USA: Orion Marine Group, Inc. Reports Second Quarter 2010 Results
Orion Marine Group, Inc., a leading heavy civil marine contractor, today reported net income for the three months ended June 30, 2010, of $7.0 million or $0.26 diluted earnings per share (based on 27,200,611 diluted shares outstanding). These results compare to net income of $6.3 million or $0.28 diluted earnings per share (based on 22,148,304 diluted shares outstanding) for the same period a year ago.
“Our bid markets remain strong and there continues to be good drivers for long-term growth,” said Mike Pearson, Orion Marine Group’s President and Chief Executive Officer. “Overall, the second quarter showed good growth and we are pleased with the results.”
Financial highlights of the Company’s second quarter 2010 include:
Second Quarter 2010
– Second quarter 2010 contract revenues were $87.1 million, an increase of 23.1%, as compared with the second quarter of 2009 revenues of $70.8 million. Second quarter revenues fell short of the Company’s stated
second quarter 2010 goal range of $90-$95 million due to changes in the timing of certain jobs.
– Gross profit for the quarter was $19.6 million which represents an increase of $0.7 million as compared with the second quarter of 2009. Gross profit margin for the quarter was 22.5%, which was lower than the
prior year period of 26.7%. During the second quarter 2009 gross profit margin was higher as a result of the timing of jobs in progress and higher self-performance.
– The Company self-performed approximately 85% of its work as measured by cost during the second quarter 2010 as compared with 90% in the prior year period.
– Selling, General, and Administrative expenses for the second quarter 2010 were $8.6 million which were in line with the prior year period.
– The Company’s second quarter 2010 EBITDA was $15.7 million, representing an 18.1% EBITDA margin, which compares to second quarter 2009 EBITDA of $15.2 million, or a 21.4% EBITDA margin.
Backlog of work under contract as of June 30, 2010 was $218.1 million which compares with backlog under contract at June 30, 2009 of $141.8 million. In addition, the recently announced large project awards, including the announcement made this morning, add approximately $40 million to backlog. Including these projects, the Company has approximately $258 million worth of backlog. The Company reminds investors that backlog can fluctuate from period to period due to the timing and execution of contracts.
Given the typical duration of the Company’s projects, which range from three to nine months, the Company’s backlog at any point in time usually represents only a portion of the revenue it expects to realize during a twelve month period. Backlog consists of projects under contract that have either (a) not been started, or (b) are in progress and not yet complete, and the Company cannot guarantee that the revenue projected in its backlog will be realized, or, if realized will result in earnings.
“Backlog remains solid as we continue to see good demand for our services,” said Mark Stauffer, Orion Marine Group’s Executive Vice President and Chief Financial Officer. “As we look at the remainder of the year, our backlog indicates revenue continuing to build into the back half of the year with full year EBITDA margins in the 16% to 18% range.”
The Company expects to continue to see positive long-term trends in port expansion, U.S. infrastructure updates, coastal and wetland restoration projects, expansion in the cruise industry and projects involving dredging services.
The Company is currently tracking $4.5 to $5.0 billion of bid opportunities. The Company continues to see strong bidding activity across its markets and geographic areas. However the cost of certain materials has declined recently, resulting in a reduction of contract values. Additionally, competition in the East Coast construction market has remained elevated with growing pressure on pricing. As a result of these two factors, the Company has re-evaluated its full year 2010 revenue goals and now believes revenue will be in the $360 to $370 million range for the full year. The Company’s full year 2010 EBITDA margin goal remains 16%-18%.
“During the second quarter, we did not sustain our historical win rate in the East Coast construction market as a result of continued pressure on pricing,” said Mr. Pearson. “Still the East Coast construction market remains strong. In fact, our bid activity level in the East Coast construction market has increased year-over-year, however our success rate has declined in this region as we have not waivered on our bid pricing discipline. We were hopeful the pricing pressure would alleviate in the back half of this year but all indications are that we will continue to see this pressure throughout 2010. As a result of this and the decline in the cost of certain materials, we felt it was prudent to re-evaluate our full year 2010 revenue goal.
Despite a decrease from our previous expectations, we still remain optimistic about the road ahead. For the full year, we expect to post solid revenue growth including approximately $40 million from the acquisitions we made earlier this year. In fact, for the full year 2010, we already have $350 million of potential revenue; including the actual revenue realized in the first two quarters of the year, plus the amount we expect to liquidate during the remainder of the year from backlog and projects on which we are low bidder.
Of course we will still need to execute the work in backlog, and sign contracts for our low bid projects. But this level of activity plus the continued strong market we are tracking give us confidence in the future. The long-term positive end market drivers remain and we are optimistic about the future.”
For the third quarter 2010, the Company expects revenue will be in the $90 to $95 million range with third quarter 2010 EBITDA margin in the 16% to 18% range.
About Orion Marine Group
Orion Marine Group, Inc. provides a broad range of marine construction and specialty services on, over and under the water along the Gulf Coast, the Atlantic Seaboard, the West Coast, Canada and the Caribbean Basin and acts as a single source turn-key solution for its customers’ marine contracting needs. Its heavy civil marine construction services include marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging, and specialty services.
Its specialty services include salvage, demolition, diving, surveying, towing and underwater inspection, excavation and repair. The Company is headquartered in Houston, Texas and has an almost 80-year legacy of successful operations.