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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

Commission file number: 1‑33891

ORION GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

State of Incorporation

26‑0097459

IRS Employer Identification Number

 

 

12000 Aerospace Avenue, Suite 300

Houston, Texas  77034

Address of Principal Executive Office

(713) 852‑6500

Registrant’s telephone number (including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Common stock, $0.01 par value per share

 

ORN

 

The New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:   Yes No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:    Yes No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:    Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted  and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files

Yes   No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, "accelerated filer", "small reporting" company and "emerging growth" company in Rule 12b‑2 of the Exchange Act (Check One):

 

 

 

 

 

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated filer

Smaller reporting company 

Emerging growth company 

 

If an emerging growth company, initiate by check mark if the registrant has elected not to use the extended transition period for complying with any, new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b‑2 of the Act) Yes  No

There were 29,607,285 shares of common stock outstanding as of February 21, 2020. The aggregate market value of the Registrant’s common equity held by non-affiliates was approximately $79.1 million as of June 28, 2019, the last business day of the Registrant’s most recently completed second fiscal quarter, based upon the last reported sales price on the New York Stock Exchange on that date.

DOCUMENTS INCORPORATED BY REFERENCE

Part III – Portions of the Registrant’s definitive Proxy Statement to be issued in connection with the 2020 Annual Meeting of Stockholders to be filed on or about April 1, 2020, are incorporated by reference in Part III of this Annual Report on Form 10‑K.

 

 

 

 

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ORION GROUP HOLDINGS, INC.

2019 Annual Report on Form 10‑K

Table of Contents

PART I 

 

3

Item 1. 

Business

3

Item 1A. 

Risk Factors

13

Item 1B. 

Unresolved Staff Comments

22

Item 2. 

Properties

22

Item 3. 

Legal Proceedings

23

Item 4. 

Mine Safety Disclosure (not applicable)

23

PART II 

 

23

Item 5. 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

23

Item 6. 

Selected Financial Data

25

Item 7. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 7A. 

Quantitative and Qualitative Disclosures about Market Risk

39

Item 8. 

Financial Statements and Supplementary Data

39

Item 9. 

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

39

Item 9A. 

Controls and Procedures

40

Item 9B. 

Other Information

41

PART III 

 

41

Item 10. 

Directors, Executive Officers and Corporate Governance

41

Item 11. 

Executive Compensation

41

Item 12. 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

42

Item 13. 

Certain Relationships and Related Transactions, and Director Independence

42

Item 14. 

Principal Accounting Fees and Services

42

PART IV 

 

42

Item 15. 

Exhibits and Financial Statement Schedules

42

SIGNATURES 

46

 

 

 

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PART I

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Annual Report on Form 10‑K and the documents incorporated by reference herein may contain forward-looking statements that are not based on historical fact.  When used in this report, words such as “expects”, “anticipates”, “believes”, “seeks”, “estimates”, “plans”, “intends” and similar words identify forward-looking statements.  You should not place undue reliance on these forward-looking statements.  Although such statements are based on management’s current estimates and expectations and currently available competitive, financial and economic data, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements.  Some of the factors that could cause or contribute to such differences are listed and discussed in Item 1A “Risk Factors” below and elsewhere in this Annual Report on Form 10‑K.  We undertake no obligation to release publicly any revisions or updates to any forward-looking statements that are contained in this document.  We encourage you to read carefully the risk factors described in other documents we file from time to time with the United States Securities and Exchange Commission (the “SEC”).

Item 1.            BUSINESS

General background

Orion Group Holdings, Inc., 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, Canada and the Caribbean Basin through its marine segment and its concrete segment. Our marine segment provides construction and dredging services relating to marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging of waterways, channels and ports, environmental dredging, design, and specialty services. Our concrete segment provides turnkey concrete construction services including pour and finish, dirt work, layout, forming, rebar, and mesh across the light commercial, structural and other associated business areas. We are headquartered in Houston, Texas with regional offices throughout our operating areas.

Orion Group Holdings, Inc. is a Delaware corporation. The common stock of Orion Group Holdings, Inc. is listed on the New York Stock Exchange under the symbol ORN. Unless the context otherwise requires, all references herein to “Orion”, the “Company”, the “Registrant”, “we”, “us” or “our” refer to Orion Group Holdings, Inc. and its consolidated subsidiaries and affiliates.

History and growth

Orion Group Holdings, Inc. was founded in 1994 as a marine construction project management business. Since then, we have expanded our reach both through organic growth and acquisitions. We have successfully acquired and fully integrated several companies into our operations, including the acquisition of T.A.S. Commercial Concrete Construction, LLC ("TAS") during 2015, and Tony Bagliore Concrete, Inc. ("TBC") during 2017. The TAS acquisition added another segment to our business, provided diversification of end market drivers and a diversified customer base. The TBC acquisition expanded the Company’s current service offerings to an additional geographic market within its concrete segment. These strategic acquisitions have also enhanced our operational capabilities, provided us with a larger geographic base, and added to our equipment fleet. Today we are focused on becoming the leading specialty construction company in the building, industrial, and infrastructure sectors and will continue to seek growth opportunities through greenfield expansion, acquisitions, vertical integration, and diversification.

Our operating principles and guiding beliefs include:

·

Safety - We believe work place safety and accident prevention is our moral obligation as well as a good business practice. By identifying and concentrating resources to address job site hazards, we continually strive to reduce our incident rates and the severity of the incidents.

·

Quality - We believe in the importance of performing high quality work.

·

Production - We believe in the importance of performing tasks safely, efficiently, and timely.

·

Integrity – We believe that integrity is the foundation upon which all other operating principles and guiding beliefs rest and it is achieved through maintaining high ethical standards through an established code of conduct and an effective company-wide compliance program.

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·

Sustainability – We are committed to sustainability, which encompasses many aspects of how we conduct ourselves and practice our core values. We believe sustainability is important to our customers, employees, shareholders, and communities, and is also a long-term business driver. By focusing on specific initiatives that address social, environmental, governance and economic  challenges, we can minimize risk and increase our competitive advantage

Our Business Strategy

We employ the following key business strategies:

·

Continue to add construction capabilities - We also seek to add capabilities that will augment our core contracting and construction competencies, improve our gross margins, and allow us to compete more effectively for contracts that might not otherwise be available to us.

·

Expand into new markets and complementary service offerings and selectively pursue strategic acquisitions - We seek to identify attractive new markets and strategic opportunities to expand our service offering through greenfield expansions, diversification, or selective acquisitions.

·

Continue to capitalize on favorable long-term industry trends - We seek to capitalize on infrastructure capital investments across the markets we serve including port and marine infrastructure, government funded projects, transportation, oil and gas facilities, recreational waterside industry infrastructure expansion and environmental restoration markets. We seek to capitalize on privately and government funded projects across the commercial concrete markets we serve including industrial, institutional, commercial real estate, and recreational developments.

·

Diversification - To mitigate the risks inherent in the construction business as the result of general economic factors, we pursue projects in both the public and private sectors for a wide range of customers within each sector (from the federal government to small municipalities and from large corporations to small property owners and developers and in diverse geographic markets).

·

Continue to reinvest in our core operations - We pursue technically complex projects where our people, specialized services and equipment differentiate us from our competitors. We intend to enhance the types, numbers and capabilities of our equipment so we can provide turnkey construction services to our customers. This is intended to assure that when we are called on for business, we have the right people, skills, and equipment readily available for multiple projects.

·

Continue to attract, retain and develop our employees - We believe our employees are integral to the success of our project execution, and we continue to allocate resources to attract and retain talented managers, supervisors and field personnel.

·

Ownership of equipment - We own a large, versatile fleet of well-maintained construction equipment. The ownership of this equipment enables us to compete more effectively by ensuring availability of equipment at a favorable cost.

Services Provided

Marine Construction Services

Marine construction services include construction, restoration, dredging, maintenance and repair of marine transportation facilities, marine pipelines, bridges and causeways, and marine environmental structures. We have the capability of providing design-build services and typically serve as the prime contractor for these types of projects.

Marine transportation facility projects include public port facilities for container ship loading and unloading; cruise ship port facilities; private terminals; special-use Navy terminals; recreational use marinas and docks; and other marine-based facilities. These projects typically consist of the positioning and installation of steel or concrete fabrication dock or mooring structures designed for durability and longevity, and involve driving piles of concrete, pipe or sheet pile to provide a foundation for the port facility structure that we subsequently construct on the piles. We also provide on-going maintenance and repair, inspection services, emergency repair, and demolition and salvage to such facilities.

Our marine pipeline service projects generally include the installation and removal of underwater buried pipeline transmission lines; installation of pipeline intakes and outfalls for industrial facilities; construction of pipeline outfalls for

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wastewater and industrial discharges; river crossing and directional drilling; creation of hot taps and tie-ins; and inspection, maintenance and repair services.

Our bridge and causeway projects include the construction, repair and maintenance of all types of overwater bridges and causeways, as well as the development of fendering systems in marine environments. We serve as the prime contractor for many of these projects, and some of these are design-build contracts. These projects involve fabricating steel or concrete structures designed for durability and longevity, and involve driving concrete, pipe or sheet pile to create support for the concrete deck roadways that we subsequently construct on the piles. These piles can exceed four feet in diameter, can range up to 170 feet in overall length, and are often driven 90 feet into the sea floor. We do not control the funding of bridge and causeway work, which has not been consistently available

Marine environmental structure projects may include the installation of concrete mattresses to promote erosion protection; construction of levees to contain environmental mitigation projects, and the installation of geotubes for wetlands and island creation. Such structures are used for erosion control, wetlands creation and environmental remediation.

Dredging generally enhances or preserves the navigability of waterways or the protection of shorelines through the removal or replenishment of soil, sand or rock.  Dredging involves the removal of mud and silt from the channel floor by means of a mechanical backhoe, crane and bucket or cutter suction dredge and pipeline systems. Dredging is integral to marine capital and maintenance projects, including: maintenance for previously deepened waterways and harbors to remove silt, sand and other accumulated sediments; construction of breakwaters, jetties, canals and other marine structures; deepening ship channels and wharves to accommodate larger and deeper draft ships; containing erosion of wetlands and coastal marshes; land reclamation; and beach nourishment and creation of wildlife refuges. Maintenance dredging projects are a source of recurring revenue as active channels typically require routine dredging due to natural sedimentation. The frequency of maintenance dredging may be accelerated by heavy rainfall or major weather events such as hurricanes. Areas where no natural deep water ports exist, such as the Texas Gulf Coast, require substantial dredging. We maintain multiple specialty dredges of various sizes and specifications to meet customer needs. Our dredging services are typically combined with our marine construction services to provide a turn-key solution for our customers.

Our specialty services include design, salvage, demolition, surveying, towing, diving and underwater inspection, excavation and repair. Our diving services are largely performed in shallow water and include inspections, salvage and pile restoration and encapsulation. Our survey services include surveying pipelines and performing hydrographic surveys which determine the configuration of the floors of bodies of water and detect and identify wrecks and other obstructions. Most of these specialty services support our other services or provide an introductory opportunity to other customers.

Concrete Construction Services

The concrete segment provides its services in the following areas: light commercial, structural, and other services. Light commercial services include horizontally poured concrete for products such as sidewalks, ramps, tilt walls, and trenches. Structural services include elevated concrete pouring for products such as columns, elevated beams, and structural walls. Other services comprise labor related to concrete pouring, such as rebar installation and pumping services and typically support our other services. These services cover all phases of concrete construction including dirt work and layout, forming, rebar and mesh, and pour and finish.

Industry and Market Overview

Marine Segment

We provide our services to similar customers, or in some cases, the same customers, across the markets served by our business. Our marine segment customers may be in diverse end markets, including port expansion and maintenance, bridges, causeways and other marine infrastructure, the recreational waterside industry, the U.S. Department of Defense, the energy industry, coastal protection and reclamation, along with hurricane restoration and repair and environmental remediation. We believe that this broad customer base enables us to lessen the negative effects during a downturn in a

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specific end market and respond quickly to the needs of expanding end markets. The following includes an overview of our diverse markets in the marine construction industry:

Port Expansion and Maintenance

Expected increases in cargo volume and future demands from larger ships transiting the expanded Panama Canal will require ports, especially along the Gulf Coast and Atlantic Seaboard, to expand their dock capacity and port infrastructure to accommodate larger container ships and increased cargo volumes, as well as perform additional dredging services to deepen and maintain their channels. We provide customers in this sector turnkey services to meet all their port expansion and maintenance work.

Bridges and Causeways

According to the American Society of Civil Engineers, as of their most recent report, one in nine of the nation’s bridges are structurally deficient, and the average age of the nation’s bridges is 43 years old. We are able to construct or restore overwater bridges, and design, repair, or replace, fendering systems for customers.

Marine Infrastructure

The U.S. Marine Transportation System (“MTS”) consists of waterways, ports and their intermodal connections, vessels, vehicles, and system users, as well as shipyards and repair facilities crucial to maritime activity. The MTS is primarily owned and operated through an aggregation of federal, state, and local governmental authorities, as well as privately owned facilities and private companies. U.S. inland and intracoastal waterways require continuous maintenance and improvement. While waterway usage is increasing, the facilities and supporting systems are aging. In addition, channels and waterways must maintain certain depths to accommodate ship and barge traffic. Natural sedimentation in these channels and waterways require routine maintenance dredging to maintain navigability.

Our full business complement, including design, dredging, marine construction, and specialty services, such as diving, survey, and inspections, are fully utilized by our customers to meet all their marine infrastructure project needs.

Recreational Waterside Industry

An increase in the number and size of cruise ships has generated a need for substantial port infrastructure development, including planning and construction of new terminals and facilities, as well as on-going maintenance and repair services. These larger vessels require the development of new mooring structures as well as additional dredging services to accommodate deeper drafts. Our service area includes, among others, the ports of Miami, Galveston, Tampa, New Orleans, Canaveral, Juneau, Tacoma, Seattle and the Caribbean Basin, which includes numerous cruise facilities and is the most popular cruise destination in the North American market.

The Department of Defense and Homeland Security

The U.S. Navy has the responsibility for the maintenance of 40 facilities in the United States, which includes a significant amount of marine infrastructure. We believe the U.S. Navy will continue to maintain strategic facilities, including required maintenance and upgrades to its marine facility infrastructure.

The U.S. Coast Guard maintains more than 50,000 federal aids to navigation, which include buoys, lighthouses, day beacons, and radio-navigation signals. Additionally, it has oversight responsibility for over 18,000 highway and railroad bridges that span navigable waterways throughout the country. As part of the Department of Homeland Security, we anticipate that the U.S. Coast Guard’s needs for varied marine construction services, including those listed above, will provide opportunities for us in the future.

Energy Industry

We design, construct, repair and remove underwater pipelines, and provide marine construction, dredging, and on-going  maintenance services for private refineries, terminal facilities and docks, and other critical areas near shore oil and gas infrastructure.

U.S. Coastal and Wetland Restoration and Reclamation

We are hopeful that increases in coastal population density and demographic trends will lead to an increase in the number of coastal restoration and reclamation projects, and as the value of waterside assets rises from a residential and recreational

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standpoint, the private sector, government agencies and municipalities will increase spending on restoration and reclamation projects.

Hurricane Restoration and Repair

Hurricanes are often very destructive to the existing marine infrastructure and natural protection barriers of the prime storm areas of the Gulf Coast, the Atlantic Seaboard, and the Caribbean Basin, including bridges, ports, underwater channels and sensitive coastal areas. Typically, restoration and repair opportunities continue for several years after a major hurricane event. These events provide incremental projects to our industry that contribute to a favorable bidding environment and high capacity utilization in our markets during such times.

Environmental Remediation

We believe there will be additional funding for the protection of natural habitats, environmental preservation, wetlands creation and remediation for high priority projects in Louisiana and other areas in the markets we serve that will protect and restore sensitive marine and coastal areas, advance ocean science and research, and ensure sustainable use of ocean resources.

Concrete Segment

We provide our services to different customers across the markets served by our business. Our customers in the concrete segment are in diverse end markets such as industrial, institutional, commercial real estate, and recreational developments.

Our concrete segment depends on continued growth in population to support residential and nonresidential construction, specifically in the metropolitan areas of Texas. The latest estimates from the U.S. Census Bureau indicate that the metropolitan areas of Texas, specifically Dallas, Houston, San Antonio and Austin, are among the U.S. top 10 in population growth based on the most recent survey results. These markets show substantial growth in multi-family housing, medical facilities, and commercial, office, retail, and industrial buildings.

We believe that this broad customer base enables us to lessen the negative effects during a downturn in a specific end market and respond quickly to the needs of expanding end markets. The following includes an overview of our diverse markets in the concrete industry:

Industrial developments

Our industrial markets include manufacturing plants, industrial warehousing, distribution centers, waste water treatment facilities and facilities supporting the petrochemical industry. An expected increase in distribution has generated a need for substantial industrial park developments.

Institutional developments and expansions

Our institutional markets include educational facilities, medical facilities, museums, and religious developments. Due to significant population growth in the metropolitan areas of Texas, there has been great demand for institutional development and expansion. Additionally, as population and suburban areas grow, so does the continued need for medical and educational facilities.

Structural developments

Our structural markets include mid- and high-rise multi-family living, single and multi-story office buildings, parking garages, shopping malls, and other multi-story buildings. Continued growth in business expansions and relocations to Texas are driving an increase in the need for office space and apartment complexes.

Retail developments

As population continues to grow, so does the need for retail developments, such as grocery stores, shopping malls, restaurants, free standing retail outlets, and other entertainment venues.

Recreational developments

Our recreational markets include a wide-range of hotels, sports venues, and stadiums. The increase in new businesses and new educational facilities has sparked the need for additional hotels and stadiums across the metropolitan areas of Texas.

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Customers

Our customers in the marine segment include federal, state and local governmental agencies as well as private commercial and industrial enterprises in the United States and the Caribbean Basin. Customers in our concrete segment include general contractors along with owners and developers of medical facilities, religious developments, sports complexes and stadiums, school districts and developers, owners of industrial, commercial and residential buildings, and some governmental agencies across the metropolitan areas of Texas. Most projects are competitively bid, with the award typically going to the lowest qualified bidder. Our customer base shifts from time to time depending on the types of projects we bid, and ultimately are successful on obtaining.

The following table represents concentrations of contract revenue by type of customer for the years ended December 31, 2019, 2018, and 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

%

    

2018

    

%

    

2017

    

%

 

Federal Government

 

$

46,425

 

 6

%  

$

42,143

 

 8

%  

$

63,823

 

11

%

State Governments

 

 

47,831

 

 7

%  

 

30,470

 

 6

%  

 

42,613

 

 7

%

Local Governments

 

 

212,958

 

30

%  

 

107,478

 

21

%  

 

91,591

 

16

%

Private Companies

 

 

401,176

 

57

%  

 

340,803

 

65

%  

 

380,526

 

66

%

Total contract revenues

 

$

708,390

 

100

%  

$

520,894

 

100

%  

$

578,553

 

100

%

 

We do not believe that the loss of any one of these customers would have a material adverse effect on our operations since no single customer sustains a large portion of our contract revenue over time.

Backlog

Our contract backlog represents our estimate of the revenues we expect to realize under the portion of the contracts remaining to be performed. Given the typical duration of our contracts, which generally is less than one year, our backlog at any point in time usually represents only a portion of the revenue that we expect to realize during a twelve month period. We include projects in our backlog when the customer has provided an executed contract, purchase order, change order, or other legally binding notice to proceed.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

    

September 30, 2019

    

June 30, 2019

    

March 31, 2019

    

December 31, 2018

Marine segment

 

$

340.7

 

$

404.3

 

$

477.0

 

$

219.4

 

$

256.7

Concrete segment

 

 

231.6

 

 

226.2

 

 

184.0

 

 

192.1

 

 

183.7

Consolidated

 

$

572.3

 

$

630.5

 

$

661.0

 

$

411.5

 

$

440.4

 

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.

Fluctuations in Quarterly Results

Our quarterly revenues and results of operations may fluctuate significantly depending upon the mix, size, scope, and progress schedules of our projects under contract, permitting, weather or other delays, the productivity of our labor force and the utilization of our equipment. These factors, as well as others, affect the rate at which revenue is recognized as projects are completed.

Competition

In our marine segment, we compete with several regional marine construction services companies and a few national marine construction services companies. From time to time, we compete with certain national land-based heavy civil contractors. In our concrete segment, we compete mostly in the private sector and our competitors range from small, local construction companies to large regional and national construction companies.

Both of our segments are highly fragmented with competitors generally varying within the markets we serve and with few competitors competing in all of the markets we serve or for all of the services that we provide. We believe that our turnkey

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capability, expertise, experience and reputation for providing safe and timely quality services, safety record and programs, versatile equipment fleet, financial strength, surety bonding capacity, knowledge of local markets and conditions, and project management and estimating abilities allow us to compete effectively. We believe significant barriers to entry exist in the markets in which we operate, including the ability to bond large projects, maritime law constraints, specialized marine equipment and technical experience; however, a U.S. company that has adequate financial resources, access to technical expertise, and specialized equipment may become a competitor.

Insurance and Bonding

We maintain general and excess liability, construction equipment, workers’ compensation and other forms of insurance; all in amounts adequate for our operating needs and consistent with industry practice.

In connection with both segments of the business, we often are required to provide various types of surety bonds that provide security for our performance under certain public and private sector contracts. Our ability to obtain surety bonds depends upon our capitalization, adequate working capital, past performance, management expertise, and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of our backlog that we have currently bonded and their own current underwriting standards, which may change from time to time. The capacity of the surety market is subject to market-driven fluctuations driven primarily by the level of surety industry losses and the degree of surety market consolidation. Although we do not believe that fluctuations in surety market capacity have significantly affected our ability to grow our business, there is no assurance that it will not significantly affect our ability to obtain new contracts in the future. The bonds we provide typically are for the contract amount of the project. At December 31, 2019, the capacity under our current bonding arrangement was at least $500 million, with approximately $280 million of projects being bonded. We believe our strong balance sheet and working capital position will allow us to continue to access our bonding capacity.

Trade Names

We operate under a number of trade names. We consolidate our operations under the brand name "Orion Group Holdings, Inc."  We may be known as Orion Marine Group, Orion Marine Construction, Orion Marine Contractors, Orion Construction, East and West Jones Placement Area, Schneider E&C, Orion Industrial Construction, Orion Concrete Construction, T.A.S. Commercial Concrete Construction, T.A.S. Commercial Concrete Solutions, T.A.S. Proco, or Houston Industrial Tool Services, as well as our former names of King Fisher Marine Service, F. Miller Construction, T. W. LaQuay Dredging, Misener Marine Construction, Misener Diving & Salvage, Northwest Marine Construction and West Construction. We do not generally register our trademarks with the U.S. Patent & Trademark Office, but instead rely on state and common law protections. While we consider our trade names to be valuable assets, we do not consider any single trademark or trade name to be of such material importance that its absence would cause a material disruption of our business.

Equipment

We operate and maintain a large and diverse equipment fleet in our marine and concrete segments, substantially all of which we own, that includes the following:

·

Barges - spud barges, material barges, deck barges, anchor barges, hopper barges, and fuel barges. These vessels are used to provide work platforms for cranes and other equipment, to transport materials to the project site and to provide support for the project at the project site.

·

Dayboats - small pushboats, dredge tenders and skiffs are used to shift barges at the project site, to move personnel and to provide general support to the project site.

·

Tugs - larger pushboats and tug boats are used to transport barges and other support equipment to and from the project site.

·

Dredges - 24” cutter head suction dredges (diesel), 20” cutter head suction dredge (diesel/electric), 20” cutter head suction dredges (diesel), 16” cutter head suction dredges, and 12” portable cutter head suction dredges are used to provide dredging services at project sites.

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·

Cranes - crawler lattice boom cranes with lift capability from 50 tons to 400 tons and hydraulic rough terrain cranes with lift capability from 15 tons to 60 tons are used to provide lifting and pile driving capabilities on project sites, and to provide bucket work, including mechanical dredging and dragline work, to project sites.

·

Tower Cranes - Capable of being assembled to reach heights of 600 feet and have a capacity of 44,000 pounds with a maximum of 242 foot working radius.

·

Pump Trucks - concrete pump trucks are large, diesel-powered trucks mounted with a powerful pump, and an extendable, sectioned hose or cylinder to help facilitate the placement of concrete for construction projects.

·

Laser Screeds - laser screeds are self-propelled four wheel drive, four wheel steer units that encompass a 20’ telescoping boom with a 12’ wide placement head. The screed head itself consists of 3 parts: the plow, the auger, and the vibrator. The plow disperses the concrete evenly, the auger removes the excess material to finished grade, and the vibrator smooths the surface. The screed has an on board computer system able to determine the correct elevation height and provide commands for elevation control.

We believe that ownership of certain equipment is generally preferable to leasing or rental in some cases because it ensures the equipment is available as needed and normally results in lower costs. We continually monitor and adjust our fleet size so that it is consistent with the size of the business, considering both existing backlog and expected future work. We believe that our equipment is well maintained and suitable for our current operations. We have the ability to extend the useful life of our equipment through capital refurbishment at periodic intervals. Most of our fleet is serviced by our own mechanics who work at various maintenance sites and facilities. We are also capable of building, and have built, much of our highly specialized equipment. Our strategy is to deploy our fleet from project to project as required. The assets (including equipment) are pledged as collateral under the Credit Facility.

Equipment Certification

In our marine segment, some of our equipment requires certification by the U.S. Coast Guard. All equipment which requires certification has obtained such certification and is maintained in good standing thereunder. In addition, where required, our vessels’ permissible loading capacities require certification by the American Bureau of Shipping (“ABS”). The ABS is an independent classification society which certifies that certain of our larger, seagoing vessels are “in-class,” signifying that the vessels have been built and maintained in accordance with ABS standards and applicable U.S. Coast Guard rules and regulations. All of our vessels that are required to be certified by the ABS have been certified as “in-class.” These certifications indicate that the vessels are structurally capable of operating in open waters, which enhances the mobility of our fleet.

Government Regulations

We are required to comply with the macro regulatory requirements of federal, state and local governmental agencies and authorities including the following:

·

regulations concerning workplace safety, labor relations and disadvantaged businesses;

·

licensing requirements applicable to shipping and dredging; and

·

permitting and inspection requirements applicable to marine construction projects.

In our marine segment, we are also subject to government regulations pursuant to the Dredging Act, the Merchant Marine Act of 1920, commonly referred to as the "Jones Act", the Shipping Act and the Vessel Documentation Act. These statutes require vessels engaged in the transport of merchandise or passengers between two points in the United States or dredging in the navigable waters of the U.S. to be documented with a coastwise endorsement, to be owned and controlled by U.S. citizens, to be manned by U.S. crews, and to be built in the U.S. The U.S. citizenship ownership and control standards require the vessel-owning entity to be at least 75% U.S. citizen owned, and prohibit the demise or bareboat chartering of the vessel to any entity that does not meet the 75% U.S. citizen ownership test. These statutes, together with similar requirements for other sectors of the maritime industry, are collectively referred to as “cabotage” laws.

In both our marine and concrete segments, we are subject to the requirements of OSHA and certain regulations for the EPA.

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We believe that we are in material compliance with applicable regulatory requirements and have all material licenses required to conduct our operations.

Environmental Matters

General

Our activities, including concrete construction, infrastructure construction, salvage, demolition, dredging and dredge material disposal activities are subject to stringent and complex federal, state, and local laws and regulations governing environmental protection, including air emissions, water quality, solid waste management, marine and bird species and their habitats, and wetlands. A portion of our construction contracts are entered into with public authorities and frequently impose additional governmental requirements, including requirements regarding labor relations.

Such laws and regulations may require that both segments and their customers obtain, and comply with, various environmental permits, registrations, licenses and other approvals. These laws and regulations also can restrict or impact the business activities in many ways, such as delaying the appropriation and performance of particular projects; restricting the way we handle or dispose of wastes; requiring remedial action to mitigate pollution conditions that may be caused by our operations or that are attributable to others; and enjoining some or all of our operations deemed in non-compliance with environmental laws and regulations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and/or criminal penalties, the imposition of remedial obligations and the issuance of orders enjoining future operations.

We believe that compliance with existing federal, state and local environmental laws and regulations will not have a material adverse effect on our business, results of operations, or financial condition. In addition, we could be affected by future laws or regulations. As a result, there can be no assurance as to the amount or timing of future expenditures for environmental compliance or remediation, and actual future expenditures may be different from the amounts we currently anticipate. The following is a discussion of the environmental laws and regulations that could have a material effect on our marine and concrete construction services.

Waste Management

Our operations could be subject to the federal Resource Conservation and Recovery Act (“RCRA”) and comparable state laws, which impose detailed requirements for the handling, storage, treatment and disposal of hazardous and non-hazardous solid wastes. Under the auspices of the EPA, the individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent, requirements. Generators of hazardous wastes must comply with certain standards for the accumulation and storage of hazardous wastes, as well as recordkeeping and reporting requirements applicable to hazardous waste storage and disposal activities.

Site Remediation

The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as “Superfund,” and comparable state laws and regulations impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. Such classes of persons include the current and past owners or operators of sites where a hazardous substance was released, and companies that disposed or arranged for the disposal of hazardous substances at offsite locations, such as landfills. CERCLA authorizes the EPA, and in some cases third parties, to take actions in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, neighboring landowners and other third parties often file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.

We currently own or lease properties that have been used by other industries for a number of years. Although we typically have used operating and disposal practices that were standard in the industry at the time, wastes may have been disposed of or released on or under the properties owned or leased by us, on or under other locations where such substances have been taken for disposal, or on or under project sites where we perform work. In addition, some of the properties may have been operated by third parties or by previous owners whose treatment and disposal or release of wastes was not under our

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control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove or remediate previously disposed wastes or property contamination, or to perform remedial activities to prevent future contamination.

Water Discharges

The Federal Water Pollution Control Act, also known as the Clean Water Act (“CWA”), and analogous state laws impose strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States, including wetlands. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA or an analogous state agency. The CWA also regulates the discharge of dredged or fill material into waters of the U.S., and activities that result in such discharge generally require permits issued by the Corps of Engineers. Moreover, above ground storage of petroleum products is strictly regulated under the CWA. Under the CWA, federal and state regulatory agencies may impose administrative, civil and/or criminal penalties for non-compliance with discharge permits or other requirements of the CWA and analogous state laws and regulations.

The Oil Pollution Act of 1990 (“OPA”), which amends and augments the CWA, establishes strict liability for owners and operators of facilities that are sites of releases of oil into waters of the U.S. OPA and its associated regulations impose a variety of requirements on responsible parties related to the prevention of oil spills and liability for damages resulting from such spills. For instance, OPA requires vessel owners and operators to establish and maintain evidence of financial responsibility sufficient to cover liabilities related to an oil spill for which such parties are statutorily responsible. We believe we are in compliance with all applicable OPA financial responsibility obligations and equipment requirements.

In 2009, regulations promulgated by the EPA covering certain previously exempt discharges to water from certain marine vessels became effective. The regulations provide for a general permit to cover such discharges and impose on marine vessel operators, including us, certain discharge, permitting, record keeping, reporting, monitoring, maintenance, and operating restrictions and requirements with respect to materials that are or may be discharged from certain vessels. Applicability of these restrictions and requirements is based on size and type of vessel, and they apply only to a minority of our vessels. We, nevertheless, are implementing such restrictions and requirements with respect to our vessels which are subject thereto, and we do not anticipate that such regulations or the associated permit terms, restrictions and requirements will adversely impact our business and results of operations.

Air Emissions

The Clean Air Act (“CAA”) and comparable state laws restrict the emission of air pollutants from many sources, including paint booths, and may require pre-approval for the construction or modification of certain facilities expected to produce air emissions, impose stringent air permit requirements, or require the utilization of specific equipment or technologies to control emissions. We believe that our operations are in substantial compliance with the CAA.

Climate Change

The U.S. Congress may consider legislation to reduce emissions of greenhouse gases in response to climate change concerns. In addition, several states have declined to wait on Congress to develop and implement climate control legislation and have already taken legal measures to reduce emissions of greenhouse gases. Passage of climate control legislation or other regulatory initiatives by Congress or various states, or the adoption of regulations by the EPA and analogous state agencies that restrict emissions of greenhouse gases in areas in which we conduct business could have an adverse effect on our operations and demand for our services.

Endangered Species

The Endangered Species Act (“ESA”) restricts activities that may affect endangered species or their habitats. We conduct activities in or near areas that may be designated as habitat for endangered or threatened species. For instance, seasonal observation of endangered or threatened West Indian Manatees adjacent to work areas may impact construction operations in Florida during the winter months. Additionally, our dredging operations in Florida are impacted by limitations for placement of dredge spoil materials on designated spoil disposal islands, from April through August of each year, when the islands are inhabited by nesting colonies of protected bird species. Further, restrictions on work during the Whooping Crane nesting period in the Aransas Pass National Wildlife Refuge from October 1 through April 15 each year and during the non-dormant grass season for sea grass in the Laguna Madre from March 1 through November 30 each year impact our construction operations in the Texas Gulf Coast area. We plan our operations and bidding activity with these

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restrictions and limitations in mind, and they have not materially hindered our business in the past. However, these and other restrictions may affect our ability to obtain work or to complete our projects on time in the future. In addition, while we believe that we are in material compliance with the ESA, the discovery of previously unidentified endangered species could cause us to incur additional costs or become subject to operating restrictions or bans in the affected area.

Employees

At December 31, 2019, our marine segment had  934 employees, 278 of whom were full-time salaried personnel and most of the remainder of whom were hourly personnel. Our concrete segment had 1,637 employees, 296 of whom were full-time salaried personnel and most of the remainder of whom were hourly personnel.

From time to time, we hire additional employees for certain large projects and, subject to local market conditions, additional crew members are generally available for hire on relatively short notice. We believe our employees are our most valuable resource, and our workforce possesses a strong dedication to and pride in our company. Our employees are not currently represented by labor unions, except certain employees in our marine segment located in the Pacific Northwest and Alaska, in respect of which collective bargaining agreements are in place. Certain employees are represented by collective bargaining agreements in our concrete segment. Employees represented by collective bargaining agreements represent approximately 4% of our total workforce.

Financial Information About Geographic Areas

We are a project-driven marine and concrete contractor, and our operations represent two reportable segments for financial reporting. Our business is primarily conducted along the coastal regions of the United States for our marine segment and in the metropolitan areas of Texas for our concrete segment. Revenues generated from our marine segment outside the United States, primarily in the Caribbean Basin and Mexico, totaled 1.6%, 2.3%, and 1.6% of total revenues for the years ended December 31, 2019, 2018 and 2017, respectively. Our long-lived assets are substantially located in the United States.

Access to the Company’s Filings

We maintain a website at www.oriongroupholdingsinc.com on which we make available, free of charge, access to the various reports we file with, or furnish to, the SEC. The website is made available for information purposes only. It should not be relied upon for investment purposes, and none of the information on our website is incorporated into this Annual Report on Form 10‑K by reference. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Item 1A.         RISK FACTORS

We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our business, financial condition, and results of operations. The risks described below highlight some of the factors that have affected and could affect us in the future. We may also be affected by unknown risks or risks that we currently think are immaterial. If any such events actually occur, our business, financial condition, and results of operations could be materially adversely affected.

Risk Factors Relating to Our Business

We rely on highly competitive and highly regulated government contracts.

Government funding for public works projects is limited, thus creating a highly competitive environment for the limited number of public projects available. Reduced levels of, or delays in, government funding cause delays in project lettings and result in intense competition and pricing pressure for such projects. In addition, government contracts are subject to specific procurement regulations, contract provisions and a variety of regulatory requirements relating to their formation, administration, performance and accounting. Many of these contracts include express or implied certifications of compliance with applicable laws and contract provisions. As a result, any violations of these regulations could bring about litigation, including the possibility of qui tam (“Whistle Blower”) litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, and could cause termination of other existing government contracts and result in the loss of future government contracts. Due to the significant competition in the marketplace and the level of regulations on government contracts, we could suffer reductions in new projects and see lower revenues and profit

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margins on those projects, which could have a material adverse effect on the business, operating results and financial condition.

Our operations are susceptible to a variety of adverse conditions including weather conditions, natural disasters, health epidemics or pandemics or other contagious outbreaks and terrorist attacks that could negatively impact the markets in which we operate.

Our business, operating results and financial condition could be materially and adversely affected by severe weather and other natural disasters, such as earthquakes or hurricanes, particularly along the Gulf Coast, the West Coast, the Atlantic Seaboard, and the Caribbean Basin. Repercussions of severe weather conditions could cause significant interruption of projects in process and have safety implications to personnel at those sites.

Our business, operating results and financial condition could be materially and adversely affected if a public health epidemic or pandemic or other contagious outbreak, including the novel coronavirus (referred to as COVID-19) reported to have originated in Wuhan, China, interferes with our ability, or that of our employees, contractors, suppliers, customers and other business partners to perform our and their respective responsibilities and obligations relative to the conduct of our business.

 

Terrorist attacks, targeted at ports, marine facilities, shipping or metropolitan areas could affect the markets in which we operate our business and our expectations. Increased armed hostilities, terrorist attacks or responses from the United States may lead to further acts of terrorism and civil disturbances in the United States or elsewhere, which may further contribute to economic instability in the United States. These attacks or armed conflicts may affect our operations or those of our customers or suppliers and could impact our revenues, our production capability and our ability to complete contracts in a timely manner.

 

We depend on continued growth in population in our geographic market areas in Texas to support residential and nonresidential construction for our concrete construction segment.

Our concrete segment depends on continued growth in population in our geographic market areas in Texas to support residential and nonresidential construction. A growing population generates economic growth and expansion in construction for retail, office buildings, etc. If the population decreases or slows in growth, it often times adversely affects economic growth, which ultimately limits the need for residential and nonresidential construction services in the areas we currently perform services.

The timing of new contracts may result in volatility in our cash flow and profitability. These factors as well as others that may cause our actual financial results to vary from any publicly disclosed earnings guidance and forecasts are outside of our control.

Our revenues are generated from project-based work. It is generally very difficult to predict the timing and source of awarded contracts. The selection of, timing of, or failure to obtain projects, delays in awards of projects, the rebidding or termination of projects due to budget overruns, or the cancellations of projects or delays in completion of contracts could result in the under-utilization of our assets and reduce our cash flows and profitability. Even if we are awarded contracts, we face additional risks that could affect whether, or when, work will begin. For example, some of our contracts are subject to financing and other contingencies that may delay or result in termination of projects. This may make it difficult to match workforce size and equipment location with contract needs. In some cases, we may be required to bear the cost of a readily available workforce and fleet of equipment that is larger than needed at the time, resulting in unpredictability in our cash flow, expenses and profitability. If an expected contract award or the related notice to proceed is delayed or not received, we could incur substantial costs without receipt of any corresponding revenues. Delays by our customers in obtaining required approvals and permits for their infrastructure projects may delay their awarding contracts for those projects and, once awarded, the ability to commence construction under those contracts. Moreover, construction projects for which our services are contracted may require significant expenditures by us prior to receipt of relevant payments by a customer and may expose us to potential credit risk if such customer should encounter financial difficulties. Such expenditures could reduce our cash flows and necessitate increased borrowings under our credit facility. Finally, the winding down or completion of work on significant projects that were active in previous periods will reduce our revenue and earnings if

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such significant projects have not been replaced in the current period. From time to time we may publicly provide earnings or other forms of guidance, which reflect our predictions about future revenue, operating costs and capital structure, among other factors. Any such predictions may be impacted by these factors as well as others that are beyond our control and might not turn out to be accurate.

Fluctuations in commodity prices may affect our customers’ investment decisions and therefore subject us to risks of cancellation, delays in existing work, or changes in the timing and funding of new awards. Additionally, fluctuations in commodity prices can negatively affect our project costs.

Commodity prices can affect our customers in a number of ways. For example, for those customers that produce commodity products such as oil, gas, concrete, steel products, fluctuations in price can have a direct effect on their profitability and cash flow and, therefore, their willingness to continue to invest or make new capital investments. To the extent commodity prices decline or fluctuate and our customers defer new investments or cancel or delay existing projects, the demand for our services decreases, which may have a material adverse impact on the business, financial condition, and results of operations.

Commodity prices can also strongly affect the costs of projects. We use concrete and steel as well as  diesel fuel and other petroleum-based products to operate our equipment used in our construction contracts. Fluctuations in supplies relative to demand and other factors can cause unanticipated increases in their cost. Rising commodity prices can negatively impact the potential returns on projects that are planned, as well as those in progress, and result in customers deferring new investments or canceling or delaying existing projects. The short-term nature of the majority of our projects typically protects us from these potential price increases, however, if we are unable to procure commodities for completion of our projects at estimated prices due to rising commodity prices, our margins may erode on certain in progress or future projects.

We may be unable to obtain sufficient bonding capacity for our contracts and the need for performance and surety bonds may adversely affect our business.

As more fully described in “Insurance and Bonding” under “Item 1. Business,” we are generally required to post bonds in connection with government and certain private sector contracts to ensure job completion. We have entered into a bonding agreement with a large multinational surety which acts as surety, issues bid bonds, performance bonds and payment bonds, and obligates itself upon other contracts of guaranty required by us in the day-to-day operations of our business. However, our surety is not obligated under the bonding agreement to issue bonds for us and bonding decisions are made on a case-by-case basis. We may not be able to maintain a sufficient level of bonding capacity in the future, which could preclude us from being able to bid for certain contracts and successfully contract with certain customers, or cause us to have to increase our letter of credit utilization in lieu of bonds, thereby reducing available borrowing capacity under our credit facility. In addition, the conditions of the bonding market may change, increasing our costs of bonding or restricting our ability to get new bonding which could have a material adverse effect on our business, operating results and financial condition.

Our business depends on good customer relationships and our reputation in both the marine and concrete infrastructure markets, which is developed and maintained by our executives and key project managers. Loss of any of our relationships, reputation or executives or key project managers could materially reduce our revenues and profits.

Our contracts are typically entered into on a project-by-project basis, so we generally do not have continuing contractual commitments with our customers beyond the terms of the current contract. We benefit from key customer relationships built over time and with both public and private entities. We also benefit from our reputation in the marine and concrete construction markets developed over years of successfully performing on projects. Both of these aspects of our business were developed and are maintained through our executives and key project managers. Our inability to retain our executives and key project managers or inability to complete projects timely and successfully resulting in customer satisfaction could have a material adverse effect on our current customer relationships and reputation. The inability to maintain relationships with our customers in general or obtain new customers based on our reputation could have a material adverse effect on our business, operating results and financial condition.

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We may not be able to fully realize the revenue value reported in our backlog.

As of December 31, 2019, we had a backlog of work to be completed on contracts totaling approximately $340.7 million in our marine segment and approximately $231.6 million in our concrete segment. Backlog develops as a result of new awards, which represent the potential revenue value realizable pursuant to new project commitments received by us during a given period.

Backlog consists of awarded projects which have either (a) not yet been started or (b) are in progress but are not yet complete. In the latter case, the revenue value reported in backlog is the remaining value related to work that has not yet been completed. We cannot guarantee that the revenue projected in our backlog will be realized, or if realized, will result in earnings. From time-to-time, projects are cancelled that appeared to have a high certainty of going forward at the time they were recorded as new awards. In the event of a project cancellation, we may be reimbursed for certain costs but typically have no contractual right to recover the total revenue reflected in our backlog. In addition to being unable to recover certain direct costs, cancelled projects may also result in additional unrecoverable costs due to the resulting under-utilization of our assets or labor force.

We could suffer contract losses if we fail to accurately estimate our costs or fail to execute within our cost estimates on fixed-price, lump-sum contracts.

Much of our revenue is derived from fixed-price, lump-sum contracts. Under these contracts, we perform our services and execute our projects at a fixed price and where, as a result, we could benefit from cost savings, but we may be unable to recover any cost overruns. Fixed-price contracts carry inherent risks, including risks of losses from underestimating costs, operational difficulties and other factors that may occur over the contract period. If our cost estimates for a contract are inaccurate, or if we do not execute the contract within our cost estimates, we may incur losses or the project may not be as profitable as we expected. In addition, we are sometimes required to incur costs in connection with modifications to a contract (change orders) that may not be approved by the customer as to scope and/or price, or to incur unanticipated costs, including costs for customer-caused delays, errors in specifications or designs, or contract suspension or termination that we may not be able to recover. These, in turn, could have a material adverse effect on our business, operating results and financial condition. The revenue, cost and gross profit realized on such contracts can vary, sometimes substantially, from the original projections due to changes in a variety of factors, such as:

·

failure to properly estimate costs of engineering, design, material, equipment or labor;

·

unanticipated technical problems with the structures or services being supplied by us, which may require that we spend our own funds to remedy the problem;

·

project modifications creating unanticipated costs;

·

differing site conditions;

·

changes in the costs of equipment, materials, labor or subcontractors;

·

our suppliers’ or subcontractors’ failure to perform;

·

difficulties in our customers obtaining required governmental permits or approvals;

·

changes in local laws and regulations;

·

changes in ad valorem and other tariffs;

·

delays caused by local weather conditions; and

·

exacerbation of any one or more of these factors as projects grow in size and complexity.

These risks may increase if the project is of a long-term duration because of the elevated risk that the circumstances upon which we based our original bid will change in a manner that increases costs. In addition, we sometimes bear the risk of delays caused by unexpected conditions or events.

We could suffer penalties on our contracts for late completion.

In many instances, including in our fixed-price contracts, we guarantee that we will complete a project by a scheduled date. If we subsequently fail to complete the project as scheduled, without sufficient justification, we may be liable for any customer losses resulting from such delay, generally in the form of contractually agreed-upon liquidated damages. In addition, failure to maintain a required schedule could cause us to default on our government contracts, giving rise to a

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variety of potential damages. To the extent that these events occur, the total costs of the project could exceed our original estimates, and we could experience reduced profits or, in some cases, a loss for that project.

Our projects could be hindered due to our dependence on third parties to complete many of our contracts.

A portion of the work performed under our contracts is performed by third-party subcontractors we hire. We also rely on third-party equipment manufacturers or suppliers to provide much of the materials used for projects. If we are unable to hire qualified subcontractors or find qualified equipment manufacturers or suppliers, our ability to successfully complete a project could be impaired. If we are not able to locate qualified third-party subcontractors or the amount we are required to pay for subcontractors or equipment and supplies exceeds what we have estimated, especially in a lump-sum or a fixed-price contract, we may suffer losses on these contracts. If a subcontractor, supplier, or manufacturer fails to provide services, supplies or equipment as required under a contract for any reason, we may be required to source these services, equipment or supplies to other third parties on a delayed basis or on less favorable terms, which could impact contract profitability. There is a risk that we may have disputes with our subcontractors relating to, among other things, the quality and timeliness of work performed, customer concerns about the subcontractor, or our failure to extend existing task orders or issue new task orders under a contract. In addition, faulty workmanship, equipment or materials could impact the overall project, resulting in claims against us for failure to meet required project specifications.

In the current economic environment, third parties may find it difficult to obtain sufficient financing to help fund their operations. The inability to obtain financing could adversely affect a third party’s ability to provide materials, equipment or services which could have a material adverse impact on our business, financial condition, and results of operations. In addition, a failure by a third party subcontractor, supplier or manufacturer to comply with applicable laws, regulations or client requirements could negatively impact our business and, for government clients, could result in fines, penalties, suspension or even debarment being imposed on us, which could have a material adverse impact on our business, financial condition, and results of operations.

We may incur higher costs to acquire, manufacture and maintain equipment necessary for our operations.

We have traditionally owned the majority of the equipment used in our projects, and we do not bid on contracts for which we do not have, or cannot quickly procure, whether through construction, acquisition or lease, the necessary equipment to complete projects. We are capable of building much of the specialized equipment used in our projects, including dayboats, tenders and dredges. To the extent that we are unable to buy or build equipment necessary for our needs, either due to a lack of available funding or equipment shortages in the marketplace, we may be forced to rent equipment on a short-term basis, which could increase the costs of completing contracts, thereby reducing contract profitability. In addition, our equipment requires continuous maintenance, which we primarily provide through our own repair facilities, as well as certification by the U.S. Coast Guard for certain marine segment assets. If we are unable to continue to maintain the equipment in our fleet or are unable to obtain the requisite certifications, we may be forced to obtain third-party repair services, be unable to use our uncertified equipment or be unable to bid on contracts, which could have a material adverse effect on our business, operating results and financial condition.

In addition, our vessels in the marine segment may be subject to arrest or seizure by claimants as security for maritime torts committed by the vessel or us or the failure by us to pay for necessities, including fuel and repair services, which were furnished to the vessel. Such arrest or seizure could preclude the vessel from working, thereby causing delays in marine segment projects.

We may be subject to unionization, work stoppages, slowdowns or increased labor costs.

Only a small percentage of our marine segment workforce, located in the Pacific Northwest and Alaska, is currently unionized. If at any time, a majority of our employees unionized, it could limit the flexibility of the workforce and could result in demands that might increase our operating expenses and adversely affect our profitability. Each of our different employee groups could unionize at any time and would require separate collective bargaining agreements. If any group of our employees were to unionize and we were unable to agree on the terms of their collective bargaining agreement or we were to experience widespread employee dissatisfaction, we could be subject to work slowdowns or stoppages. In addition, we may be subject to disruptions by organized labor groups protesting our non-union status. Any of these events would be

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disruptive to our operations and could have a material adverse effect on the business, operating results and financial condition.

Our business is subject to significant operating risks and hazards that could result in damage or destruction to property, which could result in losses or liabilities to us.

Construction and maintenance sites are potentially dangerous workplaces and often put our employees and others in close proximity with mechanized equipment, moving vehicles, or other construction or worksite hazards. On most sites, we are responsible for safety and  are contractually obligated to implement safety procedures. Our safety record is an important consideration for us and for our customers. If serious accidents or fatalities occur or our safety record was to deteriorate, we may be ineligible to bid on certain work, expose ourselves to possible lawsuits, and existing service arrangements could be terminated, thus having a material adverse impact on our financial position, results of operations, cash flows and liquidity. Further, regulatory changes implemented by OSHA or the U.S. Coast Guard could impose additional costs on us. Adverse experience with hazards and claims could have a negative effect on our reputation with our existing or potential new customers and our prospects for future work.

The businesses of marine infrastructure construction, port maintenance, dredging and salvage are generally subject to a number of risks and hazards, including environmental hazards, industrial accidents, hurricanes, adverse weather conditions, collisions with fixed objects, cave-ins, encountering unusual or unexpected geological formations, disruption of transportation services and flooding. These risks could result in damage to or destruction of, dredges, transportation vessels, other maritime structures and buildings, and could also result in personal injury or death, environmental damage, performance delays, monetary losses or legal liability.

In the concrete segment, our workers are subject to the usual hazards associated with providing construction and related services on construction sites including environmental hazards, industrial accidents, hurricanes, adverse weather conditions, and flooding. Operating hazards can cause personal injury or death, damage to or destruction of property, plant and equipment, environmental damage, performance delays, monetary losses or legal liability.

Our current insurance coverage may not be adequate, and we may not be able to obtain insurance at acceptable rates, or at all.

We maintain various insurance policies, including general liability and workers’ compensation. We are partially self-insured under some of our policies, and our insurance does not cover all types or amounts of liabilities. We are not required to, and do not, specifically set aside funds for our self-insurance programs.

At any given time, we are subject to multiple workers’ compensation and personal injury claims. We maintain substantial loss accruals for workers’ compensation claims, and, until recently, our workers’ compensation and insurance costs have been rising for several years notwithstanding our emphasis on safety. Our insurance policies may not be adequate to protect us from liabilities that we incur in our business. In addition, some of the projects that we bid on require us to maintain high levels of builder’s risk insurance. We may not be able to obtain similar levels of insurance on reasonable terms, or at all. Our inability to obtain such insurance coverage at acceptable rates or at all could have a material adverse effect on our business, operating results and financial condition.

Furthermore, due to a variety of factors such as increases in claims and projected significant increases in medical costs, our insurance premiums may increase in the future and we may not be able to obtain similar levels of insurance on reasonable terms, or at all. Any such inadequacy of, or inability to obtain, insurance coverage at acceptable rates, or at all, could have a material adverse effect on our business, operating results and financial condition.

Insurance liabilities are difficult to assess and quantify due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, the number of incidents not reported and the effectiveness of our safety program. If we were to experience insurance claims or costs above our estimates, we might be required to use working capital to satisfy these costs rather than to maintain or expand our operations. To the extent that we experience a material increase in the frequency or severity of accidents or workers’ compensation and health claims, or unfavorable developments on existing claims, our operating results and financial condition could be materially and adversely affected.

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Our employees in the marine segment are covered by federal laws that provide seagoing employees remedies for job-related claims in addition to those provided by state laws.

Many of our marine segment employees are covered by federal maritime law, including provisions of the Jones Act, the Longshore and Harbor Workers Act, (“USL&H”) and the Seaman’s Wage Act. Jones Act laws typically operate to make liability limits established by USL&H and state workers’ compensation laws inapplicable to these employees and to permit these employees and their representatives to pursue litigation against employers for job-related injuries. Because in some cases we are not protected by the limits imposed by state workers’ compensation statutes, we have greater exposure for claims made by these employees as compared to employers whose employees are not covered by these provisions.

For example, in the normal course of business, we are a defendant in various personal injury lawsuits. We maintain insurance to cover claims that arise from injuries to our workforce subject to a deductible. During 2019, we recorded approximately $0.9 million of expense for our self-insured portion of these liabilities. We believe our recorded self-insurance reserves represent our best estimate of the outcomes of these claims. Should negative trends persist; we could continue to be negatively impacted in the future.

Our operations are subject to environmental laws and regulations that may expose us to significant costs and liabilities.

Our marine infrastructure construction, salvage, demolition, dredging and dredge material disposal activities are subject to stringent and complex federal, state and local environmental laws and regulations, including those concerning air emissions, water quality, solid waste management, and protection of certain marine and bird species, their habitats, and wetlands. We may incur substantial costs in order to conduct our operations in compliance with these laws and regulations. For instance, we may be required to obtain, maintain and comply with permits and other approvals (as well as those obtained for projects by our customers) issued by various federal, state and local governmental authorities; limit or prevent releases of materials from our operations in accordance with these permits and approvals; and install pollution control equipment. In addition, compliance with environmental laws and regulations can delay or prevent our performance of a particular project and increase related project costs. Moreover, new, stricter environmental laws, regulations or enforcement policies, including those imposed in response to climate change, could be implemented that significantly increase our compliance costs, or require us to adopt more costly methods of operation.

Failure to comply with environmental laws and regulations, or the permits issued under them, may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations and the issuance of injunctions limiting or preventing some or all of our operations. In addition, strict joint and several liability may be imposed under certain environmental laws, which could cause us to become liable for the investigation or remediation of environmental contamination that resulted from the conduct of others or from our own actions that were in compliance with all applicable laws at the time those actions were taken. Further, it is possible that we may be exposed to liability due to releases of pollutants, or other environmental impacts that may arise in the course of our operations. For instance, some of the work we perform is in underground and water environments, and if the field location maps or waterway charts supplied to us are not accurate, or if objects are present in the soil or water that are not indicated on the field location maps or waterway charts, our underground and underwater work could strike objects in the soil or the waterway bottom containing pollutants and result in a rupture and discharge of pollutants. In addition, we sometimes perform directional drilling operations below certain environmentally sensitive terrains and water bodies, and due to the inconsistent nature of the terrain and water bodies, it is possible that such directional drilling may cause a surface fracture releasing subsurface materials. These releases may contain contaminants in excess of amounts permitted by law, may expose us to remediation costs and fines and legal actions by private parties seeking damages for non-compliance with environmental laws and regulations or for personal injury or property damage. We may not be able to recover some or any of these costs through insurance or increased revenues, which may have a material adverse effect on our business, operating results and financial condition. See “Business - Environmental Matters” for more information.

Our concrete segment is subject to extensive and complex regulations that affect land development and building construction, including zoning, density restrictions, building design and building standards. These regulations often provide broad discretion to the administering governmental authorities as to the conditions we must meet prior to development or construction being approved, if approved at all. We are subject to determinations by these authorities as to the adequacy of water or sewage facilities. New building developments may also be subject to various assessments for

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schools and other public improvements. In addition, in many markets government authorities have implemented no growth or growth control initiatives. Any of these can limit, delay or increase the costs of development and construction.

The anticipated investment in port and marine infrastructure may not be as large as expected, which may result in periods of low demand for our marine construction services.

The demand for port construction, maintenance infrastructure services and dredging may be vulnerable to downturns in the economy generally and in the marine transportation industry specifically. The amount of capital expenditures on port facilities and marine infrastructure in our markets is affected by the actual and anticipated shipping and vessel needs of the economy in general and in our geographic markets in particular. If the general level of economic activity deteriorates, our customers may delay or cancel expansions, upgrades, maintenance and repairs to their infrastructure. A number of other factors, including the financial condition of the shipping industry, could adversely affect our customers and their ability or willingness to fund capital expenditures in the future. During downturns in the U.S. or world economies, the anticipated port usage in our geographic markets may decline, resulting in less port construction, upgrading and maintenance. As a result, demand for our services could substantially decline for extended periods.

Restrictions on foreign ownership of our vessels could limit our ability to sell off any portion of our marine construction segment or result in the forfeiture of our vessels or in our inability to continue our operations in United States navigable waters.

The Dredging Act, the Jones Act, the Shipping Act and the Vessel Documentation Act require vessels engaged in the transport of merchandise or passengers between two points in the United States or dredging in the navigable waters of the United States to be owned and controlled by United States citizens. The United States citizen ownership and control standards require the vessel-owning entity to be at least 75% U.S. citizen-owned, thus restricting foreign ownership interests in the entities that directly or indirectly own the vessels which we operate. If we were to seek to sell any portion of our marine segment that owns any of these vessels, we may have fewer potential purchasers, since some potential purchasers might be unable or unwilling to satisfy the foreign ownership restrictions described above; additionally, any sales of certain of our larger vessels to foreign buyers would be subject to approval by the U.S. Maritime Administration. As a result, the sales price for that portion of our marine segment may not attain the amount that could be obtained in an unregulated market.

Our strategy of growing through strategic acquisitions may not be successful.

We may pursue growth through the acquisition of companies or assets that will enable us to broaden the types of projects we execute and also expand into new markets. We have completed several acquisitions and plan to consider strategic acquisitions in the future. We may be unable to implement this growth strategy if we cannot identify suitable companies or assets or reach agreement on potential strategic acquisitions on acceptable terms. Moreover, an acquisition involves certain risks, including:

·

difficulties in the integration of operations, systems, policies and procedures;

·

enhancements in our controls and procedures including those necessary for a public company may make it more difficult to integrate operations and systems;

·

failure to implement proper overall business controls, including those required to support our growth, resulting in inconsistent operating and financial practices at companies we acquire or have acquired;

·

termination of relationships with the key personnel and customers of an acquired company;

·

additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls;

·

the incurrence of environmental and other liabilities, including liabilities arising from the operation of an acquired business or asset prior to our acquisition for which we are not indemnified or for which the indemnity is inadequate;

·

disruption of or receipt of insufficient management attention to our ongoing business; and

·

inability to realize the cost savings or other financial benefits that we anticipate.

Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms. Moreover, to the extent an acquisition transaction financed by non-equity consideration results in additional goodwill, it will reduce our tangible net worth, which might have an adverse effect on our credit and bonding capacity.

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Risk Factors Relating to Our Accounting, Financial Results and Financing Plans

Our bonding requirements may limit our ability to incur indebtedness.

We generally are required to provide various types of surety bonds that provide an additional measure of security for our performance under certain government and private sector contracts. Our ability to obtain surety bonds depends upon various factors including our capitalization, working capital and amount of our indebtedness. In order to help ensure that we can obtain required bonds, we may be limited in our ability to incur additional indebtedness that may be needed for potential acquisitions and operations. Our inability to incur additional indebtedness could have a material adverse effect on our business, operating results and financial condition.

Systems and information technology interruption or failure and data security breaches could adversely impact our ability to operate or expose us to significant financial losses and reputational harm.

We rely heavily on computer, information, and communications technology and related systems in order to properly operate our business. From time to time, we experience occasional system interruptions and delays. In the event we are unable to regularly deploy software and hardware, effectively upgrade our systems and network infrastructure, and take other steps to maintain or improve the efficiency and efficacy of our systems, the operation of such systems could be interrupted or result in the loss, corruption, or release of data. In addition, our computer and communication systems and operations could be damaged or interrupted by natural disasters, telecommunications failures, power loss, acts of war or terrorism, computer viruses, malicious code, physical or electronic security breaches, intentional or inadvertent user misuse or error, or similar events or disruptions. Any of these or other events could cause interruptions, delays, loss of critical and/or sensitive data or similar effects, which could have a material adverse impact on our business, financial condition, protection of intellectual property, and results of operations, as well as those of our clients.

In addition, we face the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems and system disruptions, including possible unauthorized access to and disclosure of our and our clients’ proprietary or classified information. We rely on industry accepted security measures and technology to securely maintain all confidential and proprietary information on our computer systems, but they may still be vulnerable to these threats. As a result, we may be required to expend significant resources to protect against the threat of these system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches. Any of these events could damage our reputation and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Related to Our Indebtedness

Our indebtedness requires significant debt service payments that could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness.

At December 31, 2019, our total indebtedness under the Credit Agreement was approximately $73.3 million. Per the Credit Agreement, the Term Loan Facility requires quarterly installment payments which increase throughout the life of the loan and have a date of maturity of July 31, 2023. We must also comply with various affirmative and negative covenants contained in our Credit Agreement, some of which may restrict the way in which we would like to conduct our business. Among other things, our requirements under out debt instruments could potentially limit our ability to:

·

incur additional indebtedness or liens;

·

make payments in respect of or redeem or acquire any debt or equity issued by us;

·

sell assets;

·

make loans or investments;

·

make guarantees;

·

enter into any hedging agreement for speculative purposes;

·

acquire or be acquired by other companies; or

·

amend some of our contracts.

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The restrictions under our indebtedness may prevent us from engaging in certain transactions which might otherwise be considered beneficial to us, for example, they could:

·

increase our vulnerability to general adverse economic and industry conditions;

·

limit our ability to fund future working capital and capital expenditures, to engage in future acquisitions, to enter into new construction or development activities, or to otherwise fully realize the value of our assets and opportunities because of the need to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness or to comply with any restrictive terms of our indebtedness;

·

limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate; and

·

place us at a competitive disadvantage as compared to our competitors that have less debt.

We may incur additional indebtedness in the future under our existing Credit Agreement, by issuing debt instruments, under new credit agreements, under joint venture credit agreements, under capital leases or synthetic leases, on a project-finance or other basis or a combination of these. If we incur additional indebtedness in the future, it likely would be under our existing Credit Agreement or under arrangements that may have terms and conditions at least as restrictive as those contained in our existing Credit Agreement. At December 31, 2019, available capacity to borrow on the Revolving Line of Credit was $12.6 million. Failure to comply with the terms and conditions of any existing or future indebtedness would constitute an event of default. If an event of default occurs, the lenders will have the right to accelerate the maturity of such indebtedness and foreclose upon the collateral, if any, securing that indebtedness.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under the Credit Facility allow for loans at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed will remain the same, and our net income and operating cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

We have entered into a series of receive-variable, pay-fixed interest rate swaps. We use interest rate swap agreements to hedge market risks relating to possible adverse changes in interest rates with the intent of reducing volatility in our cash flows due to fluctuations in interest rates. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk, may prove disadvantageous, or may create additional risks, including risks discussed in "Risks Related to Our Business" above. In addition, our hedging activities are subject to the risks that a counterparty may not perform its obligations under the applicable derivative instrument.

Item 1B.         UNRESOLVED STAFF COMMENTS

None

Item 2.            PROPERTIES

Our corporate headquarters is located at 12000 Aerospace Avenue, Suite 300, Houston, Texas 77034, with 21,415 square feet of office space that we lease, with a current term expiring April 30, 2022 and with two five year extensions at our option. Our  executive, legal, finance, and some accounting offices are located at this facility. We lease office space in Alaska, Louisiana, Texas and Washington for our operations, including office and yard space for our concrete segment. We own property for our waterfront maintenance and dock facilities, including equipment yards in Texas and Florida, which total approximately 53.8 acres. We also own approximately 340 acres of land in the upper Houston Ship Channel used as a Dredge Material Placement Area ("DMPA"). We may lease smaller project related offices throughout our operating areas when the need arises.

We believe that our existing facilities are adequate for our operations. We do not believe that any single facility is material to our operations and, if necessary, we could readily obtain a replacement facility. Some of our real estate assets are pledged to secure our credit facility.

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Item 3.            LEGAL PROCEEDINGS

The Company and one former and two current officers are named defendants in a class action lawsuit filed on April 11, 2019 in the United States District Court for the Southern District of Texas, Houston Division, seeking unstated compensatory damages under the federal securities laws allegedly arising from materially false and misleading statements during the period of March 13, 2018 to March 18, 2019. The complaint asserts, among other things, that the current and former officers caused the Company to overstate goodwill in certain periods; overstate accounts receivable; that the company lacked effective internal controls over financial reporting related to goodwill impairment testing and accounts receivable; and that as a result the required adjustments to goodwill and accounts receivable materially impacted the company’s financial statements causing the company’s stock price to be artificially inflated during the class period. The Company has responded to the complaint, considers all of these allegations without merit and is vigorously contesting the allegations.

In addition, from time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, civil penalties or other losses, or injunctive or declaratory relief and on rare occasions punitive damages. With respect to such lawsuits, the Company accrues reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe any of these or any other proceedings, individually or in the aggregate, would be expected to have a material adverse effect on results of operations, cash flows, or financial condition

A legal matter was settled in the Company’s favor for $5.5 million during the first quarter of 2018. Settlement amounts were recorded in Other gain from continuing operations in the Consolidated Statement of Operations, Prepaid expenses and other (current portion of the notes receivable) and Other non-current assets (non-current portion of the notes receivable) in the Consolidated Balance Sheets. As of December 31, 2019, the current portion of the notes receivable was $0.8 million and the non-current portion was $2.5 million, net of $0.3 million of unamortized discount. Legal fees related to this matter were expensed as incurred during the respective reporting period.

As a result of charges brought in September 2015 and October 2016 by the Houston Police Department, Environmental Enforcement, two subsidiaries of the Company were indicted at the request of the Harris County, Texas District Attorney’s Office by a duly organized Grand Jury of Harris County, Texas for separate but similar violations of the Texas Water Code, allegedly arising from the handling of construction concrete at certain work sites. Specifically, in each case the Company was charged with unlawfully, intentionally or knowingly discharging a waste or pollutant and is subject to a maximum fine of $250,000. The Company considers both cases without merit. However, without admitting to fault, the Company has, in both cases, agreed to diversion agreements under which the charges were dismissed, without prosecution, upon our payment of fines. None of these allegations nor the costs of defense, taken separately or as a whole, is expected to have a material impact on the Company’s balance sheet or its liquidity.

Item 4.            MINE SAFETY DISCLOSURES

Not applicable

 

PART II

Item 5.            MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is listed on the New York Stock Exchange (“NYSE”) and trades under the symbol “ORN”.

Holders

As of February 21, 2020, we had approximately 2,360 stockholders of record including beneficial holders.

Issuer Repurchase of Equity Securities

None

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Performance Graph*

The following graph shows the changes in the value of $100 invested in (1) the common stock of Orion Group Holdings, Inc., (2) the Standard & Poor’s 500 Stock Index and (3) the Dow Jones Heavy Construction Group Index. The values of each investment are based on share price appreciation, with reinvestment of all dividends, assuming any were paid. For each graph, the investments are assumed to have occurred at the beginning of each period.

Image - Image1.jpeg

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2014

    

2015

    

2016

    

2017

    

2018

    

2019

Orion Group Holdings, Inc.

 

100.00

 

37.74

 

90.05

 

70.86

 

38.82

 

46.97

S&P 500

 

100.00

 

99.27

 

108.74

 

129.86

 

121.76

 

156.92

Dow Jones US Heavy Civil Construction

 

100.00

 

87.89

 

107.62

 

112.47

 

82.51

 

109.89


*   This table and the information therein is being furnished but not filed.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by Item 201(d) of Regulation S-K is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

 

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Item 6.            SELECTED FINANCIAL DATA

The following table presents selected financial data for each of the last five fiscal years. This selected financial data should be read in conjunction with the Consolidated Financial Statements and related notes beginning on page F‑1 of this Annual Report on Form 10‑K and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These historical results are not necessarily indicative of the results of operations to be expected for any future period.

The table below includes the non-U.S. GAAP operating performance measures of EBITDA and Adjusted EBITDA. For a definition of EBITDA and Adjusted EBITDA and a reconciliation to net income calculated and presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), please see “Non-U.S. GAAP Financial Measures” immediately below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts in thousands, except share and per share information

 

    

2019

    

2018

    

2017

    

2016

    

2015

Contract revenues (1)

 

$

708,390

 

$

520,894

 

$

578,553

 

$

578,236

 

$

466,498

Gross profit

 

 

64,041

 

 

16,776

 

 

62,240

 

 

67,482

 

 

40,182

Selling, general and administrative expenses

 

 

61,012

 

 

53,197

 

 

56,640

 

 

64,987

 

 

47,715

Other expense, net

 

 

(5,684)

 

 

(6,115)

 

 

(5,679)

 

 

(6,113)

 

 

(2,580)

Net (loss) income

 

 

(5,359)

 

 

(94,422)

 

 

400

 

 

(3,620)

 

 

(8,060)

Net (loss) income per share:

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

Basic

 

$

(0.18)

 

$

(3.31)

 

$

0.01

 

$

(0.13)

 

$

(0.29)

Diluted

 

$

(0.18)

 

$

(3.31)

 

$

0.01

 

$

(0.13)

 

$

(0.29)

Weighted average shares outstanding:

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

Basic

 

 

29,322,054

 

 

28,518,353

 

 

28,029,936

 

 

27,536,967

 

 

27,366,528

Diluted

 

 

29,322,054

 

 

28,518,353

 

 

28,354,280

 

 

27,536,967

 

 

27,366,528

Other Financial Data

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

EBITDA

 

$

31,371

 

$

(67,049)

 

$

31,070

 

$

38,295

 

$

20,620

Adjusted EBITDA

 

$

36,797

 

$

24,036

 

$

31,070

 

$

38,295

 

$

20,620

Capital expenditures

 

 

17,199

 

 

17,714

 

 

10,729

 

 

18,715

 

 

20,802

Cash interest expense

 

 

6,311

 

 

4,819

 

 

4,413

 

 

5,031

 

 

3,063

Depreciation and amortization

 

 

28,407

 

 

31,799

 

 

29,491

 

 

34,162

 

 

28,083

Net cash (used in) provided by:

 

 

 

 

 

  

 

 

  

 

 

  

 

 

  

Operating activities

 

 

(716)

 

 

21,931

 

 

34,133

 

 

23,149

 

 

25,179

Investing activities

 

 

(13,331)

 

 

(13,300)

 

 

(10,080)

 

 

(17,686)

 

 

(128,795)

Financing activities

 

 

6,449

 

 

(9,033)

 

 

(15,272)

 

 

(6,503)

 

 

66,068


(1)

ASU 2014‑09, Revenue from Contracts with Customers (Topic 606), adopted on January 1, 2018, using the modified retrospective method. Prior years have not been recast.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

    

2019

    

2018

    

2017

    

2016

    

2015

Balance Sheet Data:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Cash, cash equivalents and restricted cash

 

$

1,086

 

$

8,684

 

$

9,086

 

$

305

 

$

1,345

Working capital

 

 

62,213

 

 

50,750

 

 

69,797

 

 

77,588

 

 

75,277

Total assets

 

 

394,844

 

 

312,870

 

 

433,285

 

 

447,676

 

 

461,462

Total debt, net of debt issuance costs

 

 

71,697

 

 

79,065

 

 

85,941

 

 

101,265

 

 

106,609

Total stockholders’ equity

 

 

138,021

 

 

141,585

 

 

231,266

 

 

226,204

 

 

227,714

 

Non-U.S. GAAP Financial Measures

We include in this Annual Report on Form 10‑K the non-U.S. GAAP financial measure of  EBITDA and Adjusted EBITDA. We define EBITDA as earnings before interest, income taxes, depreciation and amortization. Adjusted EBITDA is a non-GAAP measure that represents EBITDA adjusted for project adjustments, accounts receivable reserves and goodwill impairment charges. EBITDA and Adjusted EBITDA are used as supplemental operating performance measures

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by our management and by external users of our financial statements such as investors, commercial banks and others, to assess:

·

the ability of our assets to generate cash sufficient to pay interest costs and support our indebtedness;

·

our operating performance and return on capital as compared to those of other companies in our industry, without regard to financing or capital structure; and

·

the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.

EBITDA and Adjusted EBITDA are not presentations made in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income, operating income, cash flows from operating activities or any other measure of performance presented in accordance with U.S. GAAP as measures of operating performance. Because EBITDA and Adjusted EBITDA excludes some, but not all, items that affect net income and is defined differently by different companies in our industry, our definition of  EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA have important limitations as analytical tools, and you should not consider them in isolation.

The following table provides a reconciliation of EBITDA and Adjusted EBITDA to our net income for the periods indicated as calculated and presented in accordance with U.S. GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

    

2016

    

2015

Net income (loss)

 

$

(5,359)

 

$

(94,422)

 

$

400

 

$

(3,620)

 

$

(8,060)

Income tax (benefit) expense

 

 

1,868

 

 

(12,233)

 

 

(4,541)

 

 

1,581

 

 

(2,519)

Interest expense, net

 

 

6,455

 

 

7,807

 

 

5,720

 

 

6,172

 

 

3,116

Depreciation and amortization

 

 

28,407

 

 

31,799

 

 

29,491

 

 

34,162

 

 

28,083

EBITDA

 

 

31,371

 

 

(67,049)

 

 

31,070

 

 

38,295

 

 

20,620

ISG initiative

 

 

4,781

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Severance

 

 

645

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Changes in cost estimates

 

 

 —

 

 

22,770

 

 

 —

 

 

 —

 

 

 —

Reserve on disputed accounts receivables

 

 

 —

 

 

4,280

 

 

 —

 

 

 —

 

 

 —

Goodwill impairment charges

 

 

 —

 

 

69,483

 

 

 —

 

 

 —

 

 

 —

Legal settlement

 

 

 —

 

 

(5,448)

 

 

 —

 

 

 —

 

 

 —

Adjusted EBITDA

 

$

36,797

 

$

24,036

 

$

31,070

 

$

38,295

 

$

20,620

 

 

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Item  7.            MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations is based on and should be read in conjunction with our consolidated financial statements and the accompanying notes beginning on page F‑1 of this Annual Report on Form 10‑K. Certain statements made in our discussion may be forward-looking. Forward-looking statements involve risks and uncertainties and a number of other factors that could cause actual results or outcomes to differ materially from our expectations. See “Forward-Looking Statements” at the beginning of this Annual Report on Form 10‑K for additional discussion of some of these risks and uncertainties. Unless the context requires otherwise, when we refer to “we”, “us” and “our”, we are describing Orion Group Holdings, Inc. and its consolidated subsidiaries.

Overview

Orion Group Holdings, Inc., its subsidiaries and affiliates (hereafter collectively referred to as the “Company”), provides a broad range of specialty construction services in the infrastructure, industrial and building sectors of the continental United States, Alaska, and the Caribbean Basin. The Company’s marine segment services the infrastructure sector through marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging of waterways, channels and ports, environmental dredging, design, and specialty services. Its concrete segment services the building sector by providing turnkey concrete construction services including pour and finish, dirt work, layout, forming, rebar, and mesh across the light commercial structural and other associated business areas. The Company is headquartered in Houston, Texas with offices throughout its operating areas.

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 such factors 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.

Most of our revenue is derived from fixed-price contracts. We generally record revenue on construction contracts over time, measured by the percentage of actual contract costs incurred to date to total estimated costs for each contract. There are a number of factors that can create variability in contract performance and therefore impact the results of our operations. The most significant of these include the following:

·

completeness and accuracy of the original bid;

·

increases in commodity prices such as concrete, steel and fuel;

·

customer delays, work stoppages, and other costs due to weather and environmental restrictions;

·

availability and skill level of workers; and

·

a change in availability and proximity of equipment and materials.

All of these factors can have a negative impact on our contract performance, which can adversely affect the timing of revenue recognition and ultimate contract profitability. We plan our operations and bidding activity with these factors in mind and they generally have not had a material adverse impact on the results of our operations in the past.

2019 Recap and 2020 Outlook

In 2019, we recorded revenues of $708.4 million, of which $369.1 million was attributable to our marine segment and the remaining $339.3 million to our concrete segment. In addition, we ended 2019 with a consolidated backlog of $572.3 million. Our revenues in 2019 increased by 36.0% as compared with 2018 and we recorded a net loss of $5.4 million, as compared with a net loss of $94.4 million in the prior year. The net loss in 2018 was driven by the full impairment of goodwill of $69.5 million, unfavorable changes in cost estimates, the unfavorable impact of customer driven project disruptions and delays and weather patterns in the second half of 2018.

Looking toward 2020, the Company continues to focus on developing opportunities across the infrastructure, industrial, and building sectors through organic growth, greenfield expansion, and strategic acquisition opportunities.

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Marine Segment

Demand for our marine construction services remains strong. We continue to see solid demand to help maintain and expand the infrastructure that facilitates the movement of goods and people on or over waterways. Specifically, we continue to see bid opportunities from our private sector energy-related customers as they expand their marine facilities related to the storage, transportation and refining of domestically produced energy. Over the long-term, we expect to see some bid opportunities in this sector from petrochemical-related businesses, energy exporters, and liquefied natural gas facilities. Opportunities from local port authorities also remain solid, many of which are related to the completion of the Panama Canal expansion project. Additionally, bid opportunities related to coastal restoration funded through the Resource and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States Act (the “RESTORE Act”) may arise throughout 2020. We believe our current equipment fleet will allow us to better meet market demand for projects from both our public and private customers in the future.

In the long-term, we see positive trends in demands for our services in our end markets, including:

·

Continuing need to repair and improve degrading U. S. marine infrastructure;

·

Improving economic conditions and increased activity in the petrochemical industry and energy-related companies will likely give rise to an increase in capital expenditures, including larger projects, as well as maintenance call-out work;

·

Expected increases in cargo volume and future demands from larger ships transiting the Panama Canal will require ports along the Gulf Coast and Atlantic Seaboard to expand port infrastructure as well as perform additional dredging services;

·

Possible work opportunities generated by the Water Resources Reform and Development Act (the “WRRDA Act”) authorizing expenditures for the conservation and development of the nation’s waterways as well as addressing funding deficiencies within the Harbor Maintenance Trust Fund;

·

Renewed focus on coastal rehabilitation along the Gulf Coast, particularly through the use of RESTORE Act funds based on fines collected related to the 2010 Gulf of Mexico oil spill; and

·

Funding for highways and transportation under the FAST Act, which provides authority through 2020; and nearly $5 billion of federal funding provided by the USACE in connection with disaster recovery in Texas.

Concrete Segment

Our concrete segment’s demand also remains strong. The Texas building sector is in solid shape as its four major metropolitan areas, and expanding suburbs, continuously retain their positions as leading destinations for families and businesses. Population growth throughout our markets continues to drive new distribution centers, education facilities, office expansion, retail and grocery establishments and new multi-family housing units. In Houston, warehouse construction and new education facilities continue to comprise a large portion of project mix. The Dallas-Fort Worth office continues to see opportunities from warehouse distribution centers and is targeting structural construction opportunities. In the Central Texas office, retail facilities, warehouse, and structural construction are driving the project mix. Long-term, we see sustained demand for concrete services in our markets.

Consolidated Results of Operations

Backlog Information

Our contract backlog represents our estimate of the revenues we expect to realize under the portion of contracts remaining to be performed. Given the typical duration of our contracts, which is generally less than a year, our backlog at any point in time usually represents only a portion of the revenue that we expect to realize during a twelve month period. We have not been adversely affected by contract cancellations or modifications in the past, we may be in the future, especially in economically uncertain periods. Consequently, 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 time.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

    

September 30, 2019

    

June 30, 2019

    

March 31, 2019

    

December 31, 2018

Marine segment

 

$

340.7

 

$

404.3

 

$

477.0

 

$

219.4

 

$

256.7

Concrete segment

 

 

231.6

 

 

226.2

 

 

184.0

 

 

192.1

 

 

183.7

Consolidated

 

$

572.3

 

$

630.5

 

$

661.0

 

$

411.5

 

$

440.4

 

Income Statement Comparisons

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 

 

 

    

2019

    

2018

    

2017

 

 

    

Amount

    

Percent

    

Amount

    

Percent

    

Amount

    

Percent

 

 

 

(dollar amounts in thousands)

 

Contract revenues

 

$

708,390

 

100.0

%  

$

520,894

 

100.0

%  

$

578,553

 

100.0

%

Cost of contract revenues

 

 

644,349

 

91.0

%  

 

504,118

 

96.8

%  

 

516,313

 

89.2

%

Gross profit

 

 

64,041

 

9.0

%  

 

16,776

 

3.2

%  

 

62,240

 

10.8

%

Selling, general and administrative expenses

 

 

61,012

 

8.7

%  

 

53,197

 

10.1

%  

 

56,640

 

9.8

%

Amortization of intangible assets

 

 

2,640

 

0.4

%  

 

3,390

 

0.7

%  

 

4,736

 

0.8

%

Gain on sale of assets, net

 

 

(1,804)

 

(0.3)

%  

 

(3,306)

 

(0.6)

%  

 

(674)

 

(0.1)

%

Goodwill impairment charges

 

 

 —

 

 —

 

 

69,483

 

13.3

 

 

 —

 

 —

 

Other gain from continuing operations

 

 

 —

 

 —

 

 

(5,448)

 

(1.0)

 

 

 —

 

 —

 

Operating income (loss)

 

 

2,193

 

0.3

%  

 

(100,540)

 

(19.3)

%  

 

1,538

 

0.3

%

Other (expense) income:

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

Other income

 

 

771

 

0.1

%  

 

1,692

 

0.3

%  

 

41

 

 —

%

Interest income

 

 

353

 

 —

%  

 

136

 

 —

%  

 

11

 

 —

%

Interest expense

 

 

(6,808)

 

(0.9)

%  

 

(7,943)

 

(1.5)

%  

 

(5,731)

 

(1.0)

%

Other expense, net

 

 

(5,684)

 

(0.8)

%  

 

(6,115)

 

(1.2)

%  

 

(5,679)

 

(1.0)

%

Loss before income tax expense (benefit)

 

 

(3,491)

 

(0.5)

%  

 

(106,655)

 

(20.5)

%  

 

(4,141)

 

(0.7)

%

Income tax expense (benefit)

 

 

1,868

 

0.3

%  

 

(12,233)

 

(2.4)

%  

 

(4,541)

 

(0.8)

%

Net (loss) income

 

$

(5,359)

 

(0.8)

%  

$

(94,422)

 

(18.1)

%  

 

400

 

0.1

%

 

Year ended December 31, 2019 compared with year ended December 31, 2018

Contract Revenues. Contract revenues for the year ended December 31, 2019 of $708.4 million increased approximately 36.0% as compared to $520.9 million in the prior year period. The increase was primarily attributable to the execution on the larger volume of work in our backlog in the marine segment as well as increased cubic yard production in the concrete segment in the current year period as compared to the prior year period. While overall revenues increased, we did experience a shift in the component mix of our marine segment revenue from the private sector to the public sector when comparing the 2019 period to 2018. In particular, the 2019 period included a large project in the public sector that did not contribute to 2018 results. By contrast, the 2018 period included a large project in our private sector that was not replicated in the 2019 period.

Gross Profit.  Gross profit was $64.0 million for the year ended December 31, 2019, compared to $16.8 million in the prior year period, an increase of $47.2 million. Gross margin in 2019 was 9.0% of total contract revenues as compared to 3.2% in the prior year period. The increase in gross profit dollars and percentage were primarily driven by an improvement in labor efficiency resulting from application of activities from the Invest, Scale, Growth or ISG process and improved utilization rates in our marine segment, along with improved man hours per cubic yards placed in our concrete segment. Comparatively, 2018 included unfavorable changes in cost estimates and the unfavorable impact of project disruptions due to unanticipated delays in commencing work caused by customer schedules in the marine segment and unfavorable weather patterns in the concrete segment that impacted the second half of the year.

 

Selling, General and Administrative Expense. Selling, general and administrative ("SG&A") expenses were $61.0 million for the year ended December 31, 2019 compared to $53.2 million in the prior year period, an increase of $7.8 million, or

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14.7%. As a percentage of total contract revenues, SG&A expenses decreased as compared with the prior year, from 10.1% to 8.7%.  The increase in SG&A dollars was primarily attributable to expenses related to the ISG initiative.

Other Income, net of Expense. Other expense primarily reflects interest on our borrowings, partially offset by interest income and non-operating gains or losses. During 2019, we recognized $0.5 million of other income related to previously accrued contingent consideration from the purchase of TBC that was never achieved. Interest expense for 2019 also included a $0.4 million charge related to recognizing unamortized debt issuance costs as a result of the Sixth Amendment to the Credit Facility. During 2018, we recognized $1.6 million of other income on the sale of easement rights for one of our properties in the Houston area. Interest expense for 2018 included a $2.2 million charge related to recognizing unamortized debt issuance costs on early extinguishment of debt.

 

See Note 3 for additional discussion of the TBC acquisition contingent consideration.

See Note 12 for additional discussion of the amended syndicated credit agreement, also known as the Sixth Amendment, executed in May 2019.

Income Tax Expense (Benefit). We recorded tax expense of $1.9 million in 2019, compared to tax benefit of $12.2 million in 2018. Our effective tax rate in 2019 was (53.5)%, which differs from the statutory rate of 21% primarily due to the recording of an additional valuation allowance to offset net operating loss carryforwards and foreign tax credits generated during the period, foreign taxes, state income taxes and the non-deductibility of certain permanent items.

Year ended December 31, 2018 compared with year ended December 31, 2017

Contract Revenues. Contract revenues for the year ended December 31, 2018 of $520.9 million decreased approximately 10.0% as compared to $578.6 million in the prior year period. The decrease was primarily attributable to certain projects in the Marine segment, where we experienced unfavorable changes in cost estimates, the unfavorable impact of customer driven project disruptions and delays and weather patterns in the second half of 2018.

Gross Profit.  Gross profit was $16.8 million for the year ended December 31, 2018, compared to $62.2 million in the prior year period, a decrease of $45.4 million, or 73.0%. Gross profit in 2018 was 3.2% of total contract revenues as compared to 10.8% in the prior year period. The decrease in gross profit dollars and percentage was primarily attributable to unfavorable changes in cost estimates and the unfavorable impact of project disruptions due to weather events in the second half of 2018 in the marine segment as well as competitive pressure in the Houston market in the concrete segment.

Selling, General and Administrative Expense. Selling, general and administrative ("SG&A") expenses were $53.2 million for the year ended December 31, 2018 compared to $56.6 million in the prior year period, a decrease of $3.4 million, or 6.1%. This decrease was driven by cost saving initiatives implemented in the fall of 2017 as well as a reduction in certain payroll-related costs in the third quarter of 2018.

Other Expense, Net of Income. Other expense primarily reflects interest on our borrowings, partially offset by interest income and non-operating gains or losses. During 2018,  we recognized $1.6 million of other income on the sale of easement rights for one of our properties in the Houston area.  This was offset by a $2.2 million charge to interest expense related to recognizing unamortized debt issuance costs on early extinguishment of debt in the third quarter of 2018.  Our 2017 period only included the recurring interest expense on our borrowings. 

Income Tax Benefit. We recorded tax benefit of $12.2 million in 2018, compared to tax benefit of $4.5 million in 2017. Our effective tax rate in 2018 was 11.5%, which differs from the statutory rate of 21% primarily due to valuation allowances taken on net operating losses.

See Note 14 for additional discussion of income taxes.

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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:

Segment Comparison

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 

 

 

 

2019

 

2018

 

2017

 

 

    

Amount

    

Percent

    

Amount

    

Percent

    

Amount

    

Percent

 

 

 

(dollar amounts in thousands)

 

Contract revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marine segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public sector

 

$

258,039

 

69.9

%  

$

124,208

 

50.9

%  

$

149,331

 

52.3

%  

Private sector

 

 

111,099

 

30.1

%  

 

119,675

 

49.1

%  

 

136,405

 

47.7

%  

Marine segment total

 

$

369,138

 

100.0

%  

$

243,883

 

100.0

%  

$

285,736

 

100.0

%  

Concrete segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public sector

 

$

49,175

 

14.5

%  

$

55,883

 

20.2

%  

$

48,696

 

16.6

%  

Private sector

 

 

290,077

 

85.5

%  

 

221,128

 

79.8

%  

 

244,121

 

83.4

%  

Concrete segment total

 

$

339,252

 

100.0

%  

$

277,011

 

100.0

%  

$

292,817

 

100.0

%  

Total

 

$

708,390

 

 

 

$

520,894

 

 

 

$

578,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

  

 

  

 

 

  

 

  

 

 

  

 

  

 

Marine segment

 

$

1,057

 

0.3

%  

$

(61,012)

 

(25.0)

%  

$

(18,406)

 

(6.4)

%  

Concrete segment

 

 

1,136

 

0.3

%  

 

(39,528)

 

(14.3)

%  

 

19,944

 

6.8

%  

Total

 

$

2,193

 

 

 

$

(100,540)

 

 

 

$

1,538

 

 

 

 

Year ended December 31, 2019 compared with year ended December 31, 2018

Marine Segment

Revenues for our marine segment for the year ended December 31, 2019 were $369.1 million compared to $243.9 million for the year ended December 31, 2018, an increase of $125.2 million, or 51.4%. This increase is primarily attributable to the execution on the larger volume of work in our backlog in the current year as compared to the prior year where we experienced $22.8 million of unfavorable changes in cost estimates on certain projects as well as unanticipated delays in commencing certain work due to customer schedules in the second half of 2018.

Operating income for our marine segment for the year ended December 31, 2019 was $1.1 million, compared to an operating loss of $61.0 million for the year ended December 31, 2018, an increase of $62.1 million. This increase in operating income (loss) was primarily due to  the prior year full impairment of goodwill in the marine segment of $33.8 million, certain projects in the prior year where we experienced unfavorable changes in cost estimates and to unanticipated delays in commencing certain work due to customer schedules in the second half of 2018. As a percentage of total contract revenues, operating income for our marine segment was 0.3% for the year ended December 31, 2019, compared to operating loss of 25.0% for the year ended December 31, 2018. The prior year period included $33.8 million of goodwill impairment charges, $22.8 million of unfavorable changes in cost estimates and a $4.3 million reserve on disputed accounts receivable, partially offset by the recognition of a $5.4 million gain on the settlement of a legal matter which did not repeat in the current period.  The current year included $3.0 million of ISG expenses compared to none in the prior year.  After allowing for the comparative  $52.4 million of non-recurring items between the periods, marine segment operating income (loss) improved by $9.7 million.

 

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Concrete Segment

Revenues for our concrete segment for the year ended December 31, 2019 were $339.3 million compared to $277.0 million for the year ended December 31, 2018, an increase of $62.3 million, or 22.5%. This This increase in revenue was primarily due to an overall increase in cubic yard production on our projects.

Operating income for our concrete segment for the year ended December 31, 2019 was $1.1 million, compared to operating loss of  $39.5 million for the year ended December 31, 2018, an increase of $40.6 million. This increase in operating income was primarily due to the prior year full impairment of goodwill in the concrete segment of $35.7 million and production delays resulting from unfavorable weather patterns experienced during the first and third quarters of 2018. As a percentage of revenues, operating income for our concrete segment was 0.3% for the year ended December 31, 2019, compared to operating loss of 14.3% for the year ended December 31, 2018. The prior year period included $35.7 million of goodwill impairment charges.  The current year included $2.3 million of ISG expenses compared to none in the prior period.  After allowing for the comparative  $33.4 million of non-recurring items between the periods, concrete segment operating income improved by $7.2 million. The increase was primarily driven by production efficiencies in man hours per cubic yard in our markets.

Year ended December 31, 2018 compared with year ended December 31, 2017

Marine Segment

Revenues for our marine segment for the year ended December 31, 2018 were $243.9 million compared to $285.7 million for the year ended December 31, 2017, a decrease of $41.9 million, or 14.6%. This decrease is primarily attributable to certain projects where we experienced unfavorable changes in cost estimates and to unanticipated delays in commencing certain work due to customer schedules in the second half of 2018.

Operating loss for our marine segment for the year ended December 31, 2018 was $61.0 million, compared to $18.4 million for the year ended December 31, 2017, an increase of $42.6 million, or 231.5%. This increase in operating loss was primarily due to the full impairment of goodwill in the marine segment of $33.8 million, certain projects where we experienced unfavorable changes in cost estimates and to unanticipated delays in commencing certain work due to customer schedules in the second half of 2018. As a percentage of total contract revenues, operating loss for our marine segment was 25.0% for the year ended December 31, 2018, compared to 6.4% for the year ended December 31, 2017. The current year period included $33.8 million of goodwill impairment charges, $22.8 million of unfavorable changes in cost estimates and a $4.3 million reserve on disputed accounts receivable, partially offset by the recognition of a $5.4 million gain on the settlement of a legal matter.  After allowing for the $55.4 million of non-recurring items for the year ended December 31, 2018, marine segment operating loss decreased by $12.8 million.

Concrete Segment

Revenues for our concrete segment for the year ended December 31, 2018 were $277.0 million compared to $292.8 million for the year ended December 31, 2017, a decrease of $15.8 million, or 5.4%. This decrease was attributable to production delays resulting from unfavorable weather patterns experienced during the third and fourth quarters of 2018.

Operating loss for our concrete segment for the year ended December 31, 2018 was $39.5 million, compared to operating income  of  $19.9 million for the year ended December 31, 2017, a decrease of $59.5 million, or 298.2%. This decrease was primarily driven by  the full impairment of goodwill in the concrete segment of $35.7 million, production delays resulting from unfavorable weather patterns experienced during the first and third quarters of 2018 as well as continued competitive pressure in the Houston market. As a percentage of revenues, operating loss for our concrete segment was 14.3% for the year ended December 31, 2018, compared to operating income of 6.8% for the year ended December 31, 2017. The prior year period included $35.7 million of goodwill impairment charges.  After allowing for the $35.7 million of goodwill impairment charges for the year ended December 31, 2018, concrete segment operating loss was $3.9 million for the year ended December 31, 2018, compared to operating income of $19.9 million for the year ended December 31, 2017.

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Critical Accounting Estimates

The consolidated financial statements contained in this report were prepared in accordance with U.S. GAAP. The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect both the Company’s carrying values of its assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Although our significant accounting policies are described in more detail in Note 2 of the Notes to Consolidated Financial Statements; we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements:

·

Revenue Recognition from Construction Contracts;

·

Long Lived Assets;

·

Income Taxes;

·

Insurance Coverage, Litigation, Claims and Contingencies.

 

Revenue Recognition

We adopted ASU 2014‑09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018, using the modified retrospective method. We recognized the cumulative effect of initially adopting Topic 606 guidance as an adjustment to the beginning balance of retained earnings. Contracts with customers that were not substantially complete in both our marine and concrete segments were evaluated in order to determine the impact as of the date of adoption. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Our revenue is derived from contracts to provide marine construction, dredging, turnkey concrete services, and other specialty services. Our projects are typically short in duration and usually span a period of less than one year. We determine the appropriate accounting treatment for each contract before work begins and generally record revenue on contracts 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. Our contracts and related change orders typically represent a single performance obligation because individual goods and services are not separately identifiable and we provide a significantly integrated service. Revenue is recognized over time because control is continuously transferred to the customer. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our 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 incurring 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. When losses on uncompleted contracts are anticipated, the entire loss is recognized 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.

Long-Lived Assets

Our long-lived assets consist primarily of equipment used in our operations. Fixed assets are carried at cost and are depreciated over their estimated useful lives, ranging from one to 30 years, using the straight-line method for financial reporting purposes and accelerated methods for tax reporting purposes. The carrying value of our long-lived assets is evaluated periodically based on utilization of the asset and physical condition of the asset, as well as the useful life of the asset to determine if adjustment to the depreciation period or the carrying value is warranted. If events and circumstances such as poor utilization or deteriorated physical condition indicate that the asset(s) should be reviewed for possible impairment, we use projections to assess whether future cash flows, including disposition, on a non-discounted basis

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related to the tested assets are likely to exceed the recorded carrying amount of those assets to determine if an impairment exists. If we identify a potential impairment, we will estimate the fair value of the asset through known market transactions of similar equipment and other valuation techniques, which could include the use of similar projections on a discounted cash flow basis. We will report a loss to the extent that the carrying value of the impaired assets exceeds their fair values.

Income Taxes

We determine our 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. We must make significant assumptions, judgments and estimates to determine our current provision for income taxes, our 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 our 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 we do not expect to realize. The factors used to assess the likelihood of realization include our forecast of future taxable income exclusive of reversing temporary differences and carryforwards, future reversals of existing taxable temporary differences and available tax planning strategies that could be implemented to realize the net deferred tax assets.

We consider both positive and negative evidence when evaluating the need for a valuation allowance on our deferred tax assets in accordance with ASC 740. Available evidence includes historical financial information supplemented by currently available information about future years. Generally, historical financial information is more objectively verifiable than projections of future income and is therefore given more weight in our assessment.  We consider cumulative losses in the most recent twelve quarters to be significant negative evidence that is difficult to overcome in considering whether a valuation allowance is required. Conversely, we consider a cumulative income position over the most resent twelve quarters, to be significant positive evidence that a valuation allowance may not be required.

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 our financial position and results of operations. We compute 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.

We account for uncertain tax positions in accordance with the provisions of the FASB’s ASC 740‑10, which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on our consolidated tax return. We evaluate and record any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon ultimate settlement with the tax authorities in the tax jurisdictions in which we operate.

Insurance Coverage, Litigation, Claims and Contingencies

We maintain insurance coverage for our 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 our 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 $200 million in excess of primary coverage. This excess loss coverage responds to most of its liability 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 $200 million in excess of primary coverage. This excess loss coverage responds to most of its liability policies when a primary limit of $1 million has been exhausted.

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Separately, our marine segment employee health care is provided through a trust administered by a third party. Funding of the trust is based on current claims. 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 results of operations in the period in which they become known. Our 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, expects to receive a partial refund after the policy expiration.

Liquidity and Capital Resources

Our primary liquidity needs are to finance our working capital, fund capital expenditures, and pursue strategic acquisitions. Historically, our source of liquidity has been cash provided by our operating activities and borrowings under our Credit Facility (as defined below).

Changes in working capital are normal within our business given the varying mix in size, scope and timing of delivery of our projects. At December 31, 2019, our working capital was $62.2 million, as compared with $50.8 million at December 31, 2018. As of December 31, 2019, we had unrestricted cash on hand of $0.1 million. Our borrowing capacity at December 31, 2019 was approximately $12.6 million.

We expect to meet our future internal liquidity and working capital needs and maintain or replace our equipment fleet through capital expenditure purchases and major repairs, from funds generated by our operating activities for at least the next 12 months. We believe our cash position is adequate for our general business requirements discussed above and to service our debt.

The following table provides information regarding our cash flows and our capital expenditures for the years ending December 31, 2019, 2018 and 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

Cash flows (used in) provided by operating activities

 

$

(716)

 

$

21,931

 

$

34,133

Cash flows used in investing activities

 

$

(13,331)

 

$

(13,300)

 

$

(10,080)

Cash flows provided by (used in) financing activities

 

$

6,449

 

$

(9,033)

 

$

(15,272)

 

 

 

 

 

 

 

 

 

 

Capital expenditures (included in investing activities above)

 

$

(17,199)

 

$

(17,714)

 

$

(10,729)

 

Operating Activities. During 2019, we used approximately $0.7 million in cash from our operating activities. The net cash outflow is comprised of $30.1 million of cash inflows from net income, after adjusting for non-cash items and $30.8 million of cash outflows related to changes in net working capital. The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Consolidated Statements of Cash Flows, were primarily driven by a $22.9 million increase in our net position of accounts receivable and accounts payable. The increases in accounts receivable and accounts payable were consistent with our increased project activity year over year.  The year over year increase in accounts receivable is more pronounced than accounts payable due to the longer cycle times on the accounts receivable, which also include retainage whereas accounts payable typically turn in 30 days. The changes in net working capital also included a net outflow of $5.2 million from the net change in costs and estimated earnings in excess of billings on uncompleted contracts, offset by the change in billings in excess of costs and estimated earnings on uncompleted contracts. These changes were driven by the timing and execution of the underlying projects.

During 2018, our operations provided approximately $21.9 million in net cash inflows. The net cash inflow is comprised of inflows of $27.6 million related to changes in working capital, partially offset by $5.7 million of net loss after adjusting for non-cash items. The changes in net working capital were primarily driven by a net inflow of $24.6 million of cash from the net change in costs and estimated earnings in excess of billings on uncompleted contracts, offset by the change in

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billings in excess of costs and estimated earnings on uncompleted contracts. These changes were driven by the timing and execution of the underlying projects.

During 2017, our operations provided approximately $34.1 million in net cash inflows. The net cash inflow is comprised of $28.6 million of net income after adjusting for non-cash items and inflows of $5.5 million related to changes in net working capital.  The changes in net working capital were primarily driven by a decrease in accounts receivable, partially offset by a decrease in accounts payable.

Investing Activities. Capital asset additions and betterments to our fleet were $17.2 million in 2019, as compared with $17.7 million and $10.7 million in 2018 and 2017, respectively. The changes are primarily a result of the timing of purchase of capital assets.

Financing Activities. During 2019, we drew down $63.0 million from our revolving line of credit. Additionally, we repaid $49.0 million on this draw, as well as made regularly scheduled debt payments on the term loan of $3.0 million and an additional principal paydown of $18.2 million with proceeds from a sale-leaseback arrangement.

During 2018, we drew down $39.9 million from our revolving line of credit. Additionally, we repaid $27.9 million on this draw, as well as made debt payments on the term loan of $20.2 for a total of $48.1 million in debt payments.

During 2017, in connection with our new Credit Facility, we drew down $72.0 million from our revolving line of credit. Additionally, we repaid $70.0 million on this draw, as well as made regularly scheduled debt payments and additional payments on the term loan of $17.8 million for a total of $87.8 million in debt payments.

Sources of Capital

The Company entered into an amended syndicated credit agreement (the “Credit Agreement” also known as the “Fourth Amendment”) on July 31, 2018, with Regions Bank, as administrative agent and collateral agent, and the following co-syndication agents:  Bank of America, N.A., BOKF, NA dba Bank of Texas, KeyBank National Association, NBH Bank, IBERIABANK, Trustmark National Bank, First Tennessee Bank NA, and Branch Baking and Trust Company. The primary purpose of the Credit Agreement was to provide the Company with greater flexibility as it provides for the calculation of Adjusted EBITDA that adds back various project specific costs. Additionally, the Company executed the Fifth Amendment during March 2019, which was made effective as of December 31, 2018, and executed the Sixth Amendment during May 2019.

The Credit Agreement, which may be amended from time to time, provides for borrowings under a revolving line of credit and a term loan (together, the “Credit Facility”). The Credit Facility is guaranteed by the subsidiaries of the Company, secured by the assets of the Company, including stock held in its subsidiaries, and may be used to finance general corporate and working capital purposes, to finance capital expenditures, to refinance existing indebtedness, to finance permitted acquisitions and associated fees, and to pay for all related expenses to the Credit Facility. Interest is computed based on the designation of the loan, with the option of a Base Rate Loan (the base rate plus the Applicable Margin), or an Adjusted LIBOR Rate Loan (the adjusted LIBOR rate plus the Applicable Margin). Interest is due on the last day of each quarter end for Base Rate Loans and at the end of the LIBOR rate period for Adjusted LIBOR Rate Loans. Principal balances drawn under the Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty. Amounts repaid under the revolving line of credit may be re-borrowed. The Credit Facility matures on July 31, 2023.

See Note 12 in the Notes to the Financial Statements (Part IV, Item 15 of this Form 10‑K) for further discussion on the Company’s Debt.

Financial covenants

Restrictive financial covenants under the Credit Facility include:

·

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

-Fiscal Quarter Ending December 31, 2019 and each Fiscal Quarter thereafter, to not be less than 1.25 to 1.00.

·

A consolidated Leverage Ratio to not exceed the following during each noted period:

-Fiscal Quarter Ending December 31, 2019, to not exceed 4.00 to 1.00;

-Fiscal Quarter Ending March 31, 2020 and each Fiscal Quarter thereafter, to not exceed 3.00 to 1.00.

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·

A consolidated Adjusted EBITDA to not be less than the following during each noted period:

- Fiscal Year Ending December 31, 2019 : $21.7 million.

In addition, the Credit Facility contains events of default that are usual and customary for similar arrangements, including non-payment of principal, interest or fees; breaches of representations and warranties that are not timely cured; violation of covenants; bankruptcy and insolvency events; and events constituting a change of control.

The Company expects to meet its future internal liquidity and working capital needs, and maintain or replace its equipment fleet through capital expenditure purchases and major repairs, from funds generated by its operating activities for at least the next 12 months. The Company believes that its cash position and available borrowings together with cash flow from its operations is adequate for general business requirements and to service its debt. The Company was in compliance with all financial covenants as of December 31, 2019.

Derivative Financial Instruments

On September 16, 2015, the Company entered into a series of receive-variable, pay-fixed interest rate swaps to hedge the variability in the interest payments on 50% of the aggregate principal amount of the Regions Term Loan outstanding, beginning with a notional amount of $67.5 million. There were a total of five sequential interest rate swaps to achieve the hedged position and each year on August 31, with the exception of the final swap, the existing interest rate swap was scheduled to expire and be immediately replaced with a new interest rate swap until the expiration of the final swap on July 31, 2020. On December 6, 2018, the Company entered into a sixth receive-variable, pay-fixed interest rate swap to hedge the variability of interest payments. The sixth swap will begin with a notional amount of $27.0 million on July 31, 2020 and will hedge the variability in the interest payments on the aggregate scheduled principal amount of the Regions Term Loan outstanding. The sixth swap is scheduled to expire on July 31, 2023. At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting, and as such, the effective portion of unrealized changes in market value are recorded in accumulated other comprehensive (loss) income and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. Gains and losses from hedge ineffectiveness are recognized in current earnings. The change in fair market value of the swaps as of December 31, 2019 is approximately $1.0 million. The fair market value of the swaps as of December 31, 2019 is reflected as a liability of $1.0 million on the Consolidated Balance Sheets. See Note 9 for more information regarding the fair value of the Company’s derivative instruments.

 

Sale-Leaseback Arrangement

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 (the “Property”) for a purchase price of $19.1 million. Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “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. This transaction was recorded as a failed sale-leaseback. The Company recorded a liability for the amounts received, will continue to depreciate the non-land portion of the asset, 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 term. Concurrently with the sale, the Company paid $18.2 million as an additional principal payment towards the Term loan portion of the Company’s Credit Facility, consistent with terms of the Sixth Amendment.

 

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Bonding Capacity

We are often required to provide various types of surety bonds that provide additional security to our customers for our performance under certain government and private sector contracts. 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 December 31, 2019, the capacity under our current bonding arrangement was at least $500 million, with approximately $280 million of projects being bonded. We believe our strong balance sheet and working capital position will allow us to continue to access our bonding capacity.

Effect of Inflation

We are subject to the effects of inflation through increases in the cost of raw materials, and other items such as fuel, concrete and steel. Due to the relative short-term duration of our projects, we are generally able to include anticipated price increases in the cost of our bids.

Off Balance Sheet Arrangements

Currently our only off balance sheet arrangements are those discussed above under “Bonding Capacity” and those which arise in the normal course of business. These arrangements are not reasonably likely to have an effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. See Note 18 – Commitments and Contingencies of Notes to Consolidated Financial Statements beginning on page F‑1 of this Annual Report on Form 10‑K.

Contractual Obligations

The following table sets forth information about our contractual obligations and commercial commitments as of December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment Due by Period

 

    

Total

    

< 1 year

    

1-3 years

    

3-5 years

    

> 5 years

 

 

(in thousands)

Debt obligations

 

$

73,290

 

$

3,750

 

$

9,750

 

$

59,790

 

$

 —

Lease obligations

 

 

28,115

 

$

9,374

 

 

10,437

 

 

4,089

 

 

4,215

Sale-leaseback arrangement (1)

 

 

17,929

 

 

482

 

 

1,527

 

 

1,806

 

 

14,114

Purchase obligations (2)

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total

 

$

119,334

 

$

13,606

 

$

21,714

 

$

65,685

 

$

18,329


(1)

See Note 13 in the Notes to the Financial Statements (Part IV, Item 15 of this Form 10‑K) for further discussion on the Company’s Sale-leaseback arrangement.

(2)

Commitments pursuant to open purchase orders and subcontracts related to construction contracts are not included since such amounts are expected to be funded under contract billings.

To manage risks of changes in the material prices and subcontracting costs used in tendering bids for construction contracts, we routinely obtain firm quotations from our suppliers and subcontractors before submitting a bid. These quotations do not include any quantity guarantees, and we have no obligation for materials or subcontract services beyond those required to complete the contracts that we are awarded for which quotations have been provided.

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A summary of debt and other contractual obligations as of December 31, 2019 and December 31, 2018 is as follows:

 

 

 

 

 

 

 

 

 

    

December 31, 2019

    

December 31, 2018

Credit facility, non-current maturities

 

$

69,540

 

$

77,500

Credit facility, current maturities

 

 

3,750

 

 

3,000

Total long-term debt

 

$

73,290

 

$

80,500

Outstanding letters of credits

 

$

1,378

 

$

814

Leasing arrangements

 

$

28,115

 

$

33,205

Other long-term liabilities

 

$

20,436

 

$

8,759

 

The maturity date for amounts drawn under the revolving line of credit is the earlier of the Facility termination date of July 31, 2023, or the date the outstanding balance is permanently reduced to zero. Prior to the fourth quarter of 2018, the Company classified amounts drawn as current liabilities based on an intent and ability to repay the amounts using current assets within the next twelve months. During the fourth quarter of 2018, the Company determined it no longer has the intent to repay amounts drawn within the next twelve months. Therefore, the Company has classified the entire outstanding balance of the revolving line of credit as non-current.

Recently Issued Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Principles of the Notes to the Financial Statements (Part IV, Item 15 of this Form  10‑K) for further discussion.

Item 7A.            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, our results of operations are subject to risks related to fluctuations in commodity prices and fluctuations in interest rates. Historically, our exposure to foreign currency fluctuations has not been material and has been limited to temporary field accounts located in foreign countries where we perform work. Foreign currency fluctuations were immaterial in this reporting period.

Commodity price risk

We are subject to fluctuations in commodity prices for concrete, steel products and fuel. Although we routinely attempt to secure firm quotes from our suppliers, we generally do not hedge against increases in prices for commodity products. Commodity price risks may have an impact on our results of operations due to the fixed-price nature of many of our contracts, although the short-term duration of our projects may allow us to include price increases in the costs of our bids.

Interest rate risk

At December 31, 2019, we had $73.3 million in outstanding borrowings under our credit facility, with a weighted average ending interest rate of 4.64%. Also we have entered into a series of receive-variable, pay-fixed interest rate swaps to hedge the variability in the interest payments on the aggregate principal amount of the term loan component of the credit facility outstanding. At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting. Our objectives in managing interest rate risk are to lower our overall borrowing costs and limit interest rate changes on our earnings and cash flows. To achieve this, we closely monitor changes in interest rates and we utilize cash from operations to reduce our debt position, if warranted.

Item 8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item 8 is submitted as a separate section beginning on page F‑1 of this Annual Report on Form 10‑K and is incorporated herein by reference.

Additionally, a two-year Summary of Selected Quarterly Financial Data (unaudited) is included in “Selected Quarterly Financial Data” under Item 6 - Selected Quarterly Financial Data.

Item 9.            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

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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.

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, 2019.

Our management, including our principal executive officer and principal financial officer, believes that the audited consolidated financial statements contained in this Annual Report on Form 10‑K fairly present, in all material respects, our financial condition, results of operations and cash flows for the years presented in conformity with U.S. generally accepted accounting principles.  

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 quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management 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, 2018 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, 2019 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance U.S. generally accepted accounting principles.

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, 2019.  KPMG LLP’s report appears on page F‑3 of this annual report on Form 10‑K.

Inherent Limitations on Effectiveness of Controls

Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute,

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assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

Item 9B.            OTHER INFORMATION

None

PART III

Item 10.            DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors, Executive Officers, Promoters and Control Persons

The information required by Paragraph (a), and Paragraphs (c) through (g) of Item 401 of Regulation S-K (except for information required by Paragraph (e) of that Item to the extent the required information pertains to our executive officers) 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 within 120 days after the close of our fiscal year.

The following table presents the information required by Paragraph (b) of Item 401 of Regulation S-K.

 

 

 

 

 

 

 

 

Name

    

Age

    

Position with the Company

    

Year Joined the Registrant

Richard L. Daerr, Jr.

 

75

 

Chairman of the Board

 

2007

Thomas N. Amonett

 

76

 

Director

 

2007

Margaret M. Foran

 

65

 

Director

 

2019

Austin J. Shanfelter

 

62

 

Director

 

2007

Mary E. Sullivan

 

63

 

Director

 

2019

Michael J. Caliel

 

60

 

Director

 

2019

Mark R. Stauffer

 

57

 

President, Chief Executive Officer and Director

 

1999

Robert L. Tabb

 

35

 

Vice President, Chief Financial Officer and Treasurer

 

2014

Peter R. Buchler

 

73

 

Executive Vice President, Chief Administrative Officer, Chief Compliance Officer, General Counsel and Secretary

 

2009

 

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 definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Item 11.            EXECUTIVE COMPENSATION

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

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Item 12.            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 403 of Regulation S-K is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Item 13.            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Item 14.            PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

 

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, 2019 and 2018 and for each of the three years in the period ended December 31, 2019 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, 2019 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.

†  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. 2007 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on August 20, 2007 (File No. 333‑145588)).

 

42

Table of Contents

Exhibit
Number

    

Description

†  10 .3

 

Form of Stock Option Agreement Under the 2007 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on August 20, 2007 (File No. 333‑145588)).

†  10 .4

 

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 .5

 

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 .6

 

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 .7

 

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 .8

 

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)).

†  10.9

 

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)).

†  10.10

 

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)).

†  10.11

 

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)).

†  10.12

 

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)).

10.13 

 

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).

†  10.14

 

Employment Agreement dated January 1, 2015 between Orion Marine Group, Inc. and Mark R. Stauffer (incorporated herein by reference to Exhibit 10.1 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).

†  10.15

 

First Amendment, effective January 1, 2017, to Employment Agreement by and between Orion Group Holdings, Inc. and Mark Stauffer 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 March 20, 2017 (File No. 001‑33891)).

†  10.16

 

Second Amendment, effective June 5, 2018, to Employment Agreement by and between Orion Group Holdings, Inc. and Mark Stauffer dated January 1, 2015 (incorporated herein 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 8, 2018 (File No. 001‑33891)).

 

43

Table of Contents

Exhibit
Number

    

Description

†  10.17

 

Third Amendment, effective June 19, 2019, to Employment Agreement by and between Orion Group Holdings, Inc. and Mark Stauffer dated January 1, 2015 (incorporated herein 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 21, 2019 (File No. 001‑33891)).

†  10.18

 

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).

†  10.19

 

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)).

†  10.20

 

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)).

†  10.21

 

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)).

†  10.22

 

Employment Agreement dated September 30, 2015 between Orion Group Holdings, Inc., and Robert L. Tabb, as amended by the First Amendment, effective September 25, 2017 (incorporated herein by reference to Exhibit 10.20 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)).

†  10.23

 

Employment Agreement dated June 19, 2019 between Orion Group Holdings, Inc., and Robert L. Tabb (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 June 21, 2019 (File No. 001‑33891)).

10.24 

 

Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc. as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, The Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-Syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2015, filed with the Securities and Exchange Commission on August 7, 2015 (File No. 001‑33891)).

10.25 

 

First Amendment, effective March 31, 2016, to the Credit Agreement dated as of August 5, 2015, among Orion Marine Group, Inc. as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time To Time, as Guarantors, The Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-Syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended March 31,2016, filed with the Securities and Exchange Commission on May 6, 2016 (File No. 001‑33891)).

10.26 

 

Second amendment, effective June 30, 2017, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc. as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2017, filed with the Securities and Exchange Commission on August 3, 2017 (File No. 1‑33891)).

 

44

Table of Contents

Exhibit
Number

    

Description

10.27 

 

Third amendment, effective September 30, 2017, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc. as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended September 30, 2017, filed with the Securities and Exchange Commission on November 9, 2017 (File No. 001‑33891)).

10.28 

 

Fourth amendment, effective July 31, 2018, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc. as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2018, filed with the Securities and Exchange Commission on August 3, 2018 (File No. 001‑33891)).

 10.29

 

Fifth amendment, effective March 21, 2019, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc. as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K, filed with the Securities and Exchange Commission on March 26, 2019 (File No. 001‑33891)).

10.30 

 

Sixth Amendment, effective May 7, 2019, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc. as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein 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 9, 2019 (File No. 001‑33891)).

*  21 .1

 

List of Subsidiaries.

*  23 .1

 

Consent of Independent Registered Public Accounting Firm -KPMG.

24 .1

 

Power of Attorney (included on signature page of this filing).

* 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.

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.


*     Filed herewith

†     Management contract or compensatory plan or arrangement

 

45

Table of Contents

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.

 

 

 

February 28, 2020

By:

/s/ Mark R. Stauffer

 

 

Mark R. Stauffer
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/  Mark R. Stauffer

 

President, Chief Executive Officer and

 

February 28, 2020

Mark R. Stauffer

 

Director

 

 

 

 

 

 

 

/s/  Robert L. Tabb

 

Vice President and Chief

 

February 28, 2020

Robert L. Tabb

 

Financial Officer

 

 

 

 

 

 

 

/s/  Richard L. Daerr, Jr.

 

Chairman of the Board

 

February 28, 2020

Richard L. Daerr, Jr.

 

 

 

 

 

 

 

 

 

/s/  Thomas N. Amonett

 

Director

 

February 28, 2020

Thomas N. Amonett

 

 

 

 

 

 

 

 

 

/s/  Margaret M. Foran

 

Director

 

February 28, 2020

Margaret M. Foran

 

 

 

 

 

 

 

 

 

/s/  Austin J. Shanfelter

 

Director

 

February 28, 2020

Austin J. Shanfelter

 

 

 

 

 

 

 

 

 

/s/  Mary E. Sullivan

 

Director

 

February 28, 2020

Mary E. Sullivan

 

 

 

 

 

 

 

 

 

/s/  Michael J. Caliel

 

Director

 

February 28, 2020

Michael J. Caliel

 

 

 

 

 

 

 

46

Table of Contents

ORION GROUP HOLDINGS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

Reports of Independent Registered Public Accounting Firm 

F‑2

Consolidated Balance Sheets at December 31, 2019 and 2018 

F‑4

Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018 and 2017 

F‑5

Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2019, 2018 and 2017 

F‑6

Consolidated Statement of Stockholders’ Equity for the Years Ended December 31, 2019, 2018 and 2017 

F‑7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017 

F‑8

Notes to Consolidated Financial Statements 

F‑9

 

 

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, 2019 and 2018, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, 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, 2019, 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 February 28, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue as of January 1, 2018 due to the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606).

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842).

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.

 

/s/ KPMG LLP

We have served as the Company’s auditor since 2017.

Houston, Texas

February 28, 2020

 

F-2

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, 2019, 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, 2019, 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, 2019 and 2018, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated February 28, 2020 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 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

February 28, 2020

F-3

Table of Contents

Orion Group Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2019 and 2018

(In Thousands, Except Share and Per Share Information)

 

 

 

 

 

 

 

 

 

 

2019

    

2018

ASSETS

 

 

  

 

 

  

Current assets:

 

 

  

 

 

  

Cash and cash equivalents

 

$

128

 

$

8,684

Restricted cash

 

 

958

 

 

 —

Accounts receivable:

 

 

  

 

 

  

Trade, net of allowance of $2,600 and $4,280, respectively

 

 

116,540

 

 

77,641

Retainage

 

 

42,547

 

 

30,734

Income taxes receivable

 

 

962

 

 

467

Other current

 

 

2,680

 

 

4,257

Inventory

 

 

1,114

 

 

1,056

Costs and estimated earnings in excess of billings on uncompleted contracts

 

 

41,389

 

 

9,217

Prepaid expenses and other

 

 

5,647

 

 

5,000

Total current assets

 

 

211,965

 

 

137,056

Property and equipment, net of depreciation

 

 

132,348

 

 

148,003

Operating lease right-of-use assets, net of amortization

 

 

17,997

 

 

 —

Financing lease right-of-use assets, net of amortization

 

 

7,896

 

 

 —

Inventory, non-current

 

 

7,037

 

 

7,598

Intangible assets, net of amortization

 

 

12,147

 

 

14,787

Deferred income tax asset

 

 

85

 

 

 —

Other non-current

 

 

5,369

 

 

5,426

Total assets

 

$

394,844

 

$

312,870

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

  

 

 

  

Current liabilities:

 

 

  

 

 

  

Current debt, net of debt issuance costs

 

$

3,668

 

$

2,946

Accounts payable:

 

 

  

 

 

  

Trade

 

 

70,421

 

 

42,023

Retainage

 

 

562

 

 

736

Accrued liabilities

 

 

16,966

 

 

18,840

Income taxes payable

 

 

1,523

 

 

 —

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

48,781

 

 

21,761

Current portion of operating lease liabilities

 

 

5,043

 

 

 —

Current portion of financing lease liabilities

 

 

2,788

 

 

 —

Total current liabilities

 

 

149,752

 

 

86,306

Long-term debt, net of debt issuance costs

 

 

68,029

 

 

76,119

Operating lease liabilities

 

 

13,596

 

 

 —

Financing lease liabilities

 

 

3,760

 

 

 —

Other long-term liabilities

 

 

20,436

 

 

8,759

Deferred income tax liability

 

 

205

 

 

49

Interest rate swap liability

 

 

1,045

 

 

52

Total liabilities

 

 

256,823

 

 

171,285

Stockholders’ equity:

 

 

  

 

 

  

Preferred stock -- $0.01 par value, 10,000,000 authorized, none issued

 

 

 —

 

 

 —

Common stock -- $0.01 par value, 50,000,000 authorized, 30,303,395 and 29,611,989 issued; 29,592,164 and 28,900,758 outstanding at December 31, 2019 and December 31, 2018, respectively

 

 

303

 

 

296

Treasury stock, 711,231 shares, at cost, as of December 31, 2019 and December 31, 2018, respectively

 

 

(6,540)

 

 

(6,540)

Other comprehensive loss

 

 

(1,045)

 

 

(52)

Additional paid-in capital

 

 

182,523

 

 

179,742

Retained loss

 

 

(37,220)

 

 

(31,861)

Total stockholders’ equity

 

 

138,021

 

 

141,585

Total liabilities and stockholders’ equity

 

$

394,844

 

$

312,870

 

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

F-4

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, 

 

    

2019

    

2018

    

2017

Contract revenues

 

$

708,390

 

$

520,894

 

$

578,553

Costs of contract revenues

 

 

644,349

 

 

504,118

 

 

516,313

Gross profit

 

 

64,041

 

 

16,776

 

 

62,240

Selling, general and administrative expenses

 

 

61,012

 

 

53,197

 

 

56,640

Amortization of intangible assets

 

 

2,640

 

 

3,390

 

 

4,736

Gain on sale of assets, net

 

 

(1,804)

 

 

(3,306)

 

 

(674)

Goodwill impairment charges

 

 

 —

 

 

69,483

 

 

 —

Other gain from continuing operations

 

 

 —

 

 

(5,448)

 

 

 —

Operating income (loss)

 

 

2,193

 

 

(100,540)

 

 

1,538

Other (expense) income:

 

 

  

 

 

  

 

 

  

Other income

 

 

771

 

 

1,692

 

 

41

Interest income

 

 

353

 

 

136

 

 

11

Interest expense

 

 

(6,808)

 

 

(7,943)

 

 

(5,731)

Other expense, net

 

 

(5,684)

 

 

(6,115)

 

 

(5,679)

Loss before income taxes

 

 

(3,491)

 

 

(106,655)

 

 

(4,141)

Income tax expense (benefit)

 

 

1,868

 

 

(12,233)

 

 

(4,541)

Net (loss) income

 

$

(5,359)

 

$

(94,422)

 

$

400

 

 

 

 

 

 

 

 

 

 

Basic (loss) income per share

 

$

(0.18)

 

$

(3.31)

 

$

0.01

Diluted (loss) income per share

 

$

(0.18)

 

$

(3.31)

 

$

0.01

Shares used to compute (loss) income per share:

 

 

  

 

 

  

 

 

  

Basic

 

 

29,322,054

 

 

28,518,353

 

 

28,029,936

Diluted

 

 

29,322,054

 

 

28,518,353

 

 

28,354,280

 

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 Comprehensive (Loss) Income

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31,

 

    

2019

    

2018

    

2017

Net (loss) income

 

$

(5,359)

 

$

(94,422)

 

$

400

Change in fair value of cash flow hedge, net of tax benefit of $228, net of tax benefit of $15, and net of tax expense of $53 for the years ended December 31, 2019, 2018 and 2017, respectively

 

 

(765)

 

 

(26)

 

 

356

Total comprehensive (loss) income

 

$

(6,124)

 

$

(94,448)

 

$

756

 

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

F-6

Table of Contents

Orion Group Holdings, Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

(In Thousands, Except Share and Per Share Information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

Common

   

Treasury

   

Other

   

Additional

   

 

 

   

 

 

 

 

Stock

 

Stock

 

Comprehensive

 

Paid-In

 

Retained

 

 

 

 

 

Shares

   

Amount

 

Shares

   

Amount

 

Loss

 

Capital

 

Earnings (Loss)

 

Total

Balance, January 1, 2017

 

28,405,850

 

$

283

 

(711,231)

 

$

(6,540)

 

$

(382)

 

$

171,079

 

$

61,764

 

$

226,204

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

2,303

 

 

 —

 

 

2,303

Deferred tax adjustment

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

683

 

 

683

Exercise of stock options

 

229,551

 

 

 2

 

 —

 

 

 —

 

 

 —

 

 

1,318

 

 

 —

 

 

1,320

Issuance of restricted stock

 

345,913

 

 

 3

 

 —

 

 

 —

 

 

 —

 

 

(3)

 

 

 —

 

 

 —

Cash flow hedge, net of tax

 

 —

 

 

 —

 

 —

 

 

 —

 

 

356

 

 

 —

 

 

 —

 

 

356

Forfeiture of restricted stock

 

(120,353)

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

400

 

 

400

Balance, December 31, 2017

 

28,860,961

 

$

288

 

(711,231)

 

$

(6,540)

 

$

(26)

 

$

174,697

 

$

62,847

 

$

231,266

Adoption of ASC 606 (Note 2)

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(286)

 

 

(286)

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

2,238

 

 

 —

 

 

2,238

Exercise of stock options

 

488,303

 

 

 5

 

 —

 

 

 —

 

 

 —

 

 

2,810

 

 

 —

 

 

2,815

Issuance of restricted stock

 

333,864

 

 

 3

 

 —

 

 

 —

 

 

 —

 

 

(3)

 

 

 —

 

 

 —

Cash flow hedge, net of tax

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(26)

 

 

 —

 

 

 —

 

 

(26)

Forfeiture of restricted stock

 

(71,139)

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(94,422)

 

 

(94,422)

Balance, December 31, 2018

 

29,611,989

 

$

296

 

(711,231)

 

$

(6,540)

 

$

(52)

 

$

179,742

 

$

(31,861)

 

$

141,585

Stock-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

2,753

 

 

 —

 

 

2,753

Exercise of stock options

 

7,021

 

 

 —

 

 —

 

 

 

 

 

 

 

 

35

 

 

 —

 

 

35

Issuance of restricted stock

 

757,012

 

 

 8

 

 —

 

 

 —

 

 

 —

 

 

(8)

 

 

 —

 

 

 —

Cash flow hedge, net of tax

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(993)

 

 

 —

 

 

 —

 

 

(993)

Forfeiture of restricted stock

 

(72,627)

 

 

(1)

 

 —

 

 

 —

 

 

 —

 

 

 1

 

 

 —

 

 

 —

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(5,359)

 

 

(5,359)

Balance, December 31, 2019

 

30,303,395

 

$

303

 

(711,231)

 

$

(6,540)

 

$

(1,045)

 

$

182,523

 

$

(37,220)

 

$

138,021

 

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

F-7

Table of Contents

Orion Group Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 

 

    

2019

    

2018

    

2017

Cash flows from operating activities:

 

 

  

 

 

  

 

 

  

Net (loss) income

 

$

(5,359)

 

$

(94,422)

 

$

400

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

 

 

  

 

 

  

 

 

  

Depreciation and amortization

 

 

26,096

 

 

31,799

 

 

29,491

Amortization of ROU operating leases

 

 

5,177

 

 

 —

 

 

 —

Amortization of ROU finance leases

 

 

2,312

 

 

 —

 

 

 —

Unamortized debt issuance costs upon debt modification

 

 

399

 

 

2,164

 

 

 —

Amortization of deferred debt issuance costs

 

 

453

 

 

725

 

 

1,269

Deferred income taxes

 

 

71

 

 

(13,194)

 

 

(4,166)

Stock-based compensation

 

 

2,753

 

 

2,238

 

 

2,303

Gain on sale of property and equipment

 

 

(1,804)

 

 

(3,306)

 

 

(674)

Goodwill impairment charges

 

 

 —

 

 

69,483

 

 

 —

Allowance for doubtful accounts

 

 

 —

 

 

4,280

 

 

 —

Other gain from continuing operations

 

 

 —

 

 

(5,448)

 

 

 —

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

  

Accounts receivable

 

 

(51,709)

 

 

10,936

 

 

15,022

Income tax receivable

 

 

(495)

 

 

(128)

 

 

(952)

Inventory

 

 

503

 

 

647

 

 

89

Prepaid expenses and other

 

 

131

 

 

1,671

 

 

(226)

Costs and estimated earnings in excess of billings on uncompleted contracts

 

 

(32,172)

 

 

36,789

 

 

(6,030)

Accounts payable

 

 

28,894

 

 

(4,584)

 

 

(5,666)

Accrued liabilities

 

 

1,334

 

 

(5,301)

 

 

(1,519)

Operating lease liabilities

 

 

(5,843)

 

 

 —

 

 

 —

Income tax payable

 

 

1,523

 

 

(256)

 

 

(433)

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

27,020

 

 

(12,162)

 

 

5,225

Net cash (used in) provided by operating activities

 

 

(716)

 

 

21,931

 

 

34,133

Cash flows from investing activities:

 

 

  

 

 

  

 

 

  

Proceeds from sale of property and equipment

 

 

2,015

 

 

3,234

 

 

6,826

Purchase of property and equipment

 

 

(17,199)

 

 

(17,714)

 

 

(10,729)

Acquisition of TBC

 

 

 —

 

 

 —

 

 

(6,000)

TBC acquisition adjustment

 

 

 —

 

 

 —

 

 

(557)

Contributions to CSV life insurance

 

 

(721)

 

 

(260)

 

 

(545)

Proceeds from return of investment

 

 

 —

 

 

94

 

 

 —

Insurance claim proceeds related to property and equipment

 

 

2,574

 

 

1,346

 

 

925

Net cash used in investing activities

 

 

(13,331)

 

 

(13,300)

 

 

(10,080)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Borrowings from Credit Facility

 

 

63,000

 

 

39,861

 

 

72,000

Payments made on borrowings from Credit Facility

 

 

(70,210)

 

 

(48,111)

 

 

(87,813)

Proceeds from sale-leaseback arrangement

 

 

18,210

 

 

 —

 

 

 —

Loan costs from Credit Facility

 

 

(1,680)

 

 

(861)

 

 

(779)

Capital lease liability

 

 

 —

 

 

(2,737)

 

 

 —

Payments of finance lease liabilities

 

 

(2,906)

 

 

 —

 

 

 —

Exercise of stock options

 

 

35

 

 

2,815

 

 

1,320

Net cash provided by (used in) financing activities

 

 

6,449

 

 

(9,033)

 

 

(15,272)

Net change in cash, cash equivalents and restricted cash

 

 

(7,598)

 

 

(402)

 

 

8,781

Cash, cash equivalents and restricted cash at beginning of period

 

 

8,684

 

 

9,086

 

 

305

Cash, cash equivalents and restricted cash at end of period

 

$

1,086

 

$

8,684

 

$

9,086

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

128

 

$

8,684

 

$

9,086

Restricted cash

 

 

958

 

 

 —

 

 

 —

Total cash, cash equivalents and restricted cash shown above

 

$

1,086

 

$

8,684

 

$

9,086

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

  

 

 

  

 

 

 

Cash paid during the period for:

 

 

  

 

 

  

 

 

  

Interest

 

$

6,311

 

$

4,819

 

 

4,413

Taxes, net of refunds

 

$

578

 

$

903

 

$

1,008

Non-cash investing activity:

 

 

 

 

 

 

 

 

 

Capital lease expenditures included in accrued expenses

 

$

 —

 

$

13,103

 

 

 —

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

 

F-8

Table of Contents

Orion Group Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Years Ended December 31, 2019, 2018 and 2017

(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., its subsidiaries and affiliates (hereafter collectively referred to as the "Company"), provide a broad range of specialty construction services in the infrastructure, industrial, and building sectors of the continental United States, Alaska, Canada and the Caribbean Basin. The Company’s marine segment services the infrastructure sector through marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging of waterways, channels and ports, environmental dredging, design, and specialty services. Its concrete segment services the building sector by providing turnkey concrete construction services including pour and finish, dirt work, layout, forming, rebar, and mesh across the light commercial, structural and other associated business areas. The Company is headquartered in Houston, Texas with offices throughout its operating areas.

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, which operates under the Orion Marine Group brand and logo, and concrete, which operates under the TAS Commercial Concrete brand and logo.

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.

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 it complies with regulatory environments 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. This segment complies with regulatory environments 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 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. All intercompany balances and transactions have been eliminated in consolidation.

 

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation in the Company’s condensed consolidated statement of operations. As part of the Company’s Invest, Scale and Grow (“ISG”) initiative it realigned its project management personnel within the operating groups for the combined company. As a result of the realignment, beginning in the second quarter of 2019, the Company elected to classify certain project management costs in Cost of contract revenue in its Consolidated Statements of Operations (the “Statements of Operations”) to better represent how those costs are managed and controlled. For periods reported prior to the second quarter of 2019, certain project management costs were included in Selling, general and administrative (“SG&A”)

F-9

Table of Contents

expenses. The Company’s SG&A expense for 2019 included project management costs of $1.1 million incurred in the first quarter of 2019, and SG&A expense for 2018 and 2017 included project management costs of $4.9 million and $4.7 million, respectively.   

 

2.Summary of Significant Accounting Principles

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;

·

Accounts receivable and allowance for doubtful accounts;

·

Property, plant and equipment;

·

Leases;

·

Finite and infinite-lived intangible assets, testing for indicators of impairment;

·

Stock-based compensation;

·

Income taxes; and

·

Self-insurance

Revenue Recognition

The Company adopted ASU 2014‑09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018, using the modified retrospective method. The Company recognized the cumulative effect of initially adopting Topic 606 guidance as an adjustment to the beginning balance of retained earnings. Contracts with customers that were not substantially complete in both the Company’s marine and concrete segments were evaluated in order to determine the impact as of the date of adoption.

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 short in duration and usually span a period of less than one year. The Company determines the appropriate accounting treatment for each contract before work begins and generally records revenue on contracts 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. The Company’s contracts and related change orders typically represent a single performance obligation because the Company provides a significant integrated service and individual goods and services are not separately identifiable. Revenue is recognized over time because control is continuously transferred to the customer. 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. When losses on uncompleted contracts are anticipated, the entire loss is recognized 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.

F-10

Table of Contents

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. Based on its reading of the contract and its performance, the Company believes collection of these claims is probable, although the full amount of the recorded claims may not be collected.

Contract assets and liabilities 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.

·

Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts - 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 (i.e. Contract Assets) and are recorded as a current asset, until such amounts are either received or written off.

·

Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts - Represent billings in excess of revenues recognized (i.e. Contract Liabilities) and are recorded as a current liability, until the underlying obligation has been performed or discharged.

The following table summarizes the cumulative effect of the changes made to the Company’s unaudited Consolidated Balance Sheet as of January 1, 2018 from the adoption of Topic 606:

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance at

    

Adjustments

    

Balance at

 

 

December 31, 

 

Due to Topic

 

January 1,

 

 

2017

 

606

 

2018

Assets

 

 

  

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

46,006

 

$

1,383

 

$

47,389

Liabilities

 

 

  

 

 

  

 

 

  

Billings in excess of costs and estimated earnings on uncompleted contracts

 

$

33,923

 

$

1,745

 

$

35,668

Deferred income tax liability

 

 

13,243

 

 

(76)

 

 

13,167

Equity

 

 

  

 

 

  

 

 

  

Retained earnings

 

$

62,847

 

$

(286)

 

$

62,561

 

F-11

Table of Contents

The following tables summarize the impact of adopting Topic 606 on the Company’s Consolidated Balance Sheet as of December 31, 2018 and Statement of Operations for the year ended December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Balances Without

    

 

 

 

 

 

 

 

Adoption of

 

Effect of Change

 

 

As Reported

 

Topic 606

 

Higher (Lower)

Assets

 

 

  

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

9,217

 

$

10,040

 

$

(823)

Liabilities

 

 

  

 

 

  

 

 

  

Billings in excess of costs and estimated earnings on uncompleted contracts

 

$

21,761

 

$

22,886

 

$

(1,125)

Deferred income tax liability

 

 

49

 

 

(57)

 

 

106

Equity

 

 

  

 

 

  

 

 

  

Retained earnings

 

$

(31,861)

 

$

(32,057)

 

$

196

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Balances Without

    

 

 

 

 

 

 

 

Adoption of

 

Effect of Change

 

 

As Reported

 

Topic 606

 

Higher (Lower)

Contract revenues

 

$

520,894

 

$

519,769

 

$

1,125

Cost of contract revenues

 

 

504,118

 

 

503,295

 

 

823

Gross profit

 

 

16,776

 

 

16,474

 

 

302

Income tax (benefit) expense

 

 

(12,233)

 

 

(12,339)

 

 

106

Net (loss) income

 

$

(94,422)

 

$

(94,618)

 

$

196

 

 

 

 

 

 

 

 

 

 

Basic (loss) income per share

 

$

(3.31)

 

$

(3.32)

 

$

0.01

Diluted (loss) income per share

 

$

(3.31)

 

$

(3.32)

 

$

0.01

 

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, 2019, the aggregate amount of the remaining performance obligations was approximately $572.3 million. Of this amount, the Company expects to recognize $465.1 million, or 81%, in the next 12 months and the remaining balance thereafter.

 

Classification of Current Assets and Liabilities

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

Cash, 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, 2019 and 2018 consisted primarily of overnight bank deposits.

Restricted cash as of December 31, 2019 consisted of $1.0 million of collateral related to a marine project and is classified in current assets. 

Risk Concentrations

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

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

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Accounts Receivable

Accounts receivable are stated at the historical carrying value, less allowances for doubtful accounts. The Company has significant investments in billed and unbilled receivables as of December 31, 2019 and 2018. 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, which are included in costs in excess of billings, arise as revenues are recognized over time. Unbilled amounts on contracts represent recoverable costs and accrued profits not yet billed. Revenue associated with these billings is recorded net of any sales tax, if applicable. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability. In establishing an allowance for doubtful accounts, the Company evaluates its contract receivables and costs in excess of billings 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 doubtful accounts if it is determined that the amounts will not be collected or if a settlement is reached for an amount that is less than the carrying value. As of December 31, 2019 and 2018, the Company has recorded an allowance for doubtful accounts of $2.6 million and $4.3 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, 2019 totaled $42.5 million, of which $11.0 million is expected to be collected beyond 2020. Retainage at December 31, 2018 totaled $30.7 million.

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 expenditure is considered probable and the amount can be reasonably estimated. The Company did not recognize any environmental liabilities as of December 31, 2019 or  2018, respectively.

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 9 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. 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. Refer to Note 8 for more information regarding inventory.

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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 seven 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 5 years

Buildings and improvements

 

5 to 30 years

Construction equipment

 

3 to 15 years

Vessels and other equipment

 

1 to 15 years

Office equipment

 

1 to 5 years

 

The Company generally uses accelerated depreciation methods for tax purposes where appropriate.

Dry-docking costs are capitalized and amortized using the straight-line method over a period ranging from three to 15 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 charge 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, 2019 or December 31, 2018.

Leases

The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, on a prospective basis, forgoing comparative reporting. The Company elected to utilize the transition guidance within the new standard, which allows the Company to carryforward the historical lease classification. The Company elected to not separate lease and non-lease components for all classes of underlying assets in which it is the lessee and made an accounting policy election to not account for leases with an initial term of 12 months or less on the balance sheet. Adoption of the standard resulted in the recording of additional net ROU operating lease assets of approximately $23.3 million and lease liabilities for operating leases of approximately $24.0 million on the Consolidated Balance Sheets as of January 1, 2019. The adoption of this guidance did not have an impact on net income. See Note 20 for more information regarding leases.

Intangible Assets

Intangible assets that have finite lives are amortized. In addition, the Company evaluates 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. If the estimate of an intangible asset’s remaining life is changed, the remaining carrying value of such asset is amortized prospectively over that revised remaining useful life. Intangible assets that have infinite lives are not amortized, but are subject to impairment testing at least annually or more frequently if events or circumstances indicate that the asset may be impaired.

The Company has one infinite-lived intangible asset, a trade name, which is tested for impairment annually on October 31, or whenever events or circumstances indicate that the carrying amount of the trade name may not be recoverable. Impairment is calculated as the excess of the trade name’s carrying value over its fair value. The fair value of the trade

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name is 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.

See Note 10 for additional discussion of intangible assets and trade name impairment testing.

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 options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions in the computation. Changes in these assumptions can cause significant fluctuations in the fair value of the option award. The fair value of restricted stock grants 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 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 16 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 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 14 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 $200 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

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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 $200 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 Results 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 accrued liability for insurance includes incurred but not reported claims of $3.7 million and $5.7 million at December 31, 2019 and 2018, respectively.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issues accounting standards and updates (each, an "ASU") from time to time to its Accounting Standards Codification (‘ASC’), which is the primary source of U.S. GAAP. The Company regularly monitors ASUs as they are issued and considers applicability to its business. All ASUs are adopted by their respective due dates and in the manner prescribed by the FASB.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which changes the way in which entities estimate and present credit losses for most financial assets, including accounts receivable.  The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year.  Early adoption is permitted, although the Company does not intend to do so.  For the Company’s trade receivables, certain other receivables and certain other financial instruments, it will be required to use a new forward-looking “expected” credit loss model based on historical loss rates that will replace the existing “incurred” credit loss model, which will generally result in earlier recognition of allowances for credit losses.  The Company is currently evaluating the impact this guidance will have on its consolidated financial statements, but it does not anticipate the new standard will materially impact the financial statements.

During the periods presented in these financial statements, the Company implemented other new accounting pronouncements other than those noted above that are discussed in the notes where applicable.

 

3.Business Acquisitions

TBC Acquisition

On April 9, 2017, T.A.S. Commercial Concrete Construction, LLC, a wholly owned subsidiary of Orion Group Holdings, Inc. ("the Company") entered into a Stock Purchase Agreement ("the Agreement") for the purchase of all the issued and outstanding shares (the "shares") of Tony Bagliore Concrete, Inc. ("TBC"), a Texas corporation. The Company and the two sole shareholders of TBC closed the purchase transactions on April 10, 2017 (the "Closing Date"). Upon the terms of and subject to the conditions set forth in the Agreement, the total aggregate consideration paid on the Closing Date by the Company to the Sellers for the shares was $6.0 million in cash. In addition however, if certain target considerations were met in future periods, an additional cash payment of up to $2.0 million would become payable to the Seller.

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The purpose of the acquisition was primarily to achieve growth by expanding the Company’s current service offerings in addition to expansion into new markets. The tangible assets acquired include accounts receivable, retainage and fixed assets.

Under the acquisition method of accounting, the total acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of TBC based on their estimated fair values as of the closing of the acquisition. The table below outlines the total actual acquisition consideration allocated based on the preliminary fair values of TBC’s tangible and intangible assets and liabilities as of April 9, 2017:

 

 

 

 

 

Accounts receivable

    

$

3,239

Retainage

 

 

1,860

Fixed assets, net

 

 

2,098

Other

 

 

 9

Goodwill

 

 

2,562

Other intangible assets

 

 

878

Accounts payable

 

 

(2,017)

Accrued expenses and other current liabilities

 

 

(1,080)

Contingent consideration

 

 

(456)

Deferred tax liability

 

 

(1,093)

Total Acquisition Consideration at April 9, 2017

 

$

6,000

Working capital adjustment (all attributable to Goodwill)

 

 

557

Total Acquisition Consideration

 

$

6,557

 

The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed was allocated to goodwill. The goodwill of $3.1 million arising from the acquisition consisted primarily of synergies and business opportunities that were expected to be realized from the purchase of TBC. The goodwill was not deductible for income tax purposes. In the fourth quarter of 2018, the Company’s annual goodwill impairment test indicated that its goodwill was fully impaired, primarily due to a decline in the Company’s market capitalization and as a result the goodwill related to the TBC acquisition was written off.

Finite-lived intangible assets acquired include customer relationships and contractual backlog. (See Note 10).

The fixed assets acquired include construction equipment as well as automobiles and trucks and will be depreciated in accordance with Company policy, generally three to 15 years.

As stated in the Agreement, the Company agreed to pay the sellers up to $2.0 million in cash, if earned, as additional purchase consideration. The seller’s right to receive the contingent consideration, if any, was to be based on the Company’s achievement of certain future financial targets. The Company measured the fair value of the contingent consideration at the Acquisition Date, and determined that fair value to be approximately $0.5 million, as shown in the table above. This amount of contingent liability was initially classified on the Consolidated Balance Sheets as an other long-term liability.  During 2019 it was determined that the financial targets had not been met.  The $0.5 million liability was removed from the balance sheet and reflected as component of other income in the Consolidated Statement of Operations.

 

 

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4.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, 

    

 

    

2019

    

2018

    

Marine Segment

 

 

  

 

 

  

 

Construction

 

$

242,527

 

$

156,925

 

Dredging

 

 

112,303

 

 

73,237

 

Specialty Services

 

 

14,308

 

 

13,721

 

Marine segment contract revenues

 

$

369,138

 

$

243,883

 

 

 

 

 

 

 

 

 

Concrete Segment

 

 

  

 

 

  

 

Light Commercial

 

$

284,624

 

$

215,628

 

Structural

 

 

54,497

 

 

60,926

 

Other

 

 

131

 

 

457

 

Concrete segment contract revenues

 

$

339,252

 

$

277,011

 

 

 

 

 

 

 

 

 

Total contract revenues

 

$

708,390

 

$

520,894

 

 

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 often combine multiple services, such as engineering, dredging, diving and construction, into one distinct finished product which is transferred to the customer. These 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 chief operating decision maker (“CODM”) for 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 sidewalks, ramps, tilt walls and trenches. 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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5.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, 2019 and December 31, 2018, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

 

Federal Government

    

$

4,765

    

 3

%  

$

2,319

    

 2

%

State Governments

 

 

5,864

 

 4

%  

 

916

 

 1

%

Local Governments

 

 

41,944

 

26

%  

 

30,187

 

28

%

Private Companies

 

 

106,514

 

67

%  

 

74,953

 

69

%

Total receivables

 

$

159,087

 

100

%  

$

108,375

 

100

%

 

At December 31, 2019 and 2018, 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, 2019, 2018 and 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

    

%

    

2018

    

%

    

2017

    

%

 

Federal Government

$

46,425

 

 6

%  

$

42,143

 

 8

%  

$

63,823

 

11

%  

State Governments

 

47,831

 

 7

%  

 

30,470

 

 6

%  

 

42,613

 

 7

%  

Local Government

 

212,958

 

30

%  

 

107,478

 

21

%  

 

91,591

 

16

%  

Private Companies

 

401,176

 

57

%  

 

340,803

 

65

%  

 

380,526

 

66

%  

Total contract revenues

$

708,390

 

100

%  

$

520,894

 

100

%  

$

578,553

 

100

%  

 

In the years ended December 31, 2019, 2018 and 2017, 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 1.6%, 2.3% and 1.6% of total revenues for the years ended December 31, 2019, 2018 and 2017, respectively, and were primarily located in the Caribbean Basin and Mexico.

 

 

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6.Contracts in Progress

Contracts in progress are as follows at December 31, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Costs incurred on uncompleted contracts

 

$

884,244

 

$

461,144

Estimated earnings

 

 

144,160

 

 

73,170

 

 

 

1,028,404

 

 

534,314

Less: Billings to date

 

 

(1,035,796)

 

 

(546,858)

 

 

$

(7,392)

 

$

(12,544)

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

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

41,389

 

$

9,217

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

(48,781)

 

 

(21,761)

 

 

$

(7,392)

 

$

(12,544)

 

Included in cost and estimated earnings in excess of billings on uncompleted projects is approximately $0.1 million and $1.1 million at December 31, 2019 and 2018, respectively, related to claims and unapproved change orders. See Note 2 - Summary of Significant Accounting Principles to the Company’s consolidated financial statements for discussion of  the accounting for these claims.

Contract costs include all direct costs, such as materials 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. Incentive fees, if available, are billed to the customer based on the terms and conditions of the contract. Pending claims are recognized as an increase in contract revenue only when the collection is deemed probable and if the amount can be reasonably estimated for purposes of calculating total profit or loss on long-term contracts. Changes in job performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined, without regard to the percentage of completion.

During the year-ended December 31, 2018, we recognized unfavorable changes in our estimates on two construction projects in our Marine Segment. These changes were caused by prolonged weather delays, unforeseen access and other client-imposed restrictions that impacted our productivity. The result of these changes in estimates is reflected as a decrease in revenue of $22.8 million in the consolidated statement of operations for the year-ended December 31, 2018 and included in billings in excess of costs and estimated earnings on uncompleted contracts.

 

7.Property and Equipment

The following is a summary of property and equipment at December 31, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Automobiles and trucks

 

$

2,161

 

$

1,709

Building and improvements

 

 

44,278

 

 

43,628

Construction equipment

 

 

153,147

 

 

161,113

Vessels and other equipment

 

 

84,022

 

 

90,217

Office equipment

 

 

8,652

 

 

8,061

 

 

 

292,260

 

 

304,728

Less: Accumulated depreciation

 

 

(196,973)

 

 

(195,373)

Net book value of depreciable assets

 

 

95,287

 

 

109,355

Construction in progress

 

 

1,198

 

 

2,785

Land

 

 

35,863

 

 

35,863

 

 

$

132,348

 

$

148,003

 

At December 31, 2018, the Company had $9.2 million of assets, net of accumulated depreciation, under capital leases which are reflected in the above table.

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For the years ended December 31, 2019, 2018 and 2017, depreciation expense was $23.5 million, $28.4 million and $24.8 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 12).

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

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that 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. 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. Approximately $6.4 million were classified as held for sale on the Company’s Consolidated Balance Sheet at December 31, 2016. During the year ended December 31, 2017, approximately $5.4 million of these assets were sold for cash of $4.5 million. The difference of $0.9 million is classified as a loss on the sale of assets on the Consolidated Statements of Operations. The remaining assets held for sale of $1.0 million was classified as a total loss as a result of Hurricane Harvey. Insurance claims of approximately $0.9 million were received in the fourth quarter of 2017. The difference of $0.1 million is classified as a loss on disposal of assets on the Consolidated Statements of Operations. No assets remained as held for sale on the Company’s Consolidated Balance Sheet at December 31, 2019 or December 31, 2018.

 

8.Inventory

Current inventory at both December 31, 2019 and 2018 of $1.1 million consisted primarily of spare parts and small equipment held for use in the ordinary course of business.

Non-current inventory at December 31, 2019 and 2018 totaled $7.0 million and $7.6 million, respectively, and consisted primarily of spare engine components or items which require longer lead times for sourcing or fabrication for certain of the Company’s assets to reduce equipment downtime.

 

9.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.

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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, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements

 

    

Carrying Value

    

Level 1

    

Level 2

    

Level 3

December 31, 2019

 

  

 

 

  

 

  

 

  

Assets:

 

 

  

 

  

 

  

 

  

Cash surrender value of life insurance policy

 

$

2,714

 

 —

 

2,714

 

 —

Liabilities:

 

 

  

 

  

 

  

 

  

Derivatives

 

$

1,045

 

 —

 

1,045

 

 —

December 31, 2018

 

 

  

 

  

 

  

 

  

Assets:

 

 

  

 

  

 

  

 

  

Cash surrender value of life insurance policy

 

$

1,993

 

 —

 

1,993

 

 —

Liabilities:

 

 

  

 

  

 

  

 

  

Derivatives

 

$

79

 

 —

 

79

 

 —

 

The Company’s derivatives, which are comprised of interest rate swaps, are valued using a discounted cash flow analysis that incorporates observable market parameters, such as interest rate yield curves and credit risk adjustments, that are necessary to reflect the probability of default by us or the counterparty. These derivatives are classified as a Level 2 measurement within the fair value hierarchy. See Note 12 for additional information on the Company’s derivative instrument.

Our concrete segment has life insurance policies with a combined face value of $11.1 million as of December 31, 2019. 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 noncurrent" 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, 2019 and 2018 approximated its carrying value of $73.3 million and $80.5 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.

 

10.Goodwill and Intangible Assets

Goodwill

The table below summarizes changes in goodwill recorded by the Company during the periods ended December 31, 2019 and 2018:

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Beginning balance, January 1

 

$

 —

 

$

69,483

Impairments

 

 

 —

 

 

(69,483)

Ending balance

 

$

 —

 

$

 —

 

In the fourth quarter of 2018, the Company’s annual goodwill impairment test indicated that its goodwill was fully impaired, primarily due to a decline in the Company’s market capitalization and as a result it incurred a goodwill impairment charge of $69.5 million with $33.8 million related to the Marine segment and $35.7 million related to the Concrete segment.

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Intangible assets

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

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Finite-lived intangible assets, beginning of period

 

$

35,240

 

$

35,240

Additions

 

 

 —

 

 

 —

Total finite-lived intangible assets, end of period

 

$

35,240

 

$

35,240

 

 

 

 

 

 

 

Accumulated amortization, beginning of period

 

$

(27,345)

 

$

(23,955)

Current year amortization

 

 

(2,640)

 

 

(3,390)

Total accumulated amortization

 

 

(29,985)

 

 

(27,345)

 

 

 

 

 

 

 

Net finite-lived intangible assets, end of period

 

$

5,255

 

 

7,895

Infinite-lived intangible assets

 

 

6,892

 

 

6,892

Total net intangible assets

 

$

12,147

 

$

14,787

 

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 year ended December 31, 2019, $2.6 million of amortization expense was recognized for these assets. In 2019 and 2018, the Company evaluated the useful lives of these finite-lived intangible assets and no change was needed.

Future expense remaining of approximately $5.3 million will be amortized as follows:

 

 

 

 

 

2020

    

 

2,069

2021

 

 

1,521

2022

 

 

1,239

2023

 

 

389

2024

 

 

37

 

 

$

5,255

 

Additionally, the Company has one indefinite-lived intangible asset, a trade name, which is tested for impairment annually on October 31, or whenever events or circumstances indicate that the carrying amount of the trade name may not be recoverable. Impairment is calculated as the excess of the trade name’s carrying value over its fair value. The fair value of the trade name is 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. The impairment test concluded that the fair value of the trade name was in excess of the carrying value, therefore no impairment was recorded.

 

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11.Accrued Liabilities

Accrued liabilities at December 31, 2019 and 2018 consisted of the following:

 

 

 

 

 

 

 

 

 

    

December 31, 2019

    

December 31, 2018

Accrued salaries, wages and benefits

 

$

7,323

 

$

6,492

Accrual for insurance liabilities

 

 

3,714

 

 

5,680

Sales taxes

 

 

3,021

 

 

2,178

Property taxes

 

 

389

 

 

924

Sale-leaseback arrangement

 

 

482

 

 

 —

Accounting and audit fees

 

 

267

 

 

 —

Interest

 

 

76

 

 

 —

Capital lease liability (1)

 

 

 —

 

 

3,045

Other accrued expenses

 

 

1,694

 

 

521

Total accrued liabilities

 

$

16,966

 

$

18,840

 


(1)

December 31, 2018 balance relates to capital leases accounted for under ASC 840 and prior to the adoption of ASC 842 as of January 1, 2019.  

 

12.Long-term Debt and Line of Credit

The Company entered into an amended syndicated credit agreement (the “Credit Agreement” also known as the “Fourth Amendment”) on July 31, 2018 with Regions Bank, as administrative agent and collateral agent, and the following co-syndication agents:  Bank of America, N.A., BOKF, NA dba Bank of Texas, KeyBank National Association, NBH Bank, IBERIABANK, Trustmark National Bank, First Tennessee Bank NA, and Branch Banking and Trust Company.

The Credit Agreement, which may be amended from time to time, provides for borrowings under a revolving line of credit and a term loan (together, the “Credit Facility”). The Credit Facility is guaranteed by the subsidiaries of the Company, secured by the assets of the Company, including stock held in its subsidiaries, and may be used to finance general corporate and working capital purposes, to finance capital expenditures, to refinance existing indebtedness, to finance permitted acquisitions and associated fees, and to pay for all related expenses to the Credit Facility. Interest is due and is computed based on the designation of the loan, with the option of a Base Rate Loan (the base rate plus the Applicable Margin), or an Adjusted LIBOR Rate Loan (the adjusted LIBOR rate plus the Applicable Margin). Interest is due on the last day of each quarter end for Base Rate Loans and at the end of the LIBOR rate period for Adjusted LIBOR Rate Loans. Principal balances drawn under the Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty. Amounts repaid under the revolving line of credit may be re-borrowed. The Credit Facility matures on July 31, 2023.

Total debt issuance costs for the Fourth Amendment, which included underwriter fees, legal fees and syndication fees were approximately $0.9 million and were capitalized as non-current deferred charges and amortized using the effective interest rate method over the duration of the loan. Additionally, the Company executed the Fifth Amendment during March 2019, which was made effective as of December 31, 2018, and executed the Sixth Amendment during May 2019. The Company incurred additional debt issuance costs of approximately $0.6 million and $0.9 million respectively for the Fifth and Sixth Amendments. With the execution of the aforementioned Sixth Amendment, $50.0 million of the existing revolving line of credit was modified and accounted for under guidelines of ASC 470‑50, Debt, Modifications and Extinguishments, and a pro-rated portion of unamortized debt issuance costs of approximately $0.4 million was recognized as interest expense as of May 2019. The remaining debt issuance costs of approximately $0.9 million related to the Fourth, Fifth, and Sixth Amendments will be amortized over the duration of the loan.

The yearly weighted average interest rate for the Credit Facility as of December 31, 2019 was 5.41%.

 

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Table of Contents

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

 

    

 

    

Debt Issuance

    

 

    

 

    

Debt Issuance

    

 

 

 

Principal

 

Costs(1)

 

Total

 

Principal

 

Costs(1)

 

Total

Term loan - current

 

$

3,750

 

$

(82)

 

$

3,668

 

$

3,000

 

$

(54)

 

$

2,946

Total current debt

 

 

3,750

 

 

(82)

 

 

3,668

 

 

3,000

 

 

(54)

 

 

2,946

Revolving line of credit

 

 

36,000

 

 

(782)

 

 

35,218

 

 

22,000

 

 

(213)

 

 

21,787

Term loan - long-term

 

 

33,540

 

 

(729)

 

 

32,811

 

 

55,500

 

 

(1,168)

 

 

54,332

Total long-term debt

 

 

69,540

 

 

(1,511)

 

 

68,029

 

 

77,500

 

 

(1,381)

 

 

76,119

Total debt

 

$

73,290

 

$

(1,593)

 

$

71,697

 

$

80,500

 

$

(1,435)

 

$

79,065


(1)

Total debt issuance costs, include underwriter fees, legal fees and syndication fees and fees related to the execution of the Fourth, Fifth, and Sixth Amendments to the Credit Agreement.

Provisions of the revolving line of credit and accordion

The Company has a maximum borrowing availability under the revolving line of credit and swingline loans (as defined in the Credit Agreement) of $50.0 million. There is a letter of credit sublimit that is equal to the lesser of $20.0 million and the aggregate unused amount of the revolving commitments then in effect. There is also a swingline sublimit equal to the lesser of $5.0 million and the aggregate unused amount of the revolving commitments then in effect.

Revolving loans may be designated as Base Rate Loan or Adjusted LIBOR Rate Loans, at the Company’s request, and must be drawn in an aggregate minimum amount of $1.0 million and integral multiples of $250,000 in excess of that amount. Swingline loans must be drawn in an aggregate minimum amount of $250,000 and integral multiples of $50,000 in excess of that amount. The Company may convert, change, or modify such designations from time to time.

The Company is subject to a commitment fee for the unused portion of the maximum borrowing availability under the revolving line of credit. The commitment fee, which is due quarterly in arrears, is equal to the Applicable Margin of the actual daily amount by which the Aggregate Revolving Commitments exceeds the Total Revolving Outstanding. The revolving line of credit termination date is the earlier of the Credit Facility termination date, July 31, 2023, or the date the outstanding balance is permanently reduced to zero, in accordance with the terms of the amended Credit Facility.

The maturity date for amounts drawn under the revolving line of credit is the earlier of the Facility termination date of July 31, 2023, or the date the outstanding balance is permanently reduced to zero. Prior to the fourth quarter of 2018, the Company classified amounts drawn as current liabilities based on an intent and ability to repay the amounts using current assets within the next twelve months. During the fourth quarter of 2018, the Company determined it no longer has the intent to repay amounts drawn within the next twelve months. As of December 31, 2019, the Company determined that it still does not have the intent to repay amounts drawn within the next twelve months. Therefore, the Company has classified the entire outstanding balance of the revolving line of credit as non-current.

As of December 31, 2019, the outstanding balance for all borrowings under the revolving line of credit was $36.0 million, where $32.0 million was designated as an Adjusted LIBOR Rate Loan at a weighted average rate of 4.50% and $4.0 million was designated as a Base Rate Loan at a rate of 6.50%. There were also $1.4 million in outstanding letters of credit as of December 31, 2019, which reduced the maximum borrowing availability on the revolving line of credit to $12.6 million as of December 31, 2019. During 2019, the Company drew down $63.0 million for general corporate purposes and made payments of $49.0 million on the revolving line of credit which resulted in a net increase of $14.0 million.

Provisions of the term loan

The original principal amount of $60.0 million for the term loan commitment is paid off in quarterly installment payments (as stated in the Credit Agreement). At December 31, 2019, the outstanding term loan component of the Credit Facility totaled $37.3 million and was secured by specific assets of the Company.

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Table of Contents

The table below outlines the total remaining payment amounts annually for the term loan through maturity of the Credit Facility:

 

 

 

 

 

2020

    

 

3,750

2021

 

 

4,500

2022

 

 

5,250

2023

 

 

23,790

 

 

$

37,290

 

During 2019 the Company made the scheduled quarterly principal payments of $3.0 million, and an additional principal paydown of $18.2 million with proceeds from a sale-leaseback arrangement. The current portion of debt is $3.8 million and the non-current portion is $33.5 million. As of December 31, 2019, the term loan was designated as an Adjusted LIBOR Rate Loan with an interest rate of 4.50%.

Financial covenants

Restrictive financial covenants under the Credit Facility include:

·

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

-Fiscal Quarter Ending December 31, 2019 and each Fiscal Quarter thereafter, to not be less than 1.25 to 1.00.

·

A consolidated Leverage Ratio to not exceed the following during each noted period:

-Fiscal Quarter Ending December 31, 2019, to not exceed 4.00 to 1.00;

-Fiscal Quarter Ending March 31, 2020 and each Fiscal Quarter thereafter, to not exceed 3.00 to 1.00.

·

A consolidated Adjusted EBITDA to not be less than the following during each noted period:

- Fiscal Year Ending December 31, 2019 : $21.7 million.

In addition, the Credit Facility contains events of default that are usual and customary for similar arrangements, including non-payment of principal, interest or fees; breaches of representations and warranties that are not timely cured; violation of covenants; bankruptcy and insolvency events; and events constituting a change of control.

The Company expects to meet its future internal liquidity and working capital needs and maintain or replace its equipment fleet through capital expenditure purchases and major repairs, from funds generated by its operating activities for at least the next 12 months. The Company believes that its cash position and available borrowings together with cash flow from its operations is adequate for general business requirements and to service its debt. The Company was in compliance with all financial covenants as of December 31, 2019.

Derivative Financial Instruments

On September 16, 2015, the Company entered into a series of receive-variable, pay-fixed interest rate swaps to hedge the variability in the interest payments on 50% of the aggregate principal amount of the Regions Term Loan outstanding, beginning with a notional amount of $67.5 million. There were a total of five sequential interest rate swaps to achieve the hedged position and each year on August 31, with the exception of the final swap, the existing interest rate swap was scheduled to expire and be immediately replaced with a new interest rate swap until the expiration of the final swap on July 31, 2020. On December 6, 2018, the Company entered into a sixth receive-variable, pay-fixed interest rate swap to hedge the variability of interest payments. The sixth swap will begin with a notional amount of $27.0 million on July 31, 2020 and will hedge the variability in the interest payments on the aggregate scheduled principal amount of the Regions Term Loan outstanding. The sixth swap is scheduled to expire on July 31, 2023. At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting, and as such, the effective portion of unrealized changes in market value are recorded in accumulated other comprehensive (loss) income and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. Gains and losses from hedge ineffectiveness are recognized in current earnings. The change in fair market value of the swaps as of December 31, 2019 is approximately $1.0 million. The fair market value of the swaps as of December 31, 2019 is reflected as a liability of $1.0 million on the Consolidated Balance Sheets. See Note 9 for more information regarding the fair value of the Company’s derivative instruments.

 

 

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Table of Contents

13.Other Long-Term Liabilities

Other long-term liabilities at December 31, 2019 and 2018 consisted of the following:

 

 

 

 

 

 

 

 

 

    

December 31, 2019

    

December 31, 2018

Sale-leaseback arrangement

 

$

17,447

 

$

 —

Accrual for insurance liabilities

 

 

2,989

 

 

2,355

Capital lease liability (1)

 

 

 —

 

 

5,189

Deferred rent

 

 

 —

 

 

759

Contingent consideration - TBC acquisition

 

 

 —

 

 

456

Total other long-term liabilities

 

$

20,436

 

$

8,759


(1)

December 31, 2018 balance relates to capital leases accounted for under ASC 840 and prior to the adoption of ASC 842 as of January 1, 2019.

 

Sale-Leaseback Arrangement

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 (the “Property”) for a purchase price of $19.1 million. Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “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. This transaction was recorded as a failed sale-leaseback. The Company recorded a liability for the amounts received, will continue to depreciate the non-land portion of the asset, 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 term. Concurrently with the sale, the Company paid $18.2 million towards the Term loan portion of the Company’s Credit Facility, consistent with terms of the Sixth Amendment.

14.Income Taxes

The following table presents the components of our consolidated income tax (benefit) expense for the years ended December 31, 2019, 2018 and 2017:

 

 

 

 

 

 

 

 

 

 

 

 

    

Current

    

Deferred

    

Total

Year ended December 31, 2019

 

 

  

 

 

  

 

 

  

U.S. Federal

 

$

 —

 

$

 —

 

$

 —

State and local

 

 

716

 

$

104

 

$

820

Foreign

 

 

1,081

 

 

(33)

 

 

1,048

 

 

$

1,797

 

$

71

 

$

1,868

Year ended December 31, 2018

 

 

  

 

 

  

 

 

  

U.S. Federal

 

$

(12)

 

$

(12,664)

 

$

(12,676)

State and local

 

 

183

 

$

(471)

 

$

(288)

Foreign

 

 

731

 

 

 —

 

 

731

 

 

$

902

 

$

(13,135)

 

$

(12,233)

Year ended December 31, 2017

 

 

  

 

 

  

 

 

  

U.S. Federal  (a)

 

$

(780)

 

$

(3,986)

 

$

(4,766)

State and local

 

 

550

 

 

(180)

 

 

370

Foreign

 

 

(145)

 

 

 —

 

 

(145)

 

 

$

(375)

 

$

(4,166)

 

$

(4,541)


(a)

Includes a $5.9 million net benefit recorded in the fourth quarter of 2017 resulting from the enactment of the Act on December 22, 2017.

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Table of Contents

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:

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

 

Statutory amount (computed at 21% in 2019 and 2018 and 35% in 2017)

 

$

(733)

 

$

(22,398)

 

$

(1,449)

 

Re-measurement of deferred tax assets (a)

 

 

 —

 

 

 —

 

 

(7,451)

 

Valuation allowance on foreign tax credits (a)

 

 

1,081

 

 

593

 

 

1,514

 

State income tax, net of federal benefit

 

 

991

 

 

(1,922)

 

 

168

 

Permanent differences, other

 

 

461

 

 

1,550

 

 

505

 

Permanent differences, incentive stock options

 

 

311

 

 

(24)

 

 

447

 

Valuation allowance, other

 

 

(166)

 

 

10,384

 

 

(77)

 

Uncertain tax provision

 

 

 —

 

 

 —

 

 

1,614

 

Other

 

 

(77)

 

 

(416)

 

 

188

 

Consolidated income tax provision

 

$

1,868

 

$

(12,233)

 

$

(4,541)

 

Consolidated effective tax rate

 

 

(53.5)

%  

 

11.5

%  

 

109.7

%


(a)

In 2017, represents impact resulting from the enactment of the Act on December 22, 2017.

In the year ended 2019, the Company’s effective tax rate differed from the statutory rate of 21% primarily due to the recording of an additional valuation allowance to offset net operating loss carryforwards and foreign tax credits generated during the period, foreign taxes, state income taxes and the non-deductibility of certain permanent items.

In the year ended 2018, the Company’s effective tax rate differed from the statutory rate of 21% primarily due to recording an $11.0 million, or $0.39 per share, valuation allowance against the Company’s net deferred tax assets, including net operating losses and foreign tax credits. The Company also recorded tax expense of $1.2 million related to the $69.5 million goodwill impairment. Additionally, the Company recorded tax expense related to permanent differences from meals and entertainment.

In the year ended 2017, the Company’s effective tax rate differed from the statutory rate of 35% primarily due to the impact of the Act enacted on December 22, 2017. We recorded a net tax benefit of $5.9 million, or $0.21 per share, resulting from the re-measurement of the Company’s net deferred tax liabilities to reflect the new, lower U.S. corporate income tax rate of 21%, partially offset by the addition of a partial valuation allowance recorded against existing foreign tax credit carryforwards not expected to be utilized in future tax years. This net tax benefit was partially offset by the addition of an uncertain tax position reserve as well as tax expense for permanent differences associated with incentive stock options and meals and entertainment.

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Table of Contents

Deferred Taxes

The Company’s deferred tax assets and liabilities are as follows:

 

 

 

 

 

 

 

 

 

 

Long Term

 

 

As of December 31, 

 

    

2019

    

2018

Assets related to:

 

 

  

 

 

  

Accrued liabilities

 

$

1,030

 

$

1,105

Intangible assets

 

 

3,020

 

 

3,054

Net operating loss carryforward

 

 

15,246

 

 

15,970

Non-qualified stock options

 

 

586

 

 

672

Foreign tax credits

 

 

2,570

 

 

1,489

Goodwill

 

 

7,232

 

 

8,200

Leases

 

 

9,038

 

 

 —

Other

 

 

1,347

 

 

2,684

Total gross deferred tax assets

 

 

40,069

 

 

33,174

Less valuation allowance

 

 

(16,960)

 

 

(15,815)

Total net deferred tax assets

 

 

23,109

 

 

17,359

Liabilities related to:

 

 

  

 

 

  

Depreciation and amortization

 

 

(22,634)

 

 

(16,974)

Other

 

 

(595)

 

 

(434)

Total deferred tax liabilities

 

 

(23,229)

 

 

(17,408)

Net deferred tax liabilities

 

$

(120)

 

$

(49)

 

The Company has net operating loss carryforwards for federal income tax purposes of $44.1 million as of December 31, 2019, which are available to reduce future taxable income. The amount of net operating loss that arose before the 2018 tax year is $7.5 million.  These net operating losses will expire beginning 2032 and continuing through 2037.  In addition, the Company has $36.6 million of net operating losses that arose after the 2017 tax year.  These carryforwards last for an indefinite period of time but are limited to offset 80% of taxable income in any given year.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use 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 three-year cumulative loss is a significant piece of objective evidence. This objective 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, 2019, the Company continued to maintain a valuation allowance of $17.0 million.  This includes an increase of $1.1 million during the year ended December 31, 2019 primarily to offset the value of additional foreign tax credits generated during the year.  

Uncertain Tax Benefits

The Company and its subsidiaries file consolidated federal income tax returns in the United States and also file in various states. With few exceptions, the Company remains subject to federal and state income tax examinations for the years of 2013-2019. As of December 31, 2019, the Company has recorded unrecognized tax benefits of $1.6 million for any uncertain tax positions. The Company does not expect that unrecognized tax benefits as of December 31, 2019 for certain federal income tax matters will significantly change over the next 12 months. The final outcome of these uncertain tax positions is not yet determinable. Our uncertain tax benefits, if recognized, would affect the Company’s effective tax rate.

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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, 2019 and 2018 are reconciled in the table below:

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

Balances 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 the end of 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, 2019, 2018 and 2017. 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 does not believe that its tax positions will significantly change due to any settlement and/or expiration of statutes of limitations prior to December 31, 2020.

 

15.Earnings (Loss) Per Share

Basic earnings (loss) per share is based on the weighted average number of common shares outstanding during each period. Diluted earnings (loss) 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, 2019, 2018 and 2017, the Company had 1,636,656, 1,938,967, and 2,274,908, 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, 2019 and 2018. Such stock options are antidilutive and are not included in the computation of earnings (loss) per share for those periods.

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

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 

 

    

2019

    

2018

    

2017

Basic:

 

  

 

  

 

  

Weighted average shares outstanding

 

29,322,054

 

28,518,353

 

28,029,936

Diluted:

 

  

 

  

 

  

Total basic weighted average shares outstanding

 

29,322,054

 

28,518,353

 

28,029,936

Effect of potentially dilutive securities:

 

  

 

  

 

  

Common stock options

 

 —

 

 —

 

324,344

Total weighted average shares outstanding assuming dilution

 

29,322,054

 

28,518,353

 

28,354,280

 

 

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16.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 2011 Long Term Incentive Plan (the "2011 LTIP") and 2017 Long Term Incentive Plan (the "2017 LTIP"), which was approved by shareholders in May 2017 and authorized the maximum aggregate number of shares to be issued of 2,400,000. In general, the Company’s 2017 LTIP provides for grants of restricted stock and stock options to be issued with a per-share price equal to the fair market value of a share of common stock on the date of grant. Option terms are specified at each grant date, but are 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, 2017

 

372,306

 

$

5.66

Granted

 

345,913

 

$

7.22

Vested

 

(225,406)

 

$

7.25

Forfeited/repurchased shares

 

(120,353)

 

$

6.08

Nonvested at December 31, 2017

 

372,460

 

$

6.01

Granted

 

333,864

 

$

7.47

Vested

 

(217,244)

 

$

6.61

Forfeited/repurchased shares

 

(71,139)

 

$

6.85

Nonvested at December 31, 2018

 

417,941

 

$

7.04

Granted

 

757,012

 

$

2.52

Vested

 

(585,754)

 

$

3.74

Forfeited/repurchased shares

 

(72,627)

 

$

6.05

Nonvested at December 31, 2019

 

516,572

 

$

4.29

 

Independent directors receive equity compensation in the form of grants. In January 2019, two new independent directors each received equity compensation grants of 8,427 shares, with a fair value of $4.45 per share. In May 2019, the Company’s independent directors each received equity compensation grants of 45,918 shares, with a fair value of $1.96 per share. In October 2019, a new independent director received an equity compensation grant of 14,218 shares, with a fair value of $4.22 per share. In May 2018, the Company’s independent directors each received equity compensation grants of 12,064 shares, with a fair value of $7.46 per share. In May 2017, the Company’s independent directors each received equity compensation grants of 12,465 shares, with a fair value of $7.22 per share.

In March 2019, the Company granted an executive of the Company 168,350 shares of restricted common stock, which vested one-third at March 31, June 30, and September 30, 2019, respectively. The fair value of all shares awarded on the date of the grant was $2.97 per share. In May 2019, certain officers and executives of the Company were awarded 62,500 shares with a vesting period of three years and a fair value of $1.96 per share. In July 2019, certain officers and executives of the Company were awarded 46,500 shares with a vesting period of three years and a fair value of $3.66. In December 2019, certain officers and executives of the Company were awarded 31,500 shares with a vesting period of three years and a fair value of $5.08 per share. In May 2018, certain officers and executives of the Company were awarded 203,752 shares with a vesting period of three years and a fair value of $7.46 per share. In July 2018 an executive was awarded 2,769 shares of restricted common stock with a fair value of $9.03 per share. Additionally, in 2017, certain officers and executives of the Company were awarded 213,643 shares with a vesting period of three years and a weighted average fair value of $7.22 per share.

Performance Stock

In May 2019, the Company awarded certain executives 187,500 shares of performance stock. The performance-based stock will potentially vest 50% if the target is met, with 25% each vesting on the second and third anniversary of the grant, with 100% of the shares to be earned based on the achievement of an objective, tiered return on invested capital, measured over a one-year performance period. The Company evaluates the probability of achieving this each reporting period. The fair value of all shares awarded on the date of the grant was $1.96 per share. In May 2018, the Company awarded certain

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executives 67,023 shares of performance based stock, which will potentially vest at the end of fiscal 2021, with 100% of the shares to be earned based on the achievement of an objective, tiered return on invested capital measured over a three-year performance period. The Company evaluates the probability of achieving this each reporting period. The fair value of all shares awarded on the date of the grant was $7.46 per share. In May 2017, the Company awarded certain executives 69,945 shares of performance based stock, which vest based on the achievement of an objective return on invested capital measured over a two-year performance period covering the 2018 and 2019 fiscal years. The fair value on the date of grant was $7.22 per share.

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, 2017

 

2,349,446

 

$

8.39

 

  

 

 

  

Granted

 

425,204

 

$

7.22

 

  

 

 

  

Exercised

 

(229,551)

 

$

5.75

 

  

 

 

  

Forfeited

 

(633,978)

 

$

10.36

 

  

 

 

  

Outstanding at December 31, 2017

 

1,911,121

 

$

7.79

 

  

 

 

  

Granted

 

374,215

 

$

7.49

 

  

 

 

  

Exercised

 

(488,303)

 

$

5.76

 

  

 

 

  

Forfeited

 

(132,252)

 

$

7.89

 

  

 

 

  

Outstanding at December 31, 2018

 

1,664,781

 

$

8.31

 

  

 

 

  

Granted

 

 —

 

$

 —

 

  

 

 

  

Exercised

 

(7,021)

 

$

4.94

 

  

 

 

  

Forfeited

 

(192,994)

 

$

15.26

 

  

 

 

  

Outstanding at December 31, 2019

 

1,464,766

 

$

7.41

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest at December 31, 2019

 

1,460,181

 

$

7.41

 

4.78

 

$

91

Exercisable at December 31, 2019

 

1,293,830

 

$

7.41

 

4.34

 

$

91

 

The Company calculates the fair value of each option on the date of grant using the Black-Scholes pricing model and the following weighted-average assumptions in each year:

 

 

 

 

 

 

 

 

 

 

    

2018

    

2017

 

Weighted average grant-date fair value of options granted

 

$

2.78

 

$

7.22

 

Risk-free interest rate

 

 

2.65

%  

 

1.46

%

Expected volatility

 

 

52

%  

 

48

%

Expected term of options (in years)

 

 

3.0

 

 

3.0

 

Dividend yield

 

 

 —

%  

 

 —

%

 

The risk-free interest rate is based on interest rates on U.S. Treasury zero-coupon issues that match the contractual terms of the stock option grants. The expected term represents the period in which the Company’s equity awards are expected to be outstanding, which for the years presented is based on the exercise history.

For years ended December 31, 2019, 2018 and 2017, compensation expense related to stock based awards outstanding for the periods was $2.8 million, $2.2 million and $2.3 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.

During the year ended December 31, 2018, certain officers and executives of the Company were awarded 374,215 options with a vesting period of three years and a weighted average exercise price of $7.49 per share. During the year ended December 31, 2017, certain officers and executives of the Company were awarded 425,204 options with a vesting period of three years and a weighted average exercise price of $7.22 per share.

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In the year ended December 31, 2019, the Company received proceeds of less than $0.1 million upon the exercise of 7,021 options. In the year ended December 31, 2018, the Company received proceeds of approximately $2.8 million upon the exercise of 488,303 options. In the year ended December 31, 2017, the Company received proceeds of $1.3 million upon the exercise of 229,551 options.

As of December 31, 2019, total unrecognized compensation expense related to unvested stock and options was approximately  $2.0 million, which is expected to be recognized over a period of approximately 1.5 years.

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

Total intrinsic value of options exercised

 

$

 —

 

$

1,286

 

$

706

Total fair value of shares vested

 

$

769

 

$

705

 

$

855

 

 

17.Employee Benefits

All of the Company’s marine segment employees except the Associate Divers, the Associate Tugmasters, and union employees in the Pacific Northwest, are eligible to participate in the Company’s 401(k) Retirement Plan after completing six months of service. Each participant may contribute between 1% and 80% of eligible compensation on a pre-tax basis, up to the annual IRS limit. The Company matches 100% on the first 2% 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. Employer matching contributions vest over a four-year period. At its discretion, the Company may make additional matching and profit-sharing contributions. During the years ended December 31, 2019, 2018 and 2017 the Company contributed $1.3 million, $1.4 million and $1.4 million, respectively to the Plan.

All of the Company’s concrete segment employees except Leads, Helpers, Laborers, Finishers, Formsetters, Carpenters, Rodbusters, Patchmen, Equipment Operators, Field Engineering Trainees and certain Highly Compensated Employees are eligible to participate in the AGC Southwest Chapters 401(k) Retirement Plan, a multiple employer plan, after completing three months of service. Each participant may contribute up to the annual IRS limit. The Company matches 50% on the first 6% of eligible compensation contributed to the Plan. Participants’ contributions are fully vested at all times. Employer matching contributions vest over a five-year period. At its discretion, the Company may make additional matching and profit-sharing contributions. During the year ended December 31, 2019, 2018 and 2017, the Company contributed $0.1 million, $0.2 million and $0.4 million, respectively.

The Company’s 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;

·

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.

 

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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

 

2019

 

2018

 

P/I (2)

 

2019

 

2018

 

2017

 

Imposed

 

Agreement

International Union of Operating Engineers - Employers Construction Industry Retirement Plan - Local 302 and 612 Trust Funds

    

91-6028571

    

Green

    

Green

    

N/A

    

$

3,021

    

$

2,482

    

$

1,974

    

 —

    

2022

Washington Laborers

 

91-6022315

 

Green

 

Green

 

N/A

 

$

30

 

$

 —

 

$

 —

 

 —

 

2023

Carpenters Retirement Plan of Western Washington

 

91-6029051

 

Green

 

Green

 

N/A

 

$

695

 

$

932

 

$

693

 

 —

 

2022

Cement Masons & Plasterers Trust Funds

 

91-6066773

 

Green

 

Green

 

N/A

 

$

 2

 

$

 —

 

$

 —

 

 —

 

2023

Washington-Idaho-Montana Carpenters-Employers Retirement Trust Fund

 

91-6123987

 

Yellow

 

Yellow

 

I

 

$

36

 

$

 —

 

$

 —

 

 —

 

2021

Engineers - AGC Retirement Trust of the Inland Empire

 

91-6070237

 

Yellow

 

Yellow

 

I

 

$

20

 

$

 —

 

$

 —

 

 —

 

2021

Alaska Carpenters Trust Fund

 

92-0120866

 

Yellow

 

Green

 

I

 

$

377

 

$

328

 

$

396

 

 —

 

2021

Alaska Laborers Trust Fund

 

91-6028298

 

Yellow

 

Yellow

 

I

 

$

552

 

$

321

 

$

218

 

 —

 

2020


(1)

The most recent PPA zone status available in 2019 and 2018 is for the plan’s year end during 2018 and 2017, 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.

 

18.Commitments and Contingencies

The Company and one former and two current officers are named defendants in a class action lawsuit filed on April 11, 2019 in the United States District Court for the Southern District of Texas, Houston Division, seeking unstated compensatory damages under the federal securities laws allegedly arising from materially false and misleading statements during the period of March 13, 2018 to March 18, 2019. The complaint asserts, among other things, that the current and former officers caused the Company to overstate goodwill in certain periods; overstate accounts receivable; that the company lacked effective internal controls over financial reporting related to goodwill impairment testing and accounts receivable; and that as a result the required adjustments to goodwill and accounts receivable materially impacted the company’s financial statements causing the company’s stock price to be artificially inflated during the class period. The Company has responded to the complaint, considers all of these allegations without merit and is vigorously contesting the allegations.

In addition, from time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, civil penalties or other losses, or injunctive or declaratory relief and on rare occasions punitive damages. With respect to such lawsuits, the Company accrues reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe any of these or any other proceedings, individually or in the aggregate, would be expected to have a material adverse effect on results of operations, cash flows, or financial condition

A legal matter was settled in the Company’s favor for $5.5 million during the first quarter of 2018. Settlement amounts were recorded in Other gain from continuing operations in the Consolidated Statement of Operations, Prepaid expenses and other (current portion of the notes receivable) and Other non-current assets (non-current portion of the notes receivable) in the Consolidated Balance Sheets. As of December 31, 2019, the current portion of the notes receivable was $0.8 million and the non-current portion was $2.5 million, net of $0.3 million of unamortized discount. Legal fees related to this matter were expensed as incurred during the respective reporting period.

As a result of charges brought in September 2015 and October 2016 by the Houston Police Department, Environmental Enforcement, two subsidiaries of the Company were indicted at the request of the Harris County, Texas District Attorney’s

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Office by a duly organized Grand Jury of Harris County, Texas for separate but similar violations of the Texas Water Code, allegedly arising from the handling of construction concrete at certain work sites. Specifically, in each case the Company was charged with unlawfully, intentionally or knowingly discharging a waste or pollutant and is subject to a maximum fine of $250,000. The Company considers both cases without merit. However, without admitting to fault, the Company has, in both cases, agreed to diversion agreements under which the charges were dismissed, without prosecution, upon our payment of fines. None of these allegations nor the costs of defense, taken separately or as a whole, is expected to have a material impact on the Company’s balance sheet or its liquidity.

19.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. Segment information for the periods presented is provided as follows:

 

 

 

 

 

 

 

 

 

    

Year Ended

    

Year Ended

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

Marine

 

 

 

 

 

 

Contract revenues

 

$

369,138

 

$

243,883

Operating income (loss)

 

 

1,057

 

 

(61,012)

Depreciation and amortization expense

 

 

(19,889)

 

 

(22,657)

 

 

 

 

 

 

 

Total assets

 

$

264,681

 

$

190,503

Property, plant and equipment, net

 

 

 114,873

 

 

128,168

 

 

 

 

 

 

 

Concrete

 

 

  

 

 

  

Contract revenues

 

$

339,252

 

$

277,011

Operating (loss) income

 

 

1,136

 

 

(39,528)

Depreciation and amortization expense

 

 

(8,519)

 

 

(9,142)

 

 

 

 

 

 

 

Total assets

 

$

130,163

 

$

122,367

Property, plant and equipment, net

 

 

 17,475

 

 

19,835

 

There were $1.2 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2019. There were $2.5 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2018. The marine segment had foreign revenues of $11.4 million and $12.2 million, respectively, for the years ended December 31, 2019 and 2018. These revenues are derived from projects in the Caribbean Basin and Mexico and are paid primarily in U.S. dollars. There was no foreign revenue for the concrete segment.

 

20.Leases

The Company has operating and finance leases for office space, equipment and vehicles.

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 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.

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The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Leases recorded on the balance sheet consists of the following:

 

 

 

 

 

 

    

December 31,

Leases

 

2019

Assets

 

 

 

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

 

$

17,997

Financing lease right-of-use assets, net (2)

 

 

7,896

Total assets

 

$

25,893

Liabilities

 

 

  

Current

 

 

  

Operating

 

$

5,043

Financing

 

 

2,788

Total current

 

 

7,831

Noncurrent

 

 

  

Operating

 

 

13,596

Financing

 

 

3,760

Total noncurrent

 

 

17,356

Total liabilities

 

$

25,187


(1)

Operating lease right-of-use assets are recorded net of accumulated amortization of $5.2 million as of December 31, 2019.

(2)

Financing lease right-of-use assets are recorded net of accumulated amortization of $6.2 million as of December 31, 2019

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

 

 

 

 

 

 

    

December 31,

 

 

 

2019

 

Weighted Average Remaining Lease Term (in years)

 

  

 

Operating leases

 

5.30

 

Financing leases

 

1.18

 

Weighted Average Discount Rate

 

  

 

Operating leases (1)

 

4.80

%

Financing leases

 

5.10

%


(1)

Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.

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Table of Contents

The components of lease expense are as follows:

 

 

 

 

 

 

 

Year Ended

 

    

December 31, 2019

Operating lease costs:

 

 

  

Operating lease cost

 

$

6,930

Short-term lease cost (1)

 

 

2,001

Financing lease costs:

 

 

  

Interest on lease liabilities

 

 

362

Amortization of right-of-use assets

 

 

2,312

Total lease cost

 

$

11,605


(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, 2019

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

 

 

 

Operating cash flows for operating leases

 

$

6,887

Operating cash flows for finance leases

 

$

362

Financing cash flows for finance leases

 

$

2,906

Non-cash activity:

 

 

  

ROU assets obtained in exchange for new operating lease liabilities

 

$

25,743

ROU assets obtained in exchange for new financing lease liabilities

 

$

1,021

 

Maturities of lease liabilities are summarized as follows:

 

 

 

 

 

 

 

 

 

 

Operating Leases

    

Finance Leases

Year ending December 31,

 

 

 

 

 

 

2020

 

$

5,802

 

$

3,572

2021

 

 

4,327

 

 

3,190

2022

 

 

2,871

 

 

49

2023

 

 

2,250

 

 

41

2024

 

 

1,791

 

 

 7

Thereafter

 

 

4,215

 

 

 —

Total future minimum lease payments

 

 

21,256

 

 

6,859

Less - amount representing interest

 

 

2,617

 

 

311

Present value of future minimum lease payments

 

 

18,639

 

 

6,548

Less - current lease obligations

 

 

5,043

 

 

2,788

Long-term lease obligations

 

$

13,596

 

$

3,760

 

21.Related Party Transactions

Upon the completion of the TAS acquisition, the Company entered into a lease arrangement with an entity in which an employee owns an interest. This lease is for office space and yard facilities used by the concrete segment. Annual lease expense was approximately $478,000 for the year ending December 31, 2017. Due to the resignation of this employee, these transactions ceased to be related party transactions as of July 31, 2017.

 

F-37

Table of Contents

22.Selected Quarterly Financial Data (Unaudited)

The following tables set forth selected unaudited financial information for the eight quarters in the two-year period ended December 31, 2019. This information has been prepared on the same basis as the audited financial statements and, in the opinion of management, contains all adjustments necessary for a fair presentation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

First

    

Second

    

Third

    

Fourth

    

Total

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

(in thousands, except per share data)

2019

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Revenues

 

$

143,105

 

$

165,985

 

$

199,507

 

$

199,793

 

$

708,390

Gross profit

 

 

9,082

 

 

14,977

 

 

20,893

 

 

19,089

 

 

64,041

Operating (loss) income

 

 

(6,177)

 

 

(423)

 

 

6,092

 

 

2,701

 

 

2,193

(Loss) income before income taxes

 

 

(7,331)

 

 

(1,773)

 

 

4,506

 

 

1,107

 

 

(3,491)

Net (loss) income

 

 

(7,924)

 

 

(1,633)

 

 

4,039

 

 

159

 

 

(5,359)

(Loss) earnings per share:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Basic

 

$

(0.27)

 

$

(0.06)

 

$

0.14

 

$

0.01

 

$

(0.18)

Diluted

 

$

(0.27)

 

$

(0.06)

 

$

0.14

 

$

0.01

 

$

(0.18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

First

    

Second

    

Third

    

Fourth

    

Total

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

(in thousands, except per share data)

2018

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Revenues

 

$

136,843

 

$

159,767

 

$

125,073

 

$

99,211

 

$

520,894

Gross profit (loss)

 

 

14,695

 

 

19,462

 

 

4,825

 

 

(22,206)

 

 

16,776

Operating income (loss)

 

 

7,069

 

 

4,591

 

 

(7,405)

 

 

(104,795)

 

 

(100,540)

Income (loss) before income taxes

 

 

5,590

 

 

3,909

 

 

(9,427)

 

 

(106,727)

 

 

(106,655)

Net income (loss)

 

 

4,101

 

 

2,249

 

 

(6,356)

 

 

(94,416)

 

 

(94,422)

Earnings (loss) per share:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Basic

 

$

0.15

 

$

0.08

 

$

(0.22)

 

$

(3.32)

 

$

(3.31)

Diluted

 

$

0.14

 

$

0.08

 

$

(0.22)

 

$

(3.32)

 

$

(3.31)

 

F-38

Table of Contents

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, 2017

 

  

 

 

  

 

 

  

 

 

  

 

Provision for doubtful accounts

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Reserve for losses on uncompleted contracts

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Year ended December 31, 2018

 

 

  

 

 

  

 

 

  

 

 

  

Provision for doubtful accounts

 

$

 —

 

$

4,280

 

$

 —

 

$

4,280

Reserve for losses on uncompleted contracts

 

$

 —

 

$

22,770

 

$

 —

 

$

22,770

Year ended December 31, 2019

 

 

  

 

 

  

 

 

  

 

 

  

Provision for doubtful accounts

 

$

4,280

 

$

 —

 

$

1,680

 

$

2,600

Reserve for losses on uncompleted contracts

 

$

22,770

 

$

2,455

 

$

14,300

 

$

10,925

 

F-39

orn_Ex4_1

Exhibit 4.1

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

As of December 31, 2019, Orion Group Holdings, Inc. (the “Company,” “we,” “us” or “our”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended:  our common stock, par value $0.01 per share (our “Common Stock”).

The following summary does not purport to be complete and is subject to, and qualified in its entirety by reference to (1) the applicable provisions of the Delaware General Corporation Law (the “DGCL”) and (2) the applicable provisions of our amended and restated certificate of incorporation (our “charter”) and our amended and restated bylaws (our “bylaws”), both of which are incorporated by reference as exhibits to the Annual Report on Form 10-K of which this Exhibit is a part.  We encourage you to read our charter, our bylaws, and the applicable provisions of the DGCL for additional information.

Authorized Shares.  Our charter authorizes us to issue up to 50,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”). The Company’s Board of Directors (the “Board”) is authorized to issue Preferred Stock from time to time in one or more series and, with respect to each series of Preferred Stock, to fix the number of shares to constitute the series and the rights and preferences of the shares of any series so established, provided such actions are compliant with the DGCL. As of December 31, 2019, we only have one outstanding class of Common Stock and there are no outstanding shares of Preferred Stock.

Voting Rights.  All voting rights are vested in the holders of Common Stock.  Each registered holder of Common Stock is entitled to one vote for each share held on all matters submitted to a vote of the stockholders of the Company.  Directors are elected by a plurality of the votes of the shares present in person or by proxy at the stockholders meeting and entitled to vote in such election.  When a quorum is present at any meeting of the stockholders, any matter to be voted upon by the stockholders at such meeting is decided by a majority of the votes and shares present or represented and voting on the matter.  Our stockholders may not cumulate their votes in the election of directors or any other matter.

Dividend Rights.  Subject to the rights that may be granted to any holders of Preferred Stock, dividends on Common Stock, if any, as may be declared by the Board out of funds legally available therefor, would be payable ratably in proportion to the number of shares of Common Stock held by the holders of Common Stock.

Liquidation and Dissolution.  Upon a liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to receive ratably the net assets of the Company which may be available after the payment of all debts and other liabilities, and after distribution in full of all preferential amounts distributed to holders of any series outstanding of Preferred Stock.

Fully Paid and Nonassessable.  All outstanding shares of Common Stock are fully paid and nonassessable, which means that holders will have paid their purchase price in full and we may not require them to pay additional funds.

Preemptive and Other Rights.  Holders of our Common Stock have no redemption or conversion rights and no preemptive or other rights to subscribe for our securities.

Limitations on Ownership by Non-U.S. Citizens.  The Company is subject to and complies with the applicable citizenship requirements of the Foreign Dredge Act of 1906, 46 U.S.C. section 55109, as amended; the Merchant Marine Act of 1920, 46 U.S.C. section 55101, et. seq., as amended; the Shipping Act of 1916, 46 U.S.C. section 50501, as amended; and any other U.S. maritime, shipping, and vessel regulations and laws requiring or relating to the ownership or control of the Company for purposes of owning and operating vessels in the U.S. coastwise trade (collectively, the “U.S. Maritime Laws”).  These U.S. Maritime Laws prohibit foreign ownership or control of persons engaged in the transport of merchandise or passengers or dredging in the navigable waters of the U.S.  A corporation is considered to be foreign-owned or controlled if, among other things, 25% or more of the ownership or voting interests with respect to its equity stock is held by non-U.S. citizens. If we should fail to comply

1

with such requirements, our vessels would lose their eligibility to engage in coastwise trade or dredging within U.S. domestic waters.  Therefore, the Company limits the percentage of the shares of any class of the Company’s capital stock that is owned by a non-US citizen, in order to comply with such requirements.  To facilitate our compliance, our charter includes the following provisions:

limits ownership by non-U.S. citizens of any class or series of our capital stock (including our Common Stock) to 23%;

requires us to withhold dividends and suspend voting rights with respect to any shares held by non-U.S. citizens;

permits a stock certification system with two types of certificates to aid tracking of ownership;

permits us to redeem any shares held by non-U.S. citizens so that our foreign ownership is less than 23%; and

permits us to take measures to ascertain ownership of our stock.

Stockholders and proposed transferees may be required to certify whether they are U.S. citizens before purchasing or transferring our Common Stock. If a stockholder or a proposed transferee cannot make such certification, or if a proposed sale or transfer of our shares of Common would result in the ownership by non-U.S. citizens of 23% or more of our Common Stock, the stockholder may not be allowed to purchase or transfer our Common Stock. All certificates representing the shares of our Common Stock will bear legends referring to the foregoing restrictions. In addition, our charter permits us to establish and maintain a dual stock certificate system under which different forms of certificates may be used to reflect whether the owner is a U.S. citizen.

Certain Anti-Takeover Provisions of the DGCL, our Charter, and our Bylaws.  Certain provisions of the DGCL and our charter and bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction or other attempts to influence or replace our incumbent directors and officers. These provisions are summarized below.

Delaware Anti-Takeover Statute.  We have elected to be subject to Section 203 of the DGCL, an anti-takeover law. Subject to certain exceptions, this law prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the time that such stockholder became an interested stockholder, unless the business combination or acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner.  Generally, under Section 203, an “interested stockholder” is a person or entity who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status did own) fifteen percent (15%) or more of a corporation’s outstanding voting stock.  The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by our Board, including discouraging takeover attempts that might result in a premium over the market price for the shares of Common Stock held by stockholders.

Classified Board.  Under our charter, our Board is divided into three classes of directors, with the classes to be as nearly equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. At each annual meeting of stockholders, successors to the class of directors whose terms expires at that annual meeting are and will be elected for a three-year term.  The classification of directors has the effect of making it more difficult for stockholders to change the composition of our Board.

Authorized But Unissued Shares.  The authorized but unissued shares of our Common Stock and Preferred Stock are available for future issues without stockholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of Common Stock and Preferred Stock could make it more difficult or discourage an attempt to obtain control of us by means of a proxy context, tender offer, merger or otherwise.

2

Filling Board Vacancies; Removal.  Our charter provides that vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by the affirmative vote of a majority of the directors then in office, though less than a quorum, or by the sole remaining director. Each director will hold office until his or her successor is elected and qualified, or until the director’s earlier death, resignation, retirement or removal from office. Any director may resign at any time upon written notice to our Board or to our President. Directors may be removed only for cause upon the affirmative vote of the holders of 75% of the voting power of the outstanding shares of capital stock voting together as a single class.

No Cumulative Voting.  Holders of our Common Stock do not have cumulative voting rights in the election of directors or on any other matter.

Advance Notice Requirement for Stockholder Proposals and Director Nominations.  Our bylaws provide that stockholders seeking to bring business before or to nominate candidates for election as directors at a meeting of stockholders must provide timely notice of their proposal in writing to the corporate secretary and comply with certain specified procedural requirements.

No Stockholder Action by Written Consent; Special Meeting.  Our charter precludes stockholders from initiating or effecting any action by written consent and thereby taking actions opposed by our Board in that manner.  Our bylaws also provide that special meeting of stockholders may be called only by our Board.

Limitations on Ownership by Non-U.S. Citizens. As described above under “Limitations on Ownership by Non-U.S. Citizens,” certain provisions of our charter designed to ensure our compliance with U.S. Maritime Laws may have an anti-takeover effect by limiting the percentage ownership of our capital stock by non-U.S. citizens.

Amendments to Our Charter and Bylaws.  Pursuant to the DGCL and our charter, certain anti-takeover provisions of our certificate of incorporation may not be repealed or amended, in whole or in part, without the approval of at least 80% of the outstanding stock entitled to vote. Our charter permits our Board to adopt, amend and repeal our bylaws. Our charter also provides that our bylaws can be amended by the affirmative vote of the holders of at least 80% of the voting power of the outstanding shares of our Common Stock.

Listing.  Our Common Stock is listed on the New York Stock Exchange under the symbol “ORN.”

Transfer Agent and Registrar.  Our transfer agent and registrar for our Common Stock is American Stock Transfer & Trust Company.

3

orn_Ex21_1

Exhibit 21.1

 

 

image1.png

LIST OF CORPORATE ENTITIES (UPDATED 02/25/20)

 

ENTITY

ABBREVIATION

STATE/PROVINCE

OWNER

INTEREST

Orion Group Holdings, Inc.

ORN

DE

Parent Company

n/a

Picture 7

Orion Administrative Services, Inc.

OAS

TX

ORN

100%

East & West Jones Placement Areas, LLC

EWJ

TX

OAS

100%

Preferred Tool Services, Inc.

PTS/HITS

TX

OAS

100%

Orion Marine Group, LLC

OMGLLC

TX

OAS

100%

Picture 8

Orion Marine Contractors, Inc.

OMR

DE

ORN

100%

Northwest Marine Construction, ULC

NMC

Canada

OMR

100%

Picture 9

Schneider E&C Company, Inc.

SCH

FL

ORN

100%

Picture 10

Orion Industrial Construction, LLC

(fka F. Miller Construction, LLC)

OIC

LA

ORN

100%

Picture 5

OCLP, LLC

OCLPLLC

NV

ORN

100%

OCGP, LLC

OCGP

TX

OCLPLLC

100%

Orion Construction, LP

OCLP

TX

OCLPLLC

99%

OCGP (GP)

1%

Picture 6

Orion Marine Construction, Inc.

OMC

FL

OCLP

100%

Orion Marine Construction Bahamas,

LLC

OMCBH

Bahamas

OMC

100%

Orion Marine Construction Cayman, Inc.

OMCCY

Grand Cayman Branch

OMC

100%

Verdant Isle Port Partners (Joint Venture)

VIPP

Grand Cayman

OMC

2.5%

Royal Caribbean

47.5%

Carnival

47.5%

McAlpine

2.5%

Orion Marine Construction, Inc.-

Honduras

OMCH

Honduran Branch

OMC

100%

Orion Marine Construction TCI, Ltd

OMCTCI

Turks & Caicos

OMC

100%

Orion Marine de Mexico, S de R.L. de C.V.

OMdeMex

Mexico

OMC

99%

OAS

1%

SSL South, LLC

SSL

FL

OMC

100%

OM Marine Services de Mexico S de R.L. de C.V.

OMMSdMex

Mexico

SSL

99%

OIC

1%

T. LaQuay Dredging, LLC

TLD

TX

OMC

100%

King Fisher Marine Services, LLC

KFMS

TX

OMC

100%

Misener Marine Construction, Inc.

NMCGA

GA

OMC

100%

Industrial Channel & Dock

Company

ICDC

TX

OMC

100%

Commercial Channel & Dock

Company

CCDC

TX

OMC

100%

Picture 4

Orion Concrete Construction, LLC

OCC

DE

ORN

100%

T.A.S. Commercial Concrete

Construction, LLC

TAS

DE

OCC

100%

Tony Bagliore Concrete, Inc. dba T.A.S.

Commercial Concrete CTX

TBC

TX

TAS

100%

 

1 | P a g e

 

 

image1.png

LIST OF CORPORATE ENTITIES (UPDATED 02/25/20)

 

ENTITY

ABBREVIATION

STATE/PROVINCE

OWNER

INTEREST

 

T.A.S. Commercial Concrete Solutions, LLC

TASCCS

TX

OCC

100%

T.A.S. Proco, LLC

TASP

TX

TASCCC

99%

OCC

1%

Picture 3

Orion Corporate Services, LLC

OCS

TX

ORN

100%

Picture 2

Orion Government Services, LLC

OGS

WA

OMR

50%

OCLP

50%

 

2 | P a g e

orn_Ex23_1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Orion Group Holdings, Inc.:

We consent to the incorporation by reference in the registration statements (No. 333‑160719) on Form S-3 and S-3/A, and (No. 333-148301, No. 333-174814, and No. 333-218222) on Form S-8 of Orion Group Holdings, Inc. of our reports dated February 28, 2020, with respect to the consolidated balance sheets of Orion Group Holdings, Inc. as of December 31, 2019 and 2018, the related consolidated statements of operations,  comprehensive (loss) income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and the effectiveness of internal control over financial reporting as of December 31, 2019, which reports appear in the December 31, 2019 annual report on Form 10‑K of Orion Group Holdings, Inc.  Our report with respect to the consolidated financial statements refers to a change in accounting for revenue and leases.

/s/ KPMG LLP

Houston, Texas
February 28, 2020

 

orn_Ex31_1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a - 14(a)/15d - 14(a)

OF THE SECURITIES EXCHANGE ACT, AS AMENDED

I, Mark R. Stauffer, certify that:

1.  I have reviewed this Form 10-K of Orion Group Holdings, Inc;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

e

 

By:

/s/ Mark R. Stauffer

February 28, 2020

Mark R. Stauffer

 

President and Chief Executive Officer

 

orn_Ex31_2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a - 14(a)/15d - 14(a)

OF THE SECURITIES EXCHANGE ACT, AS AMENDED

I, Robert L. Tabb, certify that:

1.  I have reviewed this Form 10-K of Orion Group Holdings, Inc;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

e

 

By:

/s/ Robert L. Tabb

February 28, 2020

Robert L. Tabb

 

Vice President and Chief Financial Officer

 

orn_Ex32_1

Exhibit 32.1

SECTION 1350 CERTIFICATIONS

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Orion Group Holdings, Inc (the “Company”) on Form 10-K for the year ended December  31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Mark R. Stauffer and Robert L. Tabb, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

 

By:

/s/ Mark R. Stauffer

February 28, 2020

Mark R. Stauffer

 

President and Chief Executive Officer

 

 

By:

/s/ Robert L. Tabb

February 28, 2020

Robert L. Tabb

 

Vice President and Chief Financial Officer

 

v3.19.3.a.u2
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]    
Balances at beginning of the year $ 1,614 $ 1,614
Additions based on tax position related to current year 0 0
Additions based on tax positions related to prior years 0 0
Reductions based on tax positions related to current year 0 0
Reductions based on tax positions related to prior years 0 0
Settlements with tax authorities 0 0
Lapse of statute of limitations 0 0
Balance at the end of year $ 1,614 $ 1,614
v3.19.3.a.u2
Long-term Debt, Line of Credit and Derivatives - Debt Maturity Schedule (Details) - Line of Credit - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Debt Instrument [Line Items]    
Principal $ 73,290 $ 80,500
Term Loan    
Debt Instrument [Line Items]    
2020 3,750  
2021 4,500  
2022 5,250  
2023 23,790  
Principal $ 37,290  
v3.19.3.a.u2
Accrued Liabilities (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Accrued Liabilities, Current [Abstract]    
Accrued salaries, wages and benefits $ 7,323 $ 6,492
Accrual for insurance liabilities 3,714 5,680
Sales taxes 3,021 2,178
Property taxes 389 924
Sale-leaseback arrangement 482 0
Accounting and audit fees 267 0
Interest 76 0
Capital lease liability 0 3,045
Other accrued expenses 1,694 521
Total accrued liabilities $ 16,966 $ 18,840
v3.19.3.a.u2
Income Taxes - Components of Income Tax Expense (Benefit) by Jurisdiction and by Classification (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
U.S. Federal      
Current   $ (12) $ (780)
Deferred   (12,664) (3,986)
Total   (12,676) (4,766)
State and local      
Current $ 716 183 550
Deferred 104 (471) (180)
Total 820 (288) 370
Foreign      
Current 1,081 731 (145)
Deferred (33)    
Total 1,048 731 (145)
Total Income Taxes      
Current 1,797 902 (375)
Deferred 71 (13,135) (4,166)
Total $ 1,868 $ (12,233) $ (4,541)
v3.19.3.a.u2
Selected Quarterly Financial Data (Tables)
12 Months Ended
Dec. 31, 2019
Quarterly Financial Information Disclosure [Abstract]  
Schedule of quarterly financial information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

First

    

Second

    

Third

    

Fourth

    

Total

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

(in thousands, except per share data)

2019

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Revenues

 

$

143,105

 

$

165,985

 

$

199,507

 

$

199,793

 

$

708,390

Gross profit

 

 

9,082

 

 

14,977

 

 

20,893

 

 

19,089

 

 

64,041

Operating (loss) income

 

 

(6,177)

 

 

(423)

 

 

6,092

 

 

2,701

 

 

2,193

(Loss) income before income taxes

 

 

(7,331)

 

 

(1,773)

 

 

4,506

 

 

1,107

 

 

(3,491)

Net (loss) income

 

 

(7,924)

 

 

(1,633)

 

 

4,039

 

 

159

 

 

(5,359)

(Loss) earnings per share:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Basic

 

$

(0.27)

 

$

(0.06)

 

$

0.14

 

$

0.01

 

$

(0.18)

Diluted

 

$

(0.27)

 

$

(0.06)

 

$

0.14

 

$

0.01

 

$

(0.18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

First

    

Second

    

Third

    

Fourth

    

Total

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

(in thousands, except per share data)

2018

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Revenues

 

$

136,843

 

$

159,767

 

$

125,073

 

$

99,211

 

$

520,894

Gross profit (loss)

 

 

14,695

 

 

19,462

 

 

4,825

 

 

(22,206)

 

 

16,776

Operating income (loss)

 

 

7,069

 

 

4,591

 

 

(7,405)

 

 

(104,795)

 

 

(100,540)

Income (loss) before income taxes

 

 

5,590

 

 

3,909

 

 

(9,427)

 

 

(106,727)

 

 

(106,655)

Net income (loss)

 

 

4,101

 

 

2,249

 

 

(6,356)

 

 

(94,416)

 

 

(94,422)

Earnings (loss) per share:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Basic

 

$

0.15

 

$

0.08

 

$

(0.22)

 

$

(3.32)

 

$

(3.31)

Diluted

 

$

0.14

 

$

0.08

 

$

(0.22)

 

$

(3.32)

 

$

(3.31)

 

v3.19.3.a.u2
Summary of Significant Accounting Policies - Restricted Cash and Accounts Receivable (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Restricted cash    
Restricted cash $ 958  
Accounts Receivable [Abstract]    
Allowance for doubtful accounts receivable 2,600 $ 4,300
Retainage 42,547 $ 30,734
Retainage, long-term $ 11,000  
v3.19.3.a.u2
Business Acquisition - Narrative (Details) - USD ($)
$ in Thousands
12 Months Ended
Apr. 10, 2017
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Apr. 09, 2017
Business Acquisition [Line Items]          
Federal statutory tax rate   21.00% 21.00% 35.00%  
Contingent consideration     $ 456    
Other Income          
Business Acquisition [Line Items]          
Reduction in contingent liability   $ 500      
Other Long-term Liability          
Business Acquisition [Line Items]          
Contingent consideration         $ 500
Tony Bagliore Concrete, Inc. (TBC)          
Business Acquisition [Line Items]          
Payments to acquire businesses $ 6,000        
Maximum contingent consideration         2,000
Contingent consideration         456
Goodwill, net of working capital adjustment         $ 3,100
Minimum | Tony Bagliore Concrete, Inc. (TBC)          
Business Acquisition [Line Items]          
Property and equipment useful life   3 years      
Maximum | Tony Bagliore Concrete, Inc. (TBC)          
Business Acquisition [Line Items]          
Property and equipment useful life   15 years      
v3.19.3.a.u2
Leases - Lease Cost (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Leases [Abstract]  
Operating lease cost $ 6,930
Short-term lease cost 2,001
Interest on lease liabilities 362
Amortization of right-of-use assets 2,312
Total lease cost $ 11,605
v3.19.3.a.u2
Fair Value (Tables)
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Schedule of fair value, assets and liabilities measured on recurring basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements

 

    

Carrying Value

    

Level 1

    

Level 2

    

Level 3

December 31, 2019

 

  

 

 

  

 

  

 

  

Assets:

 

 

  

 

  

 

  

 

  

Cash surrender value of life insurance policy

 

$

2,714

 

 —

 

2,714

 

 —

Liabilities:

 

 

  

 

  

 

  

 

  

Derivatives

 

$

1,045

 

 —

 

1,045

 

 —

December 31, 2018

 

 

  

 

  

 

  

 

  

Assets:

 

 

  

 

  

 

  

 

  

Cash surrender value of life insurance policy

 

$

1,993

 

 —

 

1,993

 

 —

Liabilities:

 

 

  

 

  

 

  

 

  

Derivatives

 

$

79

 

 —

 

79

 

 —

 

v3.19.3.a.u2
Selected Quarterly Financial Data (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Selected Quarterly Financial Information [Abstract]                      
Revenues $ 199,793 $ 199,507 $ 165,985 $ 143,105 $ 99,211 $ 125,073 $ 159,767 $ 136,843 $ 708,390 $ 520,894 $ 578,553
Gross profit 19,089 20,893 14,977 9,082 (22,206) 4,825 19,462 14,695 64,041 16,776 62,240
Operating (loss) income 2,701 6,092 (423) (6,177) (104,795) (7,405) 4,591 7,069 2,193 (100,540) 1,538
(Loss) income before income taxes 1,107 4,506 (1,773) (7,331) (106,727) (9,427) 3,909 5,590 (3,491) (106,655) (4,141)
Net (loss) income $ 159 $ 4,039 $ (1,633) $ (7,924) $ (94,416) $ (6,356) $ 2,249 $ 4,101 $ (5,359) $ (94,422) $ 400
Earnings Per Share, Basic and Diluted [Abstract]                      
Basic (USD per share) $ 0.01 $ 0.14 $ (0.06) $ (0.27) $ (3.32) $ (0.22) $ 0.08 $ 0.15 $ (0.18) $ (3.31) $ 0.01
Diluted (loss) income per share (in dollars per share) $ 0.01 $ 0.14 $ (0.06) $ (0.27) $ (3.32) $ (0.22) $ 0.08 $ 0.14 $ (0.18) $ (3.31) $ 0.01
v3.19.3.a.u2
Revenue (Tables)
12 Months Ended
Dec. 31, 2019
Revenue from Contract with Customer [Abstract]  
Schedule of disaggregation of revenue

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 

    

 

    

2019

    

2018

    

Marine Segment

 

 

  

 

 

  

 

Construction

 

$

242,527

 

$

156,925

 

Dredging

 

 

112,303

 

 

73,237

 

Specialty Services

 

 

14,308

 

 

13,721

 

Marine segment contract revenues

 

$

369,138

 

$

243,883

 

 

 

 

 

 

 

 

 

Concrete Segment

 

 

  

 

 

  

 

Light Commercial

 

$

284,624

 

$

215,628

 

Structural

 

 

54,497

 

 

60,926

 

Other

 

 

131

 

 

457

 

Concrete segment contract revenues

 

$

339,252

 

$

277,011

 

 

 

 

 

 

 

 

 

Total contract revenues

 

$

708,390

 

$

520,894

 

 

v3.19.3.a.u2
Schedule II - Valuation And Qualifying Accounts
12 Months Ended
Dec. 31, 2019
Valuation and Qualifying Accounts [Abstract]  
Schedule II - Valuation And Qualifying Accounts

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, 2017

 

  

 

 

  

 

 

  

 

 

  

 

Provision for doubtful accounts

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Reserve for losses on uncompleted contracts

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Year ended December 31, 2018

 

 

  

 

 

  

 

 

  

 

 

  

Provision for doubtful accounts

 

$

 —

 

$

4,280

 

$

 —

 

$

4,280

Reserve for losses on uncompleted contracts

 

$

 —

 

$

22,770

 

$

 —

 

$

22,770

Year ended December 31, 2019

 

 

  

 

 

  

 

 

  

 

 

  

Provision for doubtful accounts

 

$

4,280

 

$

 —

 

$

1,680

 

$

2,600

Reserve for losses on uncompleted contracts

 

$

22,770

 

$

2,455

 

$

14,300

 

$

10,925

 

v3.19.3.a.u2
Revenue
12 Months Ended
Dec. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenue

4.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, 

    

 

    

2019

    

2018

    

Marine Segment

 

 

  

 

 

  

 

Construction

 

$

242,527

 

$

156,925

 

Dredging

 

 

112,303

 

 

73,237

 

Specialty Services

 

 

14,308

 

 

13,721

 

Marine segment contract revenues

 

$

369,138

 

$

243,883

 

 

 

 

 

 

 

 

 

Concrete Segment

 

 

  

 

 

  

 

Light Commercial

 

$

284,624

 

$

215,628

 

Structural

 

 

54,497

 

 

60,926

 

Other

 

 

131

 

 

457

 

Concrete segment contract revenues

 

$

339,252

 

$

277,011

 

 

 

 

 

 

 

 

 

Total contract revenues

 

$

708,390

 

$

520,894

 

 

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 often combine multiple services, such as engineering, dredging, diving and construction, into one distinct finished product which is transferred to the customer. These 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 chief operating decision maker (“CODM”) for 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 sidewalks, ramps, tilt walls and trenches. 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.

v3.19.3.a.u2
Inventory
12 Months Ended
Dec. 31, 2019
Inventory Disclosure [Abstract]  
Inventory

8.Inventory

Current inventory at both December 31, 2019 and 2018 of $1.1 million consisted primarily of spare parts and small equipment held for use in the ordinary course of business.

Non-current inventory at December 31, 2019 and 2018 totaled $7.0 million and $7.6 million, respectively, and consisted primarily of spare engine components or items which require longer lead times for sourcing or fabrication for certain of the Company’s assets to reduce equipment downtime.

v3.19.3.a.u2
Long-term Debt And Line of Credit
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Long-term Debt and Line of Credit

12.Long-term Debt and Line of Credit

The Company entered into an amended syndicated credit agreement (the “Credit Agreement” also known as the “Fourth Amendment”) on July 31, 2018 with Regions Bank, as administrative agent and collateral agent, and the following co-syndication agents:  Bank of America, N.A., BOKF, NA dba Bank of Texas, KeyBank National Association, NBH Bank, IBERIABANK, Trustmark National Bank, First Tennessee Bank NA, and Branch Banking and Trust Company.

The Credit Agreement, which may be amended from time to time, provides for borrowings under a revolving line of credit and a term loan (together, the “Credit Facility”). The Credit Facility is guaranteed by the subsidiaries of the Company, secured by the assets of the Company, including stock held in its subsidiaries, and may be used to finance general corporate and working capital purposes, to finance capital expenditures, to refinance existing indebtedness, to finance permitted acquisitions and associated fees, and to pay for all related expenses to the Credit Facility. Interest is due and is computed based on the designation of the loan, with the option of a Base Rate Loan (the base rate plus the Applicable Margin), or an Adjusted LIBOR Rate Loan (the adjusted LIBOR rate plus the Applicable Margin). Interest is due on the last day of each quarter end for Base Rate Loans and at the end of the LIBOR rate period for Adjusted LIBOR Rate Loans. Principal balances drawn under the Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty. Amounts repaid under the revolving line of credit may be re-borrowed. The Credit Facility matures on July 31, 2023.

Total debt issuance costs for the Fourth Amendment, which included underwriter fees, legal fees and syndication fees were approximately $0.9 million and were capitalized as non-current deferred charges and amortized using the effective interest rate method over the duration of the loan. Additionally, the Company executed the Fifth Amendment during March 2019, which was made effective as of December 31, 2018, and executed the Sixth Amendment during May 2019. The Company incurred additional debt issuance costs of approximately $0.6 million and $0.9 million respectively for the Fifth and Sixth Amendments. With the execution of the aforementioned Sixth Amendment, $50.0 million of the existing revolving line of credit was modified and accounted for under guidelines of ASC 470‑50, Debt, Modifications and Extinguishments, and a pro-rated portion of unamortized debt issuance costs of approximately $0.4 million was recognized as interest expense as of May 2019. The remaining debt issuance costs of approximately $0.9 million related to the Fourth, Fifth, and Sixth Amendments will be amortized over the duration of the loan.

The yearly weighted average interest rate for the Credit Facility as of December 31, 2019 was 5.41%.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

 

    

 

    

Debt Issuance

    

 

    

 

    

Debt Issuance

    

 

 

 

Principal

 

Costs(1)

 

Total

 

Principal

 

Costs(1)

 

Total

Term loan - current

 

$

3,750

 

$

(82)

 

$

3,668

 

$

3,000

 

$

(54)

 

$

2,946

Total current debt

 

 

3,750

 

 

(82)

 

 

3,668

 

 

3,000

 

 

(54)

 

 

2,946

Revolving line of credit

 

 

36,000

 

 

(782)

 

 

35,218

 

 

22,000

 

 

(213)

 

 

21,787

Term loan - long-term

 

 

33,540

 

 

(729)

 

 

32,811

 

 

55,500

 

 

(1,168)

 

 

54,332

Total long-term debt

 

 

69,540

 

 

(1,511)

 

 

68,029

 

 

77,500

 

 

(1,381)

 

 

76,119

Total debt

 

$

73,290

 

$

(1,593)

 

$

71,697

 

$

80,500

 

$

(1,435)

 

$

79,065


(1)

Total debt issuance costs, include underwriter fees, legal fees and syndication fees and fees related to the execution of the Fourth, Fifth, and Sixth Amendments to the Credit Agreement.

Provisions of the revolving line of credit and accordion

The Company has a maximum borrowing availability under the revolving line of credit and swingline loans (as defined in the Credit Agreement) of $50.0 million. There is a letter of credit sublimit that is equal to the lesser of $20.0 million and the aggregate unused amount of the revolving commitments then in effect. There is also a swingline sublimit equal to the lesser of $5.0 million and the aggregate unused amount of the revolving commitments then in effect.

Revolving loans may be designated as Base Rate Loan or Adjusted LIBOR Rate Loans, at the Company’s request, and must be drawn in an aggregate minimum amount of $1.0 million and integral multiples of $250,000 in excess of that amount. Swingline loans must be drawn in an aggregate minimum amount of $250,000 and integral multiples of $50,000 in excess of that amount. The Company may convert, change, or modify such designations from time to time.

The Company is subject to a commitment fee for the unused portion of the maximum borrowing availability under the revolving line of credit. The commitment fee, which is due quarterly in arrears, is equal to the Applicable Margin of the actual daily amount by which the Aggregate Revolving Commitments exceeds the Total Revolving Outstanding. The revolving line of credit termination date is the earlier of the Credit Facility termination date, July 31, 2023, or the date the outstanding balance is permanently reduced to zero, in accordance with the terms of the amended Credit Facility.

The maturity date for amounts drawn under the revolving line of credit is the earlier of the Facility termination date of July 31, 2023, or the date the outstanding balance is permanently reduced to zero. Prior to the fourth quarter of 2018, the Company classified amounts drawn as current liabilities based on an intent and ability to repay the amounts using current assets within the next twelve months. During the fourth quarter of 2018, the Company determined it no longer has the intent to repay amounts drawn within the next twelve months. As of December 31, 2019, the Company determined that it still does not have the intent to repay amounts drawn within the next twelve months. Therefore, the Company has classified the entire outstanding balance of the revolving line of credit as non-current.

As of December 31, 2019, the outstanding balance for all borrowings under the revolving line of credit was $36.0 million, where $32.0 million was designated as an Adjusted LIBOR Rate Loan at a weighted average rate of 4.50% and $4.0 million was designated as a Base Rate Loan at a rate of 6.50%. There were also $1.4 million in outstanding letters of credit as of December 31, 2019, which reduced the maximum borrowing availability on the revolving line of credit to $12.6 million as of December 31, 2019. During 2019, the Company drew down $63.0 million for general corporate purposes and made payments of $49.0 million on the revolving line of credit which resulted in a net increase of $14.0 million.

Provisions of the term loan

The original principal amount of $60.0 million for the term loan commitment is paid off in quarterly installment payments (as stated in the Credit Agreement). At December 31, 2019, the outstanding term loan component of the Credit Facility totaled $37.3 million and was secured by specific assets of the Company.

The table below outlines the total remaining payment amounts annually for the term loan through maturity of the Credit Facility:

 

 

 

 

 

2020

    

 

3,750

2021

 

 

4,500

2022

 

 

5,250

2023

 

 

23,790

 

 

$

37,290

 

During 2019 the Company made the scheduled quarterly principal payments of $3.0 million, and an additional principal paydown of $18.2 million with proceeds from a sale-leaseback arrangement. The current portion of debt is $3.8 million and the non-current portion is $33.5 million. As of December 31, 2019, the term loan was designated as an Adjusted LIBOR Rate Loan with an interest rate of 4.50%.

Financial covenants

Restrictive financial covenants under the Credit Facility include:

·

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

-Fiscal Quarter Ending December 31, 2019 and each Fiscal Quarter thereafter, to not be less than 1.25 to 1.00.

·

A consolidated Leverage Ratio to not exceed the following during each noted period:

-Fiscal Quarter Ending December 31, 2019, to not exceed 4.00 to 1.00;

-Fiscal Quarter Ending March 31, 2020 and each Fiscal Quarter thereafter, to not exceed 3.00 to 1.00.

·

A consolidated Adjusted EBITDA to not be less than the following during each noted period:

- Fiscal Year Ending December 31, 2019 : $21.7 million.

In addition, the Credit Facility contains events of default that are usual and customary for similar arrangements, including non-payment of principal, interest or fees; breaches of representations and warranties that are not timely cured; violation of covenants; bankruptcy and insolvency events; and events constituting a change of control.

The Company expects to meet its future internal liquidity and working capital needs and maintain or replace its equipment fleet through capital expenditure purchases and major repairs, from funds generated by its operating activities for at least the next 12 months. The Company believes that its cash position and available borrowings together with cash flow from its operations is adequate for general business requirements and to service its debt. The Company was in compliance with all financial covenants as of December 31, 2019.

Derivative Financial Instruments

On September 16, 2015, the Company entered into a series of receive-variable, pay-fixed interest rate swaps to hedge the variability in the interest payments on 50% of the aggregate principal amount of the Regions Term Loan outstanding, beginning with a notional amount of $67.5 million. There were a total of five sequential interest rate swaps to achieve the hedged position and each year on August 31, with the exception of the final swap, the existing interest rate swap was scheduled to expire and be immediately replaced with a new interest rate swap until the expiration of the final swap on July 31, 2020. On December 6, 2018, the Company entered into a sixth receive-variable, pay-fixed interest rate swap to hedge the variability of interest payments. The sixth swap will begin with a notional amount of $27.0 million on July 31, 2020 and will hedge the variability in the interest payments on the aggregate scheduled principal amount of the Regions Term Loan outstanding. The sixth swap is scheduled to expire on July 31, 2023. At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting, and as such, the effective portion of unrealized changes in market value are recorded in accumulated other comprehensive (loss) income and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. Gains and losses from hedge ineffectiveness are recognized in current earnings. The change in fair market value of the swaps as of December 31, 2019 is approximately $1.0 million. The fair market value of the swaps as of December 31, 2019 is reflected as a liability of $1.0 million on the Consolidated Balance Sheets. See Note 9 for more information regarding the fair value of the Company’s derivative instruments.

v3.19.3.a.u2
Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

16.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 2011 Long Term Incentive Plan (the "2011 LTIP") and 2017 Long Term Incentive Plan (the "2017 LTIP"), which was approved by shareholders in May 2017 and authorized the maximum aggregate number of shares to be issued of 2,400,000. In general, the Company’s 2017 LTIP provides for grants of restricted stock and stock options to be issued with a per-share price equal to the fair market value of a share of common stock on the date of grant. Option terms are specified at each grant date, but are 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, 2017

 

372,306

 

$

5.66

Granted

 

345,913

 

$

7.22

Vested

 

(225,406)

 

$

7.25

Forfeited/repurchased shares

 

(120,353)

 

$

6.08

Nonvested at December 31, 2017

 

372,460

 

$

6.01

Granted

 

333,864

 

$

7.47

Vested

 

(217,244)

 

$

6.61

Forfeited/repurchased shares

 

(71,139)

 

$

6.85

Nonvested at December 31, 2018

 

417,941

 

$

7.04

Granted

 

757,012

 

$

2.52

Vested

 

(585,754)

 

$

3.74

Forfeited/repurchased shares

 

(72,627)

 

$

6.05

Nonvested at December 31, 2019

 

516,572

 

$

4.29

 

Independent directors receive equity compensation in the form of grants. In January 2019, two new independent directors each received equity compensation grants of 8,427 shares, with a fair value of $4.45 per share. In May 2019, the Company’s independent directors each received equity compensation grants of 45,918 shares, with a fair value of $1.96 per share. In October 2019, a new independent director received an equity compensation grant of 14,218 shares, with a fair value of $4.22 per share. In May 2018, the Company’s independent directors each received equity compensation grants of 12,064 shares, with a fair value of $7.46 per share. In May 2017, the Company’s independent directors each received equity compensation grants of 12,465 shares, with a fair value of $7.22 per share.

In March 2019, the Company granted an executive of the Company 168,350 shares of restricted common stock, which vested one-third at March 31, June 30, and September 30, 2019, respectively. The fair value of all shares awarded on the date of the grant was $2.97 per share. In May 2019, certain officers and executives of the Company were awarded 62,500 shares with a vesting period of three years and a fair value of $1.96 per share. In July 2019, certain officers and executives of the Company were awarded 46,500 shares with a vesting period of three years and a fair value of $3.66. In December 2019, certain officers and executives of the Company were awarded 31,500 shares with a vesting period of three years and a fair value of $5.08 per share. In May 2018, certain officers and executives of the Company were awarded 203,752 shares with a vesting period of three years and a fair value of $7.46 per share. In July 2018 an executive was awarded 2,769 shares of restricted common stock with a fair value of $9.03 per share. Additionally, in 2017, certain officers and executives of the Company were awarded 213,643 shares with a vesting period of three years and a weighted average fair value of $7.22 per share.

Performance Stock

In May 2019, the Company awarded certain executives 187,500 shares of performance stock. The performance-based stock will potentially vest 50% if the target is met, with 25% each vesting on the second and third anniversary of the grant, with 100% of the shares to be earned based on the achievement of an objective, tiered return on invested capital, measured over a one-year performance period. The Company evaluates the probability of achieving this each reporting period. The fair value of all shares awarded on the date of the grant was $1.96 per share. In May 2018, the Company awarded certain executives 67,023 shares of performance based stock, which will potentially vest at the end of fiscal 2021, with 100% of the shares to be earned based on the achievement of an objective, tiered return on invested capital measured over a three-year performance period. The Company evaluates the probability of achieving this each reporting period. The fair value of all shares awarded on the date of the grant was $7.46 per share. In May 2017, the Company awarded certain executives 69,945 shares of performance based stock, which vest based on the achievement of an objective return on invested capital measured over a two-year performance period covering the 2018 and 2019 fiscal years. The fair value on the date of grant was $7.22 per share.

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, 2017

 

2,349,446

 

$

8.39

 

  

 

 

  

Granted

 

425,204

 

$

7.22

 

  

 

 

  

Exercised

 

(229,551)

 

$

5.75

 

  

 

 

  

Forfeited

 

(633,978)

 

$

10.36

 

  

 

 

  

Outstanding at December 31, 2017

 

1,911,121

 

$

7.79

 

  

 

 

  

Granted

 

374,215

 

$

7.49

 

  

 

 

  

Exercised

 

(488,303)

 

$

5.76

 

  

 

 

  

Forfeited

 

(132,252)

 

$

7.89

 

  

 

 

  

Outstanding at December 31, 2018

 

1,664,781

 

$

8.31

 

  

 

 

  

Granted

 

 —

 

$

 —

 

  

 

 

  

Exercised

 

(7,021)

 

$

4.94

 

  

 

 

  

Forfeited

 

(192,994)

 

$

15.26

 

  

 

 

  

Outstanding at December 31, 2019

 

1,464,766

 

$

7.41

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest at December 31, 2019

 

1,460,181

 

$

7.41

 

4.78

 

$

91

Exercisable at December 31, 2019

 

1,293,830

 

$

7.41

 

4.34

 

$

91

 

The Company calculates the fair value of each option on the date of grant using the Black-Scholes pricing model and the following weighted-average assumptions in each year:

 

 

 

 

 

 

 

 

 

 

    

2018

    

2017

 

Weighted average grant-date fair value of options granted

 

$

2.78

 

$

7.22

 

Risk-free interest rate

 

 

2.65

%  

 

1.46

%

Expected volatility

 

 

52

%  

 

48

%

Expected term of options (in years)

 

 

3.0

 

 

3.0

 

Dividend yield

 

 

 —

%  

 

 —

%

 

The risk-free interest rate is based on interest rates on U.S. Treasury zero-coupon issues that match the contractual terms of the stock option grants. The expected term represents the period in which the Company’s equity awards are expected to be outstanding, which for the years presented is based on the exercise history.

For years ended December 31, 2019, 2018 and 2017, compensation expense related to stock based awards outstanding for the periods was $2.8 million, $2.2 million and $2.3 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.

During the year ended December 31, 2018, certain officers and executives of the Company were awarded 374,215 options with a vesting period of three years and a weighted average exercise price of $7.49 per share. During the year ended December 31, 2017, certain officers and executives of the Company were awarded 425,204 options with a vesting period of three years and a weighted average exercise price of $7.22 per share.

In the year ended December 31, 2019, the Company received proceeds of less than $0.1 million upon the exercise of 7,021 options. In the year ended December 31, 2018, the Company received proceeds of approximately $2.8 million upon the exercise of 488,303 options. In the year ended December 31, 2017, the Company received proceeds of $1.3 million upon the exercise of 229,551 options.

As of December 31, 2019, total unrecognized compensation expense related to unvested stock and options was approximately  $2.0 million, which is expected to be recognized over a period of approximately 1.5 years.

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

Total intrinsic value of options exercised

 

$

 —

 

$

1,286

 

$

706

Total fair value of shares vested

 

$

769

 

$

705

 

$

855

 

v3.19.3.a.u2
Leases
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases

20.Leases

The Company has operating and finance leases for office space, equipment and vehicles.

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 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.

Leases recorded on the balance sheet consists of the following:

 

 

 

 

 

 

    

December 31,

Leases

 

2019

Assets

 

 

 

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

 

$

17,997

Financing lease right-of-use assets, net (2)

 

 

7,896

Total assets

 

$

25,893

Liabilities

 

 

  

Current

 

 

  

Operating

 

$

5,043

Financing

 

 

2,788

Total current

 

 

7,831

Noncurrent

 

 

  

Operating

 

 

13,596

Financing

 

 

3,760

Total noncurrent

 

 

17,356

Total liabilities

 

$

25,187


(1)

Operating lease right-of-use assets are recorded net of accumulated amortization of $5.2 million as of December 31, 2019.

(2)

Financing lease right-of-use assets are recorded net of accumulated amortization of $6.2 million as of December 31, 2019

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

 

 

 

 

 

 

    

December 31,

 

 

 

2019

 

Weighted Average Remaining Lease Term (in years)

 

  

 

Operating leases

 

5.30

 

Financing leases

 

1.18

 

Weighted Average Discount Rate

 

  

 

Operating leases (1)

 

4.80

%

Financing leases

 

5.10

%


(1)

Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.

The components of lease expense are as follows:

 

 

 

 

 

 

 

Year Ended

 

    

December 31, 2019

Operating lease costs:

 

 

  

Operating lease cost

 

$

6,930

Short-term lease cost (1)

 

 

2,001

Financing lease costs:

 

 

  

Interest on lease liabilities

 

 

362

Amortization of right-of-use assets

 

 

2,312

Total lease cost

 

$

11,605


(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, 2019

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

 

 

 

Operating cash flows for operating leases

 

$

6,887

Operating cash flows for finance leases

 

$

362

Financing cash flows for finance leases

 

$

2,906

Non-cash activity:

 

 

  

ROU assets obtained in exchange for new operating lease liabilities

 

$

25,743

ROU assets obtained in exchange for new financing lease liabilities

 

$

1,021

 

Maturities of lease liabilities are summarized as follows:

 

 

 

 

 

 

 

 

 

 

Operating Leases

    

Finance Leases

Year ending December 31,

 

 

 

 

 

 

2020

 

$

5,802

 

$

3,572

2021

 

 

4,327

 

 

3,190

2022

 

 

2,871

 

 

49

2023

 

 

2,250

 

 

41

2024

 

 

1,791

 

 

 7

Thereafter

 

 

4,215

 

 

 —

Total future minimum lease payments

 

 

21,256

 

 

6,859

Less - amount representing interest

 

 

2,617

 

 

311

Present value of future minimum lease payments

 

 

18,639

 

 

6,548

Less - current lease obligations

 

 

5,043

 

 

2,788

Long-term lease obligations

 

$

13,596

 

$

3,760

 

v3.19.3.a.u2
Stock-Based Compensation - Stock Option Activity (Details) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Number of Shares      
Beginning stock options outstanding (in shares) 1,664,781 1,911,121 2,349,446
Granted (in shares)   374,215 425,204
Exercised (in shares) (7,021) (488,303) (229,551)
Forfeited (in shares) (192,994) (132,252) (633,978)
Ending stock options outstanding (in shares) 1,464,766 1,664,781 1,911,121
Weighted Average Exercise Price Per Share      
Beginning stock options outstanding (in dollars per share) $ 8.31 $ 7.79 $ 8.39
Granted (in dollars per share)   7.49 7.22
Exercised (in dollars per share) 4.94 5.76 5.75
Forfeited (in dollars per share) 15.26 7.89 10.36
Ending stock options outstanding (in dollars per share) $ 7.41 $ 8.31 $ 7.79
Vested and expected to vest at December 31, 2017      
Number of Shares 1,460,181    
Weighted Average Exercise Price Per Share (in dollars per share) $ 7.41    
Weighted Average Contractual Life 4 years 9 months 11 days    
Aggregate Intrinsic Value $ 91    
December 31, 2018      
Number of Shares 1,293,830    
Weighted Average Exercise Price Per Share (in dollars per share) $ 7.41    
Weighted Average Contractual Life 4 years 4 months 2 days    
Aggregate Intrinsic Value $ 91    
v3.19.3.a.u2
Contracts in Progress (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Jan. 01, 2017
Contractors [Abstract]        
Costs incurred on uncompleted contracts $ 884,244 $ 461,144    
Estimated earnings 144,160 73,170    
Costs incurred and estimated earnings on uncompleted contracts 1,028,404 534,314    
Less: Billings to date (1,035,796) (546,858)    
Costs and estimated earnings in excess of billings on uncompleted contracts, net (7,392) (12,544)    
Costs and estimated earnings in excess of billings on uncompleted contracts 41,389 9,217 $ 46,006 $ 47,389
Billings in excess of costs and estimated earnings on uncompleted contracts $ (48,781) $ (21,761) $ (33,923) $ (35,668)
v3.19.3.a.u2
Inventory (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Inventory Disclosure [Abstract]    
Inventory $ 1,114 $ 1,056
Inventory, non-current $ 7,037 $ 7,598
v3.19.3.a.u2
Commitments and Contingencies - Narrative (Details)
3 Months Ended 12 Months Ended
Mar. 31, 2018
USD ($)
Oct. 31, 2016
defendant
Dec. 31, 2019
USD ($)
Other Commitments [Line Items]      
Legal settlement $ 5,500,000    
Notes receivable, current     $ 800,000
Notes receivables, noncurrent     2,500,000
Receivable, unamortized discount     300,000
Houston Police Department, Environmental Enforcement | Pending Litigation      
Other Commitments [Line Items]      
Number of defendants | defendant   2  
Estimate of possible loss     $ 250,000
v3.19.3.a.u2
Leases (Tables)
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Schedule of leases recorded on the balance sheet

 

 

 

 

 

    

December 31,

Leases

 

2019

Assets

 

 

 

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

 

$

17,997

Financing lease right-of-use assets, net (2)

 

 

7,896

Total assets

 

$

25,893

Liabilities

 

 

  

Current

 

 

  

Operating

 

$

5,043

Financing

 

 

2,788

Total current

 

 

7,831

Noncurrent

 

 

  

Operating

 

 

13,596

Financing

 

 

3,760

Total noncurrent

 

 

17,356

Total liabilities

 

$

25,187


(1)

Operating lease right-of-use assets are recorded net of accumulated amortization of $5.2 million as of December 31, 2019.

(2)

Financing lease right-of-use assets are recorded net of accumulated amortization of $6.2 million as of December 31, 2019

Schedule of information related to lease terms and discount rates

 

 

 

 

 

    

December 31,

 

 

 

2019

 

Weighted Average Remaining Lease Term (in years)

 

  

 

Operating leases

 

5.30

 

Financing leases

 

1.18

 

Weighted Average Discount Rate

 

  

 

Operating leases (1)

 

4.80

%

Financing leases

 

5.10

%


(1)

Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.

Schedule of components of lease expense

 

 

 

 

 

 

Year Ended

 

    

December 31, 2019

Operating lease costs:

 

 

  

Operating lease cost

 

$

6,930

Short-term lease cost (1)

 

 

2,001

Financing lease costs:

 

 

  

Interest on lease liabilities

 

 

362

Amortization of right-of-use assets

 

 

2,312

Total lease cost

 

$

11,605


(1)

Includes expenses related to leases with a lease term of more than one month but less than one year.

Schedule of supplemental cash flow information

 

 

 

 

 

    

Year Ended

 

 

December 31, 2019

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

 

 

 

Operating cash flows for operating leases

 

$

6,887

Operating cash flows for finance leases

 

$

362

Financing cash flows for finance leases

 

$

2,906

Non-cash activity:

 

 

  

ROU assets obtained in exchange for new operating lease liabilities

 

$

25,743

ROU assets obtained in exchange for new financing lease liabilities

 

$

1,021

 

Schedule of finance lease maturities

 

 

 

 

 

 

 

 

 

Operating Leases

    

Finance Leases

Year ending December 31,

 

 

 

 

 

 

2020

 

$

5,802

 

$

3,572

2021

 

 

4,327

 

 

3,190

2022

 

 

2,871

 

 

49

2023

 

 

2,250

 

 

41

2024

 

 

1,791

 

 

 7

Thereafter

 

 

4,215

 

 

 —

Total future minimum lease payments

 

 

21,256

 

 

6,859

Less - amount representing interest

 

 

2,617

 

 

311

Present value of future minimum lease payments

 

 

18,639

 

 

6,548

Less - current lease obligations

 

 

5,043

 

 

2,788

Long-term lease obligations

 

$

13,596

 

$

3,760

 

Schedule of operating lease maturities

 

 

 

 

 

 

 

 

 

 

Operating Leases

    

Finance Leases

Year ending December 31,

 

 

 

 

 

 

2020

 

$

5,802

 

$

3,572

2021

 

 

4,327

 

 

3,190

2022

 

 

2,871

 

 

49

2023

 

 

2,250

 

 

41

2024

 

 

1,791

 

 

 7

Thereafter

 

 

4,215

 

 

 —

Total future minimum lease payments

 

 

21,256

 

 

6,859

Less - amount representing interest

 

 

2,617

 

 

311

Present value of future minimum lease payments

 

 

18,639

 

 

6,548

Less - current lease obligations

 

 

5,043

 

 

2,788

Long-term lease obligations

 

$

13,596

 

$

3,760

 

v3.19.3.a.u2
Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]      
Contract revenues $ 708,390 $ 520,894 $ 578,553
Costs of contract revenues 644,349 504,118 516,313
Gross profit 64,041 16,776 62,240
Selling, general and administrative expenses 61,012 53,197 56,640
Amortization of intangible assets 2,640 3,390 4,736
Gain on sale of assets, net (1,804) (3,306) (674)
Goodwill impairment charges   69,483 0
Other gain from continuing operations   (5,448) 0
Operating income (loss) 2,193 (100,540) 1,538
Other (expense) income:      
Other income 771 1,692 41
Interest income 353 136 11
Interest expense (6,808) (7,943) (5,731)
Other expense, net (5,684) (6,115) (5,679)
Loss before income taxes (3,491) (106,655) (4,141)
Income tax (benefit) expense 1,868 (12,233) (4,541)
Net (loss) income $ (5,359) $ (94,422) $ 400
Basic (loss) income per share (in dollars per share) $ (0.18) $ (3.31) $ 0.01
Diluted (loss) income per share (in dollars per share) $ (0.18) $ (3.31) $ 0.01
Shares used to compute (loss) income per share:      
Basic (in shares) 29,322,054 28,518,353 28,029,936
Diluted (in shares) 29,322,054 28,518,353 28,354,280
v3.19.3.a.u2
Consolidated Statements of Cash Flows
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Cash flows from operating activities      
Net (loss) income $ (5,359) $ (94,422) $ 400
Adjustments to reconcile net (loss) income to net cash used in operating activities:      
Depreciation and amortization 26,096 31,799 29,491
Amortization of ROU operating leases 5,177    
Amortization of ROU finance leases 2,312    
Unamortized debt issuance costs upon debt modification 399 2,164 0
Amortization of deferred debt issuance costs 453 725 1,269
Deferred income taxes 71 (13,194) (4,166)
Stock-based compensation 2,753 2,238 2,303
Gain on sale of property and equipment (1,804) (3,306) (674)
Goodwill impairment charges   69,483 0
Allowance for doubtful accounts 0 4,280 0
Other gain from continuing operations 0 (5,448) 0
Change in operating assets and liabilities:      
Accounts receivable (51,709) 10,936 15,022
Income tax receivable (495) (128) (952)
Inventory 503 647 89
Prepaid expenses and other 131 1,671 (226)
Costs and estimated earnings in excess of billings on uncompleted contracts (32,172) 36,789 (6,030)
Accounts payable 28,894 (4,584) (5,666)
Accrued liabilities 1,334 (5,301) (1,519)
Operating lease liabilities (5,843)    
Income tax payable 1,523 (256) (433)
Billings in excess of costs and estimated earnings on uncompleted contracts 27,020 (12,162) 5,225
Net cash (used in) provided by operating activities (716) 21,931 34,133
Cash flows from investing activities:      
Proceeds from sale of property and equipment 2,015 3,234 6,826
Purchase of property and equipment (17,199) (17,714) (10,729)
Acquisition of TBC 0 0 (6,000)
TBC acquisition adjustment 0 0 (557)
Contributions to CSV life insurance (721) (260) (545)
Proceeds from return of investment   94  
Insurance claim proceeds related to property and equipment 2,574 1,346 925
Net cash used in investing activities (13,331) (13,300) (10,080)
Cash flows from financing activities:      
Borrowings from Credit Facility 63,000 39,861 72,000
Payments made on borrowings from Credit Facility (70,210) (48,111) (87,813)
Proceeds from sale-leaseback arrangement 18,210    
Loan costs from Credit Facility (1,680) (861) (779)
Capital lease liability   (2,737)  
Payments of finance lease liabilities (2,906)    
Exercise of stock options 35 2,815 1,320
Net cash used in financing activities 6,449 (9,033) (15,272)
Net change in cash and cash equivalents (7,598) (402) 8,781
Cash and cash equivalents at beginning of period 8,684 9,086 305
Cash and cash equivalents at end of period 1,086 8,684 9,086
Cash and cash equivalents 128 8,684 9,086
Restricted cash 958    
Supplemental disclosures of cash flow information, cash paid during the period for:      
Interest 6,311 4,819 4,413
Taxes, net of refunds $ 578 903 $ 1,008
Non-cash investing activity      
Capital lease expenditures included in accrued expenses   $ 13,103  
v3.19.3.a.u2
Earnings (Loss) Per Share (Tables)
12 Months Ended
Dec. 31, 2019
Earnings Per Share [Abstract]  
Schedule of earnings per share, basic and diluted

 

 

 

 

 

 

 

 

 

Year ended December 31, 

 

    

2019

    

2018

    

2017

Basic:

 

  

 

  

 

  

Weighted average shares outstanding

 

29,322,054

 

28,518,353

 

28,029,936

Diluted:

 

  

 

  

 

  

Total basic weighted average shares outstanding

 

29,322,054

 

28,518,353

 

28,029,936

Effect of potentially dilutive securities:

 

  

 

  

 

  

Common stock options

 

 —

 

 —

 

324,344

Total weighted average shares outstanding assuming dilution

 

29,322,054

 

28,518,353

 

28,354,280

 

v3.19.3.a.u2
Accrued Liabilities (Tables)
12 Months Ended
Dec. 31, 2019
Payables and Accruals [Abstract]  
Schedule of accrued liabilities

 

 

 

 

 

 

 

 

 

 

    

December 31, 2019

    

December 31, 2018

Accrued salaries, wages and benefits

 

$

7,323

 

$

6,492

Accrual for insurance liabilities

 

 

3,714

 

 

5,680

Sales taxes

 

 

3,021

 

 

2,178

Property taxes

 

 

389

 

 

924

Sale-leaseback arrangement

 

 

482

 

 

 —

Accounting and audit fees

 

 

267

 

 

 —

Interest

 

 

76

 

 

 —

Capital lease liability (1)

 

 

 —

 

 

3,045

Other accrued expenses

 

 

1,694

 

 

521

Total accrued liabilities

 

$

16,966

 

$

18,840

 


December 31, 2018 balance relates to capital leases accounted for under ASC 840 and prior to the adoption of ASC 842 as of January 1, 2019.

v3.19.3.a.u2
Related Party Transactions
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions

21.Related Party Transactions

Upon the completion of the TAS acquisition, the Company entered into a lease arrangement with an entity in which an employee owns an interest. This lease is for office space and yard facilities used by the concrete segment. Annual lease expense was approximately $478,000 for the year ending December 31, 2017. Due to the resignation of this employee, these transactions ceased to be related party transactions as of July 31, 2017.

v3.19.3.a.u2
Other Long-Term Liabilities
12 Months Ended
Dec. 31, 2019
Liabilities, Other than Long-term Debt, Noncurrent [Abstract]  
Other Long-Term Liabilities

13.Other Long-Term Liabilities

Other long-term liabilities at December 31, 2019 and 2018 consisted of the following:

 

 

 

 

 

 

 

 

 

    

December 31, 2019

    

December 31, 2018

Sale-leaseback arrangement

 

$

17,447

 

$

 —

Accrual for insurance liabilities

 

 

2,989

 

 

2,355

Capital lease liability (1)

 

 

 —

 

 

5,189

Deferred rent

 

 

 —

 

 

759

Contingent consideration - TBC acquisition

 

 

 —

 

 

456

Total other long-term liabilities

 

$

20,436

 

$

8,759


(1)

December 31, 2018 balance relates to capital leases accounted for under ASC 840 and prior to the adoption of ASC 842 as of January 1, 2019.

 

Sale-Leaseback Arrangement

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 (the “Property”) for a purchase price of $19.1 million. Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “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. This transaction was recorded as a failed sale-leaseback. The Company recorded a liability for the amounts received, will continue to depreciate the non-land portion of the asset, 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 term. Concurrently with the sale, the Company paid $18.2 million towards the Term loan portion of the Company’s Credit Facility, consistent with terms of the Sixth Amendment.

v3.19.3.a.u2
Employee Benefits
12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Employee Benefits

17.Employee Benefits

All of the Company’s marine segment employees except the Associate Divers, the Associate Tugmasters, and union employees in the Pacific Northwest, are eligible to participate in the Company’s 401(k) Retirement Plan after completing six months of service. Each participant may contribute between 1% and 80% of eligible compensation on a pre-tax basis, up to the annual IRS limit. The Company matches 100% on the first 2% 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. Employer matching contributions vest over a four-year period. At its discretion, the Company may make additional matching and profit-sharing contributions. During the years ended December 31, 2019, 2018 and 2017 the Company contributed $1.3 million, $1.4 million and $1.4 million, respectively to the Plan.

All of the Company’s concrete segment employees except Leads, Helpers, Laborers, Finishers, Formsetters, Carpenters, Rodbusters, Patchmen, Equipment Operators, Field Engineering Trainees and certain Highly Compensated Employees are eligible to participate in the AGC Southwest Chapters 401(k) Retirement Plan, a multiple employer plan, after completing three months of service. Each participant may contribute up to the annual IRS limit. The Company matches 50% on the first 6% of eligible compensation contributed to the Plan. Participants’ contributions are fully vested at all times. Employer matching contributions vest over a five-year period. At its discretion, the Company may make additional matching and profit-sharing contributions. During the year ended December 31, 2019, 2018 and 2017, the Company contributed $0.1 million, $0.2 million and $0.4 million, respectively.

The Company’s 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;

·

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

 

2019

 

2018

 

P/I (2)

 

2019

 

2018

 

2017

 

Imposed

 

Agreement

International Union of Operating Engineers - Employers Construction Industry Retirement Plan - Local 302 and 612 Trust Funds

    

91-6028571

    

Green

    

Green

    

N/A

    

$

3,021

    

$

2,482

    

$

1,974

    

 —

    

2022

Washington Laborers

 

91-6022315

 

Green

 

Green

 

N/A

 

$

30

 

$

 —

 

$

 —

 

 —

 

2023

Carpenters Retirement Plan of Western Washington

 

91-6029051

 

Green

 

Green

 

N/A

 

$

695

 

$

932

 

$

693

 

 —

 

2022

Cement Masons & Plasterers Trust Funds

 

91-6066773

 

Green

 

Green

 

N/A

 

$

 2

 

$

 —

 

$

 —

 

 —

 

2023

Washington-Idaho-Montana Carpenters-Employers Retirement Trust Fund

 

91-6123987

 

Yellow

 

Yellow

 

I

 

$

36

 

$

 —

 

$

 —

 

 —

 

2021

Engineers - AGC Retirement Trust of the Inland Empire

 

91-6070237

 

Yellow

 

Yellow

 

I

 

$

20

 

$

 —

 

$

 —

 

 —

 

2021

Alaska Carpenters Trust Fund

 

92-0120866

 

Yellow

 

Green

 

I

 

$

377

 

$

328

 

$

396

 

 —

 

2021

Alaska Laborers Trust Fund

 

91-6028298

 

Yellow

 

Yellow

 

I

 

$

552

 

$

321

 

$

218

 

 —

 

2020


(1)

The most recent PPA zone status available in 2019 and 2018 is for the plan’s year end during 2018 and 2017, 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.

v3.19.3.a.u2
Stock-Based Compensation - Stock Option Valuation Assumptions (Details) - Stock Option - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]    
Weighted average grant-date fair value of options granted (in USD per share) $ 2.78 $ 7.22
Risk-free interest rate 2.65% 1.46%
Expected volatility 52.00% 48.00%
Expected term of options 3 years 3 years
Dividend yield 0.00% 0.00%
v3.19.3.a.u2
Contracts in Progress - Additional Information (Details)
$ in Millions
12 Months Ended
Dec. 31, 2018
USD ($)
project
Dec. 31, 2019
USD ($)
Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts    
Unbilled contract claims and change orders    
Claims and unapproved change orders $ 1.1 $ 0.1
Marine    
Disaggregation of Revenue [Line Items]    
Number of construction projects with unfavorable changes in estimates | project 2  
Decrease in revenue $ 22.8  
v3.19.3.a.u2
Fair Value - Schedule of Fair Value Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Reported Value Measurement    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash surrender value of life insurance $ 2,714 $ 1,993
Derivatives (1,045) (79)
Estimate of Fair Value Measurement | Fair Value, Inputs, Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash surrender value of life insurance 0 0
Derivatives 0 0
Estimate of Fair Value Measurement | Fair Value, Inputs, Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash surrender value of life insurance 2,714 1,993
Derivatives (1,045) (79)
Estimate of Fair Value Measurement | Fair Value, Inputs, Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash surrender value of life insurance 0 0
Derivatives $ 0 $ 0
v3.19.3.a.u2
Segment Information (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2019
USD ($)
Sep. 30, 2019
USD ($)
Jun. 30, 2019
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Sep. 30, 2018
USD ($)
Jun. 30, 2018
USD ($)
Mar. 31, 2018
USD ($)
Dec. 31, 2019
USD ($)
segment
Dec. 31, 2018
USD ($)
segment
Dec. 31, 2017
USD ($)
Segment Reporting Information [Line Items]                      
Number of reportable segments | segment                 2 2  
Contract revenues $ 199,793 $ 199,507 $ 165,985 $ 143,105 $ 99,211 $ 125,073 $ 159,767 $ 136,843 $ 708,390 $ 520,894 $ 578,553
Operating income (loss) 2,701 $ 6,092 $ (423) $ (6,177) (104,795) $ (7,405) $ 4,591 $ 7,069 2,193 (100,540) 1,538
Depreciation and amortization                 (26,096) (31,799) $ (29,491)
Assets 394,844       312,870       394,844 312,870  
Property and equipment, net of depreciation 132,348       148,003       132,348 148,003  
Marine                      
Segment Reporting Information [Line Items]                      
Contract revenues                 369,138 243,883  
Marine | Mexico and the Caribbean                      
Segment Reporting Information [Line Items]                      
Contract revenues                 11,400 12,200  
Concrete                      
Segment Reporting Information [Line Items]                      
Contract revenues                 339,252 277,011  
Concrete | Foreign                      
Segment Reporting Information [Line Items]                      
Contract revenues                 0 0  
Operating Segments | Marine                      
Segment Reporting Information [Line Items]                      
Contract revenues                 369,138 243,883  
Operating income (loss)                 1,057 (61,012)  
Depreciation and amortization                 (19,889) (22,657)  
Assets 264,681       190,503       264,681 190,503  
Property and equipment, net of depreciation 114,873       128,168       114,873 128,168  
Operating Segments | Concrete                      
Segment Reporting Information [Line Items]                      
Contract revenues                 339,252 277,011  
Operating income (loss)                 1,136 (39,528)  
Depreciation and amortization                 (8,519) (9,142)  
Assets 130,163       122,367       130,163 122,367  
Property and equipment, net of depreciation $ 17,475       $ 19,835       17,475 19,835  
Intersegment Eliminations                      
Segment Reporting Information [Line Items]                      
Contract revenues                 $ 1,200 $ 2,500  
v3.19.3.a.u2
Description of Business and Basis of Presentation
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business and Basis of Presentation

1.Description of Business and Basis of Presentation

Description of Business

Orion Group Holdings, Inc., its subsidiaries and affiliates (hereafter collectively referred to as the "Company"), provide a broad range of specialty construction services in the infrastructure, industrial, and building sectors of the continental United States, Alaska, Canada and the Caribbean Basin. The Company’s marine segment services the infrastructure sector through marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging of waterways, channels and ports, environmental dredging, design, and specialty services. Its concrete segment services the building sector by providing turnkey concrete construction services including pour and finish, dirt work, layout, forming, rebar, and mesh across the light commercial, structural and other associated business areas. The Company is headquartered in Houston, Texas with offices throughout its operating areas.

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, which operates under the Orion Marine Group brand and logo, and concrete, which operates under the TAS Commercial Concrete brand and logo.

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.

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 it complies with regulatory environments 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. This segment complies with regulatory environments 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 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. All intercompany balances and transactions have been eliminated in consolidation.

 

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation in the Company’s condensed consolidated statement of operations. As part of the Company’s Invest, Scale and Grow (“ISG”) initiative it realigned its project management personnel within the operating groups for the combined company. As a result of the realignment, beginning in the second quarter of 2019, the Company elected to classify certain project management costs in Cost of contract revenue in its Consolidated Statements of Operations (the “Statements of Operations”) to better represent how those costs are managed and controlled. For periods reported prior to the second quarter of 2019, certain project management costs were included in Selling, general and administrative (“SG&A”) expenses. The Company’s SG&A expense for 2019 included project management costs of $1.1 million incurred in the first quarter of 2019, and SG&A expense for 2018 and 2017 included project management costs of $4.9 million and $4.7 million, respectively.

v3.19.3.a.u2
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Schedule of components of income tax expense (benefit)

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Current

    

Deferred

    

Total

Year ended December 31, 2019

 

 

  

 

 

  

 

 

  

U.S. Federal

 

$

 —

 

$

 —

 

$

 —

State and local

 

 

716

 

$

104

 

$

820

Foreign

 

 

1,081

 

 

(33)

 

 

1,048

 

 

$

1,797

 

$

71

 

$

1,868

Year ended December 31, 2018

 

 

  

 

 

  

 

 

  

U.S. Federal

 

$

(12)

 

$

(12,664)

 

$

(12,676)

State and local

 

 

183

 

$

(471)

 

$

(288)

Foreign

 

 

731

 

 

 —

 

 

731

 

 

$

902

 

$

(13,135)

 

$

(12,233)

Year ended December 31, 2017

 

 

  

 

 

  

 

 

  

U.S. Federal  (a)

 

$

(780)

 

$

(3,986)

 

$

(4,766)

State and local

 

 

550

 

 

(180)

 

 

370

Foreign

 

 

(145)

 

 

 —

 

 

(145)

 

 

$

(375)

 

$

(4,166)

 

$

(4,541)


(a)

Includes a $5.9 million net benefit recorded in the fourth quarter of 2017 resulting from the enactment of the Act on December 22, 2017.

Schedule of effective income tax reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

 

Statutory amount (computed at 21% in 2019 and 2018 and 35% in 2017)

 

$

(733)

 

$

(22,398)

 

$

(1,449)

 

Re-measurement of deferred tax assets (a)

 

 

 —

 

 

 —

 

 

(7,451)

 

Valuation allowance on foreign tax credits (a)

 

 

1,081

 

 

593

 

 

1,514

 

State income tax, net of federal benefit

 

 

991

 

 

(1,922)

 

 

168

 

Permanent differences, other

 

 

461

 

 

1,550

 

 

505

 

Permanent differences, incentive stock options

 

 

311

 

 

(24)

 

 

447

 

Valuation allowance, other

 

 

(166)

 

 

10,384

 

 

(77)

 

Uncertain tax provision

 

 

 —

 

 

 —

 

 

1,614

 

Other

 

 

(77)

 

 

(416)

 

 

188

 

Consolidated income tax provision

 

$

1,868

 

$

(12,233)

 

$

(4,541)

 

Consolidated effective tax rate

 

 

(53.5)

%  

 

11.5

%  

 

109.7

%


(a)

In 2017, represents impact resulting from the enactment of the Act on December 22, 2017.

Schedule of deferred tax assets and liabilities

 

 

 

 

 

 

 

 

 

Long Term

 

 

As of December 31, 

 

    

2019

    

2018

Assets related to:

 

 

  

 

 

  

Accrued liabilities

 

$

1,030

 

$

1,105

Intangible assets

 

 

3,020

 

 

3,054

Net operating loss carryforward

 

 

15,246

 

 

15,970

Non-qualified stock options

 

 

586

 

 

672

Foreign tax credits

 

 

2,570

 

 

1,489

Goodwill

 

 

7,232

 

 

8,200

Leases

 

 

9,038

 

 

 —

Other

 

 

1,347

 

 

2,684

Total gross deferred tax assets

 

 

40,069

 

 

33,174

Less valuation allowance

 

 

(16,960)

 

 

(15,815)

Total net deferred tax assets

 

 

23,109

 

 

17,359

Liabilities related to:

 

 

  

 

 

  

Depreciation and amortization

 

 

(22,634)

 

 

(16,974)

Other

 

 

(595)

 

 

(434)

Total deferred tax liabilities

 

 

(23,229)

 

 

(17,408)

Net deferred tax liabilities

 

$

(120)

 

$

(49)

 

Schedule of Unrecognized tax benefits

 

 

 

 

 

 

 

 

    

2019

    

2018

Balances 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 the end of year

 

$

1,614

 

$

1,614

 

v3.19.3.a.u2
Goodwill and Intangible Assets (Tables)
12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of changes in goodwill

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Beginning balance, January 1

 

$

 —

 

$

69,483

Impairments

 

 

 —

 

 

(69,483)

Ending balance

 

$

 —

 

$

 —

 

Schedule of changes and amortization of finite-lived intangible assets

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Finite-lived intangible assets, beginning of period

 

$

35,240

 

$

35,240

Additions

 

 

 —

 

 

 —

Total finite-lived intangible assets, end of period

 

$

35,240

 

$

35,240

 

 

 

 

 

 

 

Accumulated amortization, beginning of period

 

$

(27,345)

 

$

(23,955)

Current year amortization

 

 

(2,640)

 

 

(3,390)

Total accumulated amortization

 

 

(29,985)

 

 

(27,345)

 

 

 

 

 

 

 

Net finite-lived intangible assets, end of period

 

$

5,255

 

 

7,895

Infinite-lived intangible assets

 

 

6,892

 

 

6,892

Total net intangible assets

 

$

12,147

 

$

14,787

 

Summary of finite-lived intangible assets amortization expense

 

 

 

 

2020

    

 

2,069

2021

 

 

1,521

2022

 

 

1,239

2023

 

 

389

2024

 

 

37

 

 

$

5,255

 

v3.19.3.a.u2
Segment Information (Tables)
12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Schedule of segment reporting

 

 

 

 

 

 

 

 

    

Year Ended

    

Year Ended

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

Marine

 

 

 

 

 

 

Contract revenues

 

$

369,138

 

$

243,883

Operating income (loss)

 

 

1,057

 

 

(61,012)

Depreciation and amortization expense

 

 

(19,889)

 

 

(22,657)

 

 

 

 

 

 

 

Total assets

 

$

264,681

 

$

190,503

Property, plant and equipment, net

 

 

114,873

 

 

128,168

 

 

 

 

 

 

 

Concrete

 

 

  

 

 

  

Contract revenues

 

$

339,252

 

$

277,011

Operating (loss) income

 

 

1,136

 

 

(39,528)

Depreciation and amortization expense

 

 

(8,519)

 

 

(9,142)

 

 

 

 

 

 

 

Total assets

 

$

130,163

 

$

122,367

Property, plant and equipment, net

 

 

17,475

 

 

19,835

 

v3.19.3.a.u2
Consolidated Statements of Comprehensive (Loss) Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]      
Net (loss) income $ (5,359) $ (94,422) $ 400
Change in fair value of cash flow hedge, net of tax benefit of $228 for the year ended December 31, 2019 (765)    
Change in fair value of cash flow hedge, net of tax benefit of $15 and net of tax expense of $53 for the years ended December 31, 2018 and 2017, respectively   (26) 356
Total comprehensive (loss) income $ (6,124) $ (94,448) $ 756
v3.19.3.a.u2
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Feb. 21, 2020
Jun. 28, 2019
Document and Entity Information [Abstract]      
Document Type 10-K    
Document Period End Date Dec. 31, 2019    
Entity Registrant Name ORION GROUP HOLDINGS INC    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Accelerated Filer    
Entity Small Business true    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 79.1
Entity Common Stock, Shares Outstanding   29,607,285  
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Entity Central Index Key 0001402829    
Amendment Flag false    
v3.19.3.a.u2
Income Taxes - Net Operating Loss Carryforwards (Details) - USD ($)
$ in Thousands
12 Months Ended 24 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2017
Operating loss carryforwards        
Valuation allowance $ 16,960 $ 15,815 $ 16,960  
Increase in valuation allowance 1,100 $ 11,000    
Federal        
Operating loss carryforwards        
Net operating loss carryforwards $ 44,100   44,100 $ 7,500
Operating losses incurred     $ 36,600  
v3.19.3.a.u2
Long-term Debt, Line of Credit and Derivatives - Provisions of Term Loan (Details) - USD ($)
$ in Thousands
12 Months Ended
Sep. 27, 2019
Dec. 31, 2019
Dec. 31, 2018
Debt Instrument [Line Items]      
Additional principal paydown $ 18,200    
Line of Credit      
Debt Instrument [Line Items]      
Outstanding principal balance   $ 73,290 $ 80,500
Term Loan      
Debt Instrument [Line Items]      
Current portion of debt   3,800  
Quarterly principal payments   3,000  
Additional principal paydown   18,200  
Non-current portion of debt   $ 33,500  
Term Loan | LIBOR      
Debt Instrument [Line Items]      
Effective interest rate   4.50%  
Term Loan | Line of Credit      
Debt Instrument [Line Items]      
Line of credit facility, maximum borrowing capacity     $ 60,000
Fair value of amount outstanding   $ 37,300  
Outstanding principal balance   $ 37,290  
v3.19.3.a.u2
Goodwill and Intangible Assets - Future Amortization Expense of Finite-lived Intangible Assets (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]    
2020 $ 2,069  
2021 1,521  
2022 1,239  
2023 389  
2024 37  
Net intangible assets, end of year $ 5,255 $ 7,895
v3.19.3.a.u2
Income Taxes - Narrative (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended 24 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2019
Operating Loss Carryforwards [Line Items]                        
Federal statutory tax rate                 21.00% 21.00% 35.00%  
Tax Cuts And Jobs Act Of 2017, change in tax rate, provisional income tax benefit                     $ 5,900  
Deferred tax liabilities, provisional income tax benefit (dollars per share)                     $ 0.21  
Valuation allowance per share (in dollars per share)         $ 0.39         $ 0.39    
Valuation allowance $ 16,960       $ 15,815       $ 16,960 $ 15,815   $ 16,960
Goodwill impairment charges         69,500         69,483 $ 0  
(Loss) income before income taxes 1,107 $ 4,506 $ (1,773) $ (7,331) (106,727) $ (9,427) $ 3,909 $ 5,590 (3,491) (106,655) (4,141)  
Goodwill impairment, permanent tax difference                   1,200    
Increase in valuation allowance                 1,100 11,000    
Unrecognized tax benefit 1,614       1,614       1,614 1,614 1,614 1,614
Accrued interest and penalties on unrecognized tax benefits 0       $ 0       0 $ 0 0 0
Federal                        
Operating Loss Carryforwards [Line Items]                        
Net operating loss carryforwards $ 44,100               $ 44,100   $ 7,500 44,100
Operating losses incurred                       $ 36,600
v3.19.3.a.u2
Business Acquisition - Recognized Identified Assets Acquired and Liabilities Assumed (Details) - USD ($)
$ in Thousands
Apr. 09, 2017
Dec. 31, 2018
Dec. 31, 2017
Business Acquisition [Line Items]      
Goodwill   $ 0 $ 69,483
Contingent consideration   $ (456)  
Tony Bagliore Concrete, Inc. (TBC)      
Business Acquisition [Line Items]      
Accounts receivable $ 3,239    
Retainage 1,860    
Fixed assets, net 2,098    
Other 9    
Goodwill 2,562    
Other intangible assets 878    
Accounts payable (2,017)    
Accrued expenses and other current liabilities (1,080)    
Contingent consideration (456)    
Deferred tax liability (1,093)    
Total Acquisition Consideration, Final 6,000    
Working capital adjustment (all attributable to Goodwill) 557    
Total Acquisition Consideration $ 6,557    
v3.19.3.a.u2
Description of Business and Basis of Presentation (Details)
$ in Millions
3 Months Ended 12 Months Ended
Mar. 31, 2019
USD ($)
Dec. 31, 2019
segment
Dec. 31, 2018
USD ($)
segment
Dec. 31, 2017
USD ($)
Number of operating segments   2    
Number of reportable segments   2 2  
Selling, General and Administrative Expenses        
Project management costs | $ $ 1.1   $ 4.9 $ 4.7
v3.19.3.a.u2
Summary of Significant Accounting Principles - Property and Equipment (Details) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Property, Plant and Equipment        
Assets classified as held-for-sale $ 0.0 $ 0.0 $ 1.0 $ 6.4
Equipment improvement | Minimum        
Property, Plant and Equipment        
Property and equipment useful life 3 years      
Equipment improvement | Maximum        
Property, Plant and Equipment        
Property and equipment useful life 7 years      
Automobiles and trucks | Minimum        
Property, Plant and Equipment        
Property and equipment useful life 3 years      
Automobiles and trucks | Maximum        
Property, Plant and Equipment        
Property and equipment useful life 5 years      
Building and improvements | Minimum        
Property, Plant and Equipment        
Property and equipment useful life 5 years      
Building and improvements | Maximum        
Property, Plant and Equipment        
Property and equipment useful life 30 years      
Construction equipment | Minimum        
Property, Plant and Equipment        
Property and equipment useful life 3 years      
Construction equipment | Maximum        
Property, Plant and Equipment        
Property and equipment useful life 15 years      
Vessels and other equipment | Minimum        
Property, Plant and Equipment        
Property and equipment useful life 1 year      
Vessels and other equipment | Maximum        
Property, Plant and Equipment        
Property and equipment useful life 15 years      
Office equipment | Minimum        
Property, Plant and Equipment        
Property and equipment useful life 1 year      
Office equipment | Maximum        
Property, Plant and Equipment        
Property and equipment useful life 5 years      
Dry-docking capitalized costs | Minimum        
Property, Plant and Equipment        
Property and equipment useful life 3 years      
Dry-docking capitalized costs | Maximum        
Property, Plant and Equipment        
Property and equipment useful life 15 years      
v3.19.3.a.u2
Business Acquisition (Tables)
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Schedule of recognized identified assets acquired and liabilities assumed

 

 

 

 

Accounts receivable

    

$

3,239

Retainage

 

 

1,860

Fixed assets, net

 

 

2,098

Other

 

 

 9

Goodwill

 

 

2,562

Other intangible assets

 

 

878

Accounts payable

 

 

(2,017)

Accrued expenses and other current liabilities

 

 

(1,080)

Contingent consideration

 

 

(456)

Deferred tax liability

 

 

(1,093)

Total Acquisition Consideration at April 9, 2017

 

$

6,000

Working capital adjustment (all attributable to Goodwill)

 

 

557

Total Acquisition Consideration

 

$

6,557

 

v3.19.3.a.u2
Selected Quarterly Financial Data (Unaudited)
12 Months Ended
Dec. 31, 2019
Quarterly Financial Information Disclosure [Abstract]  
Selected Quarterly Financial Data

22.Selected Quarterly Financial Data (Unaudited)

The following tables set forth selected unaudited financial information for the eight quarters in the two-year period ended December 31, 2019. This information has been prepared on the same basis as the audited financial statements and, in the opinion of management, contains all adjustments necessary for a fair presentation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

First

    

Second

    

Third

    

Fourth

    

Total

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

(in thousands, except per share data)

2019

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Revenues

 

$

143,105

 

$

165,985

 

$

199,507

 

$

199,793

 

$

708,390

Gross profit

 

 

9,082

 

 

14,977

 

 

20,893

 

 

19,089

 

 

64,041

Operating (loss) income

 

 

(6,177)

 

 

(423)

 

 

6,092

 

 

2,701

 

 

2,193

(Loss) income before income taxes

 

 

(7,331)

 

 

(1,773)

 

 

4,506

 

 

1,107

 

 

(3,491)

Net (loss) income

 

 

(7,924)

 

 

(1,633)

 

 

4,039

 

 

159

 

 

(5,359)

(Loss) earnings per share:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Basic

 

$

(0.27)

 

$

(0.06)

 

$

0.14

 

$

0.01

 

$

(0.18)

Diluted

 

$

(0.27)

 

$

(0.06)

 

$

0.14

 

$

0.01

 

$

(0.18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

First

    

Second

    

Third

    

Fourth

    

Total

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Year

 

 

(in thousands, except per share data)

2018

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Revenues

 

$

136,843

 

$

159,767

 

$

125,073

 

$

99,211

 

$

520,894

Gross profit (loss)

 

 

14,695

 

 

19,462

 

 

4,825

 

 

(22,206)

 

 

16,776

Operating income (loss)

 

 

7,069

 

 

4,591

 

 

(7,405)

 

 

(104,795)

 

 

(100,540)

Income (loss) before income taxes

 

 

5,590

 

 

3,909

 

 

(9,427)

 

 

(106,727)

 

 

(106,655)

Net income (loss)

 

 

4,101

 

 

2,249

 

 

(6,356)

 

 

(94,416)

 

 

(94,422)

Earnings (loss) per share:

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Basic

 

$

0.15

 

$

0.08

 

$

(0.22)

 

$

(3.32)

 

$

(3.31)

Diluted

 

$

0.14

 

$

0.08

 

$

(0.22)

 

$

(3.32)

 

$

(3.31)

 

v3.19.3.a.u2
Leases - Supplemental Cash Flows (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Leases [Abstract]  
Operating cash flows for operating leases $ 6,887
Operating cash flows for finance leases 362
Financing cash flows for finance leases 2,906
ROU assets obtained in exchange for new operating lease liabilities 25,743
ROU assets obtained in exchange for new financing lease liabilities $ 1,021
v3.19.3.a.u2
Property and Equipment (Tables)
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Summary of property and equipment

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Automobiles and trucks

 

$

2,161

 

$

1,709

Building and improvements

 

 

44,278

 

 

43,628

Construction equipment

 

 

153,147

 

 

161,113

Vessels and other equipment

 

 

84,022

 

 

90,217

Office equipment

 

 

8,652

 

 

8,061

 

 

 

292,260

 

 

304,728

Less: Accumulated depreciation

 

 

(196,973)

 

 

(195,373)

Net book value of depreciable assets

 

 

95,287

 

 

109,355

Construction in progress

 

 

1,198

 

 

2,785

Land

 

 

35,863

 

 

35,863

 

 

$

132,348

 

$

148,003

 

v3.19.3.a.u2
Schedule II - Valuation And Qualifying Accounts (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Provision for doubtful accounts      
Movement in Valuation Allowances and Reserves [Roll Forward]      
Balance at the Beginning of the Period $ 4,280 $ 0 $ 0
Charged to Revenue, Cost or Expense 0 4,280 0
Deduction 1,680 0 0
Balance at the End of the Period 2,600 4,280 0
Reserve for losses on uncompleted contracts      
Movement in Valuation Allowances and Reserves [Roll Forward]      
Balance at the Beginning of the Period 22,770 0 0
Charged to Revenue, Cost or Expense 2,455 22,770 0
Deduction 14,300 0 0
Balance at the End of the Period $ 10,925 $ 22,770 $ 0
v3.19.3.a.u2
Concentration of Risk and Enterprise Wide Disclosures
12 Months Ended
Dec. 31, 2019
Risks and Uncertainties [Abstract]  
Concentration of Risk and Enterprise Wide Disclosures

5.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, 2019 and December 31, 2018, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

 

Federal Government

    

$

4,765

    

 3

%  

$

2,319

    

 2

%

State Governments

 

 

5,864

 

 4

%  

 

916

 

 1

%

Local Governments

 

 

41,944

 

26

%  

 

30,187

 

28

%

Private Companies

 

 

106,514

 

67

%  

 

74,953

 

69

%

Total receivables

 

$

159,087

 

100

%  

$

108,375

 

100

%

 

At December 31, 2019 and 2018, 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, 2019, 2018 and 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

    

%

    

2018

    

%

    

2017

    

%

 

Federal Government

$

46,425

 

 6

%  

$

42,143

 

 8

%  

$

63,823

 

11

%  

State Governments

 

47,831

 

 7

%  

 

30,470

 

 6

%  

 

42,613

 

 7

%  

Local Government

 

212,958

 

30

%  

 

107,478

 

21

%  

 

91,591

 

16

%  

Private Companies

 

401,176

 

57

%  

 

340,803

 

65

%  

 

380,526

 

66

%  

Total contract revenues

$

708,390

 

100

%  

$

520,894

 

100

%  

$

578,553

 

100

%  

 

In the years ended December 31, 2019, 2018 and 2017, 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 1.6%,  2.3% and 1.6% of total revenues for the years ended December 31, 2019, 2018 and 2017, respectively, and were primarily located in the Caribbean Basin and Mexico.

v3.19.3.a.u2
Fair Value
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value

9.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, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements

 

    

Carrying Value

    

Level 1

    

Level 2

    

Level 3

December 31, 2019

 

  

 

 

  

 

  

 

  

Assets:

 

 

  

 

  

 

  

 

  

Cash surrender value of life insurance policy

 

$

2,714

 

 —

 

2,714

 

 —

Liabilities:

 

 

  

 

  

 

  

 

  

Derivatives

 

$

1,045

 

 —

 

1,045

 

 —

December 31, 2018

 

 

  

 

  

 

  

 

  

Assets:

 

 

  

 

  

 

  

 

  

Cash surrender value of life insurance policy

 

$

1,993

 

 —

 

1,993

 

 —

Liabilities:

 

 

  

 

  

 

  

 

  

Derivatives

 

$

79

 

 —

 

79

 

 —

 

The Company’s derivatives, which are comprised of interest rate swaps, are valued using a discounted cash flow analysis that incorporates observable market parameters, such as interest rate yield curves and credit risk adjustments, that are necessary to reflect the probability of default by us or the counterparty. These derivatives are classified as a Level 2 measurement within the fair value hierarchy. See Note 12 for additional information on the Company’s derivative instrument.

Our concrete segment has life insurance policies with a combined face value of $11.1 million as of December 31, 2019. 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 noncurrent" 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, 2019 and 2018 approximated its carrying value of $73.3 million and $80.5 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.

v3.19.3.a.u2
Earnings (Loss) Per Share
12 Months Ended
Dec. 31, 2019
Earnings Per Share [Abstract]  
Earnings (Loss) Per Share

15.Earnings (Loss) Per Share

Basic earnings (loss) per share is based on the weighted average number of common shares outstanding during each period. Diluted earnings (loss) 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, 2019, 2018 and 2017, the Company had 1,636,656,  1,938,967, and 2,274,908, 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, 2019 and 2018. Such stock options are antidilutive and are not included in the computation of earnings (loss) per share for those periods.

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

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 

 

    

2019

    

2018

    

2017

Basic:

 

  

 

  

 

  

Weighted average shares outstanding

 

29,322,054

 

28,518,353

 

28,029,936

Diluted:

 

  

 

  

 

  

Total basic weighted average shares outstanding

 

29,322,054

 

28,518,353

 

28,029,936

Effect of potentially dilutive securities:

 

  

 

  

 

  

Common stock options

 

 —

 

 —

 

324,344

Total weighted average shares outstanding assuming dilution

 

29,322,054

 

28,518,353

 

28,354,280

 

v3.19.3.a.u2
Segment Information
12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Segment Reporting

19.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. Segment information for the periods presented is provided as follows:

 

 

 

 

 

 

 

 

 

    

Year Ended

    

Year Ended

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

Marine

 

 

 

 

 

 

Contract revenues

 

$

369,138

 

$

243,883

Operating income (loss)

 

 

1,057

 

 

(61,012)

Depreciation and amortization expense

 

 

(19,889)

 

 

(22,657)

 

 

 

 

 

 

 

Total assets

 

$

264,681

 

$

190,503

Property, plant and equipment, net

 

 

114,873

 

 

128,168

 

 

 

 

 

 

 

Concrete

 

 

  

 

 

  

Contract revenues

 

$

339,252

 

$

277,011

Operating (loss) income

 

 

1,136

 

 

(39,528)

Depreciation and amortization expense

 

 

(8,519)

 

 

(9,142)

 

 

 

 

 

 

 

Total assets

 

$

130,163

 

$

122,367

Property, plant and equipment, net

 

 

17,475

 

 

19,835

 

There were $1.2 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2019. There were $2.5 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2018. The marine segment had foreign revenues of $11.4 million and $12.2 million, respectively, for the years ended December 31, 2019 and 2018. These revenues are derived from projects in the Caribbean Basin and Mexico and are paid primarily in U.S. dollars. There was no foreign revenue for the concrete segment.

v3.19.3.a.u2
Stock-Based Compensation (Tables)
12 Months Ended
Dec. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of restricted stock activity

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

Number

 

Average

 

 

of

 

Fair Value

 

 

Shares

 

Per Share

Nonvested at January 1, 2017

 

372,306

 

$

5.66

Granted

 

345,913

 

$

7.22

Vested

 

(225,406)

 

$

7.25

Forfeited/repurchased shares

 

(120,353)

 

$

6.08

Nonvested at December 31, 2017

 

372,460

 

$

6.01

Granted

 

333,864

 

$

7.47

Vested

 

(217,244)

 

$

6.61

Forfeited/repurchased shares

 

(71,139)

 

$

6.85

Nonvested at December 31, 2018

 

417,941

 

$

7.04

Granted

 

757,012

 

$

2.52

Vested

 

(585,754)

 

$

3.74

Forfeited/repurchased shares

 

(72,627)

 

$

6.05

Nonvested at December 31, 2019

 

516,572

 

$

4.29

 

Schedule of stock options activity

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Weighted

    

Weighted

    

 

 

 

 

 

 

Average

 

Average

 

 

 

 

 

Number

 

Exercise

 

Contractual

 

Aggregate

 

 

of

 

Price

 

Life

 

Intrinsic

 

 

Shares

 

Per Share

 

(Years)

 

Value

Outstanding at January 1, 2017

 

2,349,446

 

$

8.39

 

  

 

 

  

Granted

 

425,204

 

$

7.22

 

  

 

 

  

Exercised

 

(229,551)

 

$

5.75

 

  

 

 

  

Forfeited

 

(633,978)

 

$

10.36

 

  

 

 

  

Outstanding at December 31, 2017

 

1,911,121

 

$

7.79

 

  

 

 

  

Granted

 

374,215

 

$

7.49

 

  

 

 

  

Exercised

 

(488,303)

 

$

5.76

 

  

 

 

  

Forfeited

 

(132,252)

 

$

7.89

 

  

 

 

  

Outstanding at December 31, 2018

 

1,664,781

 

$

8.31

 

  

 

 

  

Granted

 

 —

 

$

 —

 

  

 

 

  

Exercised

 

(7,021)

 

$

4.94

 

  

 

 

  

Forfeited

 

(192,994)

 

$

15.26

 

  

 

 

  

Outstanding at December 31, 2019

 

1,464,766

 

$

7.41

 

  

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest at December 31, 2019

 

1,460,181

 

$

7.41

 

4.78

 

$

91

Exercisable at December 31, 2019

 

1,293,830

 

$

7.41

 

4.34

 

$

91

 

Schedule of stock option valuation assumptions using Black-Scholes pricing model

 

 

 

 

 

 

 

 

 

    

2018

    

2017

 

Weighted average grant-date fair value of options granted

 

$

2.78

 

$

7.22

 

Risk-free interest rate

 

 

2.65

%  

 

1.46

%

Expected volatility

 

 

52

%  

 

48

%

Expected term of options (in years)

 

 

3.0

 

 

3.0

 

Dividend yield

 

 

 —

%  

 

 —

%

 

Schedule of intrinsic value of options exercised and fair value of shares vested

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

Total intrinsic value of options exercised

 

$

 —

 

$

1,286

 

$

706

Total fair value of shares vested

 

$

769

 

$

705

 

$

855

 

v3.19.3.a.u2
Long-term Debt, Line of Credit and Derivatives (Tables)
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Schedule of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

 

    

 

    

Debt Issuance

    

 

    

 

    

Debt Issuance

    

 

 

 

Principal

 

Costs(1)

 

Total

 

Principal

 

Costs(1)

 

Total

Term loan - current

 

$

3,750

 

$

(82)

 

$

3,668

 

$

3,000

 

$

(54)

 

$

2,946

Total current debt

 

 

3,750

 

 

(82)

 

 

3,668

 

 

3,000

 

 

(54)

 

 

2,946

Revolving line of credit

 

 

36,000

 

 

(782)

 

 

35,218

 

 

22,000

 

 

(213)

 

 

21,787

Term loan - long-term

 

 

33,540

 

 

(729)

 

 

32,811

 

 

55,500

 

 

(1,168)

 

 

54,332

Total long-term debt

 

 

69,540

 

 

(1,511)

 

 

68,029

 

 

77,500

 

 

(1,381)

 

 

76,119

Total debt

 

$

73,290

 

$

(1,593)

 

$

71,697

 

$

80,500

 

$

(1,435)

 

$

79,065


(1)

Total debt issuance costs, include underwriter fees, legal fees and syndication fees and fees related to the execution of the Fourth, Fifth, and Sixth Amendments to the Credit Agreement.

Schedule of debt maturity

 

 

 

 

2020

    

 

3,750

2021

 

 

4,500

2022

 

 

5,250

2023

 

 

23,790

 

 

$

37,290

 

v3.19.3.a.u2
Consolidated Statement of Stockholders' Equity - USD ($)
$ in Thousands
Common Stock
Treasury Stock
Other Comprehensive Income (Loss)
Additional Paid-In Capital
Retained Earnings
Total
Beginning balance, shares at Dec. 31, 2016 28,405,850          
Beginning balance at Dec. 31, 2016 $ 283 $ (6,540) $ (382) $ 171,079 $ 61,764 $ 226,204
Beginning treasury stock, shares at Dec. 31, 2016   (711,231)        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Stock-based compensation       2,303   2,303
Deferred tax adjustment         683 $ 683
Exercise of stock options, shares 229,551         229,551
Exercise of stock options $ 2     1,318   $ 1,320
Issue restricted stock, shares 345,913          
Issuance of restricted stock $ 3     (3)    
Cash flow hedge, net of tax     356     356
Forfeiture of restricted stock (in shares) (120,353)          
Net (loss) income         400 400
Ending balance, shares at Dec. 31, 2017 28,860,961          
Ending treasury stock, shares at Dec. 31, 2017   (711,231)        
Ending balance at Dec. 31, 2017 $ 288 $ (6,540) (26) 174,697 62,847 231,266
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Stock-based compensation       2,238   $ 2,238
Exercise of stock options, shares 488,303         488,303
Exercise of stock options $ 5     2,810   $ 2,815
Issue restricted stock, shares 333,864          
Issuance of restricted stock $ 3     (3)    
Cash flow hedge, net of tax     (26)     (26)
Forfeiture of restricted stock (in shares) (71,139)          
Net (loss) income         (94,422) $ (94,422)
Ending balance, shares at Dec. 31, 2018 29,611,989         29,611,989
Ending treasury stock, shares at Dec. 31, 2018   (711,231)       (711,231)
Ending balance at Dec. 31, 2018 $ 296 $ (6,540) (52) 179,742 (31,861) $ 141,585
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Adoption of ASC 606 (Note 2) | ASU 2014-09         (286) (286)
Stock-based compensation       2,753   $ 2,753
Exercise of stock options, shares 7,021         7,021
Exercise of stock options $ 8     35   $ 35
Issue restricted stock, shares 757,012          
Issuance of restricted stock       (8)    
Cash flow hedge, net of tax     (993)     (993)
Forfeiture of restricted stock (in shares) (72,627)          
Forfeiture of restricted stock $ (1)     1    
Net (loss) income         (5,359) $ (5,359)
Ending balance, shares at Dec. 31, 2019 30,303,395         30,303,395
Ending treasury stock, shares at Dec. 31, 2019   (711,231)       (711,231)
Ending balance at Dec. 31, 2019 $ 303 $ (6,540) $ (1,045) $ 182,523 $ (37,220) $ 138,021
v3.19.3.a.u2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Allowance for doubtful accounts $ 2,600 $ 4,280
Stockholders' Equity:    
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 30,303,395 29,611,989
Common stock, shares outstanding 29,592,164 28,900,758
Treasury stock, shares (in shares) 711,231 711,231
v3.19.3.a.u2
Stock-Based Compensation - Restricted Stock Activity (Details) - Restricted stock - $ / shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Number of Shares      
Beginning nonvested shares (in shares) 417,941 372,460 372,306
Granted (in shares) 757,012 333,864 345,913
Vested (in shares) (585,754) (217,244) (225,406)
Forfeited/repurchased shares (in shares) (72,627) (71,139) (120,353)
Ending nonvested shares (in shares) 516,572 417,941 372,460
Weighted Average Fair Value Per Share      
Beginning nonvested shares (in dollars per share) $ 7.04 $ 6.01 $ 5.66
Granted (in dollars per share) 2.52 7.47 7.22
Vested (in dollars per share) 3.74 6.61 7.25
Forfeited/repurchased shares (in dollars per share) 6.05 6.85 6.08
Ending nonvested shares (in dollars per share) $ 4.29 $ 7.04 $ 6.01
v3.19.3.a.u2
Concentration of Risk and Enterprise Wide Disclosures (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Concentration Risk [Line Items]                      
Contract revenues $ 199,793 $ 199,507 $ 165,985 $ 143,105 $ 99,211 $ 125,073 $ 159,767 $ 136,843 $ 708,390 $ 520,894 $ 578,553
Foreign                      
Concentration Risk [Line Items]                      
Contract revenues, percent                 1.60% 2.30% 1.60%
Customer concentration risk | Trade and contract retainage receivables                      
Concentration Risk [Line Items]                      
Trade and retainage receivables 159,087       108,375       $ 159,087 $ 108,375  
Concentration risk, percentage                 100.00% 100.00%  
Customer concentration risk | Contract revenues                      
Concentration Risk [Line Items]                      
Concentration risk, percentage                 100.00% 100.00% 100.00%
Contract revenues                 $ 708,390 $ 520,894 $ 578,553
Customer concentration risk | Federal Government | Trade and contract retainage receivables                      
Concentration Risk [Line Items]                      
Trade and retainage receivables 4,765       2,319       $ 4,765 $ 2,319  
Concentration risk, percentage                 3.00% 2.00%  
Customer concentration risk | Federal Government | Contract revenues                      
Concentration Risk [Line Items]                      
Concentration risk, percentage                 6.00% 8.00% 11.00%
Contract revenues                 $ 46,425 $ 42,143 $ 63,823
Customer concentration risk | State Governments | Trade and contract retainage receivables                      
Concentration Risk [Line Items]                      
Trade and retainage receivables 5,864       916       $ 5,864 $ 916  
Concentration risk, percentage                 4.00% 1.00%  
Customer concentration risk | State Governments | Contract revenues                      
Concentration Risk [Line Items]                      
Concentration risk, percentage                 7.00% 6.00% 7.00%
Contract revenues                 $ 47,831 $ 30,470 $ 42,613
Customer concentration risk | Local Governments | Trade and contract retainage receivables                      
Concentration Risk [Line Items]                      
Trade and retainage receivables 41,944       30,187       $ 41,944 $ 30,187  
Concentration risk, percentage                 26.00% 28.00%  
Customer concentration risk | Local Governments | Contract revenues                      
Concentration Risk [Line Items]                      
Concentration risk, percentage                 30.00% 21.00% 16.00%
Contract revenues                 $ 212,958 $ 107,478 $ 91,591
Customer concentration risk | Private Companies | Trade and contract retainage receivables                      
Concentration Risk [Line Items]                      
Trade and retainage receivables $ 106,514       $ 74,953       $ 106,514 $ 74,953  
Concentration risk, percentage                 67.00% 69.00%  
Customer concentration risk | Private Companies | Contract revenues                      
Concentration Risk [Line Items]                      
Concentration risk, percentage                 57.00% 65.00% 66.00%
Contract revenues                 $ 401,176 $ 340,803 $ 380,526
v3.19.3.a.u2
Property and Equipment Narrative (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Long Lived Assets Held-for-sale [Line Items]          
Depreciation expense   $ 23,500 $ 28,400 $ 24,800  
Assets disposed of in 2017       5,400  
Proceeds from sale of property and equipment   2,015 3,234 6,826  
Loss on Disposition of Property Plant Equipment   (1,804) (3,306) (674)  
Assets classified as held-for-sale $ 1,000 $ 0 $ 0 1,000 $ 6,400
Insurance claims pending 900     900  
Marine          
Long Lived Assets Held-for-sale [Line Items]          
Proceeds from sale of property and equipment       4,500  
Loss on Disposition of Property Plant Equipment $ 100     $ 900  
v3.19.3.a.u2
Employee Benefits - Multiemployer Plans (Details) - Multiemployer Plans, Pension - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
International Union of Operating Engineers - Employers Construction Industry Retirement Plan - Local 302 and 612 Trust Funds      
Multiemployer Plans [Line Items]      
Certified Zone Status Green Green  
Contributions $ 3,021 $ 2,482 $ 1,974
Washington Laborers      
Multiemployer Plans [Line Items]      
Certified Zone Status Green Green  
Contributions $ 30    
Carpenters Retirement Plan of Western Washington      
Multiemployer Plans [Line Items]      
Certified Zone Status Green Green  
Contributions $ 695 $ 932 693
Cement Masons & Plasterers Trust Funds      
Multiemployer Plans [Line Items]      
Certified Zone Status Green Green  
Contributions $ 2    
Washington-Idaho-Montana Carpenters-Employers Retirement Trust Fund      
Multiemployer Plans [Line Items]      
Certified Zone Status Yellow Yellow  
Contributions $ 36    
Engineers - AGC Retirement Trust of the Inland Empire      
Multiemployer Plans [Line Items]      
Certified Zone Status Yellow Yellow  
Contributions $ 20    
Alaska Carpenters Trust Fund      
Multiemployer Plans [Line Items]      
Certified Zone Status Yellow Green  
Contributions $ 377 $ 328 396
Alaska Laborers Trust Fund      
Multiemployer Plans [Line Items]      
Certified Zone Status Yellow Yellow  
Contributions $ 552 $ 321 $ 218
v3.19.3.a.u2
Leases - Term and Discount Rate (Details)
Dec. 31, 2019
Leases [Abstract]  
Weighted Average Remaining Lease Term, operating lease 5 years 3 months 18 days
Weighted Average Remaining Lease Term, finance lease 1 year 2 months 5 days
Weighted Average Discount Rate, operating lease 4.80%
Weighted Average Discount Rate, finance lease 5.10%
v3.19.3.a.u2
Goodwill and Intangible Assets - Goodwill Roll Forward (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2018
Dec. 31, 2018
Dec. 31, 2017
Goodwill [Roll Forward]      
Beginning balance, January 1   $ 69,483  
Impairments $ (69,500) (69,483) $ 0
Ending balance $ 0 $ 0 $ 69,483
v3.19.3.a.u2
Summary of Significant Accounting Principles - Remaining Performance Obligation (Details)
$ in Millions
12 Months Ended
Dec. 31, 2019
USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction  
Performance obligations expected to be satisfied $ 572.3
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01  
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction  
Performance obligations expected to be satisfied $ 465.1
Performance obligations expected to be satisfied, percentage 81.00%
Performance obligations expected to be satisfied, expected timing 12 months
v3.19.3.a.u2
Summary of Significant Accounting Policies - Insurance Coverage (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
policy
item
Dec. 31, 2018
USD ($)
Insurance Coverage    
Levels of insurance coverage maintained by the Company | item 5  
Number Of Insurance Policies | policy 2  
Accrual for insurance liabilities $ 3,714 $ 5,680
Marine    
Insurance Coverage    
Levels of insurance coverage maintained by the Company | item 5  
Amount in excess of primary insurance coverage $ 200,000  
Marine | Other liability policies    
Insurance Coverage    
Primary limit of insurance coverage 1,000  
Marine | Maritime employer's liability    
Insurance Coverage    
Primary limit of insurance coverage 10,000  
Marine | Watercraft pollution policy    
Insurance Coverage    
Primary limit of insurance coverage $ 5,000  
Concrete    
Insurance Coverage    
Levels of insurance coverage maintained by the Company | item 5  
Amount in excess of primary insurance coverage $ 200,000  
Concrete | Other liability policies    
Insurance Coverage    
Primary limit of insurance coverage $ 1,000  
v3.19.3.a.u2
Long-term Debt, Line of Credit and Derivatives - Financial covenants (Details)
$ in Millions
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
USD ($)
Debt Instrument [Line Items]    
Covenant compliance, Fixed Charge Coverage Ratio, minimum   1.25
Covenant compliance, Leverage Ratio, maximum   4.00
Covenant compliance, EBITDA, minimum   $ 21.7
Scenario, Forecast    
Debt Instrument [Line Items]    
Covenant compliance, Leverage Ratio, maximum 3.00  
v3.19.3.a.u2
Earnings (Loss) Per Share - Anti-dilutive Securities (Details) - shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Earnings Per Share [Abstract]      
Potential antidilutive securities excluded from computations of earnings per share 1,636,656 1,938,967 2,274,908
v3.19.3.a.u2
Income Taxes - Effective Income Tax Expense (Benefit) Reconciliation (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Effective Income Tax Rate Reconciliation, Amount [Abstract]      
Statutory amount (computed at 21% in 2019 and 2018 and 35% in 2017) $ (733) $ (22,398) $ (1,449)
Re-measurement of deferred tax assets     (7,451)
Valuation allowance on foreign tax credits 1,081 593 1,514
State income tax, net of federal benefit 991 (1,922) 168
Permanent differences, other 461 1,550 505
Permanent differences, incentive stock options 311 (24) 447
Valuation allowance, other (166) 10,384 (77)
Uncertain tax provision     1,614
Other (77) (416) 188
Total $ 1,868 $ (12,233) $ (4,541)
Consolidated effective tax rate (53.50%) 11.50% 109.70%
v3.19.3.a.u2
Long-term Debt, Line of Credit and Derivatives - Obligations under Debt Arrangements (Details) - USD ($)
$ in Thousands
1 Months Ended 12 Months Ended
May 31, 2019
Mar. 31, 2019
Jul. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Debt Instrument [Line Items]            
Amortization of debt issuance costs       $ 453 $ 725 $ 1,269
Net Value, current       3,668 2,946  
Net Value, long-term       68,029 76,119  
Total debt       $ 71,697 79,065  
Line of Credit            
Debt Instrument [Line Items]            
Weighted average interest rate       5.41%    
Principal current       $ 3,750 3,000  
Principal, long-term       69,540 77,500  
Principal       73,290 80,500  
Deferred Finance Costs, current       (82) (54)  
Deferred Issuance Costs, long-term       (1,511) (1,381)  
Debt Issuance Costs, Net, Total       (1,593) (1,435)  
Revolving Credit Facility            
Debt Instrument [Line Items]            
Net Value, long-term       35,218 21,787  
Revolving Credit Facility | Line of Credit            
Debt Instrument [Line Items]            
Line of credit facility, maximum borrowing capacity       50,000    
Debt issuance expense $ 400          
Principal, long-term       36,000 22,000  
Deferred Issuance Costs, long-term       (782) (213)  
Term Loan            
Debt Instrument [Line Items]            
Net Value, current       3,668 2,946  
Net Value, long-term       32,811 54,332  
Term Loan | Line of Credit            
Debt Instrument [Line Items]            
Line of credit facility, maximum borrowing capacity         60,000  
Principal current       3,750 3,000  
Principal, long-term       33,540 55,500  
Principal       37,290    
Deferred Finance Costs, current       (82) (54)  
Deferred Issuance Costs, long-term       (729) $ (1,168)  
Fourth, Fifth And Sixth Amendments To Credit Agreement | Line of Credit            
Debt Instrument [Line Items]            
Debt Issuance Costs, Net, Total       $ (900)    
Fourth Amendment to Credit Agreement | Line of Credit            
Debt Instrument [Line Items]            
Debt issuance cost     $ 900      
Fifth Amendment To Credit Agreement | Line of Credit            
Debt Instrument [Line Items]            
Debt issuance cost   $ 600        
Sixth Amendment To Credit Agreement | Line of Credit            
Debt Instrument [Line Items]            
Debt issuance cost $ 900          
v3.19.3.a.u2
Goodwill and Intangible Assets - Finite-lived Intangible Assets Roll Forward (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Finite-lived Intangible Assets, Gross [Roll Forward]      
Intangible assets, January 1 $ 35,240 $ 35,240  
Additions 0    
Total intangible assets, end of year 35,240 35,240 $ 35,240
Accumulated Amortization [Roll Forward]      
Accumulated amortization, January 1 (27,345) (23,955)  
Current year amortization (2,640) (3,390) (4,736)
Total accumulated amortization (29,985) (27,345) $ (23,955)
Net intangible assets      
Net intangible assets, end of year 5,255 7,895  
Infinite-lived intangible assets 6,892 6,892  
Total net intangible assets $ 12,147 $ 14,787  
v3.19.3.a.u2
Other Long-Term Liabilities - Components (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Other long-term liabilities    
Sale-leaseback arrangement $ 17,447  
Accrual for insurance liabilities 2,989 $ 2,355
Capital lease liability   5,189
Deferred rent   759
Contingent consideration - TBC acquisition   456
Total other long-term liabilities $ 20,436 $ 8,759
v3.19.3.a.u2
Business Acquisitions
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Business Acquisitions

3.Business Acquisitions

TBC Acquisition

On April 9, 2017, T.A.S. Commercial Concrete Construction, LLC, a wholly owned subsidiary of Orion Group Holdings, Inc. ("the Company") entered into a Stock Purchase Agreement ("the Agreement") for the purchase of all the issued and outstanding shares (the "shares") of Tony Bagliore Concrete, Inc. ("TBC"), a Texas corporation. The Company and the two sole shareholders of TBC closed the purchase transactions on April 10, 2017 (the "Closing Date"). Upon the terms of and subject to the conditions set forth in the Agreement, the total aggregate consideration paid on the Closing Date by the Company to the Sellers for the shares was $6.0 million in cash. In addition however, if certain target considerations were met in future periods, an additional cash payment of up to $2.0 million would become payable to the Seller.

The purpose of the acquisition was primarily to achieve growth by expanding the Company’s current service offerings in addition to expansion into new markets. The tangible assets acquired include accounts receivable, retainage and fixed assets.

Under the acquisition method of accounting, the total acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of TBC based on their estimated fair values as of the closing of the acquisition. The table below outlines the total actual acquisition consideration allocated based on the preliminary fair values of TBC’s tangible and intangible assets and liabilities as of April 9, 2017:

 

 

 

 

 

Accounts receivable

    

$

3,239

Retainage

 

 

1,860

Fixed assets, net

 

 

2,098

Other

 

 

 9

Goodwill

 

 

2,562

Other intangible assets

 

 

878

Accounts payable

 

 

(2,017)

Accrued expenses and other current liabilities

 

 

(1,080)

Contingent consideration

 

 

(456)

Deferred tax liability

 

 

(1,093)

Total Acquisition Consideration at April 9, 2017

 

$

6,000

Working capital adjustment (all attributable to Goodwill)

 

 

557

Total Acquisition Consideration

 

$

6,557

 

The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed was allocated to goodwill. The goodwill of $3.1 million arising from the acquisition consisted primarily of synergies and business opportunities that were expected to be realized from the purchase of TBC. The goodwill was not deductible for income tax purposes. In the fourth quarter of 2018, the Company’s annual goodwill impairment test indicated that its goodwill was fully impaired, primarily due to a decline in the Company’s market capitalization and as a result the goodwill related to the TBC acquisition was written off.

Finite-lived intangible assets acquired include customer relationships and contractual backlog. (See Note 10).

The fixed assets acquired include construction equipment as well as automobiles and trucks and will be depreciated in accordance with Company policy, generally three to 15 years.

As stated in the Agreement, the Company agreed to pay the sellers up to $2.0 million in cash, if earned, as additional purchase consideration. The seller’s right to receive the contingent consideration, if any, was to be based on the Company’s achievement of certain future financial targets. The Company measured the fair value of the contingent consideration at the Acquisition Date, and determined that fair value to be approximately $0.5 million, as shown in the table above. This amount of contingent liability was initially classified on the Consolidated Balance Sheets as an other long-term liability.  During 2019 it was determined that the financial targets had not been met.  The $0.5 million liability was removed from the balance sheet and reflected as component of other income in the Consolidated Statement of Operations.

v3.19.3.a.u2
Property and Equipment
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Property and Equipment

7.Property and Equipment

The following is a summary of property and equipment at December 31, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Automobiles and trucks

 

$

2,161

 

$

1,709

Building and improvements

 

 

44,278

 

 

43,628

Construction equipment

 

 

153,147

 

 

161,113

Vessels and other equipment

 

 

84,022

 

 

90,217

Office equipment

 

 

8,652

 

 

8,061

 

 

 

292,260

 

 

304,728

Less: Accumulated depreciation

 

 

(196,973)

 

 

(195,373)

Net book value of depreciable assets

 

 

95,287

 

 

109,355

Construction in progress

 

 

1,198

 

 

2,785

Land

 

 

35,863

 

 

35,863

 

 

$

132,348

 

$

148,003

 

At December 31, 2018, the Company had $9.2 million of assets, net of accumulated depreciation, under capital leases which are reflected in the above table.

For the years ended December 31, 2019, 2018 and 2017, depreciation expense was $23.5 million, $28.4 million and $24.8 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 12).

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

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that 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. 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. Approximately $6.4 million were classified as held for sale on the Company’s Consolidated Balance Sheet at December 31, 2016. During the year ended December 31, 2017, approximately $5.4 million of these assets were sold for cash of $4.5 million. The difference of $0.9 million is classified as a loss on the sale of assets on the Consolidated Statements of Operations. The remaining assets held for sale of $1.0 million was classified as a total loss as a result of Hurricane Harvey. Insurance claims of approximately $0.9 million were received in the fourth quarter of 2017. The difference of $0.1 million is classified as a loss on disposal of assets on the Consolidated Statements of Operations. No assets remained as held for sale on the Company’s Consolidated Balance Sheet at December 31, 2019 or December 31, 2018.

v3.19.3.a.u2
Accrued Liabilities
12 Months Ended
Dec. 31, 2019
Payables and Accruals [Abstract]  
Accrued Liabilities

11.Accrued Liabilities

Accrued liabilities at December 31, 2019 and 2018 consisted of the following:

 

 

 

 

 

 

 

 

 

    

December 31, 2019

    

December 31, 2018

Accrued salaries, wages and benefits

 

$

7,323

 

$

6,492

Accrual for insurance liabilities

 

 

3,714

 

 

5,680

Sales taxes

 

 

3,021

 

 

2,178

Property taxes

 

 

389

 

 

924

Sale-leaseback arrangement

 

 

482

 

 

 —

Accounting and audit fees

 

 

267

 

 

 —

Interest

 

 

76

 

 

 —

Capital lease liability (1)

 

 

 —

 

 

3,045

Other accrued expenses

 

 

1,694

 

 

521

Total accrued liabilities

 

$

16,966

 

$

18,840

 


(1)

December 31, 2018 balance relates to capital leases accounted for under ASC 840 and prior to the adoption of ASC 842 as of January 1, 2019. 

v3.19.3.a.u2
Concentration of Risk and Enterprise Wide Disclosures (Tables)
12 Months Ended
Dec. 31, 2019
Trade and contract retainage receivables  
Concentration Risk [Line Items]  
Schedules of concentration of risk, by risk factor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

 

Federal Government

    

$

4,765

    

 3

%  

$

2,319

    

 2

%

State Governments

 

 

5,864

 

 4

%  

 

916

 

 1

%

Local Governments

 

 

41,944

 

26

%  

 

30,187

 

28

%

Private Companies

 

 

106,514

 

67

%  

 

74,953

 

69

%

Total receivables

 

$

159,087

 

100

%  

$

108,375

 

100

%

 

Contract revenues  
Concentration Risk [Line Items]  
Schedules of concentration of risk, by risk factor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

    

%

    

2018

    

%

    

2017

    

%

 

Federal Government

$

46,425

 

 6

%  

$

42,143

 

 8

%  

$

63,823

 

11

%  

State Governments

 

47,831

 

 7

%  

 

30,470

 

 6

%  

 

42,613

 

 7

%  

Local Government

 

212,958

 

30

%  

 

107,478

 

21

%  

 

91,591

 

16

%  

Private Companies

 

401,176

 

57

%  

 

340,803

 

65

%  

 

380,526

 

66

%  

Total contract revenues

$

708,390

 

100

%  

$

520,894

 

100

%  

$

578,553

 

100

%  

 

v3.19.3.a.u2
Summary of Significant Accounting Principles (Policies)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Basis of Presentation

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. All intercompany balances and transactions have been eliminated in consolidation.

 

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation in the Company’s condensed consolidated statement of operations. As part of the Company’s Invest, Scale and Grow (“ISG”) initiative it realigned its project management personnel within the operating groups for the combined company. As a result of the realignment, beginning in the second quarter of 2019, the Company elected to classify certain project management costs in Cost of contract revenue in its Consolidated Statements of Operations (the “Statements of Operations”) to better represent how those costs are managed and controlled. For periods reported prior to the second quarter of 2019, certain project management costs were included in Selling, general and administrative (“SG&A”) expenses. The Company’s SG&A expense for 2019 included project management costs of $1.1 million incurred in the first quarter of 2019, and SG&A expense for 2018 and 2017 included project management costs of $4.9 million and $4.7 million, respectively.

Revenue Recognition

Revenue Recognition

The Company adopted ASU 2014‑09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018, using the modified retrospective method. The Company recognized the cumulative effect of initially adopting Topic 606 guidance as an adjustment to the beginning balance of retained earnings. Contracts with customers that were not substantially complete in both the Company’s marine and concrete segments were evaluated in order to determine the impact as of the date of adoption.

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 short in duration and usually span a period of less than one year. The Company determines the appropriate accounting treatment for each contract before work begins and generally records revenue on contracts 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. The Company’s contracts and related change orders typically represent a single performance obligation because the Company provides a significant integrated service and individual goods and services are not separately identifiable. Revenue is recognized over time because control is continuously transferred to the customer. 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. When losses on uncompleted contracts are anticipated, the entire loss is recognized 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. Based on its reading of the contract and its performance, the Company believes collection of these claims is probable, although the full amount of the recorded claims may not be collected.

Contract assets and liabilities 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.

·

Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts - 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 (i.e. Contract Assets) and are recorded as a current asset, until such amounts are either received or written off.

·

Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts - Represent billings in excess of revenues recognized (i.e. Contract Liabilities) and are recorded as a current liability, until the underlying obligation has been performed or discharged.

The following table summarizes the cumulative effect of the changes made to the Company’s unaudited Consolidated Balance Sheet as of January 1, 2018 from the adoption of Topic 606:

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance at

    

Adjustments

    

Balance at

 

 

December 31, 

 

Due to Topic

 

January 1,

 

 

2017

 

606

 

2018

Assets

 

 

  

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

46,006

 

$

1,383

 

$

47,389

Liabilities

 

 

  

 

 

  

 

 

  

Billings in excess of costs and estimated earnings on uncompleted contracts

 

$

33,923

 

$

1,745

 

$

35,668

Deferred income tax liability

 

 

13,243

 

 

(76)

 

 

13,167

Equity

 

 

  

 

 

  

 

 

  

Retained earnings

 

$

62,847

 

$

(286)

 

$

62,561

 

The following tables summarize the impact of adopting Topic 606 on the Company’s Consolidated Balance Sheet as of December 31, 2018 and Statement of Operations for the year ended December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Balances Without

    

 

 

 

 

 

 

 

Adoption of

 

Effect of Change

 

 

As Reported

 

Topic 606

 

Higher (Lower)

Assets

 

 

  

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

9,217

 

$

10,040

 

$

(823)

Liabilities

 

 

  

 

 

  

 

 

  

Billings in excess of costs and estimated earnings on uncompleted contracts

 

$

21,761

 

$

22,886

 

$

(1,125)

Deferred income tax liability

 

 

49

 

 

(57)

 

 

106

Equity

 

 

  

 

 

  

 

 

  

Retained earnings

 

$

(31,861)

 

$

(32,057)

 

$

196

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Balances Without

    

 

 

 

 

 

 

 

Adoption of

 

Effect of Change

 

 

As Reported

 

Topic 606

 

Higher (Lower)

Contract revenues

 

$

520,894

 

$

519,769

 

$

1,125

Cost of contract revenues

 

 

504,118

 

 

503,295

 

 

823

Gross profit

 

 

16,776

 

 

16,474

 

 

302

Income tax (benefit) expense

 

 

(12,233)

 

 

(12,339)

 

 

106

Net (loss) income

 

$

(94,422)

 

$

(94,618)

 

$

196

 

 

 

 

 

 

 

 

 

 

Basic (loss) income per share

 

$

(3.31)

 

$

(3.32)

 

$

0.01

Diluted (loss) income per share

 

$

(3.31)

 

$

(3.32)

 

$

0.01

 

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, 2019, the aggregate amount of the remaining performance obligations was approximately $572.3 million. Of this amount, the Company expects to recognize $465.1 million, or 81%, in the next 12 months and the remaining balance thereafter.

Classification of Current Assets and Liabilities

Classification of Current Assets and Liabilities

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

Cash, Cash Equivalents and Restricted Cash

Cash, 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, 2019 and 2018 consisted primarily of overnight bank deposits.

Restricted cash as of December 31, 2019 consisted of $1.0 million of collateral related to a marine project and is classified in current assets. 

Risk Concentrations

Risk Concentrations

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

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

Accounts receivable are stated at the historical carrying value, less allowances for doubtful accounts. The Company has significant investments in billed and unbilled receivables as of December 31, 2019 and 2018. 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, which are included in costs in excess of billings, arise as revenues are recognized over time. Unbilled amounts on contracts represent recoverable costs and accrued profits not yet billed. Revenue associated with these billings is recorded net of any sales tax, if applicable. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability. In establishing an allowance for doubtful accounts, the Company evaluates its contract receivables and costs in excess of billings 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 doubtful accounts if it is determined that the amounts will not be collected or if a settlement is reached for an amount that is less than the carrying value. As of December 31, 2019 and 2018, the Company has recorded an allowance for doubtful accounts of $2.6 million and $4.3 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, 2019 totaled $42.5 million, of which $11.0 million is expected to be collected beyond 2020. Retainage at December 31, 2018 totaled $30.7 million.

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

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

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 expenditure is considered probable and the amount can be reasonably estimated. The Company did not recognize any environmental liabilities as of December 31, 2019 or  2018, respectively.

Fair Value Measurements

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 9 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

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. 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.

Property and Equipment

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 seven 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 5 years

Buildings and improvements

 

5 to 30 years

Construction equipment

 

3 to 15 years

Vessels and other equipment

 

1 to 15 years

Office equipment

 

1 to 5 years

 

The Company generally uses accelerated depreciation methods for tax purposes where appropriate.

Dry-docking costs are capitalized and amortized using the straight-line method over a period ranging from three to 15 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 charge 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, 2019 or December 31, 2018.

Leases

Leases

The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, on a prospective basis, forgoing comparative reporting. The Company elected to utilize the transition guidance within the new standard, which allows the Company to carryforward the historical lease classification. The Company elected to not separate lease and non-lease components for all classes of underlying assets in which it is the lessee and made an accounting policy election to not account for leases with an initial term of 12 months or less on the balance sheet. Adoption of the standard resulted in the recording of additional net ROU operating lease assets of approximately $23.3 million and lease liabilities for operating leases of approximately $24.0 million on the Consolidated Balance Sheets as of January 1, 2019. The adoption of this guidance did not have an impact on net income. See Note 20 for more information regarding leases.

Intangible Assets

Intangible Assets

Intangible assets that have finite lives are amortized. In addition, the Company evaluates 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. If the estimate of an intangible asset’s remaining life is changed, the remaining carrying value of such asset is amortized prospectively over that revised remaining useful life. Intangible assets that have infinite lives are not amortized, but are subject to impairment testing at least annually or more frequently if events or circumstances indicate that the asset may be impaired.

The Company has one infinite-lived intangible asset, a trade name, which is tested for impairment annually on October 31, or whenever events or circumstances indicate that the carrying amount of the trade name may not be recoverable. Impairment is calculated as the excess of the trade name’s carrying value over its fair value. The fair value of the trade name is 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.

Stock-Based Compensation

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 options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions in the computation. Changes in these assumptions can cause significant fluctuations in the fair value of the option award. The fair value of restricted stock grants 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 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

Income Taxes

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 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 14 for additional discussion of income taxes.

Insurance Coverage

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 $200 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 $200 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 Results 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 accrued liability for insurance includes incurred but not reported claims of $3.7 million and $5.7 million at December 31, 2019 and 2018, respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issues accounting standards and updates (each, an "ASU") from time to time to its Accounting Standards Codification (‘ASC’), which is the primary source of U.S. GAAP. The Company regularly monitors ASUs as they are issued and considers applicability to its business. All ASUs are adopted by their respective due dates and in the manner prescribed by the FASB.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which changes the way in which entities estimate and present credit losses for most financial assets, including accounts receivable.  The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year.  Early adoption is permitted, although the Company does not intend to do so.  For the Company’s trade receivables, certain other receivables and certain other financial instruments, it will be required to use a new forward-looking “expected” credit loss model based on historical loss rates that will replace the existing “incurred” credit loss model, which will generally result in earlier recognition of allowances for credit losses.  The Company is currently evaluating the impact this guidance will have on its consolidated financial statements, but it does not anticipate the new standard will materially impact the financial statements.

During the periods presented in these financial statements, the Company implemented other new accounting pronouncements other than those noted above that are discussed in the notes where applicable.

v3.19.3.a.u2
Related Party Transactions (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Affiliated Entity | Lease Arrangement  
Related Party Transaction [Line Items]  
Operating leases, annual lease amount $ 478
v3.19.3.a.u2
Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Jan. 01, 2017
Revenue, Major Customer [Line Items]                        
Costs and estimated earnings in excess of billings on uncompleted contracts $ 41,389       $ 9,217       $ 41,389 $ 9,217 $ 46,006 $ 47,389
Billings in excess of costs and estimated earnings on uncompleted contracts 48,781       21,761       48,781 21,761 33,923 35,668
Deferred income tax liability 205       49       205 49 13,243 13,167
Retained earnings (37,220)       (31,861)       (37,220) (31,861) 62,847 62,561
Contract revenues 199,793 $ 199,507 $ 165,985 $ 143,105 99,211 $ 125,073 $ 159,767 $ 136,843 708,390 520,894 578,553  
Costs of contract revenues                 644,349 504,118 516,313  
Gross profit 19,089 20,893 14,977 9,082 (22,206) 4,825 19,462 14,695 64,041 16,776 62,240  
Income tax (benefit) expense                 1,868 (12,233) (4,541)  
Net (loss) income $ 159 $ 4,039 $ (1,633) $ (7,924) $ (94,416) $ (6,356) $ 2,249 $ 4,101 $ (5,359) $ (94,422) $ 400  
Basic (loss) income per share (in dollars per share) $ 0.01 $ 0.14 $ (0.06) $ (0.27) $ (3.32) $ (0.22) $ 0.08 $ 0.15 $ (0.18) $ (3.31) $ 0.01  
Diluted (loss) income per share (in dollars per share) $ 0.01 $ 0.14 $ (0.06) $ (0.27) $ (3.32) $ (0.22) $ 0.08 $ 0.14 $ (0.18) $ (3.31) $ 0.01  
Calculated under Revenue Guidance in Effect before Topic 606                        
Revenue, Major Customer [Line Items]                        
Costs and estimated earnings in excess of billings on uncompleted contracts         $ 10,040         $ 10,040    
Billings in excess of costs and estimated earnings on uncompleted contracts         22,886         22,886    
Deferred income tax asset         (57)         (57)    
Retained earnings         (32,057)         (32,057)    
Contract revenues                   519,769    
Costs of contract revenues                   503,295    
Gross profit                   16,474    
Income tax (benefit) expense                   (12,339)    
Net (loss) income                   $ (94,618)    
Basic (loss) income per share (in dollars per share)                   $ (3.32)    
Diluted (loss) income per share (in dollars per share)                   $ (3.32)    
Difference between Revenue Guidance in Effect before and after Topic 606                        
Revenue, Major Customer [Line Items]                        
Costs and estimated earnings in excess of billings on uncompleted contracts         (823)         $ (823)   1,383
Billings in excess of costs and estimated earnings on uncompleted contracts         (1,125)         (1,125)   1,745
Deferred income tax liability         106         106   (76)
Retained earnings         $ 196         196   $ (286)
Contract revenues                   1,125    
Costs of contract revenues                   823    
Gross profit                   302    
Income tax (benefit) expense                   106    
Net (loss) income                   $ 196    
Basic (loss) income per share (in dollars per share)                   $ 0.01    
Diluted (loss) income per share (in dollars per share)                   $ 0.01    
v3.19.3.a.u2
Summary of Significant Accounting Policies - Leases and Intangible Assets (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Asset
Jan. 01, 2019
USD ($)
Operating lease assets and liabilities    
Operating lease, right-of-use assets $ 17,997  
Operating lease, liability $ 18,639  
Infinite-lived intangible assets    
Number of infinite-lived intangible assets | Asset 1  
ASU 2016-02 | Restatement Adjustment    
Operating lease assets and liabilities    
Operating lease, right-of-use assets   $ 23,300
Operating lease, liability   $ 24,000
v3.19.3.a.u2
Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Assets related to:    
Accrued liabilities $ 1,030 $ 1,105
Intangible assets 3,020 3,054
Net operating loss carryforward 15,246 15,970
Non-qualified stock options 586 672
Foreign tax credits 2,570 1,489
Goodwill 7,232 8,200
Leases 9,038  
Other 1,347 2,684
Total gross deferred tax assets 40,069 33,174
Less valuation allowance (16,960) (15,815)
Total net deferred tax assets 23,109 17,359
Liabilities related to:    
Depreciation and amortization (22,634) (16,974)
Other (595) (434)
Total liabilities (23,229) (17,408)
Net deferred tax liabilities $ (120) $ (49)
v3.19.3.a.u2
Long-term Debt, Line of Credit and Derivatives - Provisions of Revolving Line of Credit and Accordion (Details) - USD ($)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Debt Instrument [Line Items]      
Repayments of Debt $ 70,210,000 $ 48,111,000 $ 87,813,000
Proceeds from lines of credit $ 63,000,000 $ 39,861,000 $ 72,000,000
Line of Credit      
Debt Instrument [Line Items]      
Weighted average interest rate 5.41%    
Revolving Credit Facility | Line of Credit      
Debt Instrument [Line Items]      
Line of credit facility, maximum borrowing capacity $ 50,000,000    
Minimum additional borrowing amount 1,000,000    
Amount over minimum additional borrowing amount, integral multiples 250,000    
Fair value of amount outstanding 36,000,000    
Remaining borrowing capacity 12,600,000    
Repayments of Debt 49,000,000    
Net increase in remaining borrowing capacity 14,000,000    
Proceeds from lines of credit 63,000,000    
Revolving Credit Facility | Line of Credit | LIBOR      
Debt Instrument [Line Items]      
Fair value of amount outstanding $ 32,000,000    
Weighted average interest rate 4.50%    
Revolving Credit Facility | Line of Credit | Base Rate      
Debt Instrument [Line Items]      
Fair value of amount outstanding $ 4,000,000    
Stated interest rate 6.50%    
Letter of Credit | Line of Credit      
Debt Instrument [Line Items]      
Line of credit facility, maximum borrowing capacity $ 20,000,000    
Letters of credit outstanding 1,400,000    
Swingline Loan | Line of Credit      
Debt Instrument [Line Items]      
Line of credit facility, maximum borrowing capacity 5,000,000    
Minimum additional borrowing amount 250,000    
Amount over minimum additional borrowing amount, integral multiples $ 50,000    
v3.19.3.a.u2
Goodwill and Intangible Assets - Narrative (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2018
USD ($)
Dec. 31, 2019
USD ($)
Asset
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Dec. 31, 2015
USD ($)
Business Acquisition [Line Items]          
Goodwill impairment charges $ 69,500   $ 69,483 $ 0  
Amortization expense   $ 2,640 3,390 $ 4,736  
Net intangible assets, end of year 7,895 $ 5,255 $ 7,895    
Number of infinite-lived intangible assets | Asset   1      
Tony Bagliore Concrete, Inc. (TBC) | Customer Relationships          
Business Acquisition [Line Items]          
Amortization expense   $ 2,600      
TAS Commercial Concrete | Customer Relationships          
Business Acquisition [Line Items]          
Finite-lived intangibles acquired         $ 18,800
Acquired finite-lived intangible assets, useful life         8 years
Marine          
Business Acquisition [Line Items]          
Goodwill impairment charges 33,800        
Concrete          
Business Acquisition [Line Items]          
Goodwill impairment charges $ 35,700        
v3.19.3.a.u2
Other Long-Term Liabilities - Sale-Leaseback (Details)
$ in Millions
Sep. 27, 2019
USD ($)
Options
Failed Sale Leaseback  
Paydown of Term loan $ 18.2
Failed Sale Leaseback  
Failed Sale Leaseback  
Sale price of properties sold $ 19.1
Lease term 15 years
Annual rent $ 1.5
Annual percentage rent increase 2.00%
Number of consecutive options to extend term | Options 2
Term of available options 10 years
v3.19.3.a.u2
Long-term Debt, Line of Credit and Derivatives - Derivative Financial Instruments (Details)
$ in Millions
12 Months Ended
Dec. 31, 2019
USD ($)
Dec. 06, 2018
USD ($)
Sep. 16, 2015
USD ($)
contract
Debt Instrument [Line Items]      
Percent Of aggregate principal amount hedged     50.00%
Interest Rate Swap      
Debt Instrument [Line Items]      
Derivative, notional amount   $ 27.0 $ 67.5
Derivative, number of instruments held | contract     5
Change in fair market value of interest rate swaps $ 1.0    
Fair market value of interest rate swap liability $ 1.0    
v3.19.3.a.u2
Earnings (Loss) Per Share - Basic and Diluted (Details) - shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Basic:      
Weighted average shares outstanding, basic 29,322,054 28,518,353 28,029,936
Effect of dilutive securities:      
Common stock options 0 0 324,344
Total weighted average shares outstanding assuming dilution 29,322,054 28,518,353 28,354,280
v3.19.3.a.u2
Goodwill and Intangible Assets
12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

10.Goodwill and Intangible Assets

Goodwill

The table below summarizes changes in goodwill recorded by the Company during the periods ended December 31, 2019 and 2018:

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Beginning balance, January 1

 

$

 —

 

$

69,483

Impairments

 

 

 —

 

 

(69,483)

Ending balance

 

$

 —

 

$

 —

 

In the fourth quarter of 2018, the Company’s annual goodwill impairment test indicated that its goodwill was fully impaired, primarily due to a decline in the Company’s market capitalization and as a result it incurred a goodwill impairment charge of $69.5 million with $33.8 million related to the Marine segment and $35.7 million related to the Concrete segment.

Intangible assets

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

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Finite-lived intangible assets, beginning of period

 

$

35,240

 

$

35,240

Additions

 

 

 —

 

 

 —

Total finite-lived intangible assets, end of period

 

$

35,240

 

$

35,240

 

 

 

 

 

 

 

Accumulated amortization, beginning of period

 

$

(27,345)

 

$

(23,955)

Current year amortization

 

 

(2,640)

 

 

(3,390)

Total accumulated amortization

 

 

(29,985)

 

 

(27,345)

 

 

 

 

 

 

 

Net finite-lived intangible assets, end of period

 

$

5,255

 

 

7,895

Infinite-lived intangible assets

 

 

6,892

 

 

6,892

Total net intangible assets

 

$

12,147

 

$

14,787

 

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 year ended December 31, 2019, $2.6 million of amortization expense was recognized for these assets. In 2019 and 2018, the Company evaluated the useful lives of these finite-lived intangible assets and no change was needed.

Future expense remaining of approximately $5.3 million will be amortized as follows:

 

 

 

 

 

2020

    

 

2,069

2021

 

 

1,521

2022

 

 

1,239

2023

 

 

389

2024

 

 

37

 

 

$

5,255

 

Additionally, the Company has one indefinite-lived intangible asset, a trade name, which is tested for impairment annually on October 31, or whenever events or circumstances indicate that the carrying amount of the trade name may not be recoverable. Impairment is calculated as the excess of the trade name’s carrying value over its fair value. The fair value of the trade name is 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. The impairment test concluded that the fair value of the trade name was in excess of the carrying value, therefore no impairment was recorded.

v3.19.3.a.u2
Summary of Significant Accounting Principles
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Principles

2.Summary of Significant Accounting Principles

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;

·

Accounts receivable and allowance for doubtful accounts;

·

Property, plant and equipment;

·

Leases;

·

Finite and infinite-lived intangible assets, testing for indicators of impairment;

·

Stock-based compensation;

·

Income taxes; and

·

Self-insurance

Revenue Recognition

The Company adopted ASU 2014‑09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018, using the modified retrospective method. The Company recognized the cumulative effect of initially adopting Topic 606 guidance as an adjustment to the beginning balance of retained earnings. Contracts with customers that were not substantially complete in both the Company’s marine and concrete segments were evaluated in order to determine the impact as of the date of adoption.

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 short in duration and usually span a period of less than one year. The Company determines the appropriate accounting treatment for each contract before work begins and generally records revenue on contracts 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. The Company’s contracts and related change orders typically represent a single performance obligation because the Company provides a significant integrated service and individual goods and services are not separately identifiable. Revenue is recognized over time because control is continuously transferred to the customer. 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. When losses on uncompleted contracts are anticipated, the entire loss is recognized 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. Based on its reading of the contract and its performance, the Company believes collection of these claims is probable, although the full amount of the recorded claims may not be collected.

Contract assets and liabilities 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.

·

Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts - 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 (i.e. Contract Assets) and are recorded as a current asset, until such amounts are either received or written off.

·

Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts - Represent billings in excess of revenues recognized (i.e. Contract Liabilities) and are recorded as a current liability, until the underlying obligation has been performed or discharged.

The following table summarizes the cumulative effect of the changes made to the Company’s unaudited Consolidated Balance Sheet as of January 1, 2018 from the adoption of Topic 606:

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance at

    

Adjustments

    

Balance at

 

 

December 31, 

 

Due to Topic

 

January 1,

 

 

2017

 

606

 

2018

Assets

 

 

  

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

46,006

 

$

1,383

 

$

47,389

Liabilities

 

 

  

 

 

  

 

 

  

Billings in excess of costs and estimated earnings on uncompleted contracts

 

$

33,923

 

$

1,745

 

$

35,668

Deferred income tax liability

 

 

13,243

 

 

(76)

 

 

13,167

Equity

 

 

  

 

 

  

 

 

  

Retained earnings

 

$

62,847

 

$

(286)

 

$

62,561

 

The following tables summarize the impact of adopting Topic 606 on the Company’s Consolidated Balance Sheet as of December 31, 2018 and Statement of Operations for the year ended December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Balances Without

    

 

 

 

 

 

 

 

Adoption of

 

Effect of Change

 

 

As Reported

 

Topic 606

 

Higher (Lower)

Assets

 

 

  

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

9,217

 

$

10,040

 

$

(823)

Liabilities

 

 

  

 

 

  

 

 

  

Billings in excess of costs and estimated earnings on uncompleted contracts

 

$

21,761

 

$

22,886

 

$

(1,125)

Deferred income tax liability

 

 

49

 

 

(57)

 

 

106

Equity

 

 

  

 

 

  

 

 

  

Retained earnings

 

$

(31,861)

 

$

(32,057)

 

$

196

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Balances Without

    

 

 

 

 

 

 

 

Adoption of

 

Effect of Change

 

 

As Reported

 

Topic 606

 

Higher (Lower)

Contract revenues

 

$

520,894

 

$

519,769

 

$

1,125

Cost of contract revenues

 

 

504,118

 

 

503,295

 

 

823

Gross profit

 

 

16,776

 

 

16,474

 

 

302

Income tax (benefit) expense

 

 

(12,233)

 

 

(12,339)

 

 

106

Net (loss) income

 

$

(94,422)

 

$

(94,618)

 

$

196

 

 

 

 

 

 

 

 

 

 

Basic (loss) income per share

 

$

(3.31)

 

$

(3.32)

 

$

0.01

Diluted (loss) income per share

 

$

(3.31)

 

$

(3.32)

 

$

0.01

 

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, 2019, the aggregate amount of the remaining performance obligations was approximately $572.3 million. Of this amount, the Company expects to recognize $465.1 million, or 81%, in the next 12 months and the remaining balance thereafter.

 

Classification of Current Assets and Liabilities

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

Cash, 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, 2019 and 2018 consisted primarily of overnight bank deposits.

Restricted cash as of December 31, 2019 consisted of $1.0 million of collateral related to a marine project and is classified in current assets. 

Risk Concentrations

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

The Company depends on its ability to continue to obtain federal, state and local governmental contracts, and indirectly, on the amount of funding available to these agencies for new and current governmental projects. 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, less allowances for doubtful accounts. The Company has significant investments in billed and unbilled receivables as of December 31, 2019 and 2018. 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, which are included in costs in excess of billings, arise as revenues are recognized over time. Unbilled amounts on contracts represent recoverable costs and accrued profits not yet billed. Revenue associated with these billings is recorded net of any sales tax, if applicable. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability. In establishing an allowance for doubtful accounts, the Company evaluates its contract receivables and costs in excess of billings 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 doubtful accounts if it is determined that the amounts will not be collected or if a settlement is reached for an amount that is less than the carrying value. As of December 31, 2019 and 2018, the Company has recorded an allowance for doubtful accounts of $2.6 million and $4.3 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, 2019 totaled $42.5 million, of which $11.0 million is expected to be collected beyond 2020. Retainage at December 31, 2018 totaled $30.7 million.

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 expenditure is considered probable and the amount can be reasonably estimated. The Company did not recognize any environmental liabilities as of December 31, 2019 or  2018, respectively.

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 9 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. 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. Refer to Note 8 for more information regarding inventory.

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 seven 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 5 years

Buildings and improvements

 

5 to 30 years

Construction equipment

 

3 to 15 years

Vessels and other equipment

 

1 to 15 years

Office equipment

 

1 to 5 years

 

The Company generally uses accelerated depreciation methods for tax purposes where appropriate.

Dry-docking costs are capitalized and amortized using the straight-line method over a period ranging from three to 15 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 charge 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, 2019 or December 31, 2018.

Leases

The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, on a prospective basis, forgoing comparative reporting. The Company elected to utilize the transition guidance within the new standard, which allows the Company to carryforward the historical lease classification. The Company elected to not separate lease and non-lease components for all classes of underlying assets in which it is the lessee and made an accounting policy election to not account for leases with an initial term of 12 months or less on the balance sheet. Adoption of the standard resulted in the recording of additional net ROU operating lease assets of approximately $23.3 million and lease liabilities for operating leases of approximately $24.0 million on the Consolidated Balance Sheets as of January 1, 2019. The adoption of this guidance did not have an impact on net income. See Note 20 for more information regarding leases.

Intangible Assets

Intangible assets that have finite lives are amortized. In addition, the Company evaluates 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. If the estimate of an intangible asset’s remaining life is changed, the remaining carrying value of such asset is amortized prospectively over that revised remaining useful life. Intangible assets that have infinite lives are not amortized, but are subject to impairment testing at least annually or more frequently if events or circumstances indicate that the asset may be impaired.

The Company has one infinite-lived intangible asset, a trade name, which is tested for impairment annually on October 31, or whenever events or circumstances indicate that the carrying amount of the trade name may not be recoverable. Impairment is calculated as the excess of the trade name’s carrying value over its fair value. The fair value of the trade name is 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.

See Note 10 for additional discussion of intangible assets and trade name impairment testing.

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 options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions in the computation. Changes in these assumptions can cause significant fluctuations in the fair value of the option award. The fair value of restricted stock grants 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 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 16 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 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 14 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 $200 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 $200 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 Results 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 accrued liability for insurance includes incurred but not reported claims of $3.7 million and $5.7 million at December 31, 2019 and 2018, respectively.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issues accounting standards and updates (each, an "ASU") from time to time to its Accounting Standards Codification (‘ASC’), which is the primary source of U.S. GAAP. The Company regularly monitors ASUs as they are issued and considers applicability to its business. All ASUs are adopted by their respective due dates and in the manner prescribed by the FASB.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which changes the way in which entities estimate and present credit losses for most financial assets, including accounts receivable.  The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year.  Early adoption is permitted, although the Company does not intend to do so.  For the Company’s trade receivables, certain other receivables and certain other financial instruments, it will be required to use a new forward-looking “expected” credit loss model based on historical loss rates that will replace the existing “incurred” credit loss model, which will generally result in earlier recognition of allowances for credit losses.  The Company is currently evaluating the impact this guidance will have on its consolidated financial statements, but it does not anticipate the new standard will materially impact the financial statements.

During the periods presented in these financial statements, the Company implemented other new accounting pronouncements other than those noted above that are discussed in the notes where applicable. 

v3.19.3.a.u2
Contracts in Progress
12 Months Ended
Dec. 31, 2019
Contractors [Abstract]  
Contracts in Progress

 

6.Contracts in Progress

Contracts in progress are as follows at December 31, 2019 and December 31, 2018:

 

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Costs incurred on uncompleted contracts

 

$

884,244

 

$

461,144

Estimated earnings

 

 

144,160

 

 

73,170

 

 

 

1,028,404

 

 

534,314

Less: Billings to date

 

 

(1,035,796)

 

 

(546,858)

 

 

$

(7,392)

 

$

(12,544)

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

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

41,389

 

$

9,217

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

(48,781)

 

 

(21,761)

 

 

$

(7,392)

 

$

(12,544)

 

Included in cost and estimated earnings in excess of billings on uncompleted projects is approximately $0.1 million and $1.1 million at December 31, 2019 and 2018, respectively, related to claims and unapproved change orders. See Note 2 - Summary of Significant Accounting Principles to the Company’s consolidated financial statements for discussion of  the accounting for these claims.

Contract costs include all direct costs, such as materials 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. Incentive fees, if available, are billed to the customer based on the terms and conditions of the contract. Pending claims are recognized as an increase in contract revenue only when the collection is deemed probable and if the amount can be reasonably estimated for purposes of calculating total profit or loss on long-term contracts. Changes in job performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined, without regard to the percentage of completion.

During the year-ended December 31, 2018, we recognized unfavorable changes in our estimates on two construction projects in our Marine Segment. These changes were caused by prolonged weather delays, unforeseen access and other client-imposed restrictions that impacted our productivity. The result of these changes in estimates is reflected as a decrease in revenue of $22.8 million in the consolidated statement of operations for the year-ended December 31, 2018 and included in billings in excess of costs and estimated earnings on uncompleted contracts.

v3.19.3.a.u2
Leases - Maturities (Details)
$ in Thousands
Dec. 31, 2019
USD ($)
Operating Leases  
2020 $ 5,802
2021 4,327
2022 2,871
2023 2,250
2024 1,791
Thereafter 4,215
Total future minimum lease payments 21,256
Less - amount representing interest 2,617
Operating Lease, Liability, Total 18,639
Less - current lease obligations 5,043
Long-term lease obligations 13,596
Finance Leases  
2020 3,572
2021 3,190
2022 49
2023 41
2024 7
Total future minimum lease payments 6,859
Less - amount representing interest 311
Present value of future minimum lease payments 6,548
Less - current lease obligations 2,788
Long-term lease obligations $ 3,760
v3.19.3.a.u2
Contracts in Progress (Tables)
12 Months Ended
Dec. 31, 2019
Contractors [Abstract]  
Schedule of contracts in progress

 

 

 

 

 

 

 

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Costs incurred on uncompleted contracts

 

$

884,244

 

$

461,144

Estimated earnings

 

 

144,160

 

 

73,170

 

 

 

1,028,404

 

 

534,314

Less: Billings to date

 

 

(1,035,796)

 

 

(546,858)

 

 

$

(7,392)

 

$

(12,544)

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

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

41,389

 

$

9,217

Billings in excess of costs and estimated earnings on uncompleted contracts

 

 

(48,781)

 

 

(21,761)

 

 

$

(7,392)

 

$

(12,544)

 

v3.19.3.a.u2
Summary of Significant Accounting Principles (Tables)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Schedules of the impact of adoption of Topic 606

The following table summarizes the cumulative effect of the changes made to the Company’s unaudited Consolidated Balance Sheet as of January 1, 2018 from the adoption of Topic 606:

 

 

 

 

 

 

 

 

 

 

 

 

    

Balance at

    

Adjustments

    

Balance at

 

 

December 31, 

 

Due to Topic

 

January 1,

 

 

2017

 

606

 

2018

Assets

 

 

  

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

46,006

 

$

1,383

 

$

47,389

Liabilities

 

 

  

 

 

  

 

 

  

Billings in excess of costs and estimated earnings on uncompleted contracts

 

$

33,923

 

$

1,745

 

$

35,668

Deferred income tax liability

 

 

13,243

 

 

(76)

 

 

13,167

Equity

 

 

  

 

 

  

 

 

  

Retained earnings

 

$

62,847

 

$

(286)

 

$

62,561

 

The following tables summarize the impact of adopting Topic 606 on the Company’s Consolidated Balance Sheet as of December 31, 2018 and Statement of Operations for the year ended December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Balances Without

    

 

 

 

 

 

 

 

Adoption of

 

Effect of Change

 

 

As Reported

 

Topic 606

 

Higher (Lower)

Assets

 

 

  

 

 

  

 

 

  

Costs and estimated earnings in excess of billings on uncompleted contracts

 

$

9,217

 

$

10,040

 

$

(823)

Liabilities

 

 

  

 

 

  

 

 

  

Billings in excess of costs and estimated earnings on uncompleted contracts

 

$

21,761

 

$

22,886

 

$

(1,125)

Deferred income tax liability

 

 

49

 

 

(57)

 

 

106

Equity

 

 

  

 

 

  

 

 

  

Retained earnings

 

$

(31,861)

 

$

(32,057)

 

$

196

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Balances Without

    

 

 

 

 

 

 

 

Adoption of

 

Effect of Change

 

 

As Reported

 

Topic 606

 

Higher (Lower)

Contract revenues

 

$

520,894

 

$

519,769

 

$

1,125

Cost of contract revenues

 

 

504,118

 

 

503,295

 

 

823

Gross profit

 

 

16,776

 

 

16,474

 

 

302

Income tax (benefit) expense

 

 

(12,233)

 

 

(12,339)

 

 

106

Net (loss) income

 

$

(94,422)

 

$

(94,618)

 

$

196

 

 

 

 

 

 

 

 

 

 

Basic (loss) income per share

 

$

(3.31)

 

$

(3.32)

 

$

0.01

Diluted (loss) income per share

 

$

(3.31)

 

$

(3.32)

 

$

0.01

 

Schedule of depreciable lives of property, plant and equipment

 

 

 

Automobiles and trucks

    

3 to 5 years

Buildings and improvements

 

5 to 30 years

Construction equipment

 

3 to 15 years

Vessels and other equipment

 

1 to 15 years

Office equipment

 

1 to 5 years

 

v3.19.3.a.u2
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

14.Income Taxes

The following table presents the components of our consolidated income tax (benefit) expense for the years ended December 31, 2019, 2018 and 2017:

 

 

 

 

 

 

 

 

 

 

 

 

    

Current

    

Deferred

    

Total

Year ended December 31, 2019

 

 

  

 

 

  

 

 

  

U.S. Federal

 

$

 —

 

$

 —

 

$

 —

State and local

 

 

716

 

$

104

 

$

820

Foreign

 

 

1,081

 

 

(33)

 

 

1,048

 

 

$

1,797

 

$

71

 

$

1,868

Year ended December 31, 2018

 

 

  

 

 

  

 

 

  

U.S. Federal

 

$

(12)

 

$

(12,664)

 

$

(12,676)

State and local

 

 

183

 

$

(471)

 

$

(288)

Foreign

 

 

731

 

 

 —

 

 

731

 

 

$

902

 

$

(13,135)

 

$

(12,233)

Year ended December 31, 2017

 

 

  

 

 

  

 

 

  

U.S. Federal  (a)

 

$

(780)

 

$

(3,986)

 

$

(4,766)

State and local

 

 

550

 

 

(180)

 

 

370

Foreign

 

 

(145)

 

 

 —

 

 

(145)

 

 

$

(375)

 

$

(4,166)

 

$

(4,541)


(a)

Includes a $5.9 million net benefit recorded in the fourth quarter of 2017 resulting from the enactment of the Act on December 22, 2017.

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:

 

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

 

Statutory amount (computed at 21% in 2019 and 2018 and 35% in 2017)

 

$

(733)

 

$

(22,398)

 

$

(1,449)

 

Re-measurement of deferred tax assets (a)

 

 

 —

 

 

 —

 

 

(7,451)

 

Valuation allowance on foreign tax credits (a)

 

 

1,081

 

 

593

 

 

1,514

 

State income tax, net of federal benefit

 

 

991

 

 

(1,922)

 

 

168

 

Permanent differences, other

 

 

461

 

 

1,550

 

 

505

 

Permanent differences, incentive stock options

 

 

311

 

 

(24)

 

 

447

 

Valuation allowance, other

 

 

(166)

 

 

10,384

 

 

(77)

 

Uncertain tax provision

 

 

 —

 

 

 —

 

 

1,614

 

Other

 

 

(77)

 

 

(416)

 

 

188

 

Consolidated income tax provision

 

$

1,868

 

$

(12,233)

 

$

(4,541)

 

Consolidated effective tax rate

 

 

(53.5)

%  

 

11.5

%  

 

109.7

%


(a)

In 2017, represents impact resulting from the enactment of the Act on December 22, 2017.

In the year ended 2019, the Company’s effective tax rate differed from the statutory rate of 21% primarily due to the recording of an additional valuation allowance to offset net operating loss carryforwards and foreign tax credits generated during the period, foreign taxes, state income taxes and the non-deductibility of certain permanent items.

In the year ended 2018, the Company’s effective tax rate differed from the statutory rate of 21% primarily due to recording an $11.0 million, or $0.39 per share, valuation allowance against the Company’s net deferred tax assets, including net operating losses and foreign tax credits. The Company also recorded tax expense of $1.2 million related to the $69.5 million goodwill impairment. Additionally, the Company recorded tax expense related to permanent differences from meals and entertainment.

In the year ended 2017, the Company’s effective tax rate differed from the statutory rate of 35% primarily due to the impact of the Act enacted on December 22, 2017. We recorded a net tax benefit of $5.9 million, or $0.21 per share, resulting from the re-measurement of the Company’s net deferred tax liabilities to reflect the new, lower U.S. corporate income tax rate of 21%, partially offset by the addition of a partial valuation allowance recorded against existing foreign tax credit carryforwards not expected to be utilized in future tax years. This net tax benefit was partially offset by the addition of an uncertain tax position reserve as well as tax expense for permanent differences associated with incentive stock options and meals and entertainment.

Deferred Taxes

The Company’s deferred tax assets and liabilities are as follows:

 

 

 

 

 

 

 

 

 

 

Long Term

 

 

As of December 31, 

 

    

2019

    

2018

Assets related to:

 

 

  

 

 

  

Accrued liabilities

 

$

1,030

 

$

1,105

Intangible assets

 

 

3,020

 

 

3,054

Net operating loss carryforward

 

 

15,246

 

 

15,970

Non-qualified stock options

 

 

586

 

 

672

Foreign tax credits

 

 

2,570

 

 

1,489

Goodwill

 

 

7,232

 

 

8,200

Leases

 

 

9,038

 

 

 —

Other

 

 

1,347

 

 

2,684

Total gross deferred tax assets

 

 

40,069

 

 

33,174

Less valuation allowance

 

 

(16,960)

 

 

(15,815)

Total net deferred tax assets

 

 

23,109

 

 

17,359

Liabilities related to:

 

 

  

 

 

  

Depreciation and amortization

 

 

(22,634)

 

 

(16,974)

Other

 

 

(595)

 

 

(434)

Total deferred tax liabilities

 

 

(23,229)

 

 

(17,408)

Net deferred tax liabilities

 

$

(120)

 

$

(49)

 

The Company has net operating loss carryforwards for federal income tax purposes of $44.1 million as of December 31, 2019, which are available to reduce future taxable income. The amount of net operating loss that arose before the 2018 tax year is $7.5 million.  These net operating losses will expire beginning 2032 and continuing through 2037.  In addition, the Company has $36.6 million of net operating losses that arose after the 2017 tax year.  These carryforwards last for an indefinite period of time but are limited to offset 80% of taxable income in any given year.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use 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 three-year cumulative loss is a significant piece of objective evidence. This objective 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, 2019, the Company continued to maintain a valuation allowance of $17.0 million.  This includes an increase of $1.1 million during the year ended December 31, 2019 primarily to offset the value of additional foreign tax credits generated during the year.  

Uncertain Tax Benefits

The Company and its subsidiaries file consolidated federal income tax returns in the United States and also file in various states. With few exceptions, the Company remains subject to federal and state income tax examinations for the years of 2013-2019. As of December 31, 2019, the Company has recorded unrecognized tax benefits of $1.6 million for any uncertain tax positions. The Company does not expect that unrecognized tax benefits as of December 31, 2019 for certain federal income tax matters will significantly change over the next 12 months. The final outcome of these uncertain tax positions is not yet determinable. Our uncertain tax benefits, if recognized, would affect the Company’s effective tax rate. The change in the total gross unrecognized tax benefits and prior year audit resolutions of the Company during the years ended December 31, 2019 and 2018 are reconciled in the table below:

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

Balances 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 the end of 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, 2019, 2018 and 2017. 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 does not believe that its tax positions will significantly change due to any settlement and/or expiration of statutes of limitations prior to December 31, 2020.

v3.19.3.a.u2
Commitments and Contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

18.Commitments and Contingencies

The Company and one former and two current officers are named defendants in a class action lawsuit filed on April 11, 2019 in the United States District Court for the Southern District of Texas, Houston Division, seeking unstated compensatory damages under the federal securities laws allegedly arising from materially false and misleading statements during the period of March 13, 2018 to March 18, 2019. The complaint asserts, among other things, that the current and former officers caused the Company to overstate goodwill in certain periods; overstate accounts receivable; that the company lacked effective internal controls over financial reporting related to goodwill impairment testing and accounts receivable; and that as a result the required adjustments to goodwill and accounts receivable materially impacted the company’s financial statements causing the company’s stock price to be artificially inflated during the class period. The Company has responded to the complaint, considers all of these allegations without merit and is vigorously contesting the allegations.

In addition, from time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, civil penalties or other losses, or injunctive or declaratory relief and on rare occasions punitive damages. With respect to such lawsuits, the Company accrues reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe any of these or any other proceedings, individually or in the aggregate, would be expected to have a material adverse effect on results of operations, cash flows, or financial condition

A legal matter was settled in the Company’s favor for $5.5 million during the first quarter of 2018. Settlement amounts were recorded in Other gain from continuing operations in the Consolidated Statement of Operations, Prepaid expenses and other (current portion of the notes receivable) and Other non-current assets (non-current portion of the notes receivable) in the Consolidated Balance Sheets. As of December 31, 2019, the current portion of the notes receivable was $0.8 million and the non-current portion was $2.5 million, net of $0.3 million of unamortized discount. Legal fees related to this matter were expensed as incurred during the respective reporting period.

As a result of charges brought in September 2015 and October 2016 by the Houston Police Department, Environmental Enforcement, two subsidiaries of the Company were indicted at the request of the Harris County, Texas District Attorney’s Office by a duly organized Grand Jury of Harris County, Texas for separate but similar violations of the Texas Water Code, allegedly arising from the handling of construction concrete at certain work sites. Specifically, in each case the Company was charged with unlawfully, intentionally or knowingly discharging a waste or pollutant and is subject to a maximum fine of $250,000. The Company considers both cases without merit. However, without admitting to fault, the Company has, in both cases, agreed to diversion agreements under which the charges were dismissed, without prosecution, upon our payment of fines. None of these allegations nor the costs of defense, taken separately or as a whole, is expected to have a material impact on the Company’s balance sheet or its liquidity.

v3.19.3.a.u2
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Comprehensive Income [Abstract]      
Change in fair value of cash flow hedge, tax (benefit) $ (228)    
Change in fair value of cash flow hedge, net of tax   $ (15) $ 53
v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 128 $ 8,684
Restricted cash 958  
Accounts receivable:    
Trade, net of allowance of $2,600 and $4,280, respectively 116,540 77,641
Retainage 42,547 30,734
Other current 2,680 4,257
Income taxes receivable 962 467
Inventory 1,114 1,056
Costs and estimated earnings in excess of billings on uncompleted contracts 41,389 9,217
Prepaid expenses and other 5,647 5,000
Total current assets 211,965 137,056
Property and equipment, net of depreciation 132,348 148,003
Operating lease right-of-use assets, net of amortization 17,997  
Financing lease right-of-use assets, net of amortization 7,896  
Inventory, non-current 7,037 7,598
Goodwill   0
Intangible assets, net of amortization 12,147 14,787
Deferred income tax asset 85  
Other non-current 5,369 5,426
Total assets 394,844 312,870
Current liabilities:    
Current debt, net of debt issuance costs 3,668 2,946
Accounts payable:    
Trade 70,421 42,023
Retainage 562 736
Accrued liabilities 16,966 18,840
Income taxes payable 1,523 0
Billings in excess of costs and estimated earnings on uncompleted contracts 48,781 21,761
Current portion of operating lease liabilities 5,043  
Current portion of financing lease liabilities 2,788  
Total current liabilities 149,752 86,306
Long-term debt, net of debt issuance costs 68,029 76,119
Operating lease liabilities 13,596  
Financing lease liabilities 3,760  
Other long-term liabilities 20,436 8,759
Deferred income tax liability 205 49
Interest rate swap liability 1,045 52
Total liabilities 256,823 171,285
Stockholders’ equity:    
Preferred stock -- $0.01 par value, 10,000,000 authorized, none issued 0 0
Common stock -- $0.01 par value, 50,000,000 authorized, 30,303,395 and 29,611,989 issued; 29,592,164 and 28,900,758 outstanding at December 31, 2019 and December 31, 2018, respectively 303 296
Treasury stock, 711,231 shares, at cost, as of December 31, 2019 and December 31, 2018, respectively (6,540) (6,540)
Other comprehensive loss (1,045) (52)
Additional paid-in capital 182,523 179,742
Retained earnings (37,220) (31,861)
Total stockholders' equity 138,021 141,585
Total liabilities and stockholders’ equity $ 394,844 $ 312,870
v3.19.3.a.u2
Employee Benefits (Tables)
12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Schedule of multi-employer plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Protection

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expiration

 

 

 

 

Act ("PPA")

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of

 

 

Employer

 

Certified Zone Status

 

FIP/RP

 

 

 

 

 

 

 

 

 

 

 

 

Collective

 

 

Identification

 

(1)

 

Status

 

Contributions

 

Surcharge

 

Bargaining

Pension Trust Fund

 

Number

 

2019

 

2018

 

P/I (2)

 

2019

 

2018

 

2017

 

Imposed

 

Agreement

International Union of Operating Engineers - Employers Construction Industry Retirement Plan - Local 302 and 612 Trust Funds

    

91-6028571

    

Green

    

Green

    

N/A

    

$

3,021

    

$

2,482

    

$

1,974

    

 —

    

2022

Washington Laborers

 

91-6022315

 

Green

 

Green

 

N/A

 

$

30

 

$

 —

 

$

 —

 

 —

 

2023

Carpenters Retirement Plan of Western Washington

 

91-6029051

 

Green

 

Green

 

N/A

 

$

695

 

$

932

 

$

693

 

 —

 

2022

Cement Masons & Plasterers Trust Funds

 

91-6066773

 

Green

 

Green

 

N/A

 

$

 2

 

$

 —

 

$

 —

 

 —

 

2023

Washington-Idaho-Montana Carpenters-Employers Retirement Trust Fund

 

91-6123987

 

Yellow

 

Yellow

 

I

 

$

36

 

$

 —

 

$

 —

 

 —

 

2021

Engineers - AGC Retirement Trust of the Inland Empire

 

91-6070237

 

Yellow

 

Yellow

 

I

 

$

20

 

$

 —

 

$

 —

 

 —

 

2021

Alaska Carpenters Trust Fund

 

92-0120866

 

Yellow

 

Green

 

I

 

$

377

 

$

328

 

$

396

 

 —

 

2021

Alaska Laborers Trust Fund

 

91-6028298

 

Yellow

 

Yellow

 

I

 

$

552

 

$

321

 

$

218

 

 —

 

2020


(1)

The most recent PPA zone status available in 2019 and 2018 is for the plan’s year end during 2018 and 2017, 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").

v3.19.3.a.u2
Other Long-Term Liabilities (Tables)
12 Months Ended
Dec. 31, 2019
Liabilities, Other than Long-term Debt, Noncurrent [Abstract]  
Schedule of other long-term liabilities

 

 

 

 

 

 

 

 

    

December 31, 2019

    

December 31, 2018

Sale-leaseback arrangement

 

$

17,447

 

$

 —

Accrual for insurance liabilities

 

 

2,989

 

 

2,355

Capital lease liability (1)

 

 

 —

 

 

5,189

Deferred rent

 

 

 —

 

 

759

Contingent consideration - TBC acquisition

 

 

 —

 

 

456

Total other long-term liabilities

 

$

20,436

 

$

8,759


December 31, 2018 balance relates to capital leases accounted for under ASC 840 and prior to the adoption of ASC 842 as of January 1, 2019.

v3.19.3.a.u2
Leases - Assets and Liabilities (Details)
$ in Thousands
Dec. 31, 2019
USD ($)
Leases [Abstract]  
Operating lease right-of-use assets, net of amortization $ 17,997
Financing lease right-of-use assets, net of amortization 7,896
Total assets 25,893
Current portion of operating lease liabilities 5,043
Current portion of financing lease liabilities 2,788
Total current 7,831
Operating lease liabilities 13,596
Financing lease liabilities 3,760
Total noncurrent 17,356
Total liabilities 25,187
Operating lease, right-of-use asset, accumulated amortization 5,200
Finance lease, right-of-use asset, accumulated amortization $ 6,200
v3.19.3.a.u2
Fair Value - Other Fair Value Measurements (Details) - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Life Insurance, face amount $ 11.1  
Reported Value Measurement    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value of debt $ 73.3 $ 80.5
v3.19.3.a.u2
Stock-Based Compensation - Narrative (Details)
$ / shares in Units, $ in Thousands
1 Months Ended 12 Months Ended
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2019
USD ($)
$ / shares
shares
Oct. 31, 2019
$ / shares
shares
Sep. 30, 2019
Jul. 31, 2019
$ / shares
shares
May 31, 2019
$ / shares
shares
Mar. 31, 2019
$ / shares
shares
Jan. 31, 2019
director
$ / shares
shares
Jul. 31, 2018
$ / shares
shares
May 31, 2018
$ / shares
shares
May 31, 2017
$ / shares
shares
May 31, 2011
Dec. 31, 2019
USD ($)
$ / shares
shares
Dec. 31, 2018
USD ($)
$ / shares
shares
Dec. 31, 2017
USD ($)
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Approved and authorized maximum number of shares to be issued                       2,400,000        
Compensation expense related to stock based awards outstanding | $                           $ 2,800 $ 2,200 $ 2,300
Granted (in shares)                             374,215 425,204
Granted (in dollars per share) | $ / shares                             $ 7.49 $ 7.22
Proceeds received upon exercise of stock options | $                           $ 35 $ 2,815 $ 1,320
Exercise of stock options, shares                           7,021 488,303 229,551
Total share-based compensation cost not yet recognized | $     $ 2,000                     $ 2,000    
Share-based compensation cost not yet recognized, period for recognition                           1 year 6 months    
Total intrinsic value of options exercised | $                             $ 1,286 $ 706
Total fair value of shares vested | $                           $ 769 $ 705 $ 855
Independent Directors                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Number of new directors | director                 2              
Officers And Executives                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Vesting period                             3 years  
Performance period                               3 years
Weighted average grant-date fair value of options granted (in USD per share) | $ / shares                             $ 7.49 $ 7.22
Granted (in shares)                             374,215 425,204
Maximum                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Proceeds received upon exercise of stock options | $                           $ 100    
Stock options                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Expiration period                         10 years      
Forfeiture rate applied to options                           5.50%    
Stock options | Minimum                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Vesting period                         3 years      
Stock options | Maximum                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Vesting period                         5 years      
Restricted stock                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Awards granted in period (in shares)                           757,012 333,864 345,913
Weighted average grant date fair value (in dollars per share) | $ / shares                           $ 2.52 $ 7.47 $ 7.22
Restricted stock | Independent Directors                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Awards granted in period (in shares)       14,218     45,918   8,427   12,064 12,465        
Weighted average grant date fair value (in dollars per share) | $ / shares       $ 4.22     $ 1.96   $ 4.45   $ 7.46 $ 7.22        
Restricted stock | Officers And Executives                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Vesting period     3 years     3 years 3 years       3 years         3 years
Awards granted in period (in shares)     31,500     46,500 62,500     2,769 203,752         213,643
Weighted average grant date fair value (in dollars per share) | $ / shares     $ 5.08     $ 3.66 $ 1.96     $ 9.03 $ 7.46         $ 7.22
Restricted stock | Certain Executives                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Vesting percentage 33.30% 33.30%     33.30%                      
Awards granted in period (in shares)               168,350                
Weighted average grant date fair value (in dollars per share) | $ / shares               $ 2.97                
Performance Shares | Certain Executives                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Shares earned based on achievement of objective, percent             100.00%                  
Awards granted in period (in shares)             187,500       67,023 69,945        
Weighted average grant date fair value (in dollars per share) | $ / shares             $ 1.96       $ 7.46 $ 7.22        
Performance period             1 year       3 years 2 years        
Performance Shares | Vesting If Performance Target Is Met | Certain Executives                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Vesting percentage             50.00%                  
Performance Shares | Vesting On Second And Third Anniversary Of Grant | Certain Executives                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Vesting percentage             25.00%                  
2017 LTIP | Stock options                                
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                                
Forfeiture rate applied to options                           3.20%    
v3.19.3.a.u2
Revenue (Details)
$ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2019
USD ($)
Sep. 30, 2019
USD ($)
Jun. 30, 2019
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Sep. 30, 2018
USD ($)
Jun. 30, 2018
USD ($)
Mar. 31, 2018
USD ($)
Dec. 31, 2019
USD ($)
segment
Dec. 31, 2018
USD ($)
segment
Dec. 31, 2017
USD ($)
Disaggregation of Revenue [Line Items]                      
Contract revenues $ 199,793 $ 199,507 $ 165,985 $ 143,105 $ 99,211 $ 125,073 $ 159,767 $ 136,843 $ 708,390 $ 520,894 $ 578,553
Number of reportable segments | segment                 2 2  
Marine                      
Disaggregation of Revenue [Line Items]                      
Contract revenues                 $ 369,138 $ 243,883  
Marine | Construction                      
Disaggregation of Revenue [Line Items]                      
Contract revenues                 242,527 156,925  
Marine | Dredging                      
Disaggregation of Revenue [Line Items]                      
Contract revenues                 112,303 73,237  
Marine | Specialty Services                      
Disaggregation of Revenue [Line Items]                      
Contract revenues                 14,308 13,721  
Concrete                      
Disaggregation of Revenue [Line Items]                      
Contract revenues                 339,252 277,011  
Concrete | Structural                      
Disaggregation of Revenue [Line Items]                      
Contract revenues                 284,624 215,628  
Concrete | Light Commercial                      
Disaggregation of Revenue [Line Items]                      
Contract revenues                 54,497 60,926  
Concrete | Other                      
Disaggregation of Revenue [Line Items]                      
Contract revenues                 $ 131 $ 457  
v3.19.3.a.u2
Property and Equipment (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Property, Plant and Equipment    
Property, plant and equipment, gross $ 292,260 $ 304,728
Less: accumulated depreciation (196,973) (195,373)
Property, plant and equipment net book value of depreciable assets 95,287 109,355
Property and equipment, net of depreciation 132,348 148,003
Automobiles and trucks    
Property, Plant and Equipment    
Property, plant and equipment, gross 2,161 1,709
Building and improvements    
Property, Plant and Equipment    
Property, plant and equipment, gross 44,278 43,628
Construction equipment    
Property, Plant and Equipment    
Property, plant and equipment, gross 153,147 161,113
Vessels and other equipment    
Property, Plant and Equipment    
Property, plant and equipment, gross 84,022 90,217
Office equipment    
Property, Plant and Equipment    
Property, plant and equipment, gross 8,652 8,061
Construction in progress    
Property, Plant and Equipment    
Property, plant and equipment, gross 1,198 2,785
Land    
Property, Plant and Equipment    
Property, plant and equipment, gross $ 35,863 35,863
Assets Held under Capital Leases [Member]    
Property, Plant and Equipment    
Property and equipment, net of depreciation   $ 9,200
v3.19.3.a.u2
Employee Benefits - Narrative (Details) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
401 (k) Retirement Plan [Abstract]      
Minimum service period for plan eligibility 6 months    
Minimum allowable contribution to the plan by each employee, percent 1.00%    
Maximum allowable contribution to the plan by each employee, percent 80.00%    
Employers matching contribution, vesting period 4 years    
Company contributions to the plan $ 1.3 $ 1.4 $ 1.4
Range 1      
401 (k) Retirement Plan [Abstract]      
Employer matching contribution, percent 100.00%    
Employer matching contribution, percent of employees' gross pay 2.00%    
Range 2      
401 (k) Retirement Plan [Abstract]      
Employer matching contribution, percent 50.00%    
Employer matching contribution, percent of employees' gross pay 2.00%    
AGC Southwest Chapters 401(k) Retirement Plan      
401 (k) Retirement Plan [Abstract]      
Employer matching contribution, percent 50.00%    
Employers matching contribution, vesting period 5 years    
Employer matching contribution, percent of employees' gross pay 6.00%    
Employer discretionary contribution amount $ 0.1 $ 0.2 $ 0.4