Orion Marine Group Inc (ORN)

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Orion Marine Group, Inc. (OMGI)

Q3 2008 Earnings Call

November 6, 2008 10:00 am ET


J. Michael Pearson - President and Chief Executive Officer

Mark Stauffer - Executive Vice President and Chief Financial Officer

Cabell Acree - Vice President and General Counsel

Christopher DeAlmeida - Investor Relations


Fred Buonocore - CJS Securities

David Yuschak - SMH Capital

Jack Kasprzak - BB&T Capital Markets

Trey Grooms - Stephens, Inc.

Jay Brosnahan - WestPark Capital Inc.

Min Cho - FBR Capital Markets

Ross Berner - Weintraub Capital



Good day everyone and welcome to the Orion Marine Group third quarter 2008 earnings conference call. Today’s call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Chris DeAlmeida. Please go ahead sir.

Christopher DeAlmeida

Good morning and welcome to the Orion Marine Group third quarter 2008 earnings conference call. Joining me today are Mike Pearson, Orion Marine Group’s President and Chief Executive Officer; Mark Stauffer, our Executive Vice President and Chief Financial Officer; and Cabell Acree, our Vice President and General Counsel.

Regarding the format of the call, we have allocated about 15 minutes for prepared remarks in which Mike and Mark will highlight our recall through third quarter and I will look for the remainder of 2008 as well 2009, and then we will open up the call to questions for the remainder of the time.

During the course of this conference call we may make projections and other forward-looking statements regarding, among other things, our end markets, revenues, gross profits, gross margin, EBITDA, backlog, projects and negotiation of pending awards, as well as our estimates and assumptions regarding our future growth, EBITDA, gross margin, administrative expenses and capital expenditures. These statements or predictions are subject to risks and uncertainties that may cause actual results to differ materially.

Moreover, past performance is not necessarily an indicator of future results. By providing this information we undertake no obligation to update or revise any projections of forward-looking statements whether as the result of new developments or otherwise. Also, please not that EBITDA and EBITDA margin may be deemed non-GAAP financial measures under the rules of the Securities Exchange Commission, including Regulation G.

Please refer to the reconciliation accompanying this earnings call available on our website at www.orionmarinegroup.com for comments on the use of non-GAAP financial measures, as well as applicable reconciliations to the most comparable GAAP measures. Also, please refer to our earnings release issued this morning, November 6, 2008 which is available on our website for additional discussions of risk factors that could cause actual results to differ materially from our current expectations.

Before I turn the call over to Mike, I would like to point out that this morning’s earnings release highlighted our current market outlook as well as details of our revenue growth goal and EBITDA goal for the fourth quarter full year 2008 and initial goals for the full year 2009 as well as other helpful information.

Based on our experiences and feedback from the investment community over the past year, we felt it was prudent to provide additional clarity and visibility to our full year goals and help investors better understand quarterly fluctuations. However, this additional visibility does not deter from our previously stated long term goals and our recommendations to view the Company over the long term.

As a matter of housekeeping, we plan on issuing new information for the next quarter during our year-end earnings release and follow the same pattern on a go-forward basis. Should you have any questions on that, please feel free to give me a call.

With that, I will turn the call over to Mike Pearson, President and Chief Executive Officer. Mike?

J. Michael Pearson

Thank you, Chris. Good morning and thanks for joining us. Overall, we are pleased with our results for the third quarter particularly in light of the active storm season.

As you know, during the quarter, we felt the effects of a rather active hurricane season. I would like to thank all of our employees for doing an excellent job at executing our hurricane preparedness program, securing their job flights, and returning to work as soon as possible. As a result, we were ready to quickly respond to our customers’ needs.

We encountered a total of seven main storms, which impacted our operations and resulted in our having to shut down all of our projects at least once, with some projects being shut down three times, which is historically abnormal. While projects are shutdown, we are unable to recognize revenue under percentage of completion account. Therefore, revenues that we would have otherwise recognized during the quarter were shifted in the future periods. Specifically, approximately $6 million of revenue during the third quarter was shifted into future periods. However, I would want to remind you that this is not loss revenue. It is just revenue that is delayed and should be recognized in future periods.

Now, while these storms reduced to recognize revenue during the quarter, we expect to see new bid opportunities as a result of this active hurricane season. And in fact, we are already working with several customers on small emergency repair projects.

Additionally, the president recently signed into law supplemental emergency funding legislation with $740 million being set aside for the Corps of Engineers for emergency dredging and construction projects in the storm affected areas. On the cost side, we built in contingencies to cover estimated demobilization and remobilization costs associated with shutting projects down for pending storms. For the third quarter, we adequately covered these costs.

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