What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-10-27 compared with 2023-07-28 · 153 added, 132 removed, 617 unchanged (32% of the section changed)

4 unchanged sentences

(In Thousands, Except Share and Per Share Information)

September 30,

Current assets:

Cash and cash equivalents

Restricted cash

Accounts receivable:

31 unchanged sentences

Common stock -- $ 0.01 par value, 50,000,000 authorized, 33,053,341 and 32,770,550 issued;

32,411,537 and 32,059,319 outstanding at June 30, 2023 and December 31, 2022, respectively

Treasury stock, 711,231 shares, at cost, as of June 30, 2023 and December 31, 2022, respectively

32,342,110 and 32,059,319 outstanding at September 30, 2023 and December 31, 2022, respectively

Treasury stock, 711,231 shares, at cost, as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

7 unchanged sentences

(In Thousands, Except Share and Per Share Information)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Contract revenues

10 unchanged sentences

Income tax (benefit) expense

Basic loss per share

Diluted loss per share

Shares used to compute loss per share:

Net (loss) income

Basic (loss) income per share

Diluted( loss) income per share

Shares used to compute (loss) income per share:

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

2 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

(In Thousands, Except Share and Per Share Information)

(In Thousands, Except Share and Per Share Information) (Unaudited)

Balance, December 31, 2022

7 unchanged sentences

Forfeiture of restricted stock

Purchase of vested stock-based awards

Payments related to tax withholding for stock-based compensation

Balance, June 30, 2023

Stock-based compensation

Issuance of restricted stock

Forfeiture of restricted stock

Payments related to tax withholding for share-based compensation

Balance, September 30, 2023

Balance, December 31, 2021

9 unchanged sentences

Balance, June 30, 2022

Stock-based compensation

Issuance of restricted stock

Forfeiture of restricted stock

Payments related to tax withholding for stock-based compensation

Balance, September 30, 2022

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

3 unchanged sentences

(in Thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

37 unchanged sentences

Cash, cash equivalents and restricted cash at end of period

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash shown above

Supplemental disclosures of cash flow information:

8 unchanged sentences

Description of Business

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 of the continental United States, Alaska, Canada 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 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.

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, provides services both on and off the water in the continental United States, Alaska, Hawaii, Canada and the Caribbean Basin through its marine segment and its concrete segment.

The Company’s marine segment provides construction and dredging services relating to 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 provides turnkey concrete construction services including place and finish, site prep, layout, forming, and rebar placement for large commercial, structural and other associated business areas.

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

Although we describe the business in this report in terms of the services the Company provides, its base of customers and the areas in which it operates, the Company has determined that its operations currently comprise two reportable segments pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting .

13 unchanged sentences

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

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

specifically in metropolitan areas of Texas.

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

6 unchanged sentences

Such adjustments are of a normal recurring nature.

Interim results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results realizable for the year ending December 31, 2023.

Interim results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results realizable 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.

12 unchanged sentences

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.

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.

At the beginning of 2023, the Company began a process to refinance the outstanding debt.

21 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.

6 unchanged sentences

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.

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

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

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

3 unchanged sentences

Variable consideration is included in the estimated recognition of revenue to the extent it is probable that a significant reversal of cumulative recognized revenue will not occur.

A determination that the collection of a claim is probable is based upon compliance with the terms of the contract and the extent to which the Company performed in accordance therewith but does not guarantee collection in full.

A determination that the collection of a claim is probable is based upon the Company’s evaluation of its compliance with the terms of the contract and the extent to which the Company performed in accordance therewith but does not guarantee collection in full.

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

6 unchanged sentences

Classification of Current Assets and Liabilities

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

The Company includes in current assets and liabilities amounts realizable and payable in the next twelve months.

Cash and Cash Equivalents and Restricted Cash

2 unchanged sentences

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

Cash equivalents at June 30, 2023 and December 31, 2022 consisted primarily of overnight bank deposits.

Restricted cash of $ 1.5 million at June 30, 2023 consisted of collateral related to the Company’s outstanding letters of credit.

The Company had no restricted cash as of December 31, 2022.

Cash equivalents at September 30, 2023 and December 31, 2022 consisted primarily of overnight bank deposits.

Risk Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of accounts receivable.

The Company depends on its ability to continue to obtain federal, state and local governmental contracts, and indirectly, on the amount of funding available to these agencies for new and current governmental projects.

A significant portion of the Company’s revenue base depends on its ability to continue to obtain federal, state and local governmental contracts, and indirectly, on the amount of funding available to these agencies for new and current governmental projects.

Therefore, a portion of the Company’s operations is dependent upon the level and timing of government funding.

2 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 June 30, 2023 and December 31, 2022.

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

1 unchanged sentence

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

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

In establishing an allowance for credit losses, the Company evaluates its contract receivables and contract assets and thoroughly reviews historical collection experience, the financial condition of its customers, billing disputes and other factors.

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

As of both June 30, 2023 and December 31, 2022, the Company had recorded an allowance for credit losses of $ 0.6 million.

As of September 30, 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 June 30, 2023 totaled $ 48.2 million, of which $ 6.1 million is expected to be collected beyond June 30, 2024.

Retainage at September 30, 2023 totaled $ 55.1 million, of which $ 4.8 million is expected to be collected beyond September 30, 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 June 30, 2023 or December 31, 2022.

The Company did not recognize any environmental liabilities as of September 30, 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 was $ 0.8 million of assets classified as held for sale as of both June 30, 2023 and December 31, 2022 included in prepaid expenses and other in the Company’s condensed consolidated balance sheets.

There was $ 0.8 million of assets classified as held for sale as of both September 30, 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.

20 unchanged sentences

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

See Note 9 for additional discussion of intangible assets and trade name impairment testing.

See Note 9 for additional discussion of intangible assets.

Stock-Based Compensation

8 unchanged sentences

GAAP, which requires the recognition of income tax expense for the amount of taxes payable or refundable for the current period and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns.

The Company must make significant assumptions, judgments and estimates to determine its current provision for income taxes, its

deferred tax assets and liabilities, and any valuation allowance to be recorded against any deferred tax asset.

The Company must make significant assumptions, judgments and estimates to determine its current provision for income taxes, its deferred tax assets and liabilities, and any valuation allowance to be recorded against any deferred tax asset.

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.

21 unchanged sentences

Losses on these policies up to the deductible amounts are accrued based upon known claims incurred and an estimate of claims incurred but not reported.

The accruals are derived from known facts, historical trends and

industry averages to determine the best estimate of the ultimate expected loss.

The accruals are derived from known facts, historical trends and industry averages to determine the best estimate of the ultimate expected loss.

Actual claims may vary from estimates.

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 $ 3.8 million and $ 5.8 million at June 30, 2023 and December 31, 2022, respectively, reflected as a component of accrued liabilities in the condensed consolidated balance sheets.

The total accrual for insurance claims liabilities was $ 4.3 million and $ 5.8 million at September 30, 2023 and December 31, 2022, 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 June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Marine Segment

22 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 June 30, 2023 and December 31, 2022, respectively:

June 30, 2023

The table below presents the concentrations of current receivables (trade and retainage) at September 30, 2023 and December 31, 2022, respectively:

September 30, 2023

December 31, 2022

6 unchanged sentences

Net receivables

At June 30, 2023, one customer in the Federal Government category accounted for 13.0 % 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 and six months ended June 30, 2023 and 2022, respectively:

Three months ended June 30,

Six months ended June 30,

At both September 30, 2023 and 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 and nine months ended September 30, 2023 and 2022, respectively:

Three months ended September 30,

Nine months ended September 30,

Federal Government

3 unchanged sentences

Total contract revenues

In the three months ended June 30, 2023, one customer in the Federal Government category accounted for 14.0 % of total contract revenues.

In the six months ended June 30, 2023, no single customer accounted for

more than 10.0% of total contract revenues.

In the three and six months ended June 30, 2022, no single customer accounted for more than 10.0% of total contract revenues.

In the three months ended September 30, 2023, one customer in the Federal Government category accounted for 10.2 % of total contract revenues.

In the nine months ended September 30, 2023, no single customer accounted for more than 10.0% of total contract revenues.

In the three and nine months ended September 30, 2022, no single customer accounted for more than 10.0% 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 4.0 % and 1.0 % of total revenues for the three months ended June 30, 2023 and 2022, respectively, and 2.9 % and 0.7 % for the six months ended June 30, 2023 and 2022, respectively, and were primarily located in the Caribbean Basin.

Contract revenues generated outside the United States totaled 2.7 % and 1.4 % of total revenues for the three months ended September 30, 2023 and 2022, respectively, and 2.8 % and 0.9 % for the nine months ended September 30, 2023 and 2022, respectively, and were primarily located in the Caribbean Basin.

Contracts in Progress

Contracts in progress are as follows at June 30, 2023 and December 31, 2022:

Contracts in progress are as follows at September 30, 2023 and December 31, 2022:

September 30,

Costs incurred on uncompleted contracts

6 unchanged sentences

Contract liabilities

Included in contract assets is approximately $ 14.2 million and $ 13.4 million at June 30, 2023 and December 31, 2022, respectively, related to claims and unapproved change orders.

Included in contract assets is approximately $ 14.1 million and $ 13.4 million at September 30, 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 June 30, 2023, the aggregate amount of the remaining performance obligations was approximately $ 818.7 million.

As of September 30, 2023, the aggregate amount of the remaining performance obligations was approximately $ 877.5 million.

Of this amount, the current expectation of the Company is that it will recognize $ 610.8 million, or 70 %, in the next 12 months and the remaining balance thereafter.

Property and Equipment

The following is a summary of property and equipment at June 30, 2023 and December 31, 2022:

The following is a summary of property and equipment at September 30, 2023 and December 31, 2022:

September 30,

Automobiles and trucks

6 unchanged sentences

Construction in progress

For the three months ended June 30, 2023 and 2022, depreciation expense was $ 4.4 million and $ 5.0 million, respectively.

For the six months ended June 30, 2023 and 2022, depreciation expense was $ 9.0 million and $ 10.2 million, respectively.

For the three months ended September 30, 2023 and 2022, depreciation expense was $ 4.5 million and $ 4.9 million, respectively.

For the nine months ended September 30, 2023 and 2022, depreciation expense was $ 13.5 million and $ 15.1 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, 2023, the Company sold property and equipment.

The book value of the assets and related accumulated depreciation were removed from the balance sheet and the Company recognized a net gain on the sales of $ 0.4 million and $ 7.0 million, respectively.

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

The book value of the assets and related accumulated depreciation 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.

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 June 30, 2023 and December 31, 2022 consisted of the following:

June 30, 2023

Other current accounts receivable at September 30, 2023 and December 31, 2022 consisted of the following:

September 30, 2023

December 31, 2022

7 unchanged sentences

The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties.

Due to their short-term nature, the Company believes that the carrying

value of its accounts receivable, other current assets, accounts payable and other current liabilities approximate their fair values.

Due to their short-term nature, the Company believes that the carrying value of its accounts receivable, other current assets, accounts payable and other current liabilities approximate their fair values.

The Company classifies financial assets and liabilities into the following three levels based on the inputs used to measure fair value in the order of priority indicated:

4 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 March 31, 2023 and December 31, 2022:

Fair Value Measurements

Carrying Value

June 30, 2023

September 30, 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 June 30, 2023.

Our concrete segment had life insurance policies with a combined face value of $ 11.1 million as of September 30, 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 June 30, 2023 and December 31, 2022 approximated its carrying value of $ 42.6 million and $ 36.0 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 September 30, 2023 and December 31, 2022 approximated its carrying value of $ 56.0 million and $ 36.0 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 months ended June 30, 2023 and 2022, $ 0.2 million and $ 0.3 million, respectively, of amortization expense was recognized for these assets.

For the six months ended June 30, 2023 and 2022, $ 0.3 million and $ 0.6 million, respectively, of amortization expense was recognized for these assets.

Future expense remaining of approximately $ 0.1 million will be amortized as follows:

For the three months ended September 30, 2023 and 2022, $ 0.1 million and $ 0.3 million, respectively, of amortization expense was recognized for these assets.

For the nine months ended September 30, 2023 and 2022, $ 0.4 million and $ 0.9 million, respectively, of amortization expense was recognized for these assets.

The remaining future amortization expense will be amortized through fiscal year 2024.

The most recent annual impairment test of the Company’s indefinite-lived intangible asset concluded that the fair value of the trade name was in excess of the carrying value, therefore no impairment was recorded.

Accrued Liabilities

Accrued liabilities at June 30, 2023 and December 31, 2022 consisted of the following:

June 30, 2023

Accrued liabilities at September 30, 2023 and December 31, 2022 consisted of the following:

September 30, 2023

December 31, 2022

6 unchanged sentences

Total accrued liabilities

On May 15, 2023, the Company entered into a new Credit Agreement with White Oak ABL, LLC and White Oak Commercial Finance, LLC which includes a $ 65.0 million asset based revolving credit facility and a $ 38.0 million fixed asset term loan.

The Company incurred debt issuance costs related to the Credit Agreement of $ 5.9 million which will be amortized over the life of the agreement.

6 unchanged sentences

The Revolver initially bears 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 %.

The quarterly weighted average interest rate for the Credit Facility, inclusive of the Company’s prior credit facility as of June 30, 2023 was 11.64 %.

The quarterly weighted average interest rate for the Credit Facility, inclusive of the Company’s prior credit facility as of September 30, 2023 was 13.06 %.

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

June 30, 2023

September 30, 2023

December 31, 2022

4 unchanged sentences

Total current debt

Revolving line of credit

Term loan - long-term

5 unchanged sentences

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

The revolving line of credit termination date is the earlier of the Credit Facility termination date, May 15, 2026, or the date the outstanding balance is permanently reduced to zero, in accordance with the terms of the Credit Facility.

As of June 30, 2023, the Company has no borrowings under the revolving line of credit.

The Company’s borrowing availability under its revolving credit facility at June 30, 2023 was approximately $ 51.2 million.

During the six months ended June 30, 2023, the Company drew down $ 14.8 million on the revolver.

During the six months ended June 30, 2023, the Company repaid the full $ 14.8 million outstanding on the revolver using proceeds from the sale- leasebacks discussed in Note 12 .

The revolving line of credit termination date is the earlier of the Credit Agreement termination date, May 15, 2026, or the date the outstanding balance is permanently reduced to zero, in accordance with the terms of the Credit Facility.

As of September 30, 2023, the Company had $ 13.5 million of borrowings under the revolving line of credit.

The Company’s borrowing availability under its revolving credit facility at September 30, 2023 was approximately $ 31.7 million.

During the nine months ended September 30, 2023, the Company borrowed $ 46.5 million on the revolving line of credit.

During the nine months ended September 30, 2023, the Company repaid $ 33.0 million outstanding on the revolving line of credit.

Financial covenants

Restrictive financial covenants under the Credit Facility include:

Restrictive financial covenants under the Credit Agreement include:

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

1 unchanged sentence

● A Revolver Loan Turnover Ratio to not be less than the following during each noted period:

- Fiscal Quarter Ending June 30, 2023 and each Fiscal Quarter thereafter, to not be less than 2.50 to 1.00.

- Fiscal Quarter Ending September 30, 2023 and each Fiscal Quarter thereafter, to not be less than 2.50 to 1.00.

● A Term Loan Loan-to-Value Ratio to not be greater than the following during each noted period:

- Fiscal Quarter Ending June 30, 2023 and each Fiscal Quarter thereafter, to not be more than 60 % .

- Fiscal Quarter Ending September 30, 2023 and each Fiscal Quarter thereafter, to not be more than 60 % .

● A Minimum EBITDA to not be less than the following during each noted period

- Quarterly Test Period Ended June 30, 2023 - $ 1,039,102

- Semi-Annual Test Period Ended September 30, 2023 - $ 8,657,960

3 unchanged sentences

● The Company shall maintain Liquidity of greater than $ 15.0 million at all times.

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;

In addition, the Credit Agreement 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;

2 unchanged sentences

and events constituting a change of control.

The Company was in compliance with all financial covenants as of June 30, 2023.

The Company was in compliance with all financial covenants as of September 30, 2023.

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 June 30, 2023 and December 31, 2022, the carrying value of this debt was $ 2.2 million and $ 1.0 million, respectively.

As of September 30, 2023 and December 31, 2022, the carrying value of this debt was $ 2.1 million and $ 1.0 million, respectively.

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.

1 unchanged sentence

A portion of the operating lease above the fair value of the land was financed by the Company.

As of June 30, 2023, the carrying value of this debt was $ 2.4 million.

As of September 30, 2023, the carrying value of this debt was $ 2.4 million.

Other Long-Term Liabilities

Other long-term liabilities at June 30, 2023 and December 31, 2022 consisted of the following:

June 30, 2023

Other long-term liabilities at September 30, 2023 and December 31, 2022 consisted of the following:

September 30, 2023

December 31, 2022

5 unchanged sentences

On May 15, 2023, the Company entered into a $ 13.0 million sale-leaseback of certain equipment in which the Company will leaseback the equipment for terms ranging from one to three years .

The transaction above was recorded as failed sale-leasebacks.

The transaction above was recorded as a failed sale-leaseback.

Concurrent with the sale of Company’s Port Lavaca South Yard property, the Company entered into a twenty-year lease agreement whereby the Company will lease back the property at an annual rental rate of approximately $ 1.1 million, subject to annual rent increases of 2.5 %.

5 unchanged sentences

Under the lease agreement, the Company has two consecutive options to extend the term of the lease by ten years for each such option.

The transaction above was recorded as failed sale-leasebacks.

The transaction above was recorded as a failed sale-leaseback.

Related to the failed sale-leasebacks the Company recorded liabilities for the amounts received, will continue to depreciate the non-land portion of the assets, and has imputed an interest rate so that the net carrying amount of the financial liability and remaining assets will be zero at the end of the initial lease terms.

1 unchanged sentence

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

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

Three months ended

Six months ended

Nine months ended

September 30,

Income tax (benefit) expense

Effective tax rate

The effective rate for the three and six months ended June 30, 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 effective rate for the three and nine months ended September 30, 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 June 30, 2023 the Company evaluated all positive and negative evidence in determining the amount of deferred tax assets more likely than not to be

Based on the review of available evidence, management believes that a valuation allowance on the net deferred tax assets at June 30, 2023 remains appropriate.

The Company does not expect that unrecognized tax benefits as of June 30, 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.

For the period ended September 30, 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 September 30, 2023 remains appropriate.

The Company does not expect that unrecognized tax benefits as of September 30, 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.

3 unchanged sentences

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 June 30, 2023 and 2022, the Company had 247,945 and 662,289 securities, respectively, that were potentially dilutive in earnings per share calculations.

For the six months ended June 30, 2023 and 2022, the Company had 264,204 and 671,318 securities, respectively, that were potentially dilutive in earnings per share calculations.

For the three months ended September 30, 2023 and 2022, the Company had 240,241 and 322,637 securities, respectively, that were potentially dilutive in earnings per share calculations.

For the nine months ended September 30, 2023 and 2022, the Company had 256,128 and 553,813 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 six months ended June 30, 2023 and 2022.

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, 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 June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Weighted average shares outstanding

5 unchanged sentences

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.

on the date of grant.

Option terms are specified at each grant date but generally are 10 years from the date of issuance.

1 unchanged sentence

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 June 30, 2023 and 2022, compensation expense related to stock-based awards outstanding was $ 0.9 million and $ 0.8 million, respectively.

In the six months ended June 30, 2023 and 2022, compensation expense related to stock-based awards outstanding was $ 1.5 million and $ 1.2 million, respectively.

In the three months ended June 30, 2023 and 2022, payments related to tax withholding for stock-based compensation for certain officers of the Company was less than $ 0.1 million and $ 0.1 million, respectively.

In the six months ended June 30, 2023 and 2022, payments related to tax withholding for stock-based compensation for certain officers of the Company was $ 0.2 million and $ 0.1 million, respectively.

In the three months ended September 30, 2023 and 2022, compensation expense related to stock-based awards outstanding was $ 0.4 million and $ 1.0 million, respectively.

In the nine months ended September 30, 2023 and 2022, compensation expense related to stock-based awards outstanding was $ 1.8 million and $ 2.1 million, respectively.

In the three months ended September 30, 2023 and 2022, payments related to tax withholding for stock-based compensation for certain officers of the Company was $ 0.3 million and $ 0.3 million, respectively.

In the nine months ended September 30, 2023 and 2022, payments related to tax withholding for stock-based compensation for certain officers of the Company was $ 0.5 million and $ 0.4 million, respectively.

In January 2023, certain officers and executives of the Company were awarded a total of 180,833 shares of restricted common stock with a vesting period of three years and a fair value of $ 3.00 per share.

7 unchanged sentences

The fair value on the date of grant of all shares awarded was $ 2.64 per share.

In the three and six months ended June 30, 2023 and 2022, there were no options exercised.

At June 30, 2023, total unrecognized compensation expense related to unvested stock was approximately $ 2.8 million, which is expected to be recognized over a period of approximately 2.2 years.

In July 2023, the Company granted an executive of the Company 12,862 shares of restricted common stock with a vesting period of three years and a fair value of $ 3.11 per share.

In the three and nine months ended September 30, 2023 and 2022, there were no options exercised.

At September 30, 2023, total unrecognized compensation expense related to unvested stock was approximately $ 2.4 million, which is expected to be recognized over a period of approximately 2.0 years.

Commitments and Contingencies

8 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Contract revenues

3 unchanged sentences

Contract revenues

Operating loss

Operating income (loss)

Depreciation and amortization expense

Property and equipment, net

There were none and $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the three months ended June 30, 2023 and 2022, respectively.

There were less than $ 0.1 million and $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the six months ended June 30, 2023 and 2022, respectively.

The marine segment had foreign revenues of $ 7.3 million and $ 1.9 million for the three months ended June 30, 2023 and 2022, respectively.

The marine segment had foreign revenues of $ 10.0 million and $ 2.6 million for the six months ended June 30, 2023 and 2022, respectively.

There were $ 0.1 million and less than $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the three months ended September 30, 2023 and 2022, respectively.

There were $ 0.1 million and $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the nine months ended September 30, 2023 and 2022, respectively.

The marine segment had foreign revenues of $ 4.5 million and $ 2.5 million for the three months ended September 30, 2023 and 2022, respectively.

The marine segment had foreign revenues of $ 14.5 million and $ 5.1 million for the nine months ended September 30, 2023 and 2022, respectively.

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

2 unchanged sentences

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 $ 11.3 million and $ 10.5 million as of June 30, 2023 and December 31, 2022, respectively.

(2) Financing lease right-of-use assets are recorded net of accumulated amortization of $ 6.3 million and $ 5.1 million as of June 30, 2023 and December 31, 2022, respectively.

(1) Operating lease right-of-use assets are recorded net of accumulated amortization of $ 13.3 million and $ 10.5 million as of September 30, 2023 and December 31, 2022, respectively.

(2) Financing lease right-of-use assets are recorded net of accumulated amortization of $ 7.5 million and $ 5.1 million as of September 30, 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 June 30,

Six Months Ended June 30,

Three months ended September 30,

Nine months ended September 30,

Operating lease costs:

7 unchanged sentences

Supplemental cash flow information related to leases is as follows:

Six Months Ended June 30,

Nine months ended September 30,

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

9 unchanged sentences

Year ending December 31,

2023 (excluding the six months ended June 30, 2023)

2023 (excluding the nine months ended September 30, 2023)

Total future minimum lease payments

6 unchanged sentences

The Company’s portion of work as a dedicated subcontractor totals $ 435.4 million.

For the three and six months ended June 30, 2023 the Company’s revenue related to the joint venture subcontract was approximately $ 25.5 million.

For the three and nine months

ended September 30, 2023 the Company’s revenue related to the joint venture subcontract was approximately $ 17.3 million and $ 42.8 million, respectively.

Subsequent Event

On July 28, 2023, the Company received a termination notice from Equity Resource Partners - East West, LLC, a Georgia limited liability company, who had contracted to purchase two parcels of land in Harris County, Texas (approximately 341.3 acres), previously used by the Company as dredge placement areas.

On October 25, 2023 the Company reached an agreement with White Oak to amend the Credit Agreement to extend the date of the mandatory $ 15 million term loan pre-payment to the earlier of three days after the sale of the East West Jones Placement Area or June 30, 2024;

to accelerate the change in financial covenant test from minimum EBITDA to minimum FCCR to Q2 2024;

and to modify certain other non-financial covenants.

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