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Business Acquisition
 6 Months Ended
Jun. 30, 2017
Business Combinations [Abstract]  
Business Acquisition
Business Acquisition

On April 9, 2017, T.A.S. Commercial Concrete Construction, LLC, a wholly owned subsidiary of Orion Group Holdings, Inc. ("the Company") entered into a Stock Purchase Agreement ("the Agreement") for the purchase of all the issued and outstanding shares (the "shares") of Tony Bagliore Concrete, Inc., a Texas corporation ("TBC"). The Company and the two sole shareholders of TBC closed the purchase transactions on April 10, 2017 (the "Closing Date"). Upon the terms of and subject to the conditions set forth in the Agreement, the total aggregate consideration paid on the Closing Date by the Company to the Sellers for the shares was $6 million in cash. In addition however, if certain target considerations are met in future periods, up to an additional cash payment of $2 million will become payable to the Seller.

The allocation of the estimated acquisition consideration is preliminary because initial accounting for this business combination is incomplete. The preliminary allocation is based on estimates, assumptions, valuations, and other studies which have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the acquisition consideration allocation unaudited purchase accounting adjustments will remain preliminary until the Company determines the final acquisition consideration allocation. The final amounts allocated to assets acquired and liabilities assumed could differ significantly from the amounts presented in the combined consolidated financial statements.

The purpose of the acquisition was primarily to achieve growth by expanding the Company's current service offerings in addition to expansion into new markets. The tangible assets acquired include accounts receivable, retainage and fixed assets.
Under the acquisition method of accounting, the total acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of TBC based on their estimated fair values as of the closing of the acquisition. The table below outlines the total actual acquisition consideration allocated to the fair values of TBC’s tangible and intangible assets and liabilities as of April 9, 2017:

Accounts receivable
$
3,239

Retainage
1,860

Fixed assets, net
2,098

Other
9

Goodwill
2,562

Other intangible assets
878

Accounts payable
(2,017
)
Accrued expenses and other current liabilities
(1,080
)
Contingent consideration
(456
)
Deferred tax liability
(1,093
)
Total Acquisition Consideration at April 9, 2017
$
6,000


The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed was allocated to goodwill. The goodwill of $2.6 million arising from the acquisition consists primarily of synergies and business opportunities expected to be realized from the purchase of the Company. The goodwill is not deductible for income tax purposes.

Finite-lived intangible assets include customer relationships and contractual backlog. (See Note 9).
The fixed assets acquired include construction equipment and automobiles and trucks and will be depreciated in accordance with Company policy, generally 3 to 15 years.
As stated in the Agreement, the Company has agreed to pay the sellers an earn-out of up to $2.0 million in cash, if earned, as additional purchase consideration. The seller's right to receive the contingent consideration, if any, shall be based on the Company's achievement of certain future financial targets. The Company measured the fair value of the contingent consideration at the Acquisition Date, and determined that fair value to be approximately $0.5 million, as shown above. This amount of contingent liability is classified on the Condensed Consolidated Balance Sheets as other long-term liabilities.
Pro Forma Results (unaudited)
The results and operations of TBC have been included in the Consolidated Statements of Operations since the acquisition date of April 9, 2017. The Company has calculated the pro forma impact of the acquisition of TBC on its operating results for the six months ended June 30, 2017 and 2016, respectively.
The Company derived the pro forma results of the acquisition based upon historical financial information obtained from the seller and certain management assumptions. The pro forma adjustments related to incremental amortization expense associated with the acquired finite-lived intangible assets and interest expense on borrowings extinguished by the Company during the purchase, assuming a January 1, 2017 and 2016 effective transaction date. In addition, the tax impact of these adjustments was calculated at a 35% statutory rate.

These pro forma results are not necessarily indicative of the results that would have been obtained had the acquisition of TBC been completed on January 1 of the respective period, or that may be obtained in the future.


Unaudited Pro Forma Combined Condensed Consolidated Statements of Operations
For the Six Month Period Ended June 30, 2017
(in thousands except per share information)

 
Orion Group Holdings
TBC (through April 9)
Combined Historical
Pro Forma Adjustments
Combined Pro Forma
Contract revenues
$
276,177

$
5,507

$
281,684

$
—

$
281,684

Costs of contract revenues
247,795

5,325

253,120

—

253,120

Gross profit
28,382

182

28,564

—

28,564

Selling, general and administrative expenses
32,507

598

33,105

146

33,251

(Gain) loss on sale of assets, net
(177
)
—

(177
)
—

(177
)
Operating loss from operations
(3,948
)
(416
)
(4,364
)
(146
)
(4,510
)
Other (expense) income
 

 
 
 
 
Other income
21

3

24

—

24

Interest income
—

—

—

—

—

Interest expense
(2,817
)
(10
)
(2,827
)
10

(2,817
)
Other expense, net
(2,796
)
(7
)
(2,803
)
10

(2,793
)
 Loss before income taxes
(6,744
)
(423
)
(7,167
)
(136
)
(7,303
)
Income tax benefit
(2,643
)
—

(2,643
)
(196
)
(2,839
)
Net loss
$
(4,101
)
$
(423
)
$
(4,524
)
$
60

$
(4,464
)
 
 
 
 
 
 
Basic loss per share
$
(0.15
)
 
$
(0.16
)
 
$
(0.16
)
Diluted loss per share
$
(0.15
)
 
$
(0.16
)
 
$
(0.16
)
Shares used to compute loss per share
 

 
 
 
 
Basic
27,867,090

 
27,867,090

 
27,867,090

Diluted
27,867,090

 
27,867,090

 
27,867,090






Unaudited Pro Forma Combined Condensed Consolidated Statements of Operations
For the Six Month Period Ended June 30, 2016
(in thousands except per share information)

 
Orion Group Holdings
TBC
Combined Historical
Pro Forma Adjustments
Combined Pro Forma
Contract revenues
$
269,924

$
17,076

$
287,000

$
—

$
287,000

Costs of contract revenues
238,267

15,754

254,021

—

254,021

Gross profit
31,657

1,322

32,979

—

32,979

Selling, general and administrative expenses
32,437

525

32,962

146

33,108

(Gain) loss on sale of assets, net
(606
)
—

(606
)
—

(606
)
Operating loss from operations
(174
)
797

623

(146
)
477

Other (expense) income
 

 
 
 
 
Other income
22

—

22

—

22

Interest income
1

—

1

—

1

Interest expense
(3,117
)
(18
)
(3,135
)
18

(3,117
)
Other expense, net
(3,094
)
(18
)
(3,112
)
18

(3,094
)
 Loss before income taxes
(3,268
)
779

(2,489
)
(128
)
(2,617
)
Income tax benefit
(1,252
)
—

(1,252
)
228

(1,024
)
Net loss
$
(2,016
)
$
779

$
(1,237
)
$
(356
)
$
(1,593
)
 
 
 
 
 
 
Basic loss per share
$
(0.07
)
 
$
(0.05
)
 
$
(0.06
)
Diluted loss per share
$
(0.07
)
 
$
(0.05
)
 
$
(0.06
)
Shares used to compute loss per share
 

 
 
 
 
Basic
27,383,748

 
27,383,748

 
27,383,748

Diluted
27,383,748

 
27,383,748

 
27,383,748