Orion (ORN) - 2021 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Orion Group Holdings' unaudited condensed consolidated financial statements and notes for Q3 2021 and prior periods Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | Metric (in thousands) | September 30, 2021 | December 31, 2020 | | :-------------------- | :------------------ | :------------------ | | Total current assets | $215,056 | $235,402 | | Total assets | $368,355 | $414,189 | | Total current liabilities | $165,824 | $180,613 | | Total liabilities | $211,681 | $254,695 | | Total stockholders' equity | $156,674 | $159,494 | - Total assets decreased by approximately $45.8 million from December 31, 2020, to September 30, 2021, primarily due to a reduction in current assets and property and equipment[11] - Total liabilities decreased by approximately $43 million, driven by a reduction in long-term debt and current liabilities[11] Condensed Consolidated Statements of Operations Statements of Operations Summary (in thousands, except per share) | Metric (in thousands, except per share) | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Contract revenues | $139,907 | $189,433 | $439,091 | $539,766 | | Gross profit | $6,578 | $22,501 | $34,334 | $63,003 | | Operating (loss) income | $(8,743) | $13,085 | $(1,122) | $21,534 | | Net (loss) income | $(10,195) | $11,803 | $(5,737) | $16,554 | | Basic (loss) earnings per share | $(0.33) | $0.39 | $(0.19) | $0.55 | - For the three months ended September 30, 2021, contract revenues decreased by 26.1% year-over-year, leading to a net loss of $10.2 million compared to a net income of $11.8 million in the prior year[14] - For the nine months ended September 30, 2021, contract revenues decreased by 18.7% year-over-year, resulting in a net loss of $5.7 million compared to a net income of $16.6 million in the prior year[14] Condensed Consolidated Statements of Comprehensive (Loss) Income Comprehensive Income Summary (in thousands) | Metric (in thousands) | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net (loss) income | $(10,195) | $11,803 | $(5,737) | $16,554 | | Change in fair value of cash flow hedge, net of tax | $0 | $150 | $1,234 | $(577) | | Total comprehensive (loss) income | $(10,195) | $11,953 | $(4,503) | $15,977 | - Total comprehensive loss for the three months ended September 30, 2021, was $(10,195) thousand, a significant decrease from $11,953 thousand in the prior year, primarily due to the net loss[15] - For the nine months ended September 30, 2021, total comprehensive loss was $(4,503) thousand, compared to a comprehensive income of $15,977 thousand in the prior year, influenced by net loss and a positive change in cash flow hedge fair value[15] Condensed Consolidated Statements of Stockholders' Equity Stockholders' Equity Summary (in thousands, except shares) | Metric (in thousands, except shares) | September 30, 2021 | December 31, 2020 | | :----------------------------------- | :----------------- | :---------------- | | Common Stock Shares | 31,779,706 | 31,171,804 | | Common Stock Amount | $318 | $312 | | Treasury Stock Amount | $(6,540) | $(6,540) | | Additional Paid-In Capital | $185,633 | $184,324 | | Retained Loss | $(22,737) | $(17,000) | | Total Stockholders' Equity | $156,674 | $159,494 | - Total stockholders' equity decreased from $159,494 thousand at December 31, 2020, to $156,674 thousand at September 30, 2021, primarily due to a net loss of $10,195 thousand in the third quarter of 2021[16] - The company issued additional common stock and restricted stock, increasing common stock shares and additional paid-in capital, partially offset by tax withholdings for stock-based compensation[16] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Metric (in thousands) | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $4,240 | $38,376 | | Net cash provided by (used in) investing activities | $14,489 | $(2,197) | | Net cash used in financing activities | $(19,425) | $(34,533) | | Net change in cash, cash equivalents and restricted cash | $(696) | $1,646 | | Cash, cash equivalents and restricted cash at end of period | $893 | $2,732 | - Net cash provided by operating activities significantly decreased from $38.4 million in 2020 to $4.2 million in 2021, primarily due to a net loss and changes in working capital[17] - Investing activities shifted from a net cash outflow of $2.2 million in 2020 to a net cash inflow of $14.5 million in 2021, largely driven by increased proceeds from the sale of property and equipment[17] - Financing activities resulted in a net cash outflow of $19.4 million in 2021, an improvement from $34.5 million outflow in 2020, due to changes in credit facility borrowings and payments[17] Notes to Condensed Consolidated Financial Statements 1. Description of Business and Basis of Presentation Orion Group Holdings, Inc. provides specialty construction services across infrastructure, industrial, and building sectors in the US, Canada, and Caribbean, operating through Marine and Concrete segments - The Company operates in two reportable segments: Marine (infrastructure sector, e.g., marine construction, dredging) and Concrete (building sector, e.g., turnkey concrete services)[19][20] - Marine segment operations are driven by macro-economic considerations like import/export seaborne transportation, energy infrastructure development, and waterway maintenance, subject to federal regulatory regimes[22] - Concrete segment operations are influenced by population movements, commercial real estate development, and institutional funding, primarily in Texas metropolitan areas, and are subject to similar regulatory regimes like OSHA[23][24] 2. Summary of Significant Accounting Policies This section outlines the significant accounting policies used in preparing the condensed consolidated financial statements, including revenue recognition, asset/liability classification, and fair value measurements - Revenue from construction contracts is generally recognized over time, measured by the percentage of actual contract costs incurred to total estimated costs[32] - The Company maintains insurance coverage for business operations, including property, equipment, automobile, general liability, and workers' compensation, with excess loss coverage totaling $200 million for both marine and concrete segments[73][74] - The total accrual for insurance claims liabilities was $67.4 million at September 30, 2021, and the total accrual for insurance claims receivable was $63.9 million[78] 3. Revenue Contract revenues are disaggregated by service line within the Marine and Concrete segments, showing declines in Marine and mixed performance in Concrete Contract Revenues by Service Line (in thousands) | Service Line (in thousands) | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :-------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Marine Construction | $38,883 | $86,505 | $121,678 | $205,459 | | Marine Dredging | $13,157 | $24,262 | $58,511 | $79,391 | | Marine Specialty Services | $2,699 | $2,114 | $10,638 | $5,699 | | Concrete Structural | $13,090 | $21,116 | $47,296 | $66,893 | | Concrete Light Commercial | $72,078 | $55,436 | $200,961 | $182,311 | | Total contract revenues | $139,907 | $189,433 | $439,091 | $539,766 | - Marine segment contract revenues decreased significantly by 51.5% for the three months ended September 30, 2021, compared to the prior year, while Concrete segment revenues increased by 11.3%[82] - For the nine months ended September 30, 2021, Marine segment revenues decreased by 34.3%, and Concrete segment revenues saw a slight decrease of 0.4%[82] 4. Concentration of Risk and Enterprise-Wide Disclosures The company's accounts receivable and contract revenues show concentrations across federal, state, local governments, and private companies, with private companies representing the largest portion Accounts Receivable by Customer Type | Customer Type | Sep 30, 2021 (Receivables) | Dec 31, 2020 (Receivables) | | :-------------- | :------------------------- | :------------------------- | | Federal Government | 2 % | 4 % | | State Governments | 1 % | - % | | Local Governments | 11 % | 13 % | | Private Companies | 86 % | 83 % | Contract Revenues by Customer Type | Customer Type | Q3 2021 (Contract Revenues) | Q3 2020 (Contract Revenues) | 9M 2021 (Contract Revenues) | 9M 2020 (Contract Revenues) | | :-------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Federal Government | 11 % | 9 % | 9 % | 6 % | | State Governments | - % | 3 % | - % | 5 % | | Local Government | 16 % | 29 % | 22 % | 29 % | | Private Companies | 73 % | 59 % | 69 % | 60 % | - Foreign revenues were 0.0% and 0.9% of total revenues for the three months ended September 30, 2021 and 2020, respectively, and 0.6% and 1.8% for the nine months ended September 30, 2021 and 2020, respectively[89] 5. Contracts in Progress Remaining performance obligations totaled approximately $572.8 million as of September 30, 2021, with 75% expected to be recognized in the next 12 months Contracts in Progress Summary (in thousands) | Metric (in thousands) | September 30, 2021 | December 31, 2020 | | :-------------------- | :----------------- | :---------------- | | Costs incurred on uncompleted contracts | $1,245,434 | $1,151,987 | | Estimated earnings | $189,553 | $202,369 | | Billings to date | $(1,442,948) | $(1,355,220) | | Net contracts in progress | $(7,961) | $(864) | - Remaining performance obligations were approximately $572.8 million as of September 30, 2021, with $432.0 million (75%) expected to be recognized in the next 12 months[91] - Contract assets included approximately $3.8 million related to claims and unapproved change orders at September 30, 2021[90] 6. Property and Equipment The net book value of property and equipment decreased to $106.7 million at September 30, 2021, partly due to a $6.7 million gain from the sale of land and buildings Property and Equipment, Net (in thousands) | Asset Category (in thousands) | September 30, 2021 | December 31, 2020 | | :---------------------------- | :----------------- | :---------------- | | Automobiles and trucks | $2,354 | $2,379 | | Building and improvements | $34,797 | $44,324 | | Construction equipment | $137,134 | $142,661 | | Vessels and other equipment | $81,928 | $79,499 | | Office equipment | $6,263 | $5,577 | | Less: Accumulated depreciation | $(190,091) | $(186,615) | | Net book value of depreciable assets | $72,385 | $87,825 | | Construction in progress | $6,415 | $1,809 | | Land | $27,885 | $35,863 | | Total Property and equipment, net | $106,685 | $125,497 | - The Company sold its land, building, and improvements in Tampa, Florida, during Q2 2021, recognizing a net gain of $6.7 million[93] - Depreciation expense for the nine months ended September 30, 2021, was $15.7 million, compared to $16.6 million in the prior year[94] 7. Other Current Accounts Receivable Other current accounts receivable increased to $66.0 million at September 30, 2021, primarily driven by an increase in insurance claims receivable Other Current Accounts Receivable (in thousands) | Receivable Type (in thousands) | September 30, 2021 | December 31, 2020 | | :----------------------------- | :----------------- | :---------------- | | Insurance claims receivable | $63,870 | $57,021 | | Accident loss receivables | $1,361 | $1,448 | | Other current receivables | $810 | $1,023 | | Total other current accounts receivable | $66,041 | $59,492 | - Insurance claims receivable increased by $6.8 million from December 31, 2020, to September 30, 2021[96] 8. Fair Value The company's recurring fair value measurements primarily include the cash surrender value of life insurance policies, with derivatives eliminated upon term loan extinguishment Fair Value Measurements (in thousands) | Financial Instrument (in thousands) | Carrying Value (Sep 30, 2021) | Level 2 Fair Value (Sep 30, 2021) | Carrying Value (Dec 31, 2020) | Level 2 Fair Value (Dec 31, 2020) | | :---------------------------------- | :---------------------------- | :-------------------------------- | :---------------------------- | :-------------------------------- | | Cash surrender value of life insurance policy | $3,417 | $3,417 | $3,169 | $3,169 | | Derivatives | $0 | $0 | $1,602 | $1,602 | - The company's interest rate swaps were canceled during Q2 2021 following the extinguishment of the term loan, eliminating derivative financial instruments[99][129] - The fair value of the company's debt was approximately $19.4 million at September 30, 2021, and $35.1 million at December 31, 2020, approximating its carrying value[104] 9. Goodwill and Intangible Assets Total net intangible assets decreased to $8.9 million at September 30, 2021, primarily due to amortization of finite-lived assets, with no impairment recorded for the infinite-lived trade name Intangible Assets, Net (in thousands) | Intangible Asset (in thousands) | September 30, 2021 | December 31, 2020 | | :------------------------------ | :----------------- | :---------------- | | Net finite-lived intangible assets | $2,044 | $3,185 | | Infinite-lived intangible assets | $6,892 | $6,892 | | Total net intangible assets | $8,936 | $10,077 | - For the nine months ended September 30, 2021, $1.1 million of amortization expense was recognized for finite-lived intangible assets[105] - The infinite-lived trade name is tested annually for impairment using the relief from royalty method, and no impairment was recorded in the most recent test[106] 10. Accrued Liabilities Accrued liabilities decreased to $83.4 million at September 30, 2021, driven by lower accrued salaries, wages, and benefits, partially offset by increased insurance claims liabilities Accrued Liabilities Summary (in thousands) | Accrued Liability (in thousands) | September 30, 2021 | December 31, 2020 | | :------------------------------- | :----------------- | :---------------- | | Accrued salaries, wages and benefits | $7,537 | $15,071 | | Accrual for insurance claims liabilities | $67,414 | $60,365 | | Sales taxes | $4,162 | $5,909 | | Property taxes | $1,167 | $908 | | Total accrued liabilities | $83,419 | $84,637 | - Accrued salaries, wages, and benefits decreased by approximately $7.5 million, while accrual for insurance claims liabilities increased by approximately $7.0 million[107] 11. Long-term Debt and Line of Credit Total debt decreased to $19.4 million at September 30, 2021, primarily due to the full extinguishment of the term loan, with $29.3 million in available borrowing capacity Debt Summary (in thousands) | Debt Type (in thousands) | September 30, 2021 | December 31, 2020 | | :----------------------- | :----------------- | :---------------- | | Revolving line of credit | $19,000 | $0 | | Term loan - current | $0 | $4,344 | | Other current debt | $139 | $0 | | Revolving line of credit (long-term) | $0 | $4,826 | | Term loan - long-term | $0 | $24,697 | | Other long-term debt | $295 | $0 | | Total debt | $19,434 | $33,867 | - The term loan component of the Credit Facility was fully extinguished during Q2 2021, using proceeds from property sales, which also led to the cancellation of interest rate swaps and a $1.3 million loss[122][129] - As of September 30, 2021, the company had $19.0 million in borrowings under the revolving line of credit and $29.3 million in maximum borrowing availability[121] 12. Other Long-Term Liabilities Other long-term liabilities increased to $23.0 million at September 30, 2021, primarily due to the deferral of payroll taxes under the CARES Act Other Long-Term Liabilities (in thousands) | Liability Type (in thousands) | September 30, 2021 | December 31, 2020 | | :---------------------------- | :----------------- | :---------------- | | Sale-leaseback arrangement | $16,164 | $16,712 | | CARES Act deferred payroll taxes | $3,821 | $0 | | Deferred compensation | $2,760 | $2,818 | | Accrual for insurance claims liabilities | $262 | $307 | | Total other long-term liabilities | $23,007 | $19,837 | - The company deferred approximately $7.6 million in Social Security taxes under the CARES Act, with $3.8 million reflected as a long-term liability due in December 2022[132][133] 13. Income Taxes The company recorded income tax expense of $1.0 million for Q3 2021, with negative effective tax rates primarily due to valuation allowance movements and non-deductible items Income Tax Metrics (in thousands, except percentages) | Metric (in thousands, except percentages) | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :---------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Income tax expense | $1,001 | $303 | $341 | $1,660 | | Effective tax rate | (10.9)% | 2.5 % | (6.3)% | 9.1 % | - The effective tax rates for both the three and nine months ended September 30, 2021, were negative, primarily due to the movement in the valuation allowance for current year activity, state income taxes, and non-deductibility of other permanent items[134] - Management believes a valuation allowance on the net deferred tax assets at September 30, 2021, remains appropriate[135] 14. Earnings Per Share Basic and diluted earnings per share calculations reflect net losses for the three and nine months ended September 30, 2021, with potentially dilutive securities excluded due to their antidilutive nature Weighted Average Shares Outstanding | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic Weighted average shares outstanding | 30,979,207 | 30,372,310 | 30,707,426 | 30,020,258 | | Diluted Weighted average shares outstanding | 30,979,207 | 30,372,310 | 30,707,426 | 30,020,258 | - Basic and diluted (loss) earnings per share were $(0.33) and $(0.19) for the three and nine months ended September 30, 2021, respectively[14] - Potentially dilutive securities were antidilutive and thus not included in the computation of diluted earnings per share for the periods ended September 30, 2021 and 2020[139] 15. Stock-Based Compensation Stock-based compensation expense for the nine months ended September 30, 2021, was $2.2 million, with approximately $3.8 million in unrecognized expense remaining Stock-Based Compensation Expense (in thousands) | Metric (in thousands) | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Stock-based compensation expense | $500 | $300 | $2,200 | $1,900 | | Payments related to tax withholding | $700 | $200 | $900 | $200 | - In May 2021, 489,850 shares of restricted common stock were granted, including performance-based awards to executives, with a fair value of $6.01 per share[143][144] - Total unrecognized compensation expense related to unvested stock was approximately $3.8 million at September 30, 2021, to be recognized over approximately 2.3 years[148] 16. Commitments and Contingencies The company recognized $102.1 million in total liabilities for a dredge fire incident in August 2020, with insurance carriers reimbursing $37.8 million to date - A dredge fire incident in August 2020 resulted in five fatalities, injuries, and an oil discharge, leading to multiple lawsuits against the company[149] - As of September 30, 2021, the company recognized $102.1 million in total liabilities for the incident, comprising $39.6 million paid and $62.4 million in accruals[149] - Insurance carriers have reimbursed the company $37.8 million to date, and the company believes it has adequate insurance coverage for all potential liabilities[151] 17. Segment Information The Marine segment experienced significant revenue decline and operating loss, while the Concrete segment saw revenue growth but also an operating loss due to project performance issues Segment Performance (in thousands) - Three Months Ended September 30 | Segment (in thousands) | Q3 2021 Contract Revenues | Q3 2020 Contract Revenues | Q3 2021 Operating (Loss) Income | Q3 2020 Operating (Loss) Income | | :--------------------- | :------------------------ | :------------------------ | :------------------------------ | :------------------------------ | | Marine | $54,739 | $112,881 | $(4,965) | $12,025 | | Concrete | $85,168 | $76,552 | $(3,778) | $1,060 | Segment Performance (in thousands) - Nine Months Ended September 30 | Segment (in thousands) | 9M 2021 Contract Revenues | 9M 2020 Contract Revenues | 9M 2021 Operating (Loss) Income | 9M 2020 Operating (Loss) Income | | :--------------------- | :------------------------ | :------------------------ | :------------------------------ | :------------------------------ | | Marine | $190,827 | $290,549 | $6,489 | $21,584 | | Concrete | $248,264 | $249,217 | $(7,611) | $(50) | - Corporate overhead costs were reallocated from the marine segment to the concrete segment as part of operating income for each segment, correcting immaterial errors in prior period reporting[156] 18. Leases Total lease assets were $27.3 million and total lease liabilities were $27.7 million at September 30, 2021, with a total lease cost of $8.6 million for the nine months ended September 30, 2021 Lease Assets and Liabilities (in thousands) | Lease Metric (in thousands) | September 30, 2021 | December 31, 2020 | | :-------------------------- | :----------------- | :---------------- | | Operating lease right-of-use assets, net | $15,193 | $18,874 | | Financing lease right-of-use assets, net | $12,135 | $12,858 | | Total assets | $27,328 | $31,732 | | Current lease liabilities | $5,378 | $8,890 | | Noncurrent lease liabilities | $22,357 | $22,913 | | Total liabilities | $27,735 | $31,803 | Lease Cost Components (in thousands) | Lease Cost Component (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $4,510 | $4,815 | | Short-term lease cost | $1,432 | $2,914 | | Interest on lease liabilities | $369 | $410 | | Amortization of right-of-use assets | $2,259 | $2,487 | | Total lease cost | $8,570 | $10,626 | - ROU assets obtained in exchange for new operating lease liabilities were $818 thousand and for new financing lease liabilities were $4,329 thousand for the nine months ended September 30, 2021[164] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes the company's financial performance, highlighting decreased revenues and net loss for Q3 and 9M 2021, driven by marine segment decline and concrete segment issues CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS The report contains forward-looking statements subject to various business, economic, competitive, and regulatory risks - The report contains forward-looking statements regarding future production, revenues, income, and capital spending, which are subject to significant business, economic, competitive, regulatory, and other risks[166][167] - Key risks include the duration of the COVID-19 pandemic, unforeseen productivity delays, government funding levels, and contract cancellations[167] Overview Orion Group Holdings, Inc. provides specialty construction services in marine and concrete segments, with most revenue from fixed-price contracts recognized over time - Orion Group Holdings, Inc. provides specialty construction services in marine and concrete segments across the US, Alaska, and the Caribbean Basin[169][171] - Most revenue is derived from fixed-price contracts, with revenue recognized over time based on the percentage of actual contract costs incurred[173] - Factors affecting contract performance include bid accuracy, commodity price increases, customer delays, weather, labor availability, and equipment/material proximity[173][176] Third Quarter 2021 Recap and 2021 Outlook Consolidated backlog increased to $572.8 million, with the company focusing on organic growth and strategic acquisitions despite a net loss in Q3 2021 Key Financial Metrics (in millions) | Metric (in millions) | Q3 2021 | Q3 2020 | | :------------------- | :------ | :------ | | Revenues | $139.9 | $189.4 | | Net (Loss) Income | $(10.2) | $11.8 | - Consolidated backlog stood at $572.8 million at the end of Q3 2021[174] - The company continues to focus on organic growth, greenfield expansion, and strategic acquisition opportunities across infrastructure, industrial, and building sectors[175] Marine Segment Demand for marine construction services continues with bid opportunities for infrastructure maintenance and expansion, supported by long-term positive trends - Demand for marine construction services continues, with bid opportunities for maintaining and expanding infrastructure on waterways[180] - Long-term positive trends include the need to repair U.S. marine infrastructure, increased cargo volume requiring port expansion and dredging, and potential work from the Water Resources Reform and Development Act (WRRDA Act) and RESTORE Act funds[181][183] - Concerns exist regarding short-term cruise line capital expenditures and the timing of energy-related project awards due to COVID-19 uncertainties[180] Concrete Segment Long-term demand for concrete construction services in Texas is driven by population and business growth, with potential opportunities from federal infrastructure funding - Long-term demand for concrete construction services in Texas is driven by population and business growth, leading to new distribution centers, educational facilities, and multi-family housing[184] - Positive trends include corporate relocations to Texas, investment in warehouse/distribution space, and a shift from inner cities to suburban areas[187] - Potential opportunities could arise from a federal infrastructure bill and federal funding for disaster recovery in Texas[183][187] Consolidated Results of Operations Consolidated results show significant declines in contract revenues, gross profit, and operating income for both the three and nine months ended September 30, 2021 Backlog Information Consolidated backlog increased to $572.8 million at September 30, 2021, primarily driven by new jobs in the marine segment Backlog by Segment (in millions) | Segment (in millions) | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | | :-------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Marine segment | $379.9 | $170.2 | $154.8 | $202.6 | $241.7 | | Concrete segment | $192.9 | $224.2 | $210.0 | $236.9 | $187.1 | | Consolidated | $572.8 | $394.4 | $364.8 | $439.5 | $428.8 | - Consolidated backlog increased to $572.8 million at September 30, 2021, primarily driven by new jobs in the marine segment[186] - The company had $2.0 billion of quoted bids outstanding at quarter-end, with $103 million on which it is the apparent low bidder or has been awarded contracts subsequently[186][189] Three months ended September 30, 2021, compared with three months ended September 30, 2020 Contract revenues decreased by 26.1% year-over-year, leading to a significant decline in gross profit and a net loss for the quarter Consolidated Results (in thousands) - Q3 Comparison | Metric (in thousands) | Q3 2021 | Q3 2020 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Contract revenues | $139,907 | $189,433 | $(49,526) | (26.1)% | | Gross profit | $6,578 | $22,501 | $(15,923) | (70.8)% | | SG&A expenses | $15,733 | $15,270 | $463 | 3.0% | | Operating (loss) income | $(8,743) | $13,085 | $(21,828) | (166.8)% | | Net (loss) income | $(10,195) | $11,803 | $(21,998) | (186.4)% | - The decrease in contract revenues was primarily due to the timing and mix of large marine projects not replicated in the current year, partially offset by increased concrete segment activity[191] - Gross profit percentage decreased from 11.9% to 4.7%, driven by decreased marine activity leading to under-recovery of indirect costs and concrete segment project performance issues[192] Nine months ended September 30, 2021, compared with nine months ended September 30, 2020 Contract revenues decreased by 18.7% year-over-year, resulting in a substantial decline in gross profit and a net loss for the nine-month period Consolidated Results (in thousands) - 9M Comparison | Metric (in thousands) | 9M 2021 | 9M 2020 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Contract revenues | $439,091 | $539,766 | $(100,675) | (18.7)% | | Gross profit | $34,334 | $63,003 | $(28,669) | (45.5)% | | SG&A expenses | $44,078 | $47,651 | $(3,573) | (7.5)% | | Operating (loss) income | $(1,122) | $21,534 | $(22,656) | (105.2)% | | Net (loss) income | $(5,737) | $16,554 | $(22,291) | (134.7)% | - The decrease in contract revenues was primarily due to severe winter weather in Texas, reduced marine segment activity, and decreased project performance in the concrete segment[199] - Gross profit percentage decreased from 11.7% to 7.8%, mainly due to decreased activity, under-recovery of indirect costs from weather delays, and decreased concrete segment project performance[201][202] Segment Results Segment results show a significant decline in Marine segment operating income and an increased operating loss for the Concrete segment for both the three and nine months ended September 30, 2021 Three months ended September 30, 2021 compared with three months ended September 30, 2020 Segment Performance (in thousands) - Q3 Comparison | Segment (in thousands) | Q3 2021 Contract Revenues | Q3 2020 Contract Revenues | Q3 2021 Operating (Loss) Income | Q3 2020 Operating (Loss) Income | | :--------------------- | :------------------------ | :------------------------ | :------------------------------ | :------------------------------ | | Marine | $54,739 | $112,881 | $(4,965) | $12,025 | | Concrete | $85,168 | $76,552 | $(3,778) | $1,060 | - Marine segment revenues decreased by 51.5% due to the timing and mix of large projects, leading to a $17.0 million decrease in operating income[211][212] - Concrete segment revenues increased by 11.3% due to increased production volumes, but operating income decreased by $4.9 million due to decreased project performance and lower margins[213][214][215] Nine months ended September 30, 2021 compared with nine months ended September 30, 2020 Segment Performance (in thousands) - 9M Comparison | Segment (in thousands) | 9M 2021 Contract Revenues | 9M 2020 Contract Revenues | 9M 2021 Operating (Loss) Income | 9M 2020 Operating (Loss) Income | | :--------------------- | :------------------------ | :------------------------ | :------------------------------ | :------------------------------ | | Marine | $190,827 | $290,549 | $6,489 | $21,584 | | Concrete | $248,264 | $249,217 | $(7,611) | $(50) | - Marine segment revenues decreased by 34.3% due to the Texas winter storm and reduced project activity, leading to a $15.1 million decrease in operating income[218][219] - Concrete segment revenues slightly decreased by 0.4%, but operating loss increased by $7.5 million due to decreased production volumes from weather impacts, project performance, and lower margins[220][221][222] Liquidity and Capital Resources Working capital decreased to $49.2 million, with primary liquidity needs for working capital, capital expenditures, and strategic acquisitions expected to be met by operating activities and credit facilities Cash Flow Summary (in thousands) | Cash Flow Activity (in thousands) | 9M 2021 | 9M 2020 | | :-------------------------------- | :------ | :------ | | Operating activities | $4,240 | $38,376 | | Investing activities | $14,489 | $(2,197) | | Financing activities | $(19,425) | $(34,533) | - Working capital was $49.2 million at September 30, 2021, down from $54.8 million at December 31, 2020[224] - The company's primary liquidity needs are for working capital, capital expenditures, and strategic acquisitions, expected to be met by operating activities and credit facilities[223][225] Bonding Capacity The company maintained at least $750 million in bonding capacity at September 30, 2021, with approximately $85 million of projects currently bonded - The company's bonding capacity under its current arrangement was at least $750 million at September 30, 2021, with approximately $85 million of projects being bonded[235] - The company believes its strong balance sheet and working capital position will allow continued access to bonding capacity[235] Effect of Inflation The company is subject to inflation effects on raw materials, fuel, concrete, and steel costs, with anticipated price increases generally included in bid costs due to short project durations - The company is subject to inflation effects on raw materials, fuel, concrete, and steel costs[236] - Due to the short-term duration of projects, anticipated price increases are generally included in bid costs[236] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risks from commodity price fluctuations and interest rates, managing interest rate risk by monitoring rates and reducing debt - The company is exposed to commodity price risk for concrete, steel products, and fuel, but generally includes anticipated price increases in bids due to short project durations[238] - Interest rate risk is managed by monitoring rates and using cash from operations to reduce debt[239] - At September 30, 2021, outstanding borrowings under the credit facility were $19.0 million, with a weighted average interest rate of 2.93%[239] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting - The company's disclosure controls and procedures were deemed effective as of September 30, 2021[240] - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2021[241] PART II OTHER INFORMATION Item 1. Legal Proceedings Information regarding legal proceedings involving the company is incorporated by reference from Note 16 to the condensed consolidated financial statements - Legal proceedings are detailed in Note 16 of the financial statements[242] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2020 Form 10-K - No material changes to risk factors since the 2020 Form 10-K[243] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period ended September 30, 2021 - No unregistered sales of equity securities in the period ended September 30, 2021[244] Item 3. Defaults upon Senior Securities There were no defaults upon senior securities - No defaults upon senior securities[245] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable[246] Item 5. Other Information No other information is reported under this item - No other information to report[247] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, and certifications - Exhibits include Amended and Restated Certificate of Incorporation and Bylaws[249] - Employment agreements for Mark R. Stauffer and Peter R. Buchler are filed as exhibits[250] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Act are included[250] SIGNATURES The report is duly signed on October 29, 2021, by Mark R. Stauffer, President and Chief Executive Officer, and Robert L. Tabb, Executive Vice President and Chief Financial Officer, on behalf of Orion Group Holdings, Inc - The report was signed by Mark R. Stauffer, President and CEO, and Robert L. Tabb, EVP and CFO, on October 29, 2021[254]