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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, 2020

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
IndianapolisIndiana
 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 classTrading Symbols(s)Name of exchange on which registered
Common Stock, $0.0001 par valueIEAThe NASDAQ Stock Market LLC
Warrants for Common StockIEAWWThe 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 August 10, 2020: 22,947,871.



Infrastructure and Energy Alternatives, Inc.
Table of Contents
PART I. FINANCIAL INFORMATION
Part II. OTHER INFORMATION




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, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$59,392  $147,259  
Accounts receivable, net211,979  203,645  
Contract assets220,868  179,303  
Prepaid expenses and other current assets33,605  16,855  
        Total current assets525,844  547,062  
Property, plant and equipment, net133,428  140,488  
Operating lease asset43,045  43,431  
Intangible assets, net30,564  37,272  
Goodwill37,373  37,373  
Company-owned life insurance3,940  4,752  
Deferred income taxes9,333  12,992  
Other assets367  1,551  
        Total assets$783,894  $824,921  
Liabilities and Stockholder's Equity (Deficit)
Current liabilities:
Accounts payable$141,174  $177,783  
Accrued liabilities153,988  158,103  
Contract liabilities123,091  115,634  
Current portion of finance lease obligations23,790  23,183  
Current portion of operating lease obligations10,392  9,628  
Current portion of long-term debt1,680  1,946  
          Total current liabilities454,115  486,277  
Finance lease obligations, less current portion35,615  41,055  
Operating lease obligations, less current portion33,633  34,572  
Long-term debt, less current portion156,546  162,901  
Debt - Series B Preferred Stock176,800  166,141  
Series B Preferred Stock - warrant obligations3,800  17,591  
Deferred compensation7,174  8,004  
         Total liabilities$867,683  $916,541  
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, 2020 and December 31, 2019, respectively
17,483  17,483  
Stockholders' equity (deficit):
Common stock, par value, $0.0001 per share; 150,000,000 and 100,000,000 shares authorized; 21,142,193 and 20,460,533 shares issued and 20,960,862 and 20,446,811 outstanding at June 30, 2020 and December 31, 2019, respectively
2  2  
Treasury stock, 181,331 and 13,722 shares at cost at June 30, 2020 and December 31, 2019, respectively.
(395) (76) 
Additional paid in capital34,463  17,167  
Accumulated deficit(135,342) (126,196) 
           Total stockholders' equity (deficit)(101,272) (109,103) 
           Total liabilities and stockholders' equity (deficit)$783,894  $824,921  
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 EndedSix Months Ended
June 30,June 30,
2020201920202019
Revenue$480,604  $327,961  $838,767  $517,742  
Cost of revenue426,363  296,539  751,485  480,576  
Gross profit54,241  31,422  87,282  37,166  
Selling, general and administrative expenses28,074  25,878  57,558  53,632  
Income (loss) from operations26,167  5,544  29,724  (16,466) 
Other income (expense), net:
Interest expense, net(16,200) (11,496) (32,265) (21,863) 
Other income (expense)(1,631) 18,272  (2,733) 18,102  
Income (loss) before benefit for income taxes8,336  12,320  (5,274) (20,227) 
(Provision) benefit for income taxes(4,739) (6,112) (3,872) 2,796  
Net income (loss)$3,597  $6,208  $(9,146) $(17,431) 
Less: Convertible Preferred Stock dividends(606) (918) (1,372) (1,443) 
Less: Contingent consideration fair value adjustment  (18,835)   (18,835) 
Less: Net income allocated to participating securities(802)       
Net income (loss) available for common stockholders$2,189  $(13,545) $(10,518) $(37,709) 
Net income (loss) per common share - basic0.11  (0.61) (0.51) (1.70) 
Net income (loss) per common share - diluted0.09  (0.61) (0.51) (1.70) 
Weighted average shares - basic20,751,673  22,252,489  20,636,944  22,220,799  
Weighted average shares - diluted39,978,382  22,252,489  20,636,944  22,220,799  

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 StockAdditional Paid-in CapitalTreasury StockAccumulated DeficitTotal Equity (Deficit)
SharesPar ValueSharesCost
Balance at December 31, 201822,155  2  4,751      (135,931) (131,178) 
Net loss—  —  —  —  —  (23,639) (23,639) 
Share-based compensation—  —  1,040  —  —  —  1,040  
Share-based payment transaction111    235  (14) (76) —  159  
Merger recapitalization transaction—  —  —  —  —  2,754  2,754  
Cumulative effect from adoption of new accounting standard, net of tax—  —  —  —  —  750  750  
Series A Preferred dividends—  —  (525) —  —  —  (525) 
Balance at March 31, 201922,266  $2  $5,501  (14) $(76) $(156,066) $(150,639) 
Net income—  —  —  —  —  6,208  6,208  
Share-based compensation—  —  720  —  —  —  720  
Series B Preferred Stock - Warrants at close—  —  9,422  —  —  —  9,422  
Series A Preferred dividends—  —  (918) —  —  —  (918) 
Balance at June 30, 201922,266  $2  $14,725  (14) $(76) $(149,858) $(135,207) 
Balance at December 31, 201920,461  $2  $17,167  (14) $(76) $(126,196) $(109,103) 
Net loss—  —  —  —  —  (12,743) (12,743) 
Share-based compensation—  —  1,113  —  —  —  1,113  
Share-based payment transactions240    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, 202020,701  $2  $33,425  (52) $(160) $(138,939) $(105,672) 
Net income—  —  —  —  —  3,597  3,597  
Share-based compensation—  —  844  —  —  —  844  
Share-based payment transactions441    800  (129) (235) —  565  
Series A Preferred dividends—  —  (606) —  —  —  (606) 
Balance at June 30, 202021,142  $2  $34,463  (181) $(395) $(135,342) $(101,272) 

See accompanying notes to condensed consolidated financial statements.

3


INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
Six Months Ended June 30,
20202019
Cash flows from operating activities:
Net loss$(9,146) $(17,431) 
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization24,001  23,801  
   Contingent consideration fair value adjustment  (18,835) 
   Warrant liability fair value adjustment2,828    
   Amortization of debt discounts and issuance costs5,379  2,732  
   Share-based compensation expense1,957  1,760  
   Loss on sale of equipment574  762  
   Deferred compensation(830) 849  
   Accrued dividends on Series B Preferred Stock7,959  1,025  
   Deferred income taxes3,659  (2,517) 
   Other, net227  60  
   Change in operating assets and liabilities:
       Accounts receivable(8,349) (2,291) 
       Contract assets(41,565) (28,471) 
       Prepaid expenses and other assets(16,685) (7,353) 
       Accounts payable and accrued liabilities(42,097) (33,012) 
       Contract liabilities7,458  18,090  
       Net cash used in operating activities(64,630) (60,831) 
Cash flow from investing activities:
   Company-owned life insurance812  (296) 
   Purchases of property, plant and equipment(5,171) (4,158) 
   Proceeds from sale of property, plant and equipment2,837  6,555  
       Net cash (used in) provided by investing activities(1,522) 2,101  
Cash flows from financing activities:
   Proceeds from long-term debt72,000  9,400  
   Payments on long-term debt(82,357) (59,334) 
   Debt financing fees  (9,473) 
   Payments on finance lease obligations(12,468) (10,119) 
   Sale-leaseback transaction  24,343  
   Proceeds from issuance of stock - Series B Preferred Stock350  50,000  
   Proceeds from stock-based awards, net760  159  
   Merger recapitalization transaction  2,754  
       Net cash (used in) provided by financing activities(21,715) 7,730  
Net change in cash and cash equivalents(87,867) (51,000) 
Cash and cash equivalents, beginning of the period147,259  71,311  
Cash and cash equivalents, end of the period$59,392  $20,311  

See accompanying notes to condensed consolidated financial statements.
4



INFRASTRUCTURE AND ENERGY ALTERNATIVES, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
(Continued)
Six Months Ended June 30,
20202019
Supplemental disclosures:
  Cash paid for interest17,821  18,281  
  Cash paid (received) for income taxes(735) 227  
Schedule of non-cash activities:
   Acquisition of assets/liabilities through finance lease7,635    
   Acquisition of assets/liabilities through operating lease5,295    
   Series A Preferred dividends declared1,372  1,443  

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”).

        As of December 31, 2019, the Company's total annual gross revenues exceeded $1.07 billion and thus we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”).

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

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 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/cancellations, higher operating costs and/or delayed project start dates or project shutdowns that may be requested or mandated by governmental authorities or others.

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, 2020. Most of the Company’s construction services are currently 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 teams 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 Company; however, given the uncertainty regarding the potential effects of the COVID-19 pandemic, any future impacts cannot be quantified or predicted with specificity.

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. Adjustments necessary to arrive at net income (loss) available for common stockholders, previously disclosed in Note 8, have been added to the prior period presentation of the consolidated statements of operations to be comparable with the current period presentation.
        The unaudited condensed consolidated financial statements include the accounts of IEA and its wholly-owned direct and indirect domestic and foreign subsidiaries and 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, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. These financial statements should be read in conjunction
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with the Company’s audited consolidated financial statements for the year ended December 31, 2019 and notes thereto included in the Company’s 2019 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, including those related to Series B Preferred Stock; 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 adopted the requirements of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which is also referred to as Accounting Standards Codification (“ASC”) Topic 606, under the modified retrospective transition approach effective January 1, 2019, with application to all existing contracts that were not substantially completed as of January 1, 2019. The Company adopted this standard for interim periods beginning after December 31, 2019, and recorded adjustments to the previously issued quarterly financial statements for the six months ended June 30, 2019. The impacts of adoption on the Company’s retained earnings on January 1, 2019 was primarily related to variable consideration on unapproved change orders. The cumulative impact of adopting Topic 606 required net adjustments of $750,000 to the statement of operations between revenue, cost of revenue and income taxes, thereby reducing income for the six months ended June 30, 2019 and reducing the December 31, 2019 accumulated deficit. The Company also adjusted the cashflow statement as of June 30, 2019, to reflect adoption.
        Under Topic 606, revenue is recognized when control of promised goods and services is transferred to customers, and the amount of revenue recognized reflects the consideration to which an entity expects to be entitled in exchange for the goods and services transferred. Revenue is recognized by the Company primarily over time utilizing the cost-to-cost measure of progress for fixed price contracts and are based on cost for time and materials and other service contracts, consistent with the Company’s previous revenue recognition practices.
Contracts
        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. The contracts contain multiple pricing options, including fixed price, time and materials, or unit price. Renewable energy projects are performed for private customers while our Specialty Civil projects are performed for a mix of various governmental entities.
        Revenue derived from projects billed on a fixed-price basis totaled 98.0% and 90.7% of consolidated revenue from operations for the three months ended June 30, 2020 and 2019, respectively, and totaled 97.2% and 90.5% for the six months ended June 30, 2020 and 2019, respectively. 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 2.0% and 9.3% of consolidated revenue from operations for the three months ended June 30, 2020 and 2019, respectively, and totaled 2.8% and 9.5% for the six months ended June 30, 2020 and 2019, respectively.

        Revenue from construction contracts is recognized over time using the cost-to-cost measure of progress for fixed price construction contracts. For these 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
7


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 condensed consolidated 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 promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. The transaction price of a contract is allocated to a distinct performance obligation and recognized as revenue when or as the performance obligation is 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 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, 2020, the amount of the Company’s remaining performance obligations was $1.1 billion. The Company expects to recognize approximately 72.3% of its remaining performance obligations as revenue during 2020. Revenue recognized from performance obligations satisfied in previous periods was $(1.6) million and $1.0 million for the three months ended June 30, 2020 and 2019, respectively, and $(3.6) million and $3.8 million for the six months ended June 30, 2020 and 2019, 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, 2020 and year ended December 31, 2019, the Company included approximately $63.5 million and $73.3 million, respectively, of unapproved change orders and/or claims in the transaction price for certain contracts that were in the process of 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.

8



Disaggregation of Revenue
        The following tables disaggregate revenue by customers and services performed, which the Company believes best depicts how the nature, amount, timing and uncertainty of its revenue:
(in thousands)Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Renewables Segment
   Wind$317,151  $179,069  565,688  $251,103  
   Solar7,111  80  7,320  2,077  
$324,262  $179,149  $573,008  $253,180  
Specialty Civil Segment
   Heavy civil$103,721  $86,170  144,943  $136,285  
   Rail32,321  37,780  79,378  80,389  
   Environmental20,300  24,862  41,438  47,888  
$156,342  $148,812  $265,759  $264,562  
Concentrations
        The Company had the following approximate revenue and accounts receivable concentrations, net of allowances, for the periods ended:
Revenue %Revenue %
Three Months EndedSix Months EndedAccounts Receivable %
June 30, 2020June 30, 2019June 30, 2020June 30, 2019June 30, 2020December 31, 2019
Company A (Specialty Civil Segment)*10.6 %*14.4 %**
* Amount was not above 10% threshold

Recently Adopted Accounting Standards - Guidance Adopted in 2020

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which eliminates certain disclosure requirements for recurring and non-recurring fair value measurements, such as the amount of and reason for transfers between Level 1 and Level 2 of the fair value hierarchy, and adds new disclosure requirements for Level 3 measurements. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted for any eliminated or modified disclosures. Certain disclosures per ASU 2018-13 are required to be applied on a retrospective basis and others on a prospective basis. We adopted the standard on January 1, 2020, and it did not have an impact on our disclosures for fair value measurements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842), which is effective for annual reporting periods beginning after December 15, 2018. Under Topic 842, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Topic 842 requires entities to adopt the new lease standard using a modified retrospective method and initially apply the related guidance at the beginning of the earliest period presented in the financial statements. 

        The Company adopted Topic 842 using the modified retrospective method as of January 1, 2019 and for interim periods beginning after December 31, 2019, without adjusting comparative periods in the financial statements. The most significant effect of the new guidance was the recognition of operating lease right-of-use assets and a liability for operating leases as of December 31, 2019. The accounting for finance leases (capital leases) was substantially unchanged. The Company elected to utilize the package of practical expedients that allowed entities to: (1) not reassess whether any expired or existing
9


contracts were or contained leases; (2) retain the existing classification of lease contracts as of the date of adoption; (3) not reassess initial direct costs for any existing leases; and (4) not separate non-lease components for all classes of leased assets.
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. We are still evaluating the new standard but do not expect it to have a material impact on our estimate of the allowance for uncollectable accounts.

        In December 2019, the FASB issued 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. We are currently evaluating the potential effects of adopting the provisions of ASU No. 2019-12.

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.

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 a contract asset. Also, we sometimes receive advance payments or deposits from our customers before revenue is recognized, resulting in deferred revenue, which is 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 consist of the following:
(in thousands)June 30, 2020December 31, 2019
Costs and estimated earnings in excess of billings on uncompleted contracts$105,737  $91,543  
Retainage receivable115,131  87,760  
220,868  179,303  
        Contract liabilities consist of the following:
(in thousands)June 30, 2020December 31, 2019
Billings in excess of costs and estimated earnings on uncompleted contracts$123,079  $115,570  
Loss on contracts in progress12  64  
$123,091  $115,634  
        
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The contract receivables amount as of December 31, 2019 included unapproved change orders of approximately $9.2 million for which the Company was pursuing settlement through dispute resolution. The Company agreed to settle the unapproved change order dispute in the current quarter.

        Revenue recognized for the three and six months ended June 30, 2020 included in the contract liability balance at December 31, 2019 was approximately $17.8 million and $108.7 million, respectively, and revenue recognized for the three and six months ended June 30, 2019 included in the contract liability balance at December 31, 2018 was approximately $18.2 million and $50.1 million, respectively.
        
        Activity in the allowance for doubtful accounts for the periods indicated is as follows:
Three Months EndedSix Months Ended
June 30,June 30,
(in thousands)2020201920202019
Allowance for doubtful accounts at beginning of period$89  $72  $75  $42  
    Plus: provision for (reduction in) allowance  30  14  60  
    Less: write-offs, net of recoveries        
Allowance for doubtful accounts at period end$89  $102  $89  $102  

Note 3. Property, Plant and Equipment, Net

        Property, plant and equipment consisted of the following:
(in thousands)June 30, 2020December 31, 2019
Buildings and leasehold improvements$3,385  $2,919  
Land17,600  17,600  
Construction equipment181,712  173,434  
Office equipment, furniture and fixtures3,562  3,487  
Vehicles5,566  6,087  
211,825  203,527  
Accumulated depreciation(78,397) (63,039) 
    Property, plant and equipment, net$133,428  $140,488  

        Depreciation expense of property, plant and equipment was $8,777 and $8,430 for the three months ended June 30, 2020 and 2019, respectively, and was $17,293 and $16,906 for the six months ended June 30, 2020 and 2019, respectively.



Note 4. Goodwill and Intangible Assets, Net

        The following table provides the changes in the carrying amount of goodwill, by segment:
(in thousands)RenewablesSpecialty CivilTotal
January 1, 2019$3,020  $37,237  $40,257  
   Acquisition adjustments  (2,884) (2,884) 
December 31, 2019$3,020  $34,353  $37,373  
   Adjustments      
June 30, 2020$3,020  $34,353  $37,373  

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Intangible assets consisted of the following as of the dates indicated:
June 30, 2020