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What changed in MATRIX SERVICE CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MATRIX SERVICE CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+224 added−253 removedSource: 10-K (2023-09-12) vs 10-K (2022-10-11)

Top changes in MATRIX SERVICE CO's 2023 10-K

224 paragraphs added · 253 removed · 169 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur services include engineering, fabrication, construction, and maintenance and repair, which includes planned and emergency services for both tanks and full terminals. Finally, we offer tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals.
Biggest changeFinally, we manufacture and sell precision engineered specialty tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals. 3 Table of Contents • Utility and Power Infrastructure : primarily consists of engineering, procurement, fabrication, and construction services to support growing demand for LNG utility peak shaving facilities.
However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties which could cause actual results to differ materially from our expectations, including: • the risk factors discussed in Item 1A of this Annual Report and listed from time to time in our filings with the Securities and Exchange Commission ("SEC"); • economic, market or business conditions in general and in the oil, natural gas, power, petrochemical, agricultural and mining industries in particular; • the transition to renewable energy sources and its impact on our current customer base; • the under- or over-utilization of our work force; • delays in the commencement or progression of major projects, whether due to permitting issues or other factors; • reduced creditworthiness of our customer base and the higher risk of non-payment of receivables; • the inherently uncertain outcome of current and future litigation; • the adequacy of our reserves for claims and contingencies; and • changes in laws or regulations, including the imposition, cancellation or delay of tariffs on imported goods. 2 Table of Contents Consequently, all of the forward-looking statements made in this Annual Report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business operations.
However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties which could cause actual results to differ materially from our expectations, including: • the risk factors discussed in Item 1A of this Annual Report and listed from time to time in our filings with the Securities and Exchange Commission ("SEC"); • economic, market or business conditions in general and in the natural gas, power, oil, petrochemical, agricultural and mining industries in particular; • the transition to renewable energy sources and its impact on our current customer base; • the under- or over-utilization of our work force; • delays in the commencement or progression of major projects, whether due to permitting issues or other factors; • reduced creditworthiness of our customer base and the higher risk of non-payment of receivables; • the inherently uncertain outcome of current and future litigation; • the adequacy of our reserves for claims and contingencies; and • changes in laws or regulations, including the imposition, cancellation or delay of tariffs on imported goods. 2 Table of Contents Consequently, all of the forward-looking statements made in this Annual Report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business operations.
We also continued our participation in CEO Action for Diversity & Inclusion and participated in a variety of community events including Advancing Oklahoma, a state-wide conversation on race, where Matrix leadership served on the committee that developed comprehensive programming to engage participants in discussions about race and history, the criminal justice system, everyday conversations, education, business, image and attitudes, advocacy, and the future.
We also continued our participation in CEO Action for Diversity & Inclusion and participated in a variety of community events including Advancing Oklahoma, a state-wide conversation on race, where our leadership served on the committee that developed comprehensive programming to engage participants in discussions about race and history, the criminal justice system, everyday conversations, education, business, image and attitudes, advocacy, and the future.
We believe when we value each other’s differences and encourage everyone’s voice to be heard, we can break down the barriers that stifle ideas and opportunities. In fiscal 2022, we continued to advance and strengthen our culture. We launched our first Employee Resource Groups (ERGs), creating employee-led pathways for inclusion.
We believe when we value each other’s differences and encourage everyone’s voice to be heard, we can break down the barriers that stifle ideas and opportunities. In fiscal 2023, we continued to advance and strengthen our culture. We launched our first Employee Resource Groups (ERGs), creating employee-led pathways for inclusion.
We provide engineering, fabrication, construction, and maintenance services to support critical energy infrastructure and industrial markets. We maintain regional offices throughout the United States, Canada and other international locations, and operate through separate union and merit subsidiaries. We are licensed to operate in all 50 states, in four Canadian provinces and in other international locations.
We provide engineering, fabrication, construction, and maintenance services to support critical energy infrastructure and industrial markets. We maintain regional offices throughout the United States, Canada and other international locations, and operate through separate union and merit subsidiaries. We operate in all 50 states, in four Canadian provinces and in other international locations.
Other offerings include employee assistance programs with 365/24/7 access to resources and support, and Matrix HealthMatters, our robust wellness program that provides resources and education to help employees and their families get and stay healthy, focusing wholistically on physical, mental and financial health.
Other offerings include employee assistance programs with 365/24/7 access to resources and support, and Matrix HealthMatters, our robust wellness program that provides resources and education to help employees and their families get and stay healthy, focusing holistically on physical, mental and financial health.
We have not experienced any strikes or work stoppages in recent years and are proud that our relationships with our employees and labor unions are strong. 6 Table of Contents Business Ethics and Core Values Our employees are entrusted with engineering, constructing, and maintaining the complex, critical infrastructure that supports modern daily living and quality of life.
We have not experienced any strikes or work stoppages in recent years and are proud that our relationships with our employees and labor unions are strong. Business Ethics and Core Values Our employees are entrusted with engineering, constructing, and maintaining the complex, critical infrastructure that supports modern daily living and quality of life.
We do not expect any material charges in subsequent periods relating to environmental conditions that currently exist and do not currently foresee any significant future capital spending relating to environmental matters. 8 Table of Contents
We do not expect any material charges in subsequent periods relating to environmental conditions that currently exist and do not currently foresee any significant future capital spending relating to environmental matters. 7 Table of Contents
These forward-looking statements include, among others, such things as: • amounts and nature of future project awards, revenue and margins from each of our segments; • our ability to generate sufficient cash from operations, access our credit facility, or raise cash in order to meet our short and long-term capital requirements; • our ability to comply with the covenants in our credit agreement; • the impact to our business from economic, market or business conditions in general and in the oil, natural gas, power, petrochemical, agricultural and mining industries in particular; • the impact of inflation on our operating expenses and our business operations; • the likely impact of new or existing regulations or market forces on the demand for our services; • the impact to our business of the COVID-19 pandemic and its related disruptions to supply chains, inflation and availability of materials and labor; • our expectations with respect to the likelihood of a future impairment; and • expansion and other trends of the industries we serve.
These forward-looking statements include, among others, such things as: • amounts and nature of future project awards, revenue and margins from each of our segments; • our ability to generate sufficient cash from operations, access our credit facility, obtain letters of credit, or raise cash in order to meet our short and long-term capital requirements; • our ability to comply with the covenants in our credit agreement; • the impact to our business from economic, market or business conditions in general and in the natural gas, power, oil, petrochemical, agricultural and mining industries in particular; • the impact of inflation on our operating expenses and our business operations; • the likely impact of new or existing regulations or market forces on the demand for our services; • the impact to our business from disruptions to supply chains, inflation and availability of materials and labor; • our expectations with respect to the likelihood of a future impairment; and • expansion and other trends of the industries we serve.
In addition to the above noted factors, the general timing of project starts and completions could exhibit significant fluctuations. 5 Table of Contents Other factors impacting operating results in all segments come from decreased work volume during holidays, work site permitting delays or customers accelerating or postponing work.
In addition to the above noted factors, the general timing of project starts and completions could exhibit significant fluctuations. Other factors impacting operating results in all segments come from decreased work volume during holidays, work site permitting delays or customers accelerating or postponing work.
Our people are our greatest resource, which makes our certification in fiscal 2022 as a Great Place To Work® — for the sixth consecutive year — both a point of pride and an invaluable tool for continuous improvement supporting our objective of remaining an employer of choice.
Our people are our greatest resource, which makes our certification in fiscal 2023 as a Great Place To Work® — for the seventh consecutive year — both a point of pride and an invaluable tool for continuous improvement supporting our objective of remaining an employer of choice.
The Flowdome® trademark is used to market our geodesic dome tank roofs. Our SwingMaster® trademark is used to market our central type swing joints. The patent for the Training Tank for Personnel Entry, Exit and Rescue relates to a training device that can be used to train personnel on equipment that is made to simulate confined space scenarios.
Our SwingMaster® trademark is used to market our central type swing joints. The patent for the Training Tank for Personnel Entry, Exit and Rescue relates to a training device that can be used to train personnel on equipment that is made to simulate confined space scenarios.
Given the nature of our work, the size of our employee population can vary significantly throughout the year because of the number, type, and size of projects we have in progress at any particular time. As of June 30, 2022, we had 2,810 employees worldwide.
Given the nature of our work, the size of our employee population can vary significantly throughout the year because of the number, type, and size of projects we have in progress at any particular time. As of June 30, 2023, we had 2,545 employees worldwide.
The percentage of our employees represented by unions as of June 30, 2022, was approximately 30%. Operating under collective bargaining agreements with various unions, our union employees are provided with benefits including health and welfare, pension, training programs and competitive compensation plans.
The percentage of our employees represented by trade unions as of June 30, 2023, was approximately 35%. Operating under collective bargaining agreements with various unions, our union employees are provided with benefits including health and welfare, pension, training programs and competitive compensation plans.
Our employees also benefit from the Matrix Performance Development Program, designed for collaborative development of annual performance goals and to promote continuous, transparent feedback between employees and their supervisors. 7 Table of Contents Employee Engagement We also empower our employees to donate time, talent, and resources through Company-led initiatives, employee matching, and paid volunteer time off.
Our employees also benefit from the Matrix Performance Development Program, designed for collaborative development of annual performance goals and to promote continuous, transparent feedback between employees and their supervisors. Employee Engagement We also empower our employees to donate time, talent, and resources through Company-led initiatives, matching for employee charitable contributions, and paid volunteer time off.
Across the ideals of environmental stewardship, social responsibility, governance, diversity, inclusiveness and equity, we are committed to ensuring our business strategies, policies, and practices align with sustainability goals where we can have the greatest impact globally and in our own local communities.
Across the ideals of environmental stewardship, social responsibility, governance, diversity, equity and inclusiveness, we are committed to ensuring our business strategies, policies, and practices align with such ideals so we can have the greatest impact globally and in our own local communities.
We also continued year-round learning opportunities on unconscious bias and other DEI-specific topics and enhanced our DEI education offering available to all employees through Matrix University.
We also continued year-round learning opportunities on unconscious bias and other DEI-specific topics and enhanced our DEI education offering available to all employees through Matrix University, our internal training and development program.
However, exposure to potential losses is retained through the use of deductibles, self-insured retentions and coverage limits. Typically our contracts require us to indemnify our customers for injury, damage or loss arising from the performance of our services and provide warranties for materials.
Insurance We maintain insurance coverage for various aspects of our operations. However, exposure to potential losses is retained through the use of deductibles, self-insured retentions and coverage limits. Typically our contracts require us to indemnify our customers for injury, damage or loss arising from the performance of our services and provide warranties for materials.
We have been proactive with managing our procurement processes to help reduce the impacts of rising materials prices on our business and to help ensure we continue to have the materials we need available. However, rising prices and the potential for materials shortages have created additional risk into bidding and executing work profitably.
We have been proactive with managing our procurement processes to help reduce the impacts of rising materials prices on our business and to help ensure we 4 Table of Contents continue to have the materials we need available. Rising prices and the potential for materials shortages have created additional risk in bidding and executing work profitably.
Department of Labor Occupational Safety and Health Administration (“OSHA”) and Mine Safety and Health Administration (“MSHA”), the U.S. Department of Transportation, and to regulation under state laws and by the Canadian Workers’ Compensation Board and its Workplace Health, Safety and Compensation Commission.
Regulation Health and Safety Regulations Our operations are subject to regulation by the U.S. Department of Labor Occupational Safety and Health Administration (“OSHA”) and Mine Safety and Health Administration (“MSHA”), the U.S. Department of Transportation, and to regulation under state laws and by the Canadian Workers’ Compensation Board and its Workplace Health, Safety and Compensation Commission.
Our principal executive offices are located at 5100 E. Skelly Drive, Suite 500, Tulsa, Oklahoma 74135. Our telephone number is (918) 838-8822. Unless the context otherwise requires, all references herein to “Matrix Service Company”, “Matrix”, the “Company” or to “we”, “our”, and “us” are to Matrix Service Company and its subsidiaries.
Our principal executive offices are located at 15 E. 5th Street, Suite 1100, Tulsa, Oklahoma 74103. Our telephone number is (918) 838-8822. Unless the context otherwise requires, all references herein to “Matrix Service Company”, “Matrix”, the “Company” or to “we”, “our”, and “us” are to Matrix Service Company and its subsidiaries.
OTHER BUSINESS MATTERS Customers and Marketing We provided services to approximately 400 customers in fiscal 2022. Most of our revenue comes from long-term customer relationships. One customer accounted for $87.2 million or 12.3% of our consolidated revenue in fiscal 2022, which was primarily included in the Process and Industrial Facilities segment.
OTHER BUSINESS MATTERS Customers and Marketing We provided services to approximately 400 customers in fiscal 2023. Most of our revenue comes from long-term customer relationships. One customer accounted for $84.8 million or 10.7% of our consolidated revenue in fiscal 2023, which was primarily included in the Process and Industrial Facilities segment.
Patents and Proprietary Technology Our subsidiaries have several patents and continue to pursue new ideas and innovations to better serve our customers in several areas of our business. The Flex-A-Span® and Flex-A-Seal® trademarks are utilized to market our unique seals for floating roof tanks. The FastFroth® trademark is utilized to market our unique industrial cleaning process.
Patents and Proprietary Technology Our subsidiaries have several patents and continue to pursue new ideas and innovations to better serve our customers in several areas of our business. The Flex-A-Span® and Flex-A-Seal® trademarks are utilized to market our unique seals for floating roof tanks. The Flowdome® trademark is used to market our geodesic dome tank roofs.
Material Sources and Availability The COVID-19 pandemic and increased demand and competition for qualified labor have resulted in disruptions to global supply chains, which have led to higher prices for some of the materials we need to run our business, including, but not limited to, structural steel, steel piping, rebar, valves, copper, electrical components, fabricated products and equipment, and delivery freight.
Material Sources and Availability Beginning in fiscal 2022, increased demand for certain materials and disruptions to global supply chains have led to higher prices for some of the materials we need to run our business, including, but not limited to, structural steel, steel piping, rebar, valves, copper, electrical components, fabricated products and equipment, and delivery freight.
The journey to achieving and maintaining a zero-incident safety performance requires robust training along with comprehensive policies, processes, and systems to plan, perform, report, measure, review, and improve our performance.
The journey to achieving and maintaining a zero-incident safety performance requires a strong culture of safety and hands-on leadership, combined with robust training along with comprehensive policies, processes, and systems to plan, perform, report, measure, and review, and to continuously improve our performance.
We maintain a performance and payment bonding line sufficient to support the business. We generally require our subcontractors to indemnify us and our customers and name us as an additional insured for activities arising out of the subcontractors’ work.
We maintain a performance and payment bonding line sufficient to support the business. We generally require our subcontractors to indemnify us and our customers and name us as an additional insured for activities arising out of the subcontractors’ work. We also require certain subcontractors to provide additional security, including surety bonds in favor of us, to secure the subcontractors’ work.
Competitors vary with the markets we serve with few competitors competing in all of the markets we serve or in providing all of the services we provide. Contracts are generally awarded based on price, quality, safety performance, schedule, experience and customer satisfaction.
Competition We compete with local, regional, national and international contractors and service providers. Competitors vary with the markets we serve. Few competitors compete in all of the markets we serve or provide all of the services we provide. Contracts are generally awarded based on price, quality, safety performance, schedule, experience and customer satisfaction.
We make available free of charge through the "Investor Relations" section of our website our annual reports to stockholders, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We make available free of charge through the "Investor Relations" section of our website our annual reports to stockholders, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits, and amendments to those reports, as soon as reasonably practicable after we file or furnish to the SEC.
Diversity, Equity, and Inclusion (DEI) Foundational to attracting, developing, and retaining a diverse, engaged workforce is our commitment to making sure our employees feel safe, know they are valued, that their work matters, and that they are provided opportunities to achieve their maximum potential.
Our TRIR was 0.73, 0.51, and 0.28 during fiscal years 2023, 2022, and 2021, respectively. 5 Table of Contents Diversity, Equity, and Inclusion (DEI) Foundational to attracting, developing, and retaining a diverse, engaged workforce is our commitment to making sure our employees feel safe, know they are valued, know that their work matters, and are provided opportunities to achieve their maximum potential.
We also require certain subcontractors to provide additional insurance policies, including surety bonds in favor of us, to secure the subcontractors’ work. There can be no assurance that our insurance and the additional insurance coverage provided by our subcontractors will fully protect us against a valid claim or loss under the contracts with our customers.
There can be no assurance that our insurance and the additional insurance coverage provided by our subcontractors will fully protect us against a valid claim or loss under the contracts with our customers.
We competitively bid most of our projects; however, we have a number of preferred provider relationships with customers who award us work through long-term agreements. Our projects have durations ranging from a few days to multiple years. Competition We compete with local, regional, national and international contractors and service providers.
We market our services and products primarily through our marketing and business development personnel, senior professional staff and our operating management. We competitively bid most of our projects; however, we have a number of preferred provider relationships with customers who award us work through long-term agreements. Our projects have durations ranging from a few days to multiple years.
We also provide engineering, fabrication, and construction services for LNG utility peak shaving facilities, and construction and maintenance services to a variety of power generation facilities, including natural gas fired facilities, in simple or combined cycle configuration. 3 Table of Contents • Process and Industrial Facilities : primarily serves customers in the downstream and midstream petroleum industries who are engaged in refining crude oil and processing, fractionating, and marketing of natural gas and natural gas liquids.
We also provide construction services to a variety of power generation facilities, including natural gas fired facilities in simple or combined cycle configurations. • Process and Industrial Facilities : primarily consists of plant maintenance, repair, and turnarounds in the downstream and midstream markets for energy clients including refining and processing of crude oil, fractionating, and marketing of natural gas and natural gas liquids.
Turnarounds and planned outages at customer facilities are typically scheduled in the spring and the fall when the demand for energy is lower. Within the Utility and Power Infrastructure segment, transmission and distribution work is generally scheduled by the public utilities when the demand for electricity is at its lowest.
Within the Utility and Power Infrastructure segment, transmission and distribution work is generally scheduled by the public utilities when the demand for electricity is at its lowest. Therefore, revenue volume in the summer months is typically lower than in other periods throughout the year.
This metric is also used by others in our industry, which allows for a more objective comparison of our performance. Our TRIR was 0.51, 0.28, and 0.50 during fiscal years 2022, 2021, and 2020, respectively.
This metric is also used by others in our industry, which allows for a more objective comparison of our performance.
Of those employees, 677 were employed in office-based positions and 2,133 were employed in field or craft positions. The breakdown by country was: 2,467 located in the United States, 309 in Canada, and 34 across other international locations.
Of those employees, 621 were employed in office-based positions and 1,924 were employed in field or craft positions. The breakdown by country was: 2,353 located in the United States, 159 in Canada, and 33 across other international locations. At the end of fiscal 2023, worldwide, women in management represented 1.5% and 17.6% of our field and office teams, respectively.
At the end of fiscal 2022, 45% of our overall workforce and 28% of our management team was represented by women and minorities. Recognizing that commitment to Diversity, Equity and Inclusion (DEI) begins at the top, in fiscal 2022, Matrix increased the overall diversity of our Independent Board Members to 43%, with 29% female and 14% ethnically diverse.
The percentage of minorities in management (U.S. only) for field and office represented 9.8% and 18.6%, respectively. Recognizing our commitment to Diversity, Equity and Inclusion (DEI) begins at the top. In fiscal 2023, 43% of our Independent Board Members were diverse, with 29% female and 14% ethnically diverse.
While our intellectual property is not our main business, we believe that the ability to use these patents, trademarks, and technology enables us to expand our presence in the markets we serve and minimizes the development costs typically associated with organic growth. Regulation Health and Safety Regulations Our operations are subject to regulation by the U.S.
We also hold a perpetual license to use various patents and technologies related to LNG storage tanks, liquid nitrogen/liquid oxygen storage tanks, liquid petroleum gas storage tanks and thermal vacuum chambers. 6 Table of Contents While our intellectual property is not our main business, we believe that the ability to use these patents, trademarks, and technology enables us to expand our presence in the markets we serve and minimizes the development costs typically associated with organic growth.
Therefore, revenue volume in the summer months is typically lower than in other periods throughout the year. Our business can also be affected, both positively and negatively, by seasonal factors such as energy demand or weather conditions including hurricanes, snowstorms, and abnormally low or high temperatures.
Our business can also be affected, both positively and negatively, by seasonal factors such as energy demand or weather conditions including hurricanes, snowstorms, and abnormally low or high temperatures. Some of these seasonal factors may cause some of our offices and projects to close or reduce activities temporarily.
We also serve customers in various other industries such as petrochemical, sulfur, mining and minerals companies engaged primarily in the extraction of non-ferrous metals, aerospace and defense, cement, agriculture, and other industrial customers.
Also includes engineering, procurement, fabrication, and construction for refinery upgrades and retrofits for renewable fuels. We also construct thermal vacuum test chambers for aerospace and defense industries and other infrastructure for industries including petrochemical, sulfur, mining and minerals primarily in the extraction of non-ferrous metals, cement, agriculture, wastewater treatment facilities and other industrial customers.
Another customer accounted for $78.1 million or 11.0% of our consolidated revenue in fiscal 2022, all of which was included in the Utility and Power Infrastructure segment. No other customers individually accounted for more than 10% of our consolidated revenue in fiscal 2022. See Part II, Item 8.
No other customers individually accounted for more than 10% of our consolidated revenue in fiscal 2023. See Part II, Item 8. Financial Statement and Supplementary Data, Note 13 - Segment Information, for more information about concentration of revenue by segment.
We expect to recognize approximately 83% of our total backlog reported as of June 30, 2022 as revenue within fiscal 2023. Seasonality and Other Factors Our operating results can exhibit seasonal fluctuations, especially in our Process and Industrial Facilities segment, for a variety of reasons.
Seasonality and Other Factors Our operating results can exhibit seasonal fluctuations, especially in our Process and Industrial Facilities segment, for a variety of reasons. Turnarounds and planned outages at customer facilities are typically scheduled in the spring and the fall when the demand for energy is lower.
We also include work related to cryogenic and other specialty storage tanks and terminals, including LNG, liquid nitrogen/liquid oxygen, liquid petroleum, hydrogen and other specialty vessels such as spheres in this segment, as well work related to marine structures and truck and rail loading/offloading facilities.
Also includes work related to traditional aboveground crude oil and refined product storage tanks and terminals. This segment also includes terminal balance of plant work, truck and rail loading/offloading facilities, and marine structures as well as storage tank and terminal maintenance and repair.
OPERATING SEGMENTS We operate our business through three reportable segments: • Utility and Power Infrastructure : consists of power delivery services provided to investor-owned utilities, including construction of new substations, upgrades of existing substations, transmission and distribution line installations, upgrades and maintenance, as well as emergency and storm restoration services.
We also perform traditional electrical work for public and private utilities, including construction of new substations, upgrades of existing substations, transmission and distribution line installations, and upgrades and maintenance including live wire work. Work may also include emergency and storm restoration services.
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Our services include plant maintenance, turnarounds, industrial cleaning services, engineering, fabrication, and capital construction. • Storage and Terminal Solutions : consists of work related to aboveground storage tanks and terminals.
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REPORTABLE SEGMENTS We operate our business through three reportable segments: • Storage and Terminal Solutions : primarily consists of engineering, procurement, fabrication, and construction services related to cryogenic and other specialty tanks and terminals for LNG, NGLs, hydrogen, ammonia, propane, butane, liquid nitrogen/liquid oxygen, and liquid petroleum.
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Financial Statement and Supplementary Data, Note 13 - Segment Information, for more information about concentration of revenue by segment. We market our services and products primarily through our marketing and business development personnel, senior professional staff and our operating management.
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Backlog We define backlog as the total dollar amount of revenue that we expect to recognize as a result of performing work that has been awarded to us through a signed contract, limited notice to proceed ("LNTP") or other type of assurance that we consider firm.
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The following arrangements are considered firm: • fixed-price awards; • minimum customer commitments on cost plus arrangements; and • certain time and material arrangements in which the estimated value is firm or can be estimated with a reasonable amount of certainty in both timing and amounts.
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For long-term maintenance contracts with no minimum commitments and other established customer agreements, we include only the amounts that we expect to recognize as revenue over the next 12 months.
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For arrangements in which we have received a LNTP, we include the entire scope of work in our backlog if we conclude that the likelihood of the full project proceeding as high.
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For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date. 4 Table of Contents The following table provides a summary of changes in our backlog in fiscal 2022: Utility and Power Infrastructure Process and Industrial Facilities Storage and Terminal Solutions Total (In thousands) Backlog as of June 30, 2021 $ 170,043 $ 134,777 $ 157,741 $ 462,561 Project awards 152,109 412,358 270,212 834,679 Revenue recognized (220,093) (254,848) (232,839) (707,780) Backlog as of June 30, 2022 $ 102,059 $ 292,287 $ 195,114 $ 589,460 Book-to-bill ratio (1) 0.7 1.6 1.2 1.2 (1) Calculated by dividing project awards by revenue recognized.
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In the Utility and Power Infrastructure segment, backlog decreased by 40.0% as we booked $152.1 million of project awards in fiscal 2022. Our opportunity pipeline for LNG peak shaving projects continues to be promising, however those awards, while significant, can be less frequent. Bidding activity is strong in the power delivery portion of the business.
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During fiscal 2022, we received several key contracts for electrical infrastructure services including substation and transmission line rebuilds, relay upgrades, and fiber installation. In the Process and Industrial Facilities segment, backlog increased by 116.9% as we booked $412.4 million of project awards in fiscal 2022. Client spending related to refinery maintenance operations has returned to near-normal pre-pandemic levels.
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During fiscal 2022, we received key awards for two thermal vacuum chamber projects, a midstream gas processing plant, a borate mining facility, a refinery capital project, and other renewable energy capital projects. We continue to see strong demand for thermal vacuum chambers in the coming quarters, as well as increasing opportunities in mining and minerals, and chemicals.
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In addition, we are seeing more opportunities for midstream gas work, including some larger scale projects. In the Storage and Terminal Solutions segment, backlog increased by 23.7% as we booked $270.2 million of project awards during fiscal 2022.
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This segment includes significant opportunities for storage infrastructure projects related to natural gas, LNG, ammonia, hydrogen, NGLs and other forms of renewable energy. We believe LNG and hydrogen projects in particular will be key growth drivers for this segment.
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Bidding activity on LNG projects has been strong and we have been positioning ourselves for growth in hydrogen by entering into key relationships, such as the signing of a memorandum of understanding ("MOU") with Korea Gas Corporation in August 2022 to support South Korea’s development of a hydrogen economy as it transforms itself from natural gas and the signing of a MOU with Chart Industries, Inc. in January of 2021 to support the development of hydrogen solutions.
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Oil and natural gas producers have remained cautious with capital spending, which has limited opportunities in crude oil tanks and terminals. However, the price of crude oil and natural gas increased significantly during fiscal 2022, which, if sustained, may lead to higher production volumes and more opportunities for crude oil tanks, terminals and export facilities in the coming quarters.
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Project awards in all segments are cyclical and are typically the result of a sales process that can take several months or years to complete.
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It is common for awards to shift from one period to another as the timing of awards is dependent upon a number of factors including changes in market conditions, permitting, off take agreements, project financing and other factors. Backlog volatility may increase for some segments from time to time when individual project awards are less frequent, but more significant.
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Some of these seasonal factors may cause some of our offices and projects to close or reduce activities temporarily.
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The timing of normalization of the global supply chains is uncertain and will depend on several factors, including the speed of recovery from the pandemic, producer capacity, the level of imports, worldwide demand, tariffs on imported goods and other market conditions. Insurance We maintain insurance coverage for various aspects of our operations.
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We also hold a perpetual license to use various patents and technologies related to LNG storage tanks, liquid nitrogen/liquid oxygen storage tanks, liquid petroleum gas storage tanks and thermal vacuum chambers.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeUnder the terms of our contracts, at times we commit resources to customer projects prior to receiving payments from customers in amounts sufficient to cover expenditures on these projects as they are incurred. Many of our fixed-price or cost-plus contracts require us to satisfy specified progress milestones or performance standards in order to receive a payment.
Biggest changeIf we experience delays and/or defaults in customer payments, we could suffer liquidity problems or we could be unable to recover amounts owed to us. Under the terms of our contracts, at times we commit resources to customer projects prior to receiving payments from customers in amounts sufficient to cover expenditures on these projects as they are incurred.
In addition, in the area of security awareness 13 Table of Contents and training, we have updated our foundational curriculum, established mandatory recurring training requirements, and commenced periodic phishing campaign assessments. We rely on internally and externally developed software applications and systems to support critical functions including project management, estimating, scheduling, human resources, accounting, and financial reporting.
In addition, in the area of security awareness and training, we have updated our foundational curriculum, established mandatory recurring training requirements, and commenced periodic phishing campaign assessments. 12 Table of Contents We rely on internally and externally developed software applications and systems to support critical functions including project management, estimating, scheduling, human resources, accounting, and financial reporting.
Further, scientists have concluded that increasing greenhouse gas concentrations in the atmosphere may produce physical effects, such as increased severity and frequency of storms, droughts, floods and other climate events. Such climate events have the potential to adversely affect our operations or those of our customers, which in turn could have a negative effect on us.
Further, scientists have concluded that increasing greenhouse gas concentrations in the atmosphere may produce physical effects, such as increased severity and frequency of storms, droughts, floods and other climate events. Such climate events have the potential to adversely affect certain operations or those of certain customers, which in turn could have a negative effect on us.
As a result, there have been a variety of regulatory developments, proposals or requirements and legislative initiatives as well as pressure from institutional investors to restrict the emission of greenhouse gases. The growing imperative on customers for whom we provide services to limit greenhouse gas emissions could affect demand for our products and services.
As a result, there have been a variety of regulatory developments, proposals or requirements and legislative initiatives as well as pressure from institutional investors to restrict the emission of greenhouse gases. The growing imperative on customers for whom we provide services to limit greenhouse gas emissions could affect demand for certain services and products we provide.
Because our revenue are derived from contract awards, our results of operations and cash flows can fluctuate materially from period to period. The uncertainty associated with the timing of contract awards may reduce our short-term profitability as we balance our current capacity with expectations of future contract awards.
Because our revenue is derived from contract awards, our results of operations and cash flows can fluctuate materially from period to period. The uncertainty associated with the timing of contract awards may reduce our short-term profitability as we balance our current capacity with expectations of future contract awards.
The loss of business from any one of these customers could have a material adverse effect on our business or results of operations. 10 Table of Contents Our backlog is subject to unexpected fluctuations, adjustments and cancellations and does not include the full value of our long-term maintenance contracts, and therefore, may not be a reliable indicator of our future earnings.
The loss of business from any one of these customers could have a material adverse effect on our business or results of operations. Our backlog is subject to unexpected fluctuations, adjustments and cancellations and does not include the full value of our long-term maintenance contracts, and therefore, may not be a reliable indicator of our future earnings.
A portion of our operations are conducted outside the United States, and accordingly, our business is subject to risks associated with doing business internationally, including changes in foreign currency exchange rates, instability in political or economic conditions, difficulty in repatriating cash proceeds, differing employee relations, differing regulatory environments, trade protection measures, and difficulty in administering and enforcing corporate policies which may be different than the normal business practices of local cultures.
A small portion of our operations are conducted outside the United States, and accordingly, our business is subject to risks associated with doing business internationally, including changes in foreign currency exchange rates, instability in political or economic conditions, difficulty in repatriating cash proceeds, differing employee relations, differing regulatory environments, 16 Table of Contents trade protection measures, and difficulty in administering and enforcing corporate policies which may be different than the normal business practices of local cultures.
Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties, harm our reputation, damage our relationships with customers, reduce our revenue and profits and subject us to criminal and civil enforcement actions. Environmental factors and changes in laws and regulations could increase our costs and liabilities.
Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties, harm our reputation, damage our relationships with customers, reduce our revenue and profits and subject us to criminal and civil enforcement actions. 15 Table of Contents Environmental factors and changes in laws and regulations could increase our costs and liabilities.
Climate change legislation or regulations restricting emissions of “greenhouse gases” could result in reduced demand for our services and products. There has been an increased focus in the last several years on climate change in response to findings that emissions of carbon dioxide, methane and other greenhouse gases present an endangerment to public health and the environment.
Climate change legislation or regulations restricting emissions of “greenhouse gases” could result in reduced demand for certain services and products we provide. There has been an increased focus in the last several years on climate change in response to findings that emissions of carbon dioxide, methane and other greenhouse gases present an endangerment to public health and the environment.
We can provide no absolute assurance that our operations will continue to comply with future laws and regulations 16 Table of Contents or that the costs to comply with these laws and regulations and/or a failure to comply with these laws will not significantly adversely affect our business, financial condition and results of operations.
We can provide no absolute assurance that our operations will continue to comply with future laws and regulations or that the costs to comply with these laws and regulations and/or a failure to comply with these laws will not significantly adversely affect our business, financial condition and results of operations.
Because these significant customers generally contract with us for specific projects or for specific periods of time, we may lose these customers from year to year as the projects or maintenance contracts are completed.
Because these significant customers generally contract with us for specific projects or for specific periods of time, we may lose 9 Table of Contents these customers from year to year as the projects or maintenance contracts are completed.
Following the onset of the pandemic and with the ongoing conflict between Ukraine and Russia in Europe, there has been a high degree of volatility in commodity and energy markets that affect our client's businesses. In addition, inflation in the United States has reached multi-decade highs and has been increasing since the beginning of the fiscal year.
Following the onset of the pandemic and with the ongoing conflict between Ukraine and Russia in Europe, there has been a high degree of volatility in commodity and energy markets that affect our client's businesses. In addition, inflation in the United States has reached multi-decade highs.
Further, many of our contracts contain various cost and performance incentives and penalties that impact the earnings we realize from our contracts, and adjustments related to these incentives and penalties are recorded on a percentage of completion basis in the period when estimable and probable.
No restatements are made to prior periods. Further, many of our contracts contain various cost and performance incentives and penalties that impact the earnings we realize from our contracts, and adjustments related to these incentives and penalties are recorded on a percentage of completion basis in the period when estimable and probable.
Our policies mandate compliance with these anti-bribery laws. We operate in parts of the world that have experienced corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.
We operate in parts of the world that have experienced corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.
There are numerous factors beyond our control that influence the level of maintenance and capital expenditures of our customers, including: • the demand for alternative and renewable energy products, including hydrogen; • ability and demand to export LNG and other hydrocarbon products; • the demand for natural gas, oil and electricity; • current or projected commodity prices, including natural gas, oil, power and mineral prices; • refining margins; • the ability of energy and industrial companies to generate, access and deploy capital; • interest rates; • technological challenges and advances; • tax incentives, including those for alternative energy projects; • regulatory restraints on the rates that power companies may charge their customers; and • local, national and international political and economic conditions. 9 Table of Contents Our profitability could be negatively impacted if we are not able to maintain appropriate utilization of our workforce.
There are numerous factors beyond our control that influence the level of maintenance and capital expenditures of our customers, including: • the demand for alternative and renewable energy products, including hydrogen; • ability and demand to export LNG and other hydrocarbon products; • the demand for natural gas, oil and electricity; • current or projected commodity prices, including natural gas, oil, power and mineral prices; • refining margins; • the ability of energy and industrial companies to generate, access and deploy capital; • interest rates; • technological challenges and advances; • tax incentives, including those for alternative energy projects; • regulatory restraints on the rates that power companies may charge their customers; and 8 Table of Contents • local, national and international political and economic conditions.
These difficult conditions may also cause us to incur additional, unanticipated costs that we might not be able to pass on to our customers. 11 Table of Contents We are susceptible to severe weather conditions as a result of climate change or otherwise, which may harm our business and financial results.
These difficult conditions may also cause us to incur additional, unanticipated costs that we might not be able to pass on to our customers. 10 Table of Contents We are susceptible to severe weather conditions, including those caused by climate change or otherwise, which may harm our business and financial results.
As a result, we may adjust our estimates on one or more occasions as a result of changes in cost estimates, change orders to the original contract, or claims against the customer for increased costs incurred by us due to customer-induced delays and other factors. 14 Table of Contents If estimates of costs to complete fixed-price contracts indicate a loss, a provision is made to accrue the total loss anticipated in the period the loss is determined.
As a result, we may adjust our estimates on one or more occasions as a result of changes in cost estimates, change orders to the original contract, or claims against the customer for increased costs incurred by us due to customer-induced delays and other factors.
The borrowing base includes restricted cash plus a percentage of the value of certain accounts receivable, inventory and equipment, reduced for certain reserves. To the extent that cash on hand, cash flow from operations, and borrowing availability under the Credit Agreement are insufficient to make future investments, or provide needed working capital, we may require additional financing from other sources.
To the extent that cash on hand, cash flow from operations, and borrowing availability under the Credit Agreement are insufficient to make future investments, or provide needed working capital, we may require additional financing from other sources.
Under percentage-of-completion accounting, contract revenue and earnings are recognized ratably over the contract term based on the proportion of actual costs incurred to total estimated costs. In addition, some contracts contain penalty provisions for failure to achieve certain milestones, schedules or performance standards. We review our estimates of contract revenue, costs and profitability on a monthly basis.
Under percentage-of-completion accounting, contract revenue and earnings are recognized ratably over the contract term based on the proportion of actual costs incurred to total estimated costs. We review our estimates of contract revenue, costs and profitability on a monthly basis.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. The U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business.
Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws.
The availability of engineering and construction projects is dependent upon economic conditions and the outlook for renewable energy, hydrogen, natural gas, oil, petrochemical, industrial, and power industries, and specifically, the level of capital expenditures on energy infrastructure.
The availability of engineering and construction projects is dependent upon economic conditions and the outlook for renewable energy, hydrogen, natural gas, oil, petrochemical, industrial, and power industries, and specifically, the level of capital expenditures on energy infrastructure. Additionally, we expect our customers to benefit from bills such as the Infrastructure Investment and Jobs Act and the Inflation Reduction Act.
Under these types of arrangements, we may incur significant costs for labor, equipment and supplies prior to receipt of payment. If the customer fails or refuses to pay us for any reason, there is no assurance we will be able to collect amounts due to us for costs previously incurred.
If the customer fails or refuses to pay us for any reason, there is no assurance we will be able to collect amounts due to us for costs previously incurred.
We can provide no assurance that a default could be remedied, or that our creditors would grant a waiver or further amend the terms of the Credit Agreement.
We can provide no assurance that a default could be remedied, or that our creditors would grant a waiver or further amend the terms of the Credit Agreement. We may be unable to compete for projects if we are not able to obtain surety bonds or letters of credit.
Claims for damages to persons, including claims for bodily injury or loss of life, could result in costs and liabilities, which could materially and adversely affect our financial condition, results of operations or cash flows.
Claims for damages to persons, including claims for bodily injury or loss of life, could result in costs and liabilities, which could materially and adversely affect our financial condition, results of operations or cash flows. Poor safety performance could also jeopardize our relationships with our customers and increase our insurance premiums. We are exposed to credit risk from customers.
Contract profit estimates are also adjusted, on a percentage of completion basis, in the fiscal period in which it is determined that an adjustment is required. No restatements are made to prior periods.
If estimates of costs to complete fixed-price contracts indicate a loss, a provision is made to accrue the total loss anticipated in the period the loss is determined. Contract profit estimates are also adjusted, on a percentage of completion basis, in the fiscal period in which it is determined that an adjustment is required.
Legal, Insurance, Regulatory and Compliance Risks We are involved, and are likely to continue to be involved in legal proceedings, which will increase our costs and, if adversely determined, could have a material effect on our financial condition, results of operations, cash flows and liquidity.
As of June 30, 2023, we had $3.1 million of amortizing intangible assets and $29.1 million of non-amortizing goodwill representing 0.8% and 7.3% of our total assets, respectively. 14 Table of Contents Legal, Insurance, Regulatory and Compliance Risks We are involved, and are likely to continue to be involved in legal proceedings, which will increase our costs and, if adversely determined, could have a material effect on our financial condition, results of operations, cash flows and liquidity.
A successful claim brought against us in excess of, or outside of, our insurance coverage could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity. 15 Table of Contents Litigation, regardless of its outcome, is expensive, typically diverts the efforts of our management away from operations for varying periods of time, and can disrupt or otherwise adversely impact our relationships with current or potential customers, subcontractors and suppliers.
Litigation, regardless of its outcome, is expensive, typically diverts the efforts of our management away from operations for varying periods of time, and can disrupt or otherwise adversely impact our relationships with current or potential customers, subcontractors and suppliers.
The extent to which we utilize our workforce affects our profitability. If we under utilize our workforce, our project gross margins and overall profitability suffer in the short-term. If we over utilize our workforce, we may negatively impact safety, employee satisfaction and project execution.
Our profitability could be negatively impacted if we are not able to maintain appropriate utilization of our workforce. The extent to which we utilize our workforce affects our profitability. If we under utilize our workforce, our gross margins and overall profitability suffer in the short-term.
In addition, we perform an impairment review whenever events or changes in circumstances indicate the carrying value of goodwill or an intangible or fixed asset may not be recoverable. As of June 30, 2022, we had $4.8 million of amortizing intangible assets and $42.1 million of non-amortizing goodwill representing 1.1% and 9.6% of our total assets, respectively.
In addition, we perform an impairment review whenever events or changes in circumstances indicate the fair value of a goodwill reporting unit may be less than its carrying value or the carrying value of an intangible or fixed asset may not recoverable.
This could have a material adverse effect on our business, results of operations and financial condition. Future sales of our common stock may depress our stock price.
A successful claim brought against us in excess of, or outside of, our insurance coverage could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.
Removed
Poor safety performance could also jeopardize our relationships with our customers and increase our insurance premiums. 12 Table of Contents We are exposed to credit risk from customers. If we experience delays and/or defaults in customer payments, we could suffer liquidity problems or we could be unable to recover amounts owed to us.
Added
While spending and stimulus bills are expected to provide funding in many of the markets in which we operate, we may not be able to obtain the expected benefits from these bills or similar bills in the future.
Removed
General Risk Factors Acquisitions may result in significant transaction expenses, and unidentified liabilities and risks associated with entering new markets. We may also be unable to profitably integrate and operate these businesses. Any future acquisitions may result in significant transaction expenses, unexpected liabilities and other risks in addition to the integration and consolidation risks.
Added
If we over utilize our workforce, we may negatively impact safety, employee satisfaction and project execution.
Removed
If we make any future acquisitions, we will likely assume liabilities of the acquired business or have exposure to contingent liabilities that may not be adequately covered by insurance or indemnification, if any, from the former owners of the acquired business. These potential liabilities could have a material adverse effect on our business.
Added
Many of our fixed-price or cost- 11 Table of Contents plus contracts require us to satisfy specified progress milestones or performance standards in order to receive a payment. Under these types of arrangements, we may incur significant costs for labor, equipment and supplies prior to receipt of payment.
Removed
We may also not be able to successfully complete our ongoing integration of the operations, personnel and technology from our acquisitions.
Added
The borrowing base includes restricted cash plus a percentage of the value of certain accounts receivable, inventory and equipment, reduced for certain reserves. Accounts receivable eligible to be included in the borrowing base are generally limited to receivables associated with cost reimbursable work.
Removed
Because of their size and complexity, if we fail to complete our integration efforts successfully, we may experience interruptions in our business activities, a decrease in the quality of our services, a deterioration in our employee and customer relationships, and harm to our reputation, all of which could have a material adverse effect on our business, financial condition and results of operations.
Added
While receivables associated with fixed price work do not increase the borrowing base, such work often has upfront billings, which help support the liquidity needs of the business. As of June 30, 2023, our borrowing base was $67.0 million. Our borrowing base has ranged from $67.0 million to $83.2 million during fiscal 2023.
Removed
Our integration activities have required significant attention from management, which potentially decreases the time that management may devote to serve existing customers, attract new customers and develop new services and strategies. We may also experience difficulties in combining corporate cultures, maintaining employee morale and retaining key employees.
Added
A portion of our business depends on our ability to provide surety bonds or letters of credit.
Removed
The integration efforts may also impose substantial demands on our operations or other projects. We will have to actively strive to demonstrate to our existing customers that these integrations have not resulted in adverse changes 17 Table of Contents in our standards or business focus.
Added
Current or future market conditions, including losses incurred in the construction industry or as a result of large corporate bankruptcies, as well as changes in our sureties’ assessment of our operating and financial risk, could cause our surety providers and lenders to decline to issue or renew, or substantially reduce the amount of, bid or performance bonds for our work and could increase our costs associated with collateral.
Removed
Our acquisitions have involved a significant capital commitment, and the return that we achieve on any capital invested may be less than the return achieved on our other projects or investments. There will be challenges in consolidating and rationalizing information technology platforms and administrative infrastructures.
Added
These actions could be taken on short notice.
Removed
In addition, any delays or increased costs of integrating acquired companies could adversely affect our operations, financial results and liquidity. We may not realize the growth opportunities, operating margins and synergies that are anticipated from acquisitions.
Added
If our surety providers or lenders were to limit or eliminate our access to bonding or letters of credit, our alternatives would include seeking capacity from other sureties and lenders or finding more business that does not require bonds or that allows for other forms of collateral for project performance, such as cash.
Removed
The benefits we expect to achieve as a result of an acquisition will depend, in part, on our ability to realize the anticipated growth opportunities, operating margins and synergies.
Added
We may be unable to secure these alternatives in a timely manner, on acceptable terms, or at all, which could affect our ability to bid for or work on certain future projects requiring financial assurances. 13 Table of Contents Under standard terms in the surety market, sureties issue or continue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing or renewing bonds.
Removed
Our success in realizing these growth opportunities, operating margins and synergies, and the timing of this realization, depends on the successful integration of the acquired business and operations with our existing business and operations.
Added
If we were to experience an interruption or reduction in the availability of bonding capacity as a result of these or other reasons, we may be unable to compete for or work on certain projects that require bonding.
Removed
Even if we are able to integrate existing and acquired businesses successfully, this integration may not result in the realization of the full benefits of the growth opportunities, operating margins and synergies we currently expect within the anticipated time frame or at all.
Added
We believe this risk is partly mitigated by new project opportunities resulting from our customers' investment in cleaner energy sources. We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. The U.S.
Removed
Accordingly, the benefits from an acquisition may be offset by costs incurred or delays in integrating the companies, which could cause our revenue assumptions and operating margin to be inaccurate. We face substantial competition in each of our business segments, which may have a material adverse effect on our business.
Removed
We face competition in all areas of our business from regional, national and international competitors. Our competitors range from small, family-owned businesses to well-established, well-financed entities, both privately and publicly held, including many large engineering and construction companies and specialty contractors.
Removed
We compete primarily on the basis of price, customer satisfaction, safety performance and programs, quality of our products and services, and schedule. As a result, an increase in the level of competition in one or more markets may result in lower operating margins than we have recently experienced.
Removed
Our common stock, which is listed on the NASDAQ Global Select Market, has experienced significant price and volume fluctuations. These fluctuations could continue in the future, and our stockholders may not be able to resell their shares of common stock at or above the purchase price paid.
Removed
The market price of our common stock may change significantly in response to various factors and events beyond our control, including the following: • the risk factors described in this Item 1A; • general conditions in our customers’ industries; • general conditions in the security markets; • the significant concentration of ownership of our common stock in the hands of a small number of institutional investors; • a shortfall in operating revenue or net income from that expected by securities analysts and investors; and • changes in securities analysts’ estimates of our financial performance or the financial performance of our competitors or companies in our industry.
Removed
Some companies that have volatile market prices for their securities have been subject to security class action suits filed against them. If a suit were to be filed against us, regardless of the outcome, it could result in substantial costs and a diversion of our management’s attention and resources.
Removed
Sales of a substantial number of shares of our common stock in the public market or otherwise, either by us, a member of management or a major stockholder, or the perception that these sales could occur, could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities. 18 Table of Contents We may issue additional equity securities, which could lead to dilution of our issued and outstanding stock.
Removed
The issuance of additional common stock, restricted stock units or securities convertible into our common stock could result in dilution of the ownership interest held by existing stockholders.
Removed
We are authorized to issue, without stockholder approval 5,000,000 shares of preferred stock, par value $0.01 per share, in one or more series, which may give other stockholders dividend, conversion, voting, and liquidation rights, among other rights, which may be superior to the rights of holders of our common stock.
Removed
In addition, we are authorized to issue, without stockholder approval, a significant number of additional shares of our common stock and securities convertible into either common stock or preferred stock. Shareholder activists could cause a disruption to our business.
Removed
An activist investor may indicate disagreement with our strategic direction or capital allocation policies and may seek representation on our Board of Directors.
Removed
Our business, operating results or financial condition could be adversely affected and may result in, among other things: • increased operating costs, including increased legal expenses, insurance, administrative expenses and associated costs incurred in connection with director election contests; • uncertainties as to our future direction, which could result in the loss of potential business opportunities and could make it more difficult to attract, retain, or motivate qualified personnel, and strain relationships with investors and customers; and • reduction or delay in our ability to effectively execute our current business strategy and to implement new strategies.
Removed
Item 1B. Unresolved Staff Comments None. 19 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties Our principal properties are as follows: Location Description of Facility Segment Interest United States: Tulsa, Oklahoma Corporate headquarters and regional office All segments Leased Bellingham, Washington Regional office, fabrication facility and warehouse Process and Industrial Facilities, Storage and Terminal Solutions Owned Broomall, Pennsylvania Regional office All segments Leased Catoosa, Oklahoma Fabrication facility, regional offices and warehouses All segments Leased & Owned (1) Columbus, Ohio Regional office All segments Leased Houston, Texas Regional offices and warehouse All segments Leased & Owned Norco, California Regional office and warehouse Process and Industrial Facilities, Storage and Terminal Solutions Leased Orange, California Regional office and fabrication and warehouse facility Process and Industrial Facilities, Storage and Terminal Solutions Leased Pittsburgh, Pennsylvania Regional office All segments Leased Somerset, New Jersey Regional office and warehouse Utility and Power Infrastructure, Process and Industrial Facilities Leased Temperance, Michigan Regional office and warehouse Storage and Terminal Solutions Owned Tucson, Arizona Regional office and warehouse Process and Industrial Facilities, Storage and Terminal Solutions Leased International: Burlington, Ontario, Canada Regional office All segments Owned Leduc, Alberta, Canada Regional office and warehouse Storage and Terminal Solutions Leased Sarnia, Ontario, Canada Regional office and warehouse Storage and Terminal Solutions Owned Paju-si, Gyeonggi-do, South Korea Fabrication facility, regional office and warehouse Storage and Terminal Solutions Owned Sydney, New South Wales, Australia Regional office Storage and Terminal Solutions Leased (1) We constructed certain facilities on land acquired through ground leases with renewal options.
Biggest changeProperties Our principal properties are as follows: Location Description of Facility Segment Interest United States: Tulsa, Oklahoma Corporate headquarters and regional office All segments Leased Bellingham, Washington Regional office, fabrication facility and warehouse Process and Industrial Facilities, Storage and Terminal Solutions Owned Broomall, Pennsylvania Regional office All segments Leased Catoosa, Oklahoma Fabrication facility, regional offices and warehouses All segments Leased & Owned (1) Columbus, Ohio Regional office All segments Leased Houston, Texas Regional offices and warehouse All segments Leased & Owned Norco, California Regional office and warehouse Process and Industrial Facilities, Storage and Terminal Solutions Leased Orange, California Regional office and fabrication and warehouse facility Process and Industrial Facilities, Storage and Terminal Solutions Leased Pittsburgh, Pennsylvania Regional office All segments Leased Somerset, New Jersey Regional office and warehouse Utility and Power Infrastructure, Process and Industrial Facilities Leased Temperance, Michigan Regional office and warehouse Storage and Terminal Solutions Owned Tucson, Arizona Regional office and warehouse Process and Industrial Facilities, Storage and Terminal Solutions Leased International: Leduc, Alberta, Canada Regional office and warehouse Storage and Terminal Solutions Leased Sarnia, Ontario, Canada Regional office and warehouse Storage and Terminal Solutions Owned Paju-si, Gyeonggi-do, South Korea Fabrication facility, regional office and warehouse Storage and Terminal Solutions Owned Sydney, New South Wales, Australia Regional office Storage and Terminal Solutions Leased (1) We constructed certain facilities on land acquired through ground leases with renewal options.
In addition to the locations listed above, we have smaller regional locations and temporary office facilities at numerous customer locations throughout the United States and Canada. 20 Table of Contents
In addition to the locations listed above, we have smaller regional locations and temporary office facilities at numerous customer locations throughout the United States and Canada. 17 Table of Contents

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed2 unchanged
Biggest changeInformation concerning mine safety violations or other regulatory matters required to be disclosed in this annual report under Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Annual Report on Form 10-K. 21 Table of Contents PART II
Biggest changeInformation concerning mine safety violations or other regulatory matters required to be disclosed in this annual report under Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Annual Report on Form 10-K. 18 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed4 unchanged
Biggest changeThe stock price performance reflected in the following graph is not necessarily indicative of future stock performance. 22 Table of Contents June 30, 2017 2018 2019 2020 2021 2022 Matrix Service Company $ 100.00 $ 196.26 $ 216.68 $ 103.96 $ 112.30 $ 54.12 NASDAQ Composite $ 100.00 $ 123.60 $ 133.22 $ 169.11 $ 245.60 $ 188.07 Dow Jones US Heavy Construction $ 100.00 $ 107.41 $ 113.48 $ 98.54 $ 179.38 $ 190.51
Biggest changeThe stock price performance reflected in the following graph is not necessarily indicative of future stock performance. 19 Table of Contents June 30, 2018 2019 2020 2021 2022 2023 Matrix Service Company $ 100.00 $ 110.41 $ 52.97 $ 57.22 $ 27.57 $ 32.10 NASDAQ Composite $ 100.00 $ 107.78 $ 136.82 $ 198.71 $ 152.16 $ 191.93 Dow Jones US Heavy Construction $ 100.00 $ 105.65 $ 91.74 $ 166.99 $ 177.36 $ 262.47
The graph below assumes an investment of $100 (with reinvestment of all dividends) in our common stock, the NASDAQ Composite Index, and the Dow Jones U.S. Heavy Construction Index on June 30, 2017 and tracks their relative performance through June 30, 2022.
The graph below assumes an investment of $100 (with reinvestment of all dividends) in our common stock, the NASDAQ Composite Index, and the Dow Jones U.S. Heavy Construction Index on June 30, 2018 and tracks their relative performance through June 30, 2023.
The program will continue unless and until it is modified or revoked by the Board of Directors. We made no repurchases under the program in fiscal 2022 and have no current plans to repurchase stock. As of June 30, 2022, there were 1,349,037 shares available for purchase under the Stock Buyback Program.
The program will continue unless and until it is modified or revoked by the Board of Directors. We made no repurchases under the program during fiscal 2023 and have no current plans to repurchase stock. As of June 30, 2023, there were 1,349,037 shares available for repurchase under the Stock Buyback Program.
The terms of our Credit Agreement limit share repurchases to $2.5 million per fiscal year provided that that we meet certain availability thresholds and do not violate our Fixed Charge Coverage Ratio financial covenant.
The terms of our ABL Facility limit share repurchases to $2.5 million per fiscal year provided that we meet certain availability thresholds and do not violate our Fixed Charge Coverage Ratio financial covenant.
The following graph compares, for the period from June 30, 2017 to June 30, 2022, the cumulative stockholder return on our common stock with the cumulative total return of the NASDAQ Composite Index and the Dow Jones U.S. Heavy Construction Index.
The following graph compares, for the period from June 30, 2018 to June 30, 2023, the cumulative stockholder return on our common stock with the cumulative total return of the NASDAQ Composite Index and the Dow Jones U.S. Heavy Construction Index.
As of September 30, 2022, there were 19 holders of record of our common stock. Dividend Policy We have never paid cash dividends on our common stock and the terms of our Credit Agreement limit dividends to stock dividends only (see Item 8. Financial Statements and Supplementary Data, Note 5 - Debt for more information about our Credit Agreement).
As of August 31, 2023, there were 19 holders of record of our common stock. Dividend Policy We have never paid cash dividends on our common stock and the terms of our Credit Agreement prohibit us from paying cash dividends (see Item 8. Financial Statements and Supplementary Data, Note 5 - Debt for more information about our Credit Agreement).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended June 30, 2021, which was filed with the SEC on September 13, 2021. 24 Table of Contents Matrix Service Company Results of Operations (In thousands) Utility and Power Infrastructure Process and Industrial Facilities Storage and Terminal Solutions Corporate Total Fiscal Year 2022 Consolidated revenue $ 220,093 $ 254,848 $ 232,839 $ — $ 707,780 Gross profit (loss) (8,586) 9,270 262 (2,152) (1,206) Gross profit (loss) % (3.9) % 3.6 % 0.1 % — % (0.2) % Selling, general and administrative expenses 11,771 12,506 17,284 26,129 67,690 Goodwill impairment and restructuring costs 2,746 6,867 7,330 2,015 18,958 Operating loss (23,103) (10,103) (24,352) (30,296) (87,854) Operating loss % (10.5) % (4.0) % (10.5) % — % (12.4) % Fiscal Year 2021 Consolidated revenue $ 210,052 $ 199,917 $ 263,429 $ — $ 673,398 Gross profit 1,506 17,642 13,617 — 32,765 Gross profit % 0.7 % 8.8 % 5.2 % — % 4.9 % Selling, general and administrative expenses 9,882 14,756 18,644 26,474 69,756 Restructuring costs 1,312 3,807 1,391 246 6,756 Operating loss (9,688) (921) (6,418) (26,720) (43,747) Operating loss % (4.6) % (0.5) % (2.4) % — % (6.5) % Variances Fiscal Year 2022 to Fiscal Year 2021 Increase/(Decrease) Consolidated revenue $ 10,041 $ 54,931 $ (30,590) $ — $ 34,382 Gross profit (loss) (10,092) (8,372) (13,355) (2,152) (33,971) Selling, general and administrative expenses 1,889 (2,250) (1,360) (345) (2,066) Goodwill impairment and restructuring costs 1,434 3,060 5,939 1,769 12,202 Operating loss (13,415) (9,182) (17,934) (3,576) (44,107) 25 Table of Contents Operational Update Bidding activity, project award volumes, and revenue volumes all improved in fiscal 2022 as the economy recovered from the pandemic.
Biggest changeManagement's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended June 30, 2022, which was filed with the SEC on October 11, 2022. 21 Table of Contents Matrix Service Company Results of Operations (In thousands) Storage and Terminal Solutions Utility and Power Infrastructure Process and Industrial Facilities Corporate Total Fiscal Year 2023 Consolidated revenue $ 255,693 $ 169,504 $ 369,823 $ — $ 795,020 Gross profit (loss) 10,470 10,699 10,756 (1,105) 30,820 Gross profit (loss) % 4.1 % 6.3 % 2.9 % — % 3.9 % Selling, general and administrative expenses 20,054 7,045 14,909 26,241 68,249 Goodwill impairment and restructuring costs 969 37 13,288 1,164 15,458 Operating profit (loss) (10,553) 3,617 (17,441) (28,510) (52,887) Operating profit (loss) % (4.1) % 2.1 % (4.7) % — % (6.7) % Fiscal Year 2022 Consolidated revenue $ 232,839 $ 220,093 $ 254,848 $ — $ 707,780 Gross profit (loss) 262 (8,586) 9,270 (2,152) (1,206) Gross profit (loss) % 0.1 % (3.9) % 3.6 % — % (0.2) % Selling, general and administrative expenses 17,284 11,771 12,506 26,129 67,690 Restructuring costs 7,330 2,746 6,867 2,015 18,958 Operating loss (24,352) (23,103) (10,103) (30,296) (87,854) Operating loss % (10.5) % (10.5) % (4.0) % — % (12.4) % Variances Fiscal Year 2023 to Fiscal Year 2022 Increase/(Decrease) Consolidated revenue $ 22,854 $ (50,589) $ 114,975 $ — $ 87,240 Gross profit (loss) 10,208 19,285 1,486 1,047 32,026 Selling, general and administrative expenses 2,770 (4,726) 2,403 112 559 Goodwill impairment and restructuring costs (6,361) (2,709) 6,421 (851) (3,500) Operating profit (loss) 13,799 26,720 (7,338) 1,786 34,967 Operational Update During fiscal 2023, strong bidding activity resulted in project awards of $1.3 billion and we ended the fiscal year with $1.1 billion of backlog, the highest level since the end of fiscal 2019.
Cash Flows Provided by Financing Activities Financing activities provided $12.7 million of cash in the fiscal year ended June 30, 2022 primarily due to the net borrowings of $15.0 million under our ABL Facility, partially offset by $1.3 million paid in fees to enter into the ABL Facility, and $0.9 million paid to repurchase our stock for payment of withholding taxes due on equity-based compensation.
Financing activities provided $12.7 million of cash in the fiscal year ended June 30, 2022 primarily due to the net borrowings of $15.0 million under our ABL Facility, partially offset by $1.3 million paid in fees to enter into the ABL Facility, and $0.9 million paid to repurchase our stock for payment of withholding taxes due on equity-based compensation.
The increase in forecasted costs was primarily due to poor performance of a now terminated subcontractor, which required rework, as well as supply chain and escalation issues, in order to meet our client's expectations. Segment gross margin was also negatively impacted by under recovered construction overhead costs in fiscal 2022.
The increase in forecasted costs was primarily due to performance of a now terminated subcontractor, which required rework, as well as supply chain and escalation issues, in order to meet our client's expectations. Segment gross margin was also negatively impacted by under recovered construction overhead costs in fiscal 2022.
Cash Flows Provided by Investing Activities Investing activities provided $35.7 million of cash in the fiscal year ended June 30, 2022 primarily due to $39.0 million of asset sales, including $37.4 million in proceeds from the sale-leaseback of our regional office and fabrication and warehouse facilities located in Orange, California during the fourth quarter of fiscal 2022 (see Part II.
Investing activities provided $35.7 million of cash in the fiscal year ended June 30, 2022 primarily due to $39.0 million of asset sales, including $37.4 million in proceeds from the sale-leaseback of our regional office and fabrication and warehouse facilities located in Orange, California during the fourth quarter of fiscal 2022 (see Part II.
If a contract has multiple performance obligations, we assign the contract price to each performance obligation based on the stand-alone selling prices of the distinct services that comprise each performance obligation. 37 Table of Contents Step 5: Recognize Revenue as Performance Obligations are Satisfied We record revenue for contracts with our customers as we satisfy the contracts' performance obligations.
If a contract has multiple performance obligations, we assign the contract price to each performance obligation based on the stand-alone selling prices of the distinct services that comprise each performance obligation. 33 Table of Contents Step 5: Recognize Revenue as Performance Obligations are Satisfied We record revenue for contracts with our customers as we satisfy the contracts' performance obligations.
Our primary sources of liquidity at June 30, 2022 were unrestricted cash and cash equivalents on hand, capacity under our ABL Facility (see "ABL Credit Facility" in this Liquidity and Capital Resources section and Item 8. Financial Statements and Supplementary Data, Note 5 - Debt, for more information), and cash generated from operations.
Our primary sources of liquidity at June 30, 2023 were unrestricted cash and cash equivalents on hand, capacity under our ABL Facility (see "ABL Credit Facility" in this Liquidity and Capital Resources section and Item 8. Financial Statements and Supplementary Data, Note 5 - Debt, for more information), and cash generated from operations.
However, customers may not pay these amounts until final resolution of related claims, which may extend beyond one year. 38 Table of Contents Goodwill Goodwill represents the excess of the purchase price of acquisitions over the acquisition date fair value of the net identifiable tangible and intangible assets acquired.
However, customers may not pay these amounts until final resolution of related claims, which may extend beyond one year. 34 Table of Contents Goodwill Goodwill represents the excess of the purchase price of acquisitions over the acquisition date fair value of the net identifiable tangible and intangible assets acquired.
(4) See Part II, Item 8-Financial Statements and Supplementary Data, Note 6 - Income Taxes, for more information about the deferred tax asset valuation allowance. 26 Table of Contents Reconciliation of Net Loss to Adjusted EBITDA We have presented Adjusted EBITDA, which we define as net loss before goodwill and other intangible asset impairments, restructuring costs, gain on sale of facilities, stock-based compensation, interest expense, income taxes, and depreciation and amortization, because it is used by the financial community as a method of measuring our performance and of evaluating the market value of companies considered to be in similar businesses.
(5) See Part II, Item 8-Financial Statements and Supplementary Data, Note 6 - Income Taxes, for more information about the deferred tax asset valuation allowance. 26 Table of Contents Reconciliation of Net Loss to Adjusted EBITDA We have presented Adjusted EBITDA, which we define as net loss before goodwill impairments, gain on sale of facilities, restructuring costs, stock-based compensation, interest expense, income taxes, and depreciation and amortization, because it is used by the financial community as a method of measuring our performance and of evaluating the market value of companies considered to be in similar businesses.
Since adjusted net income (loss) and adjusted earnings (loss) per fully diluted share are not measures of performance calculated in accordance with GAAP, they should be considered in addition to, rather than as a substitute for, the most directly comparable GAAP financial measures.
Since adjusted net loss and adjusted loss per fully diluted share are not measures of performance calculated in accordance with GAAP, they should be considered in addition to, rather than as a substitute for, the most directly comparable GAAP financial measures.
However, the results of litigation are inherently unpredictable and the possibility exists that the ultimate resolution of one or more of these matters could result in a material effect on our financial position, results of operations or liquidity. 40 Table of Contents
However, the results of litigation are inherently unpredictable and the possibility exists that the ultimate resolution of one or more of these matters could result in a material effect on our financial position, results of operations or liquidity. 36 Table of Contents
Significant period to period changes in revenue, gross profits and operating results between fiscal 2022 and fiscal 2021 are discussed below on a consolidated basis for each segment. A discussion of results of operations changes between fiscal 2021 and fiscal 2020 is included in Item 7.
Significant period to period changes in revenue, gross profits and operating results between fiscal 2023 and fiscal 2022 are discussed below on a consolidated basis for each segment. A discussion of results of operations changes between fiscal 2022 and fiscal 2021 is included in Item 7.
We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future. 35 Table of Contents We issue letters of credit under our ABL Facility in the normal course of business to support workers' compensation insurance programs or certain construction contracts.
We are not aware of any losses in connection with surety bonds that have been posted on our behalf, and we do not expect to incur significant losses in the foreseeable future. We issue letters of credit under our ABL Facility in the normal course of business to support workers' compensation insurance programs or certain construction contracts.
As Adjusted EBITDA excludes certain financial information compared with net loss, the most directly comparable GAAP financial measure, users of this financial information should consider the type of events and transactions that are excluded. Our non-GAAP performance measure, Adjusted EBITDA, has certain material limitations as follows: • It does not include impairments to goodwill and other intangible assets.
As Adjusted EBITDA excludes certain financial information compared with net loss, the most directly comparable GAAP financial measure, users of this financial information should consider the type of events and transactions that are excluded. Our non-GAAP performance measure, Adjusted EBITDA, has certain material limitations as follows: • It does not include impairments to goodwill.
Item 8, Financial Statements, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.) The asset sale proceeds were partially 33 Table of Contents offset by $3.3 million of capital expenditures. Capital expenditures consisted of $1.5 million for facilities, office equipment and software, and $1.8 million for construction, fabrication, and transportation equipment.
Item 8, Financial Statements, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.) The asset sale proceeds were partially offset by $3.3 million of capital expenditures. Capital expenditures consisted of $1.5 million for facilities, office equipment and software, and $1.8 million for construction, fabrication, and transportation equipment.
Any measure that excludes impairments to intangible assets has material limitations since these expenses represent the loss of an asset that was acquired in exchange for cash or other assets. • It does not include gain on sale of facilities.
Any measure that excludes impairments to intangible assets has material limitations since these expenses represent the loss of an asset that was acquired in exchange for cash or other assets. • It does not include gain on asset sales.
While the sale occurred outside the normal course of business and similar sales are not expected to be recurring or sustainable, any measure that excludes this gain has inherent limitations since the sale resulted in a material inflow of cash. • It does not include restructuring costs. Restructuring costs represent material costs that we incurred and are oftentimes cash expenses.
While these sales occurred outside the normal course of business and are not expected to be recurring, any measure that excludes this gain has inherent limitations since the sale resulted in a material inflow of cash. • It does not include restructuring costs. Restructuring costs represent material costs that we incurred and are oftentimes cash expenses.
Other factors that may impact both short and long-term liquidity include: • contract disputes, which can be significant; • collection issues, including those caused by weak commodity prices, economic slowdowns or other factors which can lead to credit deterioration of our customers; • issuances of letters of credit; and • strategic investments in new operations.
Other factors that may impact both short and long-term liquidity include: • contract disputes; • collection issues, including those caused by weak commodity prices, economic slowdowns or other factors which can lead to credit deterioration of our customers; and • strategic investments in new operations.
The letters of credit that support construction contracts carry expiration dates throughout fiscal 2023. 36 Table of Contents CRITICAL ACCOUNTING POLICIES Revenue Recognition General Information about our Contracts with Customers Our revenue comes from contracts to provide engineering, procurement, fabrication and construction, repair and maintenance and other services.
The letters of credit that support construction contracts carry expiration dates throughout fiscal 2026. 32 Table of Contents CRITICAL ACCOUNTING POLICIES Revenue Recognition General Information about our Contracts with Customers Our revenue comes from contracts to provide engineering, procurement, fabrication and construction, repair and maintenance and other services.
As of June 30, 2022, we had $23.3 million of letters of credit outstanding, nearly all of which expire within the next 12 months. The letters of credit that support our workers’ compensation programs are expected to renew annually through the term of our credit facility.
As of June 30, 2023, we had $19.3 million of letters of credit outstanding, nearly all of which expire within the next 12 months. The letters of credit that support our workers’ compensation programs are expected to renew annually through the term of our credit facility.
Item 8, Financial Statements, Note 8 - Leases, for more information about our lease obligations and the timing of expected future payments. • Outstanding Debt and Interest Payments : As of June 30, 2022, the amount outstanding under our ABL Facility was $15.0 million.
Item 8, Financial Statements, Note 8 - Leases, for more information about our lease obligations and the timing of expected future payments. • Outstanding Debt and Interest Payments : As of June 30, 2023, the amount outstanding under our ABL Facility was $10.0 million.
Costs and estimated earnings in excess of billings on uncompleted contracts included revenue for unpriced change orders and claims of $8.9 million at June 30, 2022 and $14.6 million at June 30, 2021. The amounts ultimately realized may be significantly different than the recorded amounts resulting in a material adjustment to future earnings.
Costs and estimated earnings in excess of billings on uncompleted contracts included revenue for unpriced change orders and claims of $9.7 million at June 30, 2023 and $8.9 million at June 30, 2022. The amounts ultimately realized may be significantly different than the recorded amounts resulting in a material adjustment to future earnings.
Cash effect of changes in operating assets and liabilities at June 30, 2022 in comparison to June 30, 2021 include the following: • Accounts receivable, excluding credit losses recognized during the period, increased $6.6 million during fiscal 2022, which decreased cash flows from operating activities.
Cash effect of changes in operating assets and liabilities at June 30, 2023 in comparison to June 30, 2022 include the following: • Accounts receivable, excluding credit losses recognized during the period, decreased $8.7 million during fiscal 2023, which increased cash flows from operating activities.
CIE and BIE balances can experience significant fluctuations based on business volume and the timing of when job costs are incurred and the timing of customer billings and payments. • Inventories, income taxes receivable, other current assets, operating right-of-use lease assets and other non-current assets increased $1.1 million during fiscal 2022, which decreased cash flows from operating activities.
CIE and BIE balances can experience significant fluctuations based on business volume and the timing of when job costs are incurred and the timing of customer billings and payments. • Inventories, income taxes receivable, prepaid expenses, other current assets, operating right-of-use lease assets and other non-current assets decreased $13.7 million during fiscal 2023, which increased cash flows from operating activities.
Future payments for such leases, excluding leases with initial terms of one year or less, were $31.7 million at June 30, 2022, with $7.0 million payable within the next 12 months. Refer to Part II.
Future payments for such leases, excluding leases with initial terms of one year or less, were $31.2 million at June 30, 2023, with $5.7 million payable within the next 12 months. Refer to Part II.
Based on the outstanding balance and interest rates applicable as of June 30, 2022, if we carried the borrowings to the maturity of the facility, we would make total interest payments on the outstanding debt of $6.8 million, with $1.6 million payable within the next 12 months.
Based on the outstanding balance and interest rates applicable as of June 30, 2023, if we carried the borrowings to the maturity of the facility, we would make total payments of interest and fees on the outstanding debt of $4.4 million, with $1.4 million payable within the next 12 months.
For unpriced change orders, we estimate the increase or decrease to the contract price using the variable consideration method described in the Step 3: Determine Contract Price paragraph above. Unpriced change orders are more fully discussed in Note 7 - Commitments and Contingencies of the Notes to Financial Statements.
For unpriced change orders, we estimate the increase or decrease to the contract price using the variable consideration method described in the Step 3: Determine Contract Price paragraph above. Unpriced change orders are more fully discussed in Note 2 - Revenue of the Notes to Financial Statements.
We performed our annual goodwill impairment test as of May 31, 2022, which resulted in no impairment. The fiscal 2022 test indicated that four reporting units with a combined total of $33.8 million of goodwill as of June 30, 2022 were at higher risk of future impairment.
We performed our annual goodwill impairment test as of May 31, 2023, which resulted in no impairment. The fiscal 2023 test indicated that three reporting units with a combined total of $20.9 million of goodwill as of June 30, 2023 were at higher risk of future impairment.
The variance is primarily attributable to higher business volume and the timing of billing and collections. • Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") increased $14.0 million, which decreased cash flows from operating activities.
The variance is primarily attributable to the timing of billing and collections. • Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") increased $0.1 million, which decreased cash flows from operating activities. Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") increased $20.3 million, which increased cash flows from operating activities.
Item 8-Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.) The remaining gain on the sale of property, plant and equipment comprised of equipment sold in the normal course of business.
Item 8-Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment - Industrial Cleaning Disposal, for more information.) The remaining loss on the sale of property, plant and equipment comprised of equipment sold in the normal course of business.
Overview The majority of the work for all segments is performed in the United States, with 9.5% of revenue generated internationally during fiscal 2022, 10.2% in fiscal 2021 and 7.3% in fiscal 2020. The percentage of revenue generated internationally decreased in fiscal 2022 compared to fiscal 2021 primarily due to higher levels of revenue generated domestically.
Overview The majority of the work for all segments is performed in the United States, with 9.4% of revenue generated internationally during fiscal 2023, 9.5% in fiscal 2022 and 10.2% in fiscal 2021. The percentage of revenue generated internationally decreased in fiscal 2023 and fiscal 2022 compared to fiscal 2021 primarily due to higher domestic revenue growth.
ABL Credit Facility On October 5, 2022, we and our primary U.S. and Canada operating subsidiaries entered into the First Amendment and Waiver to Credit Agreement (the “Amendment”), which amended our asset-backed credit agreement (the "ABL Facility"), dated as of September 9, 2021 with Bank of Montreal, as Administrative Agent, Swing Line Lender and a Letter of Credit Issuer, and the lenders named therein.
ABL Credit Facility On September 9, 2021, the Company and our primary U.S. and Canada operating subsidiaries entered into an asset-based credit agreement, which was amended on October 5, 2022 (as amended, the "ABL Facility"), with Bank of Montreal, as Administrative Agent, Swing Line Lender and a Letter of Credit Issuer, and the lenders named therein.
Therefore, we are routinely required to carry these costs until they can be billed and collected; and ◦ some of our large construction projects may require security in the form of letters of credit or significant retentions. The timing of collection of retentions is often uncertain; • other changes in working capital; and • capital expenditures.
Therefore, we are routinely required to carry these costs until they can be billed and collected; and ◦ some of our large construction projects may require security in the form of letters of credit or significant retentions.
Other income included a $32.4 million gain on the sale-leaseback of our regional office and fabrication and warehouse facility located in Orange, California during the fourth quarter of fiscal 2022. See Part II.
In fiscal 2022, we booked a $32.4 million gain on the sale-leaseback of our regional office and fabrication and warehouse facility located in Orange, California (see Part II.
The segment gross margin was 3.6% in fiscal 2022 compared to 8.8% in fiscal 2021. Despite generally strong project execution and higher volumes, the segment gross margin in fiscal 2022 was negatively impacted by an increase in forecasted costs to complete a midstream gas processing project. The project reduced gross profit by $8.7 million during fiscal 2022.
Finally, segment gross margin was also negatively impacted by the under recovery construction overhead costs. Despite generally strong project execution and higher volumes, the segment gross margin in fiscal 2022 was negatively impacted by an increase in forecasted costs to complete a midstream gas processing project. The project had reduced gross profit by $8.7 million during fiscal 2022.
The determination of our legal basis for a claim requires significant judgment. We estimate the change to the contract price using the variable consideration method described in the Step 3: Determine Contract Price paragraph above. Claims are more fully discussed in Note 7 - Commitments and Contingencies of the Notes to Financial Statements.
The determination of our legal basis for a claim requires significant judgment. We estimate the change to the contract price using the variable consideration method described in the Step 3: Determine Contract Price paragraph above. Claims are more fully discussed in Part II. Item 8-Financial Statements and Supplementary Data, Note 2 - Revenue.
The fiscal 2022 segment gross margin was negatively impacted by low revenue volume, which led to under recovery of construction overhead costs and a lower than previously forecasted margin on a thermal energy storage tank repair and maintenance project due to changes in repair scope, expanded client weld testing and associated schedule delays, which reduced segment gross profit by $6.3 million.
The fiscal 2022 segment gross margin was negatively impacted by low revenue volume, which led to under recovery of construction overhead costs and a lower than previously forecasted margin on a thermal energy storage tank 24 Table of Contents repair and maintenance project, which had reduced segment gross profit by $6.3 million.
We are taking the following actions: • strategic review of business processes and organizational structure; • proactive management of the cost structure and working capital; and • eliminating all non-critical capital expenditures. 31 Table of Contents Factors that routinely impact our short-term liquidity and may impact our long-term liquidity include, but are not limited to: • changes in costs and estimated earnings in excess of billings on uncompleted contracts and billings on uncompleted contracts in excess of costs due to contract terms that determine the timing of billings to customers and the collection of those billings: ◦ some cost plus and fixed price customer contracts are billed based on milestones which may require us to incur significant expenditures prior to collections from our customers; ◦ some fixed price customer contracts allow for significant upfront billings at the beginning of a project, which temporarily increases liquidity near term; ◦ time and material contracts are normally billed in arrears.
The remaining asset sales comprised of equipment sold in the normal course of business. 28 Table of Contents Factors that routinely impact our short-term liquidity and may impact our long-term liquidity include, but are not limited to: • changes in costs and estimated earnings in excess of billings on uncompleted contracts and billings on uncompleted contracts in excess of costs due to contract terms that determine the timing of billings to customers and the collection of those billings: ◦ some cost plus and fixed price customer contracts are billed based on milestones which may require us to incur significant expenditures temporarily prior to collections from our customers; ◦ some fixed price customer contracts allow for significant upfront billings at the beginning of a project, which temporarily increases liquidity near term; ◦ time and material contracts are normally billed in arrears.
On a segment basis, revenue increased in the Process and Industrial Facilities and Utility and Power Infrastructure segments by $54.9 million and $10.1 million, respectively. The increases were partially offset by a decrease in revenue of $30.6 million in the Storage and Terminal Solutions segment.
On a segment basis, revenue increased in the Process and Industrial Facilities and Storage and Terminal Solutions segments by $115.0 million and $22.8 million, respectively. These increases were partially offset by a decrease in revenue of $50.6 million in the Utility and Power Infrastructure segment.
In the event that our availability is less than the greater of (i) $15.0 million and (ii) 15.00% of the lesser of (1) the current borrowing base and (2) the commitments under the ABL Facility then in effect, a consolidated Fixed Charge Coverage Ratio of at least 1.00 to 1.00 must be maintained.
In the event that our availability is less than the greater of (i) $15.0 million and (ii) 15.00% of the commitments under the ABL Facility then in effect, a consolidated Fixed Charge Coverage Ratio of at least 1.00 to 1.00 must be maintained. We were in compliance with all covenants of the ABL Facility as of June 30, 2023.
If our view of project opportunities or gross margins deteriorates, particularly for the higher risk reporting units, then we may be required to record an impairment of goodwill. We considered the amount of headroom for each reporting unit when determining whether an impairment existed. The amount of headroom varies by reporting unit.
If our view of project opportunities or gross margins deteriorates, particularly for the higher risk reporting units, then we may be required to record an impairment of goodwill.
In order to more clearly depict our core profitability, the following tables present our operating results after certain adjustments: Reconciliation of Net Loss to Adjusted Net Income (Loss) (1) (In thousands, except per share data) Fiscal Years Ended June 30, 2022 June 30, 2021 June 30, 2020 Net loss, as reported $ (63,900) $ (31,224) $ (33,074) Restructuring costs incurred 646 6,756 14,010 Goodwill and intangible asset impairments 18,312 — 38,515 Gain on sale of facilities ( 2 ) (32,392) — — Accelerated amortization of deferred debt amendment fees (3) 1,518 — — Deferred tax valuation allowance (4) 17,943 — — Tax impact of adjustments and other net tax items 4,464 (1,739) (8,644) Adjusted net income (loss) $ (53,409) $ (26,207) $ 10,807 Loss per fully diluted share, as reported $ (2.39) $ (1.18) $ (1.24) Adjusted earnings (loss) per fully diluted share $ (2.00) $ (0.99) $ 0.40 (1) This table presents non-GAAP financial measures of our adjusted net income (loss) and adjusted earnings (loss) per fully diluted share for fiscal 2022, 2021 and 2020.
Corporate Unallocated corporate expenses were $28.5 million during fiscal 2023 compared to $30.3 million in the same period last year. 25 Table of Contents Non-GAAP Financial Measures In order to more clearly depict our core profitability, the following tables present our operating results after certain adjustments: Reconciliation of Net Loss to Adjusted Net Loss (1) (In thousands, except per share data) Fiscal Years Ended June 30, 2023 June 30, 2022 June 30, 2021 Net loss, as reported $ (52,361) $ (63,900) $ (31,224) Restructuring costs incurred 3,142 646 6,756 Goodwill and intangible asset impairments 12,316 18,312 — Gain on sale of assets (2) (2,905) (32,392) — Accelerated amortization of deferred debt amendment fees (3) — 1,518 — Tax impact of adjustments and other net tax items (4) (3,231) 4,464 (1,739) Deferred tax valuation allowance (5) 12,595 17,943 — Adjusted net loss $ (30,444) $ (53,409) $ (26,207) Loss per fully diluted share, as reported $ (1.94) $ (2.39) $ (1.18) Adjusted earnings (loss) per fully diluted share $ (1.13) $ (2.00) $ (0.99) (1) This table presents non-GAAP financial measures of our adjusted net loss and adjusted loss per fully diluted share for fiscal 2023, 2022 and 2021.
The interest rate in effect for borrowings outstanding at June 30, 2022, including applicable margin, was 6.00%.
The interest rate in effect for borrowings outstanding at June 30, 2023, including applicable margin, was approximately 7.47%.
Unrestricted cash and cash equivalents at June 30, 2022 totaled $52.4 million and availability under the ABL Facility totaled $42.5 million, resulting in total liquidity of $94.8 million.
Unrestricted cash and cash equivalents at June 30, 2023 totaled $54.8 million and availability under the ABL Facility totaled $37.7 million, resulting in total liquidity of $92.5 million.
The outstanding borrowings are due on September 9, 2026 when the ABL Facility matures. Future interest payments will be determined based on prevailing interest rates during that time. Refer to Part II.
The outstanding borrowings are due on September 9, 2026 when the ABL Facility matures. Future interest payments will be determined based on prevailing interest rates during that time. Refer to Part II. Item 8, Financial Statements, Note 5 - Debt, for more information about the terms of our ABL Facility.
(2) Gain on the sale-leaseback of our regional office and fabrication and warehouse facility located in Orange, California (see Part II. Item 8-Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.) (3) Interest expense in fiscal 2022 included $1.5 million of accelerated amortization of deferred debt amendment fees (see Part II.
In fiscal 2022, other income included a $32.4 million gain on the sale-leaseback of our regional office and fabrication and warehouse facility located in Orange, California. See Part II. Item 8, Financial Statements, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.
At June 30, 2022, our borrowing base was $80.8 million, we had $15.0 million of outstanding borrowings, and $23.3 million in letters of credit outstanding, which resulted in availability of $42.5 million under the ABL Facility.
At June 30, 2023, our borrowing base was $67.0 million, we had $10.0 million of outstanding borrowings, and we had $19.3 million in letters of credit outstanding, which resulted in availability of $37.7 million under the ABL Facility.
These operating assets can fluctuate based on the timing of inventory builds and draw-downs, accrual and receipt of income taxes receivable, prepayments of certain expenses, leasing activity, business volume, and other timing differences. • Accounts payable, accrued wages and benefits, accrued insurance, operating lease liabilities and other accrued expenses increased by $12.2 million during fiscal 2022, which increased cash flows from operating activities.
Most of this decrease was due to the receipt of $13.3 million of income tax refunds during the fiscal year. 30 Table of Contents These operating assets can fluctuate based on the timing of inventory builds and draw-downs, accrual and receipt of income taxes receivable, prepayments of certain expenses, leasing activity, business volume, and other timing differences. • Accounts payable, accrued wages and benefits, accrued insurance, operating lease liabilities and other accrued expenses, and other liabilities, non-current decreased by $9.4 million during fiscal 2023, which decreased cash flows from operating activities.
Therefore, any measure that excludes depreciation or amortization expense has material limitations. 27 Table of Contents Fiscal Years Ended June 30, 2022 June 30, 2021 June 30, 2020 (in thousands) Net loss $ (63,900) $ (31,224) $ (33,074) Goodwill and other intangible asset impairment 18,312 — 38,515 Gain on sale of facilities (1) (32,392) — — Restructuring costs 646 6,756 14,010 Stock-based compensation 7,877 8,156 9,877 Interest expense 2,951 1,559 1,597 Provision (benefit) for federal, state and foreign income taxes 5,617 (12,039) (3,570) Depreciation and amortization 15,254 17,858 19,124 Adjusted EBITDA $ (45,635) $ (8,934) $ 46,479 (1) Gain on the sale-leaseback of our regional office and fabrication and warehouse facility located in Orange, California (see Part II.
Therefore, any measure that excludes depreciation or amortization expense has material limitations. 27 Table of Contents Fiscal Years Ended June 30, 2023 June 30, 2022 June 30, 2021 (in thousands) Net loss $ (52,361) $ (63,900) $ (31,224) Goodwill and other intangible asset impairment 12,316 18,312 — Gain on sale of assets (1) (2,905) (32,392) — Restructuring costs 3,142 646 6,756 Stock-based compensation 6,791 7,877 8,156 Interest expense 2,024 2,951 1,559 Provision (benefit) for federal, state and foreign income taxes (400) 5,617 (12,039) Depreciation and amortization 13,694 15,254 17,858 Adjusted EBITDA $ (17,699) $ (45,635) $ (8,934) (1) In fiscal 2023, we booked a $2.9 million gain on the sale of our industrial cleaning business in the fourth quarter of fiscal 2023.
The program will continue unless and until it is modified or revoked by the Board of Directors. We made no repurchases under the program in fiscal 2022 and have no current plans to repurchase stock. As of June 30, 2022, there were 1,349,037 shares available for repurchase under the Stock Buyback Program.
We made no repurchases under the program during fiscal 2023 and have no current plans to repurchase stock. As of June 30, 2023, there were 1,349,037 shares available for repurchase under the Stock Buyback Program.
Our significant assumptions, including revenue growth rates, gross margins, discount rate and other factors may change in the future based on the changing economic and competitive environment in which we operate.
We considered the amount of headroom for each reporting unit when determining whether an impairment existed. The amount of headroom varies by reporting unit. Our significant assumptions, including revenue growth rates, gross margins, discount rate and other factors may change in the future based on the changing economic and competitive environment in which we operate.
Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”), an Adjusted Term SOFR ("Adjusted Term SOFR"), or at the Canadian Prime Rate, plus an applicable margin.
Our borrowing base has ranged from $67.0 million to $83.2 million during fiscal 2023. 29 Table of Contents Borrowings under the ABL Facility bear interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate (“Base Rate”), an Adjusted Term Secured Overnight Financing Rate ("Adjusted Term SOFR"), or at the Canadian Prime Rate, plus an applicable margin.
The segment gross margin in fiscal 2022 was also negatively impacted by low revenue volume, which led to the under recovery of construction overhead costs, and by an unfavorable settlement of a claim with a customer in the first quarter of fiscal 2022.
The fiscal 2022 negative segment gross margin was materially impacted by changes in the forecasted costs to complete two large capital projects and an unfavorable settlement of a claim with a customer. The segment gross margin in fiscal 2022 was also negatively impacted by the under recovery of construction overhead costs.
We also provide engineering, fabrication, and construction services for LNG utility peak shaving facilities, and construction and maintenance services to a variety of power generation facilities, including natural gas fired facilities, in simple or combined cycle configuration. • Process and Industrial Facilities : primarily serves customers in the downstream and midstream petroleum industries who are engaged in refining crude oil and processing, fractionating, and marketing of natural gas and natural gas liquids.
We also provide construction services to a variety of power generation facilities, including natural gas fired facilities in simple or combined cycle configurations. • Process and Industrial Facilities : primarily consists of plant maintenance, repair, and turnarounds in the downstream and midstream markets for energy clients including refining and processing of crude oil, fractionating, and marketing of natural gas and natural gas liquids.
The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Consolidated Balance Sheets to the total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows (in thousands): June 30, 2022 June 30, 2021 Cash and cash equivalents $ 52,371 $ 83,878 Restricted cash $ 25,000 — Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows $ 77,371 $ 83,878 The following table provides a summary of changes in our liquidity for the year ended June 30, 2022 (in thousands): Liquidity at June 30, 2021 $ 83,878 Cash used by operating activities (54,196) Capital expenditures (3,345) Proceeds from asset sales (1) 39,018 Net borrowings under ABL Facility 15,000 Remaining availability under ABL Facility 42,460 Cash restricted in support of ABL Facility (25,000) Cash used by other financing activities (2,301) Effect of exchange rate changes on cash (683) Liquidity at June 30, 2022 $ 94,831 (1) Includes $37.4 million of proceeds from the sale-leaseback of our regional office and fabrication and warehouse facility located in Orange, California during the fourth quarter of fiscal 2022.
The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Consolidated Balance Sheets to the total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows (in thousands): June 30, 2023 June 30, 2022 Cash and cash equivalents $ 54,812 $ 52,371 Restricted cash 25,000 25,000 Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows $ 79,812 $ 77,371 The following table provides a summary of changes in our liquidity for the year ended June 30, 2023 (in thousands): Liquidity at June 30, 2022 $ 94,831 Cash provided by operating activities 10,247 Capital expenditures (9,009) Proceeds from asset sales (1) 6,466 Net repayments under ABL Facility (5,000) Decrease in availability under ABL Facility (4,718) Cash used by other financing activities (58) Effect of exchange rate changes on cash (205) Liquidity at June 30, 2023 $ 92,554 (1) Includes $6.3 million of net proceeds from the sale of our industrial cleaning business during the fourth quarter of fiscal 2023.
Material Cash Requirements from Contractual and Other Obligations As of June 30, 2022, our short-term and long-term material cash requirements for known contractual and other obligations were as follows: • Operating Leases : In the normal course of business, we lease real estate and equipment under various arrangements which are classified as operating leases.
Treasury Shares We had 840,899 treasury shares as of June 30, 2023 and intend to utilize these treasury shares in connection with equity awards under the our stock incentive plans and for sales to the Employee Stock Purchase Plan. 31 Table of Contents Material Cash Requirements from Contractual and Other Obligations As of June 30, 2023, our short-term and long-term material cash requirements for known contractual and other obligations were as follows: • Operating Leases : In the normal course of business, we lease real estate and equipment under various arrangements which are classified as operating leases.
Under the program, the aggregate number of shares repurchased may not exceed 2,707,175 shares. We may repurchase our stock from time to time in the open market at prevailing market prices or in privately negotiated transactions and are not obligated to purchase any shares.
We may repurchase our stock from time to time in the open market at prevailing market prices or in privately negotiated transactions and are not obligated to purchase any shares. The program will continue unless and until it is modified or revoked by the Board of Directors.
Item 8, Financial Statements, Note 4 - Goodwill and Other Intangible Assets - Goodwill, for more information about the impairments. As a result of actions taken to reduce our cost structure, we recorded $0.6 million of restructuring costs in fiscal 2022. These costs were net of a $1.6 million credit recorded in restructuring costs in the third quarter.
As a result of actions taken to reduce our cost structure, we recorded $3.1 million of restructuring costs in fiscal 2023 and $0.6 million of restructuring costs in fiscal 2022. See Part II. Item 8, Financial Statements and Supplementary Data, Note 14 - Restructuring Costs, for more information.
The decrease in segment revenue is primarily a result of lower volumes of crude oil tank and terminal capital work. The segment gross margin was 0.1% in fiscal 2022 compared to 5.2% in fiscal 2021.
The increase in segment revenue is primarily a result of higher volumes of specialty vessel capital projects and tank repair and maintenance work. The segment gross margin was 4.1% in fiscal 2023 compared to 0.1% in fiscal 2022.
Other factors that may impact long-term liquidity include: • borrowing constraints under our credit facility and maintaining compliance with all covenants contained in the Credit Agreement; • acquisitions and disposals of businesses; and • purchases of shares under our stock buyback program. 32 Table of Contents Cash Flows Used by Operating Activities Cash flows used by operating activities for the fiscal year ended June 30, 2022 totaled $54.2 million.
Other factors that may impact long-term liquidity include: • borrowing constraints under our ABL Facility and maintaining compliance with all covenants contained in the ABL Facility; • acquisitions and disposals of businesses or assets; and • purchases of shares under our stock buyback program.
Interest expense was $3.0 million in fiscal 2022 and $1.6 million in fiscal 2021. Interest expense in fiscal 2022 included $1.5 million of accelerated amortization of deferred debt amendment fees in the first quarter (see Part II.
Interest expense was $2.0 million in fiscal 2023 and $3.0 million in fiscal 2022. Interest expense consists primarily of interest on debt outstanding, unused capacity fees, amortization of deferred debt issuance costs, letter of credit fees and other interest. Interest expense in fiscal 2022 included $1.5 million of accelerated amortization of deferred debt amendment fees in the first quarter.
Item 8-Financial Statements and Supplementary Data, Note 5 - Debt, for more information).
Item 8 - Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment - Industrial Cleaning Disposal, for more information).
Assuming that all other components of our fair value estimate remain unchanged, a change in the following assumptions would have the following effect on headroom: Headroom Sensitivity Analysis Goodwill as of June 30, 2022 (in thousands) Baseline Headroom Headroom if Revenue Growth Rate Declines by 100 Basis Points Headroom if Gross Margin Declines by 100 Basis Points Headroom if Discount Rate Increases by 100 Basis Points Reporting Unit 1 $ 12,316 5% -3% -20% -3% Reporting Unit 2 $ 11,158 4% -2% -12% -4% Reporting Unit 3 $ 8,287 103% 87% 37% 83% Reporting Unit 4 $ 6,112 23% 18% 1% 17% Reporting Unit 5 $ 4,262 16% 9% -17% 6% In the third quarter, we concluded that goodwill impairment indicators existed based on the decline in the price of our stock and operating results that have underperformed our forecasts during the year.
Assuming that all other components of our fair value estimate remain unchanged, a change in the following assumptions would have the following effect on headroom: Headroom Sensitivity Analysis Goodwill as of June 30, 2023 (in thousands) Baseline Headroom Headroom if Revenue Growth Rate Declines by 100 Basis Points Headroom if Gross Margin Declines by 100 Basis Points Headroom if Discount Rate Increases by 100 Basis Points Reporting Unit 1 $ 11,158 11% 4% -5% 3% Reporting Unit 2 $ 8,240 3,583% 3,252% 2,151% 3,180% Reporting Unit 3 $ 5,484 22% 19% 0% 16% Reporting Unit 4 $ 4,238 28% 25% 15% 24% In the second quarter of fiscal 2023, we concluded that a goodwill impairment existed in the Process and Industrial Facilities segment based on a material adverse change in gross profit on a project.
As of June 30, 2022, there were $140.6 million of surety bonds in force, of which we expect $90.3 million to expire within the next 12 months.
As of June 30, 2023, there were $127.6 million of surety bonds in force, of which we expect $126.6 million to expire within the next 12 months. Of the bonds in force, $99.6 million related to performance bonds for ongoing projects and the remainder related to contractor licensing, liens, and other bonds.
Major components of cash flows used by operating activities for the year ended June 30, 2022 are as follows: Net Cash Used by Operating Activities (In thousands) Fiscal Year Ended June 30, 2022 Net loss $ (63,900) Gain on sale of property, plant and equipment (1) (33,114) Goodwill impairment 18,312 Depreciation and amortization 15,254 Stock-based compensation expense 7,877 Deferred income tax 5,358 Other non-cash expenses 2,425 Cash effect of changes in operating assets and liabilities (6,408) Net cash used by operating activities $ (54,196) (1) Gain on sale of property, plant and equipment includes a $32.4 million gain on the sale-leaseback of our regional office and fabrication and warehouse facility located in Orange, California (see Part II.
Major components of cash flows provided by operating activities for the year ended June 30, 2023 are as follows: Net Cash Provided by Operating Activities (In thousands) Fiscal Year Ended June 30, 2023 Net loss $ (52,361) Gain on sale of property, plant and equipment (1) (2,841) Goodwill impairment 12,316 Depreciation and amortization 13,694 Stock-based compensation expense 6,791 Other non-cash expenses 147 Cash effect of changes in operating assets and liabilities 32,501 Net cash provided by operating activities $ 10,247 (1) Gain on sale of property, plant and equipment includes a $2.9 million gain on the sale of our industrial cleaning business (see Part II.
The ABL Facility is guaranteed by substantially all of our remaining U.S. and Canadian subsidiaries. The ABL Facility available borrowings may be increased by an amount not to exceed $15.0 million, subject to certain conditions, including obtaining additional commitments.
The maximum amount of loans under the ABL Facility is limited to $90.0 million. The ABL Facility's available borrowings may be increased by an amount not to exceed $15.0 million, subject to certain conditions, including obtaining additional commitments. The ABL Facility is intended to be used for working capital, capital expenditures, issuances of letters of credit and other lawful purposes.
Any future dividend payments will depend on the terms of our ABL Facility, our financial condition, capital requirements and earnings as well as other relevant factors. Stock Repurchase Program We may repurchase common stock pursuant to the Stock Buyback Program, which was approved by the board of directors in November 2018.
Dividend Policy We have never paid cash dividends on our common stock and the terms of our Credit Agreement prohibit us from paying cash dividends. Any future dividend payments will depend on the terms of our ABL Facility, our financial condition, capital requirements and earnings as well as other relevant factors.
The ABL Facility is intended to be used for working capital, capital expenditures, issuances of letters of credit and other lawful purposes. Our obligations under the ABL Facility are secured by a first lien on all our assets and the assets of our co-borrowers and guarantors under the ABL Facility.
Our obligations under the ABL Facility are guaranteed by substantially all of our U.S. and Canadian subsidiaries and are secured by a first lien on all our assets and the assets of our co-borrowers and guarantors under the ABL Facility.
See Part II. Item 8, Financial Statements, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information. The remaining asset sales comprised of equipment sold in the normal course of business.
See Part II. Item 8, Financial Statements, Note 3 - Property, Plant and Equipment - Industrial Cleaning Disposal, for more information.
Consolidated gross profit (loss) was ($1.2) million in fiscal 2022 compared to $32.8 million in fiscal 2021. Gross margin (loss) was (0.2)% in fiscal 2022 compared to 4.9% in fiscal 2021. Gross margins in fiscal 2022 were negatively impacted by low revenue volume, which led to the under recovery of construction overhead costs.
Gross margins in fiscal 2022 were negatively impacted by low revenue volume, which led to the under recovery of construction overhead costs. In addition, the competitive bidding environment and increased forecasts in costs to complete projects negatively impacted gross margins. Consolidated Selling, General and Administrative ("SG&A") expenses were $68.2 million in fiscal 2023 compared to $67.7 million in fiscal 2022.
We also serve customers in various other industries such as petrochemical, sulfur, mining and minerals companies engaged primarily in the extraction of non-ferrous metals, aerospace and defense, cement, agriculture, and other industrial customers.
Also includes engineering, procurement, fabrication, and construction for refinery upgrades and retrofits for renewable fuels. We also construct thermal vacuum test chambers for aerospace and defense industries and other infrastructure for industries including petrochemical, sulfur, mining and minerals primarily in the extraction of non-ferrous metals, cement, agriculture, wastewater treatment facilities and other industrial customers.
Item 8, Financial Statements, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information. 28 Table of Contents Our effective tax rate for fiscal 2022 was (9.6)% compared to 27.8% in fiscal 2021. The effective tax rate during fiscal 2022 was primarily impacted by a $17.9 million valuation allowance placed on our deferred tax assets.
Our effective tax rate for fiscal 2023 was 0.8% compared to (9.6)% in fiscal 2022. The effective tax rates for both periods were impacted by valuation allowances of $12.6 million and $17.9 million, respectively, placed on deferred tax assets.
Financial Statements, Note 7 - Commitment and Contingencies, for more information), third party consulting services and centralization of support costs related to restructuring activities (see "Operational Update" in this Results of Operations section), partially offset by cost reductions we implemented. 30 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Overview We define liquidity as the ongoing ability to pay our liabilities as they become due, fund business operations and meet all monetary contractual obligations.
Item 8-Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.) LIQUIDITY AND CAPITAL RESOURCES Overview We define liquidity as the ongoing ability to pay our liabilities as they become due, fund business operations and meet all monetary contractual obligations.
Utility and Power Infrastructure Revenue for the Utility and Power Infrastructure segment was $220.1 million in fiscal 2022 compared to $210.1 million in fiscal 2021. The increase is primarily due to higher volumes of power generation and power delivery work, partially offset by lower volumes of natural gas utility peak shaving and storm response service work.
The decrease is primarily due to lower volumes of natural gas utility peak shaving work, partially offset by higher volumes of power delivery work. The reduction of peak shaving work is due to the timing of commencement of new projects and the completion of previous awarded projects.
Item 8-Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.) Fiscal 2022 Versus Fiscal 2021 Consolidated Consolidated revenue was $707.8 million for fiscal 2022 compared to $673.4 million in fiscal 2021.
Item 8-Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.) (3) Interest expense in fiscal 2022 included $1.5 million of accelerated amortization of deferred debt amendment fees in connection with terminating the Senior Secured Revolving Credit facility.
Our services include engineering, fabrication, construction, and maintenance and repair, which includes planned and emergency services for both tanks and full terminals. Finally, we offer tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals.
Finally, we manufacture and sell precision engineered specialty tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals. • Utility and Power Infrastructure : primarily consists of engineering, procurement, fabrication, and construction services to support growing demand for LNG utility peak shaving facilities.
These operating liabilities can fluctuate based on the timing of vendor payments, accruals, leasing activities, business volume, and other timing differences. • Other liabilities decreased by $7.4 million, which decreased cash flows from operating activities. This decrease was primarily due to payment on the deferred payroll tax liability associated with the CARES Act. See Part II., Item 8.
These operating liabilities can fluctuate based on the timing of vendor payments, accruals, leasing activities, business volume, and other timing differences.
Item 8-Financial Statements and Supplementary Data, Note 3 - Property, Plant and Equipment - Sale-leaseback Transaction, for more information.) In addition, we added $32.5 million of liquidity as a result of entering into the ABL Facility during the first quarter of fiscal 2022. We continue to maintain adequate liquidity to support our near- to intermediate-term needs.
See Part II. Item 8, Financial Statements, Note 3 - Property, Plant and Equipment - Industrial Cleaning Disposal, for more information. In fiscal 2022, we booked a $32.4 million gain on the sale-leaseback of our regional office and fabrication and warehouse facility located in Orange, California (see Part II.
We also include work related to cryogenic and other specialty storage tanks and terminals, including LNG, liquid nitrogen/liquid oxygen, liquid petroleum, hydrogen and other specialty vessels such as spheres in this segment, as well work related to marine structures and truck and rail loading/offloading facilities.
Also includes work related to traditional aboveground crude oil and refined product storage tanks and terminals. This segment also includes terminal balance of plant work, truck and rail loading/offloading facilities, and marine structures as well as storage tank and terminal maintenance and repair.
These negative impacts were partially offset by good project execution in the remainder of the segment. Process and Industrial Facilities Revenue for the Process and Industrial Facilities segment was $254.8 million in fiscal 2022 compared to $199.9 million in fiscal 2021. The increase of $54.9 million is primarily due to higher levels of refinery maintenance and turnaround work.
Process and Industrial Facilities Revenue for the Process and Industrial Facilities segment was $369.8 million in fiscal 2023 compared to $254.8 million in fiscal 2022.
The carryback benefit was offset by $2.8 million of valuation allowances on various deferred tax assets and $1.8 million of excess tax expense related to the vesting of stock-based compensation. In fiscal 2022 and 2021, net loss was $63.9 million and $31.2 million, respectively; or $2.39 and $1.18 per fully diluted share, respectively.
In fiscal 2023 and 2022, net loss was $52.4 million and $63.9 million, respectively; or $1.94 and $2.39 per fully diluted share, respectively. Storage and Terminal Solutions Revenue for the Storage and Terminal Solutions segment was $255.7 million in fiscal 2023 compared to $232.8 million in fiscal 2022, an increase of $22.9 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCommodity Price Risk We have no direct commodity exposure, but we do have exposure to materials derived from certain commodities including steel plate, steel pipe, and copper, which are key materials we use.
Biggest changeCommodity Price Risk We have no direct commodity exposure, but we do have exposure to materials derived from certain commodities including steel plate, steel pipe, and copper, which are key materials we use. Disruptions to global supply chains in recent years have led to higher prices for some of the materials we need to run our business.
To mitigate our risk, on occasion we convert Canadian Dollar balances into U.S. Dollars to settle U.S. Dollar amounts owed by our Canadian operations. A 10% unfavorable change in the Canadian Dollar against the U.S. Dollar would not have had a material impact on our financial results for the fiscal year ended June 30, 2022.
To mitigate our risk, on occasion we convert Canadian Dollar balances into U.S. Dollars to settle U.S. Dollar amounts owed by our Canadian operations. A 10% unfavorable change in the Canadian Dollar against the U.S. Dollar would not have had a material impact on our financial results for the fiscal year ended June 30, 2023.
Financial instruments with interest rate risk at June 30, 2022 were as follows: Maturity by Fiscal Year 2023 2024 2025 2026 2027 Fair Value as of June 30, 2022 (in thousands) Long-term debt: Variable rate debt $ — $ — $ — $ — $ 15,000 $ 15,000 If the interest in effect for borrowings outstanding at June 30, 2022, including applicable margin, increases 1.00%, then our interest expense would only increase $0.2 million, which would not have a material impact to our business.
Financial instruments with interest rate risk at June 30, 2023 were as follows: Maturity by Fiscal Year 2024 2025 2026 2027 2028 Fair Value as of June 30, 2023 (in thousands) Long-term debt: Variable rate debt $ — $ — $ — $ 10,000 $ — $ 10,000 If the interest in effect for borrowings outstanding at June 30, 2023, including applicable margin, increases 1.00%, then our annual interest expense would only increase $0.1 million, which would not have a material impact to our business.
We have been proactive with managing our procurement processes to help reduce the impacts of rising materials prices on our business and to help ensure we continue to have the materials we need available. However, rising prices and the potential for materials shortages have interjected additional risk into bidding and executing work profitably. 41 Table of Contents
We have been proactive with managing our procurement processes to help reduce the impacts of rising materials prices on our business and to help ensure we continue to have the materials we need available. However, rising prices and the potential for materials shortages have created additional risk in bidding and executing work profitably. 37 Table of Contents
The interest rate in effect for borrowings outstanding at June 30, 2022, including applicable margin, was 6.00%.
The interest rate in effect for borrowings outstanding at June 30, 2023, including applicable margin, was 7.47%.
Removed
The COVID-19 Pandemic and the war between Russia and Ukraine has resulted in disruptions to global supply chains, which have led to higher prices for some of the materials we need to run our business.

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