UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☒ | |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended March 31, 2021
or
☐ | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to
Commission File Number: 001-33887
Orion Energy Systems, Inc.
(Exact name of Registrant as specified in its charter)
39-1847269 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
2210 Woodland Drive, Manitowoc, WI | 54220 | |
(Address of principal executive offices) | (Zip Code) |
(920) 892-9340
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the act:
Title of Each Class | Trading Symbol (s) | Name of Each Exchange on Which Registered | ||
Common stock, no par value | OESX | The Nasdaq Stock Market LLC (NASDAQ | ||
Common stock purchase rights | The Nasdaq Stock Market LLC (NASDAQ |
Securities registered pursuant to Section 12(g) of the act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐¨ No ☒ý
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐¨ No ☒ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ý No ☐¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ý No ☐¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.company, or an "emerging growth company". See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☒ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐¨ No ☒ý
The aggregate market value of shares of the Registrant’s common stock held by non-affiliates as of September 30, 2015,2020, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $40,265,665.
As of June 9, 2016,May 21, 2021, there were 28,059,35130,806,390 shares of the Registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 20162021 Annual Meeting of Shareholders to be held on August 3, 20165, 2021 are incorporated herein by reference in Part III of this Annual Report on Form 10-K.
ORION ENERGY SYSTEMS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED
MARCH 31,Table of Contents
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements that are based on Orion Energy System'sSystems, Inc.'s ("Orion", "we", "us", "our" and similar references) beliefs and assumptions and on information currently available to us. When used in this Form 10-K, the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions identify forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in any forward-looking statements are reasonable, these plans, intentions or expectations are based on assumptions, are subject to risks and uncertainties, and may not be achieved. These statements are based on assumptions made by us based on our experience and perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the current circumstances. Such statements are subject to a number of risks and uncertainties, many of which are beyond our control. Our actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in this Form 10-K. Important factors could cause actual results to differ materially from our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our beliefs and assumptions only as of the date of this Form 10-K, including particularly the Risk Factors described under Part I. Item 1A. of this Form 10-K. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this Form 10-K. Actual events, results and outcomes may differ materially from our expectations due to a variety of factors. Although it is not possible to identify all of these factors, they include, among others, the following:
our ability to achievemanage general economic, business and sustain profitabilitygeopolitical conditions, including the impacts of natural disasters, pandemics and positive cash flows;outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic;
the deterioration of market conditions, including our levels of cash and our limited borrowing capacity under our bank line of credit;
our lackability to successfully launch, manage and maintain our refocused business strategy to successfully bring to market new and innovative product and service offerings;
our recent and continued reliance on significant revenue to be generated in fiscal 2022 from the lighting and controls retrofit projects for two major global logistics companies;
our dependence on a limited number of major sources of recurring revenuekey customers, and the potential consequences of the loss of one or more key customers or suppliers, including key contacts at such customers;
our ability to identify and successfully complete transactions with suitable acquisition candidates in the future as part of our growth strategy;
the availability of additional debt financing and/or equity capital to pursue our evolving strategy and executesustain our strategygrowth initiatives;
our risk of potential loss related to single or focused exposure within the current customer base and product offerings;
our ability to sustain our profitability and positive cash flows;
our ability to differentiate our products in a highly competitive and converging market, expand our customer base and gain market share;
our ability to respond successfully to market competition;manage and mitigate downward pressure on the average selling prices of our products as a result of competitive pressures in the light emitting diode ("LED") market;
our ability to successfully implementmanage our strategyinventory and avoid inventory obsolescence in a rapidly evolving LED market;
our increasing reliance on third parties for the manufacture and development of focusingproducts, product components, as well as the provision of certain services;
our increasing emphasis on lighting solutions using Light Emitting Diode (“LED”) technologies in lieu of traditional High Intensity Fluorescent (“HIF”) lighting upon which our business has historically relied;
our development of,ability to develop and participationparticipate in new product and technology offerings or applications;applications in a cost effective and timely manner;
our ability to effectively manage the growth of our business, including expansion of our Orion Distribution Services division;maintain safe and secure information technology systems;
our failure to comply with the covenants in our revolving credit agreement;
our ability to recruit, hire and retain talented individuals in all disciplines of our company;
our ability to recruitbalance customer demand and hire sales talent to increase our in-market sales and production capacity;
our ability to pursuemaintain an expanded third-party sales channel through distribution and sales agents;effective system of internal control over financial reporting;
price fluctuations (including as a result of tariffs), shortages or interruptions of component supplies and raw materials used to manufacture our products;
our ability to defend our patent portfolio;portfolio and license technology from third parties;
a reduction in the price of electricity;
the reduction or elimination of investments in, or incentives to adopt, LED lighting or the elimination of, or changes in, policies, incentives or rebates in certain states or countries that encourage the use of LEDs over some traditional lighting technologies;
the cost to comply with, and the effects of, any current and future industry and government regulations, laws and policies; and
potential warranty claims in excess of our reserve estimates.
You are urged to carefully consider these factors and the other factors described under Part I. Item 1A. “Risk Factors” when evaluating any forward-looking statements, and you should not place undue reliance on these forward-looking statements.
Except as required by applicable law, we assume no obligation to update any forward-looking statements publicly or to update the reasons why actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
As used herein, unless otherwise expressly stated or the context otherwise requires, all references to “Orion,” “we,” “us,” “our,” “Company” and similar references are to Orion Energy Systems, Inc. and its consolidated subsidiaries.
Overview
We are a leading designerprovide state-of-the-art light emitting diode (“LED”) lighting systems, wireless Internet of Things (“IoT”) enabled control solutions, project engineering, design energy project management and manufacturer of high-performance, energy-efficient lighting platforms.maintenance services. We help our customers achieve energy savings with healthy, safe and sustainable solutions that enable them to reduce their carbon footprint and digitize their business. We research, design, develop, design, manufacture, market, sell, install, and implement energy management systems consisting primarily of high-performance, energy-efficient commercial and industrial interior and exterior LED lighting systems and related services. Our products are targeted for applications in three primary market segments: (i.) commercial office and retail; (ii.)retail, area lighting, and (iii.) industrial applications, although we do sell and install products into other markets. Virtually all of our sales occur within North America.
Our principal customers include large national accounts,account end-users, electrical distributors, electrical contractors and energy service companies electrical contractors and electrical distributors.(“ESCOS”). Currently, substantially alla significant amount of our products are manufactured at our leased production facility locationlocated in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties as the LED market continues to evolve in order to have versatility indiversify our product development.
We have experienced recent success offering our comprehensive project management services to provide solutions using our legacy High Intensity Fluorescent (“HIF”) technology, wenational account customers to retrofit their multiple locations. Our comprehensive services include initial site surveys and audits, utility incentive and government subsidy management, engineering design, and project management from delivery through to installation and controls integration.
Our lighting products consist primarily of LED lighting fixtures, many of which include IoT enabled control systems provided by third parties. We believe the market for LED lighting products has shiftedcontinues to LED lighting systems. Compared to legacy lighting systems, LED lighting allows for better optical performance, significantly reduced maintenance costs due to performance longevity and reduced energy consumption.grow. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied by other legacylighting technologies. LED lighting technologies are now the primary component
We generally do not have long-term contracts with our customers that provide us with recurring revenue from period to period and we typically generate substantially all of our revenue from sales of lighting systems and related services to governmental, commercial and industrial customers on a project-by-project basis. We also perform work under global services or product purchasing agreements with major customers with sales completed on a purchase order basis. The loss of, or substantial reduction in sales to, any of our significant customers, or our current single largest customer, or the termination or delay of a significant volume of purchase orders by one or more key customers, could have a material adverse effect on our results of operations in any given future period.
We typically sell our lighting systems in replacement of our customers’ existing lighting fixtures. We call this replacement process a "retrofit". We frequently sell our products and services directly to our customers and in many cases we provide design and installation as well as project management services. We also sell our lighting systems on a wholesale basis, principally to electrical distributors, electrical contractors and ESCOs to sell to their own customer bases.
The gross margins of our products can vary significantly depending upon the types of products we strivesell, with gross margins typically ranging from 10% to be the leader50%. As a result, a change in the industry transition to LED lighting technology. According to a July 2015 United States Department of Energy report ("DOE report"), we estimate the potential North American LED retrofit market within our key product categories to be approximately 1.1 billion lighting fixtures. In fiscal 2016, our LED lighting sales totaled $45,679,000, or 71%,total mix of our total lighting product revenue, comparedsales among higher or lower gross margin products can cause our profitability to $30,800,000, or 48%fluctuate from period to period.
Our fiscal year ends on March 31. We refer to our current fiscal year which ended on March 31, 2021 as "fiscal 2021". We refer to our most recently completed fiscal year, which ended on March 31, 2020, as “fiscal 2020”, and our prior fiscal year which ended on March 31, 2019 as "fiscal 2019". Our fiscal first quarter of each fiscal year ends on June 30, our total lighting product revenue for fiscal 2015. We plan to continue to primarily focussecond quarter ends on developingSeptember 30, our fiscal third quarter ends on December 31, and selling innovative LED products, although we will continue to market and sell legacy HIF solutions in circumstances in which LED solutions may not be our customers' best alternative.fiscal fourth quarter ends on March 31.
Reportable Segments
Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Our CODM is our chief executive officer. Orion hasWe have three reportable segments: Orion U.S. Markets Division ("USM"), Orion Engineered Systems Division ("OES"), and Orion Distribution Services Division ("ODS").
For financial results by reportable segment, please refer to Note 18 – Segment Data in our commercial lighting systems and energy management systems to the wholesale contractor markets. Our U.S. Markets customers include domestic energy service companies ("ESCOs") and electrical contractors.
Orion Engineered Systems Division ("OES")
Our OES divisionsegment develops and sells lighting products and provides construction and engineering services for our commercial LED and High Intensity Fluorescent ("HIF") lighting and energy management systems. OES provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and schools.
Orion Distribution Services Division ("ODS")
Our ODS divisionsegment focuses on selling our lighting products through manufacturer representative agencies and a network of broadline North American distributors. ODS had growth in fiscal 2016broadline and electrical distributors and contractors.
Orion U.S. Markets Division
Our USM segment sells commercial lighting systems and energy management systems to revenues of $2,476,000 from revenues of $978,000 in fiscal 2015, with a majority of that business transacting through broadline distributors.
Our Market Opportunity
We provide enterprise-grade LED lighting and energy management project solutions. We are primarily focused on providing commercial and industrial facilities lighting retrofit solutions in North America using solid statesolid-state LED technology. While we continue to provide solutions using our legacy HIF technology, weWe believe the market for lighting products has shifted to LED lighting systems. Comparedsystems and continues to legacy lighting systems,grow. We believe that LED lighting technology allows for better optical performance, significantly reduced maintenance costs due to performance longevity and reduced energy consumption. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied by fluorescent or other legacy technologies.
Our products deliver energy savings and efficiency gains to our commercial and industrial customers without compromising their quantity or quality of light. We estimate that our energy management systems reduce our customers’ legacy lighting-related electricity costs by approximately 50% to 80%,or greater, while increasingmaintaining their quantity of light by approximately 50%after the reduced wattage and improving overall lighting quality when replacing traditional fixtures. Our customers with legacy lighting systems typically realize a one to three yearfour-year payback period, and most often 18 – 24 months, from electricity cost savings generated by our lighting systems without considering utility incentives or government subsidies. We have sold and installed our lighting products in over 13,550 facilities across North America, representing approximately 2 billion square feet of commercial and industrial building space, including sales to 178 of the Fortune 500 companies.
We serve government and private sector end-customers in the United States Department of Energy, or DOE, we estimate the potential North American HIF and LED retrofit market within ourfollowing primary markets to be approximately 7 billion lighting fixtures. Our primary markets are: (i)markets: commercial office and retail, (ii)exterior area lighting and (iii) industrial high bay applications.
Commercial office and retail.
Our commercial office and retail market includes commercial office buildings, retail store fronts, government offices, schools, hospitals and other buildings with traditionalIndustrial applications.
Our market for industrial facilities includes manufacturing facilities, distribution and warehouse facilities, government buildings and agricultural buildings. These facilities typically containCommercial and industrial facilities in the United States employ a variety of lighting technologies, including HID, traditional fluorescents, LED and incandescent lighting fixtures. We estimate that approximately 50% of this market still utilizes inefficient high intensity discharge ("HID") lighting technologies. Our lighting systems typically replace less efficient HID, HIF fixtures, and HIFearlier generation of LED fixtures. According to the Electric Power Research Institute, or EPRI, HID fixtures only convert approximately 36% of the energy they consume into visible light. We estimate our lighting systems generally reduce lighting-related electricity costs by approximately 50% to 80% compared to HID fixtures, while increasing the quantity of light by approximately 50% and improving lighting quality.
We believe that utilities within the United States recognize the importance of energy efficiency as an economical means to manage capacity constraints and as a low-cost alternative when compared to the construction costs of building new power plants. Accordingly, many of these utilities are continually focused on demand reduction through energy efficiency. According to our research of individual state and utility programs, 49 states, through legislation, regulation or voluntary action, have seen their utilities design and fund programs that promote or deliver energy efficiency. In fact, as of May 31, 2016, only Alaska, Delaware, and Maine do not currently have some form of utilityefficiency through legislation, regulation or state energy efficiency programs for any of their commercial or industrial customers.voluntary action. Our productsproduct sales are not solely dependent upon these incentive programs, but we do believe that these incentive programs provide an important benefit as our customers evaluate their out-of-pocket cash investments.
Our Solution
Value Proposition.
We estimate our LED lighting systems generally reduce lighting-related electricity usage and costs by approximately 50%Multi-Facility Roll-Out Capability.
We offer our customers a single source, turnkey solution for project implementation in which we manage and maintain responsibility for entire multi-facilityRapid Payback Period.
In most retrofit projects where we replace HID and HIF fixtures, our customers typically realize a one toEasy Installation, Implementation and Maintenance.
Most of ourExpanded Product Offerings.
We are committed toEnvironmental Benefits.
By allowing for the permanent reduction of electricity consumption, we believe our energy management systems significantly reduce indirect CO2 emissions that are a negative by-product of energy generation.Our Competitive Strengths
Compelling Value Proposition.
By permanently reducing lighting-related electricity usage, our systems enable our customers to achieve significant cost savings, without compromisingComprehensive Project Management. We also offer our customers a single source solution whereby we manage and are responsible for thean entire retrofit lighting project, includingfrom initial site surveys and energy audits through to installation across the entire North American real estate portfolio.and controls integration. Our ability to offer such acomprehensive turnkey national solutionproject management services, coupled with best-in-class customer service, allows us to
deliver energy reductions and cost savings to our customers in timely, orderly and planned multi-facility roll-outs.
Large and Growing Customer Base.
We have developed a large and growing national customer base and have installed our products inExpanded Sales and Distribution Network.
In addition to selling directly to national accounts, electricalImpact of COVID-19 in Fiscal 2021
The COVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets, in the U.S. and globally. Our business was adversely impacted by measures taken by customers, suppliers, government entities and others to control the spread of the virus beginning in March 2020, the last few weeks of our prior fiscal year, and continuing most significantly into the second quarter of fiscal 2021. During the third quarter of fiscal 2021, we experienced a rebound in business. Project installations resumed for our largest customer and we started installations for a new large specialty retail customer. However, some customers continue to refrain from awarding new projects and potential future risks remain due to the COVID-19 pandemic.
As part of our response to the impacts of the COVID-19 pandemic, during the fourth quarter of fiscal 2020 we implemented a number of cost reduction and cash conservation measures, including reducing headcount. While certain restrictions began to initially lessen in certain jurisdictions during the second half of fiscal 2021, stay-at-home, face mask or lockdown orders remain in effect in others, with employees asked to work remotely if possible. Some customers and projects are in areas where travel restrictions have
been imposed, certain customers have either closed or reduced on-site activities, and timelines for the completion of several projects have been delayed, extended or terminated. These modifications to our business practices, including any future actions we take, may cause us to experience reductions in productivity and disruptions to our business routines. In addition, we have needed to make substantial working capital expenditures and advance inventory purchases that we may not be able to recoup if our customer agreements or a substantial volume of purchase orders under our customer agreements are delayed or terminated as a result of COVID-19. It is not possible to predict the overall impact the COVID-19 pandemic will have on our business, liquidity, capital resources or financial results, although the economic and regulatory impacts of COVID-19 significantly reduced our revenue and profitability in the first half of fiscal 2021. If the COVID-19 pandemic becomes more pronounced in our markets or experiences a resurgence in markets recovering from the spread of COVID-19, our results of operation would likely be materially adversely affected.
Our Growth Strategies
In fiscal 2021, we continued to successfully capitalize on our capability of being a significant technology shift tofull service, turn-key provider of LED lighting systems. Accordingly,and controls systems with design, build, installation and project management services, including being awarded large additional projects for a major national account. To build on this success, we are evolving our primary focus is onbusiness strategy to further leverage this unique capability, while making targeted additions to the scope and nature of our lighting and retrofit solutions using LED technologies.
Focus on executing and marketing our turnkey LED retrofit capabilities to large national account customers. We now have relationshipsbelieve one of our competitive advantages is our ability to deliver full turnkey LED lighting project capabilities starting with more than 100 resellersenergy audits and distributorssite assessments that are represented bylead to custom engineering and manufacturing through to fully managed installations. These attributes coupled with our superior customer service, high quality designs and expedited delivery responsiveness resulted in our contract to retrofit multiple locations for a North American network of independent lighting agencies. single national account in fiscal 2020 that continued into fiscal 2021.
Continue Product Innovation. We continue to expandinnovate, developing lighting fixtures and features that address specific customer requirements, while also working to maintain a leadership position in energy efficiency, smart product design and installation benefits. For interior building applications, we recently expanded our sales networkproduct line to include a family of ceiling air movement solutions, some of which incorporate LED lighting and others which utilize ultraviolet C light waves to kill viruses, bacteria and germs. We also continue to deepen our capabilities in the integration of smart lighting controls. Our goal is to provide state-of-the-art lighting products with modular plug-and-play designs to enable lighting system customization from basic controls to advanced IoT capabilities.
Leverage Orion’s Smart Lighting Systems to Support Internet of Things Applications. We believe we are also maintainingideally positioned to help customers to efficiently deploy new IoT controls and applications by leveraging the “Smart Ceiling” capabilities of their Orion solid state lighting system. IoT capabilities can include the management and tracking of facilities, personnel, resources and customer behavior, driving both sales and lowering costs. As a result, these added capabilities provide customers an even greater return on investment from their lighting system and make us an even more attractive partner, providing our in-market sales force which generates revenue through our independent channels.customers with a path to digitization for their business operations.
Develop New Sources of Revenue Through Expanded ProductMaintenance Service Offerings.
Support success of our energy management system, particularly LED lighting products, wireless controls, cloud-based power data analysisESCO and storage capabilitiesagent driven distribution sales channels. We continue to focus on building our relationships and product and sales support for our existing customers.
Products and Services
Our primary focus has been the sale of our LED lighting fixtures with integrated controls technology and related installation services. We will continue to be, emphasizing our LED lighting fixtures. focus on these products and services, as well as the development of a maintenance service offering.
Currently, substantially allmost of our products are manufactured at our leased production facility location in Manitowoc, Wisconsin, although we are increasingly sourcing products and components from third parties as the LED market continues to evolve, we also source products and components from third parties in order to have versatility in our product development. However, we do not anticipate significant changes in product sourcing in the near term. We are focused on researching, developing and/or acquiring new innovative LED products and technologies that are innovative infor the retrofit markets, such as the LED door retrofit and exterior LED lighting products.markets. We plan to focus our efforts on creating innovativedeveloping creative new LED retrofit products while continuingin order to sell legacy HIF solutions to customers in markets where LED technology adoption is in its infancy. Together with these products, we offer our customers a variety of integrated energy management services, such as system design, project management and installation.
Products
The following is a description of our primary products:
Interior LED High Bay Fixtures:
Our LED interior high bay lighting products consist of our Harris high bay, ApolloTM high bay and ISON® high bay products. Our ISON® class of LED interior fixture offers a full package of premium features, including low total cost of ownership, optics that currently exceed competitors in terms of lumen package, delivered light, modularity and advanced thermal management. Our third generation of ISON® class of LED interior fixture delivers up to an exceptional 214 lumens per watt. This advancement means our customers can get more light with less energy, and sometimes fewer fixtures, compared to other products on the market. Our ApolloTM class of LED interior fixtures is designed for new construction and retrofit projects where initial cost is the largest factor in the purchase decision. Our Harris high bay is ideal for customers seeking a cost-effective solution to deliver energy savings and maintenance reductions. In addition, our LED interior lighting products are lightweight andSmart Lighting Controls.
We offer a broad array of smart building controlThe LED Troffer Door Retrofit (LDRTM): The LDRTM is designed to replace existing 4 foot by 2 foot and 2 foot by 2 foot fluorescent troffers that are frequently found in office or retail grid ceilings. Our LDRTM product is unique in that the LED optics and electronics are housed within the doorframe that allows for installation of the product in approximately one to two minutes. Our LDRTM product also provides reduced maintenance expenses based upon improved LED chips.
Other Products. We also offer our customers a variety of other LED HIF, and inductionHIF fixtures to address their lighting and energy management needs, including fixtures designed for agribusinesses, parking lots, roadways, retail, mezzanine, outdoor applications and private label resale.
Warranty Policy. Our warranty policy generally provides for a limited one-year warranty on our HIF products and a limited five-year warranty on our LED products, although we do offer warranties ranging up to 10 years for certain LED products. Ballasts, lamps, drivers, LED chips and other electrical components are excluded from our standard warranty as they are covered by separate warranties
Services
We provide a range of fee-based lighting-related energy management services to our customers, including:
comprehensive site assessment, which includes a review of the current lighting and controls including IoT enabled devices requirements and energy usage at the customer’s facility;
site field verification, or SFV, during which we perform a test implementation of our energy management system at a customer’s facility;
utility incentive and government subsidy management, where we assist our customers in identifying, applying for and obtaining available utility incentives or government subsidies;
engineering design, which involves designing a customized system to suit our customers' facility lighting and energy management needs, and providing the customer with a written analysis of the potential energy savings and lighting and environmental benefits associated with the designed system;
project management, which involves us working with the electrical contractor in overseeing and managing all phases of implementation from delivery through installation for a single facility or through multi-facility roll-outs tied to a defined project schedule;
installation services, for our products, which we provide through our national network of qualified third-party installers;
complete facility design commissioning of IoT enabled control devices; and
recycling in connection with our retrofit installations, where we remove, dispose of and recycle our customer’s legacy lighting fixtures.
We also provide other services whichthat comprise a small amount of our revenue. These services primarily include management and control of power quality and remote monitoring and control of our installed systems. We also sell and distribute replacement lamps and fixture components into the after-market.
Our Customers
We primarily target commercial, institutional and industrial customers who have warehousing, retail, manufacturing, and office facilities. As of March 31, 2016, we have installed our products in 13,550 commercial and industrial facilities across North America. In fiscal 2016, there was no single2021, one customer that accounted for more than 10%56.0% of our total revenue. In fiscal 2015 we had one2020, that same customer Ford Motor Company, that accounted for 12%74.1% of our total revenue, and in fiscal 2019, this same customer accounted for 20.7% of our total revenue. InWe expect that we will continue to experience significant customer concentration in fiscal 2014,2022, particularly as we had onefocus on large multi-location retrofit programs. While we continue to seek to diversify our customer Standard Alternative LLC, that accounted for 23%base by expanding our reach to national accounts, ESCOs and the agent driven distribution channel, we expect to continue to derive a significant percentage of our total revenue.
The amount and concentration of our revenues with one or more customer may fluctuate on a year to year or quarter to quarter basis depending on the number of purchase orders issued by our customers. The loss of a significant customer or the termination of a material volume of purchase orders (or the underlying agreements) could have a material adverse effect on our results of operations.
Sales and Marketing
We sell our products in one of twothree ways: (i) directly to commercial and industrial customers using a systematic multi-step process that focuses onthrough our value proposition and provides our sales force with a specific protocol for workingrelationships with our customers from the point of lead generation through delivery of our products and services; andnational account partners; (ii) indirectly through independent sales agencies and electrical distributors. We believe that partnering with an agency sales force focused on providing technical productbroadline North American distributors; and sales support to our customers provides us with a greater potential for revenue growth.(iii) through ESCOs. Our Distribution Services divisionODS segment focuses on developing and expanding customer relationships with independent manufacturer’s sales agents and broadline distributors. DuringAs of the end of fiscal 2016,2021 we engaged more than 18 manufacturer representativehad 29 independent lighting agencies to expandrepresenting us in substantially all of North America expanding our reach with broadline distributors and further enhance our ability to grow revenue.distributors. We attempt to leverage the customer relationships of these customersdistributors to further extend the geographic scope of our selling efforts. We work cooperatively with our indirect channels through participation in national trade organizations and by providing training on our sales methodologies. We intend to continue to selectively expand our independent sales network, focusing on those geographic regions where we lack sufficient sales coverage.
We have historically focused our marketing efforts on traditional direct advertising, as well as developing brand awareness through customer education and active participation in trade shows and energy management seminars. These efforts have included participating in national, regional and local trade organizations, exhibiting at trade shows, executing targeted direct mail campaigns, advertising in select publications, public relations campaigns, social media and other lead generation and brand-building initiatives.
Competition
The market for energy-efficient lighting products and services is fragmented. We face strong competition primarily from manufacturers and distributors of lighting products and services as well as electrical contractors. We compete primarily on the basis of technology, cost, performance, quality, customer experience, energy efficiency, customer service and marketing support.
We also face competition from companies who provide energy management services. Some of these competitors, such as Ameresco, Inc., Johnson Controls Inc.International and Honeywell International, provide basic systems and controls designed to further energy efficiency.
Intellectual Property
As of March 31, 2016,2021, we had been issued 67over 100 United States patents and have applied for 29a number of additional United States patents. The patented and patent pending technologies cover various innovative elements of our products, including our HIF and LED fixtures. Our patented LDR
We believe that our patent portfolio as a whole is material to our business. We also believe that our patents covering our ability to manage the thermal and optical performance of our LED and HIF lighting products are material to our business, and that the loss of these patents could significantly and adversely affect our business, operating results and prospects.
Backlog
Backlog represents the amount of revenue that we expect to realize in the future as a result of firm, committed orders. BacklogOur backlog as of March 31, 20162021 and 2015March 31, 2020 totaled $5,600,000$15.5 million and $7,100,000,$18.6 million, respectively. We generally expect our backlog to becomebe recognized as revenue within one year.
Manufacturing and Distribution
We ownlease an approximately 266,000 square foot primary manufacturing and distribution facility located in Manitowoc, Wisconsin, where substantially allmost of our products are manufactured. As part of our business initiativesWe utilize both solar and wind power to adapt tosupport the rapidly evolving LED market and to continue to enhance our competitiveness, we are considering implementing significant changes toenergy requirements for our manufacturing production and assembly facility, and processes.
We generally maintain a significant supply of raw material and purchased and manufactured component inventory. We contract with transportation companies to ship our products and manage all aspects of distribution logistics. We generally ship our products directly to the end user.
Research and Development
Our research and development efforts are centered on developing new LED products and technologies and enhancing existing products. The products, technologies and services we are developing are focused on increasing end user energy efficiency and enhancing lighting output. DuringOver the last three fiscal 2014,years, we developed and commercialized the LDR
We believe that this location is in close proximity to highly regarded engineering and business schools and will offer us a greater supply of technical talent to help us develop new LED products in the future. We also operate research and development lab and test facilities in our Jacksonville, FLFlorida and Manitowoc, WIWisconsin locations.
Regulatory Matters
Our operations are subject to federal, state, and local laws and regulations governing, among other things, emissions to air, discharge to water, the remediation of contaminated properties and the generation, handling, storage, transportation, treatment, and disposal of, and exposure to, waste and other materials, as well as laws and regulations relating to occupational health and
State, county or municipal statutes often require that a licensed electrician be present and supervise each retrofit project. Further, all installations of electrical fixtures are subject to compliance with electrical codes in virtually all jurisdictions in the United States. In cases where we engage independent contractors to perform our retrofit projects, we believe that compliance with these laws and regulations is the responsibility of the applicable contractor.
Our Corporate and Other Available Information
We were incorporated as a Wisconsin corporation in April 1996 and our corporate headquarters are located at 2210 Woodland Drive, Manitowoc, Wisconsin 54220. Our Internet website address is www.orionlighting.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available through the investor relations page of our internet website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC.
Human Capital
As of March 31, 2016,2021, we had 165approximately 213 full-time and 98employees. We also employ temporary employees of which 87 work in manufacturing.our manufacturing facility as demand requires, at times up to 130 temporary employees. Our employees are not represented by any labor union, and we have never experienced a work stoppage or strike. strike due to employee relations.
We considerare an employee centric organization, maintaining a safe and respectful environment that provides opportunity for our relations withemployees.
We believe our employees are among our most important resources and are critical to our continued success. We focus significant attention on attracting and retaining talented and experienced individuals to manage and support our operations. We pay our employees competitively and offer a broad range of company-paid benefits, which we believe are competitive with others in our industry.
We are committed to hiring, developing and supporting a diverse and inclusive workplace. Our management teams and all of our employees are expected to exhibit and promote honest, ethical and respectful conduct in the workplace. We will not tolerate discrimination or harassment in any form. All of our employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination.
During fiscal 2021, in response to the COVID-19 pandemic, we implemented safety protocols and new procedures to protect our employees and our customers. These protocols include limiting travel, restricting access to our facilities along with monitoring processes, physical distancing, physical barriers, enhanced cleaning procedures, and requiring face coverings. In addition, we modified the way we conduct many aspects of our business to reduce the number of in-person interactions. For example, we significantly expanded the use of virtual interactions in all aspects of our business, including customer facing activities. Many of our administrative and operational functions during this time have required modification as well, including most of our professional workforce working remotely. We expanded paid time-off for employees impacted by COVID-19 and provided increased pay for certain employees involved in critical infrastructure who could not work remotely. We expect to continue such safety and wellness measures for the foreseeable future and may take further actions, or adapt these existing policies, as government authorities may require or recommend or as we may determine to be good.
You should carefully consider the risk factors set forth below and in other reports that we file from time to time with the Securities and Exchange Commission and the other information in this Annual Report on Form 10-K. The matters discussed in the following risk factors, and additional risks and uncertainties not currently known to us or that we currently deem immaterial, could have a material adverse effect on our business, financial condition, results of operationoperations and future growth prospects and could cause the trading price of our common stock to decline.
Risk Factor Summary
Our business is subject to a historynumber of lossesrisks and we may be unable to achieve or sustain profitability or positive cash flows in the future.
Our business has been, and positive cash flowscould again in the future will dependbe, negatively impacted by the Coronavirus (“COVID-19”) pandemic.
Our ability to achieve our desired revenue and profitability goals depends on our ability to successfully completeeffectively and timely execute on our key strategic plan. There is no guaranteeinitiatives.
Our products use components and raw materials that we willmay be ablesubject to achieveprice fluctuations, shortages or sustain profitability or positive cash flowsinterruptions of supply.
Adverse conditions in the future. Our inabilityglobal economy have negatively impacted, and could in the future negatively impact, our customers, suppliers and business.
As we evolve our business strategy to successfully achieveincrease our focus on new product and sustain profitability and positive cash flows may result in us experiencing a serious liquidity deficiency and resulting material adverse consequences that could threaten our viability.
We do not have major sources of recurring revenue and the loss of any significant customers or a major customer would likely materially adversely affect us.
Our currentevolving business strategy includes actively exploring potential acquisitions, which involves substantial risks.
Government tariffs and future financial results and position.other actions may adversely affect our business.
The market’s viewsuccess of our company, industry and products.
We increasingly rely on third-party manufacturers for the manufacture and development of our products and product componentscomponents.
Our continued emphasis on indirect distribution channels to sell our products and services to supplement our direct distribution channels has had limited success to date.
The reduction or elimination of investments in, or incentives to adopt, LED lighting or the elimination of, or changes in, policies, incentives or rebates in certain states or countries that encourage the use of LEDs over some traditional lighting technologies could cause the growth in demand for our products to slow.
Our ability to balance customer demand and production capacity and increased difficulty in obtaining permanent employee staffing could negatively impact our business.
Risks Related to Our Business
Operational Risks
Our business has been, and could again in the future be, negatively impacted by the COVID-19 pandemic.
The COVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets in the United States and globally. Our business has been adversely impacted by measures taken by customers, suppliers, government entities and others to control the spread of the virus beginning in March 2020, the last few weeks of our prior fiscal year, and continuing most significantly into the second quarter of fiscal 2021. During the third quarter of fiscal 2021, we experienced a rebound in business, with a full quarter
of project installations for our largest customer, as well as installations for a new large specialty retail customer, and no significant COVlD-19 impacts. However, some customers continue to refrain from awarding new projects and potential future risks remain due to the COVID-19 pandemic.
As part of our response to the impacts of the COVID-19 pandemic, during the fourth quarter of fiscal 2020, we implemented a number of cost reduction and cash conservation measures, including reducing headcount. While certain COVID-19 related restrictions began to initially lessen in certain jurisdictions during the second half of fiscal 2021, stay-at-home, face mask or lockdown orders remain in effect in others, with employees asked to work remotely if possible. Certain areas of the country have seen spikes of COVID-19 cases (including in and around our headquarters in Manitowoc, Wisconsin and our office in Jacksonville, Florida), which could result in renewed restrictions and lockdown orders. Some of our customers and projects are in areas where travel restrictions have been imposed, certain customers have either closed or reduced on-site activities, and timelines for the completion of several projects have been delayed, extended or terminated. These COVID-19 related modifications to our business practices, including any future actions we take, may cause us to experience reductions in productivity and disruptions to our business routines. In addition, we have needed to make substantial working capital expenditures and advance inventory purchases that we may not be able to recoup if our customer agreements or a substantial volume of purchase orders under our customer agreements are delayed or terminated as a result of COVID-19. It is not possible to predict the overall impact the COVID-19 pandemic will have on our business, liquidity, capital resources or financial results, although the economic and regulatory impacts of COVID-19 significantly reduced our revenue and profitability in the first half of fiscal 2021. If the COVID-19 pandemic becomes more pronounced in our markets or experiences a resurgence in markets recovering from the spread of COVID-19, or if another significant natural disaster or pandemic were to occur in the future, our results of operation would likely be materially adversely affected. The impact of COVID-19 may also exacerbate other risks discussed in Item 1A of this Annual Report on Form 10-K, any of which could have a material effect on our financial condition, results of operations and cash flows.
Our ability to achieve our desired revenue and profitability goals depends on our ability to effectively and timely execute on our key strategic initiatives.
Our ability to achieve our desired revenue and profitability goals depends on how effectively and timely we execute on our following key strategic initiatives:
executing and marketing our turnkey LED retrofit capabilities to large national account customers;
continuing our product innovation;
leveraging our smart lighting systems to support IoT applications;
developing our maintenance service offerings; and
supporting the success of our ESCO and distribution sales channels.
We also may identify and pursue strategic acquisition candidates that would help support these initiatives. There can be no assurance that we will be able to successfully implement these initiatives or, even if implemented, that they will result in the anticipated benefits to our business.
Our products use components and raw materials that may be subject to price fluctuations, shortages or interruptions of supply, including semiconductor chips that have been subject to an ongoing significant shortage. If we are unable to maintain supply sources of our components and raw materials or if our sources fail to satisfy our supply requirements, we may lose sales and experience increased component costs.
We are vulnerable to price increases, as well as transportation and delivery delays, for components and raw materials that we require for our products, including aluminum, copper, certain rare earth minerals, semiconductor chips, power supplies and LED chips and modules. In particular, we utilize semiconductor chips in our LED lighting products and control sensors. Since semiconductor chips have been recently subject to an ongoing significant shortage, our ability to source these important components that use semiconductor chips has been adversely affected. This has resulted in increased component delivery lead times, delays in our product production and increased costs to obtain components with available semiconductor chips. To the extent this semiconductor chip
shortage continues, our production ability and results of operations will be adversely affected. We also source certain finished goods externally.
Limitations inherent within our supply chain of certain of our components, raw materials and finished goods, including competitive, governmental, and legal limitations, natural disasters, and other events, could impact costs and future increases in the costs of these items. For example, the adoption of new tariffs by the new United States administration or by other countries and the ongoing impact of COVID-19 in China could continue to adversely affect our profitability and availability of raw materials and components, as there can be no assurance that future price increases will be successfully passed through to customers or that we will be able to find alternative suppliers. Further, suppliers’ inventories of certain components that our products require may be limited and are subject to acquisition by others. As a result of disruption to our supply chain due to COVID-19, which has caused supplier delivery constraints and concerns over component availability, we have attempted to purchase excess quantities of certain components that are critical to our product manufacturing. We will likely need to continue to follow this practice in the future. As a result, we have had, and may need to continue, to devote additional working capital to support component and raw material inventory purchases that may not be used over a reasonable period to produce saleable products, and we may be required to increase our excess and obsolete inventory reserves to account for these excess quantities, particularly if demand for our products does not meet our expectations. Also, any further delays, shortages or interruptions in the supply of our components or raw materials could further disrupt our operations. If any of these events occur, our results of operations, financial condition and cash flows could be materially adversely affected.
The success of our business depends upon market acceptance of our energy management products and services.
Our future success depends upon the continued market acceptance of our energy management products and services and obtaining additional project management retrofit contracts, as well as customer orders for new and expanded products and services to supplement our contract with our current single largest customer. If we are unable to convince current and potential new customers of the advantages of our lighting systems and energy management products and services, or our expanded product and services offerings, then our results of operations, financial condition and cash flows will likely be materially adversely affected. In addition, because the market for energy management products and services, as well as potential new customer uses for our products and services, is rapidly evolving, we may not be able to accurately assess the size of the market, and we may have limited insight into trends that may emerge and affect our business. If the market for our lighting systems and energy management products and services, as well as potential new customer uses for our products and services, does not continue to develop as we anticipate, or if the market does not accept our products or services, then our ability to grow our business could be limited and we may not be able to increase our revenue and our results of operations, financial condition and cash flows will likely be materially adversely affected.
We increasingly rely on third-party manufacturers for the manufacture and development of our products and product components.
We have increased our utilization of third-party manufacturers for the manufacture and development of our products and product components. Our business, prospects, results of operations, financial condition orand cash flows could be materially adversely affected if our third-party manufacturers were to experience problems with product quality, credit or liquidity issues, or disruptions or delays in thetheir manufacturing process or delivery of the finished products and components or the raw materials used to make such products and components.
We operate in a highly competitive industry and, if we are unable to compete successfully, our results of operations, financial condition and cash flows will likely be materially adversely affected.
We face strong competition, primarily from manufacturers and distributors of energy management products and services, as well as from ESCOs and electrical contractors. We are also facing increased competition from manufacturers in low-cost countries. We compete primarily on the basis of customer relationships, price, quality, energy efficiency, customer service and marketing support. Our products are in direct competition with the expanding availability of LED products, as well as other technologies in the lighting systems retrofit market.
Many of our competitors are better capitalized than we are and have strong customer relationships, greater name recognition, and more extensive engineering, manufacturing, sales and marketing capabilities. In addition, the LED market has seen increased convergence in recent years, resulting in our competition gaining increased market share and resources. Competitors could focus their substantial resources on developing a competing business model or energy management products or services that may be potentially more attractive to customers than our products or services. In addition, we may face competition from other products or technologies that reduce demand for electricity. Our competitors may also offer energy management products and services at reduced prices in order to improve their competitive positions. Any of these competitive factors could make it more difficult for us to attract and retain customers, or require us to lower our average selling prices in order to remain competitive, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Our ability to balance customer demand and production capacity and increased difficulty in obtaining permanent employee staffing could negatively impact our business.
As customer demand for our products changes, we must be able to adjust our production capacity, including increasing or decreasing our employee workforce, to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products. If we are not able to increase or decrease our production capacity at our targeted rate or if there are unforeseen costs associated with adjusting our capacity levels, our ability to execute our operating plan could be adversely affected
We have recently experienced increased difficulty in hiring sufficient permanent employees to support our production demands. This circumstance has resulted in our increased reliance on temporary employee staffing to support our production operations. Temporary employees can be less reliable and require more ongoing training than permanent employees. These factors can adversely affect our operational efficiencies. This situation has also placed a significant burden on our continuing employees, has resulted in higher recruiting expenses as we have sought to recruit and train additional new permanent employees, and introduced increased instability in our operations to the extent responsibilities are reallocated to new or different employees. To the extent that we are unable to effectively hire a sufficient number of permanent employees, and our reliance on temporary staffing continues to increase, our operations and our ability to execute our operating plan could be adversely affected.
Our inability to attract and retain key employees, our reseller network members or manufacturer representative agencies could adversely affect our operations and our ability to execute on our operating plan and growth strategy.
We rely upon the knowledge, experience and skills of key employees throughout our organization, particularly our senior management team, our sales group that requires technical knowledge or contacts in, and knowledge of, the LED industry, and our innovation and engineering team. In addition, our ability to attract talented new employees, particularly in our sales group and our innovation and engineering team, is also critical to our success. We also depend on our distribution channels and network of manufacturer sales representative agencies. If we are unable to attract and retain key employees, resellers, and manufacturer sales representative agencies because of competition or, in the case of employees, inadequate compensation or other factors, our results of operations and our ability to execute our operating plan could be adversely affected.
If our information technology systems security measures are breached or fail, our products may be perceived as not being secure, customers may curtail or stop buying our products, we may incur significant legal and financial exposure, and our results of operations, financial condition and cash flows could be materially adversely affected.
Our information technology systems involve the storage of our confidential information and trade secrets, as well as our customers’ personal and proprietary information in our equipment, networks and corporate systems. Security breaches expose us to a risk of loss of this information, litigation and increased costs for security measures, loss of revenue, damage to our reputation and potential liability. Security breaches or unauthorized access may result in a combination of significant legal and financial exposure, increased remediation and other costs, theft and/or unauthorized use or publication of our trade secrets and other confidential business information, damage to our reputation and a loss of confidence in the security of our products, services and networks that could have an adverse effect upon our business. While we take steps to prevent unauthorized access to our corporate systems, because the techniques used to obtain unauthorized access, disable or sabotage systems change frequently or may be designed to remain dormant until a triggering event, we may be unable to anticipate these techniques or implement adequate preventative measures. Further, the
risk of a security breach or disruption, particularly through cyber attacks, or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as cyber attacks have become more prevalent and harder to detect and fight against. In addition, hardware, software or applications we procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise network and data security. Any breach or failure of our information technology systems could result in decreased revenue, increased expenses, increased capital expenditures, customer dissatisfaction and potential lawsuits, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
Some of our existing information technology systems are in need of enhancement, updating and replacement. If our information technology systems fail, or if we experience an interruption in their operation, then our business, results of operations and financial condition could be materially adversely affected.
The efficient operation of our business is dependent on our information technology systems, some of which are in need of enhancement, updating and replacement. We rely on these systems generally to manage day-to-day operations, manage relationships with our customers, maintain our research and development data, and maintain our financial and accounting records. The failure of our information technology systems, our inability to successfully maintain, enhance and/or replace our information technology systems, or any compromise of the integrity or security of the data we generate from our information technology systems, could have a material adverse affect on our results of operations, disrupt our business and product development and make us unable, or severely limit our ability, to respond to customer demands. In addition, our information technology systems are vulnerable to damage or interruption from:
earthquake, fire, flood and other natural disasters;
employee or other theft;
attacks by computer viruses or hackers;
power outages; and
computer systems, internet, telecommunications or data network failure.
Any interruption of our information technology systems could result in decreased revenue, increased expenses, increased capital expenditures, customer dissatisfaction and potential lawsuits, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.
If we fail to establish and maintain effective internal controls over financial reporting, our business and financial results could be harmed.
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our consolidated financial statements or fraud. As of March 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that our internal controls for fiscal 2021 were designed and operating effectively. There can be no assurance that we will not experience a material weakness in our internal control over financial reporting in the future. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. A failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and in a timely manner or to detect and prevent fraud, could result in a restatement of our consolidated financial statements, and could also cause a loss of investor confidence and decline in the market price of our common stock.
Financial Risks
Adverse conditions in the global economy have negatively impacted, and could in the future negatively impact, our customers, suppliers and business.
Our operations and financial performance are impacted by worldwide economic conditions. Uncertainty about global economic conditions has contributed to customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors. The occurrence of these circumstances will likely have a material negative effect on demand for our products and services and, accordingly, on our results of operations, financial condition and cash flows. For example, any economic and political uncertainty caused by the United States tariffs imposed on other countries, and any corresponding tariffs from such other countries in response, may negatively impact demand and/or increase the cost for our products and components used in our products.
The new United States administration may pursue a wide range of monetary, regulatory and trade policies, including the continued imposition of the previous United States administration’s tariffs on certain imports. Certain sourced finished products and certain of the components used in our products are impacted by tariffs imposed on China imports. Our efforts to mitigate the impact of added costs resulting from these tariffs include a variety of activities, such as sourcing from non-tariff impacted countries and raising prices. If we are unable to successfully mitigate the impacts of these tariffs and other trade policies, our results of operations, financial condition and cash flows may be materially adversely affected.
In addition, global economic and political uncertainty has led many customers to adopt strategies for conserving cash, including limits on capital spending. Our lighting systems are often purchased as capital assets and therefore are subject to our customers’ capital availability. Uncertainty around such availability has led customers to delay their purchase decisions, which has elongated the duration of our sales cycles. Weak economic conditions in the past have adversely affected our customers’ capital budgets, purchasing decisions and facilities managers and, as a result, have adversely affected our results of operations, financial condition and cash flows. The return to a recessionary state of the global economy could potentially have negative effects on our near-term liquidity and capital resources, including slower collections of receivables, delays of existing order deliveries, postponements of incoming orders and reductions in the number and volume of purchase orders received from key customers as a result of reduced capital expenditure budgets. Our business and results of operations will be adversely affected to the extent these adverse economic conditions affect our customers’ purchasing decisions.
We do not have major sources of recurring revenue and we depend upon a limited number of customers in any given period to generate a substantial portion of our revenue. The loss of any significant customers or a major customer would likely have a materially adverse effect on our results of operations, financial condition and cash flows.
We do not have any significant long-term contracts with our customers that provide us with recurring revenue from period to period. We currently generate a substantial portion of our revenue by securing large retrofit and multi-facility roll-out projects from new and existing customers. As a result, our dependence on individual key customers can vary from period to period due to the significant size of some of our retrofit and multi-facility roll-out projects. Our top 10 customers accounted for approximately 80%, 83% and 48% respectively, of our total revenue for fiscal 2021, 2020 and 2019. In fiscal 2020, one customer accounted for 74.1% of our total revenue compared to 20.7% in fiscal 2019. In fiscal 2021, this customer accounted for 56.0% of our total revenue. We expect that we will continue to experience significant customer concentration in fiscal 2022, although we expect this relative concentration level to diminish during fiscal 2022. The loss of this customer or our failure to satisfy its installation requirements could have a material adverse effect on our results of operations, financial condition and cash flows, as well as on our reputation and our ability to execute our business strategy. We expect large retrofit and rollout projects to continue to remain a significant component of our total revenue.
The multi-location master retrofit agreements we have entered into with several of our key customers (including our current largest customer) generally require that the customer issue individual facility location work orders or purchase orders before we may install our products at that location. These master agreements do not guarantee that our key customers will make individual facility location purchases from us and they also generally allow any individual location purchase order or work order to be terminated prior to shipment. As a result, the relative amount and concentration of our revenues may fluctuate year over year and period over period
depending on the number of purchase orders or work orders issued by our key customers, which may fluctuate due to factors such as our customers’ capital expenditure budgets and general economic conditions. The loss of, or substantial reduction in sales to, any of our significant customers, or a major customer, or the termination or delay of a significant volume of purchase orders by one or more key customers, would likely have a material adverse effect on our results of operations, financial condition and cash flows in any given future period.
Our net operating loss carry-forwards provide a future benefit only if we continue to be profitable and may be subject to limitation based upon ownership changes.
We have significant federal net operating loss carry-forwards and state net operating loss carry-forwards. If we are unable to maintain our recent profitability, we may not be able to fully utilize these tax benefits. Furthermore, generally a change of more than 50% in the ownership of a company’s stock, by value, over a three-year period constitutes an ownership change for federal income tax purposes. An ownership change may limit a company’s ability to use its net operating loss carry-forwards attributable to the period prior to such change. As a result, our ability to use our net operating loss carry-forwards attributable to the period prior to such ownership change to offset taxable income could be subject to limitations in a particular year, which could potentially result in our increased future tax liability.
Given our current earnings and potential future earnings, as of March 31, 2021, we recorded a valuation allowance release of $20.9 million against our deferred tax assets. This resulted in substantially and disproportionately increasing our reported net income and our earnings per share compared to our operating results. Historical and future comparisons to these amounts are not, and will not be, indicative of actual profitability trends for our business.
We may not be able to obtain equity capital or debt financing necessary to effectively pursue our evolving strategy and sustain our growth initiatives.
Our existing liquidity and capital resources may not be sufficient to allow us to effectively pursue our evolving growth strategy, complete potential acquisitions or otherwise fund or sustain our growth initiatives. If we require additional capital resources, we may not be able to obtain sufficient equity capital and/or debt financing on acceptable terms or conditions, or at all. Factors affecting the availability to us of additional equity capital or debt financing on acceptable terms and conditions, or in sufficient amounts, include:
Our history of operating losses prior to our fiscal 2020;
Our current and future financial results and condition;
Our limited collateral availability;
Our current customer concentration;
The market’s, investors’ and lenders' view of our company, industry and products;
The perception in the equity and debt markets of our ability to execute and sustain our business plan or achieve our operating results expectations; and
The price, volatility and trading volume and history of our common stock.
Our inability to obtain the equity capital or debt financing necessary to pursue our evolving growth strategy could force us to scale back our growth initiatives or abandon potential acquisitions. If we are unable to pursue our evolving growth strategy and growth initiatives, our results of operations, financial condition and cash flows could be materially adversely affected.
Until fiscal 2020, we had a history of losses and negative cash flow and we may be unable to sustain our recent profitability and positive cash flows in the future.
Prior to fiscal 2020, we experienced net losses and negative cash flows for the prior five fiscal years. There is no guarantee that we will be able to sustain our recent profitability and positive cash flows in the future. Our inability to successfully sustain our
profitability and positive cash flows could materially and adversely affect our ability to pursue our evolving strategy and growth initiatives.
We are subject to financial and operating covenants in our credit agreement and any failure to comply with such covenants, or obtain waivers in the event of non-compliance, could limit our borrowing availability under the credit agreement, resulting in our being unable to borrow under our credit agreement and materially adversely impact our liquidity.
Our credit agreement contains provisions that limit our future borrowing availability and sets forth other customary covenants, including certain restrictions on our ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, make investments, pay any dividend or distribution on our stock, redeem, repurchase or retire shares of our stock, or pledge or dispose of assets.
There can be no assurance that we will be able to comply with the financial and other covenants in our credit agreement. Our failure to comply with these covenants could cause us to be unable to borrow under the credit agreement and may constitute an event of default which, if not cured or waived, could result in the acceleration of the maturity of any indebtedness then outstanding under the credit agreement, which would require us to pay all amounts then outstanding. Such an event could materially adversely affect our financial condition and liquidity. Additionally, such events of non-compliance could impact the terms of any additional borrowings and/or any credit renewal terms. Any failure to comply with such covenants may be a disclosable event and may be perceived negatively. Such perception could adversely affect the market price for our common stock and our ability to obtain financing in the future.
Strategic Risks
As we evolve our business strategy to increase our focus on new product and service offerings, including our comprehensive energy management and maintenance services and our IoT, “smart-building,” “connected ceilings” and other related technology, software and controls products and services, the nature of our business may be significantly changed, or transformed, and our results of operations, financial condition and cash flows may be materially adversely affected.
Our future growth and profitability are tied in part to our ability to successfully bring to market new and innovative product and service offerings. We have begun to evolve our business strategy to focus on further expanding the nature and scope of our products and services offered to our customers. This further expansion of our products and services includes pursuing projects to develop recurring revenue streams, including beginning to offer lighting, electrical, heating and ventilation, and other energy maintenance services to large customers with numerous locations. Our expansion efforts also involve utilizing control sensor technology to collect data and assisting customers in the digitization of this data, along with other potential services. We have experienced recent success offering our comprehensive energy project management services to national account customers to retrofit their multiple locations. We also plan to pursue the expansion of our IoT “smart-building” and “connected ceiling” and other related technology, software and controls products and services we offer to our customers. We have invested, and plan to continue to invest, significant time, resources and capital into expanding our offerings in these areas with no expectation that they will provide material revenue in the near term and without any assurance they will succeed or be profitable. In fact, these efforts have reduced our profitability, and will likely continue to do so, at least in the near term. Moreover, as we continue to explore, develop and refine new offerings, we expect that market preferences will continue to evolve, our offerings may not generate sufficient interest by end-user customers and we may be unable to compete effectively with existing or new competitors, generate significant revenues or achieve or maintain acceptable levels of profitability.
If we are successful in introducing new product and services offerings, including expanded energy management and maintenance services and products with new technology, software and controls, the nature of our business may significantly change or be transformed away from being principally lighting products focused. Additionally, our experience providing energy maintenance services and technology, software and controls products and services is limited. If we do not successfully execute our strategy or anticipate the needs of our customers, our credibility as a provider of energy maintenance services and technology, software and controls products could be questioned and our prospects for future revenue growth and profitability may never materialize.
As we expand our product and services offerings to new markets, the overall complexity of our business will likely increase at an accelerated rate and we may become subject to different market dynamics. The new markets into which we are expanding, or may expand, may have different characteristics from the markets in which we have historically competed. These different characteristics may include, among other things, rapidly changing technologies, different supply chains, different competitors and methods of competition, new product development rates, client concentrations and performance and compatibility requirements. Our failure to make the necessary adaptations to our business model to address these different characteristics, complexities and new market dynamics could adversely affect our operating results.
Accordingly, if we fail to successfully launch, manage and maintain our evolving business strategy, our future revenue growth and profitability would likely be limited and our results of operations, financial condition and cash flows would likely be materially adversely affected.
Our evolving business strategy includes actively exploring potential acquisitions, including potential acquisitions that could significantly change, or even transform, the nature of our business. These acquisitions could be unsuccessful or consume significant resources, which could materially adversely affect our results of operations, financial condition and cash flows.
We are actively exploring potential business acquisitions which would more quickly add expanded and different capabilities to our product and services offerings, including potential acquisitions that could significantly change, or even transform, the nature of our business. There can be no assurance that we will identify or successfully complete transactions with suitable acquisition candidates in the future. Similarly, there can be no assurance that any completed acquisitions will be successful. Acquisitions may involve significant cash expenditures, debt incurrence, stock issuances, operating losses and expenses that would otherwise be directed to investments in our existing business and could have a material adverse effect on our financial condition, results of operations and cash flows. To pursue acquisitions and other strategic transactions, we may need to raise additional debt and/or equity capital in the future, which may not be available on acceptable terms, in sufficient amounts or at all. In addition, we may issue new shares of our common stock as consideration in such transactions, which may have a dilutive impact on our existing shareholders and may also result in a reduction in the market price of our shares once those newly issued shares are resold in the market. In addition, acquisitions involve numerous other risks, including:
the failure of the acquired business to achieve its revenue or profit forecasts;
the business culture of the acquired business may not match well with our culture;
our business strategies and focus may change in ways that adversely affect our results of operations;
technological and product synergies, economies of scale and cost reductions from the acquisition may not occur as expected;
unforeseen expenses, delays or conditions may result from the acquisition, including required regulatory approvals or consents;
potential changes may result to our management team and/or board of directors;
we may acquire or assume unexpected liabilities or be subject to unexpected penalties or other enforcement actions or legal consequences;
faulty assumptions may be made regarding the macroeconomic environment or the integration process that form a basis for the acquisition;
unforeseen difficulties, delays and costs may arise in integrating the acquired business’s operations, processes and systems;
higher than expected investments may be required to implement necessary compliance processes and related systems, including information technology systems, accounting systems and internal controls over financial reporting;
we may fail to retain, motivate and integrate key management and other employees of the acquired business;
higher than expected costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies in any jurisdiction in which the acquired business conducts its operations;
we may adversely impact our sales channels and our sales channel partners; and
we may experience problems in retaining customers and integrating customer bases.
Many of these factors will be outside of our control and any one of them could result in increased costs and reduced profitability, decreases in the amount of expected revenues and diversion of our management’s time and attention. They may also delay, decrease or eliminate the realization of some or all of the benefits we anticipate when we enter into the transaction.
Because we have historically only made one acquisition to date, our ability to do so again successfully is unproven. Moreover, our management team has limited experience in, and limited time to dedicate to, pursuing, negotiating or integrating acquisitions. If we do identify suitable candidates, we may not be able to negotiate or consummate such acquisitions on favorable terms or at all. Any acquisitions we complete may not achieve their initially intended results and benefits, and may be viewed negatively by investors and other stakeholders.
We may undertake acquisitions financed in part through public offerings or private placements of debt or equity securities, including through the new issuance of our common stock or debt securities as consideration in an acquisition transaction. Such acquisition financing could result in dilution to our current shareholders, a decrease in our earnings and/or adversely affect our financial condition, liquidity or other leverage measures.
In addition to committing additional capital resources to complete any acquisitions, substantial additional capital may be required to operate the acquired businesses following their acquisition. Moreover, these acquisitions may result in significant financial losses if the intended objectives of the transactions are not achieved. Some of the businesses we may acquire may have significant operating and financial challenges, requiring significant additional capital commitments to overcome such challenges and adversely affecting our financial condition and liquidity.
Failure to implement our acquisition strategy, including successfully integrating acquired businesses, could have a material adverse effect on our results of operations, financial condition and cash flows.
The success of our business depends upon our adaptation to the quickly changing market conditions in the lighting industry and on market acceptance of our lighting retrofit solutions using LED and control technologies.
The market for lighting products has experienced a significant technology shift to LED lighting systems. In addition, we continue to explore utilizing our system platform as a “connected ceiling” or “smart ceiling”, or a framework or network that can support the installation and integration of other business technology or data information solutions on our lighting platform.
As a result, our future success depends significantly upon the adoption rate of LED products within our primary markets, our ability to participate in this ongoing market trend and our ability to expand into complementary markets. To be an effective participant in the LED market, we must keep up with the evolution of LED and related technologies, which continue to move at a fast pace. We may be unable to successfully develop and market new products or services that keep pace with technological or industry changes, differentiate ourselves from our competition, satisfy changes in customer demands or comply with present or emerging government and industry regulations and technology standards. The development and introduction of new products and services may result in increased warranty expenses and other new product and services introduction expenses. In addition, we will likely continue to incur substantial costs to research and develop new products and services, which will increase our expenses, without guarantee that our new products and services will be commercially viable. We may also spend time and resources to develop and release new products and services only to discover that a competitor has also introduced similar new products and services with superior performance, at a lower price or on better delivery terms. Moreover, if new sources of lighting or lighting-based solutions are developed, our current products and technologies could become less competitive or obsolete, which could result in reduced revenue, reduced earnings or increased losses, and/or inventory and other impairment charges.
Finally, in connection with our historical primary focus on selling our LED products, we expect our results of operations to continue to fluctuate from quarter to quarter to the extent that customers delay purchasing decisions as they evaluate their return on investment from purchasing LED products compared to alternative lighting solutions, the pricing of LED products continues to fall
and LED products continue to gain more widespread customer acceptance. Similarly, these circumstances have adversely impacted, and may continue to adversely impact, our product gross margins and our profitability from quarter to quarter.
If we are unable to achieve market acceptance of our lighting retrofit solutions using LED technologies and our system platform as a “connected ceiling” or “smart ceiling” or realize the expected benefits from our focus on promoting new products and services, our results of operations, financial condition and cash flows will likely be materially adversely affected.
The success of our LED lighting retrofit solutions depends, in part, on our ability to claim market share away from our competitors. If we are unable to expand our customer base and increase sales in our targeted markets, our results of operations, financial condition and cash flows will likely be materially adversely affected.
Participants in the LED market who are able to quickly establish customer relationships and achieve market penetration are likely to gain a competitive advantage as the lighting retrofit solutions offered by us and our competitors generally have a product life of several years following installation. If we are unable to broaden our customer base and achieve greater market penetration in the LED market in a timely manner, we may lose the opportunity to market our LED products and services to significant portions of the lighting systems retrofit market for several years and may be at a disadvantage in securing future business opportunities from customers that have previously established relationships with one or more of our competitors. These circumstances could have a material adverse effect on our results of operations, financial condition and cash flows.
In addition, as we continue to seek to expand our customer base within our national account, agent and ESCO sales channels, our success will depend, in part, on our ability to attract and retain talent to execute on our sales model. If we are unable to attract and retain sufficient talent, we may be unable to broaden our customer base, which will adversely affect our results of operations, financial condition and cash flows.
Our continued emphasis on indirect distribution channels to sell our products and services.services to supplement our direct distribution channels has had limited success to date. If we are unable to attract, incentivize and retain our third-party distributors and sales agents, or our distributors and sales agents do not sell our products and services at the levels expected, our revenues could decline and our costs could increase.
We have significantly expanded the number of ourutilize manufacturer representative sales agencies that sell our products through broadlinedistributors. Many of these sales agents and distributors many of which are not exclusive, which means that these sales agents and distributors may sell other third-party products and services in direct competition with us. Since many of our competitors use sales agents and distributors to sell their products and services, competition for such agents and distributors is intense and may adversely affect our product pricing and gross margins. Additionally, due to mismanagement, industry trends, macro-economic developments, or other reasons, our sales agents and distributors may be unable to effectively sell our products at the levels desired or anticipated. In addition, we have historically relied on direct sales to sell our products and services, which were often made in competition with sales agents and distributors. In order to attract and form lasting partnerships with sales agents and distributors, in the future, we will be requiredare attempting to overcome our historical perception as a direct sales competitor. As a result, we may have difficulty attracting and retaining sales agents and distributors and any inability to do so could have a negative effect on our ability to attract and obtain customers, which could have an adverse impact on our business.
Our financial performance is dependent on our ability to execute onachieve growth in our strategy and increaseaverage selling price of our profitability.
The gross margins of our products can vary significantly, with margins ranging from 15%10% to 50%. While we continue to implement our strategy of transitioning to higher-margin products and reducing the material cost of our products, a change in the total mix of our sales toward lower margin products, a decrease in the margins on our products as a result of competitive pressures driving down the average selling price of our products, lower sales volumes, and promotional programs to increase sales volumes could reduce our profitability and result in a material adverse effect on our businessresults of operations, financial condition and financial performance.
able to innovate and ifrelease new products on a regular basis with features and benefits that generate increases in our average selling price and average gross margin. There can be no assurance we will be successful in achieving these goals.
Legal, Regulatory and Compliance Risks
Government tariffs and other actions may adversely affect our business.
The United States government has been implementing various monetary, regulatory, and trade importation restraints, penalties, and tariffs. Certain sourced finished products and certain of the components used in our products have been impacted by tariffs imposed on China imports. Our efforts to mitigate the impact of added costs resulting from these government actions include a variety of activities, such as sourcing from non-tariff impacted countries and raising prices. If we are unable to compete successfully mitigate the impacts of these tariffs and other trade policies (including any new or different tariffs or policies implemented by the new United States administration), our revenue and profitability willresults of operations may be adversely affected.
The reduction or elimination of investments in, or incentives to customers thanadopt, LED lighting or the elimination of, or changes in, policies, incentives or rebates in certain states or countries that encourage the use of LEDs over some traditional lighting technologies could cause the growth in demand for our products to slow, which could have a material adverse affect on our results of operations, financial condition and cash flows.
Reductions in (including as a result of any budgetary constraints), or services. In addition, we may face competition from other products or technologies that reducethe elimination of, government investment and favorable energy policies designed to accelerate the adoption of LED lighting could result in decreased demand for electricity. Our competitors may also offer energy managementour products and servicesadversely affect our results of operations, financial condition and cash flows. Further, if our products fail to qualify for any financial incentives or rebates provided by governmental agencies or utilities for which our competitors’ products qualify, such programs may diminish or eliminate our ability to compete by offering products at reducedlower prices than ours.
The elimination of, or changes in, orderpolicies, incentives or rebates in certain states that encourage the use of solar power over other traditional power sources could cause the revenue from our sale of solar-related tax credits to improve their competitive positions. Any of these competitive factors could make it more difficult for usthird parties to attract and
We have long-lived assets associated with our legacy solar business and recognize revenue from the sale to third parties of our business depends upon our adaptation totax credits received from operating these solar assets. There is currently legislation pending which may decrease the changing market conditions in the lighting industry and on market acceptance of our lighting retrofit solutions using new LED technologies.
Changes in government budget priorities and political gridlock, and future potential government shutdown, could negatively impact our results of operations, financial condition.
Actual and services. If we are unable to convince current and potential customersperceived changes in governmental budget priorities as a result of the advantagesnew United States administration, and future potential government shutdowns, could adversely affect our results of our lighting systemsoperations, financial condition and energy managementcash flows. Certain government agencies purchase certain products and services then our abilitydirectly from us. When the government changes budget priorities, such as in times of war, financial crisis, or a changed administration, or reallocates spending to sell our lighting systems and energy management products and services will be limited. In addition, because the market for energy management products and services is rapidly evolving, we may not be ableareas unrelated to accurately assess the size of the market, and we may have limited insight into trends that may emerge and affect our business. If the market for our lighting systems and energy management products and services does not continue to develop, or if the market does not accept our
Product liability claims could adversely affect our business, results of operations and financial condition.
We face exposure to product liability claims in the event that our energy management products fail to perform as expected or cause bodily injury or property damage. Since virtually all of our products use electricity, it is possible that our products could result in injury, whether by product malfunctions, defects, improper installation or other causes. Particularly because our products often incorporate new technologies or designs, we cannot predict whether or not product liability claims will be brought against us in the future or result in negative publicity about our business or adversely affect our customer relations. Moreover, we may not have adequate resources in the event of a successful claim against us. A successful product liability claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages and could materially adversely affect our results of operations, financial condition and financial condition.
Our inability to protect our intellectual property, or our involvement in damaging and disruptive intellectual property litigation, could adversely affect our business, results of operations, and financial condition and cash flows or result in the loss of use of the related product or service.
We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as employee and third-party nondisclosure and assignment agreements. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations, financial condition and financial condition.
We own United States patents and patent applications for some of our products, systems, business methods and technologies. We offer no assurance about the degree of protection which existing or future patents may afford us. Likewise, we offer no assurance that our patent applications will result in issued patents, that our patents will be upheld if challenged, that competitors will not develop similar or superior business methods or products outside the protection of our patents, that competitors will not infringe upon our patents, or that we will have adequate resources to enforce our patents. Effective protection of our United States patents may be unavailable or limited in jurisdictions outside the United States, as the intellectual property laws of foreign countries sometimes offer less protection or have onerous filing requirements. In addition, because some patent applications are maintained in secrecy for a period of time, we could adopt a technology without knowledge of a pending patent application, and such technology could infringe a third party’s patent.
We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise learn of our unpatented technology. To protect our trade secrets and other proprietary information, we generally require employees, consultants, advisors and collaborators to enter into confidentiality agreements. We cannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, our business could be materially adversely affected.
We rely on our trademarks, trade names, and brand names to distinguish our company and our products and services from our competitors. Some of our trademarks may conflict with trademarks of other companies. Failure to obtain trademark registrations could limit our ability to protect our trademarks and impede our sales and marketing efforts. Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks.
In addition, third parties may bring infringement and other claims that could be time-consuming and expensive to defend. Also, parties making infringement and other claims against us may be able to obtain injunctive or other equitable relief that could effectively block our ability to provide our products, services or business methods and could cause us to pay substantial damages. In the event of a successful claim of infringement against us, we may need to obtain one or more licenses from third parties, which may not be available at a reasonable cost, or at all. It is possible that our intellectual property rights may not be valid or that we may infringe upon
Our retrofitting process frequently involves responsibility for the removal and disposal of components containing hazardous materials.
When we retrofit a customer’s facility, we typically assume responsibility for removing and disposing of its existing lighting fixtures. Certain components of these fixtures typically contain trace amounts of mercury and other hazardous materials. Older components may also contain trace amounts of polychlorinated biphenyls, or PCBs. We currently rely on contractors to remove the components containing such hazardous materials at the customer job site. The contractors then arrange for the disposal of such components at a licensed disposal facility. Failure by such contractors to remove or dispose of the components containing these hazardous materials in a safe, effective and lawful manner could give rise to liability for us, or could expose our workers or other persons to these hazardous materials, which could result in claims against us which may have a material adverse effect on our results of operations, financial condition and cash flows or reputation.
The cost of compliance with environmental laws and regulations and any related environmental liabilities could adversely affect our results of operations, or financial condition.
Our operations are subject to federal, state and local laws and regulations governing, among other things, emissions to air, discharge to water, the remediation of contaminated properties and the generation, handling, storage, transportation, treatment and disposal of, and exposure to, waste and other materials, as well as laws and regulations relating to occupational health and safety. These laws and regulations frequently change, and the violation of these laws or regulations can lead to substantial fines, penalties
Risks Related to Our Common Stock
We expect our quarterly revenue and operating results to fluctuate. If we fail to meet the expectations of market analysts or investors, the market price of our common stock could decline substantially, and we could become subject to securities litigation.
Our quarterly revenue and operating results have fluctuated in the past and will likely vary from quarter to quarter in the future. TheOur results of onefor any particular quarter are not an indication of our future performance. Our revenue and operating results may fall below the expectations of market analysts or investors in some future quarter or quarters. Our failure to meet these expectations could cause the market price of our common stock to decline substantially. If the price of our common stock is volatile or falls significantly below our current price, we may be the target of securities litigation. If we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs, management’s attention could be diverted from the operation of our business, and our reputation could be damaged, which could adversely affect our business, results of operations, or financial condition.
If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will continue to depend, in part, on the research and reports that securities or industry analysts publish about us orand our business.peer group companies. If these analysts do not continue to provide adequate research coverage or if one or more of the analysts who covers us downgrades our stock, lowers our stock’s price target or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
The price of our common stock has been, and may continue to be, volatile.
Historically, the market price of our common stock has fluctuated over a wide range, and it is likely that the price of our common stock will continue to be volatile in the future. The trading price of our common stock has ranged from $3.22 to $11.67 per share during the period from April 1, 2020 to March 31, 2021. The market price of our common stock could be impacted due to a variety of factors, including:
actual or anticipated fluctuations in our operating results or our competitors’ operating results;
actual or anticipated changes in the growth rate of the general LED lighting industry, our growth rates or our competitors’ growth rates;
conditions in the financial markets in general or changes in general economic conditions, including government efforts to mitigate the severe economic downturn resulting from the COVID-19 pandemic;
novel and unforeseen market forces and trading strategies, such as the massive short squeeze rally caused by retail investors and social media activity affecting companies such as GameStop Corp.;
actual or anticipated changes in governmental regulation, including taxation and tariff policies;
interest rate or currency exchange rate fluctuations;
our ability to forecast or report accurate financial results; and
changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally.
In addition, due to one or more of the foregoing factors in one or more future quarters, our results of operations may fall below the expectations of securities analysts and investors. In the event any of the foregoing occur, the market price of our common stock could be highly volatile and may materially decline
The market price of our common stock could be adversely affected by future sales of our common stock in the public market by us or our executive officers and directors.
We and our executive officers and directors may from time to time sell shares of our common stock in the public market or otherwise. On February 18, 2021, we reported that Michael W. Altschaefl, our Chief Executive Officer and Board Chair, and Scott A. Green, our Chief Operating Officer and Executive Vice President, had each adopted separate prearranged trading plans for a specified number of their shares of our common stock, in accordance with guidelines specified by Rule 10b5-1 under the Exchange Act and our policies regarding transactions by insiders in our common stock. We cannot predict the size or the effect, if any, that future sales of shares of our common stock by us or our executive officers and directors, or the perception of such sales, wouldwill have on the market price of our common stock.
We are not currently paying dividends on our common stock and will likely continue not paying dividends for the foreseeable future.
We have never paid or declared any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to fund the continued development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. In addition, the terms of our existing revolving credit agreement restrict the payment of cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, contractual restrictions and other factors that our board of directors deems relevant. The restrictionrestrictions on, and decision not to, pay dividends on our common stock may impact our ability to attract certain investors and raise funds, if necessary, in the capital markets.
Anti-takeover provisions included in the Wisconsin Business Corporation Law, provisions in our amended and restated articles of incorporation or bylaws and the common share purchase rights that accompany shares of our common stock could delay or prevent a change of control of our company, which could adversely impact the value of our common stock and may prevent or frustrate attempts by our shareholders to replace or remove our current board of directors or management.
A change of control of our company may be discouraged, delayed or prevented by certain provisions of the Wisconsin Business Corporation Law. These provisions generally restrict a broad range of business combinations between a Wisconsin corporation and a shareholder owning 15% or more of our outstanding common stock. These and other provisions in our amended and restated articles of incorporation, including our staggered board of directors and our ability to issue “blank check” preferred stock, as well as the provisions of our amended and restated bylaws and Wisconsin law, could make it more difficult for shareholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by theour then-current board of directors, including to delay or impede a merger, tender offer or proxy contest involving our company.
Each currently outstanding share of our common stock includes, and each newly issued share of our common stock will include, a common share purchase right. TheThese rights are attached to, and trade with, the shares of our common stock and generally are not currently exercisable. TheThese rights will become exercisable if a person or group acquires, or announces an intention to acquire, 20% or more of our outstanding common stock. TheThese rights have some anti-takeover effects and generally will cause substantial dilution to a person or group that attempts to acquire control of us without conditioning the offer on either redemption of the rights or amendment of the rights to prevent this dilution. TheThese rights could have the effect of delaying, deferring or preventing a change of control.
In addition, our employment arrangements with senior management provide for severance payments and accelerated vesting of benefits, including accelerated vesting of stock options and restricted stock awards, upon a change of control.control and a subsequent qualifying termination (other than for our Chief Executive Officer). These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby adversely affecting the market price of our common stock. These provisions may also discourage or prevent a change of control or result in a lower price per share paid to our shareholders.
None.
We lease our approximately 266,000 square foot manufacturing and distribution facility located in Manitowoc, Wisconsin. On MarchJanuary 31, 2016,2020, we entered into a purchasenew lease for the facility with a ten-year term, and sale agreement ("Agreement") with Tramontina U.S. Cookware, Inc. ("Tramontina")an option to sell our manufacturing and distribution facility for a cash purchase price of approximately $2,600,000. Pursuant to the Agreement, we are negotiating a lease with Tramontina under which we will lease approximately 200,000 square feet of the building for not less than three years, with rent at $2.00 per square foot per annum. The lease will contain options by
We recorded an impairment charge of $1,614,000 in fiscal 2016 based on the related assets' carrying values exceeding the expected proceeds from this sale transaction.
The facilities noted above are utilized by all our business segments.
We are subject to various claims and legal proceedings arising in the ordinary course of business. As of the date hereof,of this report, we are unable to currently assess whetherdo not believe that the final resolution of any of such claims or legal proceedings maywould have a material adverse effect on Orion’sour future results of operations. In addition to ordinary-course litigation, we are a party to the proceedings described below.
None.
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Shares of our Common Stock
High | Low | ||||||
Fiscal 2016 | |||||||
First Quarter | $ | 3.48 | $ | 2.17 | |||
Second Quarter | $ | 2.59 | $ | 1.73 | |||
Third Quarter | $ | 2.50 | $ | 1.58 | |||
Fourth Quarter | $ | 2.25 | $ | 1.18 | |||
Fiscal 2015 | |||||||
First Quarter | $ | 2.51 | $ | 2.00 | |||
Second Quarter | $ | 4.44 | $ | 2.30 | |||
Third Quarter | $ | 7.22 | $ | 3.50 | |||
Fourth Quarter | $ | 8.11 | $ | 4.71 |
Shareholders
As of June 9, 2016,May 21, 2021, there were approximately 229159 record holders of the 28,059,35130,806,390 outstanding shares of our common stock. The number of record holders does not include shareholders for whom shares are held in a “nominee” or “street” name.
Dividend Policy
We have never paid or declared any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. In addition, the terms of our existing credit agreement restrict the payment of cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, contractual restrictions (including those under our loan agreements) and other factors that our board of directors deems relevant.
Securities Authorized for Issuance under Equity Compensation Plans
The following table represents shares outstanding under our 20032004 Stock Optionand Incentive Awards Incentive Plan, and our 2004 Equity2016 Omnibus Incentive Plan as of March 31, 2016.
Equity Compensation Plan Information | Equity Compensation Plan Information | Equity Compensation Plan Information |
| |||||||||||||||||||
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options and Vesting of Restricted Shares | Weighted Average Exercise Price of Outstanding Options and Restricted Shares | Number of Securities Remaining Available for Future Issuances Under the Equity Compensation Plans (1) |
| Number of Shares to be Issued Upon Exercise of Outstanding Options and Vesting of Restricted Shares |
|
| Weighted Average Exercise Price of Outstanding Options |
|
| Number of Shares Remaining Available for Future Issuances Under the 2016 Omnibus Incentive Plan Plans (1) |
| ||||||||||
Equity Compensation plans approved by security holders | 3,070,435 | $ | 3.32 | 787,686 |
|
| 665,957 |
|
| $ | 2.74 |
|
|
| 1,578,445 |
| ||||||
Equity Compensation plans not approved by security holders | — | — | — |
|
| — |
|
|
| — |
|
|
| — |
| |||||||
Total | 3,070,435 | $ | 3.32 | 787,686 |
|
| 665,957 |
|
| $ | 2.74 |
|
|
| 1,578,445 |
|
(1) | |
Excludes shares reflected in the column titled “Number of |
Issuer Purchase of Equity Securities
We did not purchase shares of our common stock during the fiscal year ended March 31, 2016.
Unregistered Sales of Securities
You should read the following selected consolidated financial data in conjunction with Item 7. “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations" and our consolidated financial statements and the related notes included in Item 8. "Financial Statements and Supplementary Data" of this report. The selected historical consolidated financial data are not necessarily indicative of future results.
Fiscal Year Ended March 31, |
| Fiscal Year Ended March 31, |
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2016 | 2015 | 2014 | 2013 | 2012 |
| 2021 |
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| 2020 |
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| 2019 |
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| 2018 |
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| 2017 |
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(in thousands, except per share amounts) |
| (in thousands, except per share amounts) |
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Consolidated statements of operations data: |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Product revenue | $ | 64,897 | $ | 65,881 | $ | 71,954 | $ | 72,604 | $ | 90,782 |
| $ | 87,664 |
|
| $ | 113,352 |
|
| $ | 56,261 |
|
| $ | 55,595 |
|
| $ | 66,224 |
| |||||||||
Service revenue | 2,745 | 6,329 | 16,669 | 13,482 | 9,780 |
|
| 29,176 |
|
|
| 37,489 |
|
|
| 9,493 |
|
|
| 4,705 |
|
|
| 3,987 |
| ||||||||||||||
Total revenue | 67,642 | 72,210 | 88,623 | 86,086 | 100,562 |
|
| 116,840 |
|
|
| 150,841 |
|
|
| 65,754 |
|
|
| 60,300 |
|
|
| 70,211 |
| ||||||||||||||
Cost of product revenue(1)(5) | 49,630 | 68,388 | 54,423 | 49,551 | 62,842 | ||||||||||||||||||||||||||||||||||
Cost of service revenue | 2,015 | 4,959 | 11,220 | 9,805 | 7,682 | ||||||||||||||||||||||||||||||||||
Cost of product revenue (1)(2) |
|
| 63,233 |
|
|
| 83,588 |
|
|
| 44,111 |
|
|
| 41,415 |
|
|
| 49,630 |
| |||||||||||||||||||
Cost of service revenue (1) (3) |
|
| 23,483 |
|
|
| 30,130 |
|
|
| 7,091 |
|
|
| 4,213 |
|
|
| 3,244 |
| |||||||||||||||||||
Total cost of revenue | 51,645 | 73,347 | 65,643 | 59,356 | 70,524 |
|
| 86,716 |
|
|
| 113,718 |
|
|
| 51,202 |
|
|
| 45,628 |
|
|
| 52,874 |
| ||||||||||||||
Gross profit (loss) | 15,997 | (1,137 | ) | 22,980 | 26,730 | 30,038 | |||||||||||||||||||||||||||||||||
General and administrative expenses(1)(2)(3) | 16,884 | 14,908 | 14,951 | 13,946 | 11,399 | ||||||||||||||||||||||||||||||||||
Goodwill and long lived asset impairment (6) | 6,023 | — | — | — | — | ||||||||||||||||||||||||||||||||||
Acquisition and integration related expenses (4) | — | 47 | 819 | — | — | ||||||||||||||||||||||||||||||||||
Sales and marketing expenses(1)(2) | 11,343 | 13,290 | 13,527 | 17,129 | 15,599 | ||||||||||||||||||||||||||||||||||
Research and development expenses(1) | 1,668 | 2,554 | 2,026 | 2,259 | 2,518 | ||||||||||||||||||||||||||||||||||
Income (Loss) from operations | (19,921 | ) | (31,936 | ) | (8,343 | ) | (6,604 | ) | 522 | ||||||||||||||||||||||||||||||
Gross profit |
|
| 30,124 |
|
|
| 37,123 |
|
|
| 14,552 |
|
|
| 14,672 |
|
|
| 17,337 |
| |||||||||||||||||||
General and administrative expenses (1)(4) |
|
| 11,262 |
|
|
| 11,184 |
|
|
| 10,231 |
|
|
| 13,159 |
|
|
| 14,777 |
| |||||||||||||||||||
Impairment of assets (5) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 710 |
|
|
| 250 |
| |||||||||||||||||||
Sales and marketing expenses (1) (6) |
|
| 10,341 |
|
|
| 11,113 |
|
|
| 9,104 |
|
|
| 11,879 |
|
|
| 12,833 |
| |||||||||||||||||||
Research and development expenses (1) (7) |
|
| 1,685 |
|
|
| 1,716 |
|
|
| 1,374 |
|
|
| 1,905 |
|
|
| 2,004 |
| |||||||||||||||||||
Income (loss) from operations |
|
| 6,836 |
|
|
| 13,110 |
|
|
| (6,157 | ) |
|
| (12,981 | ) |
|
| (12,527 | ) | |||||||||||||||||||
Other income |
|
| 56 |
|
|
| 28 |
|
|
| 80 |
|
|
| 248 |
|
|
| 215 |
| |||||||||||||||||||
Interest expense | (297 | ) | (376 | ) | (481 | ) | (567 | ) | (551 | ) |
|
| (127 | ) |
|
| (279 | ) |
|
| (493 | ) |
|
| (333 | ) |
|
| (163 | ) | |||||||||
Gain on sale of OTA contract receivables | — | — | — | — | 32 | ||||||||||||||||||||||||||||||||||
Amortization of debt issue costs |
|
| (157 | ) |
|
| (243 | ) |
|
| (101 | ) |
|
| (92 | ) |
|
| (110 | ) | |||||||||||||||||||
Loss on debt extinguishment |
|
| (90 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||||||
Dividend and interest income | 128 | 300 | 567 | 845 | 850 |
|
| — |
|
|
| 5 |
|
|
| 11 |
|
|
| 15 |
|
|
| 36 |
| ||||||||||||||
Income (loss) before income tax | (20,090 | ) | (32,012 | ) | (8,257 | ) | (6,326 | ) | 853 |
|
| 6,518 |
|
|
| 12,621 |
|
|
| (6,660 | ) |
|
| (13,143 | ) |
|
| (12,549 | ) | ||||||||||
Income tax expense (benefit)(2)(3) | 36 | 49 | (2,058 | ) | 4,073 | 370 | |||||||||||||||||||||||||||||||||
Net income (loss) and comprehensive income (loss) | $ | (20,126 | ) | $ | (32,061 | ) | $ | (6,199 | ) | $ | (10,399 | ) | $ | 483 | |||||||||||||||||||||||||
Income tax (benefit) expense (8) |
|
| (19,616 | ) |
|
| 159 |
|
|
| 14 |
|
|
| (15 | ) |
|
| (261 | ) | |||||||||||||||||||
Net income (loss) |
| $ | 26,134 |
|
| $ | 12,462 |
|
| $ | (6,674 | ) |
| $ | (13,128 | ) |
| $ | (12,288 | ) | |||||||||||||||||||
Net income (loss) per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Basic | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | $ | (0.50 | ) | $ | 0.02 | |||||||||||||||||||||||||
Diluted | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | $ | (0.50 | ) | $ | 0.02 | |||||||||||||||||||||||||
Basic (8) |
| $ | 0.85 |
|
| $ | 0.41 |
|
| $ | (0.23 | ) |
| $ | (0.46 | ) |
| $ | (0.44 | ) | |||||||||||||||||||
Diluted (8) |
| $ | 0.83 |
|
| $ | 0.40 |
|
| $ | (0.23 | ) |
| $ | (0.46 | ) |
| $ | (0.44 | ) | |||||||||||||||||||
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Basic | 27,628 | 22,353 | 20,988 | 20,997 | 22,953 |
|
| 30,635 |
|
|
| 30,105 |
|
|
| 29,430 |
|
|
| 28,784 |
|
|
| 28,156 |
| ||||||||||||||
Diluted | 27,628 | 22,353 | 20,988 | 20,997 | 23,387 |
|
| 31,304 |
|
|
| 30,965 |
|
|
| 29,430 |
|
|
| 28,784 |
|
|
| 28,156 |
|
(1) | |
Includes stock-based compensation expense recognized under Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, as follows: |
|
| Fiscal Year Ended March 31, |
| |||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Cost of product revenue |
| $ | 4 |
|
| $ | 3 |
|
| $ | 2 |
|
| $ | 12 |
|
| $ | 30 |
|
Cost of service revenue |
|
| — |
|
|
| (1 | ) |
|
| 3 |
|
|
| — |
|
|
| — |
|
General and administrative expenses |
|
| 716 |
|
|
| 576 |
|
|
| 764 |
|
|
| 929 |
|
|
| 1,337 |
|
Sales and marketing expenses |
|
| 29 |
|
|
| 38 |
|
|
| 54 |
|
|
| 155 |
|
|
| 139 |
|
Research and development expenses |
|
| 4 |
|
|
| 2 |
|
|
| 2 |
|
|
| 6 |
|
|
| 99 |
|
Total stock-based compensation expense |
| $ | 753 |
|
| $ | 618 |
|
| $ | 825 |
|
| $ | 1,102 |
|
| $ | 1,605 |
|
Fiscal Year Ended March 31, | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
(in thousands) | |||||||||||||||||||
Cost of product revenue | $ | 36 | $ | 50 | $ | 70 | $ | 114 | $ | 189 | |||||||||
General and administrative expenses | 1,148 | 1,056 | 1,025 | 578 | 548 | ||||||||||||||
Sales and marketing expenses | 235 | 360 | 485 | 451 | 501 | ||||||||||||||
Research and development expenses | 43 | 33 | 13 | 21 | 29 | ||||||||||||||
Total stock-based compensation expense | $ | 1,462 | $ | 1,499 | $ | 1,593 | $ | 1,164 | $ | 1,267 |
(2) | Fiscal 2020 includes expenses of $0.1 million related to restructuring. Fiscal 2018 includes expenses of $34 thousand related to restructuring. Fiscal 2017 includes expenses of $2.2 million related to an increase in inventory reserves and other inventory adjustments. |
(3) | Fiscal 2020 includes expenses of $0.1 million related to restructuring. |
(4) | Fiscal 2020 includes expenses of |
(5) | |
Fiscal 2018 includes an intangible asset impairment of |
(6) | Fiscal 2020 includes expenses of $0.2 million related to restructuring. Fiscal 2018 includes expenses of $0.2 million related to restructuring. |
(7) | Fiscal 2018 includes expenses of $0.1 million related to restructuring. |
(8) | Fiscal 2021 includes tax benefit of $20.9 million related to the release of the valuation allowance on deferred tax assets. |
|
| As of March 31, |
| |||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Consolidated balance sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 19,393 |
|
| $ | 28,751 |
|
| $ | 8,729 |
|
| $ | 9,424 |
|
| $ | 17,307 |
|
Total assets |
|
| 92,821 |
|
|
| 72,563 |
|
|
| 56,021 |
|
|
| 45,325 |
|
|
| 62,051 |
|
Long term borrowings |
|
| 35 |
|
|
| 10,063 |
|
|
| 9,283 |
|
|
| 4,013 |
|
|
| 6,819 |
|
Shareholder notes receivable |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
Total shareholders’ equity |
|
| 58,074 |
|
|
| 31,035 |
|
|
| 17,970 |
|
|
| 23,424 |
|
|
| 35,450 |
|
As of March 31, | |||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||
(in thousands) | |||||||||||||||||||
Consolidated balance sheet data: | |||||||||||||||||||
Cash and cash equivalents | $ | 15,542 | $ | 20,002 | $ | 17,568 | $ | 14,376 | $ | 23,011 | |||||||||
Short-term investments | — | — | 470 | 1,021 | 1,016 | ||||||||||||||
Total assets | 70,875 | 87,805 | 98,940 | 102,097 | 125,650 | ||||||||||||||
Long-term debt, less current maturities | 4,021 | 3,222 | 3,151 | 4,109 | 6,704 | ||||||||||||||
Shareholder notes receivable | (4 | ) | (4 | ) | (50 | ) | (265 | ) | (221 | ) | |||||||||
Total shareholders’ equity | $ | 45,983 | $ | 64,511 | $ | 77,012 | $ | 77,769 | $ | 92,769 |
The following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes included in this Annual Report on Form 10-K for the fiscal year ended March 31, 2016.2021. See also “Forward-Looking Statements” and Item 1A “Risk Factors”.
Overview
We are a leading designerprovide state-of-the-art light emitting diode (“LED”) lighting systems, wireless Internet of Things (“IoT”) enabled control solutions, project engineering, design energy project management and manufacturer of high-performance, energy-efficient lighting platforms.maintenance services. We help our customers achieve energy savings with healthy, safe and sustainable solutions that enable them to reduce their carbon footprint and digitize their business. We research, design, develop, design, manufacture, market, sell, install, and implement energy management systems consisting primarily of high-performance, energy-efficient commercial and industrial interior and exterior LED lighting systems and related services. Our products are targeted for applications in three primary market segments: commercial office and retail, area lighting, and industrial applications, although we do sell and install products into other markets. Virtually all of our sales occur within North America. We operate in three operating segments, which we refer to as Orion U.S. Markets Division ("USM"), Orion Engineered Systems Division ("OES") and Orion Distribution Services Division ("ODS"). USM focuses on selling our lighting solutions into the wholesale markets with customers including domestic energy service companies, or ESCOs, and electrical contractors. OES focuses on selling lighting products and construction and engineering services direct to end users. OES completes the construction management services related to existing contracted projects. Its customers include national accounts, governments, municipalities and schools. ODS focuses on selling our lighting products to a developing network of broadline distributors.
Our lighting products consist primarily of LED and HIF lighting fixtures.fixtures, many of which include IoT enabled control systems. Our principal customers include large national accounts, ESCOs,account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and electrical distributors.energy service companies ("ESCOs"). Currently, substantially allmost of our products are manufactured at our leased production facility locationlocated in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties as the LED market continues to evolve and in order to provide us with versatility in our product development.
We have experienced recent success offering our comprehensive project management services to provide some solutions using our legacy HIF technology,national account customers to retrofit their multiple locations. Our comprehensive services include initial site surveys and audits, utility incentive and government subsidy management, engineering design, and project management from delivery through to installation and controls integration.
We believe the market for LED lighting products is currently in a significant technology shiftand related controls continues to LED lighting systems. Compared to legacy lighting systems, we believe that LED lighting
In fiscal 2021, we successfully capitalized on our capability of being a full service, turn-key provider of LED lighting technology. Basedand controls systems with design, build, installation and project management services, as we continued a very large project for a major national account. As a result of this success, we have begun to evolve our business strategy to focus on a July 2015 United States Departmentfurther expanding the nature and scope of Energy report, we estimateour products and services offered to our customers. This further expansion of our products and services includes pursuing projects to develop recurring revenue streams, including providing lighting and electrical maintenance services and utilizing control sensor technology to collect data and assisting customers in the digitization of this data, along with other potential North American LED retrofit market within our key product categories to be approximately 1.1 billion lighting fixtures.services. We also plan to continuepursue the expansion of our IoT, “smart-building” and “connected ceiling” and other related technology, software and controls products and services that we offer to primarily focusour customers. We currently plan on developinginvesting significant time, resources and selling innovative LED products, althoughcapital into expanding our offerings in these areas with no expectation that they will result in us realizing material revenue in the near term and without any assurance they will succeed or be profitable. In fact, it is likely that these efforts will reduce our profitability, at least in the near term as we will continueinvest resources and incur expenses to marketdevelop these offerings. While we intend to pursue these expansion strategies organically, we also are actively exploring potential business acquisitions which would more quickly add these types of expanded and sell legacy HIF solutions in circumstances in which LED solutions may not bedifferent capabilities to our customers' best alternative.
We generally do not have long-term contracts with our customers that provide us with recurring revenue from period to period and we typically generate substantially all of our revenue from sales of lighting and control systems and related services to governmental, commercial and industrial customers on a projectproject-by-project basis. We also perform work under master services or product purchasing agreements with major customers with sales completed on a purchase order basis. In addition, in order to provide quality and timely service under our multi-location master retrofit agreements we are required to make substantial working capital
expenditures and advance inventory purchases that we may not be able to recoup if the agreements or a substantial volume of purchase orders under the agreements are delayed or terminated. The loss of, or substantial reduction in sales to, any of our significant customers, or our current single largest customer, or the termination or delay of a significant volume of purchase orders by project basis. one or more key customers, could have a material adverse effect on our results of operations in any given future period.
We typically sell our lighting systems in replacement of our customers’ existing fixtures. We call this replacement process a “retrofit.”"retrofit". We frequently engage our customer’s existing electrical contractor to provide installation and project management services. We also sell our lighting systems on a wholesale basis, principally to electrical contractors,distributors and ESCOs and electrical distributors to sell to their own customer bases.
The gross margins of our products can vary significantly depending upon the types of products we sell, with margins typically ranging from 15%10% to 50%. As a result, a change in the total mix of our sales towardamong higher or lower margin products couldcan cause our profitability to fluctuate from period to period. Despite recent economic challenges, we remain optimistic about our near-term and long-term financial performance. We believe that customer purchases of LED lighting systems will continue to increase in the near-term as expected improvements in LED performance and expected decreases in LED product costs to make our LED products even more economically compelling to our customers. Our near-term optimism is based upon: (i) our efforts to expand our Distribution Services customer base; (ii) our intentions to continue to selectively expand our sales force; (iii) our investments into new high-performance LED industrial lighting fixtures; (iv) our expected fiscal 2017 increase in revenue and gross margin as we increase sales of these product lines; (v) our recent improvements in gross margin as a result of our cost containment initiatives and development of higher-performance LED products; and (vi) the increasing volume of unit sales of our new products, specifically our LED high bay lighting fixtures. Our long-term optimism is based upon the considerable size of the existing market opportunity for lighting retrofits, including the market opportunities in commercial office, government and retail markets, the continued development of our new products and product enhancements, including our new LED product offerings, and our efforts to expand our channels of distribution and our cost reduction initiatives. As we attempt to adapt our business organization to the quickly evolving lighting market, we are implementing significant changes to our manufacturing operations to increase our flexibility, remain competitive and lower our cost structure. Implementing these initiatives may result in additional cost and expenses, including asset impairment or write-down charges and other repositioning expenses and charges, which would likely materially adversely affect our reported results of operations. Our anticipated increase in revenues in fiscal 2017 may impact our available cash and borrowing capacity as a result of the high capital costs associated with the increase in the sales of our products from existing levels. As a result, we are pursuing various alternative sources of liquidity, including the sale and leaseback of our manufacturing facility, which is expected to be completed by the end of June 2016, subject to various closing conditions.
Our fiscal year ends on March 31. We refer to our just completed fiscal year, which ended on March 31, 2021, as "fiscal 2021", and our prior fiscal years which ended on March 31, 2014 as “fiscal 2014”,2020 and the year ended on March 31, 2015,2019 as "fiscal 2020" and “fiscal 2015”2019”, and our current fiscal year, which ended on March 31, 2016, as “fiscal 2016.”respectively. Our fiscal first quarter of each fiscal year ends on June 30, our fiscal second quarter ends on September 30, our fiscal third quarter ends on December 31 and our fiscal fourth quarter ends on March 31.
Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Our CODM is our chief executive officer. Orion has three reportable segments: Orion Engineered Systems Division ("OES"), and Orion Distribution Services Division ("ODS"), and Orion U.S. Markets Division (“USM”).
Impact of COVID-19 and Fiscal 2022 Outlook
The rapid market shiftCOVID-19 pandemic has disrupted business, trade, commerce, financial and credit markets, in the lighting industry from legacy lighting productsU.S. and globally. Our business was adversely impacted by measures taken by government entities and others to LED lighting products has caused us to adopt new strategies, approachescontrol the spread of the virus beginning in March 2020, the last few weeks of our prior fiscal year, and processes in order to respond proactively to this paradigm shift. These changing underlying business fundamentals in this paradigm shift include:
As a deemed essential business, we provide products and services to ensure energy and lighting infrastructure and we therefore have continued to operate throughout the pandemic. We have implemented a number of customer capital spending which we attributesafety protocols, including limiting travel and restricting access to general macro-economic concernsour facilities along with monitoring processes, physical distancing, physical barriers, enhanced cleaning procedures and conservative cash allocation strategies withinrequiring face coverings.
As part of our manufacturing and industrial customer base. Additionally,response to the impacts of the COVID-19 pandemic, during the fourth quarter of fiscal 2016 third quarter,2020 we implemented a number of cost reduction and cash conservation measures, including reducing headcount. While certain restrictions began to further emphasize sales throughinitially lessen in certain jurisdictions during fiscal 2021, stay-at-home, face mask or lockdown orders remain in effect in others, with employees asked to work remotely if possible. Some customers and projects are in areas where travel restrictions have been imposed, certain customers have either closed or reduced on-site activities, and timelines for the completion of several projects have been delayed, extended or terminated. These modifications to our distribution channel bybusiness practices, including any future actions we take, may cause us to experience reductions in productivity and disruptions to our business routines. In addition, we are required to make substantial working through manufacturer representative agencies who represent lighting distributors throughoutcapital expenditures and advance inventory purchases that we may not be able to recoup if our addressable markets: commercial office and retail, area lighting and industrial applications. While we expect this activity to generate long-term growth, in the near-term it may havecustomer agreements or a dampening impact on revenues.
The impact of COVID-19 has caused significant uncertainty and volatility in the credit markets. We rely on the credit markets to provide us with liquidity to operate and grow our businesses beyond the liquidity that operating cash flows provide. If our access to capital were to become significantly constrained or if costs of capital increased significantly due the impact of COVID-19, including volatility in the capital markets, a reduction in our credit ratings or other factors, then our financial condition, results of operations and cash flows could be adversely affected.
In addition to the managing the adverse financial impact of the COVID-19 pandemic, our ability to achieve our desired revenue growth and profitability goals depends on our ability to effectively execute on the following key strategic initiatives. We may identify strategic acquisition candidates that would help support these initiatives.
Focus on executing and marketing our turnkey LED retrofit capabilities to large national account customers. We believe one of our competitive advantages is our ability to deliver full turnkey LED lighting project capabilities. These turnkey services were the principal reason we achieved significant recent revenue growth as we executed on our commitment to retrofit multiple locations for a major national account customer. Our success in the national account market segment centers on our turnkey design, engineering, manufacturing and project management capabilities, which represent a very clear competitive advantage for us among large enterprises seeking to benefit from the illumination benefits and energy savings of LED lighting across locations nationwide. We believe one of our competitive advantages is that we are organized to serve every step of a custom retrofit project in a comprehensive, non-disruptive and timely fashion, from custom fixture design and initial site surveys to final installations. We are also able to help customers deploy state-of-the-art control systems that provide even greater long-term value from their lighting system investments.
Looking forward, we are focused on continuing to successfully execute on existing national account opportunities while also actively pursuing new national account opportunities that leverage our customized, comprehensive turnkey project solutions, and expanding our addressable market with high-quality, basic lighting systems to meet the needs of value-oriented customer segments served by our other market channels. Given our compelling value proposition, capabilities and focus on customer service, we are optimistic about our business prospects and working to build sales momentum with existing and new customers.
Continued Product Innovation. We continue to innovate, developing lighting fixtures and features that address specific customer requirements, while also working to maintain a leadership position in energy efficiency, smart product design and installation benefits. For interior building applications, we recently expanded our product line to include a family of ceiling air movement solutions, some of which incorporate LED lighting and others which utilize ultraviolet C light waves to kill viruses, bacteria and germs. We also continue to deepen our capabilities in the integration of smart lighting controls. Our goal is to provide state-of-the-art lighting products with modular plug-and-play designs to enable lighting system customization from basic controls to advanced IoT capabilities.
Leverage of Orion’s Smart Lighting Systems to Support Internet of Things Applications. We believe we are ideally positioned to help customers to efficiently deploy new IoT controls and applications by leveraging the “Smart Ceiling” capabilities of their Orion solid state lighting system. IoT capabilities can include the management and tracking of facilities, personnel, resources and customer behavior, driving both sales and lowering costs. As a result, these added capabilities provide customers an even greater return on investment from their lighting system and make us an even more attractive partner. We plan to pursue the expansion of our IoT, “smart-building” and “connected ceiling” and other related technology, software and controls products and services that we offer to our customers. While we intend to pursue these expansion strategies organically, we also are actively exploring potential business acquisitions which would more quickly add these types of expanded and different capabilities to our product and services offerings.
Develop Maintenance Service Offerings. We believe we can leverage our construction management process expertise to develop a high-quality, quick-response, multi-location maintenance service offering. Our experience with large national customers and our large installed base of fixtures position us well to extend a maintenance offering to historical customers, as well as to new customers. Development of this recurring revenue stream is making progress and we believe there is significant market opportunity.
Support success of our ESCO and agent-driven distribution sales channels. We continue to focus on building our relationships and product and sales support for our ESCO and agent driven distribution channels. These efforts include an array of product and sales training efforts as well as the development of new products to cater to the unique needs of these sales channels.
Major Developments in Fiscal 2021
During fiscal 2015years 2021 and 2020, we executed on a series of master contracts for a major national account customer with our state-of-the-art LED lighting systems and wireless IoT enabled control solutions at locations nationwide. This single national account customer represented 56.0% of our total revenue in fiscal 2021 and 74.1% of our total revenue in fiscal 2020. During March 2020, due to the COVID-19 pandemic, this customer temporarily suspended our installations at a significant number of locations that were scheduled for installation during our fiscal 2020 fourth quarter cost containment initiatives. Duringand our fiscal 2021 first quarter. These originally scheduled installations resumed during the fiscal 2016 second quarter of fiscal 2021 and continued through the second half of fiscal 2021.
Additionally, we experienced an increaseadded a large specialty retail customer and are providing turnkey LED lighting retrofit solutions for a number of its stores. This project generated product and service revenue of $8.1 million during the second half fiscal 2021. We expect to retrofit additional stores for this customer in salesfiscal 2022.
We also completed several initial retrofit projects at facilities for a major global logistics company. This customer is expected to be a significant source of revenue as we move forward, although these installations are likely to occur more slowly than we had originally anticipated. We expect to work with the customer on a project-by-project basis, versus larger-scale multi-site commitments, which limits visibility on the timing of future revenue contributions. We also have been selected to work with another major logistics company that is also expected to be a significant source of revenue in the future.
Given our LED door retrofit, or LDR, product line which has lower gross marginscurrent earnings and potential future earnings, as of March 31, 2021, we recorded a net valuation allowance release of $20.9 million against our deferred tax assets. This resulted in substantially and disproportionately increasing our reported net income and our earnings per share compared to our other LED product lines. This increase in volume negatively impactedoperating results. Historical and future comparisons to these amounts are not, and will not be, indicative of actual profitability trends for our overall gross margin during the fiscal 2016 second quarter.
Results of Operations: Fiscal 20162021 versus Fiscal 2015
The following table sets forth the line items of our consolidated statements of operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (in thousands, except percentages and per share amounts)percentages):
|
| Fiscal Year Ended March 31, |
| |||||||||||||||||
|
| 2021 |
|
| 2020 |
|
|
|
|
|
| 2021 |
|
| 2020 |
| ||||
|
| Amount |
|
| Amount |
|
| % Change |
|
| % of Revenue |
|
| % of Revenue |
| |||||
Product revenue |
| $ | 87,664 |
|
| $ | 113,352 |
|
|
| (22.7 | )% |
|
| 75.0 | % |
|
| 75.1 | % |
Service revenue |
|
| 29,176 |
|
|
| 37,489 |
|
|
| (22.2 | )% |
|
| 25.0 | % |
|
| 24.9 | % |
Total revenue |
|
| 116,840 |
|
|
| 150,841 |
|
|
| (22.5 | )% |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of product revenue |
|
| 63,233 |
|
|
| 83,588 |
|
|
| (24.4 | )% |
|
| 54.1 | % |
|
| 55.4 | % |
Cost of service revenue |
|
| 23,483 |
|
|
| 30,130 |
|
|
| (22.1 | )% |
|
| 20.1 | % |
|
| 20.0 | % |
Total cost of revenue |
|
| 86,716 |
|
|
| 113,718 |
|
|
| (23.7 | )% |
|
| 74.2 | % |
|
| 75.4 | % |
Gross profit |
|
| 30,124 |
|
|
| 37,123 |
|
|
| (18.9 | )% |
|
| 25.8 | % |
|
| 24.6 | % |
General and administrative expenses |
|
| 11,262 |
|
|
| 11,184 |
|
|
| 0.7 | % |
|
| 9.6 | % |
|
| 7.4 | % |
Sales and marketing expenses |
|
| 10,341 |
|
|
| 11,113 |
|
|
| (6.9 | )% |
|
| 8.9 | % |
|
| 7.4 | % |
Research and development expenses |
|
| 1,685 |
|
|
| 1,716 |
|
|
| (1.8 | )% |
|
| 1.4 | % |
|
| 1.1 | % |
Income from operations |
|
| 6,836 |
|
|
| 13,110 |
|
|
| (47.9 | )% |
|
| 5.9 | % |
|
| 8.7 | % |
Other income |
|
| 56 |
|
|
| 28 |
|
|
| 100.0 | % |
|
| 0.0 | % |
|
| 0.0 | % |
Interest expense |
|
| (127 | ) |
|
| (279 | ) |
|
| 54.5 | % |
|
| (0.1 | )% |
|
| (0.2 | )% |
Amortization of debt issue costs |
|
| (157 | ) |
|
| (243 | ) |
|
| 35.4 | % |
|
| (0.1 | )% |
|
| (0.2 | )% |
Loss on debt extinguishment |
|
| (90 | ) |
|
| — |
|
| NM |
|
|
| (0.1 | )% |
|
| — |
| |
Interest income |
|
| — |
|
|
| 5 |
|
|
| (100.0 | )% |
|
| — |
|
|
| 0.0 | % |
Income before income tax |
|
| 6,518 |
|
|
| 12,621 |
|
|
| (48.4 | )% |
|
| 5.6 | % |
|
| 8.4 | % |
Income tax (benefit) expense |
|
| (19,616 | ) |
|
| 159 |
|
| NM |
|
|
| -16.8 | % |
|
| 0.1 | % | |
Net income |
| $ | 26,134 |
|
| $ | 12,462 |
|
|
| 109.7 | % |
|
| 22.4 | % |
|
| 8.3 | % |
* | NM = Not Meaningful |
Fiscal Year Ended March 31, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Amount | Amount | % Change | % of Revenue | % of Revenue | ||||||||||||
Product revenue | $ | 64,897 | $ | 65,881 | (1.5 | )% | 95.9 | % | 91.2 | % | ||||||
Service revenue | 2,745 | 6,329 | (56.6 | )% | 4.1 | % | 8.8 | % | ||||||||
Total revenue | 67,642 | 72,210 | (6.3 | )% | 100.0 | % | 100.0 | % | ||||||||
Cost of product revenue | 49,630 | 68,388 | (27.4 | )% | 73.4 | % | 94.7 | % | ||||||||
Cost of service revenue | 2,015 | 4,959 | (59.4 | )% | 3.0 | % | 6.9 | % | ||||||||
Total cost of revenue | 51,645 | 73,347 | (29.6 | )% | 76.4 | % | 101.6 | % | ||||||||
Gross profit (loss) | 15,997 | (1,137 | ) | NM | 23.6 | % | (1.6 | )% | ||||||||
General and administrative expenses | 16,884 | 14,908 | 13.3 | % | 25.0 | % | 20.6 | % | ||||||||
Goodwill and long lived asset impairment | 6,023 | — | NM | 8.9 | % | — | % | |||||||||
Acquisition and integration related expenses | — | 47 | (100.0 | )% | — | % | 0.1 | % | ||||||||
Sales and marketing expenses | 11,343 | 13,290 | (14.7 | )% | 16.8 | % | 18.4 | % | ||||||||
Research and development expenses | 1,668 | 2,554 | (34.7 | )% | 2.5 | % | 3.5 | % | ||||||||
Loss from operations | (19,921 | ) | (31,936 | ) | 37.6 | % | (29.5 | )% | (44.2 | )% | ||||||
Interest expense | (297 | ) | (376 | ) | 21.0 | % | (0.4 | )% | (0.5 | )% | ||||||
Interest income | 128 | 300 | (57.3 | )% | 0.2 | % | 0.4 | % | ||||||||
Loss before income tax | (20,090 | ) | (32,012 | ) | 37.2 | % | (29.7 | )% | (44.3 | )% | ||||||
Income tax expense | 36 | 49 | (26.5 | )% | 0.1 | % | 0.1 | % | ||||||||
Net loss and comprehensive loss | $ | (20,126 | ) | $ | (32,061 | ) | 37.2 | % | (29.8 | )% | (44.4 | )% |
Revenue.
Product revenue decreasedCost of Revenue and Gross Margin.
Operating Expenses
General and Administrative.
Sales and Marketing.
Our sales and marketing expenses decreasedResearch and Development.
Interest Expense.
Loss on Debt Extinguishment. Loss on debt extinguishment in borrowings onfiscal 2021 related to the write-off of fees incurred with respect to our revolvingprior credit facility.
Income Taxes.
Results of Operations: Fiscal 20152020 versus Fiscal 2014
The following table sets forth the line items of our consolidated statements of operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (in thousands, except percentages and per share amounts)percentages):
|
| Fiscal Year Ended March 31, |
| |||||||||||||||||
|
| 2020 |
|
| 2019 |
|
|
|
|
|
| 2020 |
|
| 2019 |
| ||||
|
| Amount |
|
| Amount |
|
| % Change |
|
| % of Revenue |
|
| % of Revenue |
| |||||
Product revenue |
| $ | 113,352 |
|
| $ | 56,261 |
|
|
| 101.5 | % |
|
| 75.1 | % |
|
| 85.6 | % |
Service revenue |
|
| 37,489 |
|
|
| 9,493 |
|
|
| 294.9 | % |
|
| 24.9 | % |
|
| 14.4 | % |
Total revenue |
|
| 150,841 |
|
|
| 65,754 |
|
|
| 129.4 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of product revenue |
|
| 83,588 |
|
|
| 44,111 |
|
|
| 89.5 | % |
|
| 55.4 | % |
|
| 67.1 | % |
Cost of service revenue |
|
| 30,130 |
|
|
| 7,091 |
|
|
| 324.9 | % |
|
| 20.0 | % |
|
| 10.8 | % |
Total cost of revenue |
|
| 113,718 |
|
|
| 51,202 |
|
|
| 122.1 | % |
|
| 75.4 | % |
|
| 77.9 | % |
Gross profit |
|
| 37,123 |
|
|
| 14,552 |
|
|
| 155.1 | % |
|
| 24.6 | % |
|
| 22.1 | % |
General and administrative expenses |
|
| 11,184 |
|
|
| 10,231 |
|
|
| 9.3 | % |
|
| 7.4 | % |
|
| 15.6 | % |
Sales and marketing expenses |
|
| 11,113 |
|
|
| 9,104 |
|
|
| 22.1 | % |
|
| 7.4 | % |
|
| 13.8 | % |
Research and development expenses |
|
| 1,716 |
|
|
| 1,374 |
|
|
| 24.9 | % |
|
| 1.1 | % |
|
| 2.1 | % |
Income (loss) from operations |
|
| 13,110 |
|
|
| (6,157 | ) |
| NM |
|
|
| 8.7 | % |
|
| (9.4 | )% | |
Other income |
|
| 28 |
|
|
| 80 |
|
|
| (65.0 | )% |
|
| 0.0 | % |
|
| 0.1 | % |
Interest expense |
|
| (279 | ) |
|
| (493 | ) |
|
| 43.4 | % |
|
| (0.2 | )% |
|
| (0.7 | )% |
Amortization of debt issue costs |
|
| (243 | ) |
|
| (101 | ) |
|
| (140.6 | )% |
|
| (0.2 | )% |
|
| (0.2 | )% |
Interest income |
|
| 5 |
|
|
| 11 |
|
|
| (54.5 | )% |
|
| 0.0 | % |
|
| 0.0 | % |
Income (loss) before income tax |
|
| 12,621 |
|
|
| (6,660 | ) |
| NM |
|
|
| 8.4 | % |
|
| (10.1 | )% | |
Income tax expense |
|
| 159 |
|
|
| 14 |
|
|
| 1035.7 | % |
|
| 0.1 | % |
|
| 0.0 | % |
Net income (loss) |
| $ | 12,462 |
|
| $ | (6,674 | ) |
| NM |
|
|
| 8.3 | % |
|
| (10.1 | )% |
* | NM = Not Meaningful |
Fiscal Year Ended March 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Amount | Amount | % Change | % of Revenue | % of Revenue | ||||||||||||
Product revenue | $ | 65,881 | $ | 71,954 | (8.4 | )% | 91.2 | % | 81.2 | % | ||||||
Service revenue | 6,329 | 16,669 | (62.0 | )% | 8.8 | % | 18.8 | % | ||||||||
Total revenue | 72,210 | 88,623 | (18.5 | )% | 100.0 | % | 100.0 | % | ||||||||
Cost of product revenue | 68,388 | 54,423 | 25.7 | % | 94.7 | % | 61.4 | % | ||||||||
Cost of service revenue | 4,959 | 11,220 | (55.8 | )% | 6.9 | % | 12.7 | % | ||||||||
Total cost of revenue | 73,347 | 65,643 | 11.7 | % | 101.6 | % | 74.1 | % | ||||||||
Gross profit (loss) | (1,137 | ) | 22,980 | (104.9 | )% | (1.6 | )% | 25.9 | % | |||||||
General and administrative expenses | 14,908 | 14,951 | (0.3 | )% | 20.6 | % | 16.9 | % | ||||||||
Acquisition and integration related expenses | 47 | 819 | (94.3 | )% | 0.1 | % | 0.9 | % | ||||||||
Sales and marketing expenses | 13,290 | 13,527 | (1.8 | )% | 18.4 | % | 15.3 | % | ||||||||
Research and development expenses | 2,554 | 2,026 | 26.1 | % | 3.5 | % | 2.2 | % | ||||||||
Loss from operations | (31,936 | ) | (8,343 | ) | (282.8 | )% | (44.2 | )% | (9.4 | )% | ||||||
Interest expense | (376 | ) | (481 | ) | 21.8 | % | (0.5 | )% | (0.4 | )% | ||||||
Interest income | 300 | 567 | (47.1 | )% | 0.4 | % | 0.6 | % | ||||||||
Loss before income tax | (32,012 | ) | (8,257 | ) | (287.7 | )% | (44.3 | )% | (9.2 | )% | ||||||
Income tax expense (benefit) | 49 | (2,058 | ) | 102.4 | % | 0.1 | % | (2.2 | )% | |||||||
Net loss and comprehensive loss | $ | (32,061 | ) | $ | (6,199 | ) | (417.2 | )% | (44.4 | )% | (7.0 | )% |
Revenue.
Product revenueCost of Revenue and Gross Margin.
Cost of product revenue increased by 89.5%, or $39.5 million, in fiscalOperating Expenses
General and Administrative.
Sales and Marketing.
Our sales and marketing expensesResearch and Development.
Interest Expense. Our interestInterest expense decreased in fiscal 20152020 decreased by 21.8%43.4%, or $105,000.$0.2 million, from fiscal 2019. The decrease in interest expense was due to the reduction in financed contract debt for our Orion Throughput Agreement (“OTA”) projects in fiscal 2015 compared to the prior year.
For the year ended March 31, | |||||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | ||||||||
Revenues | $ | 38,841 | $ | 37,778 | $ | 38,766 | |||||
Operating loss | $ | (4,958 | ) | $ | (12,542 | ) | $ | (1,012 | ) | ||
Operating margin | (12.8 | )% | (33.2 | )% | (2.6 | )% |
Orion Engineered Systems Division
Our Orion Engineered Systems Division ("OES")OES segment develops and sells lighting products and provides construction and engineering services for our commercial lighting and energy management systems. OES also provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and schools.
The following table summarizes our OES segment operating results:
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Revenues |
| $ | 84,243 |
|
| $ | 122,744 |
|
| $ | 30,925 |
|
Operating income (loss) |
| $ | 7,472 |
|
| $ | 16,164 |
|
| $ | (1,237 | ) |
Operating margin |
|
| 8.9 | % |
|
| 13.2 | % |
|
| (4.0 | )% |
For the year ended March 31, | |||||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | ||||||||
Revenues | $ | 26,325 | $ | 33,454 | $ | 49,857 | |||||
Operating income (loss) | $ | (6,982 | ) | $ | (12,431 | ) | $ | 1,260 | |||
Operating margin | (26.5 | )% | (37.2 | )% | 2.5 | % |
Fiscal 20162021 Compared to Fiscal 2015
OES segment revenue decreased in fiscal 20162021 by 21.3%31.4%, or $7,129,000,$38.5 million, compared to fiscal 2015. This decrease in revenue was primarily2020, due to multiple projects put on hold as a result of COVID-19, including the projects to one large national account customer contractionthat represented 56.0% in fiscal 2021 and 74.1% of capital spending withintotal revenue in fiscal 2020. The project installations for this customer resumed during the manufacturing and industrial sector.
Fiscal 2020 Compared to Fiscal 2019
OES revenue increased in fiscal 2020 by 296.9%, or $91.8 million, compared to fiscal 2019 almost exclusively as the result of a major retrofit project for multiple locations for one of our national account customers. This sales increase led to a corresponding increase in operating income in this segment from a net loss position in fiscal 2015 was due to the expense related to the segment's long-term inventory controls impairment charge incurred during fiscal 2015 and the decline in revenue and the reduction in contribution margin dollars due to the increase of lower margin LED products.
Orion Distribution Services Division
Our Orion Distribution Services Division ("ODS") sellsODS segment focuses on selling lighting products tothrough manufacturer representative agencies and a developing network of North American broadline distributors.
The following table summarizes our ODS segment operating results:results (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Revenues |
| $ | 21,122 |
|
| $ | 15,087 |
|
| $ | 24,173 |
|
Operating income (loss) |
| $ | 2,430 |
|
| $ | (852 | ) |
| $ | (1,742 | ) |
Operating margin |
|
| 11.5 | % |
|
| (5.6 | )% |
|
| (7.2 | )% |
For the year ended March 31, | ||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | |||||
Revenues | 2,476 | 978 | — | |||||
Operating loss | (632 | ) | (455 | ) | — | |||
Operating margin | (25.5 | )% | (46.5 | )% | — | % |
Fiscal 20162021 Compared to Fiscal 2015
ODS segment revenue increased in fiscal 2016 from fiscal 2015 by 153%2021 increased 40.0%, or $1,498,000.$6.0 million, compared to fiscal 2020, primarily due to sales to one customer who represented 5.9% of fiscal 2021 total consolidated revenue. This sales increase led to a corresponding increase in operating income in this segment based on operating leverage.
Fiscal 2020 Compared to Fiscal 2019
ODS revenue decreased in fiscal 2020 by 37.6%, or $9.1 million, compared to fiscal 2019, primarily due to a decrease in sales volume through our distribution channel. ODS operating loss in fiscal 2020 improved to $(0.9) million. The increasedecrease in segment operating loss was primarily due to lower operating costs on lower employment expenses and commissions.
Orion U.S. Markets Division
Our USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include ESCOs and contractors.
The following table summarizes our USM segment operating results (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Revenues |
| $ | 11,476 |
|
| $ | 13,010 |
|
| $ | 10,656 |
|
Operating income |
| $ | 1,683 |
|
| $ | 2,447 |
|
| $ | 1,132 |
|
Operating margin |
|
| 14.7 | % |
|
| 18.8 | % |
|
| 10.6 | % |
Fiscal 2021 Compared to Fiscal 2020
USM segment revenue in fiscal 2016 was due to the relatively low base line of revenue following the April 2014 start-up of this business unit and to variability in the timing of customer orders as this business unit develops.
Fiscal 2020 Compared to Fiscal 2019
USM revenue increased in fiscal 2020 by 22.1%, or $2.4 million, compared to fiscal 2019, primarily due to an increase in sales volume as a result of our investmentreengagement in selling coststhe sales channel. This sales increase led to start-upa corresponding increase in operating income in this business unit.
Liquidity and Capital Resources
Overview
We had approximately $15,542,000$19.4 million in cash and cash equivalents as of March 31, 2016,2021, compared to $20,002,000$28.8 million at March 31, 2015. In February 2015, we completed an underwritten public offering2020. Our cash position decreased primarily as a result of 5.46 million sharesthe paydown of our common stock, at an offering price to the publicline of $3.50 per share. Net proceedscredit.
On December 29, 2020, we entered into a new Loan and Security Agreement (the “Credit Agreement”) with Bank of America, N.A., as lender (the “Lender”). The Credit Agreement replaced our existing $20.15 million secured revolving credit and security agreement dated as of October 26, 2018, as amended, with Western Alliance Bank, National Association, as lender (the “Prior Credit Agreement”). The replacement of the offering approximated $17,465,000.
As of March 31, 2021, the borrowing base supported the full availability of the Credit Facility. As of March 31, 2021, no amounts were borrowed under the Credit Facility.
Additional information on our Credit Agreement can be found in the “Indebtedness” section located below.
In January 2014,March 2020, we filed a universal shelf registration statement with the Securities and Exchange Commission. Under our shelf registration statement, we currently have the flexibility to publicly offer and sell from time to time up to $55,000,000$100.0 million of debt and/or equity securities, although, we are currently limited to selling an amount of securities equal to one-third of our public float on such registration statement.securities. The filing of the shelf registration statement may help facilitate our ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes.
In February 2015, OrionMarch 2021, we entered into a creditan At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which we may offer and security agreement ("Credit Agreement") with Wells Fargo Bank, National Association. The Credit Agreement provides for a revolving credit facility ("Credit Facility") that matures on February 6, 2018. Borrowings under the Credit Facility are initially limitedsell shares of our common stock, having an aggregate offering price of up to $15,000,000 subject$50 million from time to a borrowing base requirement based on eligible receivables and inventory. Such limit may increase to $20,000,000 subjecttime through or to the borrowing base requirement, after July 31, 2016, if we satisfy certain conditions. The Credit Facility includes a $2,000,000 sublimit forAgent, acting as sales agent or principal. No share sales were effected pursuant to the issuance of letters of credit.
We also are exploring various alternative sources of credit. Borrowings underliquidity to help ensure that we will have the Credit Agreement outstanding asbest allocation of March 31, 2016, amountedinvesting capital to approximately $3,719,000. Orion estimates that as of March 31, 2016, it was eligible to borrow an additional $229,000 under the Credit Facility based upon current levels of eligible inventory and accounts receivable. Orion was in compliance with its covenants in the Credit Agreement as of March 31, 2016.
Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, capital expenditures, pending or future litigation results, cost containment, measures and future potential acquisition transactions. In addition, we tend to experience high working capital costs whenmanagement, capital expenditures. Further, as discussed in the “Risk Factors,” we increase sales from existing levels. Based onexpect our current expectations, while we anticipate realizing improved net income performance during fiscal 2017, we also currently believe that we will experience negative working capitalforecasted cash flows during some quartersto be materially adversely impacted by the COVID-19 pandemic, the magnitude and period of fiscal 2017.impact of which is uncertain. While we believe that we will likely have adequate available cash and equivalents and credit availability under our Credit Agreement to satisfy our currently anticipated working capital and liquidity requirements during the near-term,next 12 months based on our current cash flow forecast, there can be no assurance to that effect. We are pursuing various alternative sources of liquidity, including the pending sale and leaseback of our manufacturing facility, to help ensure that we will have adequate available cash to satisfy our working capital needs. We are also implementing certain inventory management practices which should help to reduce our inventory levels and enhance our cash position. If we experience significant liquidity constraints, we may be required to issue equity or debt securities, reduce our sales efforts, implement additional cost savings initiatives or undertake other efforts to conserve our cash.
Cash Flows
The following table summarizes our cash flows for our fiscal 2016,2021, fiscal 20152020 and fiscal 2014:
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
|
| (in thousands) |
| |||||||||
Operating activities |
| $ | 1,729 |
|
| $ | 20,343 |
|
| $ | (5,058 | ) |
Investing activities |
|
| (946 | ) |
|
| (936 | ) |
|
| (449 | ) |
Financing activities |
|
| (10,141 | ) |
|
| 615 |
|
|
| 4,812 |
|
(Decrease) increase in cash and cash equivalents |
| $ | (9,358 | ) |
| $ | 20,022 |
|
| $ | (695 | ) |
Fiscal Year Ended March 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
(in thousands) | |||||||||||
Operating activities | $ | (3,473 | ) | $ | (12,812 | ) | $ | 9,901 | |||
Investing activities | (372 | ) | (730 | ) | (4,814 | ) | |||||
Financing activities | (615 | ) | 15,976 | (1,895 | ) | ||||||
(Decrease) increase in cash and cash equivalents | $ | (4,460 | ) | $ | 2,434 | $ | 3,192 |
Cash Flows Related to Operating Activities.
CashCash used inprovided by operating activities for fiscal 20162021 was $3,473,000$1.7 million and consisted of a net income adjusted for non-cash expense items of $9.1 million and net cash used by changes in operating assets and liabilities of $7.4 million. Cash used by changes in operating assets and liabilities consisted primarily of an increase in inventory of $5.3 million due to the release of new product lines and pre-ordering due to supply chain delays as a result of COVID-19, a decrease in accounts payable of $2.6 million due to the timing of payments, an increase in accounts receivable of $2.4 million due to the timing of billing and customer collections, and an increase in Revenue earned but not billed of $2.4 million due to timing on revenue recognition compared to invoicing. Cash provided by changes in operating assets and liabilities included an increase in accrued expenses of $5.8 million due to the timing of project completions and the receipt of invoices.
Cash provided by operating activities for fiscal 2020 was $20.3 million and consisted of a net income adjusted for non-cash expense items of $15.2 million and net cash provided by changes in operating assets and liabilities of $3,621,000$5.2 million. Cash used by changes in operating assets and liabilities consisted primarily of an increase in Inventory of $1.3 million due to delayed shipments at the end of the fiscal year as a result of COVID-19. Cash provided by changes in operating assets and liabilities included a decrease in Accounts receivable of $3.6 million due to the timing of billing and customer collections, a decrease in Revenue earned but not billed of $3.2 million due to timing on revenue recognition compared to invoicing.
Cash used in operating activities for fiscal 2019 was $5.1 million and consisted of a net loss adjusted for non-cash expense items of $7,094,000.$4.1 million and net cash used in changes in operating assets and liabilities of $1.0 million. Cash providedused by changes in operating assets and liabilities consisted of a decreasean increase of $7,116,000$5.8 million in accountsAccounts receivable due to the increase in lighting revenuetiming of billing and customer collections from customers,on comparatively higher fourth quarter sales, an increase in accounts payableInventory of $713,000$4.7 million due to the increase in inventory purchases to support our growth in lighting product revenue duringhigher backlog for anticipated first quarter fiscal 2016,2020 sales, and an increase of $1,803,000$1.4 million in accrued expensesRevenue earned but not billed due to a loss contingency reserve and accrued project installation costs, and a decrease in deferred contract costs of $137,000 duetiming on revenue recognition compared to the completion of solar projects.invoicing. Cash usedprovided by changes in operating assets and liabilities included an increase of $3,249,000$8.9 million in inventory due to the increase in purchases to support our anticipated growth in lighting product revenue, an increase in prepaidAccounts payable based on timing of payments and other assets of $2,645,000 for project billings that increased unbilled revenue, and a decrease in deferred revenue of $254,000 due to project completions.
Cash Flows Related to Investing Activities. Cash used in investing activities was $372,000 in fiscal 2016 which2021 was $0.9 million and consisted primarily of $401,000 for capital improvements related to LED production. Cash provided by investing activities in fiscal 2015 included $35,000 related to the salepurchases of property plant, and equipment.
Cash used in investing activities was $4,814,000 in fiscal 2014. 2020 was $0.9 million and consisted primarily of purchases of property and equipment of $0.8 million.
Cash used primarily included $4,992,000 for the acquisition of Harris and $410,000 for capital improvements related to product development tooling and information technology systems. Cash provided fromin investing activities in fiscal 20142019 was $0.4 million and consisted primarily included $555,000 from the sales of short-term investmentspurchases of property and $80,000 in proceeds from the saleequipment of assets.
Cash Flows Related to Financing Activities.
Cash used in financing activities in fiscal 2021 wasCash provided by financing activities in fiscal 2020 was $15,976,000 for fiscal 2015.$0.6 million. This included $17,465,000 incash provided consisted primarily of net proceeds of $0.8 million from our February 2015 stock offering, $2,500,000Credit Facility, offset by $0.1 million in borrowings against our revolving credit facility, $446,000 fromdebt issue costs due to the refinancingCredit Facility and $0.1 million of the JP Morgan OTA credit facility and $441,000 in proceeds from stock option and warrant exercises and stock note repayments. Cash flows used in financing activities included $4,494,000 for repayment of long-term debt and $406,000 for financing costs related to new debt agreements.
Cash flows provided by financing activities included $1,125,000 receivedin fiscal 2019 was $4.8 million. This cash provided consisted primarily of net proceeds of $5.3 million from stock option exercisesour Credit Facility, offset by $0.4 million in debt issue costs due to the Credit Facility and $215,000 from shareholder note repayments.
Working Capital
Our net working capital as of March 31, 20162021 was $29,239,000,$26.2 million, consisting of $48,530,000$56.5 million in current assets and $19,291,000$30.4 million in current liabilities. Our net working capital as of March 31, 20152020 was $36,726,000,$27.8 million, consisting of $55,045,000$55.0 million in current assets and $18,319,000$27.2 million in current liabilities. Our current accounts receivableCash and cash equivalents, net balance decreased by $7,374,000$9.4 million from the fiscal 20152020 year-end due primarily to the paydown of our line of credit. Our current Accounts receivable, net balance increased by $3.1 million from the fiscal 2020 year-end due to strengthened emphasis on collection efforts in the back halftiming of fiscal 2016.billing and customer collections. Our current inventoryRevenue earned but not billed balance increased by $2.4 million from the fiscal 20152020 year-end by $2,741,000 due to increases in LED component inventories to support the increase in LED product orders.timing of billing. Our prepaid and other current assetsInventories, net increased by $2,631,000$5.0 million from the fiscal 2020 year-end due to an increase in unbilled revenuethe release of new product lines and pre-purchases of components for completed projects. Our accounts payable increased by $713,000our products to help mitigate the impact of the COVID-19 pandemic on the increase in inventory, increased sourced products and improvements in negotiated vendor payment terms as we transition our supply chain to an increasing number of new LED vendors. Our accrued expenses increased from our fiscal 2015 year-end by $1,389,000 due to a loss contingency reserve recorded in the fourth quarter of fiscal 2016.
We generally attempt to maintain at least a three-month supply of on-hand inventory of purchased components and raw materials to meet anticipated demand, as well as to reduce our risk of unexpected raw material or component shortages or supply interruptions. Because of recent supply chain challenges, we have been making additional incremental inventory purchases. Our accounts receivables, inventory and payables may increase to the extent our revenue and order levels increase.
Indebtedness
Revolving Credit Agreement
The Credit Agreement provides for a Credit Facilityfive-year $25.0 million revolving credit facility (the “Credit Facility”) that matures on February 6, 2018.December 29, 2025. Borrowings under the Credit Facility are initially limited to $15,000,000 subject to a borrowing base requirement based on eligible receivables, inventory and inventory. Such limit may increase to $20,000,000 subject tocash. As of March 31, 2021, the borrowing base requirement, after Julysupports the full availability of the Credit Facility. As of March 31, 2016, if we satisfy certain conditions. 2021, no amounts were borrowed under the Credit Facility.
The Credit FacilityAgreement is secured by a first lien security interest in substantially all of our assets.
Borrowings under the Credit Agreement are permitted in the form of LIBOR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to our availability under the Credit Agreement. Among
other fees, we are required to pay an annual facility fee of $15,000 and a fee of 25 basis points on the unused portion of the Credit Facility.
The Credit Agreement includes a $2,000,000 sublimit for the issuancespringing minimum fixed cost coverage ratio of letters of credit.
The Credit Agreement also contains customary events of default and other customary covenants, including certain restrictions on our ability to incur additional indebtedness,
We did not incur any early termination fees in connection with the termination of March 31, 2016, amounted to approximately $3,719,000. We estimate that, as of March 31, 2016, we were only eligible to borrow an additional $229,000 under the Credit Facility based upon the then current levels of eligible inventory and accounts receivable. We were in compliance with our covenants in thePrior Credit Agreement, asbut did recognize a loss on debt extinguishment of March 31, 2016.
Capital Spending
Our capital expenditures are primarily for general corporate purposes for our corporate headquarters and technology center, production equipment and tooling and for information technology systems. Our capital expenditures totaled $401,000$0.9 million in fiscal 2016, $2,006,0002021, $0.8 million in fiscal 2015,2020, and $410,000$0.5 million in fiscal 2014. We plan to incur approximately $1,000,000 in capital expenditures in fiscal 2017.2019. Our capital spending plans predominantly consist of investments related to new product development tooling and investments inequipment and information technology systems.systems, exclusive of any capital spending for potential acquisitions. We expect to finance these capital expenditures primarily through our existing cash, equipment secured loans and leases, to the extent needed, long-term debt financing, or by using our available capacity under our Credit Facility.
Contractual Obligations
Information regarding our known contractual obligations of the types described below as of March 31, 20162021 is set forth in the following table:
|
| Payments Due By Period |
| |||||||||||||||||
|
| Total |
|
| Less than 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| More than 5 Years |
| |||||
|
| (in thousands) |
| |||||||||||||||||
Bank debt obligations |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Other debt obligations |
|
| 49 |
|
|
| 14 |
|
|
| 31 |
|
|
| 4 |
|
|
| — |
|
Cash interest payments on debt |
|
| 9 |
|
|
| 3 |
|
|
| 5 |
|
|
| 1 |
|
|
| — |
|
Lease obligations |
|
| 3,739 |
|
|
| 810 |
|
|
| 1,566 |
|
|
| 1,363 |
|
|
| — |
|
Purchase order and capital expenditure commitments (1) |
|
| 13,117 |
|
|
| 13,117 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 16,914 |
|
| $ | 13,944 |
|
| $ | 1,602 |
|
| $ | 1,368 |
|
| $ | — |
|
Payments Due By Period | |||||||||||||||||||
Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | |||||||||||||||
(in thousands) | |||||||||||||||||||
Bank debt obligations | $ | 4,282 | $ | 563 | $ | 3,719 | $ | — | $ | — | |||||||||
Other debt obligations | 140 | 119 | 16 | 5 | |||||||||||||||
Capital lease obligations | 345 | 64 | 91 | 190 | |||||||||||||||
Cash interest payments on debt | 316 | 157 | 159 | — | — | ||||||||||||||
Operating lease obligations | 1,647 | 512 | 1,037 | 98 | — | ||||||||||||||
Purchase order and capital expenditure commitments(1) | 2,189 | 2,189 | — | — | — | ||||||||||||||
Total | $ | 8,919 | $ | 3,604 | $ | 5,022 | $ | 293 | $ | — |
(1) | |
Reflects non-cancellable purchase commitments primarily for certain inventory items entered into in order to secure better pricing and ensure materials on hand. |
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Inflation
Our results from operations have not been and we do not expect them to be, materially affected by inflation.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make certain estimates and judgments that affect our reported assets, liabilities, revenue and expenses, and our related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis, including those related to revenue recognition, inventory valuation, collectability of receivables, stock-based
Revenue Recognition. We generate revenue primarily by selling commercial lighting fixtures and components and by installing these fixtures in our customer’s facilities. We recognize revenue in accordance with the guidance in “Revenue from Contracts with Customers” (Topic 606) (“ASC 606”) when control of the following criteria have been met: theregoods or services being provided (which we refer to as a performance obligation) is persuasive evidence of an arrangement; delivery has occurred and title has passed to the customer; the sales price is fixed and determinable and no further obligation exists; and collectability is reasonably assured. Virtually all of our revenue is recognized when products are shippedtransferred to a customer at an amount that reflects the consideration we expect to receive in exchange for those goods or when servicesservices. Prices are completedgenerally fixed at the time of order confirmation. The amount of expected consideration includes estimated deductions and acceptance provisions, ifearly 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 have been met. In certain of our contracts, we provideamounts paid to customers in conjunction with fulfilling a performance obligation.
If there are multiple deliverables. We recordperformance obligations in a single contract, the revenue associated with each element of these arrangements by allocating thecontract’s total contract revenuetransaction price per GAAP is allocated to each elementindividual performance obligation based on their relative standalone selling prices. Inprice. A performance obligation’s standalone selling price is the price at which we would sell such circumstances, wepromised good or service separately to a customer. We use a hierarchyan observable price to determine the selling price to be used for allocating revenue to deliverables: (1) vendor-specific objective evidence, or “VSOE” of selling price, if available, (2) third-party evidence, or “TPE” of selling price if VSOE is not available, and (3) best estimate of the selling price if neither VSOE nor TPE is available. We determine thestand-alone selling price for our lighting and energy management system products, installation and recycling services and for solar renewable product and services using management’s best estimate ofseparate performance obligations or an expected cost-plus margin per GAAP approach when one is not available. The expected cost-plus margin per GAAP approach is used to determine the stand-alone selling price for the installation performance obligation and is based on average historical installation margin.
Revenue derived from customer contracts which include only performance obligation(s) for the sale of lighting fixtures and components is classified as VSOEProduct revenue in the Consolidated Statements of Operations. The revenue for these transactions is recorded at the point in time when management believes that the customer obtains control of the products, generally either upon shipment or TPE evidence does not exist. We consider externalupon delivery to the customer’s facility. This point in time is determined separately for each contract and internalrequires 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 we refer 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 our 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 various factors, including, but not limited to, pricing practices, margin objectives, competition, geographiesthose detailed below:
when there is a legal transfer of ownership;
when the customer obtains physical possession of the products;
when the customer starts to receive the benefit of the products;
the amount and duration of physical control that we maintain on the products after they are shipped to, and received at, the customer’s facility;
whether we are required to maintain insurance on the lighting fixtures when they are in whichtransit 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 we offer our products and services, internal costs, andreceive payment from the scope and size of projects. Our Power Purchase Agreement (“PPA”) contracts are supply side agreementscustomer for the generationlight fixtures.
Revenue from turnkey projects that is allocated to the single installation performance obligation is reflected in Service revenue. Service revenue is recorded over-time as we fulfill our obligation to install the light fixtures. We measure our performance toward fulfilling our performance obligations for installations using an output method that calculates the number of electricity for which we recognize revenue on a monthly basis over the lifelight fixtures completely removed and installed as of the PPA contract, typicallymeasurement date in excess of 10 years. For sales of our solar PV systems, we recognize revenue using the percentage-of-completion method by measuring project progress by the percentage of costs incurredcomparison to date of the total estimated costs for each contract as materials are installed. Revenue from salesnumber of our solar PV systems is generally recognized overlight fixtures to be removed and installed under the contract.
We offer a period of three to 15 months. Additionally, we offer our OTA sales-type financing program, under which we finance thecalled an Orion Throughput Agreement, or OTA, for a customer’s purchaselease of our energy management systems. OurThe OTA contracts areis structured as a sales-type capital leases under GAAPlease and we recordupon successful installation of the system and customer acknowledgment that the system is operating as specified, revenue is recognized at our net investment in the lease, which typically is the net present value of the future payments atcash flows.
We also record revenue in conjunction with several limited power purchase agreements (“PPAs”) still outstanding. Those PPAs are supply-side agreements for the time customer acceptancegeneration of the installed and operating system is complete.electricity. Our OTA contracts under this sales-type financing are either structuredlast PPA expires in 2031. Revenue associated with a fixed term, typically 60 months, and a bargain purchase option at the end of term, or are one year in duration and, at the completion of the initial one-year term, provide for (i) one to four automatic one-year renewals at agreed upon pricing; (ii) an early buyout for cash; or (iii) the return of the equipment at the customer’s expense. The revenue that we are entitled to receive from the sale of our lighting fixturesenergy generated by the solar facilities under our OTA financing programthese PPAs is within the scope of ASC 606. Revenues are recognized over-time and are equal to the amount billed to the customer, which is calculated by applying the fixed rate designated in the PPAs to the variable amount of electricity generated each month. This approach is in accordance with the “right to invoice” practical expedient provided for in ASC 606. We also recognize revenue upon the sale to third parties of tax credits received from operating the solar facilities and is based onfrom amortizing a grant received from the costfederal government during the period starting when the power generating facilities were constructed until the expiration of the lighting fixturesPPAs; these revenues are not derived from contracts with customers and applicable profit margin. Our revenue from agreements entered intotherefore not under this program is not dependent upon our customers’ actual energy savings. Upon completionthe scope of the installation, we may choose to sell the future cash flows and residual rights to the equipment on a non-recourse basis to an unrelated third party finance company in exchange for cash and future payments.
Inventories.
Inventories are stated at the lower of cost orAllowance for Doubtful Accounts. We perform ongoing evaluations of our customers and continuously monitor collections and payments and estimate an allowance for doubtful accounts based upon the aging of the underlying receivables, our historical experience with write-offs and specific customer collection issues that we have identified. While such credit losses have historically been within our expectations, and we believe appropriate reserves have been established, we may not adequately predict future credit losses. If the financial condition of our customers were to deteriorate and result in an impairment of their ability to make payments, additional allowances might be required which would result in additional general and administrative expense in the period such determination is made. Our allowance for doubtful accounts was $505,000,eleven thousand dollars, or 4.4%0.1% of gross receivables, at March 31, 20162021 and $458,000,twenty-eight thousand dollars, or 2.4%0.3% of gross receivables, at March 31, 2015.2020.
Recoverability of Long-Lived Assets.
We evaluate long-lived assets such as property, equipment and definite lived intangible assets, such as patents,As of $1,614,000 relatedMarch 31, 2020, due to the write-downforecasted change in the macroeconomic conditions due to the COVID-19 pandemic, a triggering event occurred requiring us to evaluate our long-lived assets for impairment. Due to the central nature of our Manitowoc
Our impairment loss calculations require that we apply judgment in identifying asset groups, estimating future cash flows, anddetermining asset fair values, includingand estimating asset’s useful lives of the assets.lives. To make these judgments, we may use internal discounted cash flow estimates, quoted market prices, when available, and independent appraisals, as appropriate, to determine fair value.
If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be required to recognize additionalfuture impairment losses which could be material to our results of operations.
Indefinite Lived Intangible Assets. We test goodwillindefinite lived intangible assets for impairment at least annually as ofon the first day of theour fiscal fourth quarter, or when indications of potential impairment exist. We monitor for the existence of potential impairment indicators throughout the fiscal year. We conduct impairment testing for goodwill at the reporting unit level. Reporting units, as defined by Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other, may be operating segments as a whole or an operation one level below an operating segment, referred to as a component. For fiscal 2016 and fiscal 2015, our reporting units consisted of our segments: USM and OES. The ODS segment had no goodwill.
We performed a quantitative test on indefinite lived intangible assets related to our Harris tradename and determined that its fair value exceeded its carrying value and was not impaired. This test was performedqualitative assessment in conjunction with our annual impairment test of goodwill after determiningour indefinite lived intangible assets as of January 1, 2021. This qualitative assessment considered our operating results for the goodwillfirst nine months of fiscal 2021 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2022 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was impaired.
Stock-Based Compensation.
WeAccounting for Income Taxes. As part of the process of preparing our consolidated financial statements, we are required to determine our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expenses, together with assessing temporary differences resulting from recognition of items for income tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within the tax provision in our statements of operations.
Our judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our net deferred tax assets. We continue to monitor the realizability of our deferred tax assets and adjust the valuation allowance accordingly. For fiscal 2014,2020 and 2019 we reversed $2,315,000 of our valuation reserve to offset deferred tax liabilities created by the acquisition of Harris. For fiscal 2015 and fiscal 2016, we increased ourhave recorded a full valuation allowance against our net federal and our net state deferred tax assets due to our cumulative three yearthree-year taxable losses. During fiscal 2021, we reduced our valuation allowance on the basis of our reassessment of the amount of our deferred tax assets that are more likely than not to be realized. In making these determinations, we considered all available positive and negative evidence, including projected future taxable income, tax planning strategies, recent financial performance and ownership changes.
We believe that past issuances and transfers of our stock caused an ownership change in fiscal 2007 that affected the timing of the use of our net operating loss carryforwards,carry-forwards, but we do not believe the ownership change affects the use of the full amount of the net operating loss carryforwards.carry-forwards. As a result, our ability to use our net operating loss carryforwardscarry-forwards attributable to the period prior to such ownership change to offset taxable income will be subject to limitations in a particular year, which could potentially result in increased future tax liability for us.
As of March 31, 2016,2021, we had net operating loss carryforwards of approximately $55,807,000$69.4 million for federal tax purposes, and $42,181,000$61.8 million for state tax purposes, and $0.8 million for foreign tax purposes. Included in theseAs of the prior fiscal year, this amount is inclusive of the entire loss carryforwards were $3,586,000 for federal and $3,941,000 for state tax expenses that were associated withcarryforward on the exercise of non-qualified stock options. The benefit from our net operating losses created from these compensation expenses has not yet been recognized in our financial statements and will be accounted for in our shareholders’ equity as a credit to additional paid-in-capital as the deduction reduces our income taxes payable. We first recognize tax benefits from current period stock option expenses against current period income. The remaining current period income is offset by net operating losses under the tax law ordering approach. Under this approach, we will utilize the net operating losses from stock option expenses last.
We also had federal tax credit carryforwards of $1,475,000$1.3 million and state tax credit carryforwards of $769,000,$0.8 million, which are fullypartially reserved for as part of our valuation allowance. BothOf these tax attributes, $8.4 million of the federal and state net operating lossesloss carryforwards are not subject to time restrictions on use but may only be used to offset 80% of future adjusted taxable income. The $123.6 million net operating loss and tax credit carryforwards will begin to expire in varying amounts between 20202022 and 2036. 2040.
We recognize penalties and interest related to uncertain tax liabilities in income tax expense. Penalties and interest were immaterial as of the date of adoption and are included in unrecognized tax benefits. Due to the existence of net operating loss and credit carryforwards, all years since 2002 are open to examination by tax authorities.
By their nature, tax laws are often subject to interpretation. Further complicating matters is that in those cases where a tax position is open to interpretation, differences of opinion can result in differing conclusions as to the amount of tax benefits to be recognized under Financial Accounting Standards Board (FASB)("FASB") Accounting Standards Codification (ASC)("ASC") 740,
Recent Accounting Pronouncements
See Note 2 —Summary3 – Summary of Significant Accounting Policies to our accompanying audited consolidated financial statements for a full description of recent accounting pronouncements including the respective expected dates of adoption and expected effects on results of operations and financial condition.
Market risk is the risk of loss related to changes in market prices, including interest rates, foreign exchange rates and commodity pricing that may adversely impact our consolidated financial position, results of operations or cash flows.
Inflation.
Our results from operations have notForeign Exchange Risk.
We face minimal exposure to adverse movements in foreign currency exchange rates. Our foreign currency losses for all reporting periods have been nominal.Interest Rate Risk.
Our investments consist primarily of investments in money market funds. While the instruments we hold are subject to changes in the financial standing of the issuer of such securities, we do not believe that we are subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. It is our policy not to enter into interest rate derivative financial instruments. As a result, we do not currently have any significant interest rate exposure.As of March 31, 2016, $3,719,000 of our $4,767,000 of2021, we had no outstanding debt was atwith floating interest rates. An increase of 1.0% in the prime rate would result in an increase in our interest expense of approximately $37,200 per year.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Shareholders and Board of Directors and Stockholders
Orion Energy Systems, Inc.
Manitowoc, Wisconsin
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Orion Energy Systems, Inc. (the “Company”) as of March 31, 20162021 and 2015 and2020, the related consolidated statements of operations, and comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2016. In connection with our audits of2021, and the related notes (collectively referred to as the “consolidated financial statements, we have also audited the financial statement schedule II, Valuation and Qualifying Accounts for each of the three years in the period ended March 31, 2016. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), Orion Energy Systems, Inc.’sthe Company's internal control over financial reporting as of March 31, 2016,2021, based on criteria established in
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition - Standalone selling price estimations on turnkey contracts
As described in Note 3 to the consolidated financial statements, the Company generates revenue by selling commercial lighting fixtures and components and by installing these fixtures. For contracts that contain multiple performance obligations, the contract’s transaction price is allocated to the performance obligations based on their relative standalone selling prices. For turnkey contracts, the standalone selling price for installation service is estimated using an expected cost-plus a margin approach.
We identified the estimation of the standalone selling price of installation service in turnkey contracts as a critical audit matter. Under the expected cost-plus a margin approach, management estimates the cost of services and applies an estimated margin. The margin estimate requires significant management judgment and is based on a variety of factors such as geographical location, quantity and type of product to be removed and/or installed, and average historical installation margins. Auditing this estimate involved subjective and complex auditor judgment.
The primary procedures we performed to address this critical audit matter included:
Testing the design and operating effectiveness of internal controls over revenue recognition; specifically, inspecting the Company’s controls over estimation of the margin, including their review of a sample of completed turnkey contracts to compare the actual margins achieved to the estimated margin.
Evaluating the reasonableness of assumptions used by management in estimating standalone selling price for installation services by (i) examining a sample of turnkey contracts and assessing the reasonableness of the factors considered including geographical location, product type and historical experience; and (ii) examining the most significant contract on a disaggregated level and comparing management’s assumptions to our independently-developed assumptions and evaluating the reasons for significant differences.
Assessing that the estimated margin is applied consistently and calculated accurately by testing the calculation for a sample of turnkey contracts and vouching the historical cost inputs incurred for installation and recycling services and verifying the estimated margin fell within a reasonable range of historical margins
Deferred Tax Asset Valuation Allowance
As described in Note 14 to the Company’s consolidated financial statements, during the year ended March 31, 2021, the Company released approximately $20.9 million of the valuation allowance on a significant portion of its deferred tax assets. In evaluating the realizability of deferred tax assets, the available positive and negative evidence, including projected future taxable income exclusive of reversing temporary differences, history of book losses, tax planning strategies, and results of recent operations, are considered.
We identified the Company’s evaluation of the realizability of deferred tax assets as a critical audit matter. Significant management judgments are required in evaluating and weighing the collective positive and negative evidence that are used to assess the realizability of deferred tax assets, which include various assumptions surrounding projected future taxable income, the rate of continued growth, and forecasted timing of reversal of temporary differences. Auditing these elements involved complex and subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the need to involve personnel with specialized skill and knowledge.
The primary procedures we performed to address this critical audit matter included:
Testing the design and operating effectiveness of internal controls over income taxes, specifically, inspecting the Company’s controls over the evaluation of the realizability of deferred tax assets and controls over the development and review of the projected future taxable income.
Assessing the reasonableness of the Company’s ability to generate future taxable income and utilize the deferred tax assets by evaluating: (i) the forecast of future taxable income , (ii) the rate of continued growth, including performing independent estimates of the expected growth against the Company’s historical performance, and (iii) the timing of future reversal of temporary differences.
Utilizing personnel with specialized knowledge and skill in taxes to assist in the evaluation of the Company’s assessment of positive and negative evidence, and whether the estimated future sources of taxable income were sufficient to utilize the deferred tax assets in the relevant time period.
/s/BDO USA, LLP
We have served as the Company's auditor since 2012.
Milwaukee, Wisconsin
June 23, 2016
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Board of Directors and Stockholders
Orion Energy Systems, Inc.
Manitowoc, Wisconsin
Opinion on Internal Control over Financial Reporting
We have audited Orion Energy Systems, Inc.’s (the “Company’s”) internal control over financial reporting as of March 31, 2016,2021, based on criteria established in
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of March 31, 2021 and 2020, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2021, and the related notes and our report dated June 1, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “ItemItem 9A, Management’s Report on Internal Control Overover Financial Reporting”.Reporting. Our responsibility is to express an opinion on the company’sCompany’s internal control over financial reporting based on our audit.
We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/BDO USA, LLP
Milwaukee, Wisconsin
June 1, 2021
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
(in thousands, except share amounts)
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 19,393 |
|
| $ | 28,751 |
|
Accounts receivable, net |
|
| 13,572 |
|
|
| 10,427 |
|
Revenue earned but not billed |
|
| 2,930 |
|
|
| 560 |
|
Inventories, net |
|
| 19,554 |
|
|
| 14,507 |
|
Prepaid expenses and other current assets |
|
| 1,082 |
|
|
| 723 |
|
Total current assets |
|
| 56,531 |
|
|
| 54,968 |
|
Property and equipment, net |
|
| 11,369 |
|
|
| 11,817 |
|
Other intangible assets, net |
|
| 1,952 |
|
|
| 2,216 |
|
Deferred tax assets |
|
| 19,785 |
|
|
| — |
|
Long-term accounts receivable |
|
| — |
|
|
| 760 |
|
Other long-term assets |
|
| 3,184 |
|
|
| 2,802 |
|
Total assets |
| $ | 92,821 |
|
| $ | 72,563 |
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 17,045 |
|
| $ | 19,834 |
|
Accrued expenses and other |
|
| 13,226 |
|
|
| 7,228 |
|
Deferred revenue, current |
|
| 87 |
|
|
| 107 |
|
Current maturities of long-term debt |
|
| 14 |
|
|
| 35 |
|
Total current liabilities |
|
| 30,372 |
|
|
| 27,204 |
|
Revolving credit facility |
|
| — |
|
|
| 10,013 |
|
Long-term debt, less current maturities |
|
| 35 |
|
|
| 50 |
|
Deferred revenue, long-term |
|
| 640 |
|
|
| 715 |
|
Other long-term liabilities |
|
| 3,700 |
|
|
| 3,546 |
|
Total liabilities |
|
| 34,747 |
|
|
| 41,528 |
|
Commitments and contingencies (Note 15) |
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 shares at March 31, 2021 and 2020; no shares issued and outstanding at March 31, 2021 and 2020 |
|
| — |
|
|
| — |
|
Common stock, no par value: Shares authorized: 200,000,000 at March 31, 2021 and 2020; shares issued: 40,279,050 and 39,729,569 at March 31, 2021 and 2020; shares outstanding: 30,805,300 and 30,265,997 at March 31, 2021 and 2020 |
|
| — |
|
|
| — |
|
Additional paid-in capital |
|
| 157,485 |
|
|
| 156,503 |
|
Treasury stock: 9,473,750 and 9,463,572 common shares at March 31, 2021 and 2020 |
|
| (36,240 | ) |
|
| (36,163 | ) |
Retained deficit |
|
| (63,171 | ) |
|
| (89,305 | ) |
Total shareholders’ equity |
|
| 58,074 |
|
|
| 31,035 |
|
Total liabilities and shareholders’ equity |
| $ | 92,821 |
|
| $ | 72,563 |
|
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Product revenue |
| $ | 87,664 |
|
| $ | 113,352 |
|
| $ | 56,261 |
|
Service revenue |
|
| 29,176 |
|
|
| 37,489 |
|
|
| 9,493 |
|
Total revenue |
|
| 116,840 |
|
|
| 150,841 |
|
|
| 65,754 |
|
Cost of product revenue |
|
| 63,233 |
|
|
| 83,588 |
|
|
| 44,111 |
|
Cost of service revenue |
|
| 23,483 |
|
|
| 30,130 |
|
|
| 7,091 |
|
Total cost of revenue |
|
| 86,716 |
|
|
| 113,718 |
|
|
| 51,202 |
|
Gross profit |
|
| 30,124 |
|
|
| 37,123 |
|
|
| 14,552 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
| 11,262 |
|
|
| 11,184 |
|
|
| 10,231 |
|
Sales and marketing |
|
| 10,341 |
|
|
| 11,113 |
|
|
| 9,104 |
|
Research and development |
|
| 1,685 |
|
|
| 1,716 |
|
|
| 1,374 |
|
Total operating expenses |
|
| 23,288 |
|
|
| 24,013 |
|
|
| 20,709 |
|
Income (loss) from operations |
|
| 6,836 |
|
|
| 13,110 |
|
|
| (6,157 | ) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
| 56 |
|
|
| 28 |
|
|
| 80 |
|
Interest expense |
|
| (127 | ) |
|
| (279 | ) |
|
| (493 | ) |
Amortization of debt issue costs |
|
| (157 | ) |
|
| (243 | ) |
|
| (101 | ) |
Loss on debt extinguishment |
|
| (90 | ) |
|
| — |
|
|
| — |
|
Interest income |
|
| — |
|
|
| 5 |
|
|
| 11 |
|
Total other expense |
|
| (318 | ) |
|
| (489 | ) |
|
| (503 | ) |
Income (loss) before income tax |
|
| 6,518 |
|
|
| 12,621 |
|
|
| (6,660 | ) |
Income tax (benefit) expense |
|
| (19,616 | ) |
|
| 159 |
|
|
| 14 |
|
Net income (loss) |
| $ | 26,134 |
|
| $ | 12,462 |
|
| $ | (6,674 | ) |
Basic net income (loss) per share attributable to common shareholders |
| $ | 0.85 |
|
| $ | 0.41 |
|
| $ | (0.23 | ) |
Weighted-average common shares outstanding |
|
| 30,634,553 |
|
|
| 30,104,552 |
|
|
| 29,429,540 |
|
Diluted net income (loss) per share |
| $ | 0.83 |
|
| $ | 0.40 |
|
| $ | (0.23 | ) |
Weighted-average common shares and share equivalents outstanding |
|
| 31,303,727 |
|
|
| 30,964,777 |
|
|
| 29,429,540 |
|
March 31, | |||||||
2016 | 2015 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 15,542 | $ | 20,002 | |||
Accounts receivable, net | 10,889 | 18,263 | |||||
Inventories, net | 17,024 | 14,283 | |||||
Deferred contract costs | 37 | 90 | |||||
Prepaid expenses and other current assets | 5,038 | 2,407 | |||||
Total current assets | 48,530 | 55,045 | |||||
Property and equipment, net | 17,004 | 21,223 | |||||
Goodwill | — | 4,409 | |||||
Other intangible assets, net | 5,048 | 6,335 | |||||
Long-term accounts receivable | 108 | 426 | |||||
Other long-term assets | 185 | 367 | |||||
Total assets | $ | 70,875 | $ | 87,805 | |||
Liabilities and Shareholders’ Equity | |||||||
Accounts payable | $ | 11,716 | $ | 11,003 | |||
Accrued expenses and other | 6,586 | 5,197 | |||||
Deferred revenue, current | 243 | 287 | |||||
Current maturities of long-term debt | 746 | 1,832 | |||||
Total current liabilities | 19,291 | 18,319 | |||||
Revolving credit facility | 3,719 | 2,500 | |||||
Long-term debt, less current maturities | 302 | 722 | |||||
Deferred revenue, long-term | 1,022 | 1,231 | |||||
Other long-term liabilities | 558 | 522 | |||||
Total liabilities | 24,892 | 23,294 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 shares at March 31, 2016 and 2015; no shares issued and outstanding at March 31, 2016 and 2015 | — | — | |||||
Common stock, no par value: Shares authorized: 200,000,000 at March 31, 2016 and 2015; shares issued: 37,192,559 and 36,837,864 at March 31, 2016 and 2015; shares outstanding: 27,767,138 and 27,421,533 at March 31, 2016 and 2015 | — | — | |||||
Additional paid-in capital | 152,140 | 150,516 | |||||
Treasury stock: 9,425,421 and 9,416,331 common shares at March 31, 2016 and 2015 | (36,075 | ) | (36,049 | ) | |||
Shareholder notes receivable | (4 | ) | (4 | ) | |||
Retained deficit | (70,078 | ) | (49,952 | ) | |||
Total shareholders’ equity | 45,983 | 64,511 | |||||
Total liabilities and shareholders’ equity | $ | 70,875 | $ | 87,805 |
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
(in thousands, except share and per share amounts)
|
| Shareholders’ Equity |
| |||||||||||||||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Shares |
|
| Additional Paid-in Capital |
|
| Treasury Stock |
|
| Retained Earnings (Deficit) |
|
| Total Shareholders’ Equity |
| |||||
Balance, March 31, 2018 |
|
| 28,953,183 |
|
| $ | 155,003 |
|
| $ | (36,085 | ) |
| $ | (95,494 | ) |
| $ | 23,424 |
|
Shares issued under Employee Stock Purchase Plan |
|
| 4,642 |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Stock-based compensation |
|
| 653,394 |
|
|
| 825 |
|
|
| — |
|
|
| — |
|
|
| 825 |
|
Employee tax withholdings on stock-based compensation |
|
| (11,061 | ) |
|
| — |
|
|
| (10 | ) |
|
| — |
|
|
| (10 | ) |
Cumulative effect of accounting change due to adoption of ASC 606 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 401 |
|
|
| 401 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,674 | ) |
|
| (6,674 | ) |
Balance, March 31, 2019 |
|
| 29,600,158 |
|
|
| 155,828 |
|
|
| (36,091 | ) |
|
| (101,767 | ) |
|
| 17,970 |
|
Exercise of stock options and warrants for cash |
|
| 22,362 |
|
|
| 57 |
|
|
| — |
|
|
| — |
|
|
| 57 |
|
Shares issued under Employee Stock Purchase Plan |
|
| 2,361 |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| 7 |
|
Stock-based compensation |
|
| 669,238 |
|
|
| 618 |
|
|
| — |
|
|
| — |
|
|
| 618 |
|
Employee tax withholdings on stock-based compensation |
|
| (28,122 | ) |
|
| — |
|
|
| (79 | ) |
|
| — |
|
|
| (79 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,462 |
|
|
| 12,462 |
|
Balance, March 31, 2020 |
|
| 30,265,997 |
|
|
| 156,503 |
|
|
| (36,163 | ) |
|
| (89,305 | ) |
|
| 31,035 |
|
Exercise of stock options and warrants for cash |
|
| 99,000 |
|
|
| 229 |
|
|
| — |
|
|
| — |
|
|
| 229 |
|
Shares issued under Employee Stock Purchase Plan |
|
| 1,146 |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| 7 |
|
Stock-based compensation |
|
| 450,481 |
|
|
| 753 |
|
|
| — |
|
|
| — |
|
|
| 753 |
|
Employee tax withholdings on stock-based compensation |
|
| (11,324 | ) |
|
| — |
|
|
| (84 | ) |
|
| — |
|
|
| (84 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26,134 |
|
|
| 26,134 |
|
Balance, March 31, 2021 |
|
| 30,805,300 |
|
| $ | 157,485 |
|
| $ | (36,240 | ) |
| $ | (63,171 | ) |
| $ | 58,074 |
|
Fiscal Year Ended March 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Product revenue | $ | 64,897 | $ | 65,881 | $ | 71,954 | |||||
Service revenue | 2,745 | 6,329 | 16,669 | ||||||||
Total revenue | 67,642 | 72,210 | 88,623 | ||||||||
Cost of product revenue | 49,630 | 68,388 | 54,423 | ||||||||
Cost of service revenue | 2,015 | 4,959 | 11,220 | ||||||||
Total cost of revenue | 51,645 | 73,347 | 65,643 | ||||||||
Gross profit (loss) | 15,997 | (1,137 | ) | 22,980 | |||||||
Operating expenses: | |||||||||||
General and administrative | 16,884 | 14,908 | 14,951 | ||||||||
Goodwill and long lived asset impairment | 6,023 | — | — | ||||||||
Acquisition and integration related expenses | — | 47 | 819 | ||||||||
Sales and marketing | 11,343 | 13,290 | 13,527 | ||||||||
Research and development | 1,668 | 2,554 | 2,026 | ||||||||
Total operating expenses | 35,918 | 30,799 | 31,323 | ||||||||
Loss from operations | (19,921 | ) | (31,936 | ) | (8,343 | ) | |||||
Other income (expense): | |||||||||||
Interest expense | (297 | ) | (376 | ) | (481 | ) | |||||
Interest income | 128 | 300 | 567 | ||||||||
Total other income (expense) | (169 | ) | (76 | ) | 86 | ||||||
Loss before income tax | (20,090 | ) | (32,012 | ) | (8,257 | ) | |||||
Income tax expense (benefit) | 36 | 49 | (2,058 | ) | |||||||
Net loss and comprehensive loss | $ | (20,126 | ) | $ | (32,061 | ) | $ | (6,199 | ) | ||
Basic net loss per share attributable to common shareholders | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | ||
Weighted-average common shares outstanding | 27,627,693 | 22,353,419 | 20,987,964 | ||||||||
Diluted net loss per share | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | ||
Weighted-average common shares and share equivalents outstanding | 27,627,693 | 22,353,419 | 20,987,964 |
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
(in thousands, except share amounts)
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 26,134 |
|
| $ | 12,462 |
|
| $ | (6,674 | ) |
Adjustments to reconcile net income (loss) to net cash provided by |
|
|
|
|
|
|
|
|
|
|
|
|
(used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
| 1,190 |
|
|
| 1,203 |
|
|
| 1,339 |
|
Amortization of intangible assets |
|
| 290 |
|
|
| 359 |
|
|
| 444 |
|
Stock-based compensation |
|
| 753 |
|
|
| 618 |
|
|
| 825 |
|
Amortization of debt issue costs |
|
| 157 |
|
|
| 243 |
|
|
| 101 |
|
Loss on debt extinguishment |
|
| 90 |
|
|
| — |
|
|
| — |
|
Deferred income tax benefit |
|
| (19,860 | ) |
|
| — |
|
|
| — |
|
Loss on sale of property and equipment |
|
| 1 |
|
|
| 10 |
|
|
| — |
|
Provision for inventory reserves |
|
| 275 |
|
|
| 205 |
|
|
| (202 | ) |
Provision for bad debts |
|
| — |
|
|
| — |
|
|
| 56 |
|
Other |
|
| 106 |
|
|
| 57 |
|
|
| 57 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (2,384 | ) |
|
| 3,616 |
|
|
| (5,840 | ) |
Revenue earned but not billed |
|
| (2,370 | ) |
|
| 3,186 |
|
|
| (1,390 | ) |
Inventories |
|
| (5,322 | ) |
|
| (1,319 | ) |
|
| (4,689 | ) |
Prepaid expenses and other assets |
|
| (396 | ) |
|
| 66 |
|
|
| 68 |
|
Accounts payable |
|
| (2,637 | ) |
|
| (79 | ) |
|
| 8,916 |
|
Accrued expenses and other liabilities |
|
| 5,797 |
|
|
| (192 | ) |
|
| 1,975 |
|
Deferred revenue, current and long-term |
|
| (95 | ) |
|
| (92 | ) |
|
| (44 | ) |
Net cash provided by (used in) operating activities |
|
| 1,729 |
|
|
| 20,343 |
|
|
| (5,058 | ) |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (902 | ) |
|
| (814 | ) |
|
| (381 | ) |
Additions to patents and licenses |
|
| (51 | ) |
|
| (131 | ) |
|
| (68 | ) |
Proceeds from sales of property, plant and equipment |
|
| 7 |
|
|
| 9 |
|
|
| — |
|
Net cash used in investing activities |
|
| (946 | ) |
|
| (936 | ) |
|
| (449 | ) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Payment of long-term debt |
|
| (35 | ) |
|
| (92 | ) |
|
| (80 | ) |
Proceeds from revolving credit facility |
|
| 8,000 |
|
|
| 74,100 |
|
|
| 60,270 |
|
Payment of revolving credit facility |
|
| (18,013 | ) |
|
| (73,289 | ) |
|
| (54,976 | ) |
Payments to settle employee tax withholdings on stock-based compensation |
|
| (84 | ) |
|
| (76 | ) |
|
| (10 | ) |
Debt issue costs |
|
| (245 | ) |
|
| (91 | ) |
|
| (396 | ) |
Net proceeds from employee equity exercises |
|
| 236 |
|
|
| 63 |
|
|
| 4 |
|
Net cash (used in) provided by financing activities |
|
| (10,141 | ) |
|
| 615 |
|
|
| 4,812 |
|
Net (decrease) increase in cash and cash equivalents |
|
| (9,358 | ) |
|
| 20,022 |
|
|
| (695 | ) |
Cash and cash equivalents at beginning of period |
|
| 28,751 |
|
|
| 8,729 |
|
|
| 9,424 |
|
Cash and cash equivalents at end of period |
| $ | 19,393 |
|
| $ | 28,751 |
|
| $ | 8,729 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | (118 | ) |
| $ | (254 | ) |
| $ | (176 | ) |
Cash (paid) received for income taxes |
| $ | (175 | ) |
| $ | (28 | ) |
| $ | 12 |
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment by issuing a debt |
| $ | — |
|
| $ | — |
|
| $ | 74 |
|
Operating lease assets obtained in exchange for new operating lease liabilities |
| $ | 355 |
|
| $ | 2,757 |
|
| $ | — |
|
Shareholders’ Equity | ||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||
Shares | Additional Paid-in Capital | Treasury Stock | Shareholder Notes Receivable | Retained Earnings (Deficit) | Total Shareholders’ Equity | |||||||||||||||||
Balance, March 31, 2013 | 20,162,397 | $ | 128,104 | $ | (38,378 | ) | $ | (265 | ) | $ | (11,692 | ) | $ | 77,769 | ||||||||
Issuance of stock and warrants for services | 33,641 | 129 | — | — | — | 129 | ||||||||||||||||
Stock activity for acquisition | 940,940 | — | 2,382 | — | — | 2,382 | ||||||||||||||||
Exercise of stock options and warrants for cash | 446,059 | 1,152 | — | — | — | 1,152 | ||||||||||||||||
Shares issued under Employee Stock Purchase Plan | 2,373 | (4 | ) | 10 | — | — | 6 | |||||||||||||||
Tax benefit from exercise of stock options | — | 13 | — | — | — | 13 | ||||||||||||||||
Collection of shareholder notes receivable | — | — | — | 215 | — | 215 | ||||||||||||||||
Stock-based compensation | 23,084 | 1,593 | — | — | — | 1,593 | ||||||||||||||||
Treasury stock purchase | (20,168 | ) | — | (48 | ) | — | — | (48 | ) | |||||||||||||
Net loss | — | — | — | — | (6,199 | ) | (6,199 | ) | ||||||||||||||
Balance, March 31, 2014 | 21,588,326 | $ | 130,987 | $ | (36,034 | ) | $ | (50 | ) | $ | (17,891 | ) | $ | 77,012 | ||||||||
Issuance of common stock for cash, net of issuance costs | 5,462,500 | 17,465 | — | — | — | 17,465 | ||||||||||||||||
Issuance of stock and warrants for services | 27,931 | 131 | — | — | — | 131 | ||||||||||||||||
Exercise of stock options and warrants for cash | 178,387 | 430 | — | — | — | 430 | ||||||||||||||||
Shares issued under Employee Stock Purchase Plan | 1,486 | 4 | 7 | — | — | 11 | ||||||||||||||||
Collection of shareholder notes receivable | — | — | — | 46 | — | 46 | ||||||||||||||||
Stock-based compensation | 170,055 | 1,499 | — | — | — | 1,499 | ||||||||||||||||
Employee tax withholdings on stock-based compensation | (7,152 | ) | — | (22 | ) | — | — | (22 | ) | |||||||||||||
Net loss | — | — | — | — | (32,061 | ) | (32,061 | ) | ||||||||||||||
Balance, March 31, 2015 | 27,421,533 | $ | 150,516 | $ | (36,049 | ) | $ | (4 | ) | $ | (49,952 | ) | $ | 64,511 | ||||||||
Issuance of stock and warrants for services | 35,290 | 66 | — | — | — | 66 | ||||||||||||||||
Exercise of stock options and warrants for cash | 46,410 | 97 | — | — | — | 97 | ||||||||||||||||
Shares issued under Employee Stock Purchase Plan | 3,925 | (1 | ) | 8 | — | — | 7 | |||||||||||||||
Collection of shareholder notes receivable | — | — | — | — | — | — | ||||||||||||||||
Stock-based compensation | 270,303 | 1,462 | — | — | — | 1,462 | ||||||||||||||||
Employee tax withholdings on stock-based compensation | (10,323 | ) | — | (34 | ) | — | — | (34 | ) | |||||||||||||
Net loss | — | — | — | — | (20,126 | ) | (20,126 | ) | ||||||||||||||
Balance, March 31, 2016 | 27,767,138 | $ | 152,140 | $ | (36,075 | ) | $ | (4 | ) | $ | (70,078 | ) | $ | 45,983 |
ORION ENERGY SYSTEMS, INC. AND SUBSIDIARIES
Fiscal Year Ended March 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Operating activities | |||||||||||
Net loss | $ | (20,126 | ) | $ | (32,061 | ) | $ | (6,199 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) | |||||||||||
operating activities: | |||||||||||
Depreciation | 2,950 | 2,853 | 3,798 | ||||||||
Amortization | 1,215 | 1,327 | 704 | ||||||||
Stock-based compensation expense | 1,462 | 1,499 | 1,593 | ||||||||
Accretion of fair value on contingent consideration | — | — | 11 | ||||||||
Deferred income tax (benefit) expense | — | — | (2,123 | ) | |||||||
Impairment on assets | 6,023 | 12,130 | — | ||||||||
Loss (gain) on sale of property and equipment | 40 | (21 | ) | 1,733 | |||||||
Provision for inventory reserves | 509 | 361 | 1,995 | ||||||||
Provision for bad debts | 575 | 285 | 174 | ||||||||
Other | 258 | 265 | 165 | ||||||||
Changes in operating assets and liabilities, net of changes from acquisitions: | |||||||||||
Accounts receivable, current and long-term | 7,116 | (1,909 | ) | 8,395 | |||||||
Inventories, current and long-term | (3,249 | ) | (2,356 | ) | 3,962 | ||||||
Deferred contract costs | 137 | 651 | 1,376 | ||||||||
Prepaid expenses and other current assets | (2,645 | ) | 1,261 | (1,072 | ) | ||||||
Accounts payable | 713 | 2,475 | (762 | ) | |||||||
Accrued expenses and other | 1,803 | 838 | (1,575 | ) | |||||||
Deferred revenue, current and long-term | (254 | ) | (410 | ) | (2,274 | ) | |||||
Net cash (used in) provided by operating activities | (3,473 | ) | (12,812 | ) | 9,901 | ||||||
Investing activities | |||||||||||
Cash paid for acquisition, net of cash acquired | — | — | (4,992 | ) | |||||||
Purchase of property and equipment | (401 | ) | (2,006 | ) | (410 | ) | |||||
Purchase of short-term investments | — | (2 | ) | (4 | ) | ||||||
Sale of short-term investments | — | 472 | 555 | ||||||||
Additions to patents and licenses | (6 | ) | (234 | ) | (43 | ) | |||||
Proceeds from sales of property, plant and equipment | 35 | 1,040 | 80 | ||||||||
Net cash used in investing activities | (372 | ) | (730 | ) | (4,814 | ) | |||||
Financing activities | |||||||||||
Payment of long-term debt | (1,901 | ) | (4,494 | ) | (3,229 | ) | |||||
Proceeds from revolving credit facility | 65,767 | 2,500 | — | ||||||||
Repayments of revolving credit facility | (64,549 | ) | — | — | |||||||
Proceeds from long-term debt | — | 446 | — | ||||||||
Proceeds from repayment of shareholder notes | — | 46 | 215 | ||||||||
Proceeds from issuance of common stock, net of issuance costs | (2 | ) | 17,465 | — | |||||||
Payments to settle employee tax withholdings on stock-based compensation | (34 | ) | (22 | ) | — | ||||||
Excess tax benefits from stock-based compensation | — | — | 13 | ||||||||
Deferred financing costs | — | (406 | ) | (19 | ) | ||||||
Net proceeds from employee equity exercises | 104 | 441 | 1,125 |
Net cash (used in) provided by financing activities | (615 | ) | 15,976 | (1,895 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | (4,460 | ) | 2,434 | 3,192 | |||||||
Cash and cash equivalents at beginning of period | 20,002 | 17,568 | 14,376 | ||||||||
Cash and cash equivalents at end of period | $ | 15,542 | $ | 20,002 | $ | 17,568 | |||||
Supplemental cash flow information: | |||||||||||
Cash paid for interest | $ | 191 | $ | 287 | $ | 423 | |||||
Cash paid for income taxes | $ | 18 | $ | 42 | $ | 22 | |||||
Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
Vendor financed capital lease addition | $ | 396 | $ | — | $ | — | |||||
Shares returned to treasury in satisfaction of receivable | $ | — | $ | — | $ | 48 | |||||
Acquisition related contingent consideration liability | $ | — | $ | — | $ | 612 | |||||
Acquisition financed through debt | $ | — | $ | — | $ | 3,123 | |||||
Common stock issued for acquisition | $ | — | $ | — | $ | 2,416 |
NOTE 1 — DESCRIPTION OF BUSINESS
Orion includes Orion Energy Systems, Inc., a Wisconsin corporation, and all consolidated subsidiaries. Orion is a developer, manufacturer and seller of lighting and energy management systems to commercial and industrial businesses, and federal and local governments, predominantly in North America.
Orion’s corporate offices and leased primary manufacturing operations are located in Manitowoc, Wisconsin. Orion also leases office space in Jacksonville, Florida; Chicago, Illinois;Florida.
NOTE 2 — IMPACT OF COVID-19
The COVID-19 pandemic has disrupted business, trade, commerce, financial and Houston, Texas.credit markets, in the U.S. and globally. Orion’s business was adversely impacted by measures taken by government entities and others to control the spread of the virus beginning in March 2020, the last month of Orion’s fiscal 2020 year, and continuing most significantly into the second quarter of fiscal 2021. During the second half of fiscal 2021, Orion experienced a rebound in business. Project installations resumed for Orion’s largest customer and started installations for a new large specialty retail customer began, with no further significant COVID-19 impacts. However, some customers continue to refrain from awarding new projects and potential future risks remain due to the COVID-19 pandemic.
As an essential business, Orion provides products and services to ensure energy and lighting infrastructure and Orion therefore has continued to operate throughout the pandemic.
As part of Orion’s response to the impacts of the COVID-19 pandemic, during the fourth quarter of fiscal 2020 Orion implemented a number of cost reduction and cash conservation measures, including reducing headcount. While certain restrictions began to initially lessen in certain jurisdictions during fiscal 2021, stay-at-home, face mask or lockdown orders remain in effect in others, with employees asked to work remotely if possible. Some customers and projects are in areas where travel restrictions have been imposed, certain customers have either closed or reduced on-site activities, and timelines for the completion of several projects have been delayed, extended or terminated. These modifications to Orion’s business practices, including any future actions Orion takes, may cause Orion to experience reductions in productivity and disruptions to Orion’s business routines. In addition, Orion is required to make substantial working capital expenditures and advance inventory purchases that Orion may not be able to recoup if Orion’s customer agreements or a substantial volume of purchase orders under Orion’s customer agreements are delayed or terminated as a result of COVID-19. At this time, it is not possible to predict the overall impact the COVID-19 pandemic will have on Orion’s business, liquidity, capital resources or financial results, although the economic and regulatory impacts of COVID-19 significantly reduced Orion’s revenue and profitability in the first half of fiscal 2021. If the COVID-19 pandemic becomes more pronounced in Orion’s markets or experiences a resurgence in markets recovering from the spread of COVID-19, Orion’s operations in areas impacted by such events could experience further material adverse financial impacts due to market changes and other resulting events and circumstances.
Due to the forecasted change in macroeconomic conditions due to the COVID-19 pandemic, as of March 31, 2020, a triggering event occurred requiring Orion to evaluate its long-lived assets for impairment. Orion performed the Step 1 recoverability test for the asset group, and the asset group was deemed recoverable. See Note 8 – Property and Equipment.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and includes certain income tax provisions relevant to businesses. Orion is required to recognize the effect on the consolidated financial statements in the period the law was enacted, which was the period ended March 31, 2020. For the fiscal years ended March 31, 2021, and March 31, 2020, the CARES Act did not have a material impact on Orion’s consolidated financial statements. See Note 14 – Income Taxes.
NOTE 23 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Orion Energy Systems, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles, or 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 bad debt reserves,allowance for doubtful accounts, accruals for warranty expenses and loss contingencies, income taxes, impairment analyses, and certain equity transactions. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
Orion considers all highly liquid, short-term investments with original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Orion’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other, revolving credit facility and long-term debt. The carrying amounts of Orion’s financial instruments approximate their respective fair values due to the relatively short-term nature of these instruments, or in the case of long-term debt and revolving credit facility, because of the interest rates currently available to Orion for similar obligations. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.
Level 3 — Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’smanagement's best estimate of what market participants would use in valuing the asset or liability at the measurement date.
Allowance for Doubtful Accounts Receivable
Orion performs ongoing evaluations of its customers and agricultural industries, as well as wholesalers. Credit is extended based on an evaluation of a customer’s financial condition. Generally, collateral is not required for end users; however, the payment of certain trade accounts receivable from wholesalers is secured by irrevocable standby letters of credit and/or guarantees. Accounts receivable are generally due within 30-60 days. Accounts receivable are stated at the amountcontinuously monitors collections and payments. Orion expects to collect from outstanding balances. Orion provides for probable uncollectible amounts through a charge to earnings
2016 | 2015 | ||||||
Accounts receivable, gross | $ | 11,394 | $ | 18,721 | |||
Allowance for doubtful accounts | (505 | ) | (458 | ) | |||
Accounts receivable, net | $ | 10,889 | $ | 18,263 |
Not Past Due | 1-90 days past due | Greater than 90 days past due | Total past due | Total sales-type leases | |||||||||||||||
Lease balances included in consolidated accounts receivable—current | $ | 294 | $ | 4 | $ | 10 | $ | 14 | $ | 308 | |||||||||
Lease balances included in consolidated accounts receivable—long-term | 101 | — | — | — | 101 | ||||||||||||||
Total gross sales-type leases | 395 | 4 | 10 | 14 | 409 | ||||||||||||||
Allowance | — | — | (9 | ) | (9 | ) | (9 | ) | |||||||||||
Total net sales-type leases | $ | 395 | $ | 4 | $ | 1 | $ | 5 | $ | 400 |
Not Past Due | 1-90 days past due | Greater than 90 days past due | Total past due | Total sales-type leases | |||||||||||||||
Lease balances included in consolidated accounts receivable—current | $ | 1,346 | $ | 47 | $ | 186 | $ | 233 | $ | 1,579 | |||||||||
Lease balances included in consolidated accounts receivable—long-term | 398 | — | — | — | 398 | ||||||||||||||
Total gross sales-type leases | 1,744 | 47 | 186 | 233 | 1,977 | ||||||||||||||
Allowance | (12 | ) | (3 | ) | (141 | ) | (144 | ) | (156 | ) | |||||||||
Total net sales-type leases | $ | 1,732 | $ | 44 | $ | 45 | $ | 89 | $ | 1,821 |
Balance at beginning of period | Provisions charged to expense | Write offs and other | Balance at end of period | |||||||||||||
March 31, | (in Thousands) | |||||||||||||||
2016 | Allowance for Doubtful Accounts on financing receivables | $ | 156 | $ | 30 | $ | 177 | $ | 9 | |||||||
2015 | Allowance for Doubtful Accounts on financing receivables | $ | 94 | $ | 62 | $ | — | $ | 156 | |||||||
2014 | Allowance for Doubtful Accounts on financing receivables | $ | 74 | $ | 96 | $ | 76 | $ | 94 |
Cost | Obsolescence Reserve | Net | |||||||||
As of March 31, 2016 | |||||||||||
Raw materials and components | $ | 10,556 | $ | (1,052 | ) | $ | 9,504 | ||||
Work in process | 2,045 | (119 | ) | 1,926 | |||||||
Finished goods | 6,550 | (956 | ) | 5,594 | |||||||
Total | $ | 19,151 | $ | (2,127 | ) | $ | 17,024 | ||||
As of March 31, 2015 | |||||||||||
Raw materials and components | $ | 9,150 | $ | (677 | ) | $ | 8,473 | ||||
Work in process | 1,683 | (94 | ) | 1,589 | |||||||
Finished goods | 5,069 | (848 | ) | 4,221 | |||||||
Total | $ | 15,902 | $ | (1,619 | ) | $ | 14,283 |
March 31, 2016 | March 31, 2015 | ||||||
Unbilled accounts receivable | $ | 4,307 | $ | 1,710 | |||
Other prepaid expenses | 731 | 697 | |||||
Total | $ | 5,038 | $ | 2,407 |
March 31, 2016 | March 31, 2015 | ||||||
Land and land improvements | $ | 421 | $ | 1,511 | |||
Buildings and building improvements | 11,849 | 14,441 | |||||
Furniture, fixtures and office equipment | 7,233 | 8,600 | |||||
Leasehold improvements | 148 | 148 | |||||
Equipment leased to customers under Power Purchase Agreements | 4,997 | 4,997 | |||||
Plant equipment | 10,805 | 11,084 | |||||
Construction in progress | 128 | 379 | |||||
35,581 | 41,160 | ||||||
Less: accumulated depreciation and amortization | (18,577 | ) | (19,937 | ) | |||
Net property and equipment | $ | 17,004 | $ | 21,223 |
March 31, 2016 | March 31, 2015 | ||||||
Equipment | $ | 408 | $ | — | |||
Less: accumulated depreciation and amortization | (65 | ) | — | ||||
Net Equipment | $ | 343 | $ | — |
Balance at March 31, 2014 | $ | 4,409 | |
Impairments | — | ||
Balance at March 31, 2015 | 4,409 | ||
Impairments | (4,409 | ) | |
Balance at March 31, 2016 | $ | — |
March 31, 2016 | March 31, 2015 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||
Patents | $ | 2,377 | $ | (1,053 | ) | $ | 1,324 | $ | 2,447 | $ | (906 | ) | $ | 1,541 | |||||||||
Licenses | 58 | (58 | ) | — | 58 | (58 | ) | — | |||||||||||||||
Trade name and trademarks | 1,956 | — | 1,956 | 1,958 | — | 1,958 | |||||||||||||||||
Customer relationships | 3,600 | (2,512 | ) | 1,088 | 3,600 | (1,620 | ) | 1,980 | |||||||||||||||
Developed technology | 900 | (265 | ) | 635 | 900 | (109 | ) | 791 | |||||||||||||||
Non-competition agreements | 100 | (55 | ) | 45 | 100 | (35 | ) | 65 | |||||||||||||||
Total | $ | 8,991 | $ | (3,943 | ) | $ | 5,048 | $ | 9,063 | $ | (2,728 | ) | $ | 6,335 |
Fiscal 2017 | $ | 877 | |
Fiscal 2018 | 602 | ||
Fiscal 2019 | 426 | ||
Fiscal 2020 | 340 | ||
Fiscal 2021 | 266 | ||
Thereafter | 581 | ||
$ | 3,092 |
Fiscal Year Ended March 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Amortization included in cost of sales: | |||||||||||
Patents | $ | 139 | $ | 132 | $ | 135 | |||||
Total | $ | 139 | $ | 132 | $ | 135 | |||||
Amortization included in operating expenses: | |||||||||||
Customer relationships | $ | 891 | $ | 1,085 | $ | 535 | |||||
Developed technology | 156 | 90 | 19 | ||||||||
Non-competition agreements | 20 | 20 | 15 | ||||||||
Patents | 9 | — | — | ||||||||
Total | 1,076 | 1,195 | 569 | ||||||||
Total amortization | $ | 1,215 | $ | 1,327 | $ | 704 |
March 31, 2016 | March 31, 2015 | ||||||
Deferred financing costs | $ | 92 | $ | 202 | |||
Security deposits | 87 | 73 | |||||
Deferred contract costs | — | 83 | |||||
Other | 6 | 9 | |||||
Total | $ | 185 | $ | 367 |
March 31, 2016 | March 31, 2015 | ||||||
Compensation and benefits | $ | 1,794 | $ | 1,314 | |||
Sales tax | 913 | 1,168 | |||||
Contract costs | 586 | 1,267 | |||||
Legal and professional fees (1) | 2,348 | 479 | |||||
Warranty | 554 | 705 | |||||
Other accruals | 391 | 264 | |||||
Total | $ | 6,586 | $ | 5,197 |
March 31, | |||||||
2016 | 2015 | ||||||
Beginning of year | $ | 1,015 | $ | 263 | |||
Provision to product cost of revenue | 159 | 776 | |||||
Charges | (310 | ) | (24 | ) | |||
End of year | $ | 864 | $ | 1,015 |
Incentive Compensation
Orion’s compensation committee approved an Executive Fiscal Year 2016 Annual Cash Incentive Program under its 2004 Stock and Incentive Awards Plan. The plan provided for performance cash bonus payments ranging from 35-100% of the fiscal 2016 base salaries of Orion’s named executive officers and other key employees. The plan provided for bonuses to be paid out on the basis of the achievement in fiscal 2016 of at least (i) $110,000 of profit before taxes and (ii) revenue growth of 10% more than fiscal year 2015.Program. Based upon the results for the yearfiscal years ended March 31, 2016,2021, 2020 and 2019, Orion did not accrue anyaccrued approximately $0.7 million, $0.8 million, and no expense related to this plan.
Revenue Recognition
Orion generates revenues primarily by selling commercial lighting fixtures and components and by installing these fixtures in its 2004 Stock and Incentive Awards Plan. The plan provided for performance cash bonus payments rangingcustomer’s facilities. Orion recognizes revenue in accordance with the guidance in “Revenue from 35-100%Contracts with Customers” (Topic 606) (“ASC 606”) when control of the fiscal 2015 base salaries of Orion’s named executive officers and other key employees. The plangoods or services being provided for bonuses(which Orion refers to be paid out on the basis of the achievement in fiscal 2015 of at least (i) $2,300,000 of profit before taxes and (ii) revenue of at least $90,400,000. Based upon the results for the year ended March 31, 2015, Orion did not accrue any expense related to this plan.
If there are multiple performance obligations in a single contract, the contract’s total contract revenuetransaction price is allocated to each elementindividual performance obligation based on their relative standalone selling prices in accordance with ASC 605-25,
Revenue derived from customer contracts which include only performance obligation(s) for the sale of its lighting fixtures and energycomponents is classified as Product revenue in the Consolidated Statements of Operations. The revenue for these transactions is recorded at the point in time when management technologiesbelieves 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 similar to a construction project, with materials being delivereddetermined separately for each contract and contracting and projectrequires judgment by management activities occurring according to an installation schedule. The significant deliverables includeof the shipment of products and related transfer of titlecontract terms and the installation.
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 price in multiple-element arrangements, Orion establishesprices.
Revenue from turnkey projects that is allocated to the selling price for its HIF lighting and energy management system products using management's best estimatesale of the selling price, as VSOE or TPE does not exist.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 recognizedinstalled and working correctly, or (d) when products are shipped. For product revenue, management's best estimate of selling pricethe customer acknowledges that the entire installation project is determined usingsubstantially complete. Determining the point in time when a cost plus gross profit margin method. In addition, Orion records in service revenue the selling price for its installation and recycling services using management’s best estimate of selling price, as VSOE or TPE does not exist. Service revenue is recognized when services are completed and customer acceptance has been received. Recycling services provided in connection with installation entail the disposalobtains control of the customer’s legacy lighting fixtures. Orion’s service revenues, other thanfixtures in a turnkey project can be a complex judgment and is applied separately for installation and recycling that are completed prior to delivery of the product, areeach individual light fixture included in product revenue using management’s best estimatea contract. In making this judgment, management considers the timing of selling price, as VSOE or TPE does not exist. These services include comprehensive site assessment, site field verification, utility incentive and government subsidy management, engineering design, and project management. For these services, along with Orion's installation and recycling services, under a multiple-element arrangement, management’s best estimate of selling price is determined by considering several external and internalvarious factors, including, but not limited to, economic conditions and trends,those detailed below:
when there is a legal transfer of ownership;
when the customer demand, pricing practices, margin objectives, competition, geographies in which Orion offers its products and services and internal costs. The determination of estimated selling price is made through consultation with and approval by management, taking into account allobtains physical possession of the preceding factors.products;
For sales of solar photovoltaic systems, which are governed bywhen the customer contracts that require Orionstarts to deliver functioning solar power systems and are generally completed within three to 15 months fromreceive the start of construction, Orion recognizes revenue from fixed price construction contracts using the percentage-of-completion method in accordance with ASC 605-35, Construction-Type and Production-Type Contracts. Under this method, revenue arising from fixed price construction contracts is recognized as work is performed based upon the percentage of incurred costs to estimated total forecasted costs. Orion has determined that the appropriate method of measuring progress on these sales is measured by the percentage of costs incurred to datebenefit of the total estimated costs for each contract as materials are installed. The percentage-of-completion method requires revenue recognition from products;
the deliveryamount and duration of products to be deferred and the cost of such products to be capitalized as a deferred cost and current assetphysical control that Orion maintains on the balance sheet.products after they are shipped to, and received at, the customer’s facility;
whether Orion performs periodic evaluations ofis required to maintain insurance on the progress oflighting fixtures when they are in transit and after they are delivered to the installation of the solar photovoltaic systems using actual costs incurred over total estimated costs to complete a project. Provisions for estimated losses on uncompleted contracts, if any, are recognized in the period in which the loss first becomes probablecustomer’s facility;
when each light fixture is physically installed and reasonably estimable.working correctly;
when the customer formally accepts the product; and
when Orion receives payment from the customer for the light fixtures.
Revenue from turnkey projects that is allocated to the single installation performance obligation is reflected in Service revenue. Service revenue is recorded over-time as Orion fulfills its obligation to install the light fixtures. Orion measures its performance toward fulfilling its performance obligations for installations using an output method that calculates the number of light fixtures removed and installed as of the measurement date in comparison to the total number of light fixtures to be removed and installed under the contract.
Orion offers a financing program, called an Orion Throughput Agreement, or OTA, for a customer’s lease of Orion’s energy management systems. The OTA is structured as a sales-type lease and upon successful installation of the system and customer acknowledgment that the system is operating as specified, revenue is recognized at Orion’s net investment in the lease, which typically is the net present value of the future cash flows.
Orion offers a financing program, called aalso records revenue in conjunction with several limited power purchase agreement, or PPA, for Orion’s renewable energy product offerings. A PPA is a supply side agreementagreements (“PPAs”) still outstanding. Those PPAs are supply-side agreements for the generation of electricity. Orion’s last PPA expires in 2031. Revenue associated with the sale of energy generated by the solar facilities under these PPAs is within the scope of ASC 606. Revenues are recognized over-time and are equal to the amount billed to the customer, which is calculated by applying the fixed rate designated in the PPAs to the variable amount of electricity and subsequentgenerated 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 end user. Uponsolar facilities and from amortizing a grant received from the customer’s acknowledgment thatfederal government during the system is operating as specified, product revenue is recognizedperiod starting when the power generating facilities were constructed until the expiration of the PPAs; these revenues are not derived from contracts with customers and therefore not under the scope of ASC 606.
See Note 11 – Accrued Expenses and Other for a discussion of Orion’s accounting for the warranty it provides to customers for its products and services.
Sales taxes collected from customers and remitted to governmental authorities are accounted for on a monthly basis over the life of the PPA contract, which is typically in excess of 10 years.
Shipping and Handling Costs
Orion records costs incurred in connection with shipping and handling of products as cost of product revenue. Amounts billed to customers in connection with these costs are included in product revenue.
Research and Development
Orion expenses research and development costs as incurred. Amounts are included in the Statement of Operations and Comprehensive Income on the line item Research and development.
Income Taxes
Orion recognizes deferred tax assets and liabilities for the future tax consequences of temporary differences between financial reporting and income tax basis of assets and liabilities, measured using the enacted tax rates and laws expected to be in effect when the temporary differences reverse. Deferred income taxes also arise from the future tax benefits of operating loss and tax credit carryforwards. A valuation allowance is established when management determines that it is more likely than not that all or a portion of a deferred tax asset will not be realized. For the fiscal year ended March 31, 2016,2021, Orion recorded adecreased its full valuation allowance of $5,740,000by $20.9 million against its deferred tax assets.
ASC 740,
Income Taxes, also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination. Orion has classified the amounts recorded for uncertain taxbenefits in the balance sheet as other liabilities (non-current) 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 immaterial and are included in the unrecognized tax benefits.
Stock Based Compensation
Orion’s share-based payments to employees are measured at fair value and are recognized inagainst earnings, net of estimated forfeitures, on a straight-line basis over the requisite service period.
Orion accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC718,ASC 718, stock-based compensation is measured at the grant date based on the fair value
Orion didhas not issue any stock options during fiscal 2016 or 2015. The fair value of each option grant in fiscal 2014 was determined using the assumptionspaid dividends in the following table:
Fiscal Year Ended March 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Numerator: | |||||||||||
Net loss (dollars in thousands) | $ | (20,126 | ) | $ | (32,061 | ) | $ | (6,199 | ) | ||
Denominator: | |||||||||||
Weighted-average common shares outstanding | 27,627,693 | 22,353,419 | 20,987,964 | ||||||||
Weighted-average effect of assumed conversion of stock options and restricted stock | — | — | — | ||||||||
Weighted-average common shares and share equivalents outstanding | 27,627,693 | 22,353,419 | 20,987,964 | ||||||||
Net income (loss) per common share: | |||||||||||
Basic | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) | ||
Diluted | $ | (0.73 | ) | $ | (1.43 | ) | $ | (0.30 | ) |
March 31, | ||||||||
2016 | 2015 | 2014 | ||||||
Common stock options | 2,017,046 | 2,426,836 | 2,716,317 | |||||
Restricted shares | 1,053,389 | 704,688 | 539,204 | |||||
Common stock warrants | — | — | 38,980 | |||||
Total | 3,070,435 | 3,131,524 | 3,294,501 |
Concentration of Credit Risk and Other Risks and Uncertainties
Orion’s cash is deposited with three 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 fiscal 2016, 2015 and 2014,2021, no supplier accounted for more than 10% of total cost of revenue.
In fiscal 2015,2021, one customer accounted for 12%56.0% of revenue. In fiscal 2014,2020, one customer accounted for 23%74.1% of total revenue.
As of March 31, 2016 one customer2021, three customers accounted for more than 10%33.9%, 16.4% and 10.1% of accounts receivable, respectively, and as of March 31, 2015, no customer2020, two customers accounted for more than 10%37.3% and 13.0% of accounts receivable.
Recent Accounting Pronouncements
Issued: Not Yet Adopted
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows. The ASU is effective for Orion in the first quarter of Orion's fiscal 2018. Management is currently assessing the impact of adoption on its consolidated financial statements.
Recently Adopted Standards
In July 2015,December 2019, the FASB issued ASU 2015-11, “InventoryNo. 2019-12, Income Taxes (Topic 330)740): Simplifying the MeasurementAccounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general rules of Inventory,”Topic 740. The provisions of ASU 2019-12 are effective for Orion in the current period. One provision applicable to Orion and relevant to recently
filed financial statements relate to hybrid tax regimes. Hybrid tax regimes are those that impose the greater of two taxes – one based on income or one based on items other than income. The old guidance specified that if there is a tax based on income that is greater than a franchise tax based on capital, only that excess is subject to ASC 740. The new guidance states that an entity should include the amount of tax based on income in the tax provision and include any incremental amount recorded as a tax not based on income. The adoption of this ASU did not have a material impact on Orion’s consolidated financial statements.
Revenue Recognition
See Note 3 – Summary of Significant Accounting Policies for a discussion of Orion’s accounting policies related to revenue recognition.
Contract Fulfillment Costs
Costs associated with product sales are accumulated in inventory as the fixtures are manufactured and are transferred to Cost of product revenue at the time revenue is recorded. See Note 6 – Inventories. 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 changes the measurement principleis accounted for inventoryunder other guidance. For fiscal year 2021, Product revenue included $2.8 million derived from sales-type leases for light fixtures, $0.1 million derived from the lowersale of costtax credits generated from Orion’s legacy operation for distributing solar energy, and $0.1 million 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 marketindustrial 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 are included within each of Orion’s segments, dependent on the sales channel.
See Footnote 18 - Segment Data, for additional discussion concerning Orion’s reportable segments.
The following table provides detail of Orion’s total revenues for the year ended March 31, 2021 (dollars in thousands):
|
| Year Ended March 31, 2021 |
|
| Year Ended March 31, 2020 |
|
| Year Ended March 31, 2019 |
| |||||||||||||||||||||||||||
|
| Product |
|
| Services |
|
| Total |
|
| Product |
|
| Services |
|
| Total |
|
| Product |
|
| Services |
|
| Total |
| |||||||||
Revenue from contracts with customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lighting revenues, by end user |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal government |
| $ | 696 |
|
| $ | 965 |
|
| $ | 1,661 |
|
| $ | 922 |
|
| $ | 379 |
|
| $ | 1,301 |
|
| $ | 2,579 |
|
| $ | 642 |
|
| $ | 3,221 |
|
Commercial and industrial |
|
| 83,963 |
|
|
| 28,211 |
|
|
| 112,174 |
|
|
| 110,742 |
|
|
| 37,110 |
|
|
| 147,852 |
|
|
| 49,963 |
|
|
| 8,851 |
|
|
| 58,814 |
|
Total lighting |
|
| 84,659 |
|
|
| 29,176 |
|
|
| 113,835 |
|
|
| 111,664 |
|
|
| 37,489 |
|
|
| 149,153 |
|
|
| 52,542 |
|
|
| 9,493 |
|
|
| 62,035 |
|
Solar energy related revenues |
|
| 57 |
|
|
| — |
|
|
| 57 |
|
|
| 56 |
|
|
| — |
|
|
| 56 |
|
|
| 57 |
|
|
| — |
|
|
| 57 |
|
Total revenues from contracts with customers |
|
| 84,716 |
|
|
| 29,176 |
|
|
| 113,892 |
|
|
| 111,720 |
|
|
| 37,489 |
|
|
| 149,209 |
|
|
| 52,599 |
|
|
| 9,493 |
|
|
| 62,092 |
|
Revenue accounted for under other guidance |
|
| 2,948 |
|
|
| — |
|
|
| 2,948 |
|
|
| 1,632 |
|
|
| — |
|
|
| 1,632 |
|
|
| 3,662 |
|
|
| — |
|
|
| 3,662 |
|
Total revenue |
| $ | 87,664 |
|
| $ | 29,176 |
|
| $ | 116,840 |
|
| $ | 113,352 |
|
| $ | 37,489 |
|
| $ | 150,841 |
|
| $ | 56,261 |
|
| $ | 9,493 |
|
| $ | 65,754 |
|
Cash Flow Considerations
Customer payments for material only orders are due shortly after shipment.
Turnkey projects where the end-user is a commercial or industrial company typically span between one week to three months. Customer payment requirements for these projects vary by contract. Some contracts provide for customer payments for products and services as they are delivered, other contracts specify that the customer will pay for the project in its entirety upon completion of the installation.
Turnkey projects where the end-user is the federal government typically span a three to six-month period. The contracts for these sales often provide for monthly progress payments equal to ninety percent (90%) of the value provided by Orion during the month.
Orion provides long-term financing to one customer who frequently engages Orion in large turnkey projects that span between three and nine months. The customer executes an agreement providing for monthly payments of the contract price, plus interest, over a five-year period. The total transaction price in these contracts is allocated between product and services in the same manner as all other turnkey projects. The portion of the transaction associated with the installation is accounted for consistently with all other installation related performance obligations. The portion of the transaction associated with the sale of the multiple individual light fixtures is accounted for as sales-type leases in accordance with the guidance for leases. Revenues associated with the sales-type leases are included in Product revenue and recorded for each fixture separately based on the customer’s monthly acknowledgment that specified fixtures have been installed and are operating as specified.
The payments associated with these transactions that are due during the twelve months subsequent to March 31, 2021 are included in Accounts receivable, net in Orion’s Consolidated Balance Sheets. The remaining amounts due that are associated with these transactions are included in Long-term accounts receivable in Orion’s Consolidated Balance Sheets. As of March 31, 2021, there were no such transactions included in Long-term accounts receivable.
The customer’s monthly payment obligation commences after completion of the turnkey project. Orion generally sells the receivable from the customer to an independent financial institution either during, or shortly after completion of, the installation period. Upon execution of the receivables purchase / sales agreement, all amounts due from the customer are included in Revenues earned but not billed on Orion’s Consolidated Balance Sheets until cash is received from the financial institution. The financial institution releases funds to Orion based on the customer’s monthly acknowledgment of the progress Orion has achieved in fulfilling its installation obligation. Orion provides the progress certifications to the financial institution one month in arrears.
The total amount received from the sales of these receivables during the twelve months ended March 31, 2021, 2020, and 2019 was $5.1 million, $4.4 million, and $6.9 million, respectively. Orion’s losses on these sales aggregated to $0.1 million, $0.1 million,
and $0.3 million for the twelve months ended March 31, 2021, 2020, and 2019, respectively, and are included in Interest expense in the Consolidated Statements of Operations.
Practical Expedients and Exemptions
Orion expenses sales commissions when incurred because the amortization period is one year or less. These costs are recorded within Sales and marketing expense. There are no other capitalizable costs associated with obtaining contracts with customers.
Orion’s performance obligations related to lighting fixtures typically do not exceed nine months in duration. As a result, Orion has elected the practical expedient that provides an exemption to the disclosure requirements regarding information about value assigned to remaining performance obligations on contracts that have original expected durations of one year or less.
Orion also elected the practical expedient that permits companies to not disclose quantitative information about the future revenue when revenue is recognized as invoices are issued to customers for services performed.
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 March 31, 2021 and March 31, 2020 includes $0.6 million and $39 thousand, respectively, which was not derived from contracts with customers and therefore not classified as a contract asset as defined by the new standards.
Long term accounts receivable as of March 31, 2020, includes $0.6 million of contract assets related to the service portion of the long-term financing agreement provided one customer.
Deferred revenue, current as of March 31, 2021, includes $11 thousand of contract liabilities which represented 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 March 31, 2021, and March 31, 2020, after the adoption of the new standards (dollars in thousands):
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||
Accounts receivable, net |
| $ | 13,572 |
|
| $ | 10,427 |
|
Contract assets |
| $ | 2,367 |
|
| $ | 1,082 |
|
Contract liabilities |
| $ | 11 |
|
| $ | 31 |
|
There were no significant changes in the contract assets outside of standard reclassifications to Accounts receivable, net upon billing. There were no significant changes to contract liabilities.
NOTE 5 — ACCOUNTS RECEIVABLE
Orion’s accounts receivable are due from companies in the commercial, governmental, industrial and agricultural industries, as well as wholesalers. Credit is extended based on an evaluation of a customer’s financial condition. Generally, collateral is not required for end users; however, the payment of certain trade accounts receivable from wholesalers is secured by irrevocable standby letters of credit and/or guarantees. Accounts receivable are generally due within 30-60 days. Accounts receivable are stated at the amount Orion expects to collect from outstanding balances. Orion provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its assessment of the current status of individual accounts. Balances that are still outstanding after Orion has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to accounts receivable. Orion's accounts receivable and allowance for doubtful accounts balances were as follows (dollars in thousands):
|
| 2021 |
|
| 2020 |
| ||
Accounts receivable, gross |
| $ | 13,583 |
|
| $ | 10,455 |
|
Allowance for doubtful accounts |
|
| (11 | ) |
|
| (28 | ) |
Accounts receivable, net |
| $ | 13,572 |
|
| $ | 10,427 |
|
NOTE 6 — INVENTORIES
Inventories consist of raw materials and components, such as drivers, metal sheet and coil stock and molded parts; work in process inventories, such as frames and reflectors; and finished goods, including completed fixtures and systems, and accessories. All inventories are stated at the lower of cost or net realizable value for entities that measure inventorywith cost determined using the first-in, first-out (FIFO) or average cost. Netmethod. Orion reduces the carrying value of its inventories for differences between the cost and estimated net realizable value, taking into consideration usage in the preceding 9 to 12 months, expected demand, and other information indicating obsolescence. Orion records, as a charge to cost of product revenue, the amount required to reduce the carrying value of inventory to net realizable value. As of March 31, 2021 and 2020, Orion's inventory balances were as follows (dollars in thousands):
|
| Cost |
|
| Excess and Obsolescence Reserve |
|
| Net |
| |||
As of March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials and components |
| $ | 12,410 |
|
| $ | (967 | ) |
| $ | 11,443 |
|
Work in process |
|
| 758 |
|
|
| (356 | ) |
|
| 402 |
|
Finished goods |
|
| 8,295 |
|
|
| (586 | ) |
|
| 7,709 |
|
Total |
| $ | 21,463 |
|
| $ | (1,909 | ) |
| $ | 19,554 |
|
As of March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials and components |
| $ | 9,639 |
|
| $ | (1,244 | ) |
| $ | 8,395 |
|
Work in process |
|
| 699 |
|
|
| (305 | ) |
|
| 394 |
|
Finished goods |
|
| 6,598 |
|
|
| (880 | ) |
|
| 5,718 |
|
Total |
| $ | 16,936 |
|
| $ | (2,429 | ) |
| $ | 14,507 |
|
Costs associated with the procurement and warehousing of inventories, such as inbound freight charges and purchasing and receiving costs, are also included in cost of product revenue.
NOTE 7 — PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist primarily of prepaid subscription fees, prepaid insurance premiums, debt issue costs, and sales tax receivable.
NOTE 8 — PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for additions and improvements are capitalized, while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed as incurred. Properties and equipment sold, or otherwise disposed of, are removed from the property and equipment accounts, with gains or losses on disposal credited or charged to income from operations.
Orion periodically reviews the carrying values of property and equipment for impairment in accordance with ASC 360, Property, Plant and Equipment, if events or changes in circumstances indicate that the assets may be impaired. The estimated future undiscounted cash flows expected to result from the use of the assets and their eventual disposition are compared to the assets' carrying amount to determine if a write down to market value is defined asrequired.
As of March 31, 2020, due to the forecasted change in the macroeconomic conditions due to the COVID-19 pandemic, a triggering event occurred requiring Orion to evaluate its long-lived assets for impairment. Due to the central nature of its operations, Orion’s tangible and intangible definite-lived assets support its full operations, are utilized by all three of its reportable segments, and do not generate separately identifiable cash flows. As such, these assets together represent a single asset group. Orion performed the recoverability test for the asset group by comparing its carrying value to the group’s expected future undiscounted cash flows. Orion concluded that the undiscounted cash flows of the long-lived asset group exceeded its carrying value. As such the asset group was deemed recoverable and no impairment was recorded.
Property and equipment were comprised of the following (dollars in thousands):
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||
Land and land improvements |
| $ | 433 |
|
| $ | 433 |
|
Buildings and building improvements |
|
| 9,477 |
|
|
| 9,470 |
|
Furniture, fixtures and office equipment |
|
| 7,372 |
|
|
| 7,270 |
|
Leasehold improvements |
|
| 340 |
|
|
| 324 |
|
Equipment leased to customers |
|
| 4,997 |
|
|
| 4,997 |
|
Plant equipment |
|
| 12,451 |
|
|
| 12,021 |
|
Construction in progress |
|
| 135 |
|
|
| 15 |
|
|
|
| 35,205 |
|
|
| 34,530 |
|
Less: accumulated depreciation and amortization |
|
| (23,836 | ) |
|
| (22,713 | ) |
Net property and equipment |
| $ | 11,369 |
|
| $ | 11,817 |
|
Depreciation is recognized over the estimated selling pricesuseful lives of the respective assets, using the straight-line method. Orion recorded depreciation expense of $1.2 million, $1.2 million and $1.3 million for the years ended March 31, 2021, 2020 and 2019, respectively.
Depreciable lives by asset category are as follows:
Land improvements | 10-15 years | |
Buildings and building improvements | 10-39 years | |
Furniture, fixtures and office equipment | 2-10 years | |
Leasehold improvements | Shorter of asset life or life of lease | |
Equipment leased to customers under Power Purchase Agreements | 20 years | |
Plant equipment | 3-10 years |
No interest was capitalized for construction in progress during fiscal 2021 or fiscal 2020.
NOTE 9 — LEASES
From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties. Effective April 1, 2019, leases are accounted for, and reported upon, following the requirements of ASC 842, Leases.
Whether it is the lessee or the lessor, Orion’s determination of whether a contract includes a lease, and assessing how the lease should be accounted for, is a matter of judgment based on whether the risks and rewards, as well as substantive control of the assets specified in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Orion is currently assessingcontract, have been transferred from the impact of this standard on its consolidated financial statements.
assets are transferred from the lessor to a recognized debt liability be presented in the balance sheet as a reductionlessee at the end of the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by this ASU. In August 2015, the FASB issued ASU 2015-15 “Interest-Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line of Credit Arrangements- Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update).” This ASU indicates that the guidance in ASU 2015-03, discussed above, does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03, the SEC staff has indicated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably overcontract, the term of the line-of-credit arrangement, regardlessagreement in relation to the asset’s remaining economic useful life, and whether the assets are of whether theresuch a specialized nature that the lessor will not have an alternative use for such assets at the termination of the agreement. Other matters requiring judgement are any outstanding borrowingsthe lease term when the agreement includes renewal or termination options and the interest rate used when initially determining the ROU asset and lease liability.
ROU assets represent Orion’s right to use an underlying asset for the lease term and lease liabilities represent Orion’s obligation to make lease payments arising from the lease. Under ASC 842, both finance and operating lease ROU assets and lease liabilities for leases with initial terms in excess of 12 months are recognized at the commencement date based on the line-of-credit arrangement. These ASU’s were effective forpresent value of lease payments over the lease term. When available, Orion on April 1, 2016. Asuses the Company’s only deferred debt issuance costs relate toimplicit interest rate in the lease when completing this calculation. However, as most of Orion’s operating lease agreements generating ROU assets do not provide the implicit rate, Orion’s incremental borrowing rate under its revolving line of credit, upon adoption of these standards a reclassificationadjusted for differences in duration and the relative collateral value in relation to the payment obligation, at the commencement of the deferredlease is generally used in this calculation. The lease term includes options to extend or renew the agreement, or for early termination of the agreement, when it is reasonably certain that Orion will exercise such option. ROU assets are depreciated using the straight-line method over the lease term.
Orion recognizes lease expense for leases with an initial term of 12 months or less, referred to as short term leases, on a straight-line basis over the lease term.
One of Orion’s frequent customers purchases products and installation services under agreements that provide for monthly payments, at a fixed monthly amount, of the contract price, plus interest, typically over a five-year period. While Orion retains ownership of the light fixtures during the financing period, the transaction terms and the underlying economics associated with used lighting fixtures results in Orion essentially ceding ownership of the lighting fixtures to the customer after completion of the agreement. The portions of the transaction associated with the sale of the light fixtures is accounted for as a sales-type lease. The total transaction price in these contracts is allocated between the lease and non-lease components in the same manner as the total transaction price of other turnkey projects containing lighting fixtures and installation services.
Orion leases portions of its corporate headquarters to third parties; all such agreements have been, and continue to be, classified as operating leases under the applicable authoritative accounting guidance. The assets being leased continue to be included in Property and equipment, net. Lease payments earned are recorded as a reduction in administrative expenses.
Assets Orion Leases from Other Parties
On January 31, 2020, Orion entered into the current lease for its approximately 266,000 square foot primary manufacturing and distribution facility in Manitowoc, WI. The lease has a 10-year term, with the option to terminate after six years. Orion is responsible for the costs of insurance and utilities for the facility. These costs are considered variable lease costs. The agreement is classified as an operating lease.
The prior lease agreement for this facility provided the lessor the right to terminate the lease agreement at any time with 12 months’ notice to Orion. As a result, the agreement was not requiredpreviously classified as a short-term lease.
In February 2014, Orion entered into a multi-year lease agreement for use of approximately 10,500 square feet of office space in a multi-use office building in Jacksonville, Florida. The lease has since been extended, most recently during the first quarter of fiscal 2021, and there was no impactpresently terminates on June 30, 2023. The agreement is classified as an operating lease.
Orion has leased other assets from third parties, principally office and production equipment. The terms of our other leases vary from contract to contract and expire at various dates in the next five years.
The weighted average discount rate for Orion’s lease obligations as of March 31, 2021 is 5.4%. The weighted average remaining lease term as of March 31, 2021 is 4.6 years.
A summary of Orion’s assets leased from third parties follows (dollars in thousands):
|
| Balance sheet classification |
| March 31, 2021 |
|
| March 31, 2020 |
| ||
Assets |
|
|
|
|
|
|
|
|
|
|
Operating lease assets |
| Other long-term assets |
| $ | 2,585 |
|
| $ | 2,745 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
| Accrued expenses and other |
|
| 647 |
|
|
| 691 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
| Other long-term liabilities |
|
| 2,642 |
|
|
| 2,830 |
|
Total lease liabilities |
|
|
| $ | 3,289 |
|
| $ | 3,521 |
|
Orion had operating lease costs of $0.9 million for the year ended March 31, 2021. This includes short-term leases and variable lease costs, which are immaterial.
The estimated maturity of lease liabilities for each of the next five years is shown below (dollars in thousands):
Maturity of Lease Liabilities |
| Operating Leases |
| |
Fiscal 2022 |
| $ | 810 |
|
Fiscal 2023 |
|
| 820 |
|
Fiscal 2024 |
|
| 746 |
|
Fiscal 2025 |
|
| 735 |
|
Fiscal 2026 |
|
| 628 |
|
Total lease payments |
| $ | 3,739 |
|
Less: Interest |
|
| (450 | ) |
Present value of lease liabilities |
| $ | 3,289 |
|
Assets Orion Leases to Other Parties
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, at a fixed monthly amount, of the contract price, plus interest, over typically 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 under ASC 606.
While Orion retains ownership of the light fixtures during the financing period, the transaction terms and the underlying economics associated with used lighting fixtures results in Orion essentially ceding ownership of the lighting fixtures to the customer after completion of the agreement. Therefore, the portions of the transaction associated with the sale of the multiple individual light fixtures is accounted for as a sales-type lease under ASC 842.
Revenues, and production and acquisition costs, associated with sales-type leases are included in Product revenue and Costs of product revenues in the Consolidated Statement of Operations. These amounts are recorded for each fixture separately based on the Company’s financial statements.
The following chart shows the amount of applying the purchase accounting provisionsrevenue and cost of ASC 805,
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||
Product revenue |
| $ | 2,758 |
|
| $ | 1,362 |
|
Cost of product revenue |
|
| 2,512 |
|
|
| 1,208 |
|
The Purchase Agreement contained customary representationsConsolidated Balance Sheet as of March 31, 2021 does not include a net investment in sales-type leases as all amounts due from the customer associated with lighting fixtures that were acknowledged to be installed and warranties, as well as indemnification obligations, and limitations thereon, by Orion and the Harris Shareholders.
Other Agreements where Orion is the Lessor
Orion has leased unused portions of its corporate headquarters to paythird parties. The length and payment terms of the Harris Shareholders upleases vary from contract to $1,000,000 in unregistered shares of Orion's common stock upon Harris' achievement of certain revenue milestones in calendar year 2013 and/or 2014,contract and, in the case of certain Harris Shareholders who became employees of Orion, their continued employment by Orion. The potential undiscounted amount of all future payments that Orion could have been required to make under the contingent consideration arrangement was between $0 and $1,000,000. Orion recorded $612,000some cases, include options for the non-employee Harris Shareholder portion oftenants to extend the contingent consideration liability on the acquisition date. Duringlease terms. Annual lease payments are recorded as a reduction in administrative operating expenses and were not material in the years ended March 31, 2015,2021 and 2020. Orion accounts for these transactions as operating leases.
NOTE 10 — OTHER INTANGIBLE ASSETS
The costs of specifically identifiable intangible assets that do not have an indefinite life are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized.
Amortizable intangible assets are amortized over their estimated economic useful life to reflect the pattern of economic benefits consumed based upon the following lives and methods:
Patents | 10-17 years | Straight-line | ||
Licenses | 7-13 years | Straight-line | ||
Customer relationships | 5-8 years | Accelerated based upon the pattern of economic benefits consumed | ||
Developed technology | 8 years | Accelerated based upon the pattern of economic benefits consumed |
Intangible assets that have a definite life are evaluated for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable based primarily upon whether expected future undiscounted cash flows are sufficient to support the asset recovery. If the actual useful life of the asset is shorter than the estimated life, the asset may be deemed to be impaired and accordingly a write-down of the value of the asset determined by a discounted cash flow analysis or shorter amortization period may be required.
Indefinite lived intangible assets are evaluated for impairment at least annually on the first day of Orion’s fiscal fourth quarter, or when indications of potential impairment exist. This annual impairment review may begin with a qualitative test to determine whether it is more likely than not that an indefinite lived intangible asset's carrying value is greater than its fair value. If the qualitative assessment reveals that asset impairment is more likely than not, a quantitative impairment test is performed comparing the fair value of the indefinite lived intangible asset to its carrying value. Alternatively, the qualitative test may be bypassed and the quantitative impairment test may be immediately performed. If the fair value of the indefinite lived intangible asset exceeds its carrying value, the indefinite lived intangible asset is not impaired and no further review is performed. If the carrying value of the indefinite lived intangible asset exceeds its fair value, an impairment loss would be recognized in an amount equal to such excess. Once an impairment loss is recognized, the adjusted carrying value becomes the new accounting basis of the indefinite lived intangible asset.
Orion performed a qualitative assessment in conjunction with its annual impairment test of its indefinite lived intangible assets as of January 1, 2021. This qualitative assessment considered Orion’s operating results for the first nine months of fiscal 2021 in comparison to prior years as well as its anticipated fourth quarter results and fiscal 2022 plan. As a result of the conditions that existed as of the assessment date, an asset impairment was not deemed to be more likely than not and a quantitative analysis was not required.
The components of, and changes in, the carrying amount of other intangible assets were as follows (dollars in thousands):
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||||||||||||||||||
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net |
| ||||||
Patents |
| $ | 2,796 |
|
| $ | (1,875 | ) |
| $ | 921 |
|
| $ | 2,766 |
|
| $ | (1,700 | ) |
| $ | 1,066 |
|
Licenses |
|
| 58 |
|
|
| (58 | ) |
|
| — |
|
|
| 58 |
|
|
| (58 | ) |
|
| — |
|
Trade name and trademarks |
|
| 1,011 |
|
|
| — |
|
|
| 1,011 |
|
|
| 1,014 |
|
|
| — |
|
|
| 1,014 |
|
Customer relationships |
|
| 3,600 |
|
|
| (3,591 | ) |
|
| 9 |
|
|
| 3,600 |
|
|
| (3,545 | ) |
|
| 55 |
|
Developed technology |
|
| 900 |
|
|
| (889 | ) |
|
| 11 |
|
|
| 900 |
|
|
| (819 | ) |
|
| 81 |
|
Total |
| $ | 8,365 |
|
| $ | (6,413 | ) |
| $ | 1,952 |
|
| $ | 8,338 |
|
| $ | (6,122 | ) |
| $ | 2,216 |
|
As of March 31, 2021, the weighted average useful life of definite life intangible assets was 3.75 years. The estimated amortization expense for each of the next five years is shown below (dollars in thousands):
Fiscal 2022 |
| $ | 206 |
|
Fiscal 2023 |
|
| 115 |
|
Fiscal 2024 |
|
| 111 |
|
Fiscal 2025 |
|
| 100 |
|
Fiscal 2026 |
|
| 90 |
|
Thereafter |
|
| 319 |
|
|
| $ | 941 |
|
Amortization expense is set forth in the following table (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Amortization included in cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
Patents |
| $ | 175 |
|
| $ | 171 |
|
| $ | 171 |
|
Total |
| $ | 175 |
|
| $ | 171 |
|
| $ | 171 |
|
Amortization included in operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
| $ | 47 |
|
| $ | 86 |
|
| $ | 133 |
|
Developed technology |
|
| 68 |
|
|
| 102 |
|
|
| 135 |
|
Non-competition agreements |
|
| — |
|
|
| — |
|
|
| 5 |
|
Total |
|
| 115 |
|
|
| 188 |
|
|
| 273 |
|
Total amortization of intangible assets |
| $ | 290 |
|
| $ | 359 |
|
| $ | 444 |
|
Orion’s management periodically reviews the carrying value of patent applications and related costs. When a patent application is probable of being unsuccessful or a patent is no longer in use, Orion writes off the remaining carrying value as a charge to general and administrative expense within its Consolidated Statements of Operations. In fiscal years 2021, 2020, and 2019, write-offs were immaterial.
NOTE 11 — ACCRUED EXPENSES AND OTHER
As of March 31, 2021 and March 31, 2014, 2020, Accrued expenses and other included the following (dollars in thousands):
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||
Compensation and benefits |
| $ | 2,851 |
|
| $ | 2,594 |
|
Sales tax |
|
| 1,318 |
|
|
| 513 |
|
Accrued project costs |
|
| 5,010 |
|
|
| 1,173 |
|
Legal and professional fees |
|
| 497 |
|
|
| 312 |
|
Warranty |
|
| 705 |
|
|
| 708 |
|
Sales returns reserve |
|
| 106 |
|
|
| 98 |
|
Credits due to customers |
|
| 1,009 |
|
|
| 932 |
|
Other accruals |
|
| 1,730 |
|
|
| 898 |
|
Total |
| $ | 13,226 |
|
| $ | 7,228 |
|
Orion expensed $147,000generally offers a limited warranty of one to 10 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 $334,000, respectively,other fixture related items, which are significant components in compensation expenseOrion's lighting products.
Changes in Orion’s warranty accrual (both current and long-term) were as contingent considerationfollows (dollars in thousands):
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Beginning of year |
| $ | 1,069 |
|
| $ | 657 |
|
Accruals |
|
| 644 |
|
|
| 863 |
|
Warranty claims (net of vendor reimbursements) |
|
| (704 | ) |
|
| (451 | ) |
Ending balance |
| $ | 1,009 |
|
| $ | 1,069 |
|
NOTE 12 — NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for employee Harris shareholdersthe period and during fiscal 2014, recorded $278,000does not consider common stock equivalents.
Diluted net income (loss) per common share reflects the dilution that would occur if stock options were exercised and restricted shares vested. In the computation of additional earn-out expensediluted net income (loss) per common share, Orion uses the treasury stock method for non-employee Harris shareholders.
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) (dollars in thousands) |
| $ | 26,134 |
|
| $ | 12,462 |
|
| $ | (6,674 | ) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
| 30,634,553 |
|
|
| 30,104,552 |
|
|
| 29,429,540 |
|
Weighted-average effect of assumed conversion of stock options and restricted stock |
|
| 669,174 |
|
|
| 860,225 |
|
|
| — |
|
Weighted-average common shares and share equivalents outstanding |
|
| 31,303,727 |
|
|
| 30,964,777 |
|
|
| 29,429,540 |
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.85 |
|
| $ | 0.41 |
|
| $ | (0.23 | ) |
Diluted |
| $ | 0.83 |
|
| $ | 0.40 |
|
| $ | (0.23 | ) |
The following table indicates the number of directors.potentially dilutive securities excluded from the calculation of Diluted net income (loss) per common share because their inclusion would have been anti-dilutive. The number of shares is as of the end of each period:
|
| March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Common stock options |
|
| — |
|
|
| 164,072 |
|
|
| 467,836 |
|
Restricted shares |
|
| — |
|
|
| — |
|
|
| 1,312,593 |
|
Total |
|
| — |
|
|
| 164,072 |
|
|
| 1,780,429 |
|
NOTE 513 — LONG-TERM DEBT
Long-term debt as of March 31, 20162021 and 20152020 consisted of the following (dollars in thousands):
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Revolving credit facility |
| $ | — |
|
| $ | 10,013 |
|
Equipment debt obligations |
|
| 49 |
|
|
| 85 |
|
Total long-term debt |
|
| 49 |
|
|
| 10,098 |
|
Less current maturities |
|
| (14 | ) |
|
| (35 | ) |
Long-term debt, less current maturities |
| $ | 35 |
|
| $ | 10,063 |
|
March 31, | |||||||
2016 | 2015 | ||||||
Revolving credit facility | $ | 3,719 | $ | 2,500 | |||
Harris seller's note | 546 | 1,607 | |||||
Equipment lease obligations | 345 | — | |||||
Customer equipment finance notes payable | 90 | 827 | |||||
Other long-term debt | 67 | 120 | |||||
Total long-term debt | 4,767 | 5,054 | |||||
Less current maturities | (746 | ) | (1,832 | ) | |||
Long-term debt, less current maturities | $ | 4,021 | $ | 3,222 |
Revolving Credit Agreement
On February 6, 2015,December 29, 2020, Orion entered into a new Loan and Security Agreement with Bank of America, N.A., as lender (the “Credit Agreement”). The Credit Agreement replaced Orion’s prior $20.15 million secured revolving credit and security agreement (Credit Agreement) with Wells Fargodated as of October 26, 2018, as amended, by and among Orion and Western Alliance Bank, National Association. Association, as lender (the “Prior Credit Agreement”). The replacement of the Prior Credit Agreement with the Credit Agreement provides Orion with increased financing capacity and liquidity to fund its operations and implement its strategic plans.
The Credit Agreement provides for a five-year $25.0 million revolving credit facility (Credit Facility)(the “Credit Facility”) that matures on February 6, 2018.December 29, 2025. Borrowings under the Credit Facility are initially limited to $15,000,000, subject to a borrowing base requirement based on eligible receivables, inventory and inventory. cash. As of March 31, 2021, the borrowing base supports the full availability of the Credit Facility. As of March 31, 2021, no amounts were borrowed under the Credit Facility.
The Credit FacilityAgreement is secured by a first lien security interest in substantially all of Orion’s assets.
Borrowings under the Credit Agreement are permitted in the form of LIBOR or prime rate-based loans and generally bear interest at floating rates plus an applicable margin determined by reference to Orion’s availability under the Credit Agreement. Among other fees, Orion is required to pay an annual facility fee of $15,000 and a fee of 25 basis points on the unused portion of the Credit Facility.
The Credit Agreement includes a $2,000,000 sublimit for the issuancespringing minimum fixed cost coverage ratio of letters of credit.
The Credit Agreement also contains customary events of default and other 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, retire or repurchasepurchase shares of Orion’s stock, make investments or pledge or disposetransfer assets. If an event of assets.
Orion did not incur any early termination fees in connection with the termination of $130,000, regardlessthe Prior Credit Agreement, but did recognize a loss on debt extinguishment of usage. $0.1 million on the write-off of unamortized debt issue costs related to the Prior Credit Agreement. The Prior Credit Agreement was scheduled to mature on October 26, 2021.
As of March 31, 2016, the interest rate was 3.63%.2021, 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 Debt Obligation
In February 2019, Orion issued an unsecured and subordinated promissory noteentered into additional debt agreements with a financing company in the principal amount of $3,124,000 to partially fund the acquisition of Harris. The note is included in the table above as Harris seller's note. The note bears interest at the rate of 4% per annum. Principal$44 thousand and interest are payable quarterly and the note matures in July 2016.
Aggregate Maturities
As of March 31, 2016 Orion was in compliance with the debt service covenant.
Fiscal 2022 |
| $ | 14 |
|
Fiscal 2023 |
|
| 14 |
|
Fiscal 2024 |
|
| 17 |
|
Fiscal 2025 |
|
| 4 |
|
|
| $ | 49 |
|
Fiscal 2017 | $ | 746 | |
Fiscal 2018 | 3,826 | ||
Fiscal 2019 | 83 | ||
Fiscal 2020 | 83 | ||
Fiscal 2021 | 29 | ||
Thereafter | — | ||
$ | 4,767 |
NOTE 614 — INCOME TAXES
The total provision (benefit) for income taxes consists of the following for the fiscal years endingended (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Current |
| $ | 244 |
|
| $ | 84 |
|
| $ | (5 | ) |
Deferred |
|
| (19,860 | ) |
|
| 75 |
|
|
| 19 |
|
Total |
| $ | (19,616 | ) |
| $ | 159 |
|
| $ | 14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Federal, Current |
| $ | — |
|
| $ | 17 |
|
| $ | (16 | ) |
Federal, Deferred |
|
| (16,217 | ) |
| $ | 39 |
|
| $ | 19 |
|
Total Federal |
|
| (16,217 | ) |
|
| 56 |
|
|
| 3 |
|
State, Current |
|
| 244 |
|
|
| 67 |
|
|
| 11 |
|
State, Deferred |
|
| (3,643 | ) |
|
| 36 |
|
|
| — |
|
Total State |
|
| (3,399 | ) |
|
| 103 |
|
|
| 11 |
|
Total |
| $ | (19,616 | ) |
| $ | 159 |
|
| $ | 14 |
|
Fiscal Year Ended March 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Current | $ | 36 | $ | 49 | $ | 19 | |||||
Deferred | — | — | (2,077 | ) | |||||||
$ | 36 | $ | 49 | $ | (2,058 | ) | |||||
2016 | 2015 | 2014 | |||||||||
Federal | $ | 15 | $ | — | $ | (1,830 | ) | ||||
State | 21 | 49 | (228 | ) | |||||||
$ | 36 | $ | 49 | $ | (2,058 | ) |
A reconciliation of the statutory federal income tax rate and effective income tax rate is as follows:
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Statutory federal tax rate |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % |
State taxes, net |
|
| 3.7 | % |
|
| 6.5 | % |
|
| 5.6 | % |
Federal tax credit |
|
| — | % |
|
| — | % |
|
| (0.3 | )% |
Change in valuation reserve |
|
| (321.4 | )% |
|
| (25.0 | )% |
|
| (23.8 | )% |
Permanent items |
|
| (3.4 | )% |
|
| (1.0 | )% |
|
| (1.1 | )% |
Change in tax contingency reserve |
|
| (0.5 | )% |
|
| 0.2 | % |
|
| — | % |
Federal refunds |
|
| 0.0 | % |
|
| 0.0 | % |
|
| 0.3 | % |
Equity compensation cancellations |
|
| 0.6 | % |
|
| 0.2 | % |
|
| (1.0 | )% |
Other, net |
|
| (1.0 | )% |
|
| (0.6 | )% |
|
| (0.9 | )% |
Effective income tax rate |
|
| (301.0 | )% |
|
| 1.3 | % |
|
| (0.2 | )% |
Fiscal Year Ended March 31, | ||||||||
2016 | 2015 | 2014 | ||||||
Statutory federal tax rate | 34.0 | % | 34.0 | % | 34.0 | % | ||
State taxes, net | 2.8 | % | 3.6 | % | 2.8 | % | ||
Federal tax credit | — | % | 0.2 | % | 0.9 | % | ||
State tax credit | — | % | 0.1 | % | 0.4 | % | ||
Change in valuation reserve | (29.1 | )% | (37.0 | )% | (10.2 | )% | ||
Permanent items | (7.5 | )% | (0.1 | )% | (2.9 | )% | ||
Change in tax contingency reserve | (0.1 | )% | — | % | (0.3 | )% | ||
Other, net | (0.3 | )% | (1.0 | )% | 0.2 | % | ||
Effective income tax rate | (0.2 | )% | (0.2 | )% | 24.9 | % |
The net deferred tax assets and liabilities reported in the accompanying consolidated financial statements include the following components (dollars in thousands):
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Inventory, accruals and reserves |
|
| 860 |
|
|
| 1,046 |
|
Federal and state operating loss carry-forwards |
|
| 18,313 |
|
|
| 19,540 |
|
Tax credit carry-forwards |
|
| 1,916 |
|
|
| 1,916 |
|
Equity compensation |
|
| 198 |
|
|
| 250 |
|
Deferred revenue |
|
| 38 |
|
|
| 18 |
|
Lease liability |
|
| 853 |
|
|
| 903 |
|
Other |
|
| 406 |
|
|
| 121 |
|
Total deferred tax assets |
|
| 22,584 |
|
|
| 23,794 |
|
Valuation allowance |
|
| (1,279 | ) |
|
| (22,228 | ) |
Deferred tax assets, net of valuation allowance |
|
| 21,305 |
|
|
| 1,566 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Lease ROU asset |
|
| (670 | ) |
|
| (704 | ) |
Fixed assets |
|
| (626 | ) |
|
| (689 | ) |
Intangible assets |
|
| (224 | ) |
|
| (248 | ) |
Total deferred tax liabilities |
|
| (1,520 | ) |
|
| (1,641 | ) |
|
|
|
|
|
|
|
|
|
Total net deferred tax assets/(liabilities) |
| $ | 19,785 |
|
| $ | (75 | ) |
March 31, | |||||||
2016 | 2015 | ||||||
Inventory, accruals and reserves | $ | 3,686 | $ | 5,297 | |||
Other | 187 | 159 | |||||
Deferred revenue | 73 | 91 | |||||
Valuation allowance | (3,946 | ) | (5,547 | ) | |||
Total net current deferred tax assets and liabilities | $ | — | $ | — | |||
Federal and state operating loss carryforwards | 19,727 | 13,154 | |||||
Tax credit carryforwards | 1,475 | 1,475 | |||||
Non-qualified stock options | 3,125 | 2,914 | |||||
Deferred revenue | (31 | ) | 7 | ||||
Fixed assets | (1,493 | ) | (1,698 | ) | |||
Intangible assets | (1,297 | ) | (1,687 | ) | |||
Valuation allowance | (21,506 | ) | (14,165 | ) | |||
Total net long-term deferred tax assets and liabilities | $ | — | $ | — | |||
Total net deferred tax assets | $ | — | $ | — |
The CARES Act includes significant business tax provisions that, among other things, temporarily eliminate the taxable income limit for certain NOLs, allow businesses to carry back tax benefits associated withyear 2018-2020 NOLs to the excessfive prior tax years, accelerate refunds of corporate AMT credits, and generally decrease the amount of disallowed business interest expense. Because of Orion’s loss carryforwards, the income tax provisions of the tax deduction available for exercises of non-qualified stock options,CARES Act did not result in a material cash or NQSOs, over the amount recorded at grant. The amount of the benefit is based upon the ultimate deduction reflected in the applicable income tax return. Benefits of $0, $0 and $13,000 were recorded in fiscal 2016, fiscal 2015 and fiscal 2014, respectively, as a reduction in taxes payable and a credit to additional paid in capital based on the amount that was utilized in the current year.
For the fiscal year ended March 31, 2016,2021, Orion’s deferred tax assets were primarily the result of U.S. NOL and tax credit carryforwards. Orion has recorded a valuation allowance of $25,452,000, equaling the$1.3 million and $22.2 million against its net deferred tax asset balance as of March 31, 2021 and March 31, 2020, respectively, due to the uncertainty of its realization value in the future. For the fiscal yearsyear ended March 31, 2016 and2021, Orion recorded a net valuation allowance release of $20.9 million on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. For the fiscal year ended March 31, 2015,2020, the valuation allowance against Orion's net federal and net state deferred tax assets increased $5,740,000decreased $3.2 million, primarily due to the fiscal year ended March 31, 2020 loss usage.
As of each reporting date, management considers new evidence, both positive and $11,802,000, respectively.negative, that could affect its view of the future realization of deferred tax assets. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. As of March 31, 2021, in part because Orion achieved its second full year of pretax income and three years of cumulative pretax income in the U.S. federal tax jurisdiction, management determined there was sufficient positive evidence to conclude that it is more likely than not that deferred taxes assets of $20.9 are realizable. It therefore reduced the valuation allowance accordingly.
As of March 31, 2021, Orion has federal NOL carryforwards of approximately $69.4 million, state NOL carryforwards of approximately $61.8 million, and foreign NOL carryforwards of approximately $0.8 million. Orion also had federal tax credit carryforwards of approximately $1.3 million and state tax credits of $0.8 million. All of Orion's tax credit carryforwards and $123.6 million of its NOL carryforwards will begin to expire in varying amounts between 2022 and 2040. The remaining $8.4 million of its federal and state NOL carryforwards are not subject to time restrictions but may only be used to offset 80% of adjusted taxable income. Orion believes it is more likely than not that the benefit from its state credit carryforwards, foreign NOL carryforwards, a portion of its federal credit carryforwards, and certain state loss carryforwards will not be realized. In the event thatrecognition of this risk, Orion determines thathas provided a valuation allowance of $1.3 million on the deferred tax assets are ablerelated to be realized, an adjustment to the deferred tax asset would increase income in the period such determination is made.these carryforwards.
Generally, a change of more than 50% in the ownership of Orion's stock, by value, over a three yearthree-year period constitutes an ownership change for federal income tax purposes as defined under Section 382 of the Internal Revenue Code. As a result, Orion's
Orion records its tax provision based on the respective tax rules and regulations for the jurisdictions in which it operates. Where Orion believes that a tax position is supportable for income tax purposes, the item is included in their income tax returns. Where treatment of a position is uncertain, a liability is recorded based upon the expected most likely outcome taking into consideration the technical merits of the position based on specific tax regulations and facts of each matter. These liabilities may be affected by changing interpretations of laws, rulings by tax authorities, or the expiration of the statute of limitations.
Orion files income tax returns in the United States federal incomejurisdiction and in several state jurisdictions. The Company's federal tax returns for tax years 2009 to 2011 was complete. The resolutionbeginning April 1, 2017 or later are open. For states in which Orion files state income tax returns, the statute of this examination did not have a material effect on its business, financial condition, results of operations or liquidity.
State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state effect of any federal changes remains subject to examination by various states for a period of up to two years after formal notification to the states. Orion currently has no state income tax return positions in the process of examination, administrative appeals or litigation.
Uncertain tax positions
As of March 31, 2016,2021, the balance of gross unrecognized tax benefits was approximately $227,000,$0.3 million, all of which would reduceaffect Orion’s effective tax rate if recognized.
Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as other liabilities (non-current) 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. Orion had the following unrecognized tax benefit activity (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Unrecognized tax benefits as of beginning of fiscal year |
| $ | 259 |
|
| $ | 130 |
|
| $ | 129 |
|
Additions based on tax positions related to the current period positions |
|
| 123 |
|
|
| 23 |
|
|
| 1 |
|
Additions/(reductions) for tax positions of prior years |
|
| (97 | ) |
|
| 106 |
|
|
| — |
|
Unrecognized tax benefits as of end of fiscal year |
| $ | 285 |
|
| $ | 259 |
|
| $ | 130 |
|
Fiscal Year Ended March 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Unrecognized tax benefits as of beginning of fiscal year | $ | 212 | $ | 210 | $ | 188 | |||||
Additions based on tax positions related to the current period positions | 15 | 2 | 22 | ||||||||
Unrecognized tax benefits as of end of fiscal year | $ | 227 | $ | 212 | $ | 210 |
NOTE 715 — COMMITMENTS AND CONTINGENCIES
Fiscal 2017 | $ | 512 | |
Fiscal 2018 | 611 | ||
Fiscal 2019 | 426 | ||
Fiscal 2020 | 98 | ||
Thereafter | — | ||
$ | 1,647 |
Purchase Commitments
Orion enters into non-cancellable purchase commitments for certain inventory items in order to secure better pricing and ensure materials on hand and capital expenditures.hand. As of March 31, 2016,2021, Orion had entered into $2,189,000$13.1 million of purchase commitments related primarily to fiscal 2017 for inventory purchases.
Retirement Savings Plan
Orion sponsors a tax deferred retirement savings plan that permits eligible employees to contribute varying percentages of their compensation up to the limit allowed by the Internal Revenue Service. This plan also provides for discretionary contributions by Orion. In fiscal 2016, 20152021, Orion made matching contributions of $0.1 million. In fiscal 2020 and 2014,2019, Orion made matching contributions of approximately $10,000, $23,000$0.1 million and $26,000,$9 thousand, 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 whetherdoes not believe that the final resolution of any of such claims or legal proceedings maywould have a material adverse effect on Orion.its future results of operations. In addition to ordinary-course litigation, Orion was or is a party to the proceedings described below.
State Tax Assessment
During fiscal year 2018, Orion was named asnotified of a defendant in a civil lawsuit filedpending sales and use tax audit by Neal R. Verfuerth, Orion's former chief executive officer who was terminatedthe Wisconsin Department of Revenue for cause in November 2012,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 United States District Court for the Eastern District of Wisconsin (Green Bay Division). The plaintiff alleges, 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 seeks, among other relief, unspecified pecuniary and compensatory damages, fees and such other relief as the court may deem just and proper. On November 4, 2014, the court granted Orion's motion to dismiss sixopinion of the plaintiff's claims. On January 9, 2015,Company’s management, the plaintiff filed an amended complaint re-alleging claims that were dismissed by the court, including, among other things, a retaliation claim and certain claims with respect to prior management agreements and certain intellectual property rights. On January 22, 2015, Orion filed a motion to dismiss and a motion to strike certainultimate disposition of the claims made in the amended complaint. On May 18, 2015, the court dismissed the intellectual property claims re-alleged in the January 9, 2015 amended complaint. At the court's direction, the parties attempted to mediate the matter in May 2016, but were unsuccessful in resolving the matter. Orion intends to continue to defend against the claims vigorously. Orion believes that it has substantial legal and factual defenses to the claims and allegations remaining in the case and that Orionthese matters will prevail in this proceeding. Based upon the current status of the lawsuit, Orion does not believe that it is reasonably possible that the lawsuit will have a material adverse impacteffect on its future continuing resultsthe Company’s consolidated balance sheet, statements of operations.
NOTE 816 — SHAREHOLDERS’ EQUITY
Share Repurchase Program and Treasury Stock
In October 2011 and 2012, Orion’s Board of Directors approved aseveral share repurchase programprograms authorizing Orion to repurchase in aggregate up to a maximum of $1,000,000 of Orion’s outstanding common stock. In November 2011, Orion’s Board of Directors approved an increase to the share repurchase program authorizing Orion to repurchase in aggregate up to a maximum of $2,500,000 of Orion’s outstanding common stock. In April 2012, Orion's Board approved another increase to the share repurchase program authorizing Orion to repurchase in aggregate up to a maximum of $7,500,000$ 7.5 million of Orion's outstanding common stock. As of March 31, 2016,2021, Orion had repurchased 3,022,349 shares of common stock at a cost of $6,791,000$6.8 million under the program.these programs. Orion did not repurchase any shares in fiscal 2016,2021, fiscal 20152020 or fiscal 20142019 and currently does not intend to repurchase any additional common stock under this program in the near-term.
Shareholder Rights Plan
On January 3, 2019, Orion entered into Amendment No. 1 to the Rights Agreement, which amended the Rights Agreement dated as of January 7, 2009 Orion’s Board of Directors adopted a shareholder rights plan and declared a dividend distribution of oneextended its terms by three years to January 7, 2022. Under the amendment, each common share purchase right (Right) for each outstanding share of Orion’s common stock. The issuance date for(a “Right”), if exercisable, will initially represent the distribution of the Rights was February 15, 2009 to shareholders of record on February 1, 2009. Each Right entitles the registered holderright to purchase from Orion, one share of Orion’s common stock, atno par value per share, for a purchase price of $30.00$7.00 per share subject to adjustment (Purchase Price)(the “Purchase Price”).
The Rights will not be exercisable (and will be transferable only with Orion’s common stock) until a “Distribution Date” occurs (or the Rights are earlier redeemed or expire). A Distribution Date generally will occur on the earlier of a public announcement
If a person becomes an Acquiring Person, holders of Rights (except as otherwise provided in the shareholder rights plan)Rights Agreement) will have the right to receive that number of shares of Orion’s common stock having a market value of two times the then-current Purchase Price, and all Rights beneficially owned by an Acquiring Person, or by certain related parties or transferees, will be null and void. If, after a Shares Acquisition Date, Orion is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provision will be made so that each holder of a Right (except as otherwise provided in the shareholder rights plan)Rights Agreement) will thereafter have the right to receive that number of shares of the acquiring company’s common stock which at the time of such transaction will have a market value of two times the then-current Purchase Price.
Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of Orion. At any time prior to a person becoming an Acquiring Person, the Board of Directors of Orion may redeem the Rights in whole, but not in part, at a price of $0.001 per Right. Unless they are extended or earlier redeemed or exchanged, the Rights will expire on January 7, 2019.2022.
Employee Stock Purchase Plan
In August 2010, Orion’s boardBoard of directorsDirectors approved a non-compensatory employee stock purchase plan, or ESPP. The ESPP authorizes 2,500,000 shares to be issued from treasury or authorized shares to satisfy employee share purchases under the ESPP. All full-time employees of Orion are eligible to be granted a non-transferable purchase right each calendar quarter to purchase directly from Orion up to $20,000 of Orion’s common stock at a purchase price equal to 100% of the closing sale price of Orion’s common stock on The NASDAQ Capital Market on the last trading day of each quarter. In prior years, Orion issued loans to non-executive employees to purchase shares of its stock. The ESPP allows for employee loans from Orion, except for Section 16 officers, limited to 20% of an individual’s annual incomeloan program has been discontinued and no more than $250,000 outstanding at any one time. Interest on the loans is charged at the 10-year loan IRS rate and is payable at the end of each calendar year or upon loan maturity. Thenew loans are secured by a pledge of any and all Orion’s shares purchased by the participant under the ESPP and Orion has full recourse against the employee, including offset against compensation payable. As of March 31, 2013, Orion had halted the loan program.no longer issued. Orion had the following shares issued from treasury during fiscal 20162021 and fiscal 2015:
|
| As of March 31, 2021 |
| ||||||
|
| Shares Issued Under ESPP Plan |
|
| Closing Market Price |
| |||
Quarter Ended March 31, 2021 |
|
| 359 |
|
|
|
| 6.90 |
|
Quarter Ended December 31, 2020 |
|
| 178 |
|
|
|
| 9.87 |
|
Quarter Ended September 30, 2020 |
|
| 151 |
|
|
|
| 7.57 |
|
Quarter Ended June 30, 2020 |
|
| 458 |
|
|
|
| 3.46 |
|
Total |
|
| 1,146 |
|
| $ | 3.46 - 6.90 |
|
|
| As of March 31, 2020 |
| ||||||
|
| Shares Issued Under ESPP Plan |
|
| Closing Market Price |
| |||
Quarter Ended March 31, 2020 |
|
| 512 |
|
| $ |
| 3.70 |
|
Quarter Ended December 31, 2019 |
|
| 666 |
|
| $ |
| 3.35 |
|
Quarter Ended September 30, 2019 |
|
| 570 |
|
| $ |
| 2.85 |
|
Quarter Ended June 30, 2019 |
|
| 613 |
|
| $ |
| 2.97 |
|
Total |
|
| 2,361 |
|
| $ | 2.85 - 3.70 |
|
As of March 31, 2016 | |||||||||||||||
Shares Issued Under ESPP Plan | Closing Market Price | Shares Issued Under Loan Program | Dollar Value of Loans Issued | Repayment of Loans | |||||||||||
Quarter Ended March 31, 2016 | 1,435 | $1.39 | — | $ | — | $ | — | ||||||||
Quarter Ended December 31, 2015 | 1,170 | $2.17 | — | — | — | ||||||||||
Quarter Ended September 30, 2015 | 779 | $1.80 | — | — | — | ||||||||||
Quarter Ended June 30, 2015 | 541 | $2.51 | — | — | — | ||||||||||
Total | 3,925 | $1.39 - 2.51 | — | $ | — | $ | — | ||||||||
As of March 31, 2015 | |||||||||||||||
Shares Issued Under ESPP Plan | Closing Market Price | Shares Issued Under Loan Program | Dollar Value of Loans Issued | Repayment of Loans | |||||||||||
Quarter Ended March 31, 2015 | 492 | $3.14 | — | $ | — | $ | 35,400 | ||||||||
Quarter Ended December 31, 2014 | 289 | $5.50 | — | — | — | ||||||||||
Quarter Ended September 30, 2014 | 322 | $5.35 | — | — | 1,000 | ||||||||||
Quarter Ended June 30, 2014 | 383 | $4.07 | — | — | 9,600 | ||||||||||
Total | 1,486 | $3.14 - 5.50 | — | $ | — | $ | 46,000 |
Sale of shares
In March 2020, Orion filed a universal shelf registration statement with the Securities and Exchange Commission. Under the shelf registration statement, Orion currently has the flexibility to employees are reflectedpublicly offer and sell from time to time up to $100.0 million of debt and/or equity securities. The filing of the shelf registration statement may help facilitate Orion’s ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes. The COVID-19 pandemic has had a negative near-term impact on the capital markets and may impact Orion’s balance sheetability to access this capital.
In March 2021, Orion entered into an At Market Issuance Sales Agreement to undertake an “at the market” (ATM) public equity capital raising program pursuant to which Orion may offer and sell shares of common stock, having an aggregate offering price of up to $50 million from time to time through or to the Agent, acting as a contra-equity account.
NOTE 917 — STOCK OPTIONS AND RESTRICTED SHARES AND WARRANTS
At Orion’s 2019 annual meeting of shareholders held on August 7, 2019, Orion’s shareholders approved the Orion has historicallyEnergy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated (the “Amended 2016 Plan”). Approval of the Amended 2016 Plan increased the number of shares of Orion’s common stock available for issuance under the Amended 2016 Plan from 1,750,000 shares to 3,500,000 shares (an increase of 1,750,000 shares); added a minimum vesting period for all awards granted under the Amended 2016 Plan (with limited exceptions); and added a specific prohibition on the payment of dividends and dividend equivalents on unvested awards. As of March 31, 2021, the number of shares available for grant under the Amended 2016 Plan was 1,578,445.
The Amended 2016 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Amended 2016 Plan may consist of stock options, andstock appreciation rights, performance shares, performance units, common stock, restricted stock, underrestricted stock units, incentive awards or dividend equivalent units.
Prior to the 2016 Omnibus Incentive Plan, the Company maintained its 2003 Stock Option and 2004 Stock and Incentive Awards Plans (Plans). UnderPlan, as amended, which authorized the termsgrant of the Plans, Orion has reserved 13,500,000 shares for issuance to key employees, consultantscash and directors. The options generally vest and become exercisable ratably between one month and five years although longer and shorter vesting periods have been used in certain circumstances. Exercisability of the options grantedequity awards to employees (the “2004 Plan”). No new awards are generally contingent on the employees’ continued employment and non-vested options are subject to forfeiture if employment terminates
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 PlansAmended 2016 Plan and the 2004 Plan also provide to certain employeespermit accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances.
Orion historically granted stock options and restricted stock under the 2004 Plan. Orion has not issued stock options since fiscal 2014 and instead has issued restricted stock.
Orion accounts for stock-based compensation in accordance with ASC 718, Compensation Committee- Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation is measured at the grant date based on the fair value of the Board of Directors changed Orion's long-term equity incentive grant policy so that only restricted shares are issued to all employees under the Plans instead of stock options. The restricted shares are settled in Company stock when the restriction period ends. Compensation cost for restricted shares granted to employeesaward and is recognized as expense ratably over the vesting term, which is typically between three to five years, although on occasion, the vesting term may be one year or less. Settlement of the shares is contingent on the employees’ continued employment and non-vested shares are subject to forfeiture if employment terminates for any reason. In fiscal 2016, an aggregate of 795,805 restricted shares were granted valued at a price per share between $1.34 and $2.62, which was the closing market price as of each grant date. In fiscal 2015, an aggregate of 410,496 restricted shares were granted valued at a price per share between $4.16 and $7.23, which was the closing market price as of each grant date. In fiscal 2014, an aggregate of 526,663 restricted shares were granted valued at a price per share between $2.41 and $6.97, which was the closing market price as of each grant date.
The following amounts of stock-based compensation expense for restricted shares and options were recorded (dollars in thousands):
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cost of product revenue |
| $ | 4 |
|
| $ | 3 |
|
| $ | 2 |
|
Cost of service revenue |
|
| — |
|
|
| (1 | ) |
|
| 3 |
|
General and administrative |
|
| 716 |
|
|
| 576 |
|
|
| 764 |
|
Sales and marketing |
|
| 29 |
|
|
| 38 |
|
|
| 54 |
|
Research and development |
|
| 4 |
|
|
| 2 |
|
|
| 2 |
|
|
| $ | 753 |
|
| $ | 618 |
|
| $ | 825 |
|
Fiscal Year Ended March 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Cost of product revenue | $ | 36 | $ | 50 | $ | 70 | |||||
General and administrative | 1,148 | 1,056 | 1,025 | ||||||||
Sales and marketing | 235 | 360 | 485 | ||||||||
Research and development | 43 | 33 | 13 | ||||||||
$ | 1,462 | $ | 1,499 | $ | 1,593 |
The following table summarizes information with respect to outstanding stock options:
Number of Shares | Weighted Average Exercise Price | Weighted Average Fair Value of Options Granted | Aggregate Intrinsic Value | ||||||||||
Outstanding at March 31, 2013 | 3,312,523 | $ | 3.42 | 1.23 | |||||||||
Granted | 305,544 | $ | 1.98 | ||||||||||
Exercised | (446,059 | ) | $ | 2.25 | |||||||||
Forfeited | (455,691 | ) | $ | 3.26 | |||||||||
Outstanding at March 31, 2014 | 2,716,317 | $ | 3.43 | 1.32 | |||||||||
Granted | — | $ | — | ||||||||||
Exercised | (139,407 | ) | $ | 2.46 | |||||||||
Forfeited | (150,074 | ) | $ | 3.13 | |||||||||
Outstanding at March 31, 2015 | 2,426,836 | $ | 3.50 | — | |||||||||
Granted | — | $ | — | ||||||||||
Exercised | (46,410 | ) | $ | 2.09 | |||||||||
Forfeited | (363,380 | ) | $ | 4.68 | |||||||||
Outstanding at March 31, 2016 | 2,017,046 | $ | 3.32 | — | $ | — | |||||||
Exercisable at March 31, 2016 | 1,811,146 | $ | — |
|
| Number of Shares |
|
| Weighted Average Exercise Price |
| ||
Outstanding at March 31, 2018 |
|
| 629,667 |
|
| $ | 3.36 |
|
Granted |
|
| — |
|
| $ | — |
|
Exercised |
|
| — |
|
| $ | — |
|
Forfeited |
|
| (161,831 | ) |
| $ | 3.61 |
|
Outstanding at March 31, 2019 |
|
| 467,836 |
|
| $ | 3.14 |
|
Granted |
|
| — |
|
| $ | — |
|
Exercised |
|
| (22,362 | ) |
| $ | 2.51 |
|
Forfeited |
|
| (49,174 | ) |
| $ | 4.63 |
|
Outstanding at March 31, 2020 |
|
| 396,300 |
|
| $ | 2.80 |
|
Granted |
|
| — |
|
| $ | — |
|
Exercised |
|
| (99,000 | ) |
| $ | 2.34 |
|
Forfeited |
|
| (100,982 | ) |
| $ | 3.39 |
|
Outstanding at March 31, 2021 |
|
| 196,318 |
|
| $ | 2.74 |
|
Exercisable at March 31, 2021 |
|
| 196,318 |
|
|
|
|
|
The following table summarizes the range of exercise prices on outstanding stock options at March 31, 2016:
|
| March 31, 2021 |
| |||||||||
|
| Outstanding and Vested |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Weighted Average Exercise Price |
| |||
$2.00 - 2.03 |
|
| 57,292 |
|
|
| 1.21 |
|
| $ | 2.03 |
|
$2.41 - 2.75 |
|
| 92,936 |
|
|
| 1.53 |
|
|
| 2.46 |
|
$4.19 |
|
| 46,090 |
|
|
| 0.15 |
|
|
| 4.19 |
|
|
|
| 196,318 |
|
|
| 1.11 |
|
| $ | 2.74 |
|
The following table summarizes information with respect to restricted shares activity:
|
| Fiscal Year Ended March 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Balance at March 31, 2020 |
|
| 772,720 |
|
|
| 1,312,593 |
|
|
| 1,485,799 |
|
Shares issued |
|
| 287,998 |
|
|
| 279,468 |
|
|
| 529,000 |
|
Shares vested |
|
| (450,481 | ) |
|
| (669,238 | ) |
|
| (653,394 | ) |
Shares forfeited |
|
| (140,598 | ) |
|
| (150,103 | ) |
|
| (48,812 | ) |
Shares outstanding at March 31, 2021 |
|
| 469,639 |
|
|
| 772,720 |
|
|
| 1,312,593 |
|
Per share price on grant date |
| $3.92 - 10.01 |
|
| $2.69 - 3.03 |
|
| $0.84 - 1.00 |
|
March 31, 2016 | |||||||||||
Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Vested | Weighted Average Exercise Price | |||||||
$1.62 - 2.20 | 684,476 | 4.93 | $1.98 | 558,776 | $1.98 | ||||||
$2.41 - 2.75 | 373,144 | 6.24 | 2.45 | 360,744 | 2.44 | ||||||
$2.86 - 4.28 | 719,971 | 4.07 | 3.41 | 652,171 | 3.44 | ||||||
$4.49 - 4.76 | 25,400 | 2.40 | 4.64 | 25,400 | 4.64 | ||||||
$5.35 - 5.44 | 77,204 | 3.03 | 5.39 | 77,204 | 5.39 | ||||||
$9.00 | 27,000 | 1.87 | 9.00 | 27,000 | 9.00 | ||||||
$10.14 - 11.61 | 109,851 | 1.66 | 10.87 | 109,851 | 10.87 | ||||||
2,017,046 | 4.54 | $3.32 | 1,811,146 | $3.43 |
During fiscal 2016,2021, Orion grantedrecognized $0.8 million of stock-based compensation expense related to restricted shares as follows (which are included in the above stock plan activity tables):
Balance at March 31, 2015 | 704,688 | ||
Shares issued | 795,805 | ||
Shares vested | (240,633 | ) | |
Shares forfeited | (206,471 | ) | |
Shares outstanding at March 31, 2016 | 1,053,389 | ||
Per share price on grant date | $1.34-2.62 | ||
Compensation expense | $ | 1,306,191 |
As of March 31, 2016,2021, the weighted average grant-date fair value of restricted shares granted was $2.06.
Unrecognized compensation cost related to non-vested common stock-based compensation as of March 31, 20162021 is expected to be recognized as follows (dollars in thousands):
Fiscal 2022 |
| $ | 484 |
|
Fiscal 2023 |
|
| 361 |
|
Fiscal 2024 |
|
| 93 |
|
Fiscal 2025 |
|
| 10 |
|
Total |
| $ | 948 |
|
Remaining weighted average expected term |
| 3.1 years |
|
Fiscal 2017 | $ | 1,113 | |
Fiscal 2018 | 771 | ||
Fiscal 2019 | 274 | ||
Fiscal 2020 | 72 | ||
Fiscal 2021 | 12 | ||
Thereafter | — | ||
$ | 2,242 | ||
Remaining weighted average expected term | 2.6 years |
Number of Shares | Weighted Average Exercise Price | |||||
Outstanding at March 31, 2013 | 38,980 | $ | 2.25 | |||
Issued | — | — | ||||
Exercised | — | $ | — | |||
Cancelled | — | $ | — | |||
Outstanding at March 31, 2014 | 38,980 | $ | 2.25 | |||
Issued | — | — | ||||
Exercised | (38,980 | ) | 2.25 | |||
Cancelled | — | — | ||||
Outstanding at March 31, 2015 and March 31,2016 | — | $ | — |
NOTE 1018 — SEGMENT DATA
Orion reorganized its business intohas the following business segments: Orion U.S. Markets Division ("USM"), Orion Engineered Services Division ("OES"(“OES”) and, Orion Distribution Services Division ("ODS"(“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 descriptionsOES segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. OES provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and other customers.
Orion Distribution Services Division (“ODS”)
The ODS segment sells lighting products through manufacturer representative agencies and a network of Orion’s segmentsNorth American broadline electrical distributors and their summary financial information are presented below.contractors.
Orion U.S. Markets Division ("USM"(“USM”)
The USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include domestic energy service companies, or 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 which primarily include intercompany eliminations.
|
| Revenues |
|
| Operating Income (Loss) |
| ||||||||||||||||||
|
| For the year ended March 31, |
|
| For the year ended March 31, |
| ||||||||||||||||||
(dollars in thousands) |
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| ||||||
Segments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Systems |
| $ | 84,243 |
|
| $ | 122,744 |
|
| $ | 30,925 |
|
| $ | 7,472 |
|
| $ | 16,164 |
|
| $ | (1,237 | ) |
Distribution Services |
|
| 21,122 |
|
|
| 15,087 |
|
|
| 24,173 |
|
|
| 2,430 |
|
|
| (852 | ) |
|
| (1,742 | ) |
U.S. Markets |
|
| 11,475 |
|
|
| 13,010 |
|
|
| 10,656 |
|
|
| 1,683 |
|
|
| 2,447 |
|
|
| 1,132 |
|
Corporate and Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,749 | ) |
|
| (4,649 | ) |
|
| (4,310 | ) |
|
| $ | 116,840 |
|
| $ | 150,841 |
|
| $ | 65,754 |
|
| $ | 6,836 |
|
| $ | 13,110 |
|
| $ | (6,157 | ) |
|
| Depreciation and Amortization For the year ended March 31, |
|
| Capital Expenditures For the year ended March 31, |
| ||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
| ||||||
Segments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Systems |
| $ | 913 |
|
| $ | 1,013 |
|
| $ | 774 |
|
| $ | 516 |
|
| $ | 302 |
|
| $ | 165 |
|
Distribution Services |
|
| 231 |
|
|
| 187 |
|
|
| 485 |
|
|
| 158 |
|
|
| 81 |
|
|
| 44 |
|
U.S. Markets |
|
| 128 |
|
|
| 126 |
|
|
| 233 |
|
|
| 107 |
|
|
| 78 |
|
|
| 31 |
|
Corporate and Other |
|
| 208 |
|
|
| 236 |
|
|
| 291 |
|
|
| 121 |
|
|
| 353 |
|
|
| 215 |
|
|
| $ | 1,480 |
|
| $ | 1,562 |
|
| $ | 1,783 |
|
| $ | 902 |
|
| $ | 814 |
|
| $ | 455 |
|
|
| Total Assets |
| |||||
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||
Segments: |
|
|
|
|
|
|
|
|
Engineered Systems |
| $ | 29,856 |
|
| $ | 22,354 |
|
Distribution Services |
|
| 6,530 |
|
|
| 5,502 |
|
U.S. Markets |
|
| 6,057 |
|
|
| 4,859 |
|
Corporate and Other |
|
| 50,378 |
|
|
| 39,848 |
|
|
| $ | 92,821 |
|
| $ | 72,563 |
|
Revenues | Operating (Loss) Profit | ||||||||||||||||||||||
(dollars in thousands) | For the year ended March 31, | For the year ended March 31, | |||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
Segments: | |||||||||||||||||||||||
U.S. Markets | $ | 38,841 | $ | 37,778 | $ | 38,766 | $ | (4,958 | ) | $ | (12,542 | ) | $ | (1,012 | ) | ||||||||
Engineered Systems | 26,325 | 33,454 | 49,857 | (6,982 | ) | (12,431 | ) | 1,260 | |||||||||||||||
Distribution Services | 2,476 | 978 | — | (632 | ) | (455 | ) | — | |||||||||||||||
Corporate and Other | — | — | — | (7,349 | ) | (6,508 | ) | (8,591 | ) | ||||||||||||||
$ | 67,642 | $ | 72,210 | $ | 88,623 | $ | (19,921 | ) | $ | (31,936 | ) | $ | (8,343 | ) | |||||||||
Depreciation and Amortization | Capital Expenditures | ||||||||||||||||||||||
For the year ended March 31, | For the year ended March 31, | ||||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
Segments: | |||||||||||||||||||||||
U.S. Markets | $ | 1,168 | $ | 1,711 | $ | 2,667 | $ | 72 | $ | 626 | $ | 276 | |||||||||||
Engineered Systems | 1,987 | 1,404 | 302 | 43 | 495 | — | |||||||||||||||||
Distribution Services | 71 | 32 | — | 10 | 40 | — | |||||||||||||||||
Corporate and Other | 939 | 1,036 | 1,569 | 276 | 845 | 134 | |||||||||||||||||
$ | 4,165 | $ | 4,183 | $ | 4,538 | $ | 401 | $ | 2,006 | $ | 410 |
Total Assets | Deferred Revenue | ||||||||||||||
March 31, 2016 | March 31, 2015 | March 31, 2016 | March 31, 2015 | ||||||||||||
Segments: | |||||||||||||||
U.S. Markets | $ | 18,503 | $ | 27,769 | $ | 167 | $ | 157 | |||||||
Engineered Systems | 21,885 | 27,435 | 1,098 | 1,361 | |||||||||||
Distribution Services | 1,386 | 261 | — | — | |||||||||||
Corporate and Other | 29,101 | 32,340 | — | — | |||||||||||
$ | 70,875 | $ | 87,805 | $ | 1,265 | $ | 1,518 |
Orion’s revenue outside the United States is insignificant and Orion has no long-lived assets outside the United States.
NOTE 19 — RESTRUCTURING EXPENSE
During the fourth quarter of fiscal 2020, as part of Orion’s response to the impacts of the COVID-19 pandemic, Orion entered into separation agreements with multiple employees, and recognized $0.4 million of expense. Orion’s restructuring expense for the 12 months ended March 31, 2021, 2020 and 2019 is reflected within its consolidated statements of operations as follows (dollars in thousands):
|
| Year Ended March 31, |
|
| Year Ended March 31, |
|
| Year Ended March 31, |
| |||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Cost of product revenue |
| $ | — |
|
| $ | 82 |
|
| $ | — |
|
Cost of product service |
|
| — |
|
|
| 74 |
|
|
| 26 |
|
General and administrative |
|
| — |
|
|
| 28 |
|
|
| 17 |
|
Sales and marketing |
|
| — |
|
|
| 207 |
|
|
| — |
|
Total |
| $ | — |
|
| $ | 391 |
|
| $ | 43 |
|
Total restructuring expense by segment was recorded as follows (dollars in thousands):
|
| Year Ended March 31, |
|
| Year Ended March 31, |
|
| Year Ended March 31, |
| |||
|
| 2021 |
|
| 2020 |
|
| 2019 |
| |||
Orion Engineered Systems |
| $ | — |
|
| $ | 139 |
|
| $ | — |
|
Orion Distribution Systems |
|
| — |
|
|
| 142 |
|
|
| 12 |
|
Corporate and Other |
|
| — |
|
|
| 110 |
|
|
| 31 |
|
Total |
| $ | — |
|
| $ | 391 |
|
| $ | 43 |
|
NOTE 1120 — 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
On May 5, 2021, Orion announced a $0.5 million strategic investment in ndustrial, a provider of software and services that optimize industrial facilities across all stages of discrete and process manufacturing supply chains. Orion secured an equity stake in ndustrial through its participation in the date the financial statements were issued and noted no subsequent event requiring accrual or additional disclosure.
NOTE 1221 — QUARTERLY FINANCIAL DATA (UNAUDITED)
Summary quarterly results for the years ended March 31, 20162021 and March 31, 20152020 are as follows:
|
| Three Months Ended |
|
|
|
|
| |||||||||||||
|
| Jun 30, 2020 |
|
| Sep 30, 2020 |
|
| Dec 31, 2020 |
|
| March 31, 2021 |
|
| Total |
| |||||
|
| (in thousands, except per share amounts) |
|
|
|
|
| |||||||||||||
Total revenue |
| $ | 10,811 |
|
| $ | 26,281 |
|
| $ | 44,251 |
|
| $ | 35,497 |
|
| $ | 116,840 |
|
Gross profit |
| $ | 2,635 |
|
| $ | 7,263 |
|
| $ | 11,006 |
|
| $ | 9,220 |
|
| $ | 30,124 |
|
Net income (loss) (1) |
| $ | (2,219 | ) |
| $ | 1,914 |
|
| $ | 4,315 |
|
| $ | 22,124 |
|
| $ | 26,134 |
|
Basic net income (loss) per share (1) |
| $ | (0.07 | ) |
| $ | 0.06 |
|
| $ | 0.14 |
|
| $ | 0.72 |
|
| $ | 0.85 |
|
Shares used in basic per share calculation |
|
| 30,352 |
|
|
| 30,669 |
|
|
| 30,736 |
|
|
| 30,782 |
|
|
| 30,635 |
|
Diluted net loss per share (1) |
| $ | (0.07 | ) |
| $ | 0.06 |
|
| $ | 0.14 |
|
| $ | 0.71 |
|
| $ | 0.83 |
|
Shares used in diluted per share calculation |
|
| 30,352 |
|
|
| 31,170 |
|
|
| 31,320 |
|
|
| 31,295 |
|
|
| 31,304 |
|
|
| Three Months Ended |
|
|
|
|
| |||||||||||||
|
| Jun 30, 2019 |
|
| Sep 30, 2019 |
|
| Dec 31, 2019 |
|
| Mar 31, 2020 |
|
| Total |
| |||||
|
| (in thousands, except per share amounts) |
|
|
|
|
| |||||||||||||
Total revenue |
| $ | 42,378 |
|
| $ | 48,322 |
|
| $ | 34,249 |
|
| $ | 25,892 |
|
| $ | 150,841 |
|
Gross profit |
| $ | 10,283 |
|
| $ | 12,791 |
|
| $ | 8,274 |
|
| $ | 5,775 |
|
| $ | 37,123 |
|
Net income (loss) (2) |
| $ | 3,968 |
|
| $ | 6,721 |
|
| $ | 2,304 |
|
| $ | (531 | ) |
| $ | 12,462 |
|
Basic net loss per share |
| $ | 0.13 |
|
| $ | 0.22 |
|
| $ | 0.08 |
|
| $ | (0.02 | ) |
| $ | 0.41 |
|
Shares used in basic per share calculation |
|
| 29,723 |
|
|
| 30,189 |
|
|
| 30,244 |
|
|
| 30,259 |
|
|
| 30,105 |
|
Diluted net loss per share |
| $ | 0.13 |
|
| $ | 0.22 |
|
| $ | 0.07 |
|
| $ | (0.02 | ) |
| $ | 0.40 |
|
Shares used in diluted per share calculation |
|
| 30,551 |
|
|
| 30,830 |
|
|
| 30,824 |
|
|
| 30,259 |
|
|
| 30,965 |
|
(1) | Includes $20.9 million of tax benefit related to the release of the valuation allowance on deferred tax assets during the three months ended March 31, 2021. |
(2) | Includes a $0.4 million restructuring charge during the three months ended March 31, 2020. |
Three Months Ended | |||||||||||||||||||
Mar 31, 2016 | Dec 31, 2015 | Sep 30, 2015 | Jun 30, 2015 | Total | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||
Total revenue | $ | 18,576 | $ | 16,751 | $ | 15,728 | $ | 16,587 | $ | 67,642 | |||||||||
Gross profit | $ | 4,618 | $ | 4,708 | $ | 2,913 | $ | 3,758 | $ | 15,997 | |||||||||
Net income (loss) | $ | (10,870 | ) | $ | (2,004 | ) | $ | (3,600 | ) | $ | (3,652 | ) | $ | (20,126 | ) | ||||
Basic net income per share | $ | (0.39 | ) | $ | (0.07 | ) | $ | (0.13 | ) | $ | (0.13 | ) | $ | (0.73 | ) | ||||
Shares used in basic per share calculation | 27,759 | 27,672 | 27,598 | 27,482 | 27,628 | ||||||||||||||
Diluted net income per share | $ | (0.39 | ) | $ | (0.07 | ) | $ | (0.13 | ) | $ | (0.13 | ) | $ | (0.73 | ) | ||||
Shares used in diluted per share calculation | 27,759 | 27,672 | 27,598 | 27,482 | 27,628 |
Three Months Ended | |||||||||||||||||||
Mar 31, 2015 | Dec 31, 2014 | Sep 30, 2014 | Jun 30, 2014 | Total | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||
Total revenue | $ | 19,366 | $ | 26,138 | $ | 13,393 | $ | 13,313 | $ | 72,210 | |||||||||
Gross profit | $ | 2,982 | $ | 3,824 | $ | (10,555 | ) | $ | 2,612 | $ | (1,137 | ) | |||||||
Net income (loss) | $ | (4,693 | ) | $ | (4,663 | ) | $ | (18,346 | ) | $ | (4,359 | ) | $ | (32,061 | ) | ||||
Basic net income per share | $ | (0.19 | ) | $ | (0.21 | ) | $ | (0.84 | ) | $ | (0.20 | ) | $ | (1.43 | ) | ||||
Shares used in basic per share calculation | 24,071 | 21,883 | 21,820 | 21,669 | 22,353 | ||||||||||||||
Diluted net income per share | $ | (0.19 | ) | $ | (0.21 | ) | $ | (0.84 | ) | $ | (0.20 | ) | $ | (1.43 | ) | ||||
Shares used in diluted per share calculation | 24,071 | 21,883 | 21,820 | 21,669 | 22,353 |
The four quarters for net earnings per share may not add to the total year because of differences in the weighted average number of shares outstanding during the quarters and the year.
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH |
None
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures and our internal control over financial reporting as of March 31, 2016,2021, pursuant to Exchange Act Rule 13a-15(b) and 15d-15. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have identified a material weaknesses in internal controls over financial reporting described below in Management’s Report on Internal Control and have, therefore, concluded that our disclosure controls and procedures were not effective at a level of reasonable assurance as of March 31, 2016.
Management, including our Chief Executive Officer and Chief Financial Officer, believes the consolidated financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our principal executivethe Chief Executive Officer and principal financial officersChief Financial Officer, or persons performing similar functions, and effected by ourthe board of directors, management and other personnel, 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,GAAP and includes those policies and procedures that:
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. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. ProjectionsAlso, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies andor procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, our management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2016 based on the frameworkcriteria set forth in
Changes in Internal Controls OverControl over Financial Reporting
There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) underduring the Exchange Act) that occurred during the
None.
The information required by this item with respect to directors, executive officers and corporate governance is incorporated by reference to Orion'sour Proxy Statement for its
Code of Conduct
We have adopted a Code of Conduct that applies to all of our directors, employees and officers, including our principal executive officer, our principal financial officer, our controller and persons performing similar functions. Our Code of Conduct is available on our web site at www.orionlighting.com. Future material amendments or waivers relating to the Code of Conduct will be disclosed on our web site referenced in this paragraph within four business days following the date of such amendment or waiver.
The information required by this item is incorporated by reference to Orion'sour Proxy Statement for its
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS |
See Item 5, Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchaser of Securities, under the heading “Equity Compensation Plan Information” for information regarding our securities authorized for issuance under equity compensation plans. The additional information required by this item is incorporated by reference to Orion'sour Proxy Statement for its 20162021 Annual Meeting of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2016.
The information required by this item is incorporated by reference to Orion'sour Proxy Statement for its
The information required by this item is incorporated by reference to Orion'sour Proxy Statement for its
ITEM 15. |
(a) | Financial Statements |
Our financial statements are set forth in Item 8 of this Form 10-K.
Number | Exhibit Title | ||
3.1 |
SCHEDULE II VALUATION and QUALIFYING ACCOUNTS | ||||||||||||||||
Balance at beginning of period | Provisions charged to expense | Write offs and other | Balance at end of period | |||||||||||||
March 31, | (in Thousands) | |||||||||||||||
2016 | Allowance for Doubtful Accounts | $ | 458 | $ | 575 | $ | 528 | $ | 505 | |||||||
2015 | Allowance for Doubtful Accounts | $ | 384 | $ | 285 | $ | 211 | $ | 458 | |||||||
2014 | Allowance for Doubtful Accounts | $ | 900 | $ | 174 | $ | 690 | $ | 384 | |||||||
2016 | Inventory Obsolescence Reserve | $ | 1,619 | $ | 509 | $ | 1 | $ | 2,127 | |||||||
2015 | Inventory Obsolescence Reserve | $ | 2,527 | $ | 10,505 | $ | 11,413 | $ | 1,619 | |||||||
2014 | Inventory Obsolescence Reserve | $ | 2,301 | $ | 1,995 | $ | 1,769 | $ | 2,527 |
Amended and Restated Articles of Incorporation of Orion Energy Systems, Inc., filed as Exhibit 3.3 to the Registrant’s Form S-1 filed August 20, 2007, is hereby incorporated by reference. | |||
3.2 | |||
4.1 | |||
4.2 | |||
4.3 | |||
10.1 | |||
10.2 | |||
10.3 | |||
10.4 | |||
10.5 | |||
10.6 | |||
10.7 | |||
10.8 | |||
10.9 | |||
10.10 | |||
10.11 | |||
10.12 | |||
10.13 | |||
10.14 | |||
10.15 | |||
10.16 | |||
Restated Executive Employment and Severance Agreement, dated as of | |||
10.17 | |||
10.18 | |||
21.1 | |||
23.1 | |||
31.1 | |||
31.2 | |||
32.1 | |||
101 | 101.INS XBRL Instance Document+ | ||
101.SCH Taxonomy extension schema | |||
101.CAL Taxonomy extension calculation linkbase | |||
101.DEF Taxonomy extension definition linkbase document+ | |||
101.LAB Taxonomy extension label linkbase | |||
101.PRE Taxonomy extension presentation linkbase |
Documents incorporated by reference by Orion Energy Systems, Inc. are filed with the Securities and Exchange Commission under File No. 001-33887.
* | ||||
Management contract or compensatory plan or arrangement. |
+ | |
Filed herewith |
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on June 23, 2016.
ORION ENERGY SYSTEMS, INC. | ||||
By: | /s/ MICHAEL W. ALTSCHAEFL | |||
Michael W. Altschaefl | ||||
Chief Executive Officer and Board Chair |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant in the capacities indicated on June 23, 2016.
Signature | Title | |
/s/ | Chief Executive Officer and | |
Michael W. Altschaefl | Executive Officer) | |
�� | ||
/s/ | Chief Financial Officer, Chief Accounting Officer and | |
J. Per Brodin | Treasurer (Principal Financial Officer) | |
/s/ | Lead Independent Director | |
Anthony L. Otten | ||
/s/ | Director | |
Alan B. Howe | ||
/s/ Michael J. Potts | Director | |
Michael J. Potts | ||
/s/ | Director | |
Ellen B. Richstone | ||
/s/ Mark C. Williamson | Director | |
Mark C. Williamson | ||
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