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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2023
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 5. Fair value measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy has been established by GAAP that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The accounting guidance describes three levels of inputs that may be used to measure fair value: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company is exposed to counterparty credit risk associated with non-performance of its various derivative instruments. The Company’s risk would be limited to any unrealized gains on current positions. To help mitigate this risk, the Company transacts only with counterparties that are rated as investment grade or higher. In addition, all counterparties are monitored on a continuous basis. The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. At times, the Company holds certain derivative contracts that it uses to manage commodity price risk or foreign currency risk. The Company does not hold or issue derivatives for speculative or trading purposes. The fair values of these financial instruments are summarized as follows:
|  |  |  | Fair Value at |
|  | Fair Value Hierarchy Levels |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | March 31, 2023 |  |  | December 31, 2022 |
|  |  |  | Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
Derivatives designated as cash flow hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fuel hedge contracts |  | 2 |  | $ | — |  |  | $ | 2,693 |  |  | $ | — |  |  | $ | 638 |
Foreign currency exchange hedge contracts |  | 2 |  |  | 995 |  |  |  | — |  |  |  | 831 |  |  |  | 6 |
Total derivatives |  |  |  | $ | 995 |  |  | $ | 2,693 |  |  | $ | 831 |  |  | $ | 644 |
Fuel hedge contracts The Company is exposed to certain market risks, primarily commodity price risk as it relates to diesel fuel purchase requirements, which occur in the normal course of business. The Company enters into heating oil commodity swap contracts to hedge the risk that fluctuations in diesel fuel prices could have an adverse impact on cash flows associated with its domestic dredging contracts. The Company’s goal is to hedge approximately 80% of the eligible fuel requirements for work in domestic backlog. As of March 31, 2023, the Company was party to various swap arrangements to hedge the price of a portion of its diesel fuel purchase requirements for work in its backlog to be performed through October 2023. As of March 31, 2023, there were 5.4 million gallons remaining on these contracts representing forecasted domestic fuel purchases through October 2023. Under these swap agreements, the Company will pay fixed prices ranging from $2.71 to $3.95 per gallon. At March 31, 2023 and December 31, 2022, the fair value liability of the fuel hedge contracts were estimated to be $2,693 and $638, respectively, and are recorded in accrued expenses. For fuel hedge contracts considered to be highly effective, the losses reclassified to earnings from changes in fair value of derivatives, net of cash settlements and taxes, for the three months ended March 31, 2023 were $370. The remaining gains and losses included in accumulated other comprehensive loss at March 31, 2023 will be reclassified into earnings over the next seven months, corresponding to the period during which the hedged fuel is expected to be utilized. Changes in the fair value of fuel hedge contracts not considered highly effective are recorded as cost of contract revenues in the Statement of Operations. The fair values of fuel hedges are corroborated using inputs that are readily observable in public markets; therefore, the Company determines fair value of these fuel hedges using Level 2 inputs. Foreign currency exchange hedge contracts The Company is exposed to certain market risks, including foreign currency exchange rate risks related to the purchase of new vessel build materials in Europe. The Company enters into foreign currency exchange forward contracts to hedge the risk that fluctuations in the Euro in relation to the U.S. Dollar could have an adverse impact on cash flows associated with its equipment builds. As of March 31, 2023, the Company was party to various foreign exchange forward contract arrangements to hedge the purchase of materials through November 2024. As of March 31, 2023, there were 26.0 million Euro of payments remaining on these hedge contracts. Under these hedge contracts, the Company will pay fixed prices ranging from $1.00 to $1.13 per Euro. As of March 31, 2023 and December 31, 2022, the fair value asset of foreign currency exchange hedge contracts were estimated to be $995 and $831, respectively, and are recorded in other current assets. At December 31, 2022, the fair value liability of foreign currency exchange hedge contracts was estimated to be $6 and is recorded in accrued expenses. For foreign currency exchange hedge contracts considered to be highly effective, the gains reclassified to earnings from changes in fair value of derivatives, net of cash settlements and taxes, for the three months ended March 31, 2023 were $42. The remaining gains and losses included in accumulated other comprehensive loss at March 31, 2023 will be reclassified into earnings over the next twenty months, corresponding to the period during which the hedged currency is expected to be utilized. Changes in the fair value of foreign currency exchange hedge contracts not considered highly effective are recorded as other expenses in the Statement of Operations. The fair values of foreign currency exchange hedges are corroborated using inputs that are readily observable in public markets; therefore, the Company determines the fair value of these foreign currency exchange hedges using Level 2 inputs. Accumulated other comprehensive income (loss) Changes in the components of the accumulated balances of other comprehensive income (loss) are as follows:
|  | Three Months Ended |
|  | March 31, |
|  | 2023 |  |  | 2022 |
Derivatives: |  |  |  |  |  |
Fuel Hedge Contracts |  |  |  |  |  |
Reclassification of derivative losses (gains) to earnings—net of tax |  | $ | 370 |  |  | $ | (2,481 | )
Change in fair value of derivatives—net of tax |  |  | (1,906 | ) |  |  | 8,716 |
Net change in cash flow derivative fuel hedges—net of tax |  | $ | (1,536 | ) |  | $ | 6,235 |
Foreign Currency Exchange Hedge Contracts |  |  |  |  |  |
Reclassification of derivative losses (gains) to earnings—net of tax |  | $ | (42 | ) |  | $ | — |
Change in fair value of derivatives—net of tax |  |  | 169 |  |  |  | — |
Net change in cash flow derivative foreign currency hedges—net of tax |  | $ | 127 |  |  | $ | — |
Total net change in cash flow derivative hedges - net of tax |  | $ | (1,409 | ) |  | $ | 6,235 |
Adjustments reclassified from accumulated balances of other comprehensive loss (income) to earnings are as follows:
|  |  |  | Three Months Ended |
|  |  |  | March 31, |
|  | Statement of Operations Location |  | 2023 |  |  | 2022 |
Derivatives: |  |  |  |  |  |  |  |
Fuel hedge contracts |  | Costs of contract revenues |  | $ | 495 |  |  | $ | (3,319 | )
Foreign currency exchange hedge contracts |  | Other expense (income) |  |  | (52 | ) |  |  | — |
|  | Income tax benefit (provision) |  |  | 112 |  |  |  | (838 | )
|  |  |  | $ | 331 |  |  | $ | (2,481 | )
Other financial instruments The carrying value of financial instruments included in current assets and current liabilities approximates fair value due to the short-term maturities of these instruments. Based on timing of the cash flows and comparison to current market interest rates, the carrying value of the revolving credit agreement approximates fair value. In May 2021, the Company sold $325,000 of the 2029 Notes, which were outstanding at March 31, 2023 (see Note 4, Long-term debt). The fair value of the 2029 Notes was $245,622 at March 31, 2023, which is a Level 1 fair value measurement as the senior notes’ value was obtained using quoted prices in active markets. It is impracticable to determine the fair value of outstanding letters of credit or performance, bid and payment bonds due to uncertainties as to the amount and timing of future obligations, if any.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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