Item 9A. Controls and Procedures
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
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Based on management’s evaluation with the participation of our principal executive officer and principal financial officer, as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2023.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. Our system of internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of our management; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
Management, under the oversight of our principal executive officer and principal financial officer, and Audit Committee, assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal control - An Integrated Framework (“2013 Framework”). Based on its assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2023 at the reasonable assurances level.
Our independent registered public accounting firm, KPMG LLP, who audited the consolidated financial statements included in this annual report, has audited the effectiveness of our internal control over financial reporting as of December 31, 2023. KPMG LLP’s report appears on page F-4 of this annual report on Form 10-K.
Item 9B. OTHER INFORMATION
None .
Item 9C. DISCLOSURE CONCERNING CERTAIN FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors, Executive Officers, Promoters and Control Persons
The information under the heading “Information about our Executive Officers” in this Form 10-K is incorporated by reference into this section. The information required by Paragraphs (c) through (g) of Item 401 of Regulation S-K and Item 405 of Regulation S-K is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A no later than April 29, 2024 (the “Proxy Statement”).
Code of Ethics
We have adopted a code of ethics for our chief executive, chief financial and principal accounting officers; a code of business conduct and ethics for members of our Board of Directors; and corporate governance guidelines. The full texts of the codes of ethics and corporate governance guidelines are available at our website www.oriongroupholdingsinc.com. Although we have never done so, in the event we make any amendment to, or grant any waiver from, a provision of the code of ethics that applies to the principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, we will disclose such amendment or waiver and the reasons therefore on our website. We will provide any person without charge a copy of any of the aforementioned codes of ethics upon receipt of a written request. Requests should be addressed to: Orion Group Holdings, Inc. 12000 Aerospace Avenue, Suite 300, Houston, Texas 77034, Attention: Corporate Secretary.
Corporate Governance
The information required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is hereby incorporated by reference from our Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
The information required by Items 402, 407(e)(4) and 407(e)(5) is hereby incorporated by reference from our Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Items 201(d) and 403 of Regulation S-K is hereby incorporated by reference from our Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is hereby incorporated by reference from our Proxy Statement.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is hereby incorporated by reference from our Proxy Statement.
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PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Report:
1. Financial Statements
The Company’s Consolidated Financial Statements at December 31, 2023 and 2022 and for each of the three years in the period ended December 31, 2023 and the notes thereto, together with the Report of the Independent Registered Public Accounting Firm on those Consolidated Financial Statements are hereby filed as part of this Report, beginning on page F-1.
2. Financial Statement Schedule
The following financial statement schedule of the Company for each of the three years in the period ended December 31, 2023 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of the Company.
Schedule II – Schedule of Valuation and Qualifying Accounts
3. Exhibits
Exhibit
Number
Description
3.1
Amended and Restated Certificate of Incorporation of Orion Group Holdings, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed with the Securities and Exchange Commission on August 5, 2016 (File No. 001-33891)).
3.2
Amended and Restated Bylaws of Orion Group Holdings, Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed with the Securities and Exchange Commission on August 5, 2016 (File No. 001-33891)).
4.1
Description of Registered Securities of Orion Group Holdings, Inc. (Incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission on February 28, 2020 (File No. 001-338911).
† 10 .1
Form of Indemnity Agreement for Directors and Certain Officers dated November 24, 2008 (incorporated herein by reference to Exhibit 1.01 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 25, 2008 (File No. 001-33891)).
† 10 .2
Orion Marine Group, Inc. 2011 Long Term Incentive Plan (incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 4, 2011 (File No. 001-33891)).
† 10 .3
Form of Stock Option Agreement Under the 2011 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2012 (File No. 001-33891)).
† 10 .4
Form of Restricted Stock Agreement and Notice of Grant of Restricted Stock under the 2011 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2012 (File No. 001-33891)).
† 10 .5
Executive Incentive Plan (incorporated herein by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed with the Securities and Exchange Commission on November 7, 2008 (File No. 001-33891)).
† 10 .6
Orion Group Holdings, Inc. 2017 Long-Term Incentive Plan (incorporated herein by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 11, 2017 (File No. 001-33891)).
† 10.7
Form of Stock Option Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No. 001-33891)).
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Table of Contents
Exhibit
Number
Description
† 10.8
Form of Restricted Stock Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No. 001-33891)).
† 10.9
Form of Performance Unit Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No. 001-33891)).
† 10.10
Summary of Non-Employee Director Compensation (incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No. 001-33891)).
10.11
Real Estate Purchase and Sale Agreement (Jones Spoils Tracts, Harris County, TX) dated February 3, 2014, by and between PASADENA NITROGEN LLC, a Delaware limited liability company, as Seller, and CPB PROPERTIES, LLC, a Texas limited liability company, as Purchaser, and joined in by AGRIFOS HOLDINGS, INC., a Delaware corporation, effective February 26, 2014 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on March 4, 2014) (File No. 001-33891).
† 10.1 2
Employment Agreement dated January 1, 2015 between Orion Marine Group, Inc. and Peter R. Buchler (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 2, 2015) (File No. 001-33891).
† 10.13
First Amendment, effective April 1, 2017, to Employment Agreement by and between Orion Group Holdings, Inc. and Peter R. Buchler dated January 1, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 5, 2017 (File No. 001-33891)).
† 10.14
Second Amendment, effective June 5, 2018, to Employment Agreement by and between Orion Group Holdings, Inc. and Peter R. Buchler dated January 1, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 8, 2018 (File No. 001-33891)).
† 10.1 5
Third Amendment, effective June 19, 2019, to Employment Agreement by and between Orion Group Holdings, Inc. and Peter R. Buchler dated January 1, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 21, 2019 (File No. 001-33891)).
† 10.1 6
Fourth Amendment to Employment Agreement by and between Orion Group Holdings, Inc. and Peter R. Buchler, effective June 30, 2021. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 2, 2021 (File No. 001-33891)).
† 10.1 7
2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 24, 2022 (File No. 001-33891)).
† 10.1 8
Employment Offer Letter dated August 15, 2022 between Orion Group Holdings, Inc. and Travis J. Boone (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2022 (File No. 001-33891)).
† 10.1 9
Employment Offer Letter dated August 29, 2022 between Orion Group Holdings, Inc. and Gordon Scott Thanisch (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 31, 2022 (File No. 001-33891)).
10.20
Land Sale Contract, dated February 20, 2024, by and between a subsidiary of Orion Group Holdings, Inc. and Brixx Technologies LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 20, 2024 (File No. 001-33891)).
10.21
Loan Agreement dated as of May 15, 2023 among Orion Group Holdings, Inc. and certain of its subsidiaries from time to time party hereto as borrowers, the entities from time to time party hereto,
as Lenders, White Oak Commercial Finance, LLC, as Administrative Agent and Collateral Agent. . (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 15, 2023 (File No. 001-33891)).
42
Table of Contents
Exhibit
Number
Description
* 10.22
Amendment No. 1, dated December 1, 2023 to the Loan Agreement dated as of May 15, 2023 among Orion Group Holdings, Inc. and certain of its subsidiaries from time to time party hereto as borrowers, the entities from time to time party hereto, as Lenders, White Oak Commercial Finance, LLC, as Administrative Agent and Collateral Agent.
* 10.23
Amendment No. 2, dated February 27, 2024 to the Loan Agreement dated as of May 15, 2023 among Orion Group Holdings, Inc. and certain of its subsidiaries from time to time party hereto as borrowers, the entities from time to time party hereto, as Lenders, White Oak Commercial Finance, LLC, as Administrative Agent and Collateral Agent.
† 10.24
Letter Agreement, dated July 31, 2023, by and between Peter R. Buchler and Orion Group Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 4, 2023 (File No. 001-33891)).
10.25
Land Sale-Leaseback Contract, dated June 21, 2023, by and between Orion Marine Construction, Inc., a Florida corporation, and Pelican Marine Services, LLC, a Louisiana limited liability company. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 26, 2023 (File No. 001-33891)).
10.26
Land Sale-Leaseback Contract, dated June 5, 2023, by and between Orion Marine Construction, Inc., a Florida corporation, and Store Capital Acquisitions, LLC, a Delaware limited liability company. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 26, 2023 (File No. 001-33891)).
† 10.27
Employment Agreement by and between Orion Group Holdings, Inc. and Travis J. Boone, effective September 27, 2023. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 28 2023 (File No. 001-33891)).
† 10.28
Employment Agreement by and between Orion Group Holdings, Inc. and Scott Thanisch, effective September 27, 2023. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 28 2023 (File No. 001-33891)).
*† 10.29
Employment Offer Letter dated November 20, 2023 between Orion Group Holdings, Inc. and E. Chipman Earle
* 21 .1
List of Subsidiaries.
* 23 .1
Consent of Independent Registered Public Accounting Firm -KPMG, LLP.
* 31 .1
Certification of CEO pursuant to Section 302.
* 31 .2
Certification of CFO pursuant to Section 302.
* 32 .1
Certification of CEO and CFO pursuant to Section 906.
* 97.1
Orion Group Holdings, Inc. Executive Compensation Clawback Policy
*101.INS
XBRL Instance Document.
*101.SCH
XBRL Taxonomy Extension Schema Document.
* 101.CAL
XBRL Extension Calculation Linkbase Document.
*101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
*101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
*101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
*104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith
† Management contract or compensatory plan or arrangement
Item 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
ORION GROUP HOLDINGS, INC.
March 1, 2024
By:
/s/ Travis J. Boone
Travis J. Boone
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Travis J. Boone
President, Chief Executive Officer and
March 1, 2024
Travis J. Boone
Director
/s/ Scott Thanisch
Chief Financial Officer
March 1, 2024
Scott Thanisch
/s/ Austin J. Shanfelter
Chairman of the Board
March 1, 2024
Austin J. Shanfelter
/s/ Thomas N. Amonett
Director
March 1, 2024
Thomas N. Amonett
/s/ Michael J. Caliel
Director
March 1, 2024
Michael J. Caliel
/s/ Richard L. Daerr, Jr.
Director
March 1, 2024
Richard L. Daerr, Jr.
/s/ Margaret M. Foran
Director
March 1, 2024
Margaret M. Foran
/s/ Quentin P. Smith, Jr.
Director
March 1, 2024
Quentin P. Smith, Jr.
/s/ Mary E. Sullivan
Director
March 1, 2024
Mary E. Sullivan
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ORION GROUP HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
Reports of Independent Registered Public Accounting Firm (PCAOB ID 185 )
F-2
Consolidated Balance Sheets at December 31, 20 23 and 2 022
F-5
Consolidated Statements of Operations for the Years Ended December 31, 2 023 , 2 022 and 2 021
F-6
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2 023 , 2 022 and 2 021
F-7
Consolidated Statement of Stockholders’ Equity for the Years Ended December 31, 2 023 , 2 022 and 2 021
F-8
Consolidated Statements of Cash Flows for the Years Ended December 31, 2 023 , 2 022 and 2 021
F-9
Notes to Consolidated Financial Statements
F-10
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Orion Group Holdings, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Orion Group Holdings, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of estimated costs at completion and variable consideration for certain long-term, fixed-priced construction contracts
As discussed in Notes 3 and 5 to the consolidated financial statements, contract revenue is recognized over time because control of the promised goods and services is continually transferred to the customer. Progress is measured by the percentage of actual costs incurred to date to the total estimated costs at completion. Contract costs include all direct costs, such as material and labor, and those indirect costs incurred that are related to contract performance. The Company estimates variable consideration related to claims and unapproved change orders based on the most likely amount to which it expects to be entitled. The Company reported contract revenues of $711.8 million for the year ended December 31, 2023, which included revenue related to long-term, fixed price construction contracts.
F-2
Table of Contents
We identified the evaluation of estimated costs at completion and variable consideration for certain long-term, fixed-priced construction contracts in the Marine segment as a critical audit matter. Evaluating the Company’s estimated costs at completion for contracts in progress involved subjective auditor judgement given the variability and estimation uncertainty associated with costs of material and labor to be incurred over a long-term contract period. Additionally, evaluating the estimates of variable consideration involved subjective auditor judgement given the uncertainty in determining the costs the Company is entitled to recover under the contract.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s revenue process, including controls over the estimation of costs to complete and variable consideration for certain long-term, fixed-priced construction contracts. We evaluated the Company’s ability to estimate these amounts by comparing the Company’s previous estimates to actual results. We evaluated estimated costs at completion for certain in-progress contracts by:
● inspecting contractual documents with customers
● conducting interviews with and reviewing questionnaires prepared by project personnel to gain an understanding of the status, risks, and uncertainties of projects
● analyzing a selection of costs in the estimated costs at completion, including the cost of labor, materials, and subcontracts, as applicable, by comparing amounts to purchase orders, costs incurred to date on the project, and costs incurred on similar projects.
We evaluated variable consideration for a certain contract by:
● comparing a selection of costs underlying the claims and unapproved change orders to supporting documentation, including contractual documents and correspondence between the Company and the customer
● assessing management’s determination of the most likely amount to which it expects to be entitled by comparing it to the Company’s historical experience with similar claims and unapproved change orders.
/s/ KPMG LLP
We have served as the Company’s auditor since 2017.
Houston, Texas
March 1, 2024
F-3
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Orion Group Holdings, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Orion Group Holdings, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated March 1, 2024 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Houston, Texas
March 1, 2024
F-4
Table of Contents
Orion Group Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Information)
December 31,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
30,938
$
3,784
Accounts receivable:
Trade, net of allowance for credit losses of $ 361 and $ 606 , respectively
101,229
106,758
Retainage
42,044
50,873
Income taxes receivable
626
402
Other current
3,864
3,526
Inventory
2,699
2,862
Contract assets
81,522
43,903
Prepaid expenses and other
8,894
8,229
Total current assets
271,816
220,337
Property and equipment, net of depreciation
87,834
100,977
Operating lease right-of-use assets, net of amortization
25,696
14,978
Financing lease right-of-use assets, net of amortization
23,602
15,839
Inventory, non-current
6,361
5,469
Intangible assets, net of amortization
—
7,317
Deferred income tax asset
26
70
Other non-current
1,558
2,168
Total assets
$
416,893
$
367,155
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current debt, net of debt issuance costs
$
13,453
$
34,956
Accounts payable:
Trade
80,294
87,605
Retainage
2,527
1,198
Accrued liabilities
37,074
18,466
Income taxes payable
570
522
Contract liabilities
64,079
37,720
Current portion of operating lease liabilities
9,254
4,738
Current portion of financing lease liabilities
8,665
4,031
Total current liabilities
215,916
189,236
Long-term debt, net of debt issuance costs
23,740
716
Operating lease liabilities
16,632
11,018
Financing lease liabilities
13,746
11,102
Other long-term liabilities
25,320
17,072
Deferred income tax liability
64
211
Total liabilities
295,418
229,355
Stockholders’ equity:
Preferred stock -- $ 0.01 par value, 10,000,000 authorized, none issued
—
—
Common stock -- $ 0.01 par value, 50,000,000 authorized, 33,260,011 and 32,770,550 issued; 32,548,780 and 32,059,319 outstanding at December 31, 2023 and December 31, 2022, respectively
333
328
Treasury stock, 711,231 shares, at cost, as of December 31, 2023 and December 31, 2022, respectively
( 6,540 )
( 6,540 )
Additional paid-in capital
189,729
188,184
Retained loss
( 62,047 )
( 44,172 )
Total stockholders’ equity
121,475
137,800
Total liabilities and stockholders’ equity
$
416,893
$
367,155
The accompanying notes are an integral part of these consolidated financial statements
F-5
Table of Contents
Orion Group Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Share and Per Share Information)
Year ended December 31,
2023
2022
2021
Contract revenues
$
711,778
$
748,322
$
601,360
Costs of contract revenues
650,115
697,580
560,393
Gross profit
61,663
50,742
40,967
Selling, general and administrative expenses
69,431
62,503
60,181
Amortization of intangible assets
427
1,239
1,521
Gain on disposal of assets, net
( 8,455 )
( 4,970 )
( 11,418 )
Intangible asset impairment loss
6,890
—
—
Operating loss
( 6,630 )
( 8,030 )
( 9,317 )
Other (expense) income:
Other income
641
199
199
Interest income
103
104
136
Interest expense
( 11,659 )
( 4,456 )
( 5,076 )
Other expense, net
( 10,915 )
( 4,153 )
( 4,741 )
Loss before income taxes
( 17,545 )
( 12,183 )
( 14,058 )
Income tax expense
330
429
502
Net loss
$
( 17,875 )
$
( 12,612 )
$
( 14,560 )
Basic loss per share
$
( 0.55 )
$
( 0.40 )
$
( 0.47 )
Diluted loss per share
$
( 0.55 )
$
( 0.40 )
$
( 0.47 )
Shares used to compute loss per share:
Basic
32,346,992
31,402,328
30,763,527
Diluted
32,346,992
31,402,328
30,763,527
The accompanying notes are an integral part of these consolidated financial statements
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Orion Group Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
(In Thousands)
Year ended December 31,
2023
2022
2021
Net loss
$
( 17,875 )
$
( 12,612 )
$
( 14,560 )
Change in fair value of cash flow hedge, net of tax expense of $ 368 for the year ended December 31, 2021
—
—
1,234
Total comprehensive loss
$
( 17,875 )
$
( 12,612 )
$
( 13,326 )
The accompanying notes are an integral part of these consolidated financial statements
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Orion Group Holdings, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
(In Thousands, Except Share and Per Share Information)
Common
Treasury
Accumulated Other
Additional
Stock
Stock
Comprehensive
Paid-In
Retained
Shares
Amount
Shares
Amount
Loss
Capital
Earnings (Loss)
Total
Balance, January 1, 2021
31,171,804
$
312
( 711,231 )
$
( 6,540 )
$
( 1,602 )
$
184,324
$
( 17,000 )
$
159,494
Stock-based compensation
—
—
—
—
—
2,401
—
2,401
Exercise of stock options
28,546
—
—
—
—
110
110
Issuance of restricted stock
916,531
9
—
—
—
( 9 )
—
—
Forfeiture of restricted stock
( 234,232 )
( 2 )
—
—
—
2
—
—
Payments related to tax withholding for share-based compensation
( 170,192 )
( 2 )
—
—
—
( 947 )
—
( 949 )
Cash flow hedge
—
—
—
—
1,602
—
—
1,602
Net loss
—
—
—
—
—
—
( 14,560 )
( 14,560 )
Balance, December 31, 2021
31,712,457
$
317
( 711,231 )
$
( 6,540 )
$
—
$
185,881
$
( 31,560 )
$
148,098
Stock-based compensation
—
—
—
—
—
2,754
—
2,754
Issuance of restricted stock
1,603,434
16
—
—
—
( 16 )
—
—
Forfeiture of restricted stock
( 382,480 )
( 4 )
—
—
—
4
—
—
Payments related to tax withholding for share-based compensation
( 162,861 )
( 1 )
—
—
—
( 439 )
—
( 440 )
Net loss
—
—
—
—
—
—
( 12,612 )
( 12,612 )
Balance, December 31, 2022
32,770,550
$
328
( 711,231 )
$
( 6,540 )
$
—
$
188,184
$
( 44,172 )
$
137,800
Stock-based compensation
—
—
—
—
—
2,042
—
2,042
Issuance of restricted stock
1,031,853
10
—
—
—
( 10 )
—
—
Forfeiture of restricted stock
( 390,886 )
( 4 )
—
—
—
4
—
—
Payments related to tax withholding for share-based compensation
( 151,506 )
( 1 )
—
—
—
( 491 )
—
( 492 )
Net loss
—
—
—
—
—
—
( 17,875 )
( 17,875 )
Balance, December 31, 2023
33,260,011
$
333
( 711,231 )
$
( 6,540 )
$
—
$
189,729
$
( 62,047 )
$
121,475
The accompanying notes are an integral part of these consolidated financial statements
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Orion Group Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Year ended December 31,
2023
2022
2021
Cash flows from operating activities:
Net loss
$
( 17,875 )
$
( 12,612 )
$
( 14,560 )
Adjustments to reconcile net loss to net cash used in operating activities:
Operating activities:
Depreciation and amortization
18,844
20,915
22,608
Amortization of ROU operating leases
6,763
4,813
5,102
Amortization of ROU finance leases
5,034
3,142
2,822
Write-off of debt issuance costs upon debt modification
119
—
790
Amortization of deferred debt issuance costs
1,616
424
430
Deferred income taxes
( 103 )
13
( 9 )
Stock-based compensation
2,042
2,754
2,401
Gain on disposal of assets, net
( 8,455 )
( 4,970 )
( 11,418 )
Intangible asset impairment loss
6,890
—
—
Allowance for credit losses
( 109 )
322
—
Change in operating assets and liabilities:
Accounts receivable
14,129
( 28,660 )
4,703
Income tax receivable
( 224 )
3
14
Inventory
( 729 )
( 1,485 )
371
Prepaid expenses and other
( 55 )
1,645
143
Contract assets
( 37,619 )
( 15,374 )
3,742
Accounts payable
( 4,507 )
39,370
589
Accrued liabilities
11,817
( 6,630 )
( 6,544 )
Operating lease liabilities
( 6,807 )
( 4,748 )
( 4,940 )
Income tax payable
48
( 79 )
( 38 )
Contract liabilities
26,359
10,722
( 6,137 )
Net cash provided by operating activities
17,178
9,565
69
Cash flows from investing activities:
Proceeds from sale of property and equipment
11,079
4,880
27,164
Purchase of property and equipment
( 8,909 )
( 14,584 )
( 16,975 )
Insurance claim proceeds related to property and equipment
—
—
440
Net cash provided by (used in) investing activities
2,170
( 9,704 )
10,629
Cash flows from financing activities:
Borrowings on credit
106,958
24,000
53,000
Payments made on borrowings on credit
( 104,431 )
( 28,274 )
( 49,120 )
Proceeds from failed sale-leaseback arrangement
14,702
—
—
Proceeds from sale-leaseback financing
2,397
—
—
Loan costs from Credit Agreement and prior credit facility
( 6,537 )
( 664 )
—
Payments of finance lease liabilities
( 4,791 )
( 2,992 )
( 3,035 )
Payments related to tax withholding for share-based compensation
( 492 )
( 440 )
( 949 )
Exercise of stock options
—
—
110
Net cash provided by (used in) financing activities
7,806
( 8,370 )
6
Net change in cash, cash equivalents and restricted cash
27,154
( 8,509 )
10,704
Cash, cash equivalents and restricted cash at beginning of period
3,784
12,293
1,589
Cash, cash equivalents and restricted cash at end of period
$
30,938
$
3,784
$
12,293
Cash paid during the period for:
Interest
$
12,084
$
2,923
$
2,423
Taxes, net of refunds
$
618
$
533
$
568
The accompanying notes are an integral part of these consolidated financial statements
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Orion Group Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Years Ended December 31, 2023, 2022 and 2021
(Tabular Amounts in thousands, Except Share and per Share Amounts)
1. Description of Business and Basis of Presentation
Description of Business
Orion Group Holdings, Inc. and subsidiaries, (hereafter collectively referred to as the “Company”), is a leading specialty construction company serving the infrastructure, industrial, and building sectors, providing 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. Our marine segment provides construction and dredging services including marine transportation facility construction, marine pipeline construction, marine environmental structures construction, dredging of waterways, channels and ports, environmental dredging, design, and specialty services related to marine construction, fabrication, and dredging. Our concrete segment provides turnkey concrete construction services including concrete surface place and finish, site preparation, layout, forming, and rebar placement for large commercial, structural and other associated business areas. We are headquartered in Houston, Texas with regional offices throughout our 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 .
The tools used by the chief operating decision maker (“CODM”) to allocate resources and assess performance are based on two reportable and operating segments: marine and concrete, which operate under the Orion brand and logo.
In making this determination, the Company considered the similar economic characteristics of its operations that comprise its marine segment. For the marine segment, the methods used, and the internal processes employed, to deliver marine construction services are similar throughout the segment, including standardized estimating, project controls and project management. This segment has the same customers with similar funding drivers and are subject to similar regulatory regimes driven through Federal agencies such as the U.S. Army Corps of Engineers, U.S. Fish and Wildlife Service, U.S. Environmental Protection Agency and U.S. Occupational Safety and Health Administration (“OSHA”), among others. Additionally, the segment is driven by macro-economic considerations including the level of import/export seaborne transportation, development of energy-related infrastructure, cruise line expansion and operations, marine bridge infrastructure development, waterway pipeline crossings and the maintenance of waterways. These considerations, and others, are key catalysts for future prospects and are similar across the segment.
For the concrete segment, the Company also considered the similar economic characteristics of these operations. The methods used, and the internal processes employed, to deliver concrete construction services are similar throughout the segment, including standardized estimating, project controls and project management. 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. These considerations, and others, are key catalysts for current operations and future prospects and are similar across the segment.
Basis of Presentation
These consolidated financial statements include the accounts of the parent company, Orion Group Holdings, Inc. and its wholly-owned subsidiaries and have been prepared in accordance with U.S. GAAP on the going concern basis of accounting, which assumes the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. All intercompany balances and transactions have been eliminated in consolidation.
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. Substantial doubt exists when conditions and events, considered in aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the date that the consolidated financial
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statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans and actions that have not been fully implemented as of the date that the financial statements are issued. When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both: (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued; and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events 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. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.
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, 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, 2023, 2022 and 2021. Also as described in Note 10, the Company had $ 35.0 million of outstanding indebtedness under its prior credit facility as of December 31, 2022 which was scheduled to mature 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.
At the beginning of 2023, the Company began a 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 (the “Credit Agreement”) 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 10 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.
2. Summary of Significant Accounting Policies
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates, judgments and assumptions are continually evaluated based on available information and experience; however, actual amounts could differ from those estimates.
On an ongoing basis, the Company evaluates the significant accounting policies used to prepare its consolidated financial statements, including, but not limited to, those related to:
● Revenue recognition from construction contracts;
● The recording of accounts receivable and allowance for credit losses;
● The carrying value of property, plant and equipment;
● Leases;
● Finite and infinite-lived intangible assets, testing for indicators of impairment;
● Stock-based compensation;
● Income taxes; and
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● Self-insurance.
Revenue Recognition
The Company’s revenue is derived from contracts to provide marine construction, dredging, turnkey concrete services, and other specialty services. The Company’s projects are typically brief in duration, but occasionally, span a period of over one year. The Company determines the appropriate accounting treatment for each contract before work begins and, subject to qualifications discussed in the next paragraph, records contract revenue over time.
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. 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. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the stand-alone selling price of each distinct good or service. Progress is measured by the percentage of actual contract costs incurred to date to total estimated costs for each contract. This method is used because management considers contract costs incurred to be the best available measure of progress on these contracts. Contract costs include all direct costs, such as material and labor, and those indirect costs incurred that are related to contract performance such as payroll taxes and insurance. General and administrative costs are charged to expense as incurred. Upfront costs, such as costs to mobilize personnel and equipment prior to satisfying a performance obligation are capitalized and amortized over the contract performance period.
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 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. Revenue is recorded net of any sales taxes collected and paid on behalf of the customer, if applicable.
Contract revenue is derived from the original contract price as modified by agreed-upon change orders and estimates of variable consideration related to incentive fees and change orders or claims for which price has not yet been agreed by the customer. The Company estimates variable consideration based on its assessment of the most likely amount to which it expects to be entitled. 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 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:
● Accounts Receivable: Trade, net of allowance - Represent amounts billed and currently due from customers and are stated at their estimated net realizable value.
● Accounts Receivable: Retainage - Represent amounts which have not been billed to or paid by customers due to retainage provisions in construction contracts, which amounts generally become payable upon contract completion and acceptance by the customer.
● Contract Assets - Represent revenues recognized in excess of amounts billed, which management believes will be billed and collected within one year of the completion of the contract and are recorded as a current asset, until such amounts are either received or written off.
● Contract Liabilities - Represent billings in excess of revenues recognized and are recorded as a current liability, until the underlying obligation has been performed or discharged.
Classification of Current Assets and Liabilities
The Company includes in current assets and liabilities amounts realizable and payable in the next twelve months.
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Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At times, cash held by financial institutions may exceed federally insured limits. The Company has not historically sustained losses on its cash balances in excess of federally insured limits. Cash equivalents at December 31, 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.
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. Statutory mechanics’ liens provide the Company high priority in the event of lien foreclosures following financial difficulties of private owners, thus minimizing credit risk with private customers.
Accounts Receivable
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 December 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. Unbilled receivables on contracts represent recoverable costs and accrued profits that are not yet capable of being billed under the terms of the applicable contracts. Revenue associated with these billings is recorded net of any sales tax, if applicable.
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 its carrying value. As of December 31, 2023 and December 31, 2022, the Company had recorded an allowance for credit losses of $ 0.4 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 December 31, 2023 totaled $ 42.0 million, of which $ 5.4 million is expected to be collected beyond December 31, 2024. Retainage at December 31, 2022 totaled $ 50.9 million.
From time to time, the Company negotiates change orders and claims with its customers. 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. Significant losses on receivables could adversely affect the Company’s financial position, results of operations and overall liquidity.
Advertising Costs
The Company primarily obtains contracts through the open bid process, and therefore advertising costs are not a significant component of expense. Advertising costs are expensed as incurred.
Environmental Costs
Costs related to environmental remediation are charged to expense. Other environmental costs are also charged to expense unless they increase the value of the property and/or provide future economic benefits, in which event the costs are capitalized. 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 December 31, 2023 or December 31, 2022.
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Fair Value Measurements
The Company evaluates and presents certain amounts included in the accompanying consolidated financial statements at “fair value” in accordance with U.S. GAAP, which requires the Company to base its estimates on assumptions that market participants, in an orderly transaction, would use to price an asset or liability, and to establish a hierarchy that prioritizes the information used to determine fair value. Refer to Note 7 for more information regarding fair value determination.
The Company generally applies fair value valuation techniques on a non-recurring basis associated with (1) valuing assets and liabilities acquired in connection with business combinations and other transactions; (2) valuing potential impairment loss related to long-lived assets; and (3) valuing potential impairment loss related to goodwill and indefinite-lived intangible assets.
Inventory
Current inventory consists of parts and small equipment held for use in the ordinary course of business and is valued at the lower of cost (using historical average cost) or net realizable value and is relieved as utilized. Where shipping and handling costs are incurred by the Company, these charges are included in inventory and charged to cost of contract revenue upon use. Non-current inventory consists of spare parts (including engines, cutters and gears) that require special order or long-lead times for manufacture or fabrication, but must be kept on hand to reduce downtime and is valued at the lower of cost (using historical average cost) or net realizable value.
Property and Equipment
Property and equipment are recorded at cost. Ordinary maintenance and repairs that do not improve or extend the useful life of the asset are expensed as incurred. Major renewals and betterments of equipment are capitalized and depreciated generally over three to ten years until the next scheduled maintenance.
When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in results of operations for the respective period.
Depreciation is computed using the straight-line method over the estimated useful lives of the related assets for financial statement purposes, as follows:
Automobiles and trucks
3 to 10 years
Buildings and improvements
10 to 30 years
Construction equipment
3 to 10 years
Vessels and other equipment
3 to 40 years
Office equipment
3 to 5 years
The Company generally uses accelerated depreciation methods for tax purposes where beneficial.
Dry-docking costs are capitalized and amortized using the straight-line method over a period ranging from three to seven years . Dry-docking costs include, but are not limited to, the inspection, refurbishment and replacement of steel, engine components, tailshafts, mooring equipment and other parts of the vessel. Amortization related to dry-docking activities is included as a component of depreciation. These costs and the related amortization periods are periodically reviewed to determine if the estimates are accurate. If warranted, a significant upgrade of equipment may result in a revision to the useful life of the asset, in which case the change is accounted for prospectively.
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment loss is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. 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 December 31, 2023. There was $ 0.8 million of assets classified as held for sale as of December 31, 2022 that were included in prepaid expenses and other in the Company’s Consolidated Balance Sheets.
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Leases
Management determines if a contract is or contains a lease at inception of the contract or modification of the contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
Finance and operating lease right-of-use (“ROU”) assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The expected lease term includes options to extend or terminate the lease when it is reasonably certain the Company will exercise such option. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term.
The Company’s lease arrangements have lease and non-lease components. Leases with an expected term of 12 months or less are not accounted for on the balance sheet and the related lease expense is recognized on a straight-line basis over the expected lease term.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
See Note 18 for more information regarding leases.
Intangible Assets
Intangible assets that have finite lives were amortized. In addition, the Company evaluated the remaining useful life of intangible assets in each reporting period to determine whether events and circumstances warrant a revision of the remaining period of amortization. Intangible assets that had infinite lives were not amortized, but were subject to impairment testing at least annually or more frequently if events or circumstances indicated that the asset may be impaired.
The Company had one infinite-lived intangible asset, a trade name, which it tested for impairment annually on October 31, or whenever events or circumstances indicated that the carrying amount of the trade name may not be recoverable. Impairment was calculated as the excess of the trade name’s carrying value over its fair value. The fair value of the trade name was determined using the relief from royalty method, a variation of the income approach. 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. This approach is dependent on a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables. This one infinite-lived intangible asset was fully impaired as of December 31, 2023 due to the rebranding of the Company’s concrete segment in the fourth quarter of 2023.
See Note 8 for additional discussion of intangible assets.
Stock-Based Compensation
The Company recognizes compensation expense for equity awards over the vesting period based on the fair value of these awards at the date of grant. The computed fair value of these awards is recognized as a non-cash cost over the period the employee provides services, which is typically the vesting period of the award. The fair value of restricted stock grants and restricted stock units is equivalent to the fair value of the stock issued on the date of grant and is measured as the closing price of the stock on the date of grant.
Compensation expense is recognized only for stock-based payments expected to vest. The Company estimates forfeitures at the date of grant based on historical experience and future expectations. This assessment is updated on a periodic basis. See Note 14 for further discussion of the Company’s stock-based compensation plan.
Income Taxes
The Company determines its consolidated income tax provision using the asset and liability method prescribed by U.S. 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
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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 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. 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. The Company computes deferred income taxes using the liability method. Under the liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740, Income Taxes which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on its consolidated tax return. The Company evaluates and records any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates.
See Note 12 for additional discussion of income taxes.
Insurance Coverage
The Company maintains insurance coverage for its business and operations. Insurance related to property, equipment, automobile, general liability, and a portion of workers’ compensation is provided through traditional policies, subject to a deductible or deductibles. A portion of the Company’s workers’ compensation exposure is covered through a mutual association, which is subject to supplemental calls.
The marine segment maintains five levels of excess loss insurance coverage, totaling $ 300 million in excess of primary coverage. The marine segment’s excess loss coverage responds to most of its policies when a primary limit of $ 1 million has been exhausted; provided that the primary limit for Contingent Maritime Employer’s Liability is $ 10 million and the Watercraft Pollution Policy primary limit is $ 5 million. The concrete segment maintains five levels of excess loss insurance coverage, totaling $ 300 million in excess of primary coverage. The concrete segment’s excess loss coverage responds to most of its policies when a primary limit of $ 1 million has been exhausted.
If a claim arises and a potential insurance recovery is probable, the impending gain is recognized separately from the related loss. The recovery will only be recognized up to the amount of the loss once the recovery of the claim is deemed probable and any excess gain will fall under contingency accounting and will only be recognized once it is realized. The Company does not net insurance recoveries against the related claim liability as the amount of the claim liability is determined without consideration of the anticipated insurance recoveries from third parties.
Separately, the Company’s marine segment employee health care is paid for by general assets of the Company and currently administered by a third party. The administrator has purchased appropriate stop-loss coverage. 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. Actual claims may vary from estimates. Any adjustments to such reserves are included in the 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. 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 $ 7.5 million and $ 5.8 million at December 31, 2023 and December 31, 2022, respectively, reflected as a component of accrued liabilities in the consolidated balance sheet.
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3. Revenue
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:
Year ended December 31,
2023
2022
2021
Marine Segment
Construction
$
297,462
$
239,656
$
169,554
Dredging
60,667
85,414
80,831
Specialty Services
37,788
14,143
13,530
Marine segment contract revenues
$
395,917
$
339,213
$
263,915
Concrete Segment
Structural
$
53,827
$
57,425
$
58,420
Light Commercial
262,034
351,684
279,018
Other
—
—
7
Concrete segment contract revenues
$
315,861
$
409,109
$
337,445
Total contract revenues
$
711,778
$
748,322
$
601,360
The Company has determined that it has two reportable segments pursuant to FASB ASC Topic 280, Segment Reporting , but has disaggregated its contract revenues in the above chart in terms of services provided within such segments. In making this determination, the Company considered the similar characteristics of its operations as discussed in Note 1 . Additionally, as discussed, both the marine and concrete segments have limited contracts with multiple performance obligations. 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 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.
Marine Segment
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. Specialty services include design, salvage, demolition, surveying, towing, diving and underwater inspection, excavation and repair.
Concrete Segment
Structural services include elevated concrete pouring for products such as columns, elevated beams and structural walls. Light commercial services include horizontally poured concrete for products such as slabs, sidewalks, ramps and tilt walls. Other services comprise labor related to concrete pouring such as rebar installation and pumping services and typically support the Company’s structural and light commercial services.
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4. Concentration of Risk and Enterprise-Wide Disclosures
In both reportable segments accounts receivable include amounts billed to governmental agencies and private customers and do not bear interest. 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 December 31, 2023 and December 31, 2022, respectively:
December 31, 2023
December 31, 2022
Federal Government
$
8,885
6
%
$
4,612
3
%
State Governments
2,355
2
%
3,111
2
%
Local Governments
12,804
9
%
16,197
10
%
Private Companies
119,590
83
%
134,317
85
%
Gross receivables
143,634
100
%
158,237
100
%
Allowance for credit losses
( 361 )
( 606 )
Net receivables
$
143,273
$
157,631
At December 31, 2023, a customer in the Private Companies category accounted for 19.9 % 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 years ended December 31, 2023, 2022 and 2021.
2023
%
2022
%
2021
%
Federal Government
$
153,410
22
%
$
80,116
11
%
$
54,480
9
%
State Governments
59,354
8
%
62,516
8
%
4,790
1
%
Local Government
99,621
14
%
125,015
17
%
120,311
20
%
Private Companies
399,393
56
%
480,675
64
%
421,779
70
%
Total contract revenues
$
711,778
100
%
$
748,322
100
%
$
601,360
100
%
In the year ended December 31, 2023, a customer in the Federal Government category accounted for 12.7 % of total contract revenue. For the years ended December 31, 2022 and 2021, no single customer exceeded 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.
The concrete segment primarily purchases concrete from select suppliers. The loss of any one of these suppliers could adversely impact short-term operations.
Contract revenues generated outside the United States totaled 5.1 %, 0.9 % and 0.5 % of total revenues for the years ended December 31, 2023, 2022 and 2021, respectively, and were primarily located in the Caribbean Basin.
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5. Contracts in Progress
Contracts in progress are as follows as of December 31, 2023 and December 31, 2022:
December 31,
December 31,
2023
2022
Costs incurred on uncompleted contracts
$
1,394,243
$
1,251,853
Estimated earnings
176,904
180,705
1,571,147
1,432,558
Less: Billings to date
( 1,553,704 )
( 1,426,375 )
$
17,443
$
6,183
Included in the accompanying Consolidated Balance Sheets under the following captions:
Contract assets
$
81,522
$
43,903
Contract liabilities
( 64,079 )
( 37,720 )
$
17,443
$
6,183
Included in contract assets is approximately $ 13.0 million and $ 13.4 million at December 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 December 31, 2023, the aggregate amount of the remaining performance obligations was approximately $ 762.2 million. Of this amount, the current expectation of the Company is that it will recognize $ 650.4 million, or 85 %, in the next 12 months and the remaining balance thereafter.
6. Property and Equipment
The following is a summary of property and equipment as of December 31, 2023 and December 31, 2022:
December 31,
December 31,
2023
2022
Automobiles and trucks
$
1,985
$
2,232
Building and improvements
36,931
36,952
Construction equipment
125,705
130,660
Vessels and other equipment
94,030
91,495
Office equipment
6,708
6,885
265,359
268,224
Less: Accumulated depreciation
( 206,243 )
( 195,948 )
Net book value of depreciable assets
59,116
72,276
Construction in progress
3,770
816
Land
24,948
27,885
$
87,834
$
100,977
For the years ended December 31, 2023 and 2022, depreciation expense was $ 18.4 million and $ 19.7 million, respectively. Substantially all depreciation expense is included in the cost of contract revenue in the Company’s 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 10 ).
Substantially all of the Company’s long-lived assets are located in the United States.
See Note 2 to the Company’s consolidated financial statements for further discussion of property and equipment.
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7. Fair Value
Recurring Fair Value Measurements
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.
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:
● Level 1- fair values are based on observable inputs such as quoted prices in active markets for identical assets or liabilities;
● Level 2 - fair values are based on pricing inputs other than quoted prices in active markets for identical assets and liabilities and are either directly or indirectly observable as of the measurement date; and
● Level 3- fair values are based on unobservable inputs in which little or no market data exists.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 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 December 31, 2023 and December 31, 2022:
Fair Value Measurements
Carrying Value
Level 1
Level 2
Level 3
December 31, 2023
Assets:
Cash surrender value of life insurance policy
$
1,299
—
1,299
—
December 31, 2022
Assets:
Cash surrender value of life insurance policy
$
1,811
—
1,811
—
Our concrete segment has life insurance policies with a combined face value of $ 11.1 million as of December 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. These assets are included in the “Other non-current” asset section in the Company’s Consolidated Balance Sheets.
Non-Recurring Fair Value Measurements
The Company generally applies fair value valuation techniques on a non-recurring basis associated with (1) valuing assets and liabilities acquired in connection with business combinations and other transactions; (2) valuing potential impairment loss related to long-lived assets; and (3) valuing potential impairment loss related to the infinite-lived intangible asset.
Other Fair Value Measurements
The fair value of the Company’s debt at December 31, 2023 and 2022 approximated its carrying value of $ 42.3 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.
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8. Intangible Assets
The tables below present the activity and amortizations of finite-lived intangible assets:
December 31,
December 31,
2023
2022
Finite-lived intangible assets, beginning of period
$
35,242
$
34,242
Additions
—
—
Total finite-lived intangible assets, end of period
$
35,242
$
35,242
Accumulated amortization, beginning of period
$
( 34,815 )
$
( 33,576 )
Current year amortization
( 427 )
( 1,239 )
Total accumulated amortization
( 35,242 )
( 34,815 )
Net finite-lived intangible assets, end of period
$
—
427
Infinite-lived intangible assets
—
6,890
Total net intangible assets
$
—
$
7,317
Remaining net finite-lived intangible assets were acquired as part of the purchase of TAS during 2015 and TBC during 2017 and included customer relationships. 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 years ended December 31, 2023 and 2022, $ 0.4 million and $ 1.2 million, respectively, of amortization expense was recognized for these assets. As of December 31, 2023 all finite-lived intangible assets acquired as part of the purchase of TAS were fully amortized.
The Company evaluated the infinite-lived intangible assets which consisted of the TAS Concrete Construction tradename and as a result of the Company’s strategic decision to rebrand its concrete segment under the Orion banner the Company determined that the estimated fair value of the TAS Concrete Construction tradename is less than the carrying amount and an impairment loss of $ 6.9 million was recognized under ASC 350. As of December 31, 2023 all of the Company’s intangible assets are fully amortized or impaired.
9. Accrued Liabilities
Accrued liabilities as of December 31, 2023 and 2022 consisted of the following:
December 31, 2023
December 31, 2022
Accrued salaries, wages and benefits
$
19,759
$
7,605
Accrued liabilities expected to be covered by insurance
7,478
5,757
Sales taxes
2,510
1,737
Property taxes
1,111
522
Sale-leaseback arrangement
3,761
813
Accounting and audit fees
659
222
Interest
530
60
Other accrued expenses
1,266
1,750
Total accrued liabilities
$
37,074
$
18,466
10. Debt
On May 15, 2023, the Company entered into the Credit Agreement . 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 under the effective interest method. The Credit Agreement has a maturity date of May 15, 2026. The Company used the proceeds of the Credit Agreement to repay the $ 40.0 million outstanding on the Company’s prior credit facility. In connection with the extinguishment of the prior credit facility, the Company wrote off the remaining $ 0.1 million in debt issuance costs associated with the prior credit facility. On December 1, 2023, the Company entered into Amendment No, 1 to the Credit Agreement which extended the maturity date for the $ 15.0 million pre-payment to the earlier of June 30, 2024 and the date that is three business days after receipt of net proceeds in respect of the East and West Jones Sale.
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The Credit Agreement is secured by substantially all of the assets of the Company and its subsidiaries, including fixed assets and account receivables, and is used to finance general corporate and working capital purposes, capital expenditures, and permitted acquisitions and associated fees, to refinance existing indebtedness, and to pay for all expenses related to the Credit Agreement. Amounts repaid under the Revolver can be re-borrowed.
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 yearly weighted average interest rate for the Credit Agreement, as of December 31, 2023 was 12.00 %.
The Company’s obligations under debt arrangements consisted of the following:
December 31, 2023
December 31, 2022
Debt Issuance
Debt Issuance
Principal
Costs (1)
Total
Principal
Costs (1)
Total
Revolving line of credit
$
—
$
—
$
—
$
35,000
$
( 327 )
$
34,673
Term loan - current
15,000
( 2,024 )
12,976
—
—
—
Other debt
477
—
477
283
—
283
Total current debt
15,477
( 2,024 )
13,453
35,283
( 327 )
34,956
Term loan - long-term
23,000
( 3,104 )
19,896
—
—
—
Other debt
3,844
—
3,844
716
—
716
Total long-term debt
26,844
( 3,104 )
23,740
716
—
716
Total debt
$
42,321
$
( 5,128 )
$
37,193
$
35,999
$
( 327 )
$
35,672
(1) Total debt issuance costs include underwriter fees, legal fees, syndication fees and fees related to the execution of the Credit Agreement and the termination and repayment of the Company’s prior credit facility.
Provisions of the revolving line of credit
The Company has a maximum borrowing capacity under the Revolver of $ 65.0 million. There is a letter of credit sublimit that is equal to the lesser of $ 5.0 million and the aggregate unused amount of the revolving commitments then in effect.
The Company is subject to a commitment fee for the unused portion of the maximum borrowing availability under the Revolver. The Revolver 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 Agreement.
As of December 31, 2023, the Company had no borrowings under the Revolver. The Company’s borrowing availability under the Revolver at December 31, 2023 was approximately $ 47.7 million.
During the year ended December 31, 2023, the Company borrowed $ 64.0 million on the Revolver. During the year ended December 31, 2023, the Company repaid $ 64.0 million outstanding on the Revolver.
Financial covenants
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:
- Fiscal Quarter Ending June 30, 2024 and each Fiscal Quarter thereafter, to not be less than 1.10 to 1.00.
● A Revolver Loan Turnover Ratio to not be less than the following during each noted period:
- Fiscal Quarter Ending December 31, 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 December 31, 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:
- Tri-Quarterly Test Period Ended December 31, 2023 - $ 14,975,675
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- Last-Twelve-Months Test Period Ended March 31, 2024 - $ 29,703,993
● The Company shall maintain Liquidity (as defined in the Credit Agreement) of greater than $ 15.0 million at all times.
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; 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 December 31, 2023.
Other debt
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 December 31, 2023 and December 31, 2022, the carrying value of this debt was $ 1.9 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.
On June 23, 2023, the Company closed on a land-sale leaseback contract for the Company’s Port Lavaca South Yard property located in Port Lavaca, Texas for a purchase price of $ 12.0 million. A portion of the operating lease above the fair value of the land was financed by the Company. As of December 31, 2023, the carrying value of this debt was $ 2.4 million.
11. Other Long-Term Liabilities
Other long-term liabilities at December 31, 2023 and 2022 consisted of the following:
December 31, 2023
December 31, 2022
Sale-leaseback arrangement
$
23,689
$
15,156
Deferred compensation
1,293
1,639
Accrued liabilities expected to be covered by insurance
338
277
Total other long-term liabilities
$
25,320
$
17,072
Sale-Leaseback Arrangements
On May 15, 2023, the Company entered into a $ 13.0 million sale-leaseback of certain equipment in which the Company leased-back the equipment for terms ranging from one to three years . 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 %. Under the lease agreement, the Company has four consecutive options to extend the term of the lease by five years for each such option. The portion of the above transaction above related to the building was recorded as a failed sale-leaseback.
On September 27, 2019, the Company entered into a purchase and sale agreement (the “Purchase and Sale Agreement”). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its 17300 & 17140 Market Street location in Channelview, Texas for a purchase price of $ 19.1 million. Concurrent with the sale of the property, the Company entered into a fifteen-year lease agreement whereby the Company will lease back the property at an annual rental rate of approximately $ 1.5 million, subject to annual rent increases of 2.0 %. 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 a failed sale-leaseback.
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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.
12. Income Tax
The following table presents the components of our consolidated income tax expense for the years ended December 31, 2023, 2022 and 2021:
Current
Deferred
Total
Year ended December 31, 2023
U.S. Federal
$
27
$
—
$
27
State and local
415
$
( 79 )
336
Foreign
( 8 )
( 25 )
( 33 )
$
434
$
( 104 )
$
330
Year ended December 31, 2022
U.S. Federal
$
—
$
—
$
—
State and local
449
$
( 29 )
420
Foreign
( 34 )
43
9
$
415
$
14
$
429
Year ended December 31, 2021
U.S. Federal
$
—
$
—
$
—
State and local
243
( 20 )
223
Foreign
268
11
279
$
511
$
( 9 )
$
502
The Company’s income tax provision reconciles to the provision at the statutory U.S. federal income tax rate for each year ended December 31, as follows:
2023
2022
2021
Statutory amount
$
( 3,685 )
$
( 2,558 )
$
( 2,952 )
Valuation allowance on foreign tax credits
( 438 )
( 136 )
186
State income tax, net of federal benefit
69
251
44
Permanent differences, other
749
185
303
Permanent differences, stock compensation
( 40 )
217
( 262 )
Valuation allowance, other
3,675
2,251
3,108
Other
—
219
75
Consolidated income tax provision
$
330
$
429
$
502
Consolidated effective tax rate
( 1.9 )
%
( 3.5 )
%
( 3.6 )
%
In the year ended 2023, the Company’s effective tax rate differed from the 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.
In the year ended 2022, the Company’s effective tax rate differed from the 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.
In the year ended 2021, the Company’s effective tax rate differed from the statutory federal rate of 21 % primarily due to the valuation allowance related to the current year net loss.
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Deferred Taxes
The Company’s deferred tax assets and liabilities are as follows:
Long Term
As of December 31,
2023
2022
Assets related to:
Accrued liabilities
$
1,581
$
1,320
Intangible assets
3,226
2,161
Net operating loss carryforward
14,594
16,699
Stock-based compensation
221
276
Foreign tax credits
3,394
3,831
Goodwill
3,534
4,328
Leases
16,146
9,018
Other
2,656
2,301
Total gross deferred tax assets
45,352
39,934
Less valuation allowance
( 20,795 )
( 17,557 )
Total net deferred tax assets
24,557
22,377
Liabilities related to:
Depreciation and amortization
( 23,116 )
( 22,362 )
Other
( 1,479 )
( 156 )
Total deferred tax liabilities
( 24,595 )
( 22,518 )
Net deferred tax liabilities
$
( 38 )
$
( 141 )
The Company has net operating loss carryforwards for federal income tax purposes of $ 41.7 million as of December 31, 2023, which are available to reduce future taxable income. The Company’s federal net operating losses arose after the 2017 tax year and can be carried forward for an indefinite period of time but are limited to offset 80 % of taxable income in any given year. The Company has state net operating losses of $ 128.5 million that expire beginning in 2027. A portion of the state losses that arose after the 2017 tax year may be carried forward indefinitely. Additionally, the Company has foreign tax credits of $ 3.4 million that can be carried forward for up to ten years . The Company has foreign tax credits that will expire in 2026.
The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the existing deferred tax assets. The Company considers the scheduled reversal of deferred tax liabilities, available carryback periods, and tax-planning strategies in making this assessment. According to ASC subtopic 740-10, the Company’s history of losses is a significant piece of negative evidence. This negative evidence is weighed more heavily than the Company’s subjective positive evidence such as our estimated future taxable income and growth. Therefore, as of December 31, 2023, the Company continues to maintain a valuation allowance of $ 20.8 million. This valuation allowance increased by $ 3.2 million during the year ended December 31, 2023 primarily to offset deferred tax assets generated during the period.
Uncertain Tax Benefits
The Company and its subsidiaries file consolidated federal income tax returns in the United States and also file in various states and foreign jurisdictions. With few exceptions, the Company remains subject to federal and state income tax examinations for the years of 2013-2022. As of December 31, 2023, the Company has recorded unrecognized tax benefits of $ 1.6 million for uncertain tax positions. The Company expects the unrecognized tax benefits as of December 31, 2023 for certain federal income tax matters will significantly change over the next 12 months due to a lapse of the statute of limitations. The final outcome of these uncertain tax positions is not yet determinable.
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The change in the total gross unrecognized tax benefits and prior year audit resolutions of the Company during the years ended December 31, 2023 and 2022 are reconciled in the table below:
2023
2022
Balance at beginning of the year
$
1,614
$
1,614
Additions based on tax position related to current year
—
—
Additions based on tax positions related to prior years
—
—
Reductions based on tax positions related to current year
—
—
Reductions based on tax positions related to prior years
—
—
Settlements with tax authorities
—
—
Lapse of statute of limitations
—
—
Balance at end of the year
$
1,614
$
1,614
The Company’s policy is to recognize interest and penalties related to any unrecognized tax liabilities as additional tax expense. No interest or penalties have been accrued at December 31, 2023 and 2022. The Company believes it has appropriate and adequate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. Although the Company believes its recorded assets and liabilities are reasonable, tax regulations are subject to interpretation and tax litigation is inherently uncertain; therefore the Company’s assessments can involve both a series of complex judgments about future events and rely heavily on estimates and assumptions. Although the Company believes that the estimates and assumptions supporting its assessments are reasonable, the final determination of tax audit settlements and any related litigation could be materially different from that which is reflected in historical income tax provisions and recorded assets and liabilities. If the Company were to settle an audit or a matter under litigation, it could have a material effect on the income tax provision, net income, or cash flows in the period or periods for which that determination is made. Any accruals for tax contingencies are provided for in accordance with U.S. GAAP .
The Company’s statute of limitations on the tax position will expire prior to December 31, 2024.
13. Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding during each period. 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 years ended December 31, 2023, 2022 and 2021, the Company had 250,264 , 490,678 , and 831,077 , 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 years ended December 31, 2023, 2022 and 2021. 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:
Year ended December 31,
2023
2022
2021
Basic:
Weighted average shares outstanding
32,346,992
31,402,328
30,763,527
Diluted:
Total basic weighted average shares outstanding
32,346,992
31,402,328
30,763,527
Effect of potentially dilutive securities:
Common stock options
—
—
—
Total weighted average shares outstanding assuming dilution
32,346,992
31,402,328
30,763,527
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Table of Contents
14. 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 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. Option terms are specified at each grant date but generally are 10 years from the date of issuance. Options generally vest over a three to five-year period.
Restricted Stock
The following table summarizes the restricted stock activity under the Company’s equity incentive plans:
Weighted
Number
Average
of
Fair Value
Shares
Per Share
Nonvested at January 1, 2021
950,436
$
3.04
Granted
916,531
$
4.58
Vested
( 690,676 )
$
3.43
Forfeited shares
( 234,232 )
$
4.22
Nonvested at December 31, 2021
942,059
$
3.97
Granted
1,603,434
$
2.73
Vested
( 806,241 )
$
2.90
Forfeited shares
( 382,480 )
$
4.60
Nonvested at December 31, 2022
1,356,772
$
2.96
Granted
1,031,853
$
2.42
Vested
( 782,949 )
$
2.83
Forfeited shares
( 390,886 )
$
3.12
Nonvested at December 31, 2023
1,214,790
$
2.53
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.
In March 2023, the Company formalized the performance measures related to the August 2022 and September 2022 grants of 328,909 performance units to two executives . As a result, the previous grants were replaced with 335,851 performance units, an incremental increase of 6,942 performance units accounted for as a modification. The performance-based units will potentially vest 100 % if an objective, tiered return on invested capital, measured over a three-year performance period, is achieved. The Company evaluates the probability of achieving this each reporting period. The fair value of all grants awarded in March 2023 was $ 2.65 per unit.
In May 2023, the Company granted an executive of the Company 4,000 shares of restricted common stock with a vesting period of three years and a fair value of $ 2.50 per share.
In May 2023, the Company’s seven independent directors were awarded an aggregate of 238,637 shares of restricted common stock. The shares vested immediately on the date of the grant. The fair value on the date of grant of all shares awarded was $ 2.64 per share.
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 October 2023, certain officers and executives of the Company were awarded a total of 152,000 shares of restricted common stock with a vesting period of three years and a fair value of $ 4.95 per share.
In November 2023, the Company granted an executive of the Company 61,602 shares of restricted common stock with a vesting period of three years . In addition, the executive was awarded a total of 41,068 performance-based units. The
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performance-based units will potentially vest 100 % if an objective, tiered return on invested capital, measured over a three-year performance period, is achieved. The Company evaluates the probability of achieving this each reporting period. The fair value of all grants awarded in November 2023 was $ 4.87 per share or unit.
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. Austin J. 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. Shanfelter. 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. In March 2023, the remaining 250,896 time-vested restricted stock units cliff vested and were settled in stock as a result of Mr. Shanfelter fulfilling his term as Executive Chairman. 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 an objective, tiered return on invested capital, measured over a three-year performance period, is achieved. 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. The performance-based units will potentially vest 100 % if an objective, tiered return on invested capital, measured over a three-year performance period, is achieved. 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 November 2022, the Company granted an executive of the Company 64,935 shares of restricted common stock, which vested immediately on the date of grant. The fair value of all shares awarded on the date of grant was $ 2.31 per share.
In May 2021, the Company’s six independent directors each received equity compensation grants of 14,975 shares, with a fair value of $ 6.01 per share. In September 2021, the Company granted an independent director 18,215 shares of restricted common stock, which vested immediately on the date of grant. The fair value of all shares awarded on the date of grant was $ 5.49 .
In May 2021, certain officers and executives of the Company were awarded 160,000 shares of restricted common stock with a vesting period of three years and a fair value of $ 6.01 per share. In September 2021, the Company granted an executive of the Company 9,901 shares of restricted common stock with a vesting period of three years and a fair value of $ 5.05 per share.
In May 2021, the Company awarded certain executives 240,000 performance-based units. The performance-based units will potentially vest 100 % if an objective, tiered return on invested capital, measured over a three-year performance period, is achieved. The Company evaluates the probability of achieving this each reporting period. The fair value of all units awarded on the date of the grant was $ 6.01 per unit.
In December 2023, the Company determined the performance-based units awarded in May 2021 will in all likelihood not vest due to the objective, tiered return on invested capital, measured over a three-year performance period not being met. As a result, the Company made the determination that the remaining outstanding shares under the grant will be forfeited.
In December 2021, certain officers and executives of the Company were awarded 139,000 shares of restricted common stock with a vesting period of three years and a fair value of $ 3.75 per share.
In August 2021, the Company determined the performance-based units awarded in May 2020 vested near the outperformance level established above the target set based on the achievement of an objective, tiered return on invested capital, measured over a one-year performance period ending June 30, 2021. As a result, the executives earned an additional 259,565 performance-based units with a fair value of $ 2.26 , of which 50 % vested immediately on the date of determination and 25 % each will vest on the first and second anniversary of the date of determination.
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Stock Options
The following table summarizes the stock option activity under the Company’s equity incentive plans:
Weighted
Weighted
Average
Average
Number
Exercise
Contractual
Aggregate
of
Price
Life
Intrinsic
Shares
Per Share
(Years)
Value
Outstanding at January 1, 2021
922,615
$
7.10
Exercised
( 28,546 )
$
3.86
Forfeited
( 169,365 )
$
6.32
Outstanding at December 31, 2021
724,704
$
7.41
Forfeited
( 421,375 )
$
7.49
Outstanding at December 31, 2022
303,329
$
7.29
Forfeited
( 70,465 )
$
7.74
Outstanding at December 31, 2023
232,864
$
7.15
Vested and expected to vest at December 31, 2023
232,864
$
7.15
3.07
$
—
Exercisable at December 31, 2023
232,864
$
7.15
3.07
$
—
For years ended December 31, 2023, 2022 and 2021, compensation expense related to stock based awards outstanding for the periods was $ 2.0 million, $ 2.8 million and $ 2.4 million, respectively. The Company applies a 3.2 % and 5.5 % forfeiture rate, which gets compounded over the vesting terms of the individual award, to its restricted stock and option grants, respectively, based on historical analysis. For the years ended December 31, 2023, 2022 and 2021, payments related to tax withholding for share-based compensation for certain officers of the Company were approximately $ 0.5 million, $ 0.4 million and $ 0.9 million, respectively.
In the years ended December 31, 2023 and December 31, 2022, no stock options were exercised. In the year ended December 31, 2021, the Company received proceeds of approximately $ 0.1 million upon the exercise of 28,546 options.
As of December 31, 2023, total unrecognized compensation expense related to unvested stock was approximately $ 3.2 million, which is expected to be recognized over a period of approximately 2.2 years.
2023
2022
2021
Total intrinsic value of options exercised
$
—
$
—
$
50
Total fair value of shares vested
$
2,407
$
—
$
93
15. Employee Benefits
All of the Company’s employees except independent contractors, Associate Divers, the Associate Tugmasters, residents of Puerto Rico, and employees covered by a collective bargaining agreement, unless the agreement requires the employee to be included under the plan, are eligible to participate in the Company’s 401(k) Retirement Plan on the first day of any month following their date of hire. Each participant may contribute between 1 % and 80 % of eligible compensation on a pre-tax basis, Roth after-tax or a combination of pre-tax and Roth, up to the annual IRS limit. The Company matches 100 % on the first 3 % of eligible compensation contributed to the Plan and 50 % on the next 2 % of eligible compensation contributed to the Plan. Participants’ contributions are fully vested at all times. Because the Plan is a Safe Harbor Plan, the money Orion contributes to employees’ accounts in the form of a match and any related earnings become theirs immediately upon receipt. At its discretion, the Company may make additional matching and profit-sharing contributions. During the years ended December 31, 2023, 2022 and 2021 the Company contributed $ 2.7 million, $ 1.4 million and $ 1.4 million, respectively, in matching contributions.
The Company contributes to several multi-employer defined pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. Risks of participating in these multi-employer plans are different from single-employer plans in the following aspects:
● Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers;
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Table of Contents
● If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and
● If the Company chooses to stop participating in its multi-employer plans, it may be required to pay a withdrawal liability based on the underfunded status of the plan.
The following table presents the Company’s participation in these plans:
Pension Protection
Expiration
Act ("PPA")
of
Employer
Certified Zone Status
FIP/RP
Collective
Identification
(1)
Status
Contributions
Surcharge
Bargaining
Pension Trust Fund
Number
2023
2022
P/I (2)
2023
2022
2021
Imposed
Agreement
International Union of Operating Engineers - Employers Construction Industry Retirement Plan - Local 302 and 612 Trust Funds
91-6028571
Green
Green
N/A
$
1,340
$
1,289
$
1,297
—
2024
Washington Laborers
91-6022315
Green
Green
N/A
$
137
$
106
$
244
—
2024
Carpenters Retirement Plan of Western Washington
91-6029051
Green
Green
N/A
$
1,906
$
1,717
$
1,700
—
2024
Cement Masons & Plasterers Trust Funds
91-6066773
N/A
N/A
N/A
$
—
$
—
$
32
—
N/A
Western Conference of Teamsters Pension Trust Fund
91-6145047
Green
Green
N/A
$
46
$
44
$
44
—
2024
Hawaii Operating Engineers Local 3 Trust Funds
81-3751949
Green
Green
N/A
$
121
$
—
$
—
—
2024
Hawaii Regional Council of Carpenters
45-3998630
Green
Green
N/A
$
128
$
—
$
—
—
2024
(1) The most recent PPA zone status available in 2023 and 2022 is for the plan’s year end during 2022 and 2021, respectively. Zone status is based on information received from the plan and is indicative of the plans funding status. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the orange zone are less than 80 percent funded and have an Accumulated Funding Deficiency in the current year or projected into the next six years, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded.
(2) The FIP/RP Status P/I column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending (“P”), or implemented (“I”).
There are currently no plans to withdraw from any of the multi-employer plans in which the Company participates.
16. Commitments 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.
17. Segment Information
The Company currently operates in two reportable segments: marine and concrete. The Company’s financial reporting systems present various data for management to run the business, including profit and loss statements prepared according to the segments presented. Management uses operating income to evaluate performance between the two segments.
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Table of Contents
Segment information for the periods presented is provided as follows:
Year Ended December 31,
2023
2022
2021
Marine
Contract revenues
$
395,917
$
339,213
$
263,915
Operating income
3,670
9,787
5,760
Depreciation and amortization expense
( 18,219 )
( 16,592 )
( 17,287 )
Total assets
$
318,684
$
239,369
Property and equipment, net
82,215
91,390
Concrete
Contract revenues
$
315,861
$
409,109
$
337,445
Operating loss
( 10,300 )
( 17,817 )
( 15,077 )
Depreciation and amortization expense
( 5,659 )
( 7,465 )
( 8,143 )
Total assets
$
98,209
$
127,786
Property and equipment, net
5,619
9,587
There was less than $ 0.1 million, $ 0.2 million and less than $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the years ended December 31, 2023, 2022 and 2021, respectively. The marine segment had foreign revenues of $ 36.1 million, $ 6.7 million and $ 2.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. These revenues are derived from projects in the Caribbean Basin and are paid primarily in U.S. dollars. There was no foreign revenue for the concrete segment.
18. Leases
The Company has operating and finance leases for office space, equipment and vehicles. Leases recorded on the balance sheet consists of the following:
December 31,
December 31,
Leases
2023
2022
Assets
Operating lease right-of-use assets, net (1)
$
25,696
$
14,978
Financing lease right-of-use assets, net (2)
23,602
15,839
Total assets
$
49,298
$
30,817
Liabilities
Current
Operating
$
9,254
$
4,738
Financing
8,665
4,031
Total current
17,919
8,769
Noncurrent
Operating
16,632
11,018
Financing
13,746
11,102
Total noncurrent
30,378
22,120
Total liabilities
$
48,297
$
30,889
(1) Operating lease right-of-use assets are recorded net of accumulated amortization of $ 15.6 million and $ 10.5 million as of December 31, 2023 and 2022, respectively.
(2) Financing lease right-of-use assets are recorded net of accumulated amortization of $ 10.2 million and $ 5.1 million as of December 31, 2023 and 2022, respectively.
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Table of Contents
Other information related to lease term and discount rate is as follows:
December 31,
December 31,
2023
2022
Weighted Average Remaining Lease Term (in years)
Operating leases
5.90
3.90
Financing leases
2.83
4.36
Weighted Average Discount Rate
Operating leases
9.32
%
4.86
%
Financing leases
7.53
%
5.62
%
The components of lease expense are as follows:
Year Ended December 31,
2023
2022
2021
Operating lease costs:
Operating lease cost
$
8,311
$
5,012
$
5,814
Short-term lease cost (1)
2,044
1,754
1,607
Financing lease costs:
Interest on lease liabilities
1,189
767
491
Amortization of right-of-use assets
5,034
3,142
2,822
Total lease cost
$
16,578
$
10,675
$
10,734
(1) Includes expenses related to leases with a lease term of more than one month but less than one year.
Supplemental cash flow information related to leases is as follows:
Year Ended December 31,
2023
2022
2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$
8,404
$
4,966
$
5,666
Operating cash flows for finance leases
$
1,189
$
767
$
491
Financing cash flows for finance leases
$
4,791
$
2,992
$
3,035
Non-cash activity:
ROU assets obtained in exchange for new operating lease liabilities
$
18,081
$
6,740
$
1,567
ROU assets obtained in exchange for new financing lease liabilities
$
13,997
$
9,368
$
7,318
Maturities of lease liabilities are summarized as follows:
Operating Leases
Finance Leases
Year ending December 31,
2024
$
10,942
$
9,983
2025
8,203
8,747
2026
2,936
2,874
2027
2,420
1,529
2028
1,390
752
Thereafter
11,737
831
Total future minimum lease payments
37,628
24,716
Less - amount representing interest
11,742
2,305
Present value of future minimum lease payments
25,886
22,411
Less - current lease obligations
9,254
8,665
Long-term lease obligations
$
16,632
$
13,746
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19. Related Party Transaction
On March 10, 2023, the United States Navy awarded the Dragados/Hawaiian Dredging/Orion Joint Venture a $ 2.8 billion contract to complete the construction of a dry dock at Pearl Harbor Naval Shipyard. The Company’s portion of work as a dedicated subcontractor totals $ 435.4 million. For the year ended December 31, 2023 the Company’s revenue related to the joint venture subcontract was approximately $ 90.5 million.
,
20. Subsequent Events
On February 20, 2024, the Company entered into a Land Sale Contract with Brixx Technologies LLC, a Texas limited liability company, who, subject to customary due diligence and closing conditions, has agreed to purchase two parcels of land in Harris County, Texas (approximately 341.3 acres) known as the East and West Jones property, which was previously used by the Company as dredge placement areas. The purchase price is approximately $ 34 million, and closing is anticipated to occur on or before June 14, 2024.
On February 27, 2024, the Company entered into Amendment No. 2 to the Credit Agreement, which lowered the interest rate for the Revolver by 50 basis points to 30-day SOFR plus 5.0 % and the Term Loan by 100 basis points to 30-day SOFR plus 7.0 %, subject to a SOFR floor of 4.0 %.
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ORION GROUP HOLDINGS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Balance at the
Charged to
Balance at the
Beginning of
Revenue, Cost
End of
Description
the Period
or Expense
Deduction
the Period
Year ended December 31, 2021
Allowance for credit losses
$
411
$
—
$
88
$
323
Deferred tax asset valuation allowance
$
12,493
$
3,294
$
344
$
15,443
Reserve for losses on uncompleted contracts
$
1,473
$
33
$
1,472
$
34
Year ended December 31, 2022
Allowance for credit losses
$
323
$
322
$
39
$
606
Deferred tax asset valuation allowance
$
15,443
$
2,114
$
—
$
17,557
Reserve for losses on uncompleted contracts
$
34
$
351
$
32
$
353
Year ended December 31, 2023
Allowance for credit losses
$
606
$
( 109 )
$
136
$
361
Deferred tax asset valuation allowance
$
17,557
$
3,238
$
—
$
20,795
Reserve for losses on uncompleted contracts
$
353
$
547
$
347
$
553
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