Orion Marine Group Announces First Quarter 2012 Results (USA)
Orion Marine Group, Inc., a leading heavy civil marine contractor, today reported a net loss for the three months ended March 31, 2012, of $6.3 million ($0.23 diluted loss per share). These results compare to net income of $1.5 million ($0.06 diluted earnings per share) for the same period a year ago.
“Despite the challenges of the first quarter, we continue to see positive results from our adjusted bidding philosophy in the form of an improved win rate and continued sequential increases in backlog,” said Mike Pearson, Orion Marine Group’s President and Chief Executive Officer. “As expected, we continue to face challenges as we work towards returning to profitability. As we previously said, pricing pressure and gaps between dredging projects have continued into 2012, resulting in lower margins and underutilized equipment. However, we are winning work, building a nice backlog, and see positive signs for the future.”
Financial highlights of the Company’s first quarter 2012 include:
First Quarter 2012
– First quarter 2012 contract revenues were $50.9 million, a decrease of 35.6%, as compared with first quarter of 2011 revenues of $79.1 million.
Revenue for the quarter was down significantly year-over-year as a result of gaps in between projects and underutilized equipment.
– The Company self-performed approximately 85% of its work as measured by cost during the first quarter 2012 as compared with 87% in the prior year period.
– Gross profit for the quarter was negative $2.8 million, which represents a decrease of $13.1 million as compared with the first quarter of 2011.
Gross profit margin for the quarter was negative 5.5%, which was lower than the prior year period of positive 13.1%. During the first quarter of 2012, gross profit was impacted by gaps in between projects as well as underutilized dredging assets, primarily driven by a lack of Army Corps of Engineers job lettings.
– Selling, General, and Administrative expenses for the first quarter 2012 were $7.1 million as compared to $7.9 million in the prior year period.
– The Company’s first quarter 2012 EBITDA was a negative $4.4 million, representing a negative 8.6% EBITDA margin, which compares to first quarter 2011 EBITDA of $8.1 million, or a 10.2% EBITDA margin.
Backlog of work under contract as of March 31, 2012 was $215.4 million, which compares with backlog under contract at March 31, 2011 of $140.5 million. Ending first quarter backlog represents a sequential increase of $51 million as compared to the fourth quarter 2011 and a book-to-bill ratio of 2.0 times. Since the end of the quarter the Company has been successful in continuing to obtain new work.
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.
“We continue to see improving market conditions,” said Mr. Pearson. “We believe that pricing has stabilized, albeit at levels lower than historical norms, and that irrational bidding seen in prior periods has begun to subside. We believe we have found the appropriate price points in our markets and we are pleased with our progress of building backlog, controlling costs, and positioning ourselves for improved pricing conditions. It is also encouraging to see the return of private sector opportunities.
As we have said before, we do not expect the commencement of recently awarded large jobs to materially contribute to our results until the second half of 2012. Therefore, as we mentioned in our March update, we expect to see significantly pressured margins during at least the first half of the 2012, as a result of the timing of the start of our recent awards as well as underutilized dredging assets. More specifically, we expect tough results to continue into the second quarter, which will be exacerbated by a lack of projects involving dredging services, leading to idle dredge equipment. Therefore, it is not unreasonable to expect to see the bottom line second quarter results to be pressured as compared to the first quarter. However, we expect our results will begin to improve later in the year as recently awarded projects get underway, and the Corps returns to more normal job letting levels. In fact, we are now beginning to see project lettings from the Corps and we are cautiously optimistic that the Corps will begin liquidating their budget at a more normalized pace.”
“The need for our services has not gone away,” said Mark Stauffer, Orion Marine Group’s Executive Vice President and Chief Financial Officer. “In fact, we continue to see an increase in the demand for our services over the long-term. Currently, we have over $190 million worth of bids outstanding, including $26 million on which we are apparent low bidder. Likewise, we continue to experience a high level of bid activity. During the first quarter we bid on approximately $420 million worth of opportunities and were successful on approximately $100 million. The 24% win rate achieved in the first quarter, as well as a book-to-bill ratio of 2.0 times shows that we continue to see the positive results of our adjusted bidding philosophy. We are executing on our plan to rebuild backlog, control costs, and position ourselves to capitalize on a return to normal market conditions.
As we begin 2012, we continue to effectively manage our balance sheet and the Company’s cash position. Looking ahead, we must be patient while focusing on project execution and returning to and maintaining profitability. Despite the current competitive environment, we still believe the market for which we provide services can support future growth of the Company through geographic expansion, strategic acquisitions, and new service lines to complement our core capabilities. We remain committed to increasing shareholder value.”
Dredging Today Staff, May 3, 2012; Image: Orion Marine Group