USA: Orion Marine Group Reports 2011 Results
Orion Marine Group, Inc., a leading heavy civil marine contractor, today reported a net loss for the three months ended December 31, 2011, of $5.2 million ($0.19 diluted loss per share). These results compare to net income of $3.0 million ($0.11 diluted earnings per share) for the same period a year ago. For the full year 2011, Orion Marine Group reported a net loss of $13.1 million ($0.49 diluted loss per share), which compares to 2010 net income of $21.9 million ($0.81 diluted earnings per share).
“2011 proved to be exceptionally challenging, far greater than our initial expectations,” said Mike Pearson, Orion Marine Group’s President and Chief Executive Officer. “Margin pressure and inconsistent lettings by the US Army Corps of Engineers continued throughout the year. These factors affected both our profitability and equipment utilization through the end of 2011. Despite these challenges, we are focused on adjusting our business practices to match the current business environment, in part by strategically lowering margins in order to rebuild backlog.”
Financial highlights of the Company’s fourth quarter and full year 2011 include:
Fourth Quarter 2011
Fourth quarter 2011 contract revenues were $55.3 million, a decrease of 38.8%, as compared with fourth quarter of 2010 revenues of $90.4 million.
Gross profit for the quarter was $0.3 million which represents a decrease of $11.3 million as compared with the fourth quarter of 2010. Gross profit margin for the quarter was 0.6%, which was lower than the prior year period of 12.9%.
Selling, General, and Administrative expenses for the fourth quarter 2011 were $7.9 million as compared to $7.2 in the prior year period. The increase is a result of a property tax true up during the fourth quarter 2011.
The Company self-performed approximately 89% of its work as measured by cost during the fourth quarter of 2011 as compared with 81% during the prior year period.
The Company’s fourth quarter 2011 EBITDA was a negative $2.0 million, representing a negative 3.7% EBITDA margin, which compares to fourth quarter 2010 EBITDA of $9.3 million, or a 10.3% EBITDA margin.
For the second consecutive quarter the Company’s Book-to-Bill ratio was greater than one. For the fourth quarter of 2011 it’s Book-to-Bill ratio was 1.33 times, which compares to a fourth quarter 2010 Book-to-Bill ratio of 0.75 times.
Full Year 2011
Full year 2011 contract revenues decreased to $259.9 million, down 26.4% year-over-year as compared with full year 2010 revenues of $353.1 million.
Gross profit for the year was $10.2 million which represents a decrease of $55.0 million as compared with the full year 2010. Gross profit margin for the year was 3.9%, which was down from 18.5% for the full year 2010. Gross profit margin was primarily impacted during the year by margin pressure on projects involving construction services and increased idle equipment.
The Company self-performed approximately 85% of its work as measured by cost during 2011 as compared with 82% during the prior year period.
Selling, General, and Administrative expenses for the full year 2011 were $29.5 million as compared with $32.6 million in the prior year period. The decrease in Selling, General and Administrative expenses is due in part to the Company’s cost containment program implemented throughout 2011.
The Company’s full year 2011 EBITDA was $2.9 million, representing a 1.1% EBITDA margin, which compares to full year 2010 EBITDA of $53.6 million, or a 15.2% EBITDA margin.
Backlog of work under contract as of December 31, 2011 was $164.5 million which compares with backlog under contract at December 31, 2010 of $194.5 million. Ending full year backlog represents a sequential increase of $18.4 million as compared to the third quarter 2011. Subsequent to the end of the year, the Company has been successful in continuing to obtain additional awards for new work. For example, the Company announced two additional contracts this morning totaling approximately $24 million in Alaska and Florida. Additionally, during the first quarter of 2012, the Company has been successful in winning a $32 million dock construction contract for a private customer in the Gulf Coast region along with a $12 million berth construction contract for the Canaveral Port Authority.
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.
“2011 was a tough year, and while we are not out of the woods yet, we are seeing positive signs for the future,” said Mr. Pearson. “As we said previously, we made difficult decisions during 2011 to reduce and control costs while strategically bidding jobs to build backlog. The goal behind this approach is to build enough volume to cover fixed costs during this tough pricing market while aggressively going after opportunities to build back profitability. This approach is working and we are beginning to build a nice backlog.
“In fact, so far this quarter, we have announced approximately $70 million worth of large job awards including the two announced this morning. Overall we currently have over $200 million worth of bids outstanding, including $64 million on which we are apparent low bidder. Likewise, we continue to experience an overall high level of bid activity. We believe we are identifying the right price points to win work and build backlog. As we look at our end markets, we continue to see multiple long term end market drivers, including the expansion of the Panama Canal, dredging and coastal restoration opportunities, and a continued increase in waterborne commerce levels.
“Overall, we remain committed to protecting the intrinsic value of the Company by controlling overhead costs and bidding responsibly. To do this, we have taken steps to right size the Company to meet current market activity levels. During the year, we implemented several cost containment programs, and we have also strategically lowered margins on certain bids in order to rebuild backlog.”
Mr. Pearson continued, “We remain frustrated with our current situation, but we are taking the necessary actions to right size the business to meet current market activity levels while aiming to turn the business back to profitability. We expect to see continued tough quarters ahead due to gaps in projects and continued pricing pressure. However, we are executing our plan to build backlog, contain costs, manage through this downturn, and position ourselves to take advantage of a return to more normal market conditions. We are also optimistic about the future due to the strong market drivers and pent up demand for our services. We are confident that we will weather this storm and emerge a stronger Company.”
“Throughout 2011 we effectively managed our balance sheet and the Company’s cash position,” said Mark Stauffer, Orion Marine Group’s Executive Vice President and Chief Financial Officer. “Despite the current competitive environment, we still believe there is a strong long term market to support future growth of the Company through geographic expansion, strategic acquisitions, and new service lines to complement our core capabilities. We will continue to explore acquisition opportunities to further grow the business and we remain committed to increasing shareholder value.”
Dredging Today Staff, March 1, 2012