x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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) |
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | ý |
Emerging growth company | o | ||
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. o |
Page(s) | ||
ITEM 1. | ||
ITEM 2. | ||
ITEM 3. | ||
ITEM 4. | ||
ITEM 1. | ||
ITEM 1A. | ||
ITEM 2. | ||
ITEM 5. | ||
ITEM 6. | ||
Exhibit 31.1 | ||
Exhibit 31.2 | ||
Exhibit 32.1 | ||
Exhibit 32.2 | ||
EX-101 INSTANCE DOCUMENT | ||
EX-101 SCHEMA DOCUMENT | ||
EX-101 CALCULATION LINKBASE DOCUMENT | ||
EX-101 LABELS LINKBASE DOCUMENT | ||
EX-101 PRESENTATION LINKBASE DOCUMENT |
June 30, 2018 | March 31, 2018 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 7,835 | $ | 9,424 | |||
Accounts receivable, net | 7,183 | 8,736 | |||||
Revenue earned but not billed | 1,055 | — | |||||
Inventories, net | 8,597 | 7,826 | |||||
Deferred contract costs | — | 1,000 | |||||
Prepaid expenses and other current assets | 408 | 2,467 | |||||
Total current assets | 25,078 | 29,453 | |||||
Property and equipment, net | 12,571 | 12,894 | |||||
Other intangible assets, net | 2,747 | 2,868 | |||||
Other long-term assets | 105 | 110 | |||||
Total assets | $ | 40,501 | $ | 45,325 | |||
Liabilities and Shareholders’ Equity | |||||||
Accounts payable | $ | 10,215 | $ | 11,675 | |||
Accrued expenses and other | 4,909 | 4,171 | |||||
Deferred revenue, current | 89 | 499 | |||||
Current maturities of long-term debt | 80 | 79 | |||||
Total current liabilities | 15,293 | 16,424 | |||||
Revolving credit facility | 2,302 | 3,908 | |||||
Long-term debt, less current maturities | 85 | 105 | |||||
Deferred revenue, long-term | 847 | 940 | |||||
Other long-term liabilities | 615 | 524 | |||||
Total liabilities | 19,142 | 21,901 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at June 30, 2018 and March 31, 2018; no shares issued and outstanding at June 30, 2018 and March 31, 2018 | — | — | |||||
Common stock, no par value: Shares authorized: 200,000,000 at June 30, 2018 and March 31, 2018; shares issued: 38,838,329 at June 30, 2018 and 38,384,575 at March 31, 2018; shares outstanding: 29,403,485 at June 30, 2018 and 28,953,183 at March 31, 2018 | — | — | |||||
Additional paid-in capital | 155,231 | 155,003 | |||||
Treasury stock, common shares: 9,434,844 at June 30, 2018 and 9,431,392 at March 31, 2018 | (36,087 | ) | (36,085 | ) | |||
Retained deficit | (97,785 | ) | (95,494 | ) | |||
Total shareholders’ equity | 21,359 | 23,424 | |||||
Total liabilities and shareholders’ equity | $ | 40,501 | $ | 45,325 |
Three Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Product revenue | $ | 12,808 | $ | 11,781 | |||
Service revenue | 1,014 | 777 | |||||
Total revenue | 13,822 | 12,558 | |||||
Cost of product revenue | 9,724 | 8,813 | |||||
Cost of service revenue | 642 | 1,034 | |||||
Total cost of revenue | 10,366 | 9,847 | |||||
Gross profit | 3,456 | 2,711 | |||||
Operating expenses: | |||||||
General and administrative | 3,076 | 5,335 | |||||
Sales and marketing | 2,578 | 3,354 | |||||
Research and development | 405 | 524 | |||||
Total operating expenses | 6,059 | 9,213 | |||||
Loss from operations | (2,603 | ) | (6,502 | ) | |||
Other income (expense): | |||||||
Other income | 19 | — | |||||
Interest expense | (89 | ) | (67 | ) | |||
Interest income | 3 | 5 | |||||
Total other expense | (67 | ) | (62 | ) | |||
Loss before income tax | (2,670 | ) | (6,564 | ) | |||
Income tax expense | 22 | — | |||||
Net loss | $ | (2,692 | ) | $ | (6,564 | ) | |
Basic net loss per share attributable to common shareholders | $ | (0.09 | ) | $ | (0.23 | ) | |
Weighted-average common shares outstanding | 29,070,193 | 28,455,434 | |||||
Diluted net loss per share | $ | (0.09 | ) | $ | (0.23 | ) | |
Weighted-average common shares and share equivalents outstanding | 29,070,193 | 28,455,434 |
Three Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Operating activities | |||||||
Net loss | $ | (2,692 | ) | $ | (6,564 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depreciation | 347 | 353 | |||||
Amortization | 121 | 162 | |||||
Stock-based compensation | 228 | 320 | |||||
Provision for inventory reserves | 17 | 130 | |||||
Provision for bad debts | 82 | 33 | |||||
Other | 3 | 12 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, current and long-term | 1,756 | 2,103 | |||||
Revenue earned but not billed | 1,300 | — | |||||
Inventories | (102 | ) | 1,196 | ||||
Deferred contract costs | — | (770 | ) | ||||
Prepaid expenses and other assets | 150 | (163 | ) | ||||
Accounts payable | (575 | ) | (2,028 | ) | |||
Accrued expenses and other | (553 | ) | (743 | ) | |||
Deferred revenue, current and long-term | (21 | ) | 204 | ||||
Net cash provided by (used in) operating activities | 61 | (5,755 | ) | ||||
Investing activities | |||||||
Purchases of property and equipment | (23 | ) | (204 | ) | |||
Additions to patents and licenses | — | (20 | ) | ||||
Net cash used in investing activities | (23 | ) | (224 | ) | |||
Financing activities | |||||||
Payment of long-term debt and capital leases | (19 | ) | (67 | ) | |||
Proceeds from revolving credit facility | 17,188 | 16,307 | |||||
Payment of revolving credit facility | (18,794 | ) | (19,083 | ) | |||
Payments to settle employee tax withholdings on stock-based compensation | (3 | ) | — | ||||
Net proceeds from employee equity exercises | 1 | — | |||||
Net cash used in financing activities | (1,627 | ) | (2,843 | ) | |||
Net decrease in cash and cash equivalents | (1,589 | ) | (8,822 | ) | |||
Cash and cash equivalents at beginning of period | 9,424 | 17,307 | |||||
Cash and cash equivalents at end of period | $ | 7,835 | $ | 8,485 |
1. | persuasive evidence of an arrangement exists; |
2. | delivery has occurred and title has passed to the customer; |
3. | the sales price is fixed and determinable and no further obligation exists; and |
4. | collectability is reasonably assured. |
• | 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. |
Product | Services | Total | |||||||
Revenue from contracts with customers: | |||||||||
Lighting revenues, by end user | |||||||||
Federal government | $ | 97 | $ | — | $ | 97 | |||
Commercial and industrial | 11,901 | 1,014 | 12,915 | ||||||
Total lighting | 11,998 | 1,014 | 13,012 | ||||||
Solar energy related revenues | 20 | — | 20 | ||||||
Total revenues from contracts with customers | 12,018 | 1,014 | 13,032 | ||||||
Revenue accounted for under other guidance | 790 | — | 790 | ||||||
Total revenue | $ | 12,808 | $ | 1,014 | $ | 13,822 |
April 1, 2018 | June 30, 2018 | |||||
Accounts receivable, net | $ | 9,020 | $ | 7,183 | ||
Contract assets | $ | 1,773 | $ | 960 | ||
Contract liabilities | $ | 13 | $ | 13 |
As Reported June 30, 2018 | Adjustments | Balances without application of ASC 606 | |||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | 7,835 | $ | — | $ | 7,835 | |||||
Accounts receivable, net | 7,183 | (133 | ) | 7,050 | |||||||
Revenue earned but not billed | 1,055 | (1,055 | ) | — | |||||||
Inventories, net | 8,597 | (115 | ) | 8,482 | |||||||
Deferred contract costs | — | 397 | 397 | ||||||||
Prepaid expenses and other current assets | 408 | 636 | 1,044 | ||||||||
Total current assets | 25,078 | (270 | ) | 24,808 | |||||||
Property and equipment, net | 12,571 | — | 12,571 | ||||||||
Other intangible assets, net | 2,747 | — | 2,747 | ||||||||
Other long-term assets | 105 | — | 105 | ||||||||
Total assets | $ | 40,501 | $ | (270 | ) | $ | 40,231 | ||||
Liabilities and Shareholders’ Equity | |||||||||||
Accounts payable | $ | 10,215 | $ | 997 | $ | 11,212 | |||||
Accrued expenses and other | 4,909 | (1,152 | ) | 3,757 | |||||||
Deferred revenue, current | 89 | 167 | 256 | ||||||||
Current maturities of long-term debt | 80 | — | 80 | ||||||||
Total current liabilities | 15,293 | 12 | 15,305 | ||||||||
Revolving credit facility | 2,302 | — | 2,302 | ||||||||
Long-term debt, less current maturities | 85 | — | 85 | ||||||||
Deferred revenue, long-term | 847 | 82 | 929 | ||||||||
Other long-term liabilities | 615 | (82 | ) | 533 | |||||||
Total liabilities | 19,142 | 12 | 19,154 | ||||||||
Commitments and contingencies | |||||||||||
Shareholders’ equity: | |||||||||||
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at June 30, 2018 and March 31, 2018; no shares issued and outstanding at June 30, 2018 and March 31, 2018 | — | — | — | ||||||||
Common stock, no par value: Shares authorized: 200,000,000 at June 30, 2018 and March 31, 2018; shares issued: 38,838,329 at June 30, 2018 and 38,384,575 at March 31, 2018; shares outstanding: 29,403,485 at June 30, 2018 and 28,953,183 at March 31, 2018 | — | — | — | ||||||||
Additional paid-in capital | 155,231 | — | 155,231 | ||||||||
Treasury stock, common shares: 9,434,844 at June 30, 2018 and 9,431,392 at March 31, 2018 | (36,087 | ) | — | (36,087 | ) | ||||||
Retained deficit | (97,785 | ) | (282 | ) | (98,067 | ) | |||||
Total shareholders’ equity | 21,359 | (282 | ) | 21,077 | |||||||
Total liabilities and shareholders’ equity | $ | 40,501 | $ | (270 | ) | $ | 40,231 |
Three Months Ended June 30, 2018 | |||||||||||
As Reported | Adjustments | Balances without application of ASC 606 | |||||||||
Product revenue | $ | 12,808 | $ | 553 | $ | 13,361 | |||||
Service revenue | 1,014 | (725 | ) | 289 | |||||||
Total revenue | 13,822 | (172 | ) | 13,650 | |||||||
Cost of product revenue | 9,724 | 1 | 9,725 | ||||||||
Cost of service revenue | 642 | (421 | ) | 221 | |||||||
Total cost of revenue | 10,366 | (420 | ) | 9,946 | |||||||
Gross profit | 3,456 | 248 | 3,704 | ||||||||
Operating expenses: | |||||||||||
General and administrative | 3,076 | — | 3,076 | ||||||||
Sales and marketing | 2,578 | 256 | 2,834 | ||||||||
Research and development | 405 | — | 405 | ||||||||
Total operating expenses | 6,059 | 256 | 6,315 | ||||||||
Loss from operations | (2,603 | ) | (8 | ) | (2,611 | ) | |||||
Other income (expense): | |||||||||||
Other income | 19 | — | 19 | ||||||||
Interest expense | (89 | ) | (2 | ) | (91 | ) | |||||
Interest income | 3 | — | 3 | ||||||||
Total other expense | (67 | ) | (2 | ) | (69 | ) | |||||
Loss before income tax | (2,670 | ) | (10 | ) | (2,680 | ) | |||||
Income tax expense | 22 | — | 22 | ||||||||
Net loss | $ | (2,692 | ) | $ | (10 | ) | $ | (2,702 | ) | ||
Basic net loss per share attributable to common shareholders | $ | (0.09 | ) | $ | 0.00 | $ | (0.09 | ) | |||
Weighted-average common shares outstanding | 29,070,193 | — | 29,070,193 | ||||||||
Diluted net loss per share | $ | (0.09 | ) | $ | 0.00 | $ | (0.09 | ) | |||
Weighted-average common shares and share equivalents outstanding | 29,070,193 | — | 29,070,193 |
Three Months Ended June 30, 2018 | |||||||||||
As Reported | Adjustments | Balances without application of ASC 606 | |||||||||
Operating activities | |||||||||||
Net loss | $ | (2,692 | ) | $ | (10 | ) | $ | (2,702 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
Depreciation | 347 | — | 347 | ||||||||
Amortization | 121 | — | 121 | ||||||||
Stock-based compensation | 228 | — | 228 | ||||||||
Provision for inventory reserves | 17 | — | 17 | ||||||||
Provision for bad debts | 82 | — | 82 | ||||||||
Other | 3 | — | 3 | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable, current and long-term | 1,756 | (151 | ) | 1,605 | |||||||
Revenue earned but not billed | 1,300 | (1,300 | ) | — | |||||||
Inventories | (102 | ) | (571 | ) | (673 | ) | |||||
Deferred contract costs | — | 597 | 597 | ||||||||
Prepaid expenses and other assets | 150 | 1,273 | 1,423 | ||||||||
Accounts payable | (575 | ) | 112 | (463 | ) | ||||||
Accrued expenses and other | (553 | ) | 147 | (406 | ) | ||||||
Deferred revenue, current and long-term | (21 | ) | (97 | ) | (118 | ) | |||||
Net cash (used in) provided by operating activities | 61 | — | 61 | ||||||||
Investing activities | |||||||||||
Purchases of property and equipment | (23 | ) | — | (23 | ) | ||||||
Additions to patents and licenses | — | — | — | ||||||||
Proceeds from sales of property, plant and equipment | — | — | — | ||||||||
Net cash used in investing activities | (23 | ) | — | (23 | ) | ||||||
Financing activities | |||||||||||
Payment of long-term debt and capital leases | (19 | ) | — | (19 | ) | ||||||
Proceeds from revolving credit facility | 17,188 | — | 17,188 | ||||||||
Payment of revolving credit facility | (18,794 | ) | — | (18,794 | ) | ||||||
Payments to settle employee tax withholdings on stock-based compensation | (3 | ) | — | (3 | ) | ||||||
Net proceeds from employee equity exercises | 1 | — | 1 | ||||||||
Net cash used in financing activities | (1,627 | ) | — | (1,627 | ) | ||||||
Net decrease in cash and cash equivalents | (1,589 | ) | — | (1,589 | ) | ||||||
Cash and cash equivalents at beginning of period | 9,424 | — | 9,424 | ||||||||
Cash and cash equivalents at end of period | $ | 7,835 | $ | — | $ | 7,835 |
June 30, 2018 | March 31, 2018 | ||||||
Accounts receivable, gross | $ | 7,416 | $ | 8,886 | |||
Allowance for doubtful accounts | (233 | ) | (150 | ) | |||
Accounts receivable, net | $ | 7,183 | $ | 8,736 |
Cost | Reserve | Net | |||||||||
As of June 30, 2018 | |||||||||||
Raw materials and components | $ | 6,922 | $ | (1,335 | ) | $ | 5,587 | ||||
Work in process | 1,053 | (310 | ) | 743 | |||||||
Finished goods | 3,818 | (1,551 | ) | 2,267 | |||||||
Total | $ | 11,793 | $ | (3,196 | ) | $ | 8,597 | ||||
As of March 31, 2018 | |||||||||||
Raw materials and components | $ | 6,073 | $ | (1,363 | ) | $ | 4,710 | ||||
Work in process | 1,190 | (263 | ) | 927 | |||||||
Finished goods | 3,934 | (1,745 | ) | 2,189 | |||||||
Total | $ | 11,197 | $ | (3,371 | ) | $ | 7,826 |
June 30, 2018 | March 31, 2018 | ||||||
Unbilled accounts receivable (1) | $ | — | $ | 1,910 | |||
Other prepaid expenses | 408 | 557 | |||||
Total | $ | 408 | $ | 2,467 |
June 30, 2018 | March 31, 2018 | ||||||
Land and land improvements | $ | 424 | $ | 424 | |||
Buildings and building improvements | 9,245 | 9,245 | |||||
Furniture, fixtures and office equipment | 7,101 | 7,096 | |||||
Leasehold improvements | 324 | 324 | |||||
Equipment leased to customers | 4,997 | 4,997 | |||||
Plant equipment | 11,988 | 12,106 | |||||
34,079 | 34,192 | ||||||
Less: accumulated depreciation and amortization | (21,508 | ) | (21,298 | ) | |||
Property and equipment, net | $ | 12,571 | $ | 12,894 |
June 30, 2018 | March 31, 2018 | ||||||
Equipment | $ | 581 | $ | 581 | |||
Less: accumulated depreciation and amortization | (379 | ) | (344 | ) | |||
Equipment, net | $ | 202 | $ | 237 |
June 30, 2018 | March 31, 2018 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||
Patents | $ | 2,636 | $ | (1,410 | ) | $ | 1,226 | $ | 2,636 | $ | (1,370 | ) | $ | 1,266 | |||||||||
Licenses | 58 | (58 | ) | — | 58 | (58 | ) | — | |||||||||||||||
Trade name and trademarks | 1,005 | — | 1,005 | 1,005 | — | 1,005 | |||||||||||||||||
Customer relationships | 3,600 | (3,366 | ) | 234 | 3,600 | (3,326 | ) | 274 | |||||||||||||||
Developed technology | 900 | (618 | ) | 282 | 900 | (582 | ) | 318 | |||||||||||||||
Non-competition agreements | 100 | (100 | ) | — | 100 | (95 | ) | 5 | |||||||||||||||
Total | $ | 8,299 | $ | (5,552 | ) | $ | 2,747 | $ | 8,299 | $ | (5,431 | ) | $ | 2,868 |
Fiscal 2019 (period remaining) | $ | 322 | |
Fiscal 2020 | 360 | ||
Fiscal 2021 | 285 | ||
Fiscal 2022 | 188 | ||
Fiscal 2023 | 97 | ||
Fiscal 2024 | 93 | ||
Thereafter | 397 | ||
Total | $ | 1,742 |
June 30, 2018 | March 31, 2018 | ||||||
Compensation and benefits | $ | 1,249 | $ | 1,786 | |||
Accrued taxes | 316 | 237 | |||||
Contract costs | 943 | 985 | |||||
Legal and professional fees | 561 | 400 | |||||
Warranty | 365 | 402 | |||||
Sales returns reserve (1) | 156 | — | |||||
Credits due to customers (1) | 996 | — | |||||
Other accruals | 323 | 361 | |||||
Total | $ | 4,909 | $ | 4,171 |
Three Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Beginning of period | $ | 673 | $ | 759 | |||
Reclassification on adoption of ASC 606 | 73 | — | |||||
Provision to product cost of revenue | (22 | ) | 24 | ||||
Charges | (6 | ) | (2 | ) | |||
End of period | $ | 718 | $ | 781 |
Three Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Numerator: | |||||||
Net loss (in thousands) | $ | (2,692 | ) | $ | (6,564 | ) | |
Denominator: | |||||||
Weighted-average common shares outstanding | 29,070,193 | 28,455,434 | |||||
Weighted-average common shares and common share equivalents outstanding | 29,070,193 | 28,455,434 | |||||
Net loss per common share: | |||||||
Basic | $ | (0.09 | ) | $ | (0.23 | ) | |
Diluted | $ | (0.09 | ) | $ | (0.23 | ) |
June 30, 2018 | June 30, 2017 | ||||
Common stock options | 624,667 | 1,442,153 | |||
Restricted shares | 1,523,333 | 1,706,445 | |||
Total | 2,148,000 | 3,148,598 |
June 30, 2018 | March 31, 2018 | ||||||
Revolving credit facility | $ | 2,302 | $ | 3,908 | |||
Equipment lease obligations | 165 | 184 | |||||
Total long-term debt | 2,467 | 4,092 | |||||
Less current maturities | (80 | ) | (79 | ) | |||
Long-term debt, less current maturities | $ | 2,387 | $ | 4,013 |
Three Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cost of product revenue | $ | 1 | $ | 6 | |||
Cost of service revenue | 1 | — | |||||
General and administrative | 205 | 267 | |||||
Sales and marketing | 21 | 41 | |||||
Research and development | — | 6 | |||||
Total | $ | 228 | $ | 320 |
Restricted Shares | Stock Options | |||
Balance at March 31, 2018 | 1,485,799 | 629,667 | ||
Awards granted | 519,000 | — | ||
Awards vested | (453,754 | ) | — | |
Awards forfeited | (27,712 | ) | (5,000 | ) |
Awards outstanding at June 30, 2018 | 1,523,333 | 624,667 | ||
Per share price on grant date | 0.84 | — |
Revenues | Operating Income (Loss) | ||||||||||||||
For the Three Months Ended June 30, | For the Three Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Segments: | |||||||||||||||
Orion Engineered Systems | $ | 3,231 | $ | 5,408 | $ | (1,253 | ) | $ | (1,891 | ) | |||||
Orion Distribution Services | 9,226 | 5,760 | 85 | (741 | ) | ||||||||||
Orion U.S. Markets | 1,365 | 1,390 | (131 | ) | (1,532 | ) | |||||||||
Corporate and Other | — | — | (1,304 | ) | (2,338 | ) | |||||||||
$ | 13,822 | $ | 12,558 | $ | (2,603 | ) | $ | (6,502 | ) |
Three Months Ended June 30, | Three Months Ended June 30, | |||||
2018 | 2017 | |||||
Cost of product revenue | $ | — | $ | 40 | ||
General and administrative | 11 | 1,767 | ||||
Sales and marketing | 17 | 97 | ||||
Total | $ | 28 | $ | 1,904 |
Three Months Ended June 30, | Three Months Ended June 30, | |||||
2018 | 2017 | |||||
Orion Engineered Systems | 5 | — | ||||
Orion Distribution Systems | $ | 12 | $ | 75 | ||
Corporate and Other | 11 | 1,829 | ||||
Total | $ | 28 | $ | 1,904 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Rapidly declining LED component costs and LED product end user customer pricing pressure. |
• | Improving LED product performance and reducing customer return on investment payback periods resulting in increased customer preference for LED lighting products compared to legacy HIF lighting products. |
• | Increasing LED lighting product customer sales compared to decreasing HIF product sales. |
• | A broader and more diverse customer base and market opportunities compared to our historical commercial and industrial facility customers. |
• | Increased importance of highly innovative product designs and features and enhanced product research and development capabilities requiring rapid new product introduction and new methods of product and company differentiation. |
• | Significantly reduced product technology life cycles; significantly shorter product inventory shelf lives and the related increased risk of rapidly occurring product technology obsolescence. |
• | Increased reliance on international component sources. |
• | Less internal product fabrication and production capabilities needed to support LED product assembly. |
• | Different and broader types of components, fabrication and assembly processes needed to support LED product assembly compared to our legacy products. |
• | Expanding customer bases and sales channels. |
• | Significantly longer end user product warranty requirements for LED products compared to our legacy products. |
Three Months Ended June 30, | Three Months Ended June 30, | |||||
2018 | 2017 | |||||
Cost of product revenue | $ | — | $ | 40 | ||
General and administrative | 11 | 1,767 | ||||
Sales and marketing | 17 | 97 | ||||
Total | $ | 28 | $ | 1,904 |
Three Months Ended June 30, | Three Months Ended June 30, | |||||
2018 | 2017 | |||||
Orion Engineered Systems | 5 | — | ||||
Orion Distribution Systems | $ | 12 | $ | 75 | ||
Corporate and Other | 11 | 1,829 | ||||
Total | $ | 28 | $ | 1,904 |
• | LED adoption continues to grow in all sectors; |
• | Commercial and industrial sentiment remains strong; |
• | Utility incentives continue to be available; |
• | Capital spending is increasing; |
• | Business profits are increasing; and |
• | Consumer spending remains strong. |
Three Months Ended June 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Amount | Amount | % Change | % of Revenue | % of Revenue | ||||||||||||
Product revenue | $ | 12,808 | $ | 11,781 | 8.7 | % | 92.7 | % | 93.8 | % | ||||||
Service revenue | 1,014 | 777 | 30.5 | % | 7.3 | % | 6.2 | % | ||||||||
Total revenue | 13,822 | 12,558 | 10.1 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of product revenue | 9,724 | 8,813 | 10.3 | % | 70.4 | % | 70.2 | % | ||||||||
Cost of service revenue | 642 | 1,034 | (37.9 | )% | 4.6 | % | 8.2 | % | ||||||||
Total cost of revenue | 10,366 | 9,847 | 5.3 | % | 75.0 | % | 78.4 | % | ||||||||
Gross profit | 3,456 | 2,711 | 27.5 | % | 25.0 | % | 21.6 | % | ||||||||
General and administrative expenses | 3,076 | 5,335 | (42.3 | )% | 22.3 | % | 42.5 | % | ||||||||
Sales and marketing expenses | 2,578 | 3,354 | (23.1 | )% | 18.6 | % | 26.7 | % | ||||||||
Research and development expenses | 405 | 524 | (22.7 | )% | 2.9 | % | 4.2 | % | ||||||||
Loss from operations | (2,603 | ) | (6,502 | ) | 60.0 | % | (18.8 | )% | (51.8 | )% | ||||||
Other income | 19 | — | NM | 0.1 | % | — | % | |||||||||
Interest expense | (89 | ) | (67 | ) | 32.8 | % | (0.6 | )% | (0.5 | )% | ||||||
Interest income | 3 | 5 | (40.0 | )% | — | % | — | % | ||||||||
Loss before income tax | (2,670 | ) | (6,564 | ) | 59.3 | % | (19.3 | )% | (52.3 | )% | ||||||
Income tax expense | 22 | — | NM | 0.2 | % | — | % | |||||||||
Net loss | $ | (2,692 | ) | $ | (6,564 | ) | 59.0 | % | (19.5 | )% | (52.3 | )% |
For the Three Months Ended June 30, | ||||||||||
2018 | 2017 | % Change | ||||||||
Revenues | $ | 3,231 | $ | 5,408 | (40.3 | )% | ||||
Operating loss | $ | (1,253 | ) | $ | (1,891 | ) | NM | |||
Operating margin | (38.8 | )% | (35.0 | )% |
For the Three Months Ended June 30, | ||||||||||
2018 | 2017 | % Change | ||||||||
Revenues | $ | 9,226 | $ | 5,760 | 60.2 | % | ||||
Operating income (loss) | 85 | (741 | ) | NM | ||||||
Operating margin | 0.9 | % | (12.9 | )% |
For the Three Months Ended June 30, | ||||||||||
2018 | 2017 | % Change | ||||||||
Revenues | $ | 1,365 | $ | 1,390 | (1.8 | )% | ||||
Operating loss | $ | (131 | ) | $ | (1,532 | ) | NM | |||
Operating margin | (9.6 | )% | (110.2 | )% |
Three Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Operating activities | $ | 61 | $ | (5,755 | ) | ||
Investing activities | (23 | ) | (224 | ) | |||
Financing activities | (1,627 | ) | (2,843 | ) | |||
Decrease in cash and cash equivalents | $ | (1,589 | ) | $ | (8,822 | ) |
ITEM 4. | CONTROLS AND PROCEDURES |
i. | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
ii. | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
iii. | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
• | Information & Communication. We determined that our controls pertaining to information and communication did not operate effectively, resulting in a material weakness pertaining to these COSO components. Specifically, we did not have sufficient communication of the status and evolution of a project to ensure timely and accurate recognition of project costs. In addition, we did not have sufficient communication and resolution of matters identified through management’s review impacting the accounting close as noted in the Control Activities discussion below. |
• | Control Activities - Accounting Close. The operating effectiveness of our controls were inadequate related to management review controls over the accounting close process and forecasts used to support certain fair value estimates. Specifically, we did not have an accurate forecast that impacted our assessment of triggering events and potential impairment. In addition, matters identified through management review controls were not brought to a timely resolution. |
• | Ensure a thorough understanding of the current state, process owners, and procedural or technological gaps causing the deficiency; |
• | Design a remediation action for the forecasting process, to ensure supportable and accurate forecast data are gathered, analyzed and reviewed on a timely basis; |
• | Implement specific remediation actions: train process owners, allow time for process adoption and adequate transaction volume for next steps; |
• | Test and measure the design and effectiveness of the remediation actions; test and provide feedback on the design and operating effectiveness of the controls, and: |
• | Review and acceptance of completion of the remediation effort by executive management and the Audit & Finance Committee. |
• | Developed a forecast review process performed by the accounting department to confirm accuracy, completeness and reliability of forecast data. |
• | Improved the process to evaluate potential triggering events and impairment, including a more formal review of the forecast and enhanced documentation of the analysis and conclusion. |
• | Designed improved procedures and controls for project cost accounting, including enhanced communication and tracking of project costs. |
• | Implemented controls related to inventory valuation, accounting close, tax, revenue and project cost accounting, but further testing is required to confirm operating effectiveness. |
• | Continue to formalize and strengthen management review controls and timeliness of execution as they pertain to the accounting close. |
• | Update policies and procedures for process and control changes and provide additional training to key personnel. |
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 |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101.INS | XBRL Instance Document |
101.SCH | Taxonomy extension schema document |
101.CAL | Taxonomy extension calculation linkbase document |
101.LAB | Taxonomy extension label linkbase document |
101.PRE | Taxonomy extension presentation linkbase document |
+ | Filed herewith |
ORION ENERGY SYSTEMS, INC. Registrant | ||
By | /s/ William T. Hull | |
William T. Hull | ||
Chief Financial Officer | ||
(Principal Financial Officer and Authorized Signatory) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Orion Energy Systems, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Michael W. Altschaefl |
Michael W. Altschaefl |
Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Orion Energy Systems, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ William T. Hull |
William T. Hull |
Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 7, 2018 |
/s/ Michael W. Altschaefl | |
Michael W. Altschaefl | |
Chief Executive Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 7, 2018 |
/s/ William T. Hull | |
William T. Hull | |
Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jul. 31, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ORION ENERGY SYSTEMS, INC. | |
Entity Central Index Key | 0001409375 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 29,421,892 |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 30,000,000 | 30,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (usd per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, shares issued (in shares) | 38,838,329 | 38,384,575 |
Common stock, shares outstanding (in shares) | 29,403,485 | 28,953,183 |
Treasury stock (in shares) | 9,434,844 | 9,431,392 |
DESCRIPTION OF BUSINESS |
3 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | 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 leases office space in Jacksonville, Florida. Orion had leased office space in Chicago, Illinois, and Houston, Texas, but as of June 30, 2018, Orion had vacated these locations. Orion also leases warehouse space in Manitowoc, Wisconsin. During fiscal 2018, Orion had leased warehouse space in Augusta, Georgia, but as of March 31, 2018, Orion had vacated this storage location. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
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Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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. 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, 2019 or other interim periods. The Condensed Consolidated Balance Sheet at March 31, 2018 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, 2018 filed with the Securities and Exchange Commission on June 13, 2018. 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, 2018, one supplier accounted for 11.4% of total cost of revenue. For the three months ended June 30, 2017, no supplier accounted for more than 10% of total cost of revenue. For the three months ended June 30, 2018, no customer accounted for more than 10.0% of total revenue. For the three months ended June 30, 2017, one customer accounted for 16.2% of total revenue. As of June 30, 2018, no customer accounted for more than 10% of Accounts receivable. As of March 31, 2018, one customer accounted for 13.2% of Accounts receivable. Recent Accounting Pronouncements Issued: Not Yet Adopted In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "Leases" (Subtopic 842). The pronouncement, and subsequent amendments, which is included in the Accounting Standards Codification as Subtopic 842 (“ASC 842”), requires that lessees recognize right-of-use assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and disclose additional quantitative and qualitative information about leasing arrangements. Under ASU 842, leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as sales-type, finance or operating leases, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards, as well as substantive control, have been transferred through the lease contract. ASU 842 also provides guidance on the presentation of the effects of leases in the income statement and statement of cash flows. This guidance will be effective for Orion on April 1, 2019. Early adoption of the standard is permitted and a modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Orion has not yet completed its review of the full provisions of this standard against its outstanding lease arrangements and is in the process of quantifying the lease liability and related right of use asset which will be recorded to its consolidated balance sheets upon adoption of the standard. In addition, management continues to assess the impact of adoption of this standard on its consolidated statements of operations, cash flows, and the related footnote disclosures. Recently Adopted Standards On April 1, 2018, Orion adopted ASU 2014-09 and subsequent amendments, which is included in the Accounting Standards Codification as "Revenue from Contracts with Customers" (Topic 606) (“ASC 606”) and Sub-Topic 340-40 (“ASC 340-40”), using the modified retrospective approach. ASC 606 supersedes the revenue recognition requirements in “Revenue Recognition” (Topic 605) ("ASC 605") and provides guidance on the accounting for other assets and deferred costs associated with contracts with customers. ASC 606 requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASC 340-40 limits the circumstances that an entity can recognize an asset from the costs incurred to obtain or fulfill a contract that are not subject to the guidance in other portions in the Accounting Standards Codification, such as those related to inventory. The provisions of ASC 606 and ASC 340-40 require entities to use more judgments and estimates than under previous guidance when allocating the total consideration in a contract to the individual promises to customers (“performance obligations”) and determining when a performance obligation has been satisfied and revenue can be recognized. The adoption of ASC 606 did not have a material effect on Orion's financial statements. Orion has updated its processes and controls necessary for implementing this standard, including the increased disclosure requirements. In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments," which provided clarification and additional guidance as to the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU provided guidance as to the classification of a number of transactions including: contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. The new standard was effective for Orion in the first quarter of fiscal 2019 and has been applied through retrospective adjustment to all periods presented. The adoption of this standard did not have a material impact on Orion’s consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting” which provides guidance about which changes to the terms or conditions of a share-based payment award would require an entity to apply modification accounting. The provisions of this standard were effective for Orion beginning on April 1, 2018. The adoption of this standard did not have a material impact on Orion’s consolidated financial statements. |
REVENUE (Notes) |
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REVENUE | REVENUE Changes in Accounting Policies Orion adopted ASC 606 and ASC 340-40 (the “new standards”) as of April 1, 2018 for contracts with customers that were not fully complete as of April 1, 2018 using the modified retrospective transition method. The cumulative effect of initially applying the new standards was recorded as an immaterial adjustment to the opening balance of retained deficit within Orion’s condensed consolidated statement of shareholders’ equity. The new standards are applied separately for each contract between Orion and a customer. While the impact of the new standards vary for each contract based on its specific terms, in general, the new standards result in Orion (a) delaying the recognition of some of its Product revenue from the point of shipment until a later date during the installation period, (b) recording Service revenue associated with installing lighting fixtures as such fixtures are installed instead of recording all Services revenue at the completion of the installation, and (c) recording costs associated with installing lighting fixtures as they are incurred instead of deferring such costs and recognizing them at the time Service revenue was recorded. The adoption of the new standards also resulted in reclassifications (a) between Product revenue and Service revenue, and between Cost of service revenue, and Sales and marketing expenses in Orion’s Condensed Consolidated Statement of Operations, and (b) between Accounts receivable, net, Revenue earned but not billed, Inventories, net, Deferred contract costs, Prepaid expenses and other current assets, Accounts payable, Accrued expenses and other, Deferred revenue, current, Deferred revenue, long-term, and Other long-term liabilities in Orion’s Condensed Consolidated Balance Sheet. For all adjustments and changes as a result of adopting the new standards for the current period, refer to the section “Impacts on Financial Statements” below. In accordance with the modified retrospective transition method, the historical information within the financial statements has not been restated and continues to be reported under the accounting standard in effect for those periods. As a result, Orion has disclosed the accounting policies in effect prior to April 1, 2018, as well as the policies applied starting April 1, 2018. Revenue Recognition Periods prior to April 1, 2018 Revenue is recognized in accordance with ASC 605 when the following criteria are met:
Revenue is recorded net of estimated provisions for returns, early payment discounts and rebates and other consideration paid to Orion’s customers. Revenues are presented net of sales tax and other sales related taxes. Deferred contract costs consist primarily of the costs of products delivered, and services performed, that are subject to additional performance obligations or customer acceptance. These Deferred contract costs are expensed at the time the related revenue is recognized. Deferred revenue relates to advance customer billings and investment tax grants received related to Power Purchase Agreement contracts still outstanding related to Orion’s legacy solar business. Period Commencing April 1, 2018 General Information Orion generates revenues primarily by selling commercial lighting fixtures and components and by installing these fixtures in its customer’s facilities. 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 single 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 a 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 lighting fixtures and components is classified as Product revenue in the Condensed Consolidated Statements of Operations. The revenue for these transactions are 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 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 factors including, but not limited to, those detailed below:
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 completely installed as of the measurement date in comparison to the total number of light fixtures to be 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. 2018. Orion also records revenue in conjunction with several limited Power Purchase Agreement (“PPA”) contracts still outstanding. Those PPA’s outstanding are supply side agreements for the generation of electricity. The last PPA contact expires in 2031. Revenue associated with the sale of energy generated by the solar facilities under these PPA contracts is in 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 contract 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 PPA contracts; 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 9, Accrued Expenses and Other for 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 5, Inventories, Net. Costs associated with installation sales are expensed as incurred. 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, 2018, Product revenue included $0.7 million derived from sales-type leases for light fixtures, $30,875 derived from the sale of tax credits generated from Orion’s legacy operation for distributing solar energy, and $18,889 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) the federal government, and (b) commercial or industrial companies. 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. 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 therefore are included within each of Orion’s segments, dependent on the sales channel. See Footnote 17, Segments, for additional discussion concerning Orion’s reportable segments. The following table provides detail of Orion’s total revenues for the three months ended June 30, 2018 (dollars in thousands):
Cash Flow Considerations Customer payments for material only orders are due shortly after shipment. 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. Turnkey projects where the end user is a commercial or industrial company typically spans between two weeks and 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. 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 ASC 840, "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, 2018 are included in Accounts receivable,net in Orion’s Condensed Consolidated Balance Sheet. The remaining amounts due that are associated with these transactions are included in Other long-term assets in Orion’s Condensed Consolidated Balance Sheet. 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 the caption Revenues earned but not billed on Orion’s Condensed Consolidated Balance sheet 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, 2018 was $2.0 million. Orion’s losses on these sales aggregated $54,046 and is 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 of 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 has also adopted the practical expedient that provides an exemption of the disclosure requirement of the value assigned to performance obligations associated with contracts that were not complete as of April 1, 2018. 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. 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 April 1, 2018 and June 30, 2018 includes $0.6 million and $0.1 million, respectively, which was not derived from contracts with customers and therefore not classified as a contract asset as defined by the new standards. Deferred revenue, current includes $13,425 of contract liabilities which represents 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 the new standards. The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of April 1, 2018, after the adoption of the new standards, and as of June 30, 2018 (dollars in thousands).
There were no significant changes in the contract assets outside of standard reclassifications to Accounts receivable, net upon billing. There were no changes to contract liabilities. Impact on Financial Statements ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts)
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
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ACCOUNTS RECEIVABLE, NET |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTS RECEIVABLE, NET | ACCOUNTS RECEIVABLE, NET As of June 30, 2018 and March 31, 2018, Orion's Accounts receivable and Allowance for doubtful accounts balances were as follows (dollars in thousands):
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INVENTORIES, NET |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES, NET | INVENTORIES, NET As of June 30, 2018, and March 31, 2018, Orion's Inventory balances were as follows (dollars in thousands):
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | PREPAID EXPENSES AND OTHER CURRENT ASSETS As of June 30, 2018, and March 31, 2018, Prepaid expenses and other current assets include the following (dollars in thousands):
(1) As of April 1, 2018, in conjunction with the adoption of ASC 606, the balance of unbilled Accounts receivable is included in Revenue earned but not billed on the balance sheet. |
PROPERTY AND EQUIPMENT, NET |
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PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET As of June 30, 2018, and March 31, 2018, Property and equipment, net include the following (dollars in thousands):
Equipment included above under capital leases was as follows (dollars in thousands):
Orion recorded depreciation expense of $0.3 and $0.4 million for the three months ended June 30, 2018 and 2017, respectively. |
INTANGIBLE ASSETS, NET |
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INTANIGBLE ASSETS, NET | OTHER INTANGIBLE ASSETS, NET As of June 30, 2018, and March 31, 2018, the components of, and changes in, the carrying amount of Other intangible assets, net were as follows (dollars in thousands):
Amortization expense on intangible assets was $0.1 and $0.2 million for the three months ended June 30, 2018 and 2017, respectively. As of June 30, 2018, the weighted average remaining useful life of intangible assets was 5.4 years. The estimated amortization expense for the remainder of fiscal 2019, the next five fiscal years and beyond is shown below (dollars in thousands):
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ACCRUED EXPENSES AND OTHER |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES AND OTHER | ACCRUED EXPENSES AND OTHER As of June 30, 2018, and March 31, 2018, Accrued expenses and other include the following (dollars in thousands):
(1)Sales returns reserve was previously classified in Accounts receivable, net and Credits due to customers was previously classified in Accounts payable. As of April 1, 2018, in conjunction with the adoption of ASC 606, these balances are included in Accrued expenses and other on the Condensed Consolidated Balance Sheet. Orion generally offers a limited warranty of one to ten years on its lighting products including the pass through of standard warranties offered by major original equipment component manufacturers. The manufacturers’ warranties cover lamps, ballasts, LED modules, LED chips, LED drivers, control devices, and other fixture related items, which are significant components in Orion's lighting products. Changes in Orion’s warranty accrual (both current and long-term) were as follows (dollars in thousands):
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NET LOSS PER COMMON SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET LOSS PER COMMON SHARE | NET LOSS PER COMMON SHARE Basic net loss per common share is computed by dividing Basic net loss attributable to common shareholders by the Weighted-average number of common shares outstanding for the period and does not consider common stock equivalents. For the three months ended June 30, 2018 and 2017, Orion was in a net loss position; therefore, the basic and diluted weighted average shares outstanding are equal because any increase to the basic shares would be anti-dilutive. Basic and Diluted net loss per common share is calculated based upon the following:
The following table indicates the number of potentially dilutive securities excluded from the calculation of Diluted net loss per common share because their inclusion would have been anti-dilutive. The number of shares are as of the end of each period:
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RELATED PARTY TRANSACTIONS |
3 Months Ended |
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Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS During the three months ended June 30, 2018 and 2017, Orion did not have any related party transactions. |
LONG-TERM DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT | LONG-TERM DEBT Long-term debt consisted of the following (dollars in thousands):
Revolving Credit Agreement Orion has an amended credit agreement ("Credit Agreement") that provides for a revolving credit facility ("Credit Facility") subject to a borrowing base requirement based on eligible receivables and inventory. As of June 30, 2018, Orion's borrowing base was approximately $2.5 million. The Credit Facility has a maturity date of February 6, 2021, and includes a $2.0 million sublimit for the issuance of letters of credit. As of June 30, 2018, Orion had no outstanding letters of credit. Borrowings outstanding as of June 30, 2018, amounted to approximately $2.3 million and are included in non-current liabilities in the accompanying Condensed Consolidated Balance Sheet. Orion estimates that as of June 30, 2018, it was eligible to borrow an additional $0.2 million under the Credit Facility based upon current levels of eligible Inventory and Accounts receivable. Subject in each case to Orion's applicable borrowing base limitations, the Credit Agreement otherwise provides for a $15.0 million Credit Facility. This limit may increase to $20.0 million based on a borrowing base requirement, if Orion satisfies certain conditions. Orion did not meet the requirements to increase the borrowing limit to $20.0 million as of July 31, 2017, the most recent measurement date. From and after any increase in the Credit Facility limit from $15.0 million to $20.0 million, the Credit Agreement requires that Orion maintain, as of the end of each month, a minimum ratio for the trailing twelve-month period of (i) earnings before interest, taxes, depreciation and amortization, subject to certain adjustments, to (ii) the sum of cash interest expense, certain principal payments on indebtedness and certain dividends, distributions and stock redemptions, equal to at least 1.10 to 1.00. The Credit Agreement contains additional customary covenants, including certain restrictions on Orion’s ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, guarantee obligations of third parties, make loans or advances, declare or pay any dividend or distribution on Orion’s stock, redeem or repurchase shares of Orion’s stock, or pledge or dispose of assets. Orion was in compliance with its covenants in the Credit Agreement as of June 30, 2018. Each subsidiary of Orion is a joint and several co-borrower or guarantor under the Credit Agreement, and the Credit Agreement is secured by a security interest in substantially all of Orion’s and each subsidiary’s personal property (excluding various assets relating to customer Orion Throughput Agreements ("OTAs") and a mortgage on certain real property. Borrowings under the Credit Agreement bear interest at the daily three-month LIBOR plus 3.0% per annum, with a minimum interest charge for each year or portion of a year during the term of the Credit Agreement of $0.1 million, regardless of usage. As of June 30, 2018, the interest rate was 5.34%. Orion must pay an unused line fee of 0.25% per annum of the daily average unused amount of the Credit Facility and a letter of credit fee at the rate of 3.0% per annum on the undrawn amount of letters of credit outstanding from time to time under the Credit Facility. Equipment Lease Obligations In June 2015, Orion entered into a lease agreement with a financing company in the principal amount of $0.4 million to fund certain equipment. The lease is secured by the related equipment. The lease bears interest at a rate of 3.6%, and matures in June 2020. The lease contains a one dollar buyout option. Customer Equipment Finance Notes Payable In December 2014, Orion entered into a secured borrowing agreement with a financing company in the principal amount of $0.4 million to fund completed customer contracts under its OTA finance program that were previously funded under a different OTA credit agreement. The loan amount was secured by the OTA-related equipment and the expected future monthly payments under the supporting 25 individual OTA customer contracts. The borrowing agreement bore an interest rate of 8.36% and matured in April 2018. Other Long-Term Debt In September 2010, Orion entered into a note agreement with the Wisconsin Department of Commerce that provided Orion with $0.3 million to fund Orion’s rooftop solar project at its Manitowoc facility. This note is included in the table above as Other long-term debt. The note was collateralized by the related solar equipment. The note allowed for two years without interest accruing or principal payments due. Beginning in July 2012, the note bore an interest of 2% and required monthly payments of $4,600. The note matured in June 2017 and was paid in full upon maturity. |
INCOME TAXES |
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Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The income tax provision was determined by applying an estimated annual effective tax rate based upon the facts and circumstances known to book loss before income tax, adjusting for discrete items. The actual effective tax rate is adjusted each interim period, as appropriate, for changes in facts and circumstances. For the three-month period ended June 30, 2018 and 2017, Orion recorded income tax expense of $22,000 and $0, respectively, using this methodology. As of June 30, 2018, and March 31, 2018, Orion had a full valuation allowance recorded against its deferred tax assets. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event that Orion determines that the deferred tax assets are able to be realized, an adjustment to the deferred tax asset would increase income in the period such determination is made. Orion continues to evaluate the impact of the Tax Cut and Jobs Act ("Act") enacted December 22, 2017. The Act significantly changes U.S tax law by, among other things, reducing the U.S. federal corporate tax rate from 35% to 21%, imposing a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creating new taxes on certain foreign sourced earnings. During fiscal 2018, Orion recognized a provisional reduction to its deferred tax assets of $9.9 million related to the Act. Substantially all of this decrease was offset by a corresponding decrease to the valuation allowance. The Company also provisionally estimated there will be no transition tax. As of June 30, 2018, Orion has not adjusted its provisional estimates. Because Orion remains in a loss position and has a full valuation allowance, Orion does not anticipate an impact to the income statement if there is a change to these provisional estimates. Uncertain Tax Positions As of June 30, 2018, the balance of gross unrecognized tax benefits was approximately $0.1 million, all of which would reduce Orion’s effective tax rate if recognized. Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as Other long-term liabilities to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in Income tax expense. Penalties and interest are included in the unrecognized tax benefits. |
COMMITMENTS AND CONTINGENCIES |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Operating Leases Orion leases office space and equipment under operating leases expiring at various dates through 2020. Rent expense under operating leases was $0.2 million for the three months ended June 30, 2018 and 2017, respectively. Litigation Orion is subject to various claims and legal proceedings arising in the ordinary course of business. As of the date of this report, Orion is unable to currently assess whether the final resolution of any of such claims or legal proceedings may have a material adverse effect on our future results of operations. In addition to ordinary-course litigation, Orion was a party to the proceedings described below. On March 27, 2014, Orion was named as a defendant in a civil lawsuit filed by Neal R. Verfuerth, a former chief executive officer who left the Company in November 2012, in the United States District Court for the Eastern District of Wisconsin (Green Bay Division). The plaintiff alleged, among other things, that Orion breached certain agreements entered into with the plaintiff, including the plaintiff’s employment agreement, and violated certain laws. The complaint sought, among other relief, unspecified pecuniary and compensatory damages, fees and such other relief as the court may deem just and proper. On January 11, 2018, a three judge panel of the United States Court of Appeals Seventh Circuit unanimously affirmed the dismissal of all of the plaintiff’s claims against Orion. On November 10, 2017, a purported shareholder, Stephen Narten, filed a civil lawsuit in the Circuit Court for Manitowoc County against those individuals who served on Orion's Board of Directors during fiscal years 2015, 2016, and 2017 and certain current and former officers during the same period. The plaintiff, who purports to bring the suit derivatively on behalf of Orion, alleged that the director defendants breached their fiduciary duties in connection with granting certain stock-based incentive awards under Orion's 2004 Stock and Incentive Awards Plan and that the directors and current and former officers breached their fiduciary duties by accepting those awards. During the first quarter of fiscal 2019, the parties reached a settlement of the claims and the case was dismissed. The settlement did not have a material impact on Orion's results of operations or financial condition. State Tax Assessment During fiscal year 2018, Orion was notified of a pending sales and use tax audit by the Wisconsin Department of Revenue for the period covering April 1, 2013 through March 31, 2017. Although the final resolution of the Company’s sales and use tax audit is uncertain, based on current information, in the opinion of the Company’s management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated balance sheet, statements of operations, or liquidity. During fiscal year 2019, Orion was notified of a pending sales and use tax audit by the California Department of Tax and Fee Administration for the period covering April 1, 2015 through March 31, 2018. Although the final resolution of the Company’s sales and use tax audit is uncertain, based on current information, in the opinion of the Company’s management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated balance sheet, statements of operations, or liquidity. |
SHAREHOLDERS’ EQUITY |
3 Months Ended |
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Jun. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
SHAREHOLDERS' EQUITY | SHAREHOLDERS’ EQUITY Employee Stock Purchase Plan In August 2010, Orion’s board of directors approved a non-compensatory employee stock purchase plan, or ESPP. In the three months ended June 30, 2018, Orion issued 886 shares under the ESPP plan at a closing market price of $1.10. In prior years, Orion issued loans to non-executive employees to purchase shares of its stock. The loan program has been discontinued and new loans are no longer issued. As of March 31, 2017, four thousand dollars of such loans remained outstanding and were reflected on Orion’s balance sheet as a contra-equity account. During the nine months ended December 31, 2017, Orion entered into agreements with the counterparties to these loans. In exchange for the forgiveness of their outstanding loan balance, the employees returned their shares to Orion. As a result of these transactions, 1,230 shares were recorded within treasury stock and the loan balances were eliminated. |
STOCK OPTIONS AND RESTRICTED SHARES |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK OPTIONS AND RESTRICTED SHARES | STOCK OPTIONS AND RESTRICTED SHARES At Orion's 2016 Annual Meeting of Shareholders held on August 3, 2016, Orion's shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan (the "Plan"). The Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Plan may consist of stock options, stock appreciation rights, performance shares, performance units, common stock, restricted stock, restricted stock units, incentive awards or dividend equivalent units. Prior to shareholder approval of the Plan, the Company maintained its 2004 Stock and Incentive Awards Plan, as amended, which authorized the grant of cash and equity awards to employees (the “Former Plan”). No new awards are being granted under the Former Plan; however, all awards granted under the Former Plan that were outstanding as of August 3, 2016 will continue to be governed by the Former Plan. Forfeited awards originally issued under the Former Plan are canceled and are not available for subsequent issuance under the Plan. Certain non-employee directors have elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program. The Plan and the Former Plan also permit accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances. The following amounts of stock-based compensation were recorded (dollars in thousands):
During the first three months of fiscal 2019, Orion had the following activity related to its stock-based compensation:
As of June 30, 2018, the amount of deferred stock-based compensation expense to be recognized, over a remaining period of 2.1 years, was approximately $1.4 million. |
SEGMENTS |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENTS | SEGMENTS Orion has the following business segments: Orion Engineered Services Division ("OES"), Orion Distribution Services Division ("ODS"), and Orion U.S. Markets Division ("USM"). The accounting policies are the same for each business segment as they are on a consolidated basis. Orion Engineered Systems Division ("OES") The OES segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. OES provides turnkey solutions for large national accounts, governments, municipalities and schools. Orion Distribution Services Division ("ODS") The ODS segment focuses on selling lighting products through manufacturer representative agencies and a network of broadline North American distributors. Orion U.S. Markets Division ("USM") The USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include ESCOs and electrical contractors. Corporate and Other Corporate and Other is comprised of operating expenses not directly allocated to Orion’s segments and adjustments to reconcile to consolidated results (dollars in thousands).
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REORGANIZATION OF BUSINESS |
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REORGANIZATION OF BUSINESS | REORGANIZATION OF BUSINESS During fiscal 2018, Orion executed on a cost reduction plan by entering into separation agreements with multiple employees. Orion's restructuring expense for the three months ended June 30, 2018 and 2017 is reflected within its Condensed Consolidated Statements of Operations as follows (dollars in thousands):
Total restructuring expense by segment was recorded as follows (dollars in thousands):
Cash payments for employee separation costs in connection with the reorganization of business plans were $0.1 million and $1.3 million in the three months ended June 30, 2018, and June 30, 2017, respectively. The remaining restructuring cost accruals as of June 30, 2018 were $0.2 million, which represents post-retirement medical benefits for one former employee which will be paid over several years. |
SUBSEQUENT EVENTS |
3 Months Ended |
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Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and noted no subsequent event requiring accrual or disclosure. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended |
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Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | 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 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. 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, 2019 or other interim periods. The Condensed Consolidated Balance Sheet at March 31, 2018 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 |
Use of Estimates | 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 | 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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Issued: Not Yet Adopted In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "Leases" (Subtopic 842). The pronouncement, and subsequent amendments, which is included in the Accounting Standards Codification as Subtopic 842 (“ASC 842”), requires that lessees recognize right-of-use assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and disclose additional quantitative and qualitative information about leasing arrangements. Under ASU 842, leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. Similarly, lessors will be required to classify leases as sales-type, finance or operating leases, with classification affecting the pattern of income recognition. Classification for both lessees and lessors will be based on an assessment of whether risks and rewards, as well as substantive control, have been transferred through the lease contract. ASU 842 also provides guidance on the presentation of the effects of leases in the income statement and statement of cash flows. This guidance will be effective for Orion on April 1, 2019. Early adoption of the standard is permitted and a modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Orion has not yet completed its review of the full provisions of this standard against its outstanding lease arrangements and is in the process of quantifying the lease liability and related right of use asset which will be recorded to its consolidated balance sheets upon adoption of the standard. In addition, management continues to assess the impact of adoption of this standard on its consolidated statements of operations, cash flows, and the related footnote disclosures. Recently Adopted Standards On April 1, 2018, Orion adopted ASU 2014-09 and subsequent amendments, which is included in the Accounting Standards Codification as "Revenue from Contracts with Customers" (Topic 606) (“ASC 606”) and Sub-Topic 340-40 (“ASC 340-40”), using the modified retrospective approach. ASC 606 supersedes the revenue recognition requirements in “Revenue Recognition” (Topic 605) ("ASC 605") and provides guidance on the accounting for other assets and deferred costs associated with contracts with customers. ASC 606 requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASC 340-40 limits the circumstances that an entity can recognize an asset from the costs incurred to obtain or fulfill a contract that are not subject to the guidance in other portions in the Accounting Standards Codification, such as those related to inventory. The provisions of ASC 606 and ASC 340-40 require entities to use more judgments and estimates than under previous guidance when allocating the total consideration in a contract to the individual promises to customers (“performance obligations”) and determining when a performance obligation has been satisfied and revenue can be recognized. The adoption of ASC 606 did not have a material effect on Orion's financial statements. Orion has updated its processes and controls necessary for implementing this standard, including the increased disclosure requirements. In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments," which provided clarification and additional guidance as to the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This ASU provided guidance as to the classification of a number of transactions including: contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investees. The new standard was effective for Orion in the first quarter of fiscal 2019 and has been applied through retrospective adjustment to all periods presented. The adoption of this standard did not have a material impact on Orion’s consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting” which provides guidance about which changes to the terms or conditions of a share-based payment award would require an entity to apply modification accounting. The provisions of this standard were effective for Orion beginning on April 1, 2018. The adoption of this standard did not have a material impact on Orion’s consolidated financial statements. |
REVENUE (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table provides detail of Orion’s total revenues for the three months ended June 30, 2018 (dollars in thousands):
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Summary of Contract Assets and Liabilities | The following chart shows the balance of Orion’s receivables arising from contracts with customers, contract assets and contract liabilities as of April 1, 2018, after the adoption of the new standards, and as of June 30, 2018 (dollars in thousands).
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Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] |
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts)
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
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ACCOUNTS RECEIVABLE, NET (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable and allowance for doubtful accounts balances | As of June 30, 2018 and March 31, 2018, Orion's Accounts receivable and Allowance for doubtful accounts balances were as follows (dollars in thousands):
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INVENTORIES, NET (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | As of June 30, 2018, and March 31, 2018, Orion's Inventory balances were as follows (dollars in thousands):
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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | As of June 30, 2018, and March 31, 2018, Prepaid expenses and other current assets include the following (dollars in thousands):
(1) As of April 1, 2018, in conjunction with the adoption of ASC 606, the balance of unbilled Accounts receivable is included in Revenue earned but not billed on the balance sheet. |
PROPERTY AND EQUIPMENT, NET (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | As of June 30, 2018, and March 31, 2018, Property and equipment, net include the following (dollars in thousands):
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Schedule of equipment under capital leases | Equipment included above under capital leases was as follows (dollars in thousands):
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INTANGIBLE ASSETS, NET (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of other intangible assets | As of June 30, 2018, and March 31, 2018, the components of, and changes in, the carrying amount of Other intangible assets, net were as follows (dollars in thousands):
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Estimated amortization expense for each of the next five years | The estimated amortization expense for the remainder of fiscal 2019, the next five fiscal years and beyond is shown below (dollars in thousands):
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ACCRUED EXPENSES AND OTHER (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses and other | As of June 30, 2018, and March 31, 2018, Accrued expenses and other include the following (dollars in thousands):
(1)Sales returns reserve was previously classified in Accounts receivable, net and Credits due to customers was previously classified in Accounts payable. As of April 1, 2018, in conjunction with the adoption of ASC 606, these balances are included in Accrued expenses and other on the Condensed Consolidated Balance Sheet. |
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Changes in warranty accrual | Changes in Orion’s warranty accrual (both current and long-term) were as follows (dollars in thousands):
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NET LOSS PER COMMON SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the effect of net income per common share | For the three months ended June 30, 2018 and 2017, Orion was in a net loss position; therefore, the basic and diluted weighted average shares outstanding are equal because any increase to the basic shares would be anti-dilutive. Basic and Diluted net loss per common share is calculated based upon the following:
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Number of potentially dilutive securities | The following table indicates the number of potentially dilutive securities excluded from the calculation of Diluted net loss per common share because their inclusion would have been anti-dilutive. The number of shares are as of the end of each period:
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LONG-TERM DEBT (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt | Long-term debt consisted of the following (dollars in thousands):
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STOCK OPTIONS AND RESTRICTED SHARES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | The following amounts of stock-based compensation were recorded (dollars in thousands):
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Summary of outstanding non-vested stock options | During the first three months of fiscal 2019, Orion had the following activity related to its stock-based compensation:
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Summary of restricted shares granted | During the first three months of fiscal 2019, Orion had the following activity related to its stock-based compensation:
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SEGMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment reporting information | Corporate and Other is comprised of operating expenses not directly allocated to Orion’s segments and adjustments to reconcile to consolidated results (dollars in thousands).
|
REORGANIZATION OF BUSINESS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Costs | restructuring expense for the three months ended June 30, 2018 and 2017 is reflected within its Condensed Consolidated Statements of Operations as follows (dollars in thousands):
Total restructuring expense by segment was recorded as follows (dollars in thousands):
|
REVENUE - Summary of Contract Assets and Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Apr. 01, 2018 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Accounts receivable, net | $ 7,183 | $ 9,020 |
Contract assets | 960 | 1,773 |
Contract liabilities | $ 13 | $ 13 |
REVENUE - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Apr. 01, 2018 |
|
Disaggregation of Revenue [Line Items] | |||
Revenue | $ 13,032,000 | ||
Proceeds from sale of revenue earned but not billed | 2,000,000 | ||
Gain (loss) on sale of revenue earned but not billed | (54,046,000) | ||
Unbilled accounts receivable | 100,000 | $ 600,000 | |
Contract liabilities | 13,000 | $ 13,000 | |
Total revenue | 13,822,000 | $ 12,558,000 | |
Transferred over time | |||
Disaggregation of Revenue [Line Items] | |||
Revenue | 0 | ||
Light fixture sales-type lease | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 700,000 | ||
Sale of tax credits | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 30,875 | ||
Legacy solar facilities | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | $ 18,889 |
ACCOUNTS RECEIVABLE, NET (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Receivables [Abstract] | ||
Accounts receivable, gross | $ 7,416 | $ 8,886 |
Allowance for doubtful accounts | (233) | (150) |
Accounts receivable, net | $ 7,183 | $ 8,736 |
INVENTORIES, NET (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Cost | ||
Raw materials and components | $ 6,922 | $ 6,073 |
Work in process | 1,053 | 1,190 |
Finished goods | 3,818 | 3,934 |
Total | 11,793 | 11,197 |
Reserve | ||
Raw materials and components | (1,335) | (1,363) |
Work in process | (310) | (263) |
Finished goods | (1,551) | (1,745) |
Total | (3,196) | (3,371) |
Net | ||
Raw materials and components | 5,587 | 4,710 |
Work in process | 743 | 927 |
Finished goods | 2,267 | 2,189 |
Total | $ 8,597 | $ 7,826 |
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Unbilled accounts receivable | $ 0 | $ 1,910 |
Other prepaid expenses | 408 | 557 |
Total | $ 408 | $ 2,467 |
PROPERTY AND EQUIPMENT, NET (Summary of Property and Equipment) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Property and equipment | ||
Gross property and equipment | $ 34,079 | $ 34,192 |
Less: accumulated depreciation and amortization | (21,508) | (21,298) |
Property and equipment, net | 12,571 | 12,894 |
Land and land improvements | ||
Property and equipment | ||
Gross property and equipment | 424 | 424 |
Buildings and building improvements | ||
Property and equipment | ||
Gross property and equipment | 9,245 | 9,245 |
Furniture, fixtures and office equipment | ||
Property and equipment | ||
Gross property and equipment | 7,101 | 7,096 |
Leasehold improvements | ||
Property and equipment | ||
Gross property and equipment | 324 | 324 |
Equipment leased to customers | ||
Property and equipment | ||
Gross property and equipment | 4,997 | 4,997 |
Plant equipment | ||
Property and equipment | ||
Gross property and equipment | $ 11,988 | $ 12,106 |
PROPERTY AND EQUIPMENT, NET (Equipment under Capital Leases) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Capital Leased Assets [Line Items] | ||
Equipment | $ 34,079 | $ 34,192 |
Less: accumulated depreciation and amortization | (21,508) | (21,298) |
Property and equipment, net | 12,571 | 12,894 |
Assets Held under Capital Leases | ||
Capital Leased Assets [Line Items] | ||
Equipment | 581 | 581 |
Less: accumulated depreciation and amortization | (379) | (344) |
Property and equipment, net | $ 202 | $ 237 |
PROPERTY AND EQUIPMENT, NET (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 347 | $ 353 |
INTANGIBLE ASSETS, NET (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 0.1 | $ 0.2 |
Weighted average | ||
Segment Reporting Information [Line Items] | ||
Intangible assets, estimated economic useful life | 5 years 4 months 29 days |
INTANGIBLE ASSETS, NET (Future Amortization by Fiscal Year) (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Finite-Lived Intangible Assets, Estimated Amortization Expense | |
Fiscal 2019 (period remaining) | $ 322 |
Fiscal 2020 | 360 |
Fiscal 2021 | 285 |
Fiscal 2022 | 188 |
Fiscal 2023 | 97 |
Fiscal 2024 | 93 |
Thereafter | 397 |
Total | $ 1,742 |
ACCRUED EXPENSES AND OTHER (Accrued Expenses and Other) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Compensation and benefits | $ 1,249 | $ 1,786 |
Accrued taxes | 316 | 237 |
Contract costs | 943 | 985 |
Legal and professional fees | 561 | 400 |
Warranty | 365 | 402 |
Sales returns reserve | 156 | 0 |
Credits due to customers | 996 | 0 |
Other accruals | 323 | 361 |
Total | $ 4,909 | $ 4,171 |
ACCRUED EXPENSES AND OTHER (Warranty Accrual) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Other Liabilities Disclosure [Abstract] | ||
Standard And Extended Product Warranty Accrual, Increase (Decrease) Reclassification Adjustment | $ 73 | $ 0 |
Movement in Standard Product Warranty Accrual | ||
Beginning of period | 673 | 759 |
Provision to product cost of revenue | (22) | 24 |
Charges | (6) | (2) |
End of period | $ 718 | $ 781 |
ACCRUED EXPENSES AND OTHER (Narrative) (Details) |
3 Months Ended |
---|---|
Jun. 30, 2018 | |
Minimum | |
Segment Reporting Information [Line Items] | |
Limited warranty term | 1 year |
Maximum | |
Segment Reporting Information [Line Items] | |
Limited warranty term | 10 years |
NET LOSS PER COMMON SHARE (Earnings per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Numerator: | ||
Net loss | $ (2,692) | $ (6,564) |
Denominator: | ||
Weighted-average common shares outstanding (in shares) | 29,070,193 | 28,455,434 |
Weighted-average common shares and common share equivalents outstanding (in shares) | 29,070,193 | 28,455,434 |
Net loss per common share: | ||
Basic (usd per share) | $ (0.09) | $ (0.23) |
Diluted (usd per share) | $ (0.09) | $ (0.23) |
NET LOSS PER COMMON SHARE (Potentially Dilutive Securities) (Details) - shares |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Number of potentially dilutive securities | ||
Potentially dilutive securities outstanding (in shares) | 2,148,000 | 3,148,598 |
Common stock options | ||
Number of potentially dilutive securities | ||
Potentially dilutive securities outstanding (in shares) | 624,667 | 1,442,153 |
Restricted shares | ||
Number of potentially dilutive securities | ||
Potentially dilutive securities outstanding (in shares) | 1,523,333 | 1,706,445 |
RELATED PARTY TRANSACTIONS (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Related Party Transactions [Abstract] | ||
Related party transactions | $ 0 | $ 0 |
LONG-TERM DEBT (Summary of Long-Term Debt) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Long-term debt | ||
Total long-term debt | $ 2,467 | $ 4,092 |
Less current maturities | (80) | (79) |
Long-term debt, less current maturities | 2,387 | 4,013 |
Revolving credit facility | ||
Long-term debt | ||
Total long-term debt | 2,302 | 3,908 |
Equipment lease obligations | ||
Long-term debt | ||
Total long-term debt | $ 165 | $ 184 |
INCOME TAXES (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Mar. 31, 2018 |
|
Income Tax Disclosure [Abstract] | |||
Income tax expense | $ 22,000 | $ 0 | |
Deferred tax assets | $ 9,900,000 | ||
Unrecognized tax benefits | $ 100,000 |
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense under operating leases | $ 0.2 | $ 0.2 |
SHAREHOLDERS’ EQUITY (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2015 |
Mar. 31, 2017 |
|
Stockholders' Equity Note [Abstract] | |||
Share issued under ESPP | 886 | ||
Closing market price | $ 1.10 | ||
Loans issued to non-executive employees outstanding | $ 4 | ||
Treasury stock acquired (shares) | 1,230 |
STOCK OPTIONS AND RESTRICTED SHARES (Stock-based Compensation) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Stock-based compensation | ||
Total | $ 228 | $ 320 |
Cost of product revenue | ||
Stock-based compensation | ||
Total | 1 | 6 |
Cost of service revenue | ||
Stock-based compensation | ||
Total | 1 | 0 |
General and administrative | ||
Stock-based compensation | ||
Total | 205 | 267 |
Sales and marketing | ||
Stock-based compensation | ||
Total | 21 | 41 |
Research and development | ||
Stock-based compensation | ||
Total | $ 0 | $ 6 |
STOCK OPTIONS AND RESTRICTED SHARES (Restricted Shares and Stock Options) (Details) |
3 Months Ended |
---|---|
Jun. 30, 2018
$ / shares
shares
| |
Stock Options | |
Non-vested, beginning balance (shares) | 629,667 |
Awards granted (shares) | 0 |
Awards vested (shares) | 0 |
Awards forfeited (shares) | (5,000) |
Non-vested, ending balance (shares) | 624,667 |
Per share price on grant date (usd per share) | $ / shares | $ 0 |
Restricted shares | |
Restricted Shares | |
Beginning balance (shares) | 1,485,799 |
Awards granted (shares) | 519,000 |
Awards vested (shares) | (453,754) |
Awards forfeited (shares) | (27,712) |
Ending balance (shares) | 1,523,333 |
Restricted shares | Minimum | |
Restricted Shares | |
Per share price on grant date (usd per share) | $ / shares | $ 0.84 |
STOCK OPTIONS AND RESTRICTED SHARES (Narrative) (Details) $ in Millions |
3 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Deferred stock-based compensation related to grants of restricted shares, period of recognition | 2 years 1 month |
Deferred stock-based compensation related to grants of restricted shares | $ 1.4 |
SEGMENTS (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Corporate and Other | ||
Revenues | $ 13,822 | $ 12,558 |
Operating Income (Loss) | (2,603) | (6,502) |
Operating Segments | Orion Engineered Systems | ||
Corporate and Other | ||
Revenues | 3,231 | 5,408 |
Operating Income (Loss) | (1,253) | (1,891) |
Operating Segments | Orion Distribution Services | ||
Corporate and Other | ||
Revenues | 9,226 | 5,760 |
Operating Income (Loss) | 85 | (741) |
Operating Segments | Orion U.S. Markets | ||
Corporate and Other | ||
Revenues | 1,365 | 1,390 |
Operating Income (Loss) | (131) | (1,532) |
Corporate and Other | ||
Corporate and Other | ||
Revenues | 0 | 0 |
Operating Income (Loss) | $ (1,304) | $ (2,338) |
REORGANIZATION OF BUSINESS (Restructuring by Statement of Operations Location) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | $ 28 | $ 1,904 |
Cost of product revenue | ||
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | 0 | 40 |
General and administrative | ||
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | 11 | 1,767 |
Sales and marketing | ||
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | $ 17 | $ 97 |
REORGANIZATION OF BUSINESS (Restructuring by Segment) (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | $ 28,000 | $ 1,904,000 |
Orion Engineered Systems | ||
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | 0 | |
Operating Segments | Orion Engineered Systems | ||
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | 5,000 | 0 |
Operating Segments | Orion Distribution Services | ||
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | 12,000 | 75,000 |
Corporate and Other | ||
Restructuring Cost and Reserve [Line Items] | ||
Total restructuring charges | $ 11,000 | $ 1,829,000 |
REORGANIZATION OF BUSINESS (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Restructuring Cost and Reserve [Line Items] | ||
Payments for Restructuring | $ 0.1 | $ 1.3 |
Post-employment medical benefits | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring Reserve | $ 0.2 |
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