What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-26 compared with 2024-04-26 · 130 added, 45 removed, 118 unchanged (60% of the section changed)

10 unchanged sentences

These and other important factors, including those described under “Risk Factors” in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) may cause our actual results, performance- or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q

speak only as of the date of this report;

The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this report;

we disclaim- any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly.

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

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

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

competitive considerations.

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

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Backlog as of the periods ended below are as follows (in millions):

June 30, 2024

March 31, 2024

2 unchanged sentences

June 30, 2023

March 31, 2023

Marine segment

Concrete segment

We are optimistic in our end-markets and in the opportunities that are emerging across our various marketplaces as evidenced by the $3.5 billion of quoted bids outstanding at quarter end, of which over $101 million resulted in the award of contracts subsequent to the end of the fiscal quarter ended March 31, 2024.

We are optimistic in our end-markets and in the opportunities that are emerging across our various marketplaces as evidenced by the $1.2 billion of quoted bids outstanding at quarter end, of which over $118 million resulted in the award of contracts subsequent to the end of the fiscal quarter ended June 30, 2024.

These estimates are subject to fluctuations based upon the scope of services to be provided, as well as factors affecting the time required to complete the project.

Backlog is not necessarily indicative of future results.

In addition to our backlog under contract, we also have a substantial number of projects in negotiation or pending award at any given time.

In addition to our backlog under contract, we also have a substantial number of projects in negotiation or pending

award at any given time.

Delays in decisions on pending awards also have a negative impact on the timing and amount by which we are able to increase backlog.

Income Statement Comparisons

Three months ended March 31, 2024 compared with three months ended March 31, 2023.

Three months ended March 31,

Three months ended June 30, 2024 compared with three months ended June 30, 2023.

Three months ended June 30,

(dollar amounts in thousands)

4 unchanged sentences

Gain on disposal of assets, net

Operating loss

Operating (loss) income

Other (expense) income:

3 unchanged sentences

Loss before income taxes

Income tax (benefit) expense

Income tax expense (benefit)

Contract Revenues.

Contract revenues for the three months ended March 31, 2024 of $160.7 million increased $1.5 million or 0.9% as compared to $159.2 million in the prior year period.

The increase was primarily due to an increase in marine segment revenue related to the Pearl Harbor, Hawaii drydock project, partially offset by lower concrete segment revenue due to disciplined bidding standards to win quality work at attractive margins.

Contract revenues for the three months ended June 30, 2024 of $192.2 million increased $9.7 million or 5.3% as compared to $182.5 million in the prior year period.

The increase was primarily due to an increase in Marine segment revenue related to the Pearl Harbor drydock project, partially offset by lower Concrete segment revenue due to our deliberate efforts to adhere to disciplined bidding standards to win quality work at attractive margins.

Gross Profit.

Gross profit was $15.5 million for the three months ended March 31, 2024 compared to $5.8 million in the prior year period, an increase of $9.7 million.

Gross profit was $18.3 million for the three months ended June 30, 2024 compared to $13.8 million in the prior year period, an increase of $4.5 million, or 32.6%.

Gross profit in the first quarter was 9.5% of total contract revenues as compared to 7.6% in the prior year period.

The increase in gross profit dollars and margin was primarily driven by i mproved pricing of projects in both segments stemming from higher quality projects and improved execution, partially offset by lower margin and mix of dredging revenue.

Selling, General and Administrative Expense.

Selling, general and administrative (“SG&A”) expenses were $21.1 million for the three months ended June 30, 2024 compared to $18.1 million in the prior year period, an increase of $3.0 million or 16.6%.

As a percentage of total contract revenues, SG&A expenses increased from 10.0% to 10.9%.

The increase in SG&A dollars and percentage reflected an increase in compensation expense, business development spending and legal expenses.

Gain on Disposal of Assets, net.

During the three months ended June 30, 2024 and 2023 we realized $0.1 million and $6.5 million, respectively, of net gains on disposal of assets.

The three months ended June 30, 2023 included a gain of $5.2 million related to the sale-leaseback of our Port Lavaca South Yard property in Texas.

Other Income, net of Expense.

Other expense primarily reflects interest on our borrowings, partially offset by interest income and non-operating gains or losses.

Income Tax Expense (Benefit).

We recorded tax expense of $0.6 million in the three months ended June 30, 2024, compared to tax benefit of less than $0.1 million in the prior year period.

Our effective tax rate is typically based on expected income for the calendar year, statutory rates and tax planning opportunities available.

This estimated annual effective tax rate is then applied to year-to-date operations.

We expect near break-even operations for the full year ended December 31, 2024, such that a small change in the year-to-date operations could result in a large change to the estimated annual effective tax rate.

Therefore, our effective tax rate for the period ending June 30, 2024, is based off actual year-to-date operations.

Six months ended June 30, 2024 compared with six months ended June 30, 2023.

Six months ended June 30,

(dollar amounts in thousands)

Contract revenues

Cost of contract revenues

Selling, general and administrative expenses

Amortization of intangible assets

Gain on disposal of assets, net

Operating loss

Other (expense) income:

Interest income

Interest expense

Other expense, net

Loss before income taxes

Income tax expense

Contract Revenues.

Contract revenues for the six months ended June 30, 2024 of $352.8 million increased $11.1 million or 3.3% as compared to $341.7 million in the prior year period.

The increase was primarily due to an increase in marine segment revenue related to the Pearl Harbor drydock project, partially offset by lower concrete segment revenue due to disciplined bidding standards to win quality work at attractive margins.

Gross Profit.

Gross profit was $33.8 million for the six months ended June 30, 2024 compared to $19.6 million in the prior year period, an increase of $14.2 million.

Gross profit in the six months ended June 30, 2024 was 9.6% of total contract revenues as compared to 5.7% in the prior year period.

The increase in gross profit dollars and margin was primarily driven by improved pricing of projects in both segments stemming from higher quality projects and improved execution, partially offset by lower margin and mix of dredging revenue.

Selling, General and Administrative Expense.

Selling, general and administrative (“SG&A”) expenses were $19.0 million for the three months ended March 31, 2024 compared to $17.0 million in the prior year period, an increase of $2.0 million or 11.6%.

SG&A expenses were $40.1 million for the six months ended June 30, 2024 compared to $35.1 million in the prior year period, an increase of $5.0 million or 14.2%.

As a percentage of total contract revenues, SG&A expenses increased from 10.2% to 11.4%.

The increase in SG&A dollars and percentage reflecting an increase in IT and business development spending, and higher legal costs related to pursuing project-related claims.

The increase in SG&A dollars and percentage reflecting an increase in IT, compensation, business development spending, and higher legal costs related to pursuing project-related claims.

Gain on Disposal of Assets, net.

During the three months ended March 31, 2024 and 2023 we realized $0.3 million and $0.7 million, respectively, of net gains on disposal of assets.

During the six months ended June 30, 2024 and 2023 we realized $0.4 million and $7.2 million, respectively, of net gains on disposal of assets.

The six months ended June 30, 2023 included a gain of $5.2 million related to the sale-leaseback of our Port Lavaca South Yard property in Texas.

Other Income, net of Expense.

Other expense primarily reflects interest on our borrowings, partially offset by interest income and non-operating gains or losses.

Income Tax (Benefit) Expense.

We recorded tax benefit of $0.4 million in the three months ended March 31, 2024, compared to tax expense of $0.6 million in the prior year period.

Our effective tax rate for the three months ended March 31, 2024 differs from the federal statutory rate of 21% primarily due to the tax impact

from the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

Income Tax Expense.

We recorded tax expense of $0.3 million in the six months ended June 30, 2024, compared to tax expense of $0.6 million in the prior year period.

Our effective tax rate is typically based on expected income for the calendar year, statutory rates and tax planning opportunities available.

This estimated annual effective tax rate is then applied to year-to-date operations.

Therefore, our effective tax rate for the period ending June 30, 2024, is based off actual year-to-date operations.

Segment Results

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

Three months ended March 31, 2024 compared with three months ended March 31, 2023.

Three months ended March 31,

Three months ended June 30, 2024 compared with three months ended June 30, 2023.

Three months ended June 30,

(dollar amounts in thousands)

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Marine Segment

Revenues for our marine segment for the three months ended March 31, 2024 were $106.3 million compared to $79.3 million for the three months ended March 31, 2023, an increase of $27.0 million, or 34.1%.

Revenues for our marine segment for the three months ended June 30, 2024 were $131.0 million compared to $100.5 million for the three months ended June 30, 2023, an increase of $30.5 million, or 30.2%.

The increase was primarily related to the Pearl Harbor Project.

Operating loss for our marine segment for the three months ended March 31, 2024 was $4.9 million, compared to $6.1 million for the three months ended March 31, 2023, a decrease in operating loss of $1.2 million.

This decrease in operating loss was primarily due to margin improvements stemming from higher quality projects and improved execution, partially offset by lower margin and mix of dredging revenue.

Operating loss for our marine segment for the three months ended June 30, 2024 was $5.5 million, compared to operating income of $3.5 million for the three months ended June 30, 2023.

Adjusted for the gain on the Port Lavaca South Yard property sale-leaseback in Texas operating loss for the three months ended June 30, 2023 was $1.7 million.

This $3.8 million increase in operating loss was primarily due to the increase in SG&A expense discussed above.

Concrete Segment

Revenues for our concrete segment for the three months ended March 31, 2024 were $54.3 million compared to $79.9 million for the three months ended March 31, 2023, a decrease of $25.6 million, or 32.0%.

Revenues for our concrete segment for the three months ended June 30, 2024 were $61.2 million compared to $82.0 million for the three months ended June 30, 2023, a decrease of $20.8 million, or 25.3%.

This decrease was primarily due to a decrease in concrete segment revenue due to disciplined bidding standards to win quality work at attractive margins.

Operating income for our concrete segment for the three months ended March 31, 2024 was $1.7 million, compared to an operating loss of $4.6 million for the three months ended March 31, 2023, an increase of $6.3 million.

Operating income for our concrete segment for the three months ended June 30, 2024 was $2.7 million, compared to an operating loss of $1.5 million for the three months ended June 30, 2023, an increase of $4.2 million.

This increase was primarily due to reduction of lower margin work, winning higher margin jobs due to disciplined bidding standards and improved execution.

Six months ended June 30, 2024 compared with six months ended June 30, 2023.

Six months ended June 30,

(dollar amounts in thousands)

Contract revenues

Marine segment

Public sector

Private sector

Marine segment total

Concrete segment

Public sector

Private sector

Concrete segment total

Operating income (loss)

Marine segment

Concrete segment

Marine Segment

Revenues for our marine segment for the six months ended June 30, 2024 were $237.3 million compared to $179.8 million for the six months ended June 30, 2023, an increase of $57.5 million, or 31.9%.

The increase was primarily related to the Pearl Harbor Project.

Operating loss for our marine segment for the six months ended June 30, 2024 was $10.3 million, compared to 2.6 million for the six months ended June 30, 2023, an increase in operating loss of $7.7 million.

Adjusted for the gain on the Port Lavaca South Yard property sale-leaseback in Texas operating loss for the six months ended June 30, 2023 was $7.8 million.

This $2.5 million increase in operating loss was primarily due to the

increase in SG&A expense discussed above, partially offset by margin improvements stemming from higher quality projects and improved execution.

Concrete Segment

Revenues for our concrete segment for the six months ended June 30, 2024 were $115.6 million compared to $161.9 million for the six months ended June 30, 2023, a decrease of 46.3 million, or 28.6%.

This decrease was primarily due to a decrease in concrete segment revenue due to disciplined bidding standards to win quality work at attractive margins.

Operating income for our concrete segment for the six months ended June 30, 2024 was $4.4 million, compared to an operating loss of $6.0 million for the six months ended June 30, 2023, an increase of $10.4 million.

This increase was primarily due to reduction of lower margin work, winning higher margin jobs due to disciplined bidding standards and improved execution.

Liquidity and Capital Resources

Changes in working capital are normal within our business given the varying mix in size, scope, seasonality and timing of delivery of our projects.

At March 31, 2024, our working capital was $53.9 million, as compared to $55.9 million at December 31, 2023.

As of March 31, 2024, we had unrestricted cash on hand of $4.6 million.

Our borrowing availability under our revolving portion of our Credit Agreement at March 31, 2024 was approximately $28.1 million.

At June 30, 2024, our working capital was $64.2 million, as compared to $55.9 million at December 31, 2023.

As of June 30, 2024, we had unrestricted cash on hand of $4.8 million.

Our borrowing availability under our revolving portion of our Credit Agreement at June 30, 2024 was approximately $16.6 million.

Our primary liquidity needs are to finance our working capital and fund capital expenditures.

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Significant assumptions used in our forecasted model of liquidity include forecasted sales, costs, and capital expenditures, as well as expected timing and proceeds of planned real estate transactions.

The following table provides information regarding our cash flows and our capital expenditures for the three months ended March 31, 2024 and 2023:

The following table provides information regarding our cash flows and our capital expenditures for the three and six months ended June 30, 2024 and 2023:

Three months ended

Six months ended

Adjustments to remove non-cash and non-operating items

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Cash flows used in operating activities

Cash flows used in investing activities

Cash flows (used in) provided by financing activities

Cash flows (used in) provided by investing activities

Cash flows provided by financing activities

Capital expenditures (included in investing activities above)

Operating Activities.

During the three months ended March 31, 2024, we used approximately $22.8 million in cash in our operating activities.

The net cash outflow is comprised of $25.8 million of outflows related to changes in net working capital, partially offset by $3.0 million of cash inflows from net income, after adjusting for non-cash items.

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Condensed Consolidated Statements of Cash Flows, were primarily driven by a $30.2 million cash outflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period, a $2.2 million decrease in operating lease liabilities and $0.7 million of other

outflows, partially offset by $5.1 million of cash inflows pursuant to the relative timing and significance of project progression and billings during the period and a $2.2 million decrease in prepaid expenses and other.

During the three months ended June 30, 2024, we used approximately $15.3 million in cash in our operating activities.

The net cash outflow was comprised of $19.2 million of outflows related to changes in net working capital, partially offset by $3.9 million of cash inflows from net income, after adjusting for non-cash items.

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Condensed Consolidated Statements of Cash Flows, were primarily driven by $11.2 million of cash outflows pursuant to the relative timing and significance of project progression and billings during the period, a $4.8 million cash outflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period, a $2.2 million decrease in operating lease liabilities and a $1.4 million outflow related to an increase in prepaid expenses and other, partially offset by $0.4 million of other inflows.

During the six months ended June 30, 2024, we used approximately $38.2 million in cash in our operating activities.

The net cash outflow was comprised of $45.0 million of outflows related to changes in net working capital, partially offset by $6.8 million of cash inflows from net income, after adjusting for non-cash items.

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Condensed Consolidated Statements of Cash Flows, were primarily driven by a $35.0 million cash outflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period, $6.1 million of cash outflows pursuant to the relative timing and significance of project progression and billings during the period, a $4.5 million decrease in operating lease liabilities and $0.1 million of other outflows, partially offset by a $0.7 million inflow related to a decrease in prepaid expenses.

Investing Activities.

Capital asset additions and betterments to our fleet were $1.9 million in both the three months ended March 31, 2024 and 2023.

Proceeds from the sale of property and equipment were $0.3 million in the three months ended March 31, 2024, as compared with $0.6 million in the three months ended March 31, 2023.

Capital asset additions and betterments to our fleet were $4.6 million and $2.4 million in the three months ended June 30, 2024 and 2023, respectively.

Proceeds from the sale of property and equipment were $0.1 million in the three months ended June 30, 2024, as compared with $10.8 million in the three months ended June 30, 2023.

Included in the three months ended June 30, 2023 was $8.1 million of proceeds related to the sale-leaseback of the Port Lavaca South Yard property in Texas.

Capital asset additions and betterments to our fleet were $6.5 million and $4.3 million in the six months ended June 30, 2024 and 2023, respectively.

Proceeds from the sale of property and equipment were $0.4 million in

the six months ended June 30, 2024, as compared with $11.3 million in the six months ended June 30, 2023.

Included in the six months ended June 30, 2023 was $8.1 million of proceeds related to the sale-leaseback of the Port Lavaca South Yard property in Texas.

Financing Activities.

During the three months ended March 31, 2024, we had borrowings and repayments of $1.6 million on the White Oak revolving credit line, payments on finance lease liabilities of $2.0 million and loan costs of $0.1 million and a cash inflow of $0.3 million for proceeds from the exercise of stock options.

During the three months ended June 30, 2024, we had borrowings of $27.6 million and repayments of $4.9 million on the White Oak revolving credit line, payments on finance lease liabilities of $2.2 million, repayments of $0.3 million on other debt, loan costs of $0.2 million and a cash inflow of $0.1 million for proceeds from the exercise of stock options.

During the six months ended June 30, 2024, we had borrowings of $29.2 million and repayments of $6.5 million on the White Oak revolving credit line, payments on finance lease liabilities of $4.2 million, repayments of $0.4 million on other debt, loan costs of $0.3 million and a cash inflow of $0.4 million for proceeds from the exercise of stock options.

Sources of Capital

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3 to the Credit Agreement

On April 24, 2024, we executed Amendment No.

3 to the Loan Agreement with White Oak Commercial Finance, LLC.

This amendment, among other things, (i) replaces the Consolidated EBITDA covenant with a Consolidated Fixed Charge Coverage Ratio (FCCR) for the quarter ended March 31, 2024, (ii) lowers the FCCR covenant threshold from 1.10:1.00 to 1.00:1.00 through the quarter ended December 31, 2024, (iii) lowers the $15 million prepayment due June 30, 2024 to $10 million, (iv) extends the maturity of the Loan Agreement by one year to May 15, 2027, and (v) resets the make-whole provision to align with the extension.

We were in compliance with all financial covenants under the amended agreement as of March 31, 2024.

Please see “Note 9 – Debt” in our unaudited condensed consolidated financial statements for a detailed description of Amendment No.

3 to the Credit Agreement.

Amendment No.

4 to the Credit Agreement

Please see “Note 9 – Debt” in our unaudited condensed consolidated financial statements for a detailed description of Amendment No.

4 to the Credit Agreement.

Amendment No.

5 to the Credit Agreement

Please see “Note 18 – Subsequent Event” in our unaudited condensed consolidated financial statements for a detailed description of Amendment No.

5 to the Credit Agreement.

We were in compliance with all financial covenants under the amended agreement as of June 30, 2024.

Bonding Capacity

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Our ability to obtain surety bonds depends on our capitalization, working capital, past performance and external factors, including the capacity of the overall surety market.

At March 31, 2024, the capacity under our current bonding arrangement was at least $750 million, with approximately $550 million of projects being bonded.

At June 30, 2024, the capacity under our current bonding arrangement was at least $950 million, with approximately $590 million of projects being bonded.

While we believe that our current bonding capacity is sufficient to satisfy current demand for our services, any new major project opportunities may require us to seek additional bonding capacity in the future.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis