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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
☑    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2021

OR

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

COMMISSION FILE NUMBER: 001-37796

Infrastructure & Energy Alternatives, Inc.
(Exact Name of Registrant as Specified in Charter)
 
Delaware     47-4787177
(State or Other Jurisdiction
of Incorporation) 		    (IRS Employer
Identification No.)
 
6325 Digital Way
Suite 460
Indianapolis, Indiana
  46278
(Address of Principal Executive Offices)   (Zip Code)
 
Registrant’s telephone number, including area code: (765) 828-2580

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbols(s) Name of exchange on which registered
Common Stock, $0.0001 par value IEA The NASDAQ Stock Market LLC
Warrants for Common Stock IEAWW The NASDAQ Stock Market LLC
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 such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☑ Smaller reporting company ☑ Emerging growth company ☐

If an emerging growth company, indicate 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

Number of shares of Common Stock outstanding as of the close of business on July 28, 2021: 25,150,306.





PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Balance Sheets
($ in thousands, except per share data)
(Unaudited)
June 30, 2021 December 31, 2020
Assets
Current assets:
Cash and cash equivalents $ 117,674  $ 164,041 
Accounts receivable, net 232,323  163,793 
Contract assets 176,958  145,183 
Prepaid expenses and other current assets 33,007  19,352 
        Total current assets 559,962  492,369 
Property, plant and equipment, net 135,514  130,746 
Operating lease assets 37,701  36,461 
Intangible assets, net 22,202  25,434 
Goodwill 37,373  37,373 
Company-owned life insurance 4,760  4,250 
Deferred income taxes 295  2,069 
Other assets 533  438 
        Total assets $ 798,340  $ 729,140 
Liabilities and Stockholder's Equity (Deficit)
Current liabilities:
Accounts payable $ 149,352  $ 104,960 
Accrued liabilities 201,828  129,594 
Contract liabilities 90,566  118,235 
Current portion of finance lease obligations 24,842  25,423 
Current portion of operating lease obligations 9,817  8,835 
Current portion of long-term debt 2,277  2,506 
          Total current liabilities 478,682  389,553 
Finance lease obligations, less current portion 27,370  32,146 
Operating lease obligations, less current portion 29,355  29,154 
Long-term debt, less current portion 161,266  159,225 
Debt - Series B Preferred Stock 176,556  173,868 
Warrant obligations 8,834  9,200 
Deferred compensation 7,930  8,672 
         Total liabilities $ 889,993  $ 801,818 
Commitments and contingencies:
Series A Preferred Stock, par value, $0.0001 per share; 1,000,000 shares authorized; 17,483 shares and 17,483 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively
17,483  17,483 
Stockholders' equity (deficit):
Common stock, par value, $0.0001 per share; 150,000,000 and 150,000,000 shares authorized; 25,150,306 and 21,008,745 shares issued and 25,150,306 and 21,008,745 outstanding at June 30, 2021 and December 31, 2020, respectively
3  2 
Additional paid in capital 32,064  35,305 
Accumulated deficit (141,203) (125,468)
           Total stockholders' deficit (109,136) (90,161)
           Total liabilities and stockholders' deficit $ 798,340  $ 729,140 
See accompanying notes to condensed consolidated financial statements.
1

INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Operations
($ in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Revenue $ 560,148  $ 480,604  $ 836,560  $ 838,767 
Cost of revenue 506,665  426,363  766,536  751,485 
Gross profit 53,483  54,241  70,024  87,282 
Selling, general and administrative expenses 30,894  28,074  55,740  57,558 
Income from operations 22,589  26,167  14,284  29,724 
Other income (expense), net:
Interest expense, net (14,495) (16,200) (28,854) (32,265)
Other income (expense) 770  (1,631) 608  (2,733)
Income (loss) before benefit for income taxes 8,864  8,336  (13,962) (5,274)
Provision for income taxes (4,165) (4,739) (1,773) (3,872)
Net income (loss) $ 4,699  $ 3,597  $ (15,735) $ (9,146)
Less: Convertible Preferred Stock dividends (676) (606) (1,332) (1,372)
Less: Net income allocated to participating securities (788) (802) —  — 
Net income (loss) available for common stockholders $ 3,235  $ 2,189  $ (17,067) $ (10,518)
Net income (loss) per common share - basic 0.13  0.11  (0.72) (0.51)
Net income (loss) per common share - diluted 0.12  0.09  (0.72) (0.51)
Weighted average shares - basic 24,471,286  20,751,673  23,768,413  20,636,944 
Weighted average shares - diluted 33,439,303  39,978,382  23,768,413  20,636,944 

See accompanying notes to condensed consolidated financial statements.

2

INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
($ in thousands)
(Unaudited)
Common Stock Additional Paid-in Capital Treasury Stock Accumulated Deficit Total Equity (Deficit)
Shares Par Value Shares Cost
Balance at December 31, 2019 20,461  $ 2  $ 17,167  (14) $ (76) $ (126,196) $ (109,103)
Net loss —  —  —  —  —  (12,743) (12,743)
Share-based compensation —  —  1,113  —  —  —  1,113 
Equity plan compensation 240  —  280  (38) (84) —  196 
Series B Preferred Stock - Warrants at close —  —  15,631  —  —  —  15,631 
Series A Preferred dividends —  —  (766) —  —  —  (766)
Balance at March 31, 2020 20,701  $ 2  $ 33,425  (52) $ (160) $ (138,939) $ (105,672)
Net income —  —  —  —  —  3,597  3,597 
Share-based compensation —  —  844  —  —  —  844 
Equity plan compensation 441  —  800  (129) (235) —  565 
Series A Preferred dividends —  —  (606) —  —  —  (606)
Balance at June 30, 2020 21,142  $ 2  $ 34,463  (181) $ (395) $ (135,342) $ (101,272)
Balance at December 31, 2020 21,009  $ 2  $ 35,305  —  $ —  $ (125,468) $ (90,161)
Net loss —  —  —  —  —  (20,434) (20,434)
Earnout Shares 1,803  —  —  —  —  —  — 
Share-based compensation —  —  727  —  —  —  727 
Equity plan compensation 521  —  (2,909) —  —  —  (2,909)
Exercise of warrants 15  —  —  —  —  —  — 
Series A Preferred dividends —  —  (656) —  —  —  (656)
Balance at March 31, 2021 23,348  $ 2  $ 32,467  —  $ —  $ (145,902) $ (113,433)
Net loss —  —  —  —  —  4,699  4,699 
Share-based compensation —  —  1,926  —  —  —  1,926 
Equity plan compensation 249  —  (1,853) —  —  —  (1,853)
Exercise of warrants 1,553  1  200  —  —  —  201 
Series A Preferred dividends —  —  (676) —  —  —  (676)
Balance at June 30, 2021 25,150  $ 3  $ 32,064  —  $ —  $ (141,203) $ (109,136)

See accompanying notes to condensed consolidated financial statements.
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INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
Six Months Ended June 30,
2021 2020
Cash flows from operating activities:
Net loss $ (15,735) $ (9,146)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization 21,830  24,001 
   Warrant liability fair value adjustment (366) 2,828 
   Amortization of debt discounts and issuance costs 5,814  5,379 
   Share-based compensation expense 2,653  1,957 
   Loss on sale of equipment —  574 
   Deferred compensation (742) (830)
   Accrued dividends on Series B Preferred Stock —  7,959 
   Deferred income taxes 1,773  3,659 
   Other, net (172) 227 
   Change in operating assets and liabilities:
       Accounts receivable (68,531) (8,349)
       Contract assets (31,775) (41,565)
       Prepaid expenses and other assets (13,752) (16,685)
       Accounts payable and accrued liabilities 115,294  (42,097)
       Contract liabilities (27,669) 7,458 
       Net cash used in operating activities (11,378) (64,630)
Cash flow from investing activities:
   Company-owned life insurance (510) 812 
   Purchases of property, plant and equipment (14,649) (5,171)
   Proceeds from sale of property, plant and equipment 1,527  2,837 
       Net cash used in investing activities (13,632) (1,522)
Cash flows from financing activities:
   Proceeds from long-term debt —  72,000 
   Payments on long-term debt (1,314) (82,357)
   Payments on finance lease obligations (15,481) (12,468)
   Proceeds from issuance of Series B Preferred Stock —  350 
   Proceeds of issuance of employee stock awards —  760 
   Shares repurchased for tax withholding on release of restricted stock units (4,762) — 
   Proceeds from exercise of warrants 200  — 
       Net cash used in financing activities $ (21,357) $ (21,715)
Net change in cash and cash equivalents (46,367) (87,867)
Cash and cash equivalents, beginning of the period 164,041  147,259 
Cash and cash equivalents, end of the period $ 117,674  $ 59,392 

See accompanying notes to condensed consolidated financial statements.
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INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
(Continued)
Six Months Ended June 30,
2021 2020
Supplemental disclosures:
  Cash paid for interest 14,892  17,821 
  Cash paid (received) for income taxes 3,271  (735)
Schedule of non-cash activities:
   Acquisition of assets/liabilities through finance lease 10,125  7,635 
   Acquisition of assets/liabilities through operating lease 6,265  5,295 
   Series A Preferred dividends declared 1,332  1,372 

See accompanying notes to condensed consolidated financial statements.

5

INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Notes to the Condensed Consolidated Financial Statements
(unaudited)

Note 1. Business, Basis of Presentation and Significant Accounting Policies

Organization and Reportable Segments

    Infrastructure and Energy Alternatives, Inc., a Delaware corporation, is a holding company organized on August 4, 2015 (together with its wholly-owned subsidiaries, “IEA” or the “Company”). On March 26, 2018, we became a public company by consummating a merger (the “Merger”) pursuant to an Agreement and Plan of Merger, dated November 3, 2017, with M III Acquisition Corporation (“M III”).

We segregate our business into two reportable segments: the Renewables segment and the Heavy Civil and Industrial (“Specialty Civil”) segment. See Note 10. Segments for a description of the reportable segments and their operations.

Principles of Consolidation

    The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions for Quarterly Reports on Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with GAAP have been condensed or omitted.

    The unaudited condensed consolidated financial statements include the accounts of IEA and its wholly-owned domestic and foreign subsidiaries. The Company occasionally forms joint ventures with unrelated third parties for the execution of single contracts or projects. The Company assesses its joint ventures to determine if they meet the qualifications of a variable interest entity (“VIE”) in accordance with Accounting Standard Codification (“ASC”) Topic 810, Consolidation. For construction joint ventures that are not VIEs or fully consolidated but for which the Company has significant influence, the Company accounts for its interest in the joint ventures using the proportionate consolidation method, see Note 11. Joint Ventures.
In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) that are necessary to present fairly the results of operations for the interim periods presented. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020 and notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

Basis of Accounting and Use of Estimates
    
    The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of the condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Key estimates include: the recognition of revenue and project profit or loss; fair value estimates; valuations of goodwill and intangible assets; asset lives used in computing depreciation and amortization; accrued self-insured claims; other reserves and accruals; accounting for income taxes; and the estimated impact of contingencies and ongoing litigation. While management believes that its estimates are reasonable when considered in conjunction with the Company’s consolidated financial position and results of operations, actual results could differ materially from those estimates.

Revenue Recognition
    The Company derives revenue primarily from construction projects performed under contracts for specific projects requiring the construction and installation of an entire infrastructure system or specified units within an infrastructure system. Contracts contain multiple pricing options, such as fixed price, time and materials, or unit price. Generally, renewable energy projects are performed for private customers while Specialty Civil projects are performed for various governmental entities.
    Revenue derived from projects billed on a fixed-price basis totaled 99.3% and 98.0% of consolidated revenue from operations for the three months ended June 30, 2021 and 2020, respectively, and totaled 98.3% and 97.2% for the six months
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ended June 30, 2021 and 2020, respectively. Revenue and related costs for contracts billed on a time and materials basis are recognized as the services are rendered. Revenue derived from projects billed on a time and materials basis totaled 0.7% and 2.0% of consolidated revenue from operations for the three months ended June 30, 2021 and 2020, respectively, and totaled 1.7% and 2.8% for the six months ended June 30, 2021 and 2020, respectively.

    Construction contract revenue is recognized over time using the cost-to-cost measure of progress for fixed price contracts. The cost-to-cost measure of progress best depicts the continuous transfer of control of goods or services to the customer. The contractual terms provide that the customer compensates the Company for services rendered.

    Contract costs include all direct materials, labor and subcontracted costs, as well as indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and the costs of capital equipment. The cost estimation and review process for recognizing revenue over time under the cost-to-cost method is based on the professional knowledge and experience of the Company’s project managers, engineers and financial professionals. Management reviews estimates of total contract transaction price and total project costs on an ongoing basis. Changes in job performance, job conditions and management’s assessment of expected variable consideration are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and profit recognition. Changes in these factors could result in revisions to revenue and costs of revenue in the period in which the revisions are determined on a prospective basis, which could materially affect the Company’s results of operations for that period. Provisions for losses on uncompleted contracts are recorded in the period in which such losses are determined.
Performance Obligations
    A performance obligation is a contractual promise to transfer a distinct good or service to the customer and is the unit of account under Accounting Standards Codification (“ASC”) Topic 606. The transaction price of a contract is allocated to distinct performance obligations and recognized as revenue when or as the performance obligations are satisfied. The Company’s contracts often require significant integrated services and, even when delivering multiple distinct services, are generally accounted for as a single performance obligation. Contract amendments and change orders are generally not distinct from the existing contract due to the significant integrated service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. With the exception of certain Specialty Civil service contracts, the majority of the Company’s performance obligations are generally completed within one year.
    When more than one contract is entered into with a customer on or close to the same date, the Company evaluates whether those contracts should be combined and accounted for as a single contract as well as whether those contracts should be accounted for as more than one performance obligation. This evaluation requires significant judgment and is based on the facts and circumstances of the various contracts, which could change the amount of revenue and profit recognition in a given period depending upon the outcome of the evaluation.
    Remaining performance obligations represent the amount of unearned transaction prices for contracts, including approved and unapproved change orders. As of June 30, 2021, the amount of the Company’s remaining performance obligations was $1,665.3 million. The Company expects to recognize approximately 75.7% of its remaining performance obligations as revenue during the next twelve months. Revenue recognized from performance obligations satisfied in previous periods was $(0.8) million and $(1.6) million for the three months ended June 30, 2021 and 2020, respectively, and $(0.4) million and $(3.6) million for the six months ended June 30, 2021 and 2020, respectively.
Variable Consideration
    Transaction pricing for the Company’s contracts may include variable consideration, such as unapproved change orders, claims, incentives and liquidated damages. Management estimates variable consideration for a performance obligation utilizing estimation methods that best predict the amount of consideration to which the Company will be entitled. Variable consideration is included in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Management’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based on legal opinions, past practices with the customer, specific discussions, correspondence or preliminary negotiations with the customer and all other relevant information that is reasonably available. The effect of a change in variable consideration on the transaction price of a performance obligation is typically recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders, claims and liquidated damages reflected in transaction price are not resolved in the Company’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.
    As of June 30, 2021 and December 31, 2020, the Company included approximately $51.4 million and $52.6 million, respectively, of unapproved change orders and/or claims in the transaction price for certain contracts that were in the process of
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being resolved in the normal course of business, including through negotiation, arbitration and other proceedings. These transaction price adjustments are included within Contract Assets or Contract Liabilities as appropriate. The Company actively engages with its customers to complete the final change order approval process, and generally expects these processes to be completed within one year. Amounts ultimately realized upon final acceptance by customers could be higher or lower than such estimated amounts.
Disaggregation of Revenue
    The following tables disaggregate revenue by customers and services performed, which the Company believes best depicts the nature, amount, timing and uncertainty of its revenue:
(in thousands) Three Months Ended Six Months Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Renewables Segment
   Wind $ 317,066  $ 317,151  463,924  $ 565,688 
   Solar 107,788  7,111  141,304  7,320 
$ 424,854  $ 324,262  $ 605,228  $ 573,008 
Specialty Civil Segment
   Heavy civil $ 78,884  $ 103,721  127,756  $ 144,943 
   Rail 31,173  32,321  58,040  79,378 
   Environmental 25,237  20,300  45,536  41,438 
$ 135,294  $ 156,342  $ 231,332  $ 265,759 
Concentrations
    The Company had the following approximate revenue and accounts receivable concentrations, net of allowances, for the periods ended:
Revenue % Revenue %
Three Months Ended Six Months Ended Accounts Receivable %
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 June 30, 2021 December 31, 2020
Renewables and Specialty Civil Segments 11.0  % * 12.0  % * * *
* Amount was not above 10% threshold

Construction Joint Ventures

Certain contracts are executed through joint ventures. The arrangements are often formed for the execution of single contracts or projects and allow the Company to share risks and secure specialty skills required for project execution.
In accordance with ASC Topic 810, Consolidation the Company assesses its joint ventures at inception to determine if any meet the qualifications of a VIE. The Company considers a joint venture a VIE if either (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, the Company reassesses its initial determination of whether the joint venture is a VIE.
The Company also evaluates whether it is the primary beneficiary of each VIE and consolidates the VIE if the Company has both (a) the power to direct the economically significant activities of the entity and (b) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company considers the contractual agreements that define the ownership structure, distribution of profits and losses, risks,
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responsibilities, indebtedness, voting rights and board representation of the respective parties in determining whether it qualifies as the primary beneficiary. The Company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. When the Company is determined to be the primary beneficiary, the VIE is consolidated. In accordance with ASC 810, management’s assessment of whether the Company is the primary beneficiary of a VIE is performed continuously.
Construction joint ventures that do not involve a VIE, or for which the Company is not the primary beneficiary, are evaluated for consolidation under the voting interest model that considers whether the Company owns or controls more than 50% of the voting interest in the joint venture. For construction joint ventures that are not consolidated but for which the Company has significant influence, the Company accounts for its interest in the joint ventures using the proportionate consolidation method, whereby the Company’s proportionate share of the joint ventures’ assets, liabilities, revenue and cost of operations are included in the appropriate classifications in the Company’s consolidated financial statements. See Note 11. Joint Ventures for additional discussion regarding joint ventures.

Recently Adopted Accounting Standards - Guidance Adopted in 2020

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective, or prospective basis. The Company adopted the standard on January 1, 2021 on a prospective basis, which did not have an impact on our disclosures for income taxes.
Recently Issued Accounting Standards Not Yet Adopted
    
    In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial assets, including trade accounts receivables. The expected credit loss methodology under ASU 2016-13 is based on historical experience, current conditions and reasonable and supportable forecasts, and replaces the probable/incurred loss model for measuring and recognizing expected losses under current GAAP. The ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. The ASU and its related clarifying updates are effective for smaller reporting companies for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company is still evaluating the new standard but do not expect it to have a material impact on our estimate of the allowance for uncollectible accounts.
Management has evaluated other recently issued accounting pronouncements and does not believe that they will have a significant impact on the financial statements and related disclosures.

COVID-19 Pandemic

    During March 2020, the World Health Organization declared a global pandemic related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The COVID-19 pandemic has significantly affected economic conditions in the United States and internationally as national, state and local governments reacted to the public health crisis by requiring mitigation measures that have disrupted business activities for an uncertain period of time.

The Company believes that the COVID-19 pandemic has not had a material adverse impact on the Company’s financial results for the period ended June 30, 2021. Currently, most of the Company’s construction services are deemed essential under governmental mitigation orders and all of our business segments continue to operate. The Company has issued several notices of force majeure for the purpose of recognizing delays in construction schedules due to COVID-19 outbreaks on certain of its work sites and has also received notices of force majeure from the owners of certain projects and certain subcontractors. Management does not believe that any delays on projects related to these events of force majeure will have a material impact on its results of operations.

Management’s top priority has been to take appropriate actions to protect the health and safety of the Company's employees, customers and business partners, including adjusting the Company's standard operating procedures to respond to evolving health guidelines. Management believes that it is taking appropriate steps to mitigate any potential impact to the
9

Company; however, given the uncertainty regarding the potential effects of the COVID-19 pandemic, any future impacts cannot be quantified or predicted with specificity.

The effects of the COVID-19 pandemic could affect the Company’s future business activities and financial results, including new contract awards, reduced crew productivity, contract amendments or cancellations, higher operating costs or delayed project start dates or project shutdowns that may be requested or mandated by governmental authorities or others.

Note 2. Contract Assets and Liabilities

    The timing of when we bill our customers is generally dependent upon agreed-upon contractual terms, milestone billings based on the completion of certain phases of the work, or when services are provided. Sometimes, billing occurs subsequent to revenue recognition, resulting in unbilled revenue, which is accounted for as a contract asset. Sometimes we receive advance payments or deposits from our customers before revenue is recognized, resulting in deferred revenue, which is accounted for as a contract liability.

    Contract assets in the Condensed Consolidated Balance Sheets represent the following:

•costs and estimated earnings in excess of billings, which arise when revenue has been recorded but the amount has not been billed; and

•retainage amounts for the portion of the contract price billed by us for work performed but held for payment by the customer as a form of security until we reach certain construction milestones or complete the project.

    Contract assets consisted of the following:
(in thousands) June 30, 2021 December 31, 2020
Costs and estimated earnings in excess of billings on uncompleted contracts $ 83,869  $ 51,367 
Retainage receivable 93,089  93,816 
$ 176,958  $ 145,183 

    Contract liabilities consist of the following:
(in thousands) June 30, 2021 December 31, 2020
Billings in excess of costs and estimated earnings on uncompleted contracts $ 90,557  $ 117,641 
Loss on contracts in progress 9  594 
$ 90,566  $ 118,235 
    
    Revenue recognized for the three and six months ended June 30, 2021 that was included in the contract liability balance at December 31, 2020 was approximately $24.2 million and $112.0 million, respectively, and revenue recognized for the three and six months ended June 30, 2020 that was included in the contract liability balance at December 31, 2019 was approximately $17.8 million and $108.7 million.
    
    Activity in the allowance for doubtful accounts for the periods indicated was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) 2021 2020 2021 2020
Allowance for doubtful accounts at beginning of period $ —  $ 89  $ —  $ 75 
    Plus: provision for (reduction in) allowance —  —  —  14 
    Less: write-offs, net of recoveries —  —  —  — 
Allowance for doubtful accounts at period end $ —  $ 89  $ —  $ 89 

Note 3. Property, Plant and Equipment, Net

    Property, plant and equipment consisted of the following:
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(in thousands) June 30, 2021 December 31, 2020
Buildings and leasehold improvements $ 5,667  $ 4,402 
Land 17,600  17,600 
Construction equipment 212,304  192,402 
Office equipment, furniture and fixtures 3,637  3,620 
Vehicles 7,538  7,326 
246,746  225,350 
Accumulated depreciation (111,232) (94,604)
    Property, plant and equipment, net $ 135,514  $ 130,746 

    Depreciation expense of property, plant and equipment was $9,415 and $8,777 for the three months ended June 30, 2021 and 2020, respectively, and was $18,598 and $17,293 for the six months ended June 30, 2021 and 2020, respectively.


Note 4. Goodwill and Intangible Assets, Net

    The following table provides the changes in the carrying amount of goodwill, by segment:
(in thousands) Renewables Specialty Civil Total
January 1, 2020 $ 3,020  $ 34,353  $ 37,373 
   Adjustments —  —  — 
December 31, 2020 $ 3,020  $ 34,353  $ 37,373 
   Adjustments —  —  — 
June 30, 2021 $ 3,020  $ 34,353  $ 37,373 

    
Intangible assets consisted of the following as of the dates indicated:
June 30, 2021 December 31, 2020
($ in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life
Customer relationships $ 26,500  $ (10,373) $ 16,127  4.5 years $ 26,500  $ (8,481) $ 18,019  5 years
Trade name 13,400  (7,325) 6,075  2.5 years 13,400  (5,985) 7,415  3 years
$ 39,900  $ (17,698) $ 22,202  $ 39,900  $ (14,466) $ 25,434 
    
Amortization expense associated with intangible assets for the three months ended June 30, 2021 and 2020, totaled $1.6 million and $3.3 million, respectively, and $3.2 million and $6.7 million for the six months ended June 30, 2021 and 2020, respectively.

    The following table provides the annual intangible amortization expense currently expected to be recognized for the years 2021 through 2025:
(in thousands) Remainder of 2021 2022 2023 2024 2025
Amortization expense $ 3,233  $ 6,466  $ 5,841  $ 3,785  $ 2,876 
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Note 5. Fair Value of Financial Instruments

    The Company applies ASC Topic 820, Fair Value Measurement, which establishes a framework for measuring fair value. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

    The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:

Level 1 — Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities listed on active market exchanges.
Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.


    The following table sets forth information regarding the Company's liabilities measured at fair value on a recurring basis:    
June 30, 2021 December 31, 2020
(in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Liabilities
Private warrants $ —  $ 634  $ —  $ 634  $ —  $ —  $ —  $ — 
Series B Preferred Stock - Anti-dilution warrants —  —  8,200  8,200  —  —  8,800  8,800 
Series B-1 Preferred Stock - Performance warrants —  —  —  —  —  —  400  400 
Total liabilities $ —  $ 634  $ 8,200  $ 8,834  $ —  $ —  $ 9,200  $ 9,200 
    
The following is a reconciliation of the beginning and ending balances of recurring fair value measurements using Level 3 inputs:
(in thousands) Series B Preferred Stock - Anti-dilution warrants Series B-1 Preferred Stock - Performance warrants
Beginning Balance, December 31, 2020 $ 8,800  $ 400 
Fair value adjustment - loss (gain) recognized in other income (600) (400)
Ending Balance, June 30, 2021
$ 8,200  $ — 
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In 2019, the Company entered into three equity purchase agreements and issued Series B Preferred Stock as discussed in Note 6. Debt and Series B Preferred Stock. The agreements require that on the conversion of any of the Convertible Series A Preferred Stock to common shares, the Series B Preferred Stock will receive additional warrants (Anti-dilution Warrants) to purchase common shares at a price of $0.0001 per share. The agreements also require that if the Company fails to meet a certain Adjusted EBITDA (as that term is defined in the agreements) threshold on a trailing twelve-month basis from May 31, 2020 through April 30, 2021, the Series B Preferred Stock will receive additional warrants (Performance Warrants) to purchase common shares at $0.0001 per share. On May 20, 2019, the conversion rights for the Series A Preferred Stock were amended to allow the holders of Series A Preferred Stock to convert all or any portion of Series A Preferred Stock outstanding into common stock at any point in time.

    The information below describes the balance sheet classification and the recurring fair value measurement for these requirements:

Private Warrants (recurring) - The Company has 295,000 private warrants that are not actively traded on the public markets and the Company adjusts the fair value at the end of each fiscal period using the price on that date multiplied by the remaining private warrants. The Private warrants were recorded as Warrant obligations at the end of the quarter and the fair value adjustment was recorded as other expense for the three and six months ended June 30, 2021. For further discussion see Note 8. Earnings Per Share.

    Series B Preferred Stock - Anti-dilution Warrants (recurring) - The number of common shares attributable to the warrants issued to Series B Preferred Stockholders upon conversion by Series A Preferred Stockholders is determined on a 30-day volume weighted average. The Anti-dilution warrant liability was valued using the stock price at the end of the quarter and was recorded as a liability.

    Series B-1 Preferred Stock - Performance Warrants (recurring) - The warrant liability was recorded at fair value as a liability, using a Monte Carlo Simulation based on certain significant unobservable inputs, such as a risk rate premium, Adjusted EBITDA volatility, stock price volatility and projected Adjusted EBITDA for the Company. As of June 30, 2021, the Company remained above the Adjusted EBITDA threshold for the trailing twelve-month basis from May 31, 2020 through April 30, 2021 and therefore was not required to issue additional warrants.

    Other financial instruments of the Company not listed in the table consist of cash and cash equivalents, accounts receivable, accounts payable and other current liabilities that approximate their fair values. Additionally, management believes that the outstanding recorded balance on the line of credit and long-term debt, approximates fair value due to their floating interest rates.

Note 6. Debt and Series B Preferred Stock

    Debt consisted of the following obligations as of:
(in thousands) June 30, 2021 December 31, 2020
Term loan $ 173,345  $ 173,345 
Commercial equipment notes 4,268  5,582 
   Total principal due for long-term debt 177,613  178,927 
Unamortized debt discount and issuance costs (14,070) (17,196)
Less: Current portion of long-term debt (2,277) (2,506)
   Long-term debt, less current portion $ 161,266  $ 159,225 
Debt - Series B Preferred Stock $ 186,696  $ 185,396 
Unamortized debt discount and issuance costs (10,140) (11,528)
  Long-term Series B Preferred Stock $ 176,556  $ 173,868 
    
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The weighted average interest rate for the term loan as of June 30, 2021 and December 31, 2020, was 6.90% and 7.00%, respectively.
Debt Covenants
    The term loan is governed by the terms of the Third A&R Credit Agreement, dated May 2019, which include customary affirmative and negative covenants and provide for customary events of default, including, nonpayment of principal or interest and failure to timely deliver financial statements. Under the Third A&R Credit Agreement, the financial covenant provides that the First Lien Net Leverage Ratio (as defined therein) may not exceed 2.75:1.0, for the four fiscal quarters ending December 31, 2021, and for all subsequent quarters, 2.25:1.0.

    The Third A&R Credit Agreement also includes certain limitations on the payment of cash dividends on the Company's common shares and provides for other restrictions on (subject to certain exceptions) liens, indebtedness (including guarantees and other contingent obligations), investments (including loans, advances and acquisitions), mergers and other fundamental changes and sales and other dispositions of property or assets, among others.

Debt - Series B Preferred Stock
The Series B Preferred Stock is a mandatorily redeemable financial instrument under ASC Topic 480 and has been recorded as a liability using the effective interest rate method for each tranche. The mandatory redemption date for all tranches of the Series B Preferred Stock is February 15, 2025.

The Series B Preferred Stock requires quarterly dividend payments calculated at a 12% annual rate on all outstanding Series B Preferred Stock when the Company’s First Lien Net Leverage Ratio (as defined in the Third A&R Credit Agreement) is less than or equal to 1.50:1.0 and a 13.5% rate if the ratio is greater. The Series B Preferred Stock agreements allow the Company to accrue, but not pay, the dividends at a 15.0% annual rate. Accrued dividends increase the amount of Series B Preferred Stock. Accrued dividends were $18.3 million at June 30, 2021 and December 31, 2020, respectively. Dividend payments are not deductible in calculating the Company’s federal and state income taxes.

Contractual Maturities

    Contractual maturities of the Company's outstanding principal on debt obligations as of June 30, 2021:
(in thousands) Maturities
Remainder of 2021 $ 1,214 
2022 16,916 
2023 29,986 
2024 129,368 
2025 129 
Thereafter — 
Total contractual maturities $ 177,613 

Note 7. Commitments and Contingencies

    In the ordinary course of business, the Company enters into agreements that provide financing for its machinery and equipment, facility and vehicle needs. The Company reviews these agreements for potential lease classification, and at inception, determines whether a lease is an operating or finance lease. Lease assets and liabilities, which generally represent the present value of future minimum lease payments over the term of the lease, are recognized as of the commencement date. Under ASC Topic 842, leases with an initial lease term of twelve months or less are classified as short-term leases and are not recognized in the condensed consolidated balance sheets unless the lease contains a purchase option that is reasonably certain to be exercised.
    Lease term, discount rate, variable lease costs and future minimum lease payment determinations require the use of judgment as these are based on the facts and circumstances related to each specific lease. Lease terms are generally based on their initial non-cancelable terms, unless there is a renewal option that is reasonably certain to be exercised. Various factors, including economic incentives, intent, past history and business need are considered to determine if a renewal option is reasonably certain to be exercised. The implicit rate in a lease agreement is used when it can be determined. Otherwise, the Company's incremental borrowing rate, which is based on information available as of the lease commencement date, including applicable lease terms and the current economic environment, is used to determine the value of the lease obligation.
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Finance Leases
    
    The Company has obligations, exclusive of associated interest, under various finance leases for equipment totaling $52.2 million and $57.6 million at June 30, 2021 and December 31, 2020, respectively. Gross property under this capitalized lease agreement at June 30, 2021 and December 31, 2020, totaled $135.4 million and $128.0 million, less accumulated depreciation of $65.3 million and $55.1 million, respectively, for net balances of $70.1 million and $72.9 million, respectively. Depreciation expense for assets held under the finance leases is included in cost of revenue in the condensed consolidated statements of operations.

    The future minimum payments of finance lease obligations are as follows:
(in thousands)
Remainder of 2021 $ 13,547 
2022 23,379 
2023 8,984 
2024 5,043 
2025 3,555 
Thereafter 811 
Future minimum lease payments 55,319 
Less: Amount representing interest (3,107)
Present value of minimum lease payments 52,212 
Less: Current portion of finance lease obligations 24,842 
Finance lease obligations, less current portion $ 27,370 

Operating Leases
    
    In the ordinary course of business, the Company enters into non-cancelable operating leases for certain of its facilities, vehicles and equipment. The Company has obligations, exclusive of associated interest, totaling $39.2 million and $38.0 million at June 30, 2021 and December 31, 2020, respectively. Property under these operating lease agreements at June 30, 2021 and December 31, 2020, totaled $37.7 million and $36.5 million, respectively.

    The Company has long-term power-by-the-hour equipment rental agreements with a construction equipment manufacturer that have a guaranteed minimum monthly hour requirement. The minimum guaranteed amount based on the Company's current operations is $3.2 million per year. Total expense under these agreements are listed in the following table as variable lease costs.

    The future minimum payments under non-cancelable operating leases are as follows:
(in thousands)
Remainder of 2021 $ 6,229 
2022 11,238 
2023 8,776 
2024 4,740 
2025 2,236 
Thereafter 18,936 
Future minimum lease payments 52,155 
Less: Amount representing interest (12,983)
Present value of minimum lease payments 39,172 
Less: Current portion of operating lease obligations 9,817 
Operating lease obligations, less current portion $ 29,355 

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Lease Information
Three months ended Six Months Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Finance Lease cost:
   Amortization of right-of-use assets $ 5,843  $ 5,858  $ 11,678  $ 11,555 
   Interest on lease liabilities 789  940  1,606  2,126 
Operating lease cost 3,179  3,490  6,573  6,967 
Short-term lease cost 35,624  45,134  59,228  66,768 
Variable lease cost 2,910  985  4,157  1,944 
Sublease Income (33) (33) (66) (66)
Total lease cost $ 48,312  $ 56,374  $ 83,176  $ 89,294 
Other information:
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from finance leases $ 789  $ 940  $ 1,606  $ 2,126 
   Operating cash flows from operating leases $ 3,179  $ 3,385  $ 6,424  $ 6,728 
Weighted-average remaining lease term - finance leases 2.66 years 2.70 years
Weighted-average remaining lease term - operating leases 7.71 years 7.86 years
Weighted-average discount rate - finance leases 5.85  % 6.27  %
Weighted-average discount rate - operating leases 6.81  % 6.96  %

Letters of Credit and Surety Bonds

    In the ordinary course of business, the Company is required to post letters of credit and surety bonds to customers in support of performance under certain contracts. Such letters of credit are generally issued by a bank or similar financial institution. The letter of credit or surety bond commits the issuer to pay specified amounts to the holder of the letter of credit or surety bond under certain conditions. If the letter of credit or surety bond issuer were required to pay any amount to a holder, the Company would be required to reimburse the issuer, which, depending upon the circumstances, could result in a charge to earnings. As of June 30, 2021, and December 31, 2020, the Company was contingently liable under letters of credit issued under its Third A&R Credit Agreement, in the amount of $21.7 million and $7.8 million, respectively, related to projects and insurance. In addition, as of June 30, 2021 and December 31, 2020, the Company had outstanding surety bonds on projects of $3.0 billion and $2.8 billion, respectively.

Legal Proceedings

The Company is a nominal defendant to a lawsuit, instituted in December 2019 in the Delaware Chancery Court by a purported stockholder of the Company, against the Company’s Board of Directors, Oaktree, and Ares, from which Ares was subsequently dismissed. The complaint asserts a variety of claims arising out of the sale of Series B Preferred Stock and warrants to Ares and Oaktree in May 2019. The complaint alleges claims for breach of fiduciary duty directly on behalf of putative class of stockholders and derivatively on behalf of the Company, aiding and abetting breach of fiduciary duty both derivatively and directly, and unjust enrichment derivatively on behalf of the Company. The plaintiff is seeking rescission of the transaction, unspecified monetary damages, and fees. The Company has placed its director and officer liability insurance carriers on notice of the lawsuit; pursuant to the coverage terms, the Company is subject to a $1.5 million deductible, which the Company has not yet exhausted, but we expect will be spent in defense of the lawsuit. Pursuant to agreements entered into in connection with the sale of Series B Preferred Stock, the Company is obligated to indemnify Oaktree and Ares for any legal fees and damages incurred by either of them in connection with this matter.


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The Company is involved in a variety of other legal cases, claims and other disputes that arise from time to time in the ordinary course of its business. While the Company believes it has good defense against these cases and intends to defend them vigorously, it cannot provide assurance that it will be successful in recovering all or any of the potential damages it has claimed or in defending claims against the Company. While the lawsuits and claims are asserted for amounts that may be material, should an unfavorable outcome occur, management does not currently expect that any currently pending matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, an unfavorable resolution of one or more of such matters could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows.

Note 8. Earnings Per Share

    The Company calculates earnings (loss) per share (“EPS”) in accordance with ASC Topic 260, Earnings per Share. Basic EPS is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares of common stock outstanding during the period.

    Income (loss) available to common stockholders is computed by deducting the dividends accrued for the period on cumulative preferred stock from net income and net income allocated to participating securities. If there is a net loss, the amount of the loss is increased by those preferred dividends.

    Diluted EPS assumes the dilutive effect of (i) Series A cumulative convertible preferred stock, using the if-converted method, (ii) publicly traded warrants, (iii) Series B Preferred Stock - Warrants and (iv) the assumed exercise of in-the-money stock options and the assumed vesting of outstanding restricted stock units (“RSUs”), using the treasury stock method.

    Whether the Company has net income, or a net loss determines whether potential issuances of common stock are included in the diluted EPS computation or whether they would be anti-dilutive. As a result, if there is a net loss, diluted EPS is computed in the same manner as basic EPS is computed. Similarly, if the Company has net income but its preferred dividend adjustment made in computing income available to common stockholders results in a net loss available to common stockholders, diluted EPS would be computed the same as basic EPS.
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The calculations of basic and diluted EPS, are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
($ in thousands, except per share data) 2021 2020 2021 2020
Numerator:
  Net income (loss) $ 4,699  $ 3,597  (15,735) (9,146)
  Less: Convertible Preferred Stock dividends (676) (606) (1,332) (1,372)
  Less: Net income allocated to participating securities
(788) (802) —  — 
    Net income (loss) available to common stockholders 3,235  2,189  (17,067) (10,518)
Denominator:
  Weighted average common shares outstanding - basic 24,471,286  20,751,673  23,768,413  20,636,944 
   Series B Preferred Stock - Warrants(2)
6,649,026  7,683,716  —  — 
   Convertible Series A Preferred Stock —  9,448,988  —  — 
   Merger Warrants(1)
696,434  —  —  — 
   Options 61,740  —  —  — 
   RSUs(4)
1,560,817  2,094,005  —  — 
  Weighted average common shares outstanding - diluted 33,439,303  39,978,382  23,768,413  20,636,944 
Anti-dilutive:
  Convertible Series A Preferred Stock 2,090,443  —  1,859,350  8,001,014 
  Merger Warrants (1)
—  —  696,434  — 
  Series B Preferred Stock - Warrants (2)
—  —  6,131,520  7,679,520 
  Options (3)
—  —  112,355  — 
  RSUs (4)
—  —  1,759,431  1,775,182 
Basic EPS 0.13  0.11  (0.72) (0.51)
Diluted EPS (5)
0.12  0.09  (0.72) (0.51)

(1)     As of June 30, 2020, Merger Warrants to purchase 8,480,000 shares of common stock at $11.50 per share were not considered as dilutive as the warrants’ exercise price was not greater than the average market price of the common stock during the period. These warrants were calculated using the treasury stock method and were dilutive for the three months ended June 30, 2021 and anti-dilutive for the six months ended June 30, 2021.

(2)     Series B Preferred Stock - Warrants are considered as participating securities because the holders are entitled to participate in any distributions similar to that of common shareholders.
    
(3)    As of June 30, 2020, there were 539,034 of vested and unvested options not considered as dilutive as the respective exercise price or average stock price required for vesting of such awards was greater than the average market price of the common stock during the period.

(4)    As of June 30, 2021 and 2020, 132,108 and 513,153 unvested RSUs, respectively. These awards were not considered dilutive as the respective performance targets were not achieved.

(5)    For purposes of calculating diluted earnings per shares the numerator was calculated as net income (loss) less preferred dividends for the three months ended June 30, 2021 and 2020.
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Merger Warrants

On August 4, 2015, M III formed a Special Purpose Acquisition Corporation and issued public and private warrants before the Merger with the Company. As of June 30, 2021, the Company had 16,925,160 Merger Warrants outstanding, of which 295,000 are considered private warrants. Two Merger Warrants will be exercisable for one share of our common stock at $11.50 per share until the expiration on March 26, 2023. For further discussion about the valuation of the private warrants see Note 5. Fair Value of Financial Instruments.

Series B Preferred Stock Anti-dilution Warrants

The Company also had the following potential outstanding warrants related to the Series B Preferred Stock issuance.

•At June 30, 2021, a total of 636,221 warrants calculated on an if-converted method for the conversion of shares related to the outstanding Series A Preferred Stock. As discussed in Note 5. Fair Value of Financial Instruments, these warrants are recorded as a liability. These warrants are not included in the weighted average share calculation as the contingent event (conversion of Series A Preferred Stock) had not occurred at the end of the quarter.

•The second set of additional warrants would be issued if the exercise of any warrant with an exercise price of $11.50 or higher.

•The final set of additional warrants would be issued if the exercise of any equity issued pursuant to the Company’s long term incentive plan or other equity plan with a strike price of $11.50 or higher.

Series A Preferred Stock

    As of June 30, 2021, we had 17,483 shares of Series A Preferred Stock with a stated value of $1,000 per share plus accumulated dividends. Dividends are paid on the Series A Preferred Stock as, if and when declared by our Board. To extent permitted, dividends are required to be paid in cash quarterly in arrears on each March 31, June 30, September 30 and December 31 on the stated value at a rate of 10% per annum.

    If not paid in cash, dividends will accrue on the stated value and will increase the stated value on and effective as of the applicable dividend date without any further action by the Board at 12% per annum.

    So long as any shares of Series B Preferred Stock of the Company are currently outstanding or from and after the occurrence of any non-payment event or default event and until cured or waived, the foregoing rates will increase by 2% per annum.

    As of June 30, 2021, the Company has accrued a cumulative of $5.7 million in dividends to the holder of Series A Preferred Stock as a reduction to additional paid-in capital.

Stock Compensation
    
    Under guidance of ASC Topic 718 “Compensation — Stock Compensation,” stock-based compensation expense is measured at the date of grant, based on the calculated fair value of the stock-based award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the award).

    The fair value of the RSUs was based on the closing market price of our common stock on the date of the grant. Stock compensation expense for the RSUs is being amortized using the straight-line method over the service period. For the three months ended June 30, 2021 and 2020, we recognized $1.9 million and $0.8 million in compensation expense, respectively, and $2.7 million and $2.0 million for the six months ended June 30, 2021 and 2020, respectively.


Note 9. Income Taxes

    The Company’s statutory federal tax rate was 21.00% for the periods ended June 30, 2021 and 2020, respectively. State tax rates for the same period vary among states and range from approximately 0.8% to 12.0%. A small number of states do not impose an income tax.

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    The effective tax rates for the three months ended June 30, 2021 and 2020 were 47.0% and 56.8%, respectively, and were (12.7)% and (73.4)% for the six months ended June 30, 2021 and 2020, respectively. The difference between the Company’s effective tax rate and the federal statutory rate primarily results from permanent differences related to executive compensation, which is not deductible for federal and state income taxes. There were no changes in uncertain tax positions during the periods ended June 30, 2021 and 2020.

    On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted by the US Government in response to the COVID-19 pandemic to provide employment retention incentives. We do not believe that these relief measures materially affected the consolidated financial statements for the year ended December 31, 2020.

The Company has also made use of the payroll deferral provision to defer social security tax of approximately $13.6 million through December 31, 2020. Half of this amount is required to be paid on December 31, 2021 and the other half by December 31, 2022.


Note 10. Segments

    We operate our business as two reportable segments: the Renewables segment and the Specialty Civil segment. Each of our reportable segments is comprised of similar business units that specialize in services unique to their respective markets. The classification of revenue and gross profit for segment reporting purposes can at times require judgment on the part of management. Our segments may perform services across industries or perform joint services for customers in multiple industries. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs and indirect operating expenses, were made based on segment revenue.

    Separate measures of the Company’s assets, including capital expenditures and cash flows by reportable segment are not produced or utilized by management to evaluate segment performance. A substantial portion of the Company’s fixed assets are owned by and accounted for in our equipment department, including operating machinery, equipment and vehicles, as well as office equipment, buildings and leasehold improvements, and are used on an interchangeable basis across our reportable segments. As such, for reporting purposes, total under/over absorption of equipment expenses consisting primarily of depreciation is allocated to the Company's two reportable segments based on segment revenue.
    
The following is a brief description of the Company's reportable segments:

Renewables Segment

    The Renewables segment operates throughout the United States and specializes in a range of services for the power delivery, solar, wind and battery storage markets that includes design, procurement, construction, restoration, and maintenance.

Specialty Civil Segment

    The Specialty Civil segment operates throughout the United States and specializes in a range of services that include:

•Heavy civil construction services such as road and bridge construction, specialty paving, sports field development, industrial maintenance, outsourced contract mining and heavy hauling.

•Environmental remediation services such as site development, environmental site closure, and coal ash management.
•Rail infrastructure services such as planning, design, procurement, construction and maintenance of major railway and intermodal facilities.

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Segment Revenue

    Revenue by segment was as follows:
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Segment Revenue % of Total Revenue Revenue % of Total Revenue Revenue % of Total Revenue Revenue % of Total Revenue
Renewables $ 424,854  75.8  % $ 324,262  67.5  % $ 605,228  72.3  % $ 573,008  68.3  %
Specialty Civil 135,294  24.2  % 156,342  32.5  % 231,332  27.7  % 265,759  31.7  %
  Total revenue $ 560,148  100.0  % $ 480,604  100.0  % $ 836,560  100.0  % $ 838,767  100.0  %


Segment Gross Profit

    Gross profit by segment was as follows:
Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2021 2020 2021 2020
Segment Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin
Renewables $ 42,883  10.1  % $ 36,983  11.4  % $ 55,063  9.1  % $ 62,812  11.0  %
Specialty Civil 10,600  7.8  % 17,258  11.0  % 14,961  6.5  % 24,470  9.2  %
  Total gross profit $ 53,483  9.5  % $ 54,241  11.3  % $ 70,024  8.4  % $ 87,282  10.4  %


Note 11. Joint Ventures

As of June 30, 2021, the Company did not have any VIEs but did have one joint venture that used the proportionate consolidation method at 25% ownership. The following balances were included in the condensed consolidated financial statements:

(in thousands) June 30, 2021
Assets
Cash $ 6,918 
Accounts receivable 3,550 
Contract assets 2,064 
Liabilities
Accounts payable $ 3,782 
Contract liabilities 8,750 
Three Months Ended Six Months Ended
June 30, 2021 June 30, 2021
Revenue $ 5,089  $ 9,590 
Cost of revenue 5,089  9,590 
Selling, general and administrative expenses 450  450 


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Note 12. Related Party Transactions

On February 9, 2021, Ares Management, LLC, on behalf of its affiliated funds, investment vehicles and/or managed accounts (“Ares”) purchased the outstanding Series B Preferred Stock and Series A Preferred Stock from funds managed by Oaktree Capital Management (“Oaktree”). As of June 30, 2021, Ares currently holds all of the outstanding Series B Preferred Stock, except for 350 shares, and all of the outstanding Series A Preferred Stock.

Related Party Shareholders
Type of Equity Holder Ownership Percentage
Series A Preferred Stock and Series A Conversion Warrants Ares 100  %
Series B-1 Preferred Stock, Performance Warrants, Warrants at Closing (initial amount issued) Ares 100  %
Series B-2 and B-3 Preferred Stock, Warrants at Closing Ares 100  %

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

    This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “forecast,” “seek,” “target,” “continue,” “plan,” “intend,” “project,” or other similar words. All statements, other than statements of historical fact included in this Quarterly Report, regarding expectations for the impact of the COVID-19 pandemic, future financial performance, business strategies, expectations for our business, future operations, liquidity positions, availability of capital resources, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements.

    These forward-looking statements are based on information available as of the date of this Quarterly Report and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct. Forward-looking statements should not be relied upon as representing our views as of any subsequent date. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Factors that could cause actual results to differ include:

•potential risks and uncertainties relating to COVID-19, including the geographic spread, the severity of the disease, the scope and duration of the COVID-19 pandemic, actions that may be taken by governmental authorities to contain the COVID-19 pandemic or to treat its impact, and the potential negative impacts of COVID-19 on permitting and project construction cycles, the U.S. economy and financial markets;
•availability of commercially reasonable and accessible sources of liquidity and bonding;
•our ability to generate cash flow and liquidity to fund operations;
•the timing and extent of fluctuations in geographic, weather and operational factors affecting our customers, projects and the industries in which we operate;
•our ability to identify acquisition candidates and integrate acquired businesses;
•our ability to grow and manage growth profitably;
•the possibility that we may be adversely affected by economic, business, and/or competitive factors;
•market conditions, technological developments, regulatory changes or other governmental policy uncertainty that affects us or our customers;
•our ability to manage projects effectively and in accordance with management estimates, as well as the ability to accurately estimate the costs associated with our fixed price and other contracts, including any material changes in estimates for completion of projects;
•the effect on demand for our services and changes in the amount of capital expenditures by customers due to, among other things, economic conditions, commodity price fluctuations, the availability and cost of financing, and customer consolidation;
•the ability of customers to terminate or reduce the amount of work, or in some cases, the prices paid for services, on short or no notice;
•customer disputes related to the performance of services;
•disputes with, or failures of, subcontractors to deliver agreed-upon supplies or services in a timely fashion;
•our ability to replace non-recurring projects with new projects;
•the impact of U.S. federal, local, state, foreign or tax legislation and other regulations affecting the renewable energy industry and related projects and expenditures;
•the effect of state and federal regulatory initiatives, including costs of compliance with existing and future safety and environmental requirements;
•fluctuations in equipment, fuel, materials, labor and other costs;
•our beliefs regarding the state of the renewable wind energy market generally; and
•the “Risk Factors” described in our Annual Report on Form 10-K for the year ended December 31, 2020, and in our quarterly reports, other public filings and press releases.
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We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
    Throughout this section, unless otherwise noted “IEA,” “Company,” “we,” “us,” and “our” refer to Infrastructure and Energy Alternatives, Inc. and its consolidated subsidiaries. Certain amounts in this section may not foot due to rounding.

Overview

    We are a leading diversified infrastructure construction company with specialized energy and heavy civil expertise throughout the United States. We specialize in providing complete engineering, procurement and construction services throughout the United States for the renewable energy, traditional power and civil infrastructure industries. These services include the design, site development, construction, installation and restoration of infrastructure. We have completed more than 240 wind and solar projects in 40 states and construct one of every five gigawatts put in to place throughout the U.S. in any given year. Although the Company has historically focused on the renewable industry, but has recently focused on further expansion into the solar market and with our recent acquisitions have expanded its construction capabilities and geographic footprint in the areas of environmental remediation, industrial maintenance, specialty paving, heavy civil and rail infrastructure construction, creating a diverse national platform of specialty construction capabilities. We believe we have the ability to continue to expand these services because we are well-positioned to leverage our expertise and relationships in the wind energy business to provide complete infrastructure solutions in all areas.

    We have two reportable segments: the Renewables (“Renewables”) segment and the Heavy Civil and Industrial (“Specialty Civil”) segment. See Segment Results for a description of the reportable segments and their operations.

Coronavirus Pandemic Update

    The COVID-19 pandemic continues to significantly impact the United States and the world. Since the start of the COVID-19 pandemic, we have been focused on the safety of our employees and ensuring that our construction sites are managed by taking all reasonable precautions to protect on-site personnel.

    We are actively monitoring the COVID-19 pandemic, including disease progression, vaccine response and availability, federal, state and local government actions, the Center for Disease Control (“CDC”) and World Health Organization (“WHO”) responses, supplier and supply chain risks, and prevention and containment measures to maintain business operations. As the COVID-19 pandemic and the responses by federal, state and local governments continue to evolve, we continue to make adjustments to our practices and policies to protect the health of our employees and those we work with at our projects and office locations, while continuing to provide our essential construction services to our clients.

    We believe that the foregoing actions have significantly reduced the Company’s exposure to the effects of COVID-19, including our workforce’s exposure to infection from COVID-19. As of today, we have had a low incidence of infection in our workforce. As vaccines become increasingly available to our workforce, clients and their families, we are evaluating and redoing protocols as management deems appropriate and based on federal, state and local government recommendations and policies.

We have noticed an impact of COVID-19 in adding new projects to our backlog. Our bidding activity continues at very high levels, but the final approval process for some projects, especially in our Specialty Segment, has been slowed due to COVID-19. Despite that, we were able to maintain a relatively consistent total backlog for June 30, 2021 compared to December 31, 2020.

We are unable to predict whether COVID-19 will continue to negatively impact the construction business and the degree of such impact as more of the population becomes vaccinated. We do not believe that COVID-19 is having a negative impact on our liquidity. We could see a change in this status if we experience future work stoppages at our projects due to significant supply chain or production disruptions, which would prevent us from billing customers for new work performed. If the federal, state and local governments proceed with more restrictive measures, and our customers determine to stop work or terminate projects, these actions would negatively impact our business, results of operations, liquidity and prospects. In addition, the Company is unable to predict any changes in the market for bonding by our sureties.

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Current Quarter Financials

Key financial results for the quarter ended June 30, 2021 include:

•Consolidated revenues increased 16.6% to $560.1 million as compared to $480.6 million for the quarter ended June 30, 2020, of which 75.8% was attributable to the Renewables segment and 24.2% was attributable to the Specialty Civil segment;

•Operating income decreased $3.6 million, to $22.6 million as compared to income of $26.2 million for the quarter ended June 30, 2020;

•Net income increased 30.6%, or $1.1 million, to net income of $4.7 million as compared to $3.6 million for the quarter ended June 30, 2020; and

•Backlog increased 33.5%, or $692.3 million to $2.8 billion as compared to $2.1 billion for the year ended December 31, 2020.

Trends and Future Opportunities

Renewables Segment

The Renewables segment was impacted by the following significant operational trends:

•Revenue increased 31.0% to $424.9 million for the quarter ended June 30, 2021 as compared to $324.3 million.

•Revenues increased primarily due to higher demand in our solar market as projects continue to increase due to our consistent, safe and reliable performance with our customers on our wind projects, that has allowed us to capture further solar opportunities in backlog for 2021 and beyond.

•Gross profit increased 16.0% to $42.9 million for the quarter ended June 30, 2021 as compared to $37.0 million.

We have maintained a heavy focus on construction of renewable power production capacity as renewable energy, particularly from wind and solar, has become widely accepted within the electric utility industry and has become a cost-effective solution for the creation of new generating capacity. We believe that this shift coupled with the below, will continue to drive opportunity in this segment over the long-term:

•The current administration has a goal of investing $2 trillion in modern, sustainable, and clean energy infrastructure.

•Renewable energy power generation has reached a level of scale and maturity that permits these technologies to now be cost-effective competitors to more traditional power generation technologies, including on an unsubsidized basis. The most significant changes have been related to increased turbine sizes and better battery storage methods.

•Over 40 states and the District of Colombia have adopted renewable portfolio standards for clean energy.

•In December 2020, there was a one year extension of the PTC at 60% for projects that begin construction prior to December 31, 2021 and a two year extension of 26% Solar Investment Tax Credit (“ITC”) to 2022 (22% credit extended through 2023).

•On June 29, 2021, the IRS issued a notice which provides that projects that began construction in 2016-2019 have six years, and projects that began construction in 2020 have five years from the date construction began to be placed-in-service to qualify for the PTC or ITC that was in effect when construction began. This new rule effectively extends the amount of time that many projects will be eligible for PTC to 2025.

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As a result, wind and solar power are among the leading sources of new power generation capacity in the U.S., and the Company does not anticipate this trend to change in the near future as we are continuing to see growth through new awards in our backlog:

(in millions)
Segment December 31, 2020
New Awards in 2021(1)
Revenue Recognized in 2021
Backlog at June 30, 2021(2)
Renewables $ 1,513.4  $ 952.9  $ 605.2  $ 1,861.1 

(1) New awards consist of the original contract price of projects added to our backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.

(2) Backlog may differ from the transaction prices allocated to the remaining performance obligations as disclosed in Note 1. Business, Basis of Presentation and Significant Accounting Policies included in Part I, Item 1 of this Quarterly Report. Such differences relate to the timing of executing a formal contract or receiving a notice to proceed. More specifically, backlog sometimes may include awards for which a contract has not yet been executed or a notice to proceed has not been issued, but for which there are no remaining major uncertainties that the project will proceed (e.g., adequate funding is in place).

Specialty Civil Segment

The Specialty Civil segment was impacted by the following significant operational trends:

•Revenue decreased 13.5% to $135.3 million for the quarter ended June 30, 2021 as compared to $156.3 million.

•Gross profit decrease 38.6% to $10.6 million for the quarter ended June 30, 2021 as compared to $17.3 million

•Revenue and gross profit decreases for the three months ended are primarily due to challenges in the following end markets:

◦The heavy civil construction market has seen increased competition in a few of our end markets, which has led to lower margins on certain heavy civil construction projects reducing overall profitability.

◦The rail market has been negatively impacted by COVID-19 and the reduction of spending budgets of some of our customers, which has led to further delays on portions of our large rail jobs.

◦All of our end markets in this segment have experienced delays in timing related to obtaining governmental approvals and environmental permitting that have affected the start and bidding opportunities of certain projects.

•Despite the delays in project starts mentioned above we continued to see a strong bidding environment in the heavy civil construction and environmental remediation end markets for 2021 and had significant awarded projects related to:

◦The environmental remediation market continues to provide opportunities for growth and the Company has been short listed on some very significant project with anticipated start dates in 2021; and

◦The heavy civil construction market continues to be consistent year over year for awarded projects.

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We believe that our business relationships with customers in these sectors are excellent and the strong reputation that our acquired companies have built has provided us with the right foundation to continue to grow our revenue base. The drivers to further growing this segment are as follows:

•The FMI 2021 Overview Report published in the first quarter of 2021 projects that nonresidential construction put in place for the United States will be over $500 billion per year from 2021 to 2024.

•Fast Act extension and highway trust fund infusion of $13.6 billion for the highway and transit account.

•According to the American Coal Ash Association, coal combustion residuals “CCRs” or “coal ash” are produced by coal-fired power plants and represent one of the largest categories of industrial waste in the U.S., as 78.6 million tons of CCRs were produced in 2019. The Company anticipates this could be a $50.0 billion industry over the next ten years.

Additionally, there is significant overlap in labor, skills and equipment needs between our Renewables segment and our Specialty Civil segment, which we expect will continue to provide us with operating efficiencies as we continue to expand this sector. The Company continues to cross leverage these two segments and continues to see future growth through new awards in our backlog:

(in millions)
Segment December 31, 2020
New Awards in 2021(1)
Revenue Recognized in 2021
Backlog at June 30, 2021(2)
Specialty Civil $ 556.1  $ 575.9  $ 231.3  $ 900.7 

(1) New awards consist of the original contract price of projects added to our backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.

(2) Backlog may differ from the transaction prices allocated to the remaining performance obligations as disclosed in Note 1. Business, Basis of Presentation and Significant Accounting Policies included in Part I, Item 1 of this Quarterly Report. Such differences relate to the timing of executing a formal contract or receiving a notice to proceed. More specifically, backlog sometimes may include awards for which a contract has not yet been executed or a notice to proceed has not been issued, but for which there are no remaining major uncertainties that the project will proceed (e.g., adequate funding is in place).

Backlog

    For companies in the construction industry, backlog can be an indicator of future revenue streams. Estimated backlog represents the amount of revenue we expect to realize from the uncompleted portions of existing construction contracts, including new contracts under which work has not begun and awarded contracts for which the definitive project documentation is being prepared, as well as revenue from change orders and renewal options. Estimated backlog for work under fixed price contracts and cost-reimbursable contracts is determined based on historical trends, anticipated seasonal impacts, experience from similar projects and estimates of customer demand based on communications with our customers. Cost-reimbursable contracts are included in backlog based on the estimated total contract price upon completion.

The following table summarizes our backlog by segment as of June 30, 2021 and December 31, 2020:

(in millions)
Segments June 30, 2021 December 31, 2020
Renewables $ 1,861.1  $ 1,513.4 
Specialty Civil 900.7  556.1 
  Total $ 2,761.8  $ 2,069.5 
    
The Company expects to recognize 65.6% of revenue related to its backlog in the next twelve months.

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Based on historical trends in the Company’s backlog, we believe awarded contracts to be firm and that the revenue for such contracts will be recognized over the life of the project. Timing of revenue for construction and installation projects included in our backlog can be subject to change as a result of customer delays, regulatory factors and/or other project-related factors. These changes could cause estimated revenue to be realized in periods later than originally expected, or not at all. In the past, we have occasionally experienced postponements, cancellations and reductions on construction projects, due to market volatility and regulatory factors. There can be no assurance as to our customers’ requirements or the accuracy of our estimates. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings.

    Backlog is not a term recognized under GAAP, although it is a common measurement used in our industry. Our methodology for determining backlog may not be comparable to the methodologies used by others. See ‘‘Item 1A. Risk Factors’’ in our Annual Report on Form 10-K filed with the SEC on March 8, 2021 for a discussion of the risks associated with our backlog.

Significant Factors Impacting Results

Our revenues, margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Results of Operations and Forward Looking Statements, and those factors have caused fluctuations in our results in the past and are expected to cause fluctuations in our results in the future. Additional information with respect to certain of those factors is provided below.

Seasonality. Typically, our revenues are lowest in the first quarter of the year because cold, snowy or wet conditions can create challenging working environments that are more costly for our customers or cause delays on projects. In addition, infrastructure projects often do not begin in a meaningful way until our customers finalize their capital budgets, which typically occurs during the first quarter. Second quarter revenues are typically higher than those in the first quarter, as some projects begin, but continued cold and wet weather can often impact productivity. Third quarter revenues are typically the highest of the year, as a greater number of projects are underway and operating conditions, including weather, are normally more accommodating. Generally, revenues during the fourth quarter are lower than the third quarter but higher than the second quarter, as many projects are completed and customers often seek to spend their capital budgets before year end. However, the holiday season and inclement weather can sometimes cause delays during the fourth quarter, reducing revenues and increasing costs.
Our revenue and results of operations for our Specialty Civil segment are also affected by seasonality but to a lesser extent as these projects are more geographically diverse and less impacted by severe weather. While the first and second quarter revenues are typically lower than the third and fourth quarter, we believe this geographical diversity has allowed this segment to be less seasonal over the course of the year.

Weather and Natural Disasters. The results of our business in a given period can be impacted by adverse weather conditions, severe weather events or natural disasters, which include, among other things, heavy or prolonged snowfall or rainfall, hurricanes, tropical storms, tornadoes, floods, blizzards, extreme temperatures, wildfires, pandemics and earthquakes. These conditions and events can negatively impact our financial results due to the termination, deferral or delay of projects, reduced productivity and exposure to significant liabilities.

Cyclical demand. Fluctuations in end-user demand within the industries we serve, or in the supply of services within those industries, can impact demand for our services. As a result, our business may be adversely affected by industry declines or by delays in new projects. Variations in project schedules or unanticipated changes in project schedules, in particular, in connection with large construction and installation projects, can create fluctuations in revenue, which may adversely affect us in a given period. In addition, revenue from master service agreements, while generally predictable, can be subject to volatility. The financial condition of our customers and their access to capital, variations in project margins, regional, national and global economic, political and market conditions, regulatory or environmental influences, and acquisitions, dispositions or strategic investments can also materially affect quarterly results. Accordingly, our operating results in any particular period may not be indicative of the results that can be expected for any other period.

Revenue mix. The mix of revenues based on the types of services we provide in a given period will impact margins, as certain industries and services provide higher-margin opportunities. Revenue derived from projects billed on a fixed-price basis totaled 99.3% for the three months ended June 30, 2021. Revenue and related costs for construction contracts billed on a time and materials basis are recognized as the services are rendered. Revenue derived from projects billed on a time and materials basis totaled 0.7% of consolidated revenue for the three months ended June 30, 2021.

Size, scope and complexity of projects. Larger or more complex projects with design or construction complexities; more difficult terrain requirements; or longer distance requirements typically yield opportunities for higher margins as we
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assume a greater degree of performance risk and there is greater utilization of our resources for longer construction timeframes. Furthermore, smaller or less complex projects typically have a greater number of companies competing for them, and competitors at times may more aggressively pursue available work. A greater percentage of smaller scale or less complex work also could negatively impact margins due to the inefficiency of transitioning between a larger number of smaller projects versus continuous production on fewer larger projects. Also, at times we may choose to maintain a portion of our workforce and equipment in an underutilized capacity to ensure we are strategically positioned to deliver on larger projects when they move forward.

Project variability and performance. Margins for a single project may fluctuate period to period due to changes in the volume or type of work performed, the pricing structure under the project contract or job productivity. Additionally, our productivity and performance on a project can vary from period to period based on a number of factors, including unexpected project difficulties or site conditions; project location, including locations with challenging operating conditions; whether the work is on an open or encumbered right of way; inclement weather or severe weather events; environmental restrictions or regulatory delays; protests, other political activity or legal challenges related to a project; and the performance of third parties.

Subcontract work and provision of materials. Work that is subcontracted to other service providers generally yields lower margins, and therefore an increase in subcontract work in a given period can decrease margins. Our customers are usually responsible for supplying the materials for their projects; however, under some contracts we agree to procure all or part of the required materials. Margins may be lower on projects where we furnish a significant amount of materials, including projects where we provide engineering, procurement and construction ("EPC") services, as our markup on materials is generally lower than our markup on labor costs. Furthermore, fluctuations in the price of materials we procure, including as a result of changes in U.S. or global trade relationships or other economic or political conditions, may impact our margins. In a given period, an increase in the percentage of work with higher materials procurement requirements may decrease our overall margins.

Results of Operations

Three Months Ended June 30, 2021 and 2020

    The following table reflects our condensed consolidated results of operations in dollar and percentage of revenue terms for the periods indicated:
Three Months Ended June 30,
(in thousands) 2021 2020
Revenue $ 560,148  100.0  % $ 480,604  100.0  %
Cost of revenue 506,665  90.5  % 426,363  88.7  %
Gross profit 53,483  9.5  % 54,241  11.3  %
Selling, general and administrative expenses 30,894  5.5  % 28,074  5.8  %
Income from operations 22,589  4.0  % 26,167  5.4  %
Interest expense, net (14,495) (2.6) % (16,200) (3.4) %
Other income (expense) 770  0.1  % (1,631) (0.3) %
Income from continuing operations before income taxes 8,864  1.6  % 8,336  1.7  %
Provision for income taxes (4,165) (0.7) % (4,739) (1.0) %
Net income $ 4,699  0.8  % $ 3,597  0.7  %
    

For a detailed discussion of Revenue and Gross profit see Segment Results, below.

Revenue. Revenue increased 16.6%, or $79.5 million, in the second quarter of 2021, compared to the same period in 2020.

Gross profit. Gross profit decreased 1.4%, or $0.8 million, in the second quarter of 2021, compared to the same period in 2020. As a percentage of revenue, gross profit was 9.5% in the quarter, as compared to 11.3% in the prior-year period.

Selling, general and administrative expenses. Selling, general and administrative expenses increased 10.0%, or $2.8 million, in the second quarter of 2021, compared to the same period in 2020. Selling, general and administrative expenses were
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5.5% of revenue in the second quarter of 2021, compared to 5.8% in the same period in 2020. The increase in selling, general and administrative expenses was primarily driven by:

•Staff related benefit costs of $1.4 million;
•Information technology costs of $0.6 related to software licensing; and
•Business travel costs of $0.7 million.

Interest expense, net. Interest expense, net decreased by $1.7 million, in the second quarter of 2021, compared to the same period in 2020. This decrease was primarily driven by lower effective interest rates on our term loan, partially offset by an increase in the dividend rate of 13.5% on the Company's preferred Series B stock dividend. The increase in rate was due to the Company's net lien leverage ratio being above 1.5:1.0.
Other income (expense). Other income (expense) increased by $2.4 million, to income of $0.8 million in the second quarter of 2021 compared to an expense of $1.6 million for the same period in 2020. This increase was primarily the result of the impact of a decrease in the warrant liability in the second quarter of 2021. See further discussion in Note 5. Fair Value of Financial Instruments included in Item 1 of this Quarterly Report on Form 10-Q.

Provision for income taxes. Provision for income taxes decreased $0.6 million, to $4.2 million in the second quarter of 2021, compared to $4.7 million for the same period in 2020. The effective tax rates for the period ended June 30, 2021 and 2020 were 47.0% and 56.8%, respectively. The lower effective tax rate in the second quarter of 2021 was primarily attributable to lower permanent differences related to executive compensation, which are not deductible for federal and state income taxes. There were no changes in uncertain tax positions during the periods ended June 30, 2021 and 2020.

Segment Results

The Company operated our business as two reportable segments: the Renewables segment and the Specialty Civil segment. Each of our reportable segments is comprised of similar business units that specialize in services unique to the respective markets that each segment serves. The classification of revenue and gross profit for segment reporting purposes can at times require judgment on the part of management. Our segments may perform services across industries or perform joint services for customers in multiple industries. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs and indirect operating expenses, were made based on segment revenue.

The following table sets forth segment revenues and gross profit for the years indicated, as well as the dollar and percentage change from the prior year:

Three Months Ended June 30,
(in thousands) 2021 2020
Segment Revenue % of Total Revenue Revenue % of Total Revenue
Renewables $ 424,854  75.8  % $ 324,262  67.5  %
Specialty Civil 135,294  24.2  % 156,342  32.5  %
  Total revenue $ 560,148  100.0  % $ 480,604  100.0  %
Segment Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin
Renewables $ 42,883  10.1  % $ 36,983  11.4  %
Specialty Civil 10,600  7.8  % 17,258  11.0  %
  Total gross profit $ 53,483  9.5  % $ 54,241  11.3  %

Renewables Segment Results

Revenue. Renewables revenue was $424.9 million for the quarter ended June 30, 2021 as compared to $324.3 million for the same period in 2020, an increase of 31.0%, or $100.6 million. The increase in revenue was primarily due to:

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•The Company had 13 wind projects of greater than $5.0 million of revenue in the second quarter of 2021 compared to 15 wind projects during the same period in 2020,
•The average revenue of the 13 wind projects was $21.8 million in 2021 compared to $20.3 million related to the 15 wind projects during the same period in 2020, and
•Solar revenue increased $100.7 million for the quarter ended June 30, 2021 when compared to the same period for 2020.

Gross profit. Renewables gross profit was $42.9 million for the quarter ended June 30, 2021 as compared to $37.0 million for 2020, an increase of 16.0%, or $5.9 million. As a percentage of revenue, gross profit was 10.1% in 2021, as compared to 11.4% in 2020. The decrease in percentage was primarily related to adding more craft labor and rented and leased equipment in anticipation of higher work volumes and greater operating intensity in the second half of the year.

Specialty Civil Segment Results

Revenue. Specialty Civil revenue was $135.3 million for the quarter ended June 30, 2021 as compared to $156.3 million for 2020, a decrease of 13.5%, or $21.0 million. The decrease in revenue was primarily due to:

•Heavy civil market had less construction projects and a lower average value of projects in the second quarter of 2021 compared to 2020, and
•Offsetting the decrease in revenue was a slight increase in our environmental remediation market due to more projects in the second quarter of 2021.

Gross profit. Specialty Civil gross profit was $10.6 million for the quarter ended June 30, 2021 as compared to $17.3 million for 2020, a decrease of 38.6%, or $6.7 million. As a percentage of revenue, gross profit was 7.8% in 2021, as compared to 11.0% in 2020. In the second quarter of 2021, the Company had less projects under construction which contributed to lower utilization of labor and equipment fixed costs.

Results of Operations

Six Months Ended June 30, 2021 and 2020

    The following table reflects our condensed consolidated results of operations in dollar and percentage of revenue terms for the periods indicated:

Six Months Ended June 30,
(in thousands) 2021 2020
Revenue $ 836,560  100.0  % $ 838,767  100.0  %
Cost of revenue 766,536  91.6  % 751,485  89.6  %
Gross profit 70,024  8.4  % 87,282  10.4  %
Selling, general and administrative expenses 55,740  6.7  % 57,558  6.9  %
Income from operations 14,284  1.7  % 29,724  3.5  %
Interest expense, net (28,854) (3.4) % (32,265) (3.8) %
Other income (expense) 608  0.1  % (2,733) (0.3) %
Loss from continuing operations before income taxes (13,962) (1.7) % (5,274) (0.6) %
Provision for income taxes (1,773) (0.2) % (3,872) (0.5) %
Net loss $ (15,735) (1.9) % $ (9,146) (1.1) %

For a detailed discussion of Revenue and Gross profit see Segment Results, below.

Revenue. Revenue decreased 0.3%, or $2.2 million, in the first six months of 2021, compared to the same period in 2020.

Gross profit. Gross profit decreased 19.8%, or $17.3 million, in the first six months of 2021, compared to the same period in 2020. As a percentage of revenue, gross profit was 8.4% in the quarter, as compared to 10.4% in the prior-year period.
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Selling, general and administrative expenses. Selling, general and administrative expenses decreased 3.2%, or $1.8 million, in the first six months of 2021, compared to the same period in 2020. Selling, general and administrative expenses were 6.7% of revenue in the first six months of 2021, compared to 6.9% in the same period in 2020. The decrease in selling, general and administrative expenses was primarily driven by:

•Reduction in staff related benefit costs by $2.9 million.

The reduction above was partially offset by expense increase for:

•Information technology costs of $1.2 million related to software licensing.

Interest expense, net. Interest expense, net decreased by $3.4 million, in the first six months of 2021, compared to the same period in 2020. This decrease was primarily driven by lower effective interest rates on our term loan.
Other income (expense). Other income (expense) increased by $3.3 million, to income of $0.6 million in the first six months of 2021 compared to an expense of $2.7 million for the same period in 2020. This increase was primarily the result of the impact of a decrease in the warrant liability in the first six months of 2021. See further discussion in Note 5. Fair Value of Financial Instruments included in Item 1 of this Quarterly Report on Form 10-Q.

Provision for income taxes. Provision for income taxes decreased $2.1 million, to $1.8 million in the first six months of 2021, compared to $3.9 million for the same period in 2020. The effective tax rates for the first six months of 2021 and 2020 were (12.7)% and (73.4)%, respectively. The lower effective tax rate in the first six months of 2021 was primarily attributable to lower permanent differences related to executive compensation, which are not deductible for federal and state income taxes. There were no changes in uncertain tax positions during the periods ended June 30, 2021 and 2020.

Segment Results

The following table sets forth segment revenues and gross profit for the years indicated, as well as the dollar and percentage change from the prior year:

Six Months Ended June 30,
(in thousands) 2021 2020
Segment Revenue % of Total Revenue Revenue % of Total Revenue
Renewables $ 605,228  72.3  % $ 573,008  68.3  %
Specialty Civil 231,332  27.7  % 265,759  31.7  %
  Total revenue $ 836,560  100.0  % $ 838,767  100.0  %
Segment Gross Profit Gross Profit Margin Gross Profit Gross Profit Margin
Renewables $ 55,063  9.1  % $ 62,812  11.0  %
Specialty Civil 14,961  6.5  % 24,470  9.2  %
  Total gross profit $ 70,024  8.4  % $ 87,282  10.4  %

Renewables Segment Results

Revenue. Renewables revenue was $605.2 million for the first six months of 2021 as compared to $573.0 million for the same period in 2020, an increase of 5.6%, or $32.2 million. The increase in revenue was primarily due to:

•Solar revenue increased $134.0 million for the first six months of 2021 when compared to the same period for 2020.


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The increase was partially offset by $101.8 million decrease in the wind market:

•The Company had 16 wind projects of greater than $5.0 million of revenue in the first six months of 2021 compared to 17 wind projects during the same period in 2020.
•The average revenue of the 16 wind projects in 2021, was $25.4 million with an average percentage of completion of 61%.
•The average revenue of the 17 wind projects in 2020 was $31.8 million with an average percentage of completion of 75% in 2020.
•The reduction in revenue for the year on wind projects was related to earlier project starts in 2020 compared to 2021.

Gross profit. Renewables gross profit was $55.1 million for the first six months of 2021 as compared to $62.8 million for 2020, a decrease of 12.3%, or $7.7 million. As a percentage of revenue, gross profit was 9.1% in 2021, as compared to 11.0% in 2020. The decrease in percentage was primarily related to adding more craft labor and rented and leased equipment in anticipation of higher work volumes and greater operating intensity in the second half of the year.

Specialty Civil Segment Results

Revenue. Specialty Civil revenue was $231.3 million for the first six months of 2021 as compared to $265.8 million for 2020, a decrease of 13.0%, or $34.4 million. The decrease in revenue was primarily due to:

•Rail markets continue to experience a decrease in revenue primarily due to delay in project starts for railroads and lower budgets decreasing bidding opportunities,
•Heavy civil market had less construction projects and a lower average value of projects in the first six months of 2021 compared to 2020, and
•Offsetting the decrease in revenue was a slight increase in our environmental remediation market due to more projects in the first six months of 2021 compared to 2020.

Gross profit. Specialty Civil gross profit was $15.0 million for the first six months of 2021 as compared to $24.5 million for 2020, a decrease of 38.9%, or $9.5 million. As a percentage of revenue, gross profit was 6.5% in 2021, as compared to 9.2% in 2020. In the first six months of 2021, the Company had less projects under construction in the heavy civil and rail markets which contributed to lower utilization of labor and equipment fixed costs.

Liquidity and Capital Resources

Overview

    Our primary sources of liquidity are cash flows from operations, our cash balances and availability under our Third A&R Credit Agreement. Our primary liquidity needs are for working capital, debt service, dividends on our Series B Preferred Stock, income taxes, capital expenditures, insurance collateral, and strategic acquisitions. As of June 30, 2021, we had approximately $117.7 million in cash, and $53.3 million availability under our Third A&R Credit Agreement.

We anticipate that our existing cash balances, funds generated from operations, and borrowings will be sufficient to meet our cash requirements for the next twelve months. No assurance can be given, however, that these sources will be sufficient, because there are many factors which could affect our liquidity, including some which are beyond our control. Please see “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K filed with the SEC on March 8, 2021 for a discussion of the risks associated with our liquidity.

Capital Expenditures

    For the six months ended June 30, 2021, we incurred $15.5 million in finance lease payments and an additional $14.6 million cash purchases for equipment. We estimate that we will spend approximately two percent of revenue for capital expenditures for 2021. Actual capital expenditures may increase or decrease in the future depending upon business activity levels, as well as ongoing assessments of equipment lease versus buy decisions based on short and long-term equipment requirements.



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Working Capital

    We require working capital to support seasonal variations in our business, primarily due to the effect of weather conditions on external construction and maintenance work and the spending patterns of our customers, both of which influence the timing of associated spending to support related customer demand. Our business is typically slower in the first quarter of each calendar year. Working capital needs are generally lower during the spring when projects are awarded and we receive down payments from customers. Conversely, working capital needs generally increase during the summer or fall months due to increased demand for our services when favorable weather conditions exist in many of the regions in which we operate. Working capital needs are typically lower and working capital is converted to cash during the winter months. These seasonal trends, however, can be offset by changes in the timing of projects, which can be affected by project delays or accelerations and/or other factors that may affect customer spending.

    Generally, we receive 5% to 10% cash payments from our customers upon the inception of our Renewable projects. Timing of billing milestones and project close-outs can contribute to changes in unbilled revenue. As of June 30, 2021, substantially all of our costs in excess of billings and earnings will be billed to customers in the normal course of business within the next twelve months. Net accounts receivable balances, which consist of contract billings as well as costs and earnings in excess of billings and retainage, increased to $409.3 million as of June 30, 2021 from $309.0 million as of December 31, 2020, due primarily to timing of project activity, and collection of billings to customers.

    Our billing terms are generally net 30 days, and some of our contracts allow our customers to retain a portion of the contract amount (generally, from 5% to 10%) until the job is completed. As part of our ongoing working capital management practices, we evaluate opportunities to improve our working capital cycle time through contractual provisions and certain financing arrangements. Our agreements with subcontractors often may contain a ‘‘pay-if-paid’’ provision, whereby our payments to subcontractors are made only after we are paid by our customers.

Sources and Uses of Cash

    Sources and uses of cash are summarized below:
Six Months Ended June 30,
(in thousands) 2021 2020
Net cash used in operating activities (11,378) (64,630)
Net cash used in investing activities (13,632) (1,522)
Net cash used in financing activities (21,357) (21,715)
    
Operating Activities. Net cash used in operating activities for the six months ended June 30, 2021 was $11.4 million, as compared to $64.6 million over the same period in 2020. The decrease in net cash used by operating activities reflects the timing of receipts from customers and payments to vendors in the ordinary course of business. The change was primarily attributable to lower payments on payables and accrued liabilities coupled with lower collections of accounts receivable and contract assets due to the timing of projects.

Investing Activities. Net cash used in investing activities for the six months ended June 30, 2021 was $13.6 million, as compared to $1.5 million over the same period in 2020. The increase in net cash used by investing activities was primarily attributable to an increase in purchases of property, plant and equipment.

Financing Activities. Net cash used in financing activities for the six months ended June 30, 2021 was $21.4 million, as compared to $21.7 million over the same period in 2020.

Series A Preferred Stock

    As of June 30, 2021, we had 17,483 shares of Series A Preferred Stock issued and outstanding. Each share of Series A Preferred Stock had an initial stated value of $1,000 per share (or approximately $17.5 million in the aggregate). Dividends are paid on the Series A Preferred Stock as, if and when declared by our Board. To extent permitted and only as, if and when declared by our Board, dividends are required to be paid in cash quarterly in arrears on each March 31, June 30, September 30 and December 31 on the stated value at a rate of 10% per annum.

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    If not paid in cash, dividends will accrue on the stated value and will increase the stated value on and effective as of the applicable dividend date without any further action by the Board at 12% per annum. As of June 30, 2021, the Company had increased the initial stated value by $5.7 million in the aggregate rather than pay cash dividends.

    So long as any shares of Series B Preferred Stock of the Company are currently outstanding or from and after the occurrence of any non-payment event or default event and until cured or waived, the foregoing rates will increase by 2% per annum. The Company is currently restricted from paying cash dividends on Series A Preferred Stock because it has outstanding dividends that are accrued on the Series B preferred stock.

    The Series A Preferred Stock does not have a scheduled redemption date or maturity date. Subject to the terms of the Series B Preferred Stock, we may, at any time and from time to time, redeem all or any portion of the shares of Series A Preferred Stock then outstanding. As a condition to the consummation of any change of control (as described in the certificate governing the Series A Preferred Stock), we are required to redeem all shares of Series A Preferred Stock then outstanding. We are also required to use the net cash proceeds from certain transactions to redeem the maximum number of shares of Series A Preferred Stock that can be redeemed with such net cash proceeds, except as prohibited by the Third A&R Credit Agreement.

    Based on the stated value of the Series A Preferred Stock as of June 30, 2021 after giving effect to the accrual of dividends, we would be required to pay quarterly cash dividends in the aggregate of $0.6 million on the Series A Preferred Stock. If unpaid, the dividends will accrue at a rate of 12% per annum and increase the stated value of the Series A Preferred Stock. We do not presently expect to pay cash dividends.

Series B Preferred Stock

    As of June 30, 2021, we had 199,474 shares of Series B Preferred Stock issued and outstanding. Each share of Series B Preferred Stock had an initial stated value of $1,000 per share (or approximately $199.5 million in the aggregate). Our common stock and Series A Preferred Stock are junior to the Series B Preferred Stock. Dividends are paid in cash on the Series B Preferred Stock as, if and when declared by our Board. To the extent not prohibited by applicable law, and only as, if and when declared by our Board, dividends are required to be paid in cash quarterly in arrears on each March 31, June 30, September 30 and December 31. For any dividend period that the Total Net Leverage Ratio is greater than 1.50:1.00, the dividend rate is 13.5% per annum; and otherwise at a rate of 12.0% per annum.

    If not paid in cash, dividends will accrue on the stated value and will increase the stated value on Series B Preferred Stock at a rate of 15%. As of June 30, 2021, the unpaid dividends had increased the initial stated value by $18.3 million in the aggregate.

    Until the Series B Preferred Stock is redeemed, neither we nor any of our subsidiaries can declare, pay or set aside any dividends on shares of any other class or series of capital stock, except in limited circumstances. We are required to redeem all shares of Series B Preferred Stock outstanding on February 15, 2025 at the then stated value plus all accumulated and unpaid dividends thereon through the day prior to such redemption. Subject to compliance with the terms of any credit agreement, we are also required to redeem all of the Series B Preferred Stock as a condition to the consummation of certain changes in control (as defined in certificate governing the Series B Preferred Stock), as well as use the net cash proceeds from certain transactions to redeem shares of Series B Preferred Stock.

    Based on the stated value of the Series B Preferred Stock as of June 30, 2021 after giving effect to the accrual of dividends, we would be required to pay quarterly cash dividends in the aggregate of $6.6 million on the Series B Preferred Stock. If not paid the dividends will accrue at a rate of 15% per annum and increase the stated value of the Series B Preferred Stock. Actual decisions regarding payment of cash dividends on the Series B Preferred Stock will be made at the time of the applicable dividend payment based upon availability of capital resources, business conditions, other cash requirements, and other relevant factors.

Deferred Taxes - COVID-19

The CARES Act was enacted on March 27, 2020, in response to the COVID-19 emergency. The CARES Act includes many measures to assist companies, including temporary changes to income and non-income-based tax laws. Some of the key income tax-related provisions of the CARES Act include:

•Eliminating the 80% of taxable income limitation by allowing corporate entities to fully utilize net operating losses (“NOLs”) to offset taxable income in 2018, 2019 or 2020.

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•Allowing NOLs originating in 2018, 2019 or 2020 to be carried back five years.

•Increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for tax years beginning 1 January 2019 and 2020.

•Allowing taxpayers with alternative minimum tax (“AMT”) credits to claim a refund in 2020 for the entire amount of the credit instead of recovering the credit through refunds over a period of years, as originally enacted by the Tax Cuts and Jobs Act (“TCJA”).

•Payroll tax deferral.

IEA has also made use of the payroll deferral provision to defer the 6.2% social security tax, or approximately $13.6 million, through December 31, 2020. This amount is required to be paid at 50% on December 31, 2021 and December 31, 2022.

Amendment to Third A&R Credit Agreement

On October 30, 2020, the Company entered into a First Amendment to its Third A&R Credit Agreement (the “Amendment”). The Amendment provides for, among other things, an increase in the revolving credit commitments previously available by $25.0 million, bringing the aggregate principal amount of the revolving credit commitments under the Third A&R Credit Agreement to $75.0 million, upon the terms and subject to the satisfaction of the conditions set forth in the Third A&R Credit Agreement, as amended by the Amendment.

In addition, the Amendment provides that on and after the Amendment’s effective date and until delivery of the financial statements for the fiscal quarter ended December 31, 2020, as required under the Amendment, the percentage per annum interest rate for revolving loans and swing line loans is, at the Company’s option, (x) LIBOR plus a margin of 2.75% or (y) the applicable base rate plus a margin of 1.75%. Thereafter, for any day, the applicable percentage per annum interest rate for revolving loans and swing line loans is LIBOR or the base rate plus a margin depending upon the Company’s first lien net leverage ratio as of the last day of the most recently ended consecutive four fiscal quarter period, as set forth below:

First Lien Net Leverage Ratio LIBOR Loans Base Rate Loans
Less than 1.00:1.00 2.50% 1.50%
Less than 2.00:1.00 but greater than or equal to 1.00:1.00 2.75% 1.75%
Less than 3.00:1.00 but greater than or equal to 2.00:1.00 3.00% 2.00%
Less than 3.50:1.00 but greater than or equal to 3.00:1.00 3.25% 2.25%
Greater than or equal to 3.50:1.00 3.50% 2.50%

The Amendment also further specifies the unused commitment fee rate. On and after the Amendment’s effective date and until delivery of the financial statements for the fiscal quarter ended December 31, 2020, as required under the Amendment, the rate is 0.40% per annum. Thereafter, for any day, the applicable percentage per annum depends upon the Company’s senior secured net leverage ratio, as set forth below:

Senior Secured Net Leverage Ratio Applicable Unused Commitment Fee Rate
Less than 1.00:1.00 0.35%
Less than 2.00:1.00 but greater than or equal to 1.00:1.0 0.40%
Less than 3.00:1.00 but greater than or equal to 2.00:1.00 0.45%
Greater than or equal to 3.00:1.00 0.50%


36


Contractual Obligations

    The following table sets forth our contractual obligations and commitments for the periods indicated as of June 30, 2021.
Payments due by period
(in thousands) Total Remainder of 2021 2022 2023 2024 2025 Thereafter
Debt (principal) (1)
177,613  1,214  16,916  29,986  129,368  129  — 
Debt (interest) (2)
34,603  6,161  11,924  10,203  6,312  3  — 
Debt - Series B Preferred Stock (3)
199,474  —  —  —  —  199,474  — 
Dividends - Series B Preferred Stock (4)
112,797  13,057  26,113  26,113  26,113  21,401  — 
Finance leases (5)
55,319  13,547  23,379  8,984  5,043  3,555  811 
Operating leases (6)
52,155  6,229  11,238  8,776  4,740  2,236  18,936 
Total $ 631,961  $ 40,208  $ 89,570  $ 84,062  $ 171,576  $ 226,798  $ 19,747 
(1)Represents the contractual principal payment due dates on our outstanding debt.
(2)Includes variable rate interest using June 30, 2021 rates.
(3)Represents the mandatorily redeemable debt - Series B Preferred with expected redemption date of February 15, 2025.
(4)Future declared dividends have been included at 12% but payment determination will be evaluated each quarter resulting in differing accumulated dividend rates.
(5)We have obligations, inclusive of associated interest, recognized under various finance leases for equipment totaling $55.3 million at June 30, 2021. Net amounts recognized within property, plant and equipment, net in the condensed consolidated balance sheet under these financed lease agreements at June 30, 2021 totaled $70.1 million.
(6)We lease real estate, vehicles, office equipment and certain construction equipment from unrelated parties under non-cancelable leases. Lease terms range from month-to-month to terms expiring through 2038.

    For detailed discussion and additional information pertaining to our debt instruments, see Note 6. Debt and Note 7. Commitments and Contingencies in the notes to our condensed consolidated financial statements, included in Part I, Item 1.

Off-Balance Sheet Arrangements

    As is common in our industry, we have entered into certain off-balance sheet arrangements in the ordinary course of business. Our significant off-balance sheet transactions include liabilities associated with letter of credit obligations, surety and performance and payment bonds entered into in the normal course of business, liabilities associated with deferred compensation plans, liabilities associated with certain indemnification and guarantee arrangements.

    As of June 30, 2021 and December 31, 2020, the Company was contingently liable under letters of credit issued under its revolving credit facility or its old credit facility in the amount of $21.7 million and $7.8 million, respectively, related to projects and insurance.

    As of June 30, 2021 and December 31, 2020, the Company had outstanding surety bonds on projects of $3.0 billion and $2.8 billion, respectively.

Recently Issued Accounting Pronouncements

    See Note 1. Business, Basis of Presentation and Summary of Significant Accounting Policies in the notes to our condensed consolidated financial statements, included in Part I, Item 1.

37

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Credit Risk

    We are subject to concentrations of credit risk related to our net receivable position with customers, which includes amounts related to billed and unbilled accounts receivable and costs and earnings in excess of billings on uncompleted contracts net of advanced billings with the same customer. We grant credit under normal payment terms, generally without collateral, and as a result, we are subject to potential credit risk related to our customers’ ability to pay for services provided. This risk may be heightened if there is depressed economic and financial market conditions. However, we believe the concentration of credit risk related to billed and unbilled receivables and costs and estimated earnings in excess of billings on uncompleted contracts is limited because of the lack of concentration and the high credit rating of our customers.

Interest Rate Risk

    Borrowings under the Third A&R Credit Agreement and certain other borrowings are 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 remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. The outstanding debt balance as of June 30, 2021 was $177.6 million. A one hundred basis point change in the LIBOR rate would increase or decrease interest expense by $1.8 million. As of June 30, 2021, we had no derivative financial instruments to manage interest rate risk.
Item 4. Control and Procedures

    Attached as exhibits to this Quarterly Report on Form 10-Q are certifications of IEA’s Chief Executive Officer and Chief Financial Officer that are required in accordance with Rule 13a-14 of the Exchange Act of 1934. This section includes information concerning the controls and controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications.

Evaluation of Disclosure Controls and Procedures

    Our management has established and maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. The disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

    As of the end of the period covered by this Quarterly Report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, these officers have concluded that, as of June 30, 2021, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

    There has been no change in our internal control over financial reporting during the quarter ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

38

Part II. OTHER INFORMATION
Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 7. Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements included in Item 1. Financial Statements of Part I of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

    At June 30, 2021, there have been no other material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K filed with the SEC on March 8, 2021, which is accessible on the SEC's website at www.sec.gov, except as described below.


Item 6. Exhibits

(a)    Exhibits.
    
Exhibit Number Description
2.1#
2.2
2.3
2.4
39

2.5
2.6
2.7
2.8#
2.9
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
40

3.9
3.10
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
41

4.14
4.15
4.16
4.17
4.18
10.1†
10.2†
10.3†
10.4†
31.1*
31.2*
32.1**
32.2**
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS)
*Filed herewith.
**Furnished herewith
† Indicates a management contract or compensatory plan or arrangement.
# Schedules have been omitted pursuant to Item 601(b)(5) of Regulation S-K. We will furnish the omitted schedules to the Securities and Exchange Commission upon request by the Commission.

42


SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
   
  INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
   
Dated: July 28, 2021 By: /s/ Peter J. Moerbeek
  Name: Peter J. Moerbeek
  Title:   Executive Vice President, Chief Financial Officer
  Principal Financial and Accounting Officer

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