We are a leading designer and manufacturer of high-performance, energy-efficient
lighting platforms. We research, develop, design, manufacture, market, sell
and implement energy management systems consisting primarily of high-performance,
energy-efficient commercial and industrial interior and exterior lighting systems
and related services. Our products are targeted for applications in three primary
market segments: (i.) commercial office and retail; (ii.) 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.
We are primarily focused on providing commercial and industrial facilities
lighting retrofit solutions in North America using solid state Light Emitting
Diode (“LED”) technology. Our principal customers include national
accounts, energy service companies, electrical contractors and electrical distributors.
Currently, substantially all of our products are manufactured at our production
facility location in Manitowoc, Wisconsin, although we are increasingly sourcing
products and components from third parties as the LED market continues to evolve
in order to have versatility in our product development.
While we continue to provide solutions using our legacy High Intensity Fluorescent
(“HIF”) technology, we believe the market for lighting products
has shifted 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. 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 legacy technologies. LED lighting technologies are now the primary
component of our revenue as we strive to be the leader 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.
Reportable segments are components of an entity that have separate financial
data that the entitys 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 U.S. Markets
Division ("USM"), Orion Engineered Systems Division ("OES"),
and Orion Distribution Services Division ("ODS").
We are primarily focused on providing commercial and industrial facilities
lighting retrofit solutions in North America using solid state LED technology.
While we continue to provide solutions using our legacy HIF technology, we believe
the market for lighting products has shifted to LED lighting systems. Compared
to legacy lighting systems, 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’ lighting-related
electricity costs by approximately 50% to 80%, while increasing their quantity
of light by approximately 50% and improving lighting quality when replacing
traditional fixtures. Our customers typically realize a one to three year payback
period 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.
Energy-efficient lighting systems are cost-effective and environmentally responsible
solutions allowing end users to reduce operating expenses. Based on a July 2015
report published by the United States Department of Energy, or DOE, we estimate
the potential North American HIF and LED retrofit market within our primary
markets to be approximately 7 billion lighting fixtures. Our primary markets
are: (i) commercial office and retail, (ii) 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
and other buildings with traditional ten to twelve foot ceiling heights. The
DOE estimates that there are approximately 980 million office troffer fixtures
within the United States, which is a rectangular light fixture that fits into
a modular dropped ceiling grid. We believe we have the opportunity to increase
our revenue by serving this market with our LED Door Retrofit, or LDRTM, lighting
solutions.
Area lighting. Our market for area lighting includes parking garages, surface
lots, automobile dealerships and gas service stations. The DOE estimates that
there are approximately 65 million area lighting fixtures within the United
States and an additional 44 million roadway lighting fixtures in the United
States.
Industrial applications. Our market for industrial facilities includes manufacturing
facilities, distribution and warehouse facilities, government buildings and
agricultural buildings. These facilities typically contain high bay lighting
fixtures. The DOE estimates that there are approximately 139 million low/high
bay fixtures within the United States. We estimate that approximately 50% of
this market still utilizes inefficient High Intensity Discharge ("HID")
lighting technologies.
Commercial and industrial facilities in the United States employ a variety of
lighting technologies, including HID, traditional fluorescents, LED and incandescent
lighting fixtures. Our lighting systems typically replace less efficient HID
and HIF 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 utility or state energy
efficiency programs for any of their commercial or industrial customers. Our
products 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.
50/50 Value Proposition. We estimate our lighting systems generally reduce
lighting-related electricity costs by approximately 50% to 80% compared to legacy
fixtures, while increasing the quantity of light by approximately 50% and improving
lighting quality. In the commercial office and retail markets, we estimate our
lighting systems generally reduce electricity costs by 50%. From December 1,
2001 through March 31, 2016, we believe that the use of our HIF and LED fixtures
has saved our customers $3.7 billion in electricity costs and reduced their
energy consumption by 48.2 billion kWh.
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-facility roll-outs of our energy management
solutions across North American commercial and industrial facility portfolios.
This capability allows us to offer our customers an orderly, timely and scheduled
process for recognizing energy reductions and cost savings.
Rapid Payback Period. In most retrofit projects where we replace HID and HIF
fixtures, our customers typically realize a one to three year payback period
on our lighting systems. These returns are achieved without considering utility
incentives or government subsidies (although subsidies and incentives are continually
being made available to our customers and us in connection with the installation
of our systems that further shorten payback periods).
Easy Installation, Implementation and Maintenance. Most of our HIF and LED fixtures
are designed with a lightweight construction and modular plug-and-play architecture
that allows for fast and easy installation, facilitates maintenance and allows
for easy integration of other components of our energy management system. Our
office LED LDRTM products are designed to allow for a fast and easy installation
without disrupting the ceiling space or the office work space. We believe our
system’s design reduces installation time and expense compared to other
lighting solutions, which further improves our customers’ return on investment.
We also believe that our use of standard components reduces our customers’
ongoing maintenance costs.
Expanded Product Offerings. We are committed to continue developing LED product
offerings in all of the markets we serve.
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