What changed in this filing

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Item 1. Financial Statements

2024-10-31 compared with 2024-07-26 · 153 added, 137 removed, 626 unchanged (32% of the section changed)

4 unchanged sentences

(In Thousands, Except Share and Per Share Information)

September 30,

Current assets:

1 unchanged sentence

Accounts receivable:

Trade, net of allowance for credit losses of $ 523 and $ 361 , as of June 30, 2024 and December 31, 2023, respectively

Trade, net of allowance for credit losses of $ 716 and $ 361 , as of September 30, 2024 and December 31, 2023, respectively

Income taxes receivable

28 unchanged sentences

Common stock -- $ 0.01 par value, 50,000,000 authorized, 39,610,116 and 33,260,011 issued;

33,370,955 and 32,548,780 outstanding at June 30, 2024 and December 31, 2023, respectively

Treasury stock, 711,231 shares, at cost, as of June 30, 2024 and December 31, 2023, respectively

38,898,885 and 32,548,780 outstanding at September 30, 2024 and December 31, 2023, respectively

Treasury stock, 711,231 shares, at cost, as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

7 unchanged sentences

(In Thousands, Except Share and Per Share Information)

Three months ended June 30,

Six months ended June 30,

Three months ended

Nine months ended

September 30,

Contract revenues

3 unchanged sentences

Gain on disposal of assets, net

Operating (loss) income

Operating income (loss)

Other (expense) income:

2 unchanged sentences

Other expense, net

Loss before income taxes

Income (loss) before income taxes

Income tax expense (benefit)

Basic loss per share

Diluted loss per share

Shares used to compute loss per share:

Net income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

Shares used to compute net income (loss) per share:

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

15 unchanged sentences

Balance, June 30, 2024

Stock-based compensation

Issuance of restricted stock

Forfeiture of restricted stock

Payments related to tax withholding for share-based compensation

Issuance of common stock

Balance, September 30, 2024

Balance, December 31, 2022

9 unchanged sentences

Balance, June 30, 2023

Stock-based compensation

Issuance of restricted stock

Forfeiture of restricted stock

Payments related to tax withholding for stock-based compensation

Balance, September 30, 2023

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

3 unchanged sentences

(in Thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

28 unchanged sentences

Payments made on borrowings on credit

Proceeds from failed sale-leaseback arrangement

Payments made on term loan

Proceeds from failed sale-leaseback arrangements

Payments made on failed sale-leaseback arrangements

Proceeds from sale-leaseback financing

1 unchanged sentence

Payments of finance lease liabilities

Proceeds from issuance of common stock

Payments related to tax withholding for share-based compensation

4 unchanged sentences

Cash, cash equivalents and restricted cash at end of period

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash shown above

Supplemental disclosures of cash flow information:

9 unchanged sentences

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.

26 unchanged sentences

Such adjustments are of a normal recurring nature.

Interim results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results realizable for the year ending December 31, 2024.

Interim results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results realizable for the year ending December 31, 2024.

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.

6 unchanged sentences

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 (See Note 9 and Note 18 ).

Significant assumptions used in the Company's forecasted model of liquidity include forecasted sales, costs, our ability to manage spending on capital expenditures, our ability to complete certain asset sales, collect claims and unapproved change order revenue and improve working capital.

47 unchanged sentences

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

Cash equivalents at June 30, 2024 and December 31, 2023 consisted primarily of overnight bank deposits.

Cash equivalents at September 30, 2024 and December 31, 2023 consisted primarily of overnight bank deposits.

Risk Concentrations

6 unchanged sentences

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

The Company had significant investments in billed and unbilled receivables as of June 30, 2024 and December 31, 2023.

The Company had significant investments in billed and unbilled receivables as of September 30, 2024 and December 31, 2023.

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.

3 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, the Company had recorded an allowance for credit losses of $ 0.5 million and $ 0.4 million, respectively.

As of September 30, 2024 and December 31, 2023, the Company had recorded an allowance for credit losses of $ 0.7 million and $ 0.4 million, respectively.

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

Retainage at June 30, 2024 totaled $ 36.4 million, of which $ 5.6 million is expected to be collected beyond June 30, 2025.

Retainage at September 30, 2024 totaled $ 36.5 million, of which $ 7.9 million is expected to be collected beyond September 30, 2025.

Retainage at December 31, 2023 totaled $ 42.0 million.

10 unchanged sentences

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

The Company did not recognize any environmental liabilities as of June 30, 2024 or December 31, 2023.

The Company did not recognize any environmental liabilities as of September 30, 2024 or December 31, 2023.

Fair Value Measurements

35 unchanged sentences

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

There were no assets classified as held for sale as of June 30, 2024 or December 31, 2023.

There were no assets classified as held for sale as of September 30, 2024 or December 31, 2023.

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

13 unchanged sentences

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.

Employee Stock Purchase Plan (“ESPP”) compensation fair value is determined using the Black Scholes Merton Option Pricing model, using a six-month expected term to conform with the six-month ESPP offering period.

Compensation expense is recognized only for share-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 share-based compensation plan.

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 entity’s financial statements or tax returns.

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

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

20 unchanged sentences

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.

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.

7 unchanged sentences

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 $ 5.2 million and $ 7.5 million at June 30, 2024 and December 31, 2023, respectively, reflected as a component of accrued liabilities in the consolidated balance sheet.

The total accrual for insurance claims liabilities was $ 2.7 million and $ 7.5 million at September 30, 2024 and December 31, 2023, respectively, reflected as a component of accrued liabilities in the consolidated balance sheet.

Recent Accounting Pronouncements

16 unchanged sentences

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Marine Segment

22 unchanged sentences

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

The table below presents the concentrations of current receivables (trade and retainage) at June 30, 2024 and December 31, 2023, respectively:

June 30, 2024

The table below presents the concentrations of current receivables (trade and retainage) at September 30, 2024 and December 31, 2023, respectively:

September 30, 2024

December 31, 2023

6 unchanged sentences

Net receivables

At June 30, 2024, the United States Navy, which is included in the Federal Government category, accounted for 27.2 % of total current receivables.

At September 30, 2024, the United States Navy, which is included in the Federal Government category, accounted for 23.7 % of total current receivables.

At December 31, 2023, a customer in the Private Companies category accounted for 19.9 % of total current receivables.

Additionally, the table below represents concentrations of contract revenue by type of customer for the three and six months ended June 30, 2024 and 2023, respectively:

Three months ended June 30,

Six months ended June 30,

Additionally, the table below represents concentrations of contract revenue by type of customer for the three and nine months ended September 30, 2024 and 2023, respectively:

Three months ended September 30,

Nine months ended September 30,

Federal Government

3 unchanged sentences

Total contract revenues

For the three months ended June 30, 2024, the United States Navy, which is included in the Federal Government category, accounted for 28.9 % of total contract revenues.

For the three months ended June 30, 2023, the United States Navy, which is included in the Federal Government category, accounted for 14.0 % of total contract revenues.

For the six months ended June 30, 2024, the United States Navy, which is included in the Federal Government category, accounted for 26.5 % of total contract revenues.

For the six months ended June 30, 2023, no single customer accounted for more than 10.0% of total contract revenues.

For the three months ended September 30, 2024, the United States Navy, which is included in the Federal Government category, accounted for 25.2 % of total contract revenues and a customer in the Private Companies category accounted for 10.0 % of total contract revenues.

For the three months ended September 30, 2023, the United States Navy, which is included in the Federal Government category, accounted for 10.2 % of total contract revenues.

For the nine months ended September 30, 2024, the United States Navy, which is included in the Federal Government category, accounted for 26.0 % of total contract revenues.

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

With the exception of the Unites States Navy, 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 besides the United States Navy sustains such a large portion of receivables or contract revenue over time.

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.

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

For the fiscal year ended December 31, 2023 and the three months and six months ended June 30, 2024, the Company’s revenue related to the joint venture subcontract was approximately $ 90.5 million, $ 55.5 million and $ 93.5 million, respectively.

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 $ 447.6 million.

For the fiscal year ended December 31, 2023 and the three months and nine months ended September 30, 2024, the Company’s revenue related to the joint venture subcontract was approximately $ 90.5 million, $ 57.2 million and $ 150.7 million, respectively.

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 8.6 % and 4.0 % of total revenues for the three months ended June 30, 2024 and 2023, respectively, and 7.4 % and 2.9 % for the six months ended June 30, 2024 and 2023, respectively, and were primarily located in the Caribbean Basin.

Contract revenues generated outside the United States totaled 10.1 % and 2.7 % of total revenues for the three months ended September 30, 2024 and 2023, respectively, and 8.4 % and 2.8 % for the nine months ended September 30, 2024 and 2023, respectively, and were primarily located in the Caribbean Basin.

Contracts in Progress

Contracts in progress are as follows at June 30, 2024 and December 31, 2023:

Contracts in progress are as follows at September 30, 2024 and December 31, 2023:

September 30,

Costs incurred on uncompleted contracts

3 unchanged sentences

( 1,553,704 )

Included in the accompanying Consolidated Balance Sheets under the following captions:

Included in the accompanying Condensed Consolidated Balance Sheets under the following captions:

Contract assets

Contract liabilities

Included in contract assets is approximately $ 13.5 million and $ 13.0 million at June 30, 2024 and December 31, 2023, respectively, related to claims and unapproved change orders.

Included in contract assets is approximately $ 15.0 million and $ 13.0 million at September 30, 2024 and December 31, 2023, respectively, related to claims and unapproved change orders.

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

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

As of June 30, 2024, the aggregate amount of the remaining performance obligations was approximately $ 758.4 million.

As of September 30, 2024, the aggregate amount of the remaining performance obligations was approximately $ 690.5 million.

Of this amount, the current expectation of the Company is that it will recognize $ 578.3 million, or 84 %, in the next 12 months and the remaining balance thereafter.

Property and Equipment

The following is a summary of property and equipment at June 30, 2024 and December 31, 2023:

The following is a summary of property and equipment at September 30, 2024 and December 31, 2023:

September 30,

Automobiles and trucks

6 unchanged sentences

Construction in progress

For the three months ended June 30, 2024 and 2023, depreciation expense was $ 4.1 million and $ 4.4 million, respectively.

For the six months ended June 30, 2024 and 2023, depreciation expense was $ 8.3 million and $ 9.0 million, respectively.

For the three months ended September 30, 2024 and 2023, depreciation expense was $ 3.6 million and $ 4.5 million, respectively.

For the nine months ended September 30, 2024 and 2023, depreciation expense was $ 12.0 million and $ 13.5 million, respectively.

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

11 unchanged sentences

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

The following table sets forth by level within the fair value hierarchy the Company’s recurring financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2024 and December 31, 2023:

Fair Value Measurements

Carrying Value

June 30, 2024

September 30, 2024

Cash surrender value of life insurance policy

1 unchanged sentence

Cash surrender value of life insurance policy

Our concrete segment had life insurance policies with a combined face value of $ 11.1 million as of June 30, 2024.

Our concrete segment had life insurance policies with a combined face value of $ 11.1 million as of September 30, 2024.

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.

1 unchanged sentence

Other Fair Value Measurements

The fair value of the Company’s debt at June 30, 2024 and December 31, 2023 approximated its carrying value of $ 64.7 million and $ 42.3 million, respectively, as interest is based on current market interest rates for debt with similar risk and maturity.

The fair value of the Company’s debt at September 30, 2024 and December 31, 2023 approximated its carrying value of $ 31.9 million and $ 42.3 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.

Accrued Liabilities

Accrued liabilities at June 30, 2024 and December 31, 2023 consisted of the following:

June 30, 2024

Accrued liabilities at September 30, 2024 and December 31, 2023 consisted of the following:

September 30, 2024

December 31, 2023

33 unchanged sentences

On July 26, 2024, the Company executed Amendment No.

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

See Note 18 for more information regarding Amendment No.

The quarterly weighted average interest rate for the Credit Agreement, as of June 30, 2024 was 12.07 %.

5 to the Loan Agreement with White Oak Commercial Finance, LLC and the Lenders party thereto.

This amendment, among other things, (i) replaced the minimum FCCR covenant with a minimum EBITDA covenant for the next four quarters, (ii) modified the minimum liquidity requirements through January 1, 2025, (iii) replaced the requirement to raise $ 45.0 million through asset sales by September 30, 2024, with certain milestones requiring the Company to raise $ 25.0 million (the “2024 Liquidity Transactions”) by September 30, 2024, and (iv) further modified the timing and amounts of term loan prepayments.

Under the terms of Amendment No.

5, the Company was required to make the following term loan prepayments:

July 26, 2024 - $ 2.0 million, August 30, 2024 - $ 4.0 million and September 30, 2024 - $ 4.0 million.

The Company is also required to make the following term loan prepayments:

October 31, 2024 - $ 1.67 million, November 29, 2024 - $ 1.67 million and December 31, 2024 - $ 1.67 million.

Amendment No.

5 also includes other administrative and definitional changes, including changes to the EBITDA requirements used to compute the interest rate margin applicable to the revolving credit facility.

The quarterly weighted average interest rate for the Credit Agreement, as of September 30, 2024 was 11.87 %.

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

June 30, 2024

September 30, 2024

December 31, 2023

3 unchanged sentences

Total current debt

Revolving line of credit - long-term

Term loan - long-term

6 unchanged sentences

The Revolver termination date is the earlier of the Credit Agreement termination date, May 15, 2027, or the date the outstanding balance is permanently reduced to zero, in accordance with the terms of the Credit Agreement.

As of June 30, 2024, the Company had $ 22.7 million in borrowings under the Revolver.

The Company’s borrowing availability under the Revolver at June 30, 2024 was approximately $ 16.6 million.

During the six months ended June 30, 2024, the Company borrowed $ 29.2 million on the Revolver.

During the six months ended June 30, 2024, the Company repaid $ 6.5 million outstanding on the Revolver.

As of September 30, 2024, the Company had no borrowings under the Revolver.

The Company’s borrowing availability under the Revolver at September 30, 2024 was approximately $ 46.1 million.

During the nine months ended September 30, 2024, the Company had borrowings and repayments of $ 39.3 million on the Revolver.

Financial covenants

1 unchanged sentence

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

- Trailing Four Quarter Test Period Ending June 30, 2024 to not be less than 1.00 to 1.00.

- Trailing Four Quarter Test Period Ending September 30, 2025 and each Fiscal Quarter thereafter, to not be less than 1.10 to 1.00.

8 unchanged sentences

- Trailing Four Quarter Test Period ending June 30, 2025 - $ 31,691,000 .

● The Company shall not permit Liquidity (as defined in the Credit Agreement) of to fall below the following during each noted period (i) for more than three (3) consecutive Business Days (as defined in the Credit Agreement) nor (i) as of the close of business on Friday of each week:

From April 24, 2024 through July 26, 2024

$ 8,000,000 ;

provided that Liquidity may be less than $ 8,000,000 but no less than $ 5,000,000 on the close of business of one Friday during such period and during the week (ending Sunday) that includes such Friday

From July 27, 2024 October 31, 2024

From November 1, 2024 through November 30, 2024

From December 1, 2024 through December 31, 2024

From January 1, 2025 through the Maturity Date

provided that if the 2024 Liquidity Transactions (as defined in the Amendment) occur on or prior to September 30, 2024, minimum liquidity requirement shall be set to $ 20,000,000 .

The Company shall not permit Liquidity (as defined in the Credit Agreement) to fall below $ 20.0 million (i) for more than three (3) consecutive Business Days (as defined in the Credit Agreement) nor (ii) as of the close of business on Friday of each week.

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;

3 unchanged sentences

and, events constituting a change of control.

The Company was in compliance with all financial covenants under the amended agreement as of June 30, 2024.

The Company was in compliance with all financial covenants under the amended agreement as of September 30, 2024.

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

and Mobilease for the purpose of financing equipment purchased.

As of June 30, 2024 and December 31, 2023, the carrying value of this debt was $ 1.7 million and $ 1.9 million, respectively.

As of September 30, 2024 and December 31, 2023, the carrying value of this debt was $ 1.5 million and $ 1.9 million, respectively.

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

1 unchanged sentence

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

As of both June 30, 2024 and December 31, 2023, the carrying value of this debt was $ 2.4 million.

As of both September 30, 2024 and December 31, 2023, the carrying value of this debt was $ 2.4 million.

Other Long-Term Liabilities

Other long-term liabilities at June 30, 2024 and December 31, 2023 consisted of the following:

June 30, 2024

Other long-term liabilities at September 30, 2024 and December 31, 2023 consisted of the following:

September 30, 2024

December 31, 2023

15 unchanged sentences

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.

The Company’s effective tax rate is based on expected income, statutory rates and tax planning opportunities available to it.

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

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

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

Three months ended

Six months ended

Nine months ended

September 30,

Income tax expense (benefit)

Effective tax rate

The effective rate for the three and nine months ended September 30, 2024 differed from the Company’s statutory federal rate of 21 % primarily due to the tax impact from the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

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

1 unchanged sentence

The Company expects 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, the Company’s effective tax rate for the period ending June 30, 2024, is based off actual year-to-date operations.

Therefore, the Company’s effective tax rate for the period ending September 30, 2024, is based off actual year-to-date operations.

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

1 unchanged sentence

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

For the period ended June 30, 2024 the Company evaluated all positive and negative evidence in determining the amount of deferred tax assets more likely than not to be realized.

Based on the review of available evidence, management believes that a valuation allowance on the net deferred tax assets at June 30, 2024 remains appropriate.

The Company expects the unrecognized tax benefits as of June 30, 2024 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.

For the period ended September 30, 2024 the Company evaluated all positive and negative evidence in determining the amount of deferred tax assets more likely than not to be realized.

Based on the review of available evidence, management believes that a valuation allowance on the net deferred tax assets at September 30, 2024 remains appropriate.

The Company reduced its previously unrecognized tax benefits by $ 1.6 million in the quarter ended September 30, 2024 due to a lapse in the statute of limitations.

The Company does not have any unrecognized tax benefits as of September 30, 2024.

Earnings Per Share

1 unchanged sentence

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

For the three months ended June 30, 2024 and 2023, the Company had 181,025 and 247,945 securities, respectively, that were potentially dilutive in earnings per share calculations.

For the six months ended June 30, 2024 and 2023, the Company had 201,550 and 264,204 securities, respectively, that were potentially dilutive in earnings per share calculations.

For the three months ended September 30, 2024 and 2023, the Company had 187,235 and 240,241 securities, respectively, that were potentially dilutive in earnings per share calculations.

For the nine months ended September 30, 2024 and 2023, the Company had 196,744 and 256,128 securities, respectively, that were potentially dilutive in earnings per share calculations.

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

The exercise price for certain stock options awarded by the Company exceeded the average market price of the Company’s common stock for the three and six months ended June 30, 2024 and 2023.

The exercise price for certain stock options awarded by the Company exceeded the average market price of the Company’s common stock for the three and nine months ended September 30, 2024 and 2023.

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

The Company reported a net loss for all periods presented;

The Company reported a net loss for the three months ended September 30, 2023 and nine months ended September 30, 2024 and 2023;

therefore, all potentially dilutive securities are antidilutive and are excluded from the computation of diluted loss per share for such periods.

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

Three months ended June 30,

Six months ended June 30,

Three months ended

Nine months ended September 30,

September 30,

Weighted average shares outstanding

2 unchanged sentences

Common stock options

Employee stock purchase plan

Total weighted average shares outstanding assuming dilution

Issuance of Common Stock

On September 12, 2024, the Company completed the sale of 5,589,000 shares of common stock, including 729,000 shares of common stock pursuant to an option granted to the underwriters, in an underwritten public offering.

The Company received net proceeds of approximately $ 26.5 million, after deducting underwriting discounts and other estimated offering expenses payable by the Company.

The net proceeds were used for working capital and for general corporate purposes, including repayment of borrowings under the Credit Agreement.

Share-Based Compensation

1 unchanged sentence

In general, the Company’s 2022 LTIP provides for grants of restricted stock and performance-based awards 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.

In the three months ended June 30, 2024 and 2023, compensation expense related to share-based awards outstanding was $ 1.6 million and $ 0.9 million, respectively.

In the six months ended June 30, 2024 and 2023, compensation expense related to share-based awards outstanding was $ 1.9 million and $ 1.5 million, respectively.

In the three months ended June 30, 2024 and 2023, payments related to tax withholding for share-based compensation for certain officers of the Company were less than $ 0.1 million in both periods.

In the six months ended June 30, 2024 and 2023, payments related to tax withholding for share-based compensation for certain officers of the Company were less than $ 0.1 million and $ 0.2 million, respectively.

In May 2024 shareholders approved the ESPP, which became effective on September 16, 2024.

The Company has reserved a total of 1,000,000 shares under the ESPP, all of which are authorized and available for future issuance under the ESPP.

The ESPP provides a means by which eligible employees of the Company are given an opportunity to purchase shares of common stock at a discount as permitted under the Internal Revenue Code of 1986, as amended.

During the three and nine months ended September 30, 2024, there were no shares issued under the ESPP.

The Company has an outstanding liability pertaining to the ESPP of less than $ 0.1 million as of September 30, 2024, included in accrued expenses, for employee contributions to the ESPP, pending issuance at the end of the offering period.

In the three months ended September 30, 2024 and 2023, compensation expense related to share-based awards outstanding was $ 1.0 million and $ 0.4 million, respectively.

In the nine months ended September 30, 2024 and 2023, compensation expense related to share-based awards outstanding was $ 2.9 million and $ 1.8 million, respectively.

In the three months ended September 30, 2024 and 2023, payments related to tax withholding for

share-based compensation for certain officers of the Company were $ 0.4 million and $ 0.3 million, respectively.

In the nine months ended September 30, 2024 and 2023, payments related to tax withholding for share-based compensation for certain officers of the Company were $ 0.4 million and $ 0.5 million, respectively.

On March 4, 2024, an employee of the Company was awarded a total of 2,197 shares of restricted common stock with a vesting period of three years and a fair value of $ 6.83 per share.

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On June 24, 2024, an employee of the Company was awarded a total of 1,482 shares of restricted common stock with a vesting period of three years and a fair value of $ 8.77 per share.

In the three months ended June 30, 2024, there were 10,246 options exercised generating proceeds to the Company of $ 0.1 million.

In the six months ended June 30, 2024, there were 56,568 options exercised

generating proceeds to the Company of $ 0.4 million.

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

At June 30, 2024, total unrecognized compensation expense related to unvested stock was approximately $ 9.1 million, which is expected to be recognized over a period of approximately 2.5 years.

On August 5, 2024, an employee of the Company was awarded a total of 1,652 shares of restricted common stock with a vesting period of three years and a fair value of $ 6.78 per share.

In the three months ended September 30, 2024, there were no options exercised.

In the nine months ended September 30, 2024, there were 56,568 options exercised generating proceeds to the Company of $ 0.4 million.

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

At September 30, 2024, total unrecognized compensation expense related to unvested stock was approximately $ 8.1 million, which is expected to be recognized over a period of approximately 2.3 years.

Commitments and Contingencies

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Three months ended

Six months ended

Nine months ended

September 30,

Contract revenues

Operating (loss) income

Operating income (loss)

Depreciation and amortization expense

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Property and equipment, net

There were $ 1.1 million and none in intersegment revenues between the Company’s two reportable segments for the three months ended June 30, 2024 and 2023, respectively.

There were $ 1.7 million and less than $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the six months ended June 30, 2024 and 2023, respectively.

The marine segment had foreign revenues of $ 16.5 million and $ 7.3 million for the three months ended June 30, 2024 and 2023, respectively.

The marine segment has foreign revenues of $ 26.0 million and $ 10.0 million for the six months ended June 30, 2024 and 2023, respectively.

There was $ 0.1 million in intersegment revenues between the Company’s two reportable segments for both the three months ended September 30, 2024 and 2023.

There were $ 1.8 million and $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the nine months ended September 30, 2024 and 2023, respectively.

The marine segment had foreign revenues of $ 22.8 million and $ 4.5 million for the three months ended September 30, 2024 and 2023, respectively.

The marine segment has foreign revenues of $ 48.8 million and $ 14.5 million for the nine months ended September 30, 2024 and 2023, respectively.

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

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Leases recorded on the balance sheet consists of the following:

September 30,

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

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Total liabilities

(1) Operating lease right-of-use assets are recorded net of accumulated amortization of $ 20.5 million and $ 15.6 million as of June 30, 2024 and December 31, 2023, respectively.

(2) Financing lease right-of-use assets are recorded net of accumulated amortization of $ 13.8 million and $ 10.2 million as of June 30, 2024 and December 31, 2023, respectively.

(1) Operating lease right-of-use assets are recorded net of accumulated amortization of $ 23.1 million and $ 15.6 million as of September 30, 2024 and December 31, 2023, respectively.

(2) Financing lease right-of-use assets are recorded net of accumulated amortization of $ 15.8 million and $ 10.2 million as of September 30, 2024 and December 31, 2023, respectively.

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

September 30,

Weighted Average Remaining Lease Term (in years)

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The components of lease expense are as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Operating lease costs:

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Supplemental cash flow information related to leases is as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

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

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Year ending December 31,

2024 (excluding the six months ended June 30, 2024)

2024 (excluding the nine months ended September 30, 2024)

Total future minimum lease payments

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The Company’s portion of work as a dedicated subcontractor totals $ 447.6 million.

For the three months ended June 30, 2024 and 2023, the Company’s revenue related to the joint venture subcontract was approximately

$ 55.5 million and $ 25.5 million, respectively.

For the six months ended June 30, 2024 and 2023, the Company’s revenue related to the joint venture subcontract was approximately $ 93.5 million and $ 25.5 million, respectively.

Subsequent Event

On July 26, 2024, the Company executed Amendment No.

5 to the Loan Agreement with White Oak Commercial Finance, LLC and the Lenders party thereto.

This amendment, among other things, (i) replaces the minimum FCCR covenant with a minimum EBITDA covenant for the next four quarters, (ii) modifies the minimum liquidity requirements through January 1, 2025, (iii) replaces the requirement to raise $ 45.0 million through asset sales by September 30, 2024, with certain milestones requiring the Company to raise $ 25.0 million (the “2024 Liquidity Transactions”) by September 30, 2024, and (iv) further modifies the timing and amounts of term loan prepayments.

Under the terms of Amendment No.

5, the Company must make the following term loan prepayments:

July 26, 2024 – $ 2.0 million, August 30, 2024 - $ 4.0 million and September 30, 2024 - $ 4.0 million.

The Company must also make a prepayment of $ 5.0 million upon the close of the sale of the East-West Jones property.

If the East-West Jones property does not close on or before September 30, 2024, the Company must make the following term loan prepayments:

October 31, 2024 - $ 1.67 million, November 29, 2024 - $ 1.67 million and December 31, 2024 - $ 1.67 million.

In the event the 2024 Liquidity Transactions do not occur on or prior to September 30, 2024, the following will occur:

(i) margin will be increased by 50 basis-points on October 1 , 2024 and every seven day period thereafter (but in any event not in excess of 200 basis-points) and the pricing grid level for the revolving facility shall be set to Level III, (ii) accounts constituting Eligible Surety Bond Accounts shall be phased out of the Borrowing Base and shall no longer constitute Eligible Surety Bond Accounts pursuant to a schedule to be determined by the Administrative Agent in its sole discretion and which may be reduced to zero, and (iii) the following additional prepayments will be required:

January 31, 2025 - $ 1.67 million, February 28, 2025 - $ 1.67 million and March 31, 2025- $ 1.67 million.

Amendment No.

5 also includes other administrative and definitional changes, including changes to the EBITDA requirements used to compute the interest rate margin applicable to the revolving credit facility.

For the three months ended September 30, 2024 and 2023, the Company’s revenue related to the joint venture subcontract was

approximately $ 57.2 million and $ 17.3 million, respectively.

For the nine months ended September 30, 2024 and 2023, the Company’s revenue related to the joint venture subcontract was approximately $ 150.7 million and $ 42.8 million, respectively.

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

What changed 10-Q

Item 1. Financial Statements