Andrew Swerdlow - IR Mark Stauffer - President and CEO Chris DeAlmeida - VP and CFO

Jon Tanwanteng - CJS Securities Trey Grooms - Stephens Adam Thalhimer - BB&T Capital Scott Levin - Imperial Capital Marco Rodriguez - Stonegate Partners John Rogers - D.A. Davidson

Hello, and welcome to the Orion Marine Group Q2 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. And I now like to introduce your host for today's call, Andrew Swerdlow. You may begin.

Good morning. And welcome to the Orion Marine Group's second quarter 2015 earnings conference call. Joining me today are Mark Stauffer, Orion Marine Group's President and Chief Executive Officer and Chris DeAlmeida, our Vice President and Chief Financial Officer. Regarding the format of the call, we have allocated about 20 minutes for prepared remarks in which Mark and Chris will highlight our results and update out market outlook. We will then open the call for sale side analyst questions for the remainder of the time. We would ask that you limit your questions to one question and one follow-up before getting back into queue. During the course of this conference call, we will make projections and other forward looking statements regarding, among other things, our end-markets, revenues, gross profit, gross margin, EBITDA, EBITDA margin, backlog, projects in negotiation and pending award, as well as our estimates and assumptions regarding our future growth, EBITDA, EBITDA margin, gross margins, administrative expenses, and capital expenditures. These statements are predictions that are subject to risks and uncertainties, including those described in our 10-K for 2014 that may cause actual results to differ materially from those statements. Moreover, past performance is not necessarily an indicator of future results. By providing this information, we undertake no obligation to update or revise any projections or forward looking statements, whether as a result of new developments or otherwise. Also, please note that EBITDA and EBITDA margins are non-GAAP financial measures under rules of the Securities and Exchange Commission, including Regulation G. Please refer to the reconciliation accompanying this earnings call available on our Web site at www.orionmarinegroup.com for comments on the use of non-GAAP financial measures as well applicable reconciliations to the most comparable GAAP measures. Also, please refer to the press release issued this morning, August 06, 2015, and our quarterly and annual filings with the SEC, which are available on our Web site for additional discussions and risk factors that could cause actual results to differ materially from our current expectations. With that, I'll turn the call over to Mark Stauffer, President and Chief Executive Officer. Mark?

Thank you, Drew and thanks for joining us this morning. I would like to start by thanking the entire Orion Marine Group team for their continued hard work and dedication, along with welcoming over 1,200 TAS employees to the Orion organization. I look forward to continuing to build on both companies’ past successes as a leading construction company. As expected, inconsistent lettings by the corps of engineers led to underutilized equipment in the second quarter. Additionally, as noted in our mid-period update, Texas experienced the wettest second quarter in over 120 years. This inclement weather caused delays in existing jobs and the startup of new jobs, which further impacted our second quarter results. Despite the temporary impact of these delays, we expect to see additional opportunities related to the record rainfall in the form of additional bid opportunities in the coming months. In fact, we recently received a change order on an existing contract to perform dredging where excess shoaling had occurred as a result of the recent rains. While I am disappointed in the results for the first half of 2015, our improving backlog and the continued improvement across many of our end market drivers gives me confidence in the second half of 2015 and beyond. As we have said previously, we are focused on returning to the historical mid-teen EBITDA margins we enjoyed a few years ago. We are also focused on returning to and maintaining a double digit return on invested capital. To achieve these goals, we need to see better continuity between jobs which will lead to higher sustained asset utilization, and continued bid pricing improvement. However, we must also be adaptive to the current market. In order to achieve our return on invested capital goal, we have accelerated our review of our fleet to ensure our assets are made in current and future market demand. We accelerated this detailed review process during the second quarter, and expect to continue to work on it throughout the remainder of this year. We remain confident in our business drivers and outlook for the future. We believe Orion is a successful Company with a strong past and an even stronger future. We remain committed to increasing shareholder value and providing solid long term returns. Before turning to our outlook, I will like to take some time to discuss our recent acquisition. Throughout the history of the Company, growth through acquisitions has been rooted in expanding our existing geographic footprint and enhancing our ability to control the critical path on any job in order to meet our customers’ needs. Today and as we move forward, we will continue to look for opportunities to grow the business through organic growth and greenfield expansion. And as we previously stated, we will look for ways to continue to enhance and diversify our service offerings. As we have said before, we have been exploring opportunities to provide services in adjacent areas, while staying true to our project management roots. In this regard, we have identified several strategic areas for growth. One of these areas is to develop more upland infrastructure capabilities beyond the water’s edge. As a result, I am pleased to announce that yesterday we acquired TAS Commercial Concrete based in Houston, Texas. Throughout its 35 year history TAS has developed a reputation for safely delivering quality work to its customers that consists largely of private repeat customers. This success has helped TAS grow into the second largest Texas based commercial concrete contractor. TAS currently operates in both Houston and the Dallas Fort Worth Metroplex and provides commercial concrete services through its three primary business lines, light commercial or flatwork, structural concrete and labor only pour and finish services. TAS generally acts as a subcontractor on the projects it performs for a variety of large, largely private sector customers in the industrial, warehouse, office, retail, medical, multifamily, and educational space. While growth in our Marine construction segment is primarily driven by the increasing demand for water side infrastructure as the usage of the water waste moved goods and people increases, growth in the commercial concrete segment is driven by overall population changes in its operating areas in the commercial construction that follows. Non-residential construction in both Houston and the DFW Metroplex have grown approximately 68% since 2011 as both areas have experienced tremendous growth. TAS has grown its revenue over 100% in the same timeframe from $115 million in 2011 to $263 million in 2014. This acquisition adds another operating segment to our business, and provides diversification of end market drivers and a diversified customer base including non-marine customers. TAS will continue to focus on its markets and the customers it serves. However, it will allow us to also bid on opportunities of the Marine Construction segment that include upland foundation and flatwork particularly in the warehouse and industrial areas. With strong demand for commercial concrete being driven by population growth in Texas, we believe we have the opportunity to continue to grow the solid platform TAS has developed and expand these services in other areas in the future. We look forward to building on the success TAS has achieved over the last 35 years and expect that over-time TAS will be an integral part of providing additional turnkey services to a wide variety of customers. Turning to our Marine Construction segment, we continue to experience a high level of demand for our suite of services to help maintain and expand the infrastructure that facilitates the movement of goods and peoples on and over the water ways. This continued demand can be seen both in our backlog and the high level of bids outstanding. Our private sector energy related clients continue to maintain and undertake capital expansion of their marine facilities related to storage, transportation and refining of domestically produced energy. The two largest contracts announced in the quarter totaling $64 million reflect the strength of this end market. We believe these storage expansion projects are driven by increases in the quantity of domestically produced crude, which is still at record levels. Taking a longer term view, we also believe further opportunities in this sector could arise from petrochemical related customers, energy exporters and LNG facilities over the next several years. Private recreational customers also continue to be a solid driver of bid opportunities as they expand, prepare and refurbish waterside infrastructure throughout the Caribbean. We believe we will continue to see opportunities from recreational customers for the foreseeable future. As we mentioned in the past, we are seeing an increased number of design build projects in the private sector which provides us more turnkey opportunities. Local port authorities should also continue to provide a steady source of bid opportunities as they undertake capital expansion plans in anticipation of larger shift and increase in cargo volume many of which are tied to the Panama Canal expansion to be completed in 2016. Larger ships transiting the Panama Canal are requiring ports in the Gulf Coast in Southeast Atlantic to undertake large scale building projects, infrastructure improvements, and associated maintenance services in order to service these larger ships. As I mentioned previously, a large contributor to the underutilization of equipment in the first half of the year was due to inconsistent lettings from the Army Corps of Engineers. As we approach the end of the federal fiscal year on September 30th we expect to see an increase in bid activity from the corps which could provide opportunities for us to improve utilization through the remainder of 2015. We are hopeful that fiscal 2016 corps appropriations process can be complete with full year funding for the corps put in place prior to the beginning of October, eliminating the need for a continuing resolution and provide for more consistent pace of corps lettings. The corps' fiscal 2016 appropriation has already been passed by the house of representative and the senate appropriation subcommittee on energy and water development and a ways to full those by the senate. While 2016 appropriations for the corps still must be completed it is encouraging to see progress being made as Congress continues its appropriation process through regular order something that hasn’t occurred for several years. We were also pleased to see the recently announced settlements related to the 2010 Gulf of Mexico oil spill. The settlement totals $18.7 million with $5.5 million going toward clean water at [indiscernible], $7.1 million to the five Gulf Coast states for natural resource damages over the next 15 years and $4.9 million over the next 18 years to the five Gulf Coast states to settle economic and other claims. Payments will begin 12 months after the agreement [becomes] final. Given the time frame of the payments we expect we could see bid opportunities related to this funding beginning late in 2016 or early in 2017. Turning to DLTs congress recently passed a three month extension for highway funding and the senate is considering a long term six year bill that is garnering bipartisan support in that chamber. Although there is resistance in the house to the senate version of the bill, we are hopeful that a long-term bill could provide a catalyst for pricing improvement on state BOT jobs. In closing we are excited about the acquisition of TAS which has a similar operating philosophy, serves different end markets, broadens our service offerings and is driven by market drivers experiencing sustainable growth. This acquisition will help contribute to solid bottom line performance, sustainable growth and the return of value to our shareholders. In our marine construction segment we remain focused on bidding responsibly in order to grow backlog and on project execution to deliver job at or above where they have been. As we move forward we will continue to focus on driving bottom line results and getting back to mid teen EBITDA margins in our heavy silver marine construction business, while looking forward for ways to grow the successful model TAS has built in our commercial concrete business. With that I will turn the call over to Chris to discuss our financial results in more detail. Chris?

Thank you, Mark and thanks again for joining us. For the second quarter, 2015 we reported a net loss of approximately $1.8 million or a loss of $0.07 per diluted share. These results compare with a net loss of $1.2 million or a loss of $0.04 per diluted share in the prior year period. Excluding the delays caused by the heavy rain and flooding in Texas results for the second quarter would have been a slight improvement over last year. Second quarter 2015 contract revenue was $86.1 million of which 63% was generated from federal, state and local government agencies while 37% was generated from the private sector. This compares to 42% being generated from federal, state and local government agencies and 58% from the private sector in the prior year period. Second quarter 2015 gross profit was $6 million or a gross profit margin of 7%, which compares to gross profit in the prior year period of 5.8 million or a gross profit margin of 6.5%. During the second quarter of 2015 we bid on approximately $376 million of opportunities and were successful on approximately 100 million, this resulted in 27% run rate for the quarter and a book to bill ratio of 1.16 times. We are pleased with our run rate in the quarter and the visibility our backlog provides us for the remainder of 2015 and beyond. SG&A expense for the second quarter of 2015 was 8.8 million which compares to $8.1 million in the prior year period. The increase is primarily attributable to increased stock compensation expense, one time recruitment expenses and acquisition related cost. As of June 30, 2015 we had approximately $21 million of cash on hand which compares to approximately $39 million of cash on hand at the end of last year. The decrease in cash balances is primarily related to the project timing and start of new work. As part of our capital allocation strategy we continue to execute on our stock repurchase program during the quarter. So far this year we have purchased approximately 350,000 shares totaling approximately $3.1 million. As we go forward we will remain opportunistic with regard to our share repurchases. However the specific timing and the amount of actual future share repurchases if any will vary based on our capital needs, market conditions security wall organizations and other factors. EBITDA for the second quarter 2015 was $2.5 million or an EBITDA margin of 2.9%, which compares to EBITDA of $3.9 million or an EBITDA margin of 4.4% in the prior year period. Our free cash flow for the second quarter 2015 was $700,000 which compares to a negative $4.8 million in the prior year period. As a reminder we define free cash flow as EBITDA less CapEx. Our free cash flow was higher during the second quarter of 2015 as a result of the timing of certain CapEx projects this year versus the prior year period. As Mark mentioned we've accelerate our review of our fleet to ensure our asset mix meets the current and future market demand while delivering solid returns. We are accomplishing this through a deep analysis of our existing capital expenditure plan to maximize return on owned equipment and determine the correct balance of equipment to own versus rent. In that regard we expect full year 2015 capital expenditures to be $18 million. Overall we are pleased with the financial health of the company and we are focused on maintaining a solid financial position and returning value to shareholders. Now turning to the acquisition of TAS. As Mark mentioned the acquisition meets our strategic goal of enhancing our service offering while getting exposure to a new market that supports growth for years to come. TAS recorded full year 2014 revenue of $236.2 million and EBITDA of $24.2 million with capital expenditures of approximately $5 million resulting in a free cash flow for TAS in 2014 of approximately $19.2 million. We anticipate TAS' CapEx program for 2015 to total approximately $5 million of which $2 million will occur between now and the end of year resulting in combined 2015 full year capital expenditures of approximately $20 million. While TAS historically has an EBITDA margin less than the mid-teens the acquisition provides an attractive free cash flow with strong bid opportunities for the future. Now turning to our new credit facility. During the second quarter we executed an extension of our prior credit facility for one year. However subsequent to the end of the quarter and associated with this transaction we entered into a new five year 185 million senior secured syndicated credit facility led by Regions Bank. This new facility consists of $135 million term loan and a $50 million revolver. Proceeds from the new facility were used to refinance our existing $33 million of debt and fund the purchase of TAS. Today we have approximately $149 million of debt outstanding and availability under our revolver of approximately $36 million. Under the term loan facility, amortization during the first year will be 5% per annum paid quarterly. Our initial interest rate is LIBOR plus 250 basis points with a 50 basis points commitment fee on the unused portion of the revolver. With regard to covenants we are required to maintain a fixed charge coverage ratio of no less than 1.25:1 with an initial leverage ratio of no greater than 3.25 times. Based on the combined trailing 12 months pro forma result as of June 30, 2015, our leverage ratio is 2.58 times. We are pleased with this new facility and the capital it provides us for the future. The robust support for this facility allowed us to establish a new credit program with solid financing terms at attractive pricing levels. This facility provided financing for the TAS acquisition [while the inflexibility] for future acquisitions and operating needs. We believe the TAS acquisition will help continue to drive growth over the long term. On a pro forma basis, combined 2014 revenue including TAS was $622 million with $58 million of EBITDA or an EBITDA margin of 9.3%. As of June 30, 2015, combined backlog for both companies was approximately $400 million. The inclement weather impacts during the second quarter affected both Orion and TAS which will impact our combined full year results despite an expected strong back half of the year. Looking ahead, we expect to continue to see modest growth in both revenue and EBITDA. Specifically, we expect combined 2015 pro forma full year revenue to grow 3% to 5% as compared to combined full year pro forma 2014 revenue with combined EBITDA margin similar to 2014. We expect a higher growth rate to return in 2016 given the strong market fundamentals that exist in both segments. SG&A expense for the full year 2015 including TAS is expected to be approximately 9% of full year 2015 reported revenue. Going forward we will operate as two reportable segments, our Heavy Civil Marine Construction segment and our new Commercial Concrete segment. As of June 30, 2015, our Heavy Civil Marine Construction segment had backlog of work under contract of 223 million of which 13% is for federal project, 10% is for state projects, 39% is for local projects and 37% is in the private sector. TAS, our new commercial concrete segment ended the second quarter with backlog of approximately 174 million, up 14% year-over-year. Additionally, we currently have combined bids outstanding of approximately 576 million of which we have been notified that we are the apparent low bidder or we’ll receive award subsequent to the end of the quarter of approximately $70 million. Of this approximately 260 million of the bids outstanding are related to the Marine Construction segment with approximately 316 million related to the Commercial Concrete segment. As a low bid and subsequent award approximately $17 million is related to the Marine Construction segment with $53 million related to the Commercial Concrete segment. In conclusion we are excited about the progress the acquisition of TAS represents in achieving our strategic vision for the Company. This acquisition provides solid EBITDA at a reasonable purchase multiple along with robust free cash flow metric. Additionally, we still anticipate the results in the Marine Construction segment to improve in the back half of the year. We remain confident in our market fundamentals and we believe there remains ample opportunity for growth given the improving conditions across our end markets. With that, I’ll turn the call back over to Drew to begin the Q&A portion of the call. Drew?

Thanks Chris. We would now like to open the call up for questions. Rhonda, would you please review the procedure for placing question?

[Operator Instructions] Our first question comes from Jon Tanwanteng with CJS Securities.

Can you break out the expected growth rate for the legacy marine business and TAS separately at all?

We can a little bit, looking at the combined -- again we have 623 million of revenue pro forma combined for 2014 we expect that to grow 3% to 5%. Coming into the year we expected to see similar growth rates in kind of legacy Orion business and civil construction segment similar to last year it was around 9%. However, with the weather impacts in the second quarter that is going to shift out the timing of jobs keep in mind 12 months job -- three months later but it’s still the same aspect. So that will put some pressure on the full year growth rate for the Marine construction segment. With the TAS acquisition we do expect to see a little bit of growth from them year-over-year for the full year again partially based on they were impacted as well by the tremendous amount of rain here in Texas in the second quarter.

Okay, got it. And then just in terms of the growth rate at TAS itself it seems like it's coming off a pretty steep ramp. What's the reason for the slowdown in 2015 I'm assuming its energy but ending more color will be appreciated and also what gives you confidence in reacceleration next year?

Well. I don’t think its energy I think we've been going through this process obviously with these guys. I think part of it's just the timing of stuff. They are committed to growing but they want to do that smartly as well so that in sales making sure they've got the appropriate people that they've got the appropriate oversight, so I think we've got a lot of room to grow in the Dallas Fort Worth market with that segment and there is still [above step] going on in Houston is very exciting and so we think primarily as Chris just said they were impacted as we were in the second quarter very unusual the latest three months we've had in a 120 years in Texas but I think as we look forward to 2016 assuming we don’t have a repeat of that which would be unusual we would expect continued growth in their segment as well.

Okay. And how creative do you expect the acquisition to actually be this year and next and are there any cost synergies at all or is it mostly kind of an organic in sales kind of thing?

We're concerning at a more organic and sales growth opportunity. I'm a little hesitant to give you, we do believe it's accretive and will be accretive in 2015 and 2016, keep in mind we did sign a new credit facility associated with that and I kind of laid out the expected interest expense and then also there will be some amortization of the intangibles associated with the purchase as well. But it will be accretive in 2015 and it will be accretive in 2016 and going forward so we think it will have good positive bottom line results overall for us.

And John I do think again as I said in my remarks TAS is going to be focused on what they've been doing and we expect them to continue to do that and continue to do that well as they have done, we do think though that as we move forward again as I said there are opportunities for a potential cross selling and potential operational synergies, we think that will come with time, but we are very excited about exploring what those opportunities are and looking forward to both segments to be able to assist each other on certain projects.

Okay great. And then just one quick one. What's the net debt position going to be after the close?

Well at the end of the quarter we had $20 million of cash concerning the acquisition that would be a cash free debt rebalancing that they deliver to us. We've got $20 million of cash for over $21 million from cash for the $129 million of debt outstanding today.

Thank you. Our next question comes from Trey Grooms with Stephens. You may ask your question.

Hi, Good morning guys. This is Blake filling in for Trey, congrats on the acquisition. So my first question is can you give a little more color on the strategic rationale of the deal and then elaborate on the cross sale opportunities that TAS provides to a more traditional marine work?

Yes, absolutely. The rationale behind as we've talked about for quiet sometime, as we look for growth opportunities and execute our strategic plan, we have identified a number of different areas one of which was uploading the capability and keep in mind that I'll color our traditional heavy silver marine construction business we pull a lot of concrete today in the dock constructions that we do DOT work and such, we have tremendous experience pouring concrete, we pour a lot of it day in and day out we also have a lot of historically we've performed a lot of land based aspects of work on our projects over the years, so this is not something that is born to us at all. Secondly though as we look for growth opportunities in some of these areas that we've identified we're looking for things that provide either perhaps a vertical integration or our good and solid matches for our core competencies, our skill sets and we touched on that in the remarks about project management, this is essentially a lot of the projects are -- the project in the works that TAS does, they are similar in duration, similar in the variety of sizes as we have in the marine construction segment, it's project management that's what we know and what we do every day, so we checked really all the boxes that we had in looking for the opportunities to execute on a strategic vision. Having said that if we look at lot of the work that we do, there are many times when in particular turnkey operations where there is upland portions of work that today we generally pass on we’ll team with somebody else, we’ll subcontract that out, variety of different things. But what TAS will afford as to do is look at those in a different light and potentially do some cross selling with some of these opportunities. So we're excited about that, but we’re also excited about what’s just going on with the work that TAS historically does which again they will continue to do. We’re excited about the growth potential there. And I think the sustainability to have with the drivers in the Texas market are pretty significant and so we’re excited about that. But again we think that there will be opportunities for us to join forces on certain projects where both segments can come together and execute on that work.

And then my second question is can you just go into more detail on the size of each TAS’ three sub-segments and then a little more detail on the revenue breakdown of their customers’ end markets?

Well, they don’t really manage the business such that they view those as different. It’s kind of like with us it ebbs and flows, I mean we may work on a dock job for Navy, for a port authority, for a private sector client. So they have kind of a fairly broad mix of like commercial, structural and stuff like that. If we look back to last year, I mean it’s a pretty good spread between warehouse, office, retail, the education space, the medical space and each one of these is going to entail projects either in the light commercial vain or structural vain. So, it’s kind of a mix it’s going to ebb and flow as the different types projects are let. So, it’s going to change from period to period based on what they bid on and what they go after or what they get.

Our next question comes from Adam Thalhimer with BB&T Capital. Your line is open.

Do we have SG&A for the TAS business?

We do. Last year, they reported SG&A of $15.6 million, overall. And again as we look at it combined of course this will include the amortization of the intangibles. As we look at our full year combined revenue, we’d expect SG&A to be about 9% of that total cost, total revenue.

And then what would be just depreciation, Chris?

Depreciation of their assets, last year was $2.1 million.

Are you inheriting any non-cash amortization that they already have?

No, I don’t believe we are.

And then the interest expense, you said [indiscernible] 5%?

No, it’s LIBOR plus 250, and there is a 50 basis point commitment fee on the unused portion of the revolver which today is about $36 million.

And what will be your thoughts on 2016 CapEx?

2016 CapEx combined we expect the full year keep in line we won’t have a portion of the year this year but expect full year CapEx next year to be $22 million to $25 million for the combined Company.

And then you talked about -- well how should I understand your comments about what you want to do with your core marine fleets?

Well, I think the point there is that as we look at our markets, as we look at our market, the activity in the various markets where we are in bid pricing, where we’ve been with the core budgeting and stuff like that. What we’re taking a hard look at is do we have -- are we -- is our fleet matched up with what the current market is and the future market is. And so, we’re just taking a look at whether or not some of the things that we own today we need to own and maintain is there an aspect of some of this that we’d be better off renting. So effectively it’s a process of just making sure that we've got the fleet matched up with where we are in the market. No, not only today but going forward and also correspondingly as the CapEx program tide because one leads to the other, so as a lot of our CapEx and its expenditures is there on maintaining the existing fleet but most of it is so as we look at that program it has impacts on both it impacts just the caring cost of it but also the maintenance cost surface, so we're taking a very deep dive on that to just determine do we have the right mix of equipment for the market conditions today and going forward.

Okay. And jumping around here but does TAS -- I know you touched on this, but how much energy in a public infrastructure exposure do you think they have or is it all kind of like commercial.

Well if you call working on a building or a structure or something that's used by an energy company exposure to the energy sector, we are not little bit of it but I think primarily what they are focused on is warehouse to office retail like commercial the structural stuffs that may or may not be use, I mean they are and I think in one of the things they we're excited about is as I spoke earlier about in terms of opportunities is looking for stuff in the kind of industrial warehouse base tied to what the marine and construction segment does which they are doing virtually none of today, and short answer to your question is I would say not much as tied that. I think that's majority of what they are doing is tied too population growth in the markets they serve which again is Houston and Dallas Forth Worth primarily.

Okay. And did you give any color on who you are buying this from and what the kind of process was is in this point?

The founder and financial backers were involved on the sell side but founder was involved in that, and he will remain involved with us, going forward management of TAS will continue to manage the business going forward, it really wasn’t a formal process, we have got to know these guys over the last more than last year and so it was really not a process that again a kind of formal process this is more of a kind of one-off negotiated transaction.

Okay good. And lastly just on your marine bid funnel, you bids outstanding were down kind of 15 percentish month over month. You didn’t take away from that or just timing?

It's timing.

Our next question comes from Scott Levin of Imperial Capital.

I want to ask you if you are going to think about change in the name of the company just something a little bit more broad here given the increased focused on mainly on the construction there but in all seriousness, I guess I'd ask you nature of the customer base it seems on the service like it might be a bit different than kind of your core I'm guessing it's mostly private sector. Is there anything we should think about in terms of just the nature of the contracts, the nature of customer base and how that might differ from your marine business and might that make for a bit more lumpiness in reported earnings quarter-to-quarter on a go forward basis or is that not the case?

Well actually I think the opposite. I think TAS is a little more smooth throughout the quarters than the marine construction segment, historically they've been little bit more smooth, it's not to say that it's still not a lumpy business it is, but I think this if anything could potentially help smooth out the earnings throughout the year. I think that in terms of their customer base and contracts, contracts are very similar they do primarily act as a subcontractor, we have a lot of experience with that, we act as a subcontractor occasionally as well. So that's a little bit of a change but in terms of the actual contracts, very similar contracts and contractual terms that we operate under today. The size and duration of their projects is very similar to what we've historically done their approach to jobs, their approach to risk how they manage that risk is very-very similar to ours, that's one of thing I mean this was just felt like a very natural fit for both of us as we got to know these guys very well over the last year plus, it's very-very similar, lot of similarities to us. Quite honestly looking at their jobs sites throughout this process we're kind of looking around at and telling ourselves [Technical Difficulty] little water here this looks exactly like something some of our existing operations we'd be working on today. So it's a very familiar operation for us. I think that may not be readily apparent on the phase of it but it is and we have a lot of experience as I said earlier performing work on land. We also have a lot of experience for in concrete. And so I don’t think in terms of the contracts, it’s project site, project durations anything like that, this is much of a departure.

And Scott just to add a little bit of detail to that on the customer standpoint too, about 90% of their business is generated through repeat customers, for the top 10 they’ve got an average relationship of about 12 years. But some of those top 10 span over two decades of relationships with them and they do multiple jobs per year through that. So we feel really comfortable with that and that leads more to that smoother earnings cycle for them throughout the year. I think for them Q2 is an anomaly just because of all the rain over so many days of delay, I mean it was the wettest Q2, wettest three months on history, a record history for the State of Texas. So you can’t pour concrete in the rain very well. So that did cause delay. But generally speaking we see a lot smooth earnings from them and feel really comfortable about their customer relationships and how that’s going to pan out over time.

And the other point I would just emphasize again I mean I said this in the remarks and we put this in the release. But the other thing we like about this as well is the diversification that it provides us because it is primarily private sector and it is in a robust economic sector, Texas which we expect to continue and the question about the energy prices all that stuff at stake. The state of Texas today is much more than just drilling, and which is primarily what’s been affected in the energy patches is the upland piece our upstream piece. But I think the point is that in particular as we talked about through the last several quarters and all this budgetary dysfunction in Washington DC and the impact that has on the Corps of Engineer budget and the highway budget and all that, we like what this provides and not that we’re abandoning that by any sense, that’s still very important to us. We still are very focused on the Heavy Civil Marine segment. And long term, think that are very-very excited about the long term prospects there and driving that back to historical levels. Having said that, to get this involved to get TAS is part of the Orion organization and have a diversification away into the private sector that’s not driven by and dependent upon that budgetary mess in DC is a positive in our view.

But is it safe to say that given where your margins are on the legacy business that there is more margin upside potential on the marine side and this is kind of running at what you expect to kind of be go for margins or there's some margin upside potential in the concrete side as well?

Well, I think definitely the margin improvement is definitely much more -- our expectations are much more on the Heavy Civil Marine Construction side. I think on the concrete business, as we said, well, I think we alluded to this earlier, but in specifically answering your question, I think their margins where they are now is what we expect going forward. Having said that though, it’s a much less capital intensive business, so from a free cash flow standpoint and a return standpoint, it fits with our goals and objectives. But as we said, we’re still focused on getting the Heavy Civil Marine Construction segment back to historical levels.

Couple of quick follow ups. The weather, you’re guiding though I guess pro forma of 3% to 5% growth in 2015 with comparable margins. Is the weather impact in 2Q is that a needle mover versus what it otherwise would have been? And if so, could you quantify that even roughly if that isn’t deemed in a way an impactful number?

It wasn’t impactful number. What I would say to that as I said in my prepared remarks was had we not have the weather event in Q2, we would had a slight improvement over the last year’s results. Keep in mind we expected to see somewhat of a gap just related to the Army Corps of Engineers and the timing of new projects we’re starting here that are started here in the third quarter. So there was an expected gap in the second quarter. But that was worsened by the weather. So that did make an impact on our second quarter results. And we would have seen an improvement year-over-year, slight improvement year-over-year had we not had that weather.

So maybe 2 million on the legacy business and then was it in -- is it impactful on the TAS as well?

On TAS side of things yes it was impactful. We will sell their results of course on a pro forma basis and we’re kind of picking up from yesterday or really today forward as far as what we’ll report for financial results for 2015. But it is safe to say it made a meaningful impact than their results and we would have expected to see higher results out of them in the second quarter had they not had all the delays because of weather.

Our next question comes from Marco Rodriguez of Stonegate Partners. You may ask your question sir.

Good morning, guys. Thank you for taking my questions. Most of my questions have been asked and answered but just kind of couple quick follow ups here, first in regard to the acquisition of TAS can you talk a little bit more about the integration, it kind of sounds like TAS is going to operate as its own entity, that's just nothing really changes there and I think in your prepared remarks you said that there is not really much on the cost synergy side, so if you can talk a little bit about that and then also there is seasonality of revenue you did make some that it was somewhat choppy but still at the same point kind of even on an earnings perspective, can you kind of elaborate on that as well please?

Yes, absolutely. Well on the integration side you are right, this is a little bit different for us and compared to historical acquisitions that we've made within the heavy silver marine construction segment, this is a new segment for us, it will be operated as a separate segment but also it will be operated just separately. I think you hit it correctly from the prepared remarks that they will continue to operate as they have, obviously there is some back office integration that will occur, and then as we go forward we'll look for -- there are some back office things that from an economies of scale standpoint we'll take a look at combined the operationally this will operate as a standalone segment from the existing heavy silver marine construction segment and begin, that does not mean that we will not look for operational opportunities as I've discussed earlier but just from an operating stand point this will operate as a standalone segment.

And on the cost synergy side of things, we like to look conservatively, we like to look at this with zero cost synergies and like Mark our intent is to operate this standalone so we'll have two operating segments, so we don’t expect much cost synergies, there may be some that come up along the way, clearly there are some upticks for just economies of scale like it sells on plans and things of that nature that may make sense or may not make sense as we go forward, so there may be some opportunities and clearly we'll look for those but at the same time we think its great acquisition, we think it's nicely accretive solely on what was zero across synergies, so anything that would be from that perspective would just provide a little more gravy so to speak. On kind of the seasonality of the business again it's less seasonal than the heavy silver marine construction segment is today. They are generally running a pretty steady number of cubic yards, are pouring a pretty steady number of cubic yards on a day and day out basis. I think the biggest factor for them in seasonality can be weather but that being said it does impacts them and dramatically as we saw them in the second quarter, but we have had a dramatic rain either, so that's an impact but generally speaking we should see a much smoother seasonality from that operating segments, financial results that we do on the heavy silver marine construction side.

Got it very helpful. And last quick follow up question here, in terms of the guidance, pro forma guidance was 3% to 5% top line year-over-year, just kind of trying to make sure I understand things in your prepared remarks and then responses to questions, TAS seems to be doing or has done very well in fiscal 2014 and you still expect some growth there and obviously you have the negative impact of weather here for both segments but specifically for the marine group and your army corps of engineers, is that fair for me to kind of take from your comments that the marine group based on what you're guiding for fiscal 2015 if I were to just to look at that segment in isolation that the growth rate year-over-year is either flat to down?

For the full year or the back half of the year?

For the full year.

For the full year, compared to the initial 9% yes, but I think it's probably fair to assume, if you want to look at it this way, it's probably fair to assume that 3% to 5% can kind of be applied to growth rate on both sides and both operating segments for the full year, again TAS is coming -- they did have a nice 2014, we do still expect to see some growth there but then we continue to expect to see growth on the marine construction side of things too. The biggest impact as we look in the back end of the year or for the full year results on the marine construction segment is really the second quarter, we're suggesting a little bit of tapering off here in the third quarter and fourth quarter but we still have a very strong and robust back end of the year and there are still a lot of activity that's going on, jobs shifted out so the opportunity kind of double up and make up the second quarter is what's difficult, so that’s' putting some of that pressure on the full year results because the way the job is scheduled out you basically have shifted that job outward and in particularly there was some jobs that we're expecting to start doing work, have because of the rain has delayed other parts of the job, so we’ll still do that work, but that work is going to start now more in November-December than the expected second quarter and it’s just because from the timing aspect its scheduling, it’s a scheduling conflict that’s going to make that impact.

Our next question comes from John Rogers of D.A. Davidson. Your line is open sir.

Couple of things I just wanted to follow up on. On TAS, of the purchase price, what's tangible and what’s goodwill of the 115?

So, goodwill is going to run about $57 million, they have assets of about -- right about $14 million is the fixed asset valuation. So there is some that was applied to the trade data that we do plan on continuing to use and operating at TAS commercial concrete and then of course there is a portion that will apply to the contracts that we took over, that piece will be amortized over the life of the contract, but I think we’re doing that over about a three year period and then the assets will go over depreciated life of the assets.

But Chris its $57 million in incremental goodwill that will be on added to your balance sheet….

Correct, and that will be directly related to the TAS operating segment.

And then is there any sort of an earn-out associated with and no equity, the owners are just being cashed out?

Correct.

And then just on the marine equipment side, you talked about renting equipment or streamlining that a little bit. Are you contemplating any asset sales there?

Well, I don’t want to take anything off the table I mean obviously we got to be very careful about that. It could be that we have disposals through attrition, if you know what I mean like if there has been [indiscernible] that we don’t replace it, it’s kind of taking a look at are we optimizing our flex to the market and are there -- because there is certain things, and there is certain pieces of equipment we use that there is no rental market for us. So we have to own them. So then the question is how much of that type of thing should we own given where the market is and where we see the market going. There is other things that there is a fairly readily available rental market and so we can take a look at that and just see are we at the optimum owned versus rent from a flex standpoint to meet market demand or projects and stuff like that. So we’re not sitting here saying we’re going to have a whole bunch of assets held for sale or anything like that. But what we are saying is, as we take a look at things can we manage some of these things, we replaced everything that’s needing to be replaced we kind of get rid of it at the end of the slide so I mean we’re going to manage this process smartly. We don’t want to doing things that’s detrimental but we also want to take a hard look at the whole level of equipment and lease versus owned equation. So therefore the flex equation on being able to still meet the market demand and execute the work that we need to execute and control on our own destiny versus taking a hard look at the CapEx expand and the carrying cost.

And then just in terms of your business or operations in the second quarter, looks like -- going through the balance sheet fairly quickly but significant uptick in receivables for the quarter. Is there anything usual there or was it…

It’s really the timing. I mean as we talked about, as we’ve indicated, we’ve expected work to begin in the third, fourth quarters. So that reflects the work that’s already have material projects are occurring and as soon as that occur you’re going to go into your accounts receivable, go through the normal collections process and collect that and that’s a direct reflection on the cash balance. So looking at cash and AR combined, the two kind of grew and I think that’s truly an indication of the projects that are expected to start to liquidate as we go forward.

And Chris is there any impact from your mix of public versus private customers?

No, on the AR side of things, that really doesn’t make an impact, it’s more the timing when the jobs are, when the material purchases and keep in mind both of the material purchase we make upfront and then that will we’ll build that to the customer. But of course with terms with contracts [indiscernible] we’ll build those out to customers and just goes through the normal billing cycle. So in certain cases like during the quarter we made the initial commitment to make the purchase and that will result in some money cash being expended for that which will then in turn translate into additional accounts receivable.

And then lastly I guess maybe for Mark. Are there other acquisitions or companies that you are having informal negotiations with. Is there out there?

Well. John the way I'll answer that is that we look at a lot of things all the time, that doesn't mean anything is going to happen. I would tell you that were pleased with this one, then obviously this is a significant transaction for us, we are focused on making sure that this is a successful -- for us it is good for us it's good for the TAS employees. I mean the TAS employees are key to the success of that operation that they've enjoyed over the last 35 years, so we want to make sure that we're focused on making sure that this is successful for Orion, for the Orion shareholders for the TAS employees, for Orion employees, so that's our focus on, but there is always percolating out there as you can appreciate but there is dumb news to report today.

Okay. And is it your expectation or vision over the next number of years to have a balance between onshore offshore work or does that come into that? Because this looks like an expansion increases your concentration specifically in the Houston markets the Gulf Coast where it's in the past I guess have talked about your expansion out into other marine market?

Yes. And we're still -- I would answer to that two ways. We are still focused on that we are again we are were not taken our focus off the marine construction business, we are still very interested in expanding our market share in the pack northwest, Alaska, the west coast, very interested in doing that as well in kind of the mid-Atlantic and Chesapeake region. So we remain committed to that. Clearly the Texas market has been it's very good for us, it's a very robust market, the Texas economy has obviously recovered very nicely from the recession. Lot of activity here, lot of population growth, population to Texas is expected to double in the next 25 years, so we think there is a tremendous amount of activity that's going to occur in Texas and this gives us again a good exposure to that in a diversified way, so we are very happy about that. But an answer to your broader question I don’t know there will be -- I think again as we look at our strategic plan and areas that we've identified, some may or may not be and in the same vein some maybe closer tied to vertical integration of the heavy silver segment, heavy silver marine segment, but you never know about the timing of opportunities, we match, when we look at things and opportunities we compare those and measure those against our strategic plan and if they make sense we take a deeper look at it, if they don’t make sense in that vein, we don’t take a further look at it. So I think some of that is just kind of like the project side, sometimes it depends on what you go after and what's you are successful in getting, as to when it's going to look like but I think -- but in your basic question this does give us more exposure to Texas which we view as a good thing and does give us a diversity of drivers away from some of the federal government stuff which we view as a good thing, again having said that we are still committed to being successful with the heavy silver marine construction segment.

[Operator Instructions] There are no question in the queue. And now I turn it back over to Mr. Andrew Swerdlow for closing remarks.

On behalf of Orion Marine Group, we would like to thank you for taking the time to talk with us this morning. And we look forward to speaking with you in the future. If you have any follow-up questions, please feel free to give me a call. Thanks, and have a good day.

That concludes our conference for today. You may now disconnect.