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 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
		September 30, 2023				December 31, 2022
		Assets		Liabilities		Assets		Liabilities
Derivatives designated as cash flow hedging instruments:
Fuel hedge contracts	2	$	2,868	$	—	$	—	$	638
Foreign currency exchange hedge contracts	2		—		374		831		6
Total derivatives		$	2,868	$	374	$	831	$	644

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 dredging backlog.

As of September 30, 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 March 2025. As of September 30, 2023, there were 12.6 million gallons remaining on these contracts representing forecasted domestic fuel purchases through March 2025. Under these swap agreements, the Company will pay fixed prices ranging from $2.34 to $3.22 per gallon.

At September 30, 2023 and December 31, 2022, the fair value asset and liability of the fuel hedge contracts were estimated to be $2,868 and $638, respectively, and are recorded in prepaid expenses and other current assets and accrued expenses, respectively, in the condensed consolidated balance sheets. 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 nine months ended September 30, 2023 were $1,507. The remaining gains and losses included in accumulated other comprehensive loss at September 30, 2023 will be reclassified into earnings over the next eighteen 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.

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 US Dollar could have an adverse impact on cash flows associated with its equipment builds.

As of September 30, 2023, the Company was party to various foreign exchange forward contract arrangements to hedge the purchase of materials through November 2024. As of September 30, 2023, there were 23.7 million Euro of payments remaining on these hedge contracts. Under these hedge contracts, the Company will pay fixed prices ranging from $1.01 to $1.13 per Euro.

As of September 30, 2023 and December 31, 2022, the fair value liability and asset of foreign currency exchange hedge contracts were estimated to be $374 and $831, respectively, and are recorded in accrued expenses and prepaid expenses and other current assets, respectively, in the condensed consolidated balance sheets. 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 in the condensed consolidated balance sheet. 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 nine months ended September 30, 2023 were $519. The remaining gains and losses included in accumulated other comprehensive loss at September 30, 2023 will be reclassified into earnings over the next fourteen 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.

Changes in the components of the accumulated balances of other comprehensive income (loss) are as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Derivatives:
Fuel Hedge Contracts
Reclassification of derivative (gains) losses to earnings—net of tax		(297	)		(2,358	)		1,507		$	(9,558	)
Change in fair value of derivatives—net of tax		3,271			(3,590	)		1,113			9,228
Net change in cash flow derivative fuel hedges—net of tax	$	2,974		$	(5,948	)	$	2,620		$	(330	)
Foreign Currency Exchange Hedge Contracts
Reclassification of derivative gains to earnings—net of tax	$	(198	)	$	(196	)	$	(519	)	$	(196	)
Change in fair value of derivatives—net of tax		(621	)		(1,078	)		(377	)		(837	)
Net change in cash flow derivative foreign currency hedges—net of tax	$	(819	)	$	(1,274	)	$	(896	)	$	(1,033	)
Total net change in cash flow derivative hedges - net of tax	$	2,155		$	(7,222	)	$	1,724		$	(1,363	)

Adjustments reclassified from accumulated balances of other comprehensive income (loss) to earnings are as follows:


		Three Months Ended						Nine Months Ended
		September 30,						September 30,
	Statement of Operations Location	2023			2022			2023			2022
Derivatives:
Fuel hedge contracts	Costs of contract revenues	$	(649	)	$	(3,154	)	$	1,425		$	(12,786	)
Foreign currency exchange hedge contracts	Other income (expense)	$	(13	)	$	—			(437	)		—
	Income tax provision		(167	)		(600	)		—			(3,032	)
		$	(495	)	$	(2,554	)	$	988		$	(9,754	)

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 September 30, 2023 (see Note 4, Long-term debt). The fair value of the 2029 Notes was $266,565 at September 30, 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.