Orion Marine Group Inc (ORN)

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Orion Marine Group, Inc. (ORN)

Q2 2013 Earnings Conference Call

August 1, 2013 10:00 ET


Chris DeAlmeida - Vice President, Finance & Accounting

Mike Pearson – President and Chief Executive Officer

Mark Stauffer - Executive Vice President and Chief Financial Officer


Scott Levine - Imperial Capital

Jon Tanwanteng - CJS Securities

Min Cho - FBR

Cory Mitchell - D.A. Davidson



Good day, ladies and gentlemen, and welcome to the Q2 2013 Orion Marine Group, Inc Earnings Conference Call. My name is Sue, and I’ll be your operator today. At this time all participants are in listen-only mode. (Operator Instructions)

I would like to turn the call over to Mr. Chris DeAlmeida, Vice President, Finance and Accounting. Please proceed, sir.

Chris DeAlmeida - Vice President, Finance & Accounting

Good morning and welcome to the Orion Marine Group’s second quarter 2013 earnings conference call. Joining me today are Mike Pearson, Orion Marine Group’s President and Chief Executive Officer, and Mark Stauffer, our Executive Vice President and Chief Financial Officer.

Regarding the format of the call, we’ve allocated about 15 minutes for prepared remarks in which Mike and Mark will highlight our results for the quarter and update our market outlook. We’ll then open the call for sell-side analyst questions for the remainder of the time. We would ask that you limit your questions to one question and one follow-up before getting back in the queue.

During the course of this conference call, we will make projections and other forward-looking statements regarding, among other things, our end markets, revenues, gross profit, gross margin, EBITDA, EBITDA margin, backlog, projects and negotiation and pending awards, as well as our estimates and assumptions regarding our future growth, EBITDA, EBITDA margin, gross margin, administrative expenses and capital expenditures. These statements are predictions that are subject to risks and uncertainties, including those described in our 10-K for 2012, that may cause actual results to differ materially from those statements. 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 or forward-looking statements, whether as a result of new developments or otherwise.

Also, please note that EBITDA and EBITDA margin are non-GAAP financial measures under the rules of the Securities and 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 the applicable reconciliations to most comparable GAAP measures.

Also, please refer to our earnings release issued this morning, August 1, 2013 and our quarterly and annual filings with the SEC, which are available on our website, for additional discussions of risk factors that could cause actual results to differ materially from our current expectations.

With that I’ll turn the call over to Mike Pearson, President and CEO. Mike?

Mike Pearson – President and Chief Executive Officer

Thank you, Chris, and thanks for joining us this morning. Before we’d begin I would like to take a moment to thank our nearly 1200 co-workers for all their hard work and dedication to the company. Because of their talent and commitment we continue to see improving results in challenging market conditions.

Now our second quarter results again reflect significant year-over-year increases in revenue, gross margin and EBITDA. As we look ahead, we remain encouraged with our long-term in market drivers and we’re confident in our long-term outlook. Today we’re tracking over $6 billion worth of bid opportunities over the next few years, and all of that 22% are federal projects, 29% are state, 19% are local and 30% are in the private sector.

We continue to experience strong demand for our services from the private sector as we continue to bid on projects that involve the infrastructure improvements, replacements and new bills from multiple types of clients including the energy-related companies and private terminal operators. Additionally we expect to continue to see multiple opportunities from state governments related to transportation spending and environmental restoration and repairs. Today we’re working and bidding on several bridge projects and we remain optimistic about bridge related opportunities in the second half of 2013 and beyond. Also, we expect to see an increase in environmental restoration and repair related to the RESTORE Act over the long-term. Fines related to the RESTORE Act should be set by the end of 2013 and we expect to begin to see bid opportunities at some point in 2014.

Despite the passage of a continuing resolution in March, the Army Corps of Engineers’ lettings have remained uncertain. Now as we get near the end of the fiscal year, there have been some developments from Washington on the passage of the full year corers, but last month the House of Representatives passed an Energy and Water Appropriations Bill for the upcoming fiscal year. And this included increased funding for the corers operation and maintenance budget and that’s where we see the majority of our bid opportunities arise from. The bills been placed on the Senate Legislative Calendar and it awaits actions there. Now, while the bill is still a long way from being signed in the wall, we’re hopeful that the core may operate under a full budget for fiscal year 2014.

We’re also closely tracking developments related to the Water Resources Development Act of 2013 and this was passed by the Senate in May. The legislation would authorize but not fund the Army Corps of Engineers to construct projects to restore, develop and protect the nations various water ways. The bill now awaits action and the house representatives, where we require brought by participant support in order to be passed. This word of legislation also includes language similar to the RAMP Act to correct the funding gap between the Harbor Maintenance Trust Fund, Receipts and Expenditures for dredging projects.

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