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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2020

OR

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

For the transition period from ________ to ________

Commission file number: 1-33891

ORION GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

State of Incorporation

26-0097459

IRS Employer Identification Number

12000 Aerospace Avenue, Suite 300

Houston, Texas 77034

Address of Principal Executive Office

(713) 852-6500

Registrant’s telephone number (including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Common stock, 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2020

OR

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

For the transition period from ________ to ________

Commission file number: 1-33891

ORION GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

State of Incorporation

26-0097459

IRS Employer Identification Number

12000 Aerospace Avenue, Suite 300

Houston, Texas 77034

Address of Principal Executive Office

(713) 852-6500

Registrant’s telephone number (including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Common stock, $0.01 par value per share

ORN

The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:   Yes No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:    Yes No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:    Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files

Yes   No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, "accelerated filer", "small reporting" company and "emerging growth" company in Rule 12b-2 of the Exchange Act (Check One):

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated filer

Smaller reporting company 

Emerging growth company 

If an emerging growth company, initiate by check mark if the registrant has elected not to use the extended transition period for complying with any, new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes  No

There were 30,348,870 shares of common stock outstanding as of July 30, 2020.

ORN

The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:   Yes No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:    Yes No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days:    Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files

Yes   No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, "accelerated filer", "small reporting" company and "emerging growth" company in Rule 12b-2 of the Exchange Act (Check One):

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated filer

Smaller reporting company 

Emerging growth company 

If an emerging growth company, initiate by check mark if the registrant has elected not to use the extended transition period for complying with any, new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes  No

There were 30,348,870 shares of common stock outstanding as of July 30, 2020.

Table of Contents

ORION GROUP HOLDINGS, INC.

Quarterly Report on Form 10-Q for the period ended June 30, 2020

Index

Page

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019

3

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019

4

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019

6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

35

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

46

Item 4.

Controls and Procedures

47

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

49

Item 3.

Defaults upon Senior Securities

49

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

49

Item 6.

Exhibits

50

SIGNATURES

51

2

Table of Contents

Part

PART I.FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Orion Group Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Information)

    

June 30,

    

December 31,

2020

    

2019

ASSETS

 

(Unaudited)

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

10,343

$

128

Restricted cash

958

Accounts receivable:

 

  

 

  

Trade, net of allowance for credit losses of $3,011 and $2,600, respectively

 

96,146

 

116,540

Retainage

 

37,963

 

42,547

Income taxes receivable

 

1,059

 

962

Other current

 

2,260

 

2,680

Inventory

 

1,963

 

1,114

Costs and estimated earnings in excess of billings on uncompleted contracts

 

36,339

 

41,389

Prepaid expenses and other

 

5,354

 

5,647

Total current assets

 

191,427

 

211,965

Property and equipment, net of depreciation

 

126,971

 

132,348

Operating lease right-of-use assets, net of amortization

16,762

17,997

Financing lease right-of-use assets, net of amortization

13,783

7,896

Inventory, non-current

 

6,360

 

7,037

Intangible assets, net of amortization

 

11,114

 

12,147

Deferred income tax asset

143

85

Other non-current

 

4,861

 

5,369

Total assets

$

371,421

$

394,844

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Current debt, net of debt issuance costs

$

4,358

$

3,668

Accounts payable:

 

 

  

Trade

 

46,869

 

70,421

Retainage

 

434

 

562

Accrued liabilities

 

20,731

 

16,966

Income taxes payable

 

1,227

 

1,523

Billings in excess of costs and estimated earnings on uncompleted contracts

 

53,829

 

48,781

Current portion of operating lease liabilities

5,095

5,043

Current portion of financing lease liabilities

4,919

2,788

Total current liabilities

137,462

149,752

Long-term debt, net of debt issuance costs

 

47,734

 

68,029

Operating lease liabilities

12,334

13,596

Financing lease liabilities

8,288

3,760

Other long-term liabilities

 

20,017

 

20,436

Deferred income tax liability

 

164

 

205

Interest rate swap liability

 

1,989

 

1,045

Total liabilities

 

227,988

256,823

Stockholders’ equity:

 

  

 

  

Preferred stock -- $0.01 par value, 10,000,000 authorized, none issued

 

 

Common stock -- $0.01 par value, 50,000,000 authorized, 31,060,101 and 30,303,395 issued; 30,348,870 and 29,592,164 outstanding at June 30, 2020 and December 31, 2019, respectively

 

311

 

303

Treasury stock, 711,231 shares, at cost, as of June 30, 2020 and December 31, 2019, respectively

 

(6,540)

 

(6,540)

Accumulated other comprehensive loss

 

(1,989)

 

(1,045)

Additional paid-in capital

 

184,120

 

182,523

Retained loss

 

(32,469)

 

(37,220)

Total stockholders’ equity

 

143,433

 

138,021

Total liabilities and stockholders’ equity

$

371,421

$

394,844

The accompanying notes are an integral part of these condensed consolidated financial statements

3

Table of Contents

Orion Group Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In Thousands, Except Share and Per Share Information)

(Unaudited)

Three months ended June 30, 

Six months ended June 30,

    

2020

    

2019

    

2020

    

2019

    

Contract revenues

$

183,713

$

165,985

$

350,333

$

309,090

Costs of contract revenues

 

162,969

 

151,008

 

309,831

 

285,031

Gross profit

 

20,744

 

14,977

 

40,502

 

24,059

Selling, general and administrative expenses

 

16,512

 

15,114

 

32,381

 

30,087

Amortization of intangible assets

517

658

1,033

1,318

Gain on sale of assets, net

 

(369)

 

(372)

 

(1,361)

 

(746)

Operating income (loss)

 

4,084

 

(423)

 

8,449

 

(6,600)

Other (expense) income:

 

  

 

  

 

  

 

  

Other income

 

39

 

534

 

136

 

557

Interest income

 

54

 

94

 

94

 

242

Interest expense

 

(1,169)

 

(1,978)

 

(2,571)

 

(3,303)

Other expense, net

 

(1,076)

 

(1,350)

 

(2,341)

 

(2,504)

Income (loss) before income taxes

 

3,008

 

(1,773)

 

6,108

 

(9,104)

Income tax expense (benefit)

 

980

 

(140)

 

1,357

 

453

Net income (loss)

$

2,028

$

(1,633)

$

4,751

$

(9,557)

Basic earnings (loss) per share

$

0.07

$

(0.06)

$

0.16

$

(0.33)

Diluted earnings (loss) per share

$

0.07

$

(0.06)

$

0.16

$

(0.33)

Shares used to compute income (loss) per share:

 

  

 

  

 

  

 

  

Basic

 

30,031,188

 

29,097,094

 

29,842,298

 

29,086,811

Diluted

 

30,031,188

 

29,097,094

 

29,842,298

 

29,086,811

The accompanying notes are an integral part of these condensed consolidated financial statements

4

Table of Contents

Orion Group Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)

Three months ended June 30, 

Six months ended June 30, 

    

2020

    

2019

    

2020

    

2019

    

Net income (loss)

$

2,028

$

(1,633)

$

4,751

$

(9,557)

Change in fair value of cash flow hedge, net of tax expense of $9 and tax benefit of $217 for the three and six months ended June 30, 2020, respectively and net of tax benefit of $145 and $225 for the three and six months ended June 30, 2019.

31

 

(506)

 

(727)

 

(790)

Total comprehensive income (loss)

$

2,059

$

(2,139)

$

4,024

$

(10,347)

The accompanying notes are an integral part of these condensed consolidated financial statements

5

Table of Contents

Orion Group Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In Thousands, Except Share and Per Share Information)

(Unaudited)

   

Common

   

Treasury

   

Accumulated Other

   

Additional

   

   

Stock

Stock

 

Comprehensive

 

Paid-In

 

Retained

Shares

   

Amount

Shares

   

Amount

 

Loss

 

Capital

Earnings (Loss)

Total

Balance, December 31, 2019

 

30,303,395

$

303

 

(711,231)

$

(6,540)

$

(1,045)

$

182,523

$

(37,220)

$

138,021

Stock-based compensation

 

 

 

 

 

 

462

 

 

462

Issuance of restricted stock

 

185,356

 

2

 

 

 

 

(2)

 

 

Forfeiture of restricted stock

 

(3,351)

 

 

 

 

 

 

 

Cash flow hedge

 

 

 

 

 

(984)

 

 

 

(984)

Net income

 

 

 

 

 

 

 

2,723

 

2,723

Balance, March 31, 2020

 

30,485,400

$

305

 

(711,231)

$

(6,540)

$

(2,029)

$

182,983

$

(34,497)

$

140,222

Stock-based compensation

 

 

 

 

 

 

1,167

 

 

1,167

Issuance of restricted stock

 

638,938

 

6

 

 

 

 

(6)

 

 

Forfeiture of restricted stock

 

(54,510)

 

 

 

 

 

 

 

Purchase of vested stock-based awards

(9,727)

(24)

(24)

Cash flow hedge

 

 

 

 

 

40

 

 

 

40

Net income

 

 

 

 

 

 

 

2,028

 

2,028

Balance, June 30, 2020

 

31,060,101

$

311

 

(711,231)

$

(6,540)

$

(1,989)

$

184,120

$

(32,469)

$

143,433

   

Common

   

Treasury

   

Accumulated Other

   

Additional

   

   

Stock

Stock

 

Comprehensive

 

Paid-In

 

Retained

Shares

   

Amount

Shares

   

Amount

 

Loss

 

Capital

Earnings

Total

Balance, December 31, 2018

29,611,989

$

296

(711,231)

$

(6,540)

$

(52)

$

179,742

$

(31,861)

$

141,585

Stock-based compensation

664

664

Exercise of stock options

7,021

35

35

Issuance of restricted stock

185,204

1

(1)

Forfeiture of restricted stock

(18,207)

Cash flow hedge

(284)

(284)

Net loss

 

(7,924)

(7,924)

Balance, March 31, 2019

29,786,007

$

297

 

(711,231)

$

(6,540)

$

(336)

$

180,440

$

(39,785)

$

134,076

Stock-based compensation

1,064

1,064

Issuance of restricted stock

479,590

6

(6)

Forfeiture of restricted stock

(50,513)

(1)

1

Cash flow hedge

(758)

(758)

Net loss

 

(1,633)

(1,633)

Balance, June 30, 2019

30,215,084

$

302

 

(711,231)

$

(6,540)

$

(1,094)

$

181,499

$

(41,418)

$

132,749

The accompanying notes are an integral part of these condensed consolidated financial statements

6

Table of Contents

Orion Group Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Six months ended June 30,

    

2020

    

2019

Cash flows from operating activities:

 

  

 

  

Net income (loss)

$

4,751

$

(9,557)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

  

 

  

Operating activities:

 

  

 

  

Depreciation and amortization

 

12,311

 

13,108

Amortization of ROU operating leases

3,066

2,927

Amortization of ROU finance leases

1,585

1,154

Unamortized debt issuance costs upon debt modification

 

 

399

Amortization of deferred debt issuance costs

286

186

Deferred income taxes

 

(99)

 

43

Stock-based compensation

 

1,629

 

1,728

Gain on sale of property and equipment

 

(1,361)

 

(746)

Allowance for credit losses

 

411

 

Change in operating assets and liabilities:

 

 

Accounts receivable

 

23,645

 

(28,257)

Income tax receivable

 

(97)

 

(398)

Inventory

 

(172)

 

252

Prepaid expenses and other

 

900

 

126

Costs and estimated earnings in excess of billings on uncompleted contracts

 

5,050

 

(14,424)

Accounts payable

 

(23,680)

 

6,261

Accrued liabilities

 

2,818

 

(1,601)

Operating lease liabilities

(2,721)

(2,896)

Income tax payable

 

(296)

 

409

Billings in excess of costs and estimated earnings on uncompleted contracts

 

5,048

 

30,204

Net cash provided by (used in) operating activities