Company Quick10K Filing
Orion Energy Systems
Price2.81 EPS0
Shares31 P/E9
MCap87 P/FCF17
Net Debt-7 EBIT10
TEV79 TEV/EBIT8
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-05
10-K 2020-03-31 Filed 2020-06-05
10-Q 2019-12-31 Filed 2020-02-06
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-05
10-K 2019-03-31 Filed 2019-06-05
10-Q 2018-12-31 Filed 2019-02-08
10-Q 2018-09-30 Filed 2018-11-13
10-Q 2018-06-30 Filed 2018-08-07
10-K 2018-03-31 Filed 2018-06-13
10-Q 2017-12-31 Filed 2018-02-07
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-04
10-K 2017-03-31 Filed 2017-06-13
10-Q 2016-12-31 Filed 2017-02-08
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-03
10-K 2016-03-31 Filed 2016-06-23
10-Q 2015-12-31 Filed 2016-02-09
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-11
10-K 2015-03-31 Filed 2015-06-12
10-Q 2014-12-31 Filed 2015-02-09
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-08
10-K 2014-03-31 Filed 2014-06-13
10-Q 2013-12-31 Filed 2014-02-07
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-09
10-K 2013-03-31 Filed 2013-06-14
10-Q 2012-12-31 Filed 2013-02-08
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-K 2012-03-31 Filed 2012-06-14
10-Q 2011-12-31 Filed 2012-06-14
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-09
10-K 2011-03-31 Filed 2011-07-22
10-Q 2010-12-31 Filed 2011-02-09
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-K 2010-03-31 Filed 2010-06-14
10-Q 2009-12-31 Filed 2010-02-09
8-K 2020-08-06 Shareholder Vote
8-K 2020-08-05 Earnings, Exhibits
8-K 2020-06-04
8-K 2020-05-20
8-K 2020-02-06
8-K 2020-01-29
8-K 2019-11-21
8-K 2019-11-06
8-K 2019-10-16
8-K 2019-08-07
8-K 2019-08-05
8-K 2019-06-04
8-K 2019-05-16
8-K 2019-02-07
8-K 2019-01-03
8-K 2018-11-29
8-K 2018-11-13
8-K 2018-10-26
8-K 2018-09-06
8-K 2018-08-07
8-K 2018-06-04
8-K 2018-05-30
8-K 2018-03-30
8-K 2018-02-07

OESX 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Description of Business
Note 2 - Impact of Covid - 19
Note 3 - Summary of Significant Accounting Policies
Note 4 - Revenue
Note 5 - Accounts Receivable, Net
Note 6 - Inventories, Net
Note 7 - Prepaid Expenses and Other Current Assets
Note 8 - Property and Equipment, Net
Note 9 - Leases
Note 10 - Other Intangible Assets, Net
Note 11 - Accrued Expenses and Other
Note 12 - Net Income (Loss) per Common Share
Note 13 - Long - Term Debt
Note 14 - Income Taxes
Note 15 - Commitments and Contingencies
Note 16 - Shareholders' Equity
Note 17 - Stock Options and Restricted Shares
Note 18 - Segments
Note 19 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
EX-31.1 oesx-ex311_9.htm
EX-31.2 oesx-ex312_7.htm
EX-32.1 oesx-ex321_8.htm
EX-32.2 oesx-ex322_6.htm

Orion Energy Systems Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
1159269462302012201420172020
Assets, Equity
5036228-6-202012201420172020
Rev, G Profit, Net Income
201482-4-102012201420172020
Ops, Inv, Fin

10-Q 1 oesx-10q_20200630.htm 10-Q oesx-10q_20200630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

Commission file number 001-33887

 

Orion Energy Systems, Inc.

(Exact name of Registrant as specified in its charter)

 

 

Wisconsin

 

39-1847269

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification number)

 

2210 Woodland Drive, Manitowoc, Wisconsin

 

54220

(Address of principal executive offices)

 

(Zip code)

Registrant’s telephone number, including area code: (920) 892-9340

 

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, no par value

 

OESX

 

The Nasdaq Stock Market LLC

(NASDAQ Capital Market)

Common stock purchase rights

 

 

 

The Nasdaq Stock Market LLC

(NASDAQ Capital Market)

 

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an "emerging growth company". See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate 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 Exchange Act).    Yes      No  

There were 30,624,889 shares of the Registrant’s common stock outstanding on July 31, 2020.

 

 

 


ORION ENERGY SYSTEMS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED June 30, 2020

TABLE OF CONTENTS

 

 

 

Page(s)

PART I FINANCIAL INFORMATION

3

ITEM 1.

Financial Statements (unaudited)

3

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and March 31, 2020

3

 

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

4

 

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

5

 

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

6

 

Notes to the Condensed Consolidated Financial Statements

7

ITEM 2.

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

24

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

34

ITEM 4.

Controls and Procedures

34

PART II OTHER INFORMATION

35

ITEM 1.

Legal Proceedings

35

ITEM 1A.

Risk Factors

35

ITEM 2.

Unregistered Sale of Equity Securities and Use of Proceeds

35

ITEM 5.

Other Information

35

ITEM 6.

Exhibits

36

SIGNATURE

37

 

 


 

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

 

June 30, 2020

 

 

March 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,784

 

 

$

28,751

 

Accounts receivable, net

 

 

5,704

 

 

 

10,427

 

Revenue earned but not billed

 

 

2,379

 

 

 

560

 

Inventories, net

 

 

17,070

 

 

 

14,507

 

Prepaid expenses and other current assets

 

 

570

 

 

 

723

 

Total current assets

 

 

36,507

 

 

 

54,968

 

Property and equipment, net

 

 

11,688

 

 

 

11,817

 

Other intangible assets, net

 

 

2,161

 

 

 

2,216

 

Long-term accounts receivable

 

 

 

 

 

760

 

Other long-term assets

 

 

3,008

 

 

 

2,802

 

Total assets

 

$

53,364

 

 

$

72,563

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Accounts payable

 

$

13,660

 

 

$

19,834

 

Accrued expenses and other

 

 

5,796

 

 

 

7,228

 

Deferred revenue, current

 

 

92

 

 

 

107

 

Current maturities of long-term debt

 

 

14

 

 

 

35

 

Total current liabilities

 

 

19,562

 

 

 

27,204

 

Revolving credit facility

 

 

 

 

 

10,013

 

Long-term debt, less current maturities

 

 

46

 

 

 

50

 

Deferred revenue, long-term

 

 

696

 

 

 

715

 

Other long-term liabilities

 

 

4,011

 

 

 

3,546

 

Total liabilities

 

 

24,315

 

 

 

41,528

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at

   June 30, 2020 and March 31, 2020; no shares issued and outstanding at

   June 30, 2020 and March 31, 2020

 

 

 

 

 

 

Common stock, no par value: Shares authorized: 200,000,000 at June 30, 2020

   and March 31, 2020; shares issued: 40,092,349 at June 30, 2020 and

   39,729,569 at March 31, 2020; shares outstanding: 30,624,889 at

   June 30, 2020 and 30,265,997 at March 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

156,752

 

 

 

156,503

 

Treasury stock, common shares: 9,467,460 at June 30, 2020 and 9,463,572 at

   March 31, 2020

 

 

(36,179

)

 

 

(36,163

)

Retained deficit

 

 

(91,524

)

 

 

(89,305

)

Total shareholders’ equity

 

 

29,049

 

 

 

31,035

 

Total liabilities and shareholders’ equity

 

$

53,364

 

 

$

72,563

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements.

 

3


 

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

Product revenue

 

$

9,701

 

 

$

32,339

 

Service revenue

 

 

1,110

 

 

 

10,039

 

Total revenue

 

 

10,811

 

 

 

42,378

 

Cost of product revenue

 

 

7,229

 

 

 

23,825

 

Cost of service revenue

 

 

947

 

 

 

8,270

 

Total cost of revenue

 

 

8,176

 

 

 

32,095

 

Gross profit

 

 

2,635

 

 

 

10,283

 

Operating expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

2,411

 

 

 

3,007

 

Sales and marketing

 

 

1,854

 

 

 

2,706

 

Research and development

 

 

415

 

 

 

411

 

Total operating expenses

 

 

4,680

 

 

 

6,124

 

(Loss) income from operations

 

 

(2,045

)

 

 

4,159

 

Other income (expense):

 

 

 

 

 

 

 

 

Other income

 

 

9

 

 

 

12

 

Interest expense

 

 

(49

)

 

 

(136

)

Amortization of debt issue costs

 

 

(61

)

 

 

(61

)

Interest income

 

 

0

 

 

 

2

 

Total other expense

 

 

(101

)

 

 

(183

)

(Loss) income before income tax

 

 

(2,146

)

 

 

3,976

 

Income tax expense

 

 

73

 

 

 

8

 

Net (loss) income

 

$

(2,219

)

 

$

3,968

 

Basic net (loss) income per share attributable to

   common shareholders

 

$

(0.07

)

 

$

0.13

 

Weighted-average common shares outstanding

 

 

30,352,217

 

 

 

29,723,472

 

Diluted net (loss) income per share

 

$

(0.07

)

 

$

0.13

 

Weighted-average common shares and share

   equivalents outstanding

 

 

30,352,217

 

 

 

30,550,892

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements.

4


 

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

 

 

 

Shareholders’ Equity

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Additional

Paid-in

Capital

 

 

Treasury

Stock

 

 

Retained

Deficit

 

 

Total

Shareholders’

Equity

 

Balance, March 31, 2020

 

 

30,265,997

 

 

$

156,503

 

 

$

(36,163

)

 

$

(89,305

)

 

$

31,035

 

Exercise of stock options for cash

 

 

20,000

 

 

 

41

 

 

 

 

 

 

 

 

 

41

 

Shares issued under Employee Stock Purchase

   Plan

 

 

458

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

342,780

 

 

 

208

 

 

 

 

 

 

 

 

 

208

 

Employee tax withholdings on stock-based

   compensation

 

 

(4,346

)

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,219

)

 

 

(2,219

)

Balance, June 30, 2020

 

 

30,624,889

 

 

 

156,752

 

 

 

(36,179

)

 

 

(91,524

)

 

 

29,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Additional

Paid-in

Capital

 

 

Treasury

Stock

 

 

Retained

Deficit

 

 

Total

Shareholders’

Equity

 

Balance, March 31, 2019

 

 

29,600,158

 

 

$

155,828

 

 

$

(36,091

)

 

$

(101,767

)

 

$

17,970

 

Exercise of stock options for cash

 

 

10,000

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Shares issued under Employee Stock Purchase

   Plan

 

 

613

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

535,344

 

 

 

171

 

 

 

 

 

 

 

 

 

171

 

Employee tax withholdings on stock-based

   compensation

 

 

(24,628

)

 

 

 

 

 

(64

)

 

 

 

 

 

(64

)

Net income

 

 

 

 

 

 

 

 

 

 

 

3,968

 

 

 

3,968

 

Balance, June 30, 2019

 

 

30,121,487

 

 

 

156,015

 

 

 

(36,153

)

 

 

(97,799

)

 

 

22,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements.

5


 

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

Operating activities

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(2,219

)

 

$

3,968

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by

operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

292

 

 

 

315

 

Amortization of intangible assets

 

 

78

 

 

 

94

 

Stock-based compensation

 

 

208

 

 

 

171

 

Amortization of debt issue costs

 

 

61

 

 

 

61

 

Provision for inventory reserves

 

 

27

 

 

 

80

 

Other

 

 

9

 

 

 

21

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, current and long-term

 

 

5,483

 

 

 

(9,199

)

Revenue earned but not billed

 

 

(1,819

)

 

 

238

 

Inventories

 

 

(2,590

)

 

 

(1,610

)

Prepaid expenses and other assets

 

 

236

 

 

 

(5

)

Accounts payable

 

 

(6,119

)

 

 

7,106

 

Accrued expenses and other

 

 

(1,322

)

 

 

777

 

Deferred revenue, current and long-term

 

 

(34

)

 

 

(21

)

Net cash (used in) provided by operating activities

 

 

(7,709

)

 

 

1,996

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(221

)

 

 

(200

)

Additions to patents and licenses

 

 

(23

)

 

 

 

Net cash used in investing activities

 

 

(244

)

 

 

(200

)

Financing activities

 

 

 

 

 

 

 

 

Payment of long-term debt

 

 

(25

)

 

 

(21

)

Proceeds from revolving credit facility

 

 

 

 

 

31,100

 

Payments of revolving credit facility

 

 

(10,013

)

 

 

(31,329

)

Payments to settle employee tax withholdings on stock-based compensation

 

 

(19

)

 

 

(63

)

Net proceeds from employee equity exercises

 

 

43

 

 

 

18

 

Net cash used in financing activities

 

 

(10,014

)

 

 

(295

)

Net (decrease) increase in cash and cash equivalents

 

 

(17,967

)

 

 

1,501

 

Cash and cash equivalents at beginning of period

 

 

28,751

 

 

 

8,729

 

Cash and cash equivalents at end of period

 

$

10,784

 

 

$

10,230

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Operating lease assets obtained in exchange for new operating lease liabilities

 

$

355

 

 

$

 

 

The accompanying notes are an integral part of these Condensed Consolidated Statements.

 

6


 

ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES

UNAUDITED NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS

Organization

Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion is a developer, manufacturer and seller of lighting and energy management systems to commercial and industrial businesses, and federal and local governments, predominantly in North America

Orion’s corporate offices and leased primary manufacturing operations are located in Manitowoc, Wisconsin. Orion also leases office space in Jacksonville, Florida.

 

NOTE 2 — IMPACT OF COVID-19

The COVID-19 pandemic has disrupted business, trade, commerce, and financial and credit markets in the U.S. and globally. Orion’s business has been adversely impacted by measures taken by government entities and others to control the spread of the virus beginning in March 2020, the last month of its fiscal 2020 year. As a deemed essential business, Orion provides products and services to ensure energy and lighting infrastructure and Orion therefore continues to operate throughout the pandemic. Orion has implemented a number of safety protocols, including limiting travel, restricting access to our facilities along with monitoring processes, physical distancing, physical barriers, enhanced cleaning procedures, and requiring face coverings. Nonetheless, Orion did experience a material adverse effect from the COVID-19 pandemic due to the curtailment of activity in the last few weeks of the 2020 fiscal year and during the first quarter of fiscal 2021, including the delay of project installations for a major national account customer. Orion now expects this project to resume during the second quarter of fiscal 2021.

As part of Orion’s response to the impacts of the COVID-19 pandemic, during the fourth quarter of fiscal 2020, Orion implemented a number of cost reduction and cash conservation measures, including reducing headcount. Orion recognized $0.4 million in restructuring expense during the fourth quarter of fiscal 2020. As of June 30, 2020, substantially all of the restructuring accrual had been paid.

While certain restrictions began to initially lessen in certain jurisdictions during Orion’s fiscal 2021 first quarter, stay-at-home, face mask or lockdown orders remain in effect in others, with employees asked to work remotely if possible. Certain areas of the country have seen a spike of COVID-19 cases, which could result in renewed restrictions and lockdown orders. Some customers and projects are in areas where travel restrictions have been imposed, certain customers have either closed or reduced on-site activities, and timelines for the completion of multiple projects have been extended. At this time, it is not possible to predict the overall impact the COVID-19 pandemic will have on Orion’s business, liquidity, capital resources or financial results. However, Orion does expect that the economic and regulatory impacts of COVID-19 will materially and adversely impact revenue and profitability in fiscal 2021. If there is prolonged adverse impact, Orion’s business, liquidity, capital resources, financial results, and the carrying values of Orion’s property, plant and equipment and intangible assets may be impacted negatively. Orion will continue to actively monitor the situation and may take further actions that alter business operations.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and includes certain income tax provisions relevant to businesses. Orion is required to recognize the effect on the consolidated financial statements in the period the law was enacted, which is the period ended March 31, 2020. For the fiscal year ended March 31, 2020, and three months ended June 30, 2020, the CARES Act did not have a material impact on Orion’s consolidated financial statements. See Note 14 – Income Taxes.

7


 

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of Orion Energy Systems, Inc. and its wholly owned subsidiaries.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Orion have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results that may be expected for the fiscal year ending March 31, 2021 or other interim periods.

The Condensed Consolidated Balance Sheet at March 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements.

The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in Orion’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed with the SEC on June 5, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during that reporting period. Areas that require the use of significant management estimates include revenue recognition, inventory obsolescence and allowance for doubtful accounts, accruals for warranty and loss contingencies, income taxes, impairment analyses, and certain equity transactions. Accordingly, actual results could differ from those estimates.

Concentration of Credit Risk and Other Risks and Uncertainties

Orion's cash is deposited with two financial institutions. At times, deposits in these institutions exceed the amount of insurance provided on such deposits. Orion has not experienced any losses in such accounts and believes that it is not exposed to any significant financial institution viability risk on these balances.

Orion purchases components necessary for its lighting products, including ballasts, lamps and LED components, from multiple suppliers. For the three months ended June 30, 2020, three suppliers accounted for 16.1%, 12.5% and 10.0% of total cost of revenue, respectively. For the three months ended June 30, 2019, one supplier accounted for 13.7% of total cost of revenue.

For the three months ended June 30, 2020, one customer accounted for 32.9% of total revenue. For the three months ended June 30, 2019, one customer accounted for 77.0% of total revenue.

As of June 30, 2020, two customers accounted for 35.7% and 13.6% of accounts receivable, respectively. As of March 31, 2020, two customers accounted for 37.3% and 13.0% of accounts receivable, respectively.

Recent Accounting Pronouncements

 

Issued: Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to assess impairment of its financial

8


 

instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. The provisions of ASU 2016-13 and the related amendments are effective for Orion for fiscal years (and interim reporting periods within those years) beginning after December 15, 2022. Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Orion is currently evaluating the impact of adoption of this standard on its consolidated statements of operations, cash flows, and the related footnote disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general rules of Topic 740. The provisions of ASU 2019-12 are effective for Orion for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Orion is currently evaluating the impact of adoption on this standard on its consolidated statements of operations, cash flows, and the related footnote disclosures.

 

NOTE 4 — REVENUE

General Information

Orion generates revenues primarily by selling commercial LED lighting fixtures and components, including controls and integrated IoT capabilities, and by installing these fixtures in its customer’s facilities on a turnkey basis via a dedicated installation and support team. Orion recognizes revenue in accordance with the guidance in ASC 606 when control of the goods or services being provided (which Orion refers to as a performance obligation) is transferred to a customer at an amount that reflects the consideration that management expects to receive in exchange for those goods or services. Prices are generally fixed at the time of order confirmation. The amount of expected consideration includes estimated deductions and early payment discounts calculated based on historical experience, customer rebates based on agreed upon terms applied to actual and projected sales levels over the rebate period, and any amounts paid to customers in conjunction with fulfilling a performance obligation.

If there are multiple performance obligations in a contract, the contract’s total sales price is allocated to each individual performance obligation based on their relative standalone selling price. A performance obligation’s standalone selling price is the price at which Orion would sell such promised good or service separately to a customer. Orion uses an observable price to determine the stand-alone selling price for separate performance obligations or a cost-plus margin approach when one is not available. The cost-plus margin approach is used to determine the stand-alone selling price for the installation performance obligation and is based on average historical installation margin.

Revenue derived from customer contracts which include only performance obligation(s) for the sale of lighting fixtures and components is classified as Product revenue in the Condensed Consolidated Statements of Operations. The revenue for these transactions is recorded at the point in time when management believes that the customer obtains control of the products, generally either upon shipment or upon delivery to the customer’s facility. This point in time is determined separately for each contract and requires judgment by management of the contract terms and the specific facts and circumstances concerning the transaction.

Revenue from a customer contract which includes both the sale of fixtures and the installation of such fixtures (which Orion refers to as a turnkey project) is allocated between each lighting fixture and the installation performance obligation based on relative standalone selling prices.

Revenue from turnkey projects that is allocated to the sale of the lighting fixtures is recorded at the point in time when management believes the customer obtains control of the product(s) and is reflected in Product revenue. This point in time is determined separately for each customer contract based upon the terms of the contract and the nature and extent of Orion’s control of the light fixtures during the installation. Product revenue associated with turnkey projects can be recorded (a) upon shipment or delivery, (b) subsequent to shipment or delivery and upon customer payments for the light fixtures, (c) when an individual light fixture is installed and working correctly, or (d) when the customer acknowledges that the entire installation project is substantially complete. Determining the point in time when a customer obtains control of the lighting fixtures in a

9


 

turnkey project can be a complex judgment and is applied separately for each individual light fixture included in a contract. In making this judgment, management considers the timing of various factors, including, but not limited to, those detailed below:

 

when there is a legal transfer of ownership;

 

when the customer obtains physical possession of the products;

 

when the customer starts to receive the benefit of the products;

 

the amount and duration of physical control that Orion maintains on the products after they are shipped to, and received at, the customer’s facility;

 

whether Orion is required to maintain insurance on the lighting fixtures when they are in transit and after they are delivered to the customer’s facility;

 

when each light fixture is physically installed and working correctly;

 

when the customer formally accepts the product; and

 

when Orion receives payment from the customer for the light fixtures.

Revenue from turnkey projects that is allocated to the single installation performance obligation is reflected in Service revenue. Service revenue is recorded over-time as Orion fulfills its obligation to install the light fixtures. Orion measures its performance toward fulfilling its performance obligations for installations using an output method that calculates the number of light fixtures removed and installed as of the measurement date in comparison to the total number of light fixtures to be removed or installed under the contract.

Most products are manufactured in accordance with Orion’s standard specifications. However, some products are manufactured to a customer’s specific requirements with no alternative use to Orion. In such cases, and when Orion has an enforceable right to payment, Product revenue is recorded on an over-time basis measured using an input methodology that calculates the costs incurred to date as compared to total expected costs. There was no over-time revenue related to custom products recognized in the three months ended June 30, 2020 and June 30, 2019.

Orion also records revenue in conjunction with several limited power purchase agreements (“PPAs”) still outstanding. Those PPAs are supply-side agreements for the generation of electricity. Orion’s last PPA expires in 2031. Revenue associated with the sale of energy generated by the solar facilities under these PPAs is within the scope of ASC 606. Revenues are recognized over-time and are equal to the amount billed to the customer, which is calculated by applying the fixed rate designated in the PPAs to the variable amount of electricity generated each month. This approach is in accordance with the “right to invoice” practical expedient provided for in ASC 606. Orion also recognizes revenue upon the sale to third parties of tax credits received from operating the solar facilities and from amortizing a grant received from the federal government during the period starting when the power generating facilities were constructed until the expiration of the PPAs; these revenues are not derived from contracts with customers and therefore not under the scope of ASC 606.

When shipping and handling activities are performed after a customer obtains control of the product, Orion has elected to treat shipping and handling costs as an activity necessary to fulfill the performance obligation to transfer product to the customer and not as a separate performance obligation. Any shipping and handling costs charged to customers are recorded in Product revenue. Shipping and handling costs are accrued and included in Cost of product revenue.

See Note 11 – Accrued Expenses and Other for a discussion of Orion’s accounting for the warranty it provides to customers for its products and services.

Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis.

 

Contract Fulfillment Costs

Costs associated with product sales are accumulated in inventory as the fixtures are manufactured and are transferred to Cost of product revenue at the time revenue is recorded. See Note 6 – Inventories, Net. Costs associated with installation sales are expensed as incurred.

 

10


 

Disaggregation of Revenue

Orion’s Product revenue includes revenue from contracts with customers accounted for under the scope of ASC 606 and revenue which is accounted for under other guidance. For the three months ended June 30, 2020, Product revenue included $0.8 million derived from sales-type leases for light fixtures, $0.1 million derived from the sale of tax credits generated from Orion’s legacy operation for distributing solar energy, and $19 thousand derived from the amortization of federal grants received in 2010 and 2011 as reimbursement for a portion of the costs to construct the legacy solar facilities which are not under the scope of ASC 606.

For the three months ended June 30, 2019, Product revenue included $0.4 million derived from sales-type leases for light fixtures, $0.1 million derived from the sale of tax credits generated from Orion’s legacy operation for distributing solar energy, and $19 thousand derived from the amortization of federal grants received in 2010 and 2011 as reimbursement for a portion of the costs to construct the legacy solar facilities which are not under the scope of ASC 606. All remaining Product revenue, and all Service revenue, are derived from contracts with customers as defined in ASC 606.

The primary end-users of Orion’s lighting products and services are (a) commercial or industrial companies, and (b) the federal government.

Commercial or industrial end-users obtain Orion products and services through turnkey project sales or by purchasing products either direct from Orion or through distributors or energy service companies ("ESCOs"). Revenues associated with commercial and industrial end-users are included within each of Orion’s segments, dependent on the sales channel.

The federal government obtains Orion products and services primarily through turnkey project sales that Orion makes to a select group of contractors who focus on the federal government. Revenues associated with government end-users are primarily included in the Orion Engineered Systems Division segment.

See Note 18 – Segments, for additional discussion concerning Orion’s reportable segments.

The following tables provide detail of Orion’s total revenues for the three months ended June 30, 2020 and June 30, 2019 (dollars in thousands):

 

 

 

Three Months Ended June 30, 2020

 

 

 

Product

 

 

Services

 

 

Total

 

Revenue from contracts with customers:

 

 

 

 

 

 

 

 

 

 

 

 

Lighting revenues, by end user

 

 

 

 

 

 

 

 

 

 

 

 

Federal government

 

$

50

 

 

$

 

 

$

50

 

Commercial and industrial

 

 

8,709

 

 

 

1,110

 

 

 

9,819

 

Total lighting

 

 

8,759

 

 

 

1,110

 

 

 

9,869

 

Solar energy related revenues

 

 

22

 

 

 

 

 

 

22

 

Total revenues from contracts with customers

 

 

8,781

 

 

 

1,110

 

 

 

9,891

 

Revenue accounted for under other guidance

 

 

920

 

 

 

 

 

 

920

 

Total revenue

 

$

9,701

 

 

$

1,110

 

 

$

10,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

 

Product

 

 

Services

 

 

Total

 

Revenue from contracts with customers:

 

 

 

 

 

 

 

 

 

 

 

 

Lighting revenues, by end user

 

 

 

 

 

 

 

 

 

 

 

 

Federal government

 

$

658

 

 

$

246

 

 

$

904

 

Commercial and industrial

 

 

31,184

 

 

 

9,793

 

 

 

40,977

 

Total lighting

 

 

31,842

 

 

 

10,039

 

 

 

41,881

 

Solar energy related revenues

 

 

19

 

 

 

 

 

 

19

 

Total revenues from contracts with customers

 

 

31,861

 

 

 

10,039

 

 

 

41,900

 

Revenue accounted for under other guidance

 

 

478

 

 

 

 

 

 

478

 

Total revenue

 

$

32,339

 

 

$

10,039

 

 

$

42,378

 

 

11


 

Cash Flow Considerations

Customer payments for material-only orders are due shortly after shipment.

Turnkey projects where the end-user is a commercial or industrial company typically span between one week to three months. Customer payment requirements for these projects vary by contract. Some contracts provide for customer payments for products and services as they are delivered, other contracts specify that the customer will pay for the project in its entirety upon completion of the installation.

Turnkey projects where the end-user is the federal government typically span a three to six-month period. The contracts for these sales often provide for monthly progress payments equal to ninety percent (90%) of the value provided by Orion during the month.

Orion provides long-term financing to one customer who frequently engages Orion in large turnkey projects that span between three and nine months. The customer executes an agreement providing for monthly payments of the contract price, plus interest, over a five-year period. The total transaction price in these contracts is allocated between product and services in the same manner as all other turnkey projects. The portion of the transaction associated with the installation is accounted for consistently with all other installation related performance obligations. The portion of the transaction associated with the sale of the multiple individual light fixtures is accounted for as sales-type leases in accordance with the guidance for leases. Revenues associated with the sales-type leases are included in Product revenue and recorded for each fixture separately based on the customer’s monthly acknowledgment that specified fixtures have been installed and are operating as specified.

The payments associated with these transactions that are due during the twelve months subsequent to June 30, 2020 are included in Accounts receivable, net in Orion’s Condensed Consolidated Balance Sheets. The remaining amounts due that are associated with these transactions are included in Other long-term assets in Orion’s Condensed Consolidated Balance Sheets.

The customer’s monthly payment obligation commences after completion of the turnkey project. Orion generally sells the receivable from the customer to an independent financial institution either during, or shortly after completion of, the installation period. Upon execution of the receivables purchase / sales agreement, all amounts due from the customer are included in Revenues earned but not billed on Orion’s Condensed Consolidated Balance Sheets until cash is received from the financial institution. The financial institution releases funds to Orion based on the customer’s monthly acknowledgment of the progress Orion has achieved in fulfilling its installation obligation. Orion provides the progress certifications to the financial institution one month in arrears.

The total amount received from the sales of these receivables during the three months ended June 30, 2020, was $0.2 million. Orion’s gains on these sales were $9 thousand for the three months ended June 30, 2020 and are included in Interest expense in the Condensed Consolidated Statements of Operations.

The total amount received from the sales of these receivables during the three months ended June 30, 2019 was $2.8 million. Orion’s losses on these sales were $47 thousand for the three months ended June 30, 2019 and are included in Interest expense in the Condensed Consolidated Statement of Operations.

 

Practical Expedients and Exemptions

Orion expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within Sales and marketing expense. There are no other capitalizable costs associated with obtaining contracts with customers.

Orion’s performance obligations related to lighting fixtures typically do not exceed nine months in duration. As a result, Orion has elected the practical expedient that provides an exemption to the disclosure requirements regarding information about value assigned to remaining performance obligations on contracts that have original expected durations of one year or less.

Orion also elected the practical expedient that permits companies to not disclose quantitative information about the future revenue when revenue is recognized as invoices are issued to customers for services performed.

12


 

Other than the turnkey projects which result in sales-type leases discussed above, Orion generally receives full payment for satisfied performance obligations in less than one year. Accordingly, Orion does not adjust revenues for the impact of any potential significant financing component as permitted by the practical expedients provided in ASC 606.

 

Contract Balances

A receivable is recognized when Orion has an enforceable right to payment in accordance with contract terms and an invoice has been issued to the customer. Payment terms on invoiced amounts are typically 30 days from the invoice date.

Revenue earned but not billed represents revenue that has been recognized in advance of billing the customer, which is a common practice in Orion turnkey contracts. Once Orion has an unconditional right to consideration under a turnkey contract, Orion typically bills the customer accordingly and reclassifies the amount to Accounts receivable, net. Revenue earned but not billed as of June 30, 2020, and March 31, 2020, includes $0.7 million and $39 thousand, respectively, which was not derived from contracts with customers and therefore not classified as a contract asset as defined by ASC 606.

Deferred revenue, current as of June 30, 2020, and March 31, 2020, includes $16 thousand and $31 thousand, respectively, of contract liabilities which represent consideration received from customers prior to the point that Orion has fulfilled the promises included in a performance obligation and recorded revenue.

Deferred revenue, long-term consists of the unamortized portion of the funds received from the federal government in 2010 and 2011 as reimbursement for the costs to build the two facilities related to the PPAs. As the transaction is not considered a contract with a customer, this value is not a contract liability as defined by ASC 606.

The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of June 30, 2020 and March 31, 2020 (dollars in thousands):

 

 

 

June 30,

2020

 

 

March 31,

2020

 

Accounts receivable, net

 

$

5,704

 

 

$

10,427

 

Contract assets

 

$

1,649

 

 

$

1,082

 

Contract liabilities

 

$

16

 

 

$

31

 

 

There were no significant changes in the contract assets outside of standard reclassifications to Accounts receivable, net upon billing. There were no significant changes to contract liabilities.

 

 

NOTE 5 — ACCOUNTS RECEIVABLE, NET

As of June 30, 2020, and March 31, 2020, Orion's Accounts receivable and Allowance for doubtful accounts balances were as follows (dollars in thousands):

 

 

 

June 30,

2020

 

 

March 31,

2020

 

Accounts receivable, gross

 

$

5,732

 

 

$

10,455

 

Allowance for doubtful accounts

 

 

(28

)

 

 

(28

)

Accounts receivable, net

 

$

5,704

 

 

$

10,427

 

 

13


 

NOTE 6 — INVENTORIES, NET

As of June 30, 2020, and March 31, 2020, Orion's Inventory balances were as follows (dollars in thousands):

 

 

 

Cost

 

 

Excess and

Obsolescence

Reserve

 

 

Net

 

As of June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Raw materials and components

 

$

11,635

 

 

$

(1,073

)

 

$

10,562

 

Work in process

 

 

679

 

 

 

(492

)

 

 

187

 

Finished goods

 

 

7,126

 

 

 

(805

)

 

 

6,321

 

Total

 

$

19,440

 

 

$

(2,370

)

 

$

17,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Raw materials and components

 

$

9,639

 

 

$

(1,244

)

 

$

8,395

 

Work in process

 

 

699

 

 

 

(305

)

 

 

394

 

Finished goods

 

 

6,598

 

 

 

(880

)

 

 

5,718

 

Total

 

$

16,936

 

 

$

(2,429

)

 

$

14,507

 

 

NOTE 7 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist primarily of prepaid insurance premiums, debt issue costs, and sales tax receivable.

NOTE 8 — PROPERTY AND EQUIPMENT, NET

As of June 30, 2020, and March 31, 2020, Property and equipment, net, included the following (dollars in thousands):

 

 

 

June 30,

2020

 

 

March 31,

2020

 

Land and land improvements

 

$

433

 

 

$

433

 

Buildings and building improvements

 

 

9,470

 

 

 

9,470

 

Furniture, fixtures and office equipment

 

 

7,250

 

 

 

7,270

 

Leasehold improvements

 

 

324

 

 

 

324

 

Equipment leased to customers

 

 

4,997

 

 

 

4,997

 

Plant equipment

 

 

12,191

 

 

 

12,021

 

Construction in Progress

 

 

3

 

 

 

15

 

Gross property and equipment

 

 

34,668

 

 

 

34,530

 

Less: accumulated depreciation

 

 

(22,980

)

 

 

(22,713

)

Total property and equipment, net

 

$

11,688

 

 

$

11,817

 

 

Orion recorded depreciation expense of $0.3 million for both the three months ended June 30, 2020, and June 30, 2019.

 

NOTE 9 — LEASES

From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties.

Whether it is the lessee or the lessor, Orion’s determination of whether a contract includes a lease, and assessing how the lease should be accounted for, is a matter of judgment based on whether the risks and rewards, as well as substantive control of the assets specified in the contract, have been transferred from the lessor to the lessee. The judgment considers matters such as whether the assets are transferred from the lessor to the lessee at the end of the contract, the term of the agreement in relation to the asset’s remaining economic useful life, and whether the assets are of such a specialized nature that the lessor will not have an alternative use for such assets at the termination of the agreement. Other matters requiring judgment are the lease term when the agreement includes renewal or termination options and the interest rate used when initially determining the right of use (“ROU”) asset and lease liability.

14


 

ROU assets represent Orion’s right to use an underlying asset for the lease term and lease liabilities represent Orion’s obligation to make lease payments arising from the lease. Under ASC 842, both finance and operating lease ROU assets and lease liabilities for leases with initial terms in excess of 12 months are recognized at the commencement date based on the present value of lease payments over the lease term. When available, Orion uses the implicit interest rate in the lease when completing this calculation. However, as most of Orion’s operating lease agreements generating ROU assets do not provide the implicit rate, Orion’s incremental borrowing rate under its line of credit, adjusted for differences in duration and the relative collateral value in relation to the payment obligation, at the commencement of the lease is generally used in this calculation. The lease term includes options to extend or renew the agreement, or for early termination of the agreement, when it is reasonably certain that Orion will exercise such option. ROU assets are depreciated using the straight-line method over the lease term.

Orion recognizes lease expense for leases with an initial term of 12 months or less, referred to as short term leases, on a straight-line basis over the lease term.

One of Orion’s frequent customers purchases products and installation services under agreements that provide for monthly payments, at a fixed monthly amount, of the contract price, plus interest, typically over a five-year period. While Orion retains ownership of the light fixtures during the financing period, the transaction terms and the underlying economics associated with used lighting fixtures results in Orion essentially ceding ownership of the lighting fixtures to the customer after completion of the agreement. The portions of the transaction associated with the sale of the light fixtures is accounted for as a sales-type lease. The total transaction price in these contracts is allocated between the lease and non-lease components in the same manner as the total transaction price of other turnkey projects containing lighting fixtures and installation services.

Orion leases portions of its corporate headquarters to third parties; all such agreements have been, and continue to be, classified as operating leases under the applicable authoritative accounting guidance. The assets being leased continue to be included in Property and equipment, net. Lease payments earned are recorded as a reduction in administrative expenses.

 

Assets Orion Leases from Other Parties

On January 31, 2020, Orion entered into the current lease for its approximately 266,000 square foot primary manufacturing and distribution facility in Manitowoc, WI. The lease has a 10-year term, with the option to terminate after six years. Orion is responsible for the costs of insurance and utilities for the facility. These costs are considered variable lease costs. The agreement is classified as an operating lease.

The prior lease agreement for this facility provided the lessor the right to terminate the lease agreement at any time with 12 months’ notice to Orion. As a result, the agreement was previously classified as a short-term lease.

In February 2014, Orion entered into a multi-year lease agreement for use of approximately 10,500 square feet of office space in a multi-use office building in Jacksonville Florida. The lease has since been extended, most recently during the first quarter of fiscal 2021, and presently terminates on June 30, 2023. The agreement is classified as an operating lease.

Orion has leased other assets from third parties, principally office and production equipment. The terms of our other leases vary from contract to contract and expire at various dates through 2020.

A summary of Orion’s assets leased from third parties follows (dollars in thousands):

 

 

 

Balance sheet classification

 

June 30, 2020

 

 

March 31, 2020

 

Assets

 

 

 

 

 

 

 

 

 

 

Operating lease assets

 

Other long-term assets

 

$

2,956

 

 

$

2,745

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities