June 30,
2009
Mr. Rufus
Decker
Accounting
Branch Chief
U.S.
Securities and Exchange Commission
100 F
Street, N.E., Mail Stop 7010
Washington,
D.C. 20549
Re: Orion
Marine Group, Inc.
Form 10-K for the fiscal year ended
December 31, 2008
Form 10-Q for the period ended March
31, 2009
Schedule 14A filed on April 13,
2009
File No. 1-33891
Dear Mr.
Decker:
Orion
Marine Group, Inc., (the “Company”) hereby further responds to the comments
received by facsimile on May 28, 2009 (the “Comment Letter”) from the staff of
the Division of Corporation Finance (the “Staff”) of the Securities and Exchange
Commission (the “Commission”). The responses below are to Staff
comments numbered “8,” “9” and “10” in the Comment Letter, which concern the
Company’s Schedule 14A Definitive Proxy Statement filed on April 13, 2009 (the
“2009 Proxy Statement”). The Company responded to the balance of the Staff’s
comments set forth in the Comment Letter in its response letter to the Staff
dated June 10, 2009 and in a supplement thereto dated June 15, 2009, both of
which have been submitted to the Commission. The Company requested, and the
Staff granted, an extension to June 30, 2009 to provide the responses set forth
below.
For your
convenience and as requested, the Company’s responses are prefaced by the exact
text of the Staff’s corresponding comment, which in each case is set forth in
bold text.
SCHEDULE 14A DEFINITIVE
PROXY STATEMENT FILED ON APRIL 13, 2009
Executive Compensation, page
14
Compensation Discussion and
Analysis, page
14
Components of Executive
Compensation, page 15
Performance-Based Incentive
Compensation, page 16
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8.
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With
a view toward future disclosure, please provide us with a materially
complete description and analysis of the individual goals applicable to
each of your named executive officers, as well as the compensation
committee's assessment of how each officer performed with respect to those
goals. In this regard, we note your disclosure on page 17 that "certain
individual goals were not met in full." Your description and analysis
should identify both the goals that were not fully met and the officers
who did not meet those goals.
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Response: Set
forth below are summaries of the individual performance goals for each of the
Company’s named executive officers in 2008 and the Compensation Committee's
assessment of each officer’s performance with respect to such
goals.
Mr. J. Michael Pearson, President and
Chief Executive Officer. Mr. Pearson’s 2008 individual
performance goals were as follows:
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·
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Assure the Company’s
completion of the acquisition of certain assets of Subaqueous Services,
Inc. (“SSI”), as a component of the Company’s growth
strategy. The Company successfully completed this
acquisition on February 28, 2008, and the Compensation Committee of the
Company’s Board of Directors determined that Mr. Pearson had met this
goal.
|
|
·
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Identify additional potential
acquisition targets for the Company, with a view to generally positioning
the Company for future acquisitions, as part of the Company’s growth
strategy, which includes internal as well as external
growth. Mr. Pearson met a significant part of this goal,
in that several potential acquisition targets were identified and
assessed; however, the Compensation Committee determined that factors
beyond Mr. Pearson’s control, including prevailing credit and mergers and
acquisitions market conditions, effectively prevented Mr. Pearson from
completely achieving this goal.
|
Mr. Mark R. Stauffer, Executive Vice
President and Chief Financial Officer. Mr. Stauffer’s 2008
individual performance goals were as follows:
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·
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Assure the completion of the
Company’s acquisition of certain assets of SSI. The
Company successfully completed this acquisition on February 28, 2008, and
the Compensation Committee determined that Mr. Stauffer had met this
goal.
|
|
·
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Develop an internal report for
tracking Company asset utilization and available asset capacity to enable
the Company to assess periodic asset utilization rates and asset
utilization trends. The Compensation Committee
determined that Mr. Stauffer had met this
goal.
|
|
·
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Develop an internal report for
tracking Company revenues and projects by customer
class. The Compensation Committee determined that Mr.
Stauffer had met this goal.
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Mr. Elliott J. Kennedy, Executive
Vice President, Gulf Region. Mr. Kennedy’s 2008 individual
performance goals were as follows:
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·
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Meet financial performance
targets set for the operations under Mr. Kennedy’s
supervision. The Compensation Committee determined that
Mr. Kennedy met a significant part of this goal. In determining
the appropriate 2008 cash incentive bonus for Mr. Kennedy, the Committee
considered additional factors, including principally Mr. Kennedy’s key
role in improving the Company’s results of operations during the second
half of 2008, as described further
below.
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|
·
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Implement significant asset
management initiatives and promote the Company’s services in markets in
which the Company had not previously participated, as part of the
Company’s growth strategy and ongoing efforts to improve
profitability. The Compensation Committee determined
that Mr. Kennedy had met these
goals.
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5
Mr. James L. Rose, Executive Vice
President, Atlantic Seaboard and Caribbean Region. Mr. Rose’s
2008 individual performance goals were as follows:
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·
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Meet financial performance
targets set for the operations under Mr. Rose’s
supervision. The Compensation Committee determined that
Mr. Rose met a significant part of this goal. In determining
the appropriate 2008 cash incentive bonus for Mr. Rose, the Committee
considered additional factors, including principally Mr. Rose’s key role
in improving the Company’s results of operations during the second half of
2008.
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|
·
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Implement significant
marketing and sales, asset management, and
logistics initiatives to promote and maintain the Company’s
presence in additional markets in which the Company had recently began to
participate, as part of the Company’s growth
strategy. The Compensation Committee determined that Mr.
Rose had met these goals.
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Mr. J. Cabell Acree, III, Vice
President, General Counsel and Secretary. Mr. Acree’s 2008
individual performance goals were as follows:
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·
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Provide assistance to the
Company’s Director, Human Resources and its Health, Safety and
Environmental (“HS&E”) Managers to improve awareness of and ensure
compliance with applicable HS&E regulations and Company
policies. The Compensation Committee determined that Mr.
Acree had met this goal.
|
|
·
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Customize various Company
contract templates for all aspects of the Company’s contracting
operations. The Compensation Committee determined that
Mr. Acree had met this goal.
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9.
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We
note your disclosure on page 17 that the compensation committee "awarded a
supplement to the bonus to certain individuals." With a view toward future
disclosure, please provide us with a materially
complete description and analysis of the compensation committee's decision
to award bonus supplements. In doing so, please identify the named
executive officers who received supplemental awards and quantify the
amounts of the awards. You should also address the impact, if any, that
the unsatisfied individual goals had on the committee's decision to award the
supplements.
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Response: The
Compensation Committee determined that supplemental bonuses were necessary and
appropriate to recognize and reward certain executive officers and other senior
managers for their extraordinary efforts in improving the Company’s financial
performance in the second half of 2008. This improved performance enabled the
Company to exceed its revised full-year financial goal for revenue, to achieve
the upper end of its revised 2008 EBITDA margin goal, and to post record results
for both revenues and EBITDA for 2008.
Each of
Messrs. Pearson and Stauffer were instrumental in formulating a strategy for
improving the Company’s performance during the second half of
2008. Meanwhile, each of Messrs. Kennedy and Rose, as well as certain
other senior managers, played key roles in implementing that strategy
successfully, including overseeing the necessary operations and managing their
respective subordinates to ensure performance improvements.
Page 3 of
5
All of
the named executive officers met their individual performance goals in
substantial part as demonstrated above. The fact that not all goals were
completely achieved was a significant consideration in the Compensation
Committee’s award of cash incentive compensation, and indeed, reduced the bonus
amounts that such individuals otherwise would have been entitled to receive
under the Company’s Executive Incentive Plan. The Committee, however,
also considered the Company’s need to reward extraordinary management efforts,
to retain executive personnel, and to maintain incentives to support future
growth and more favorable financial performance. As a result, the Committee
determined to award supplemental bonuses to certain other senior managers, and
to the following named executive officers in the respective amounts set forth
below:
|
Mr.
Pearson
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$ | 92,058 | ||
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Mr.
Stauffer
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$ | 76,100 | ||
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Mr.
Kennedy
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$ | 45,400 | ||
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Mr.
Rose
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$ | 61,250 | ||
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Total:
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$ | 274,809 |
The
Committee approved a total of $474,674 in supplemental bonuses for named
executive officers and other senior managers. Of that amount, the Committee
awarded approximately $199,865 to senior managers other than named executive
officers, in recognition of their extraordinary efforts in improving the
Company’s results of operations in the second half of 2008 and as a retention
tool to provide incentives for additional future positive
performance.
Long-Term Incentive
Compensation, page 18
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10.
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We
note your disclosure on page 18 that "[t]he Compensation Committee will
determine on an annual basis who will receive awards under the LTIP and
the limitations on those awards. The determination will be based on
factors that normally apply to a company's decision to grant awards, i.e.,
performance and industry conditions." With a view toward future
disclosure, please provide us with a materially complete description and
analysis of the compensation committee's long-term incentive award
determinations for 2008. In doing so, please address how the committee
determined the number of shares underlying the option awards received by
each named executive officer in
2008.
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Response: For
2008, the Compensation Committee awarded the named executive officers options to
purchase Company common stock under the Company’s Long Term Incentive Plan in
the amounts disclosed in the table in the 2009 Proxy Statement under the caption
“Grants of Plan Based
Awards.” In determining the 2008 awards, the Committee’s primary
consideration was to provide longer-term performance incentives to the named
executive officers in order to align their interests in the long-term growth and
prospects of the Company with those of the Company’s shareholders. Stock options
granted to the named executive officers vest over a three-year period and thus
provide executives with an incentive to manage the Company’s operations for the
longer-term.
In
particular, the Committee’s analysis included an assessment of the impact that
individual executive officers could likely have on the Company’s future
performance, growth and prospects, in order to determine the relative impact
that such officers could have on enhancing longer-term shareholder value. In
addition, to insure that awards to Company executives were in line with the
market, the Committee, with its independent consultant, carefully assessed
levels of equity incentive compensation paid historically by its peers. Further,
the Committee, in determining the amount of such awards, considered the
Company’s growth strategies and how to best provide incentives for the
achievement of such strategies.
Page 4 of
5
As
reflected in the table in the 2009 Proxy Statement under the caption “Grants of Plan Based Awards,”
the Committee determined to grant the greatest number of stock options to
the President and Chief Executive Officer, and then in descending amounts to the
Executive Vice President and Chief Financial Officer, the Company’s Regional
Executive Vice Presidents, and the Company’s General Counsel. In large part, the
respective numbers of stock options granted to the named executive officers
reflect the Committee’s determination of the relative impact that each such
officer could likely have on the creation and protection of long-term
shareholder value and the levels of incentives necessary, consistent with the
market, for insuring superior performance in order to promote the Company’s
longer-term performance, growth and prospects.
***
In
connection with the Company’s response to the Staff’s comments, the Company
acknowledges that:
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·
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The
Company is responsible for the adequacy and accuracy of the disclosure in
its filings;
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·
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Staff
comments or changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
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·
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The
Company may not assert Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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We hope
that our answers above appropriately respond to the Staff’s
comments. Please do not hesitate to contact me by telephone at (713)
852-6500, or in my absence, Cabell Acree at the same number, with any questions
or comments regarding this correspondence.
Sincerely,
/s/ Mark R. Stauffer
Mark R. Stauffer
Mark R. Stauffer
Executive
Vice President and Chief Financial Officer
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