Orion Marine Group Inc, a heavy civil marine contractor, today reported net income for the three months ended December 31, 2013, of $2.1 million ($0.08 diluted earnings per share).
These results compare to net income of $1.5 million ($0.05 diluted earnings per share) for the same period a year ago. For the full year 2013, Orion Marine Group reported net income of $0.3 million ($0.01 diluted earnings per share), which compares to the prior full year 2012 net loss of $11.9 million ($0.44 diluted loss per share).
“We are pleased with our results for the fourth quarter and full year 2013, which are due to the hard work and dedication of the entire Orion Marine Group team,” said Mike Pearson, Orion Marine Group’s Chief Executive Officer. “Accelerated execution on certain projects in the fourth quarter resulted in a record quarterly revenue. Our backlog, identified bid opportunities, continued strength in the private sector and a clarified outlook on federal funding for the next two fiscal years gives us optimism for 2014 and beyond.”
Financial highlights of the Company’s fourth quarter and full year 2013 include:
Fourth Quarter 2013
– Fourth quarter 2013 contract revenue was $106.4 million, an increase of 7.9%, as compared with fourth quarter 2012 revenue of $98.6 million.
– The Company self-performed approximately 84% of its work as measured by cost during the fourth quarter 2013, as compared with 83% in the prior year period.
– Gross profit for the quarter was $12.8 million, an increase of approximately $0.3 million as compared with the fourth quarter of 2012. Gross profit margin for the fourth quarter of 2013 was 12.0%, which was slightly lower than the prior year period of 12.7%.
– Selling, General, and Administrative expense for the fourth quarter 2013 was $8.9 million as compared to $6.8 million in the prior year period. The increase in Selling, General and Administrative expense is primarily due to bonuses payable to non-executives, an increase in group medical costs, and an increase in bad debt related to a single job for a small private customer. The fourth quarter of 2012 also had a benefit from a reduction of professional fees related to a favorable outcome of litigation.
– The Company’s fourth quarter 2013 EBITDA was $8.9 million, representing a 8.3% EBITDA margin, which compares to fourth quarter 2012 EBITDA of $9.4 million, or a 9.5% EBITDA margin.
Full Year 2013
– Full year 2013 contract revenue was $354.5 million, the highest in the Company’s history, and an increase of 21.4% as compared with full year 2012 revenues of $292.0 million.
– Gross profit for the year was $32.0 million, which represents an increase of $17.6 million as compared with the full year 2012. Gross profit margin for the full year 2013 was 9.0%, which is up from 4.9% for the full year 2012. The year over year increase in gross profit margin was primarily attributable to solid project execution, as well as sustained increases in some of the Company’s equipment utilization throughout 2013.
– The Company self-performed approximately 84% of its work as measured by cost during 2013 as compared with 83% during the prior year period.
– Selling, General, and Administrative expense for the full year 2013 was $32.1 million as compared with $28.6 million in the prior year period. The increase in Selling, General and Administrative expense is primarily due to increased staffing and overhead costs resulting from the expansion into Alaska in 2012, bonuses payable to non-executives, and an increase in bad debt related to a single job for a small private customer. The fourth quarter of 2012 also had a benefit from a reduction of professional fees related to a favorable outcome on litigation. As a percentage of revenues, Selling General & Administrative expense declined as compared with the prior year, from 9.8% in 2012 to 9.1% in 2013.
– The Company’s full year 2013 EBITDA was $21.4 million, representing a 6.0% EBITDA margin, which compares to full year 2012 EBITDA of $5.8 million, or a 1.9% EBITDA margin.
“We continue to be pleased with our bid market opportunities,” said Mr. Pearson. “Demand from private sector clients has been an excellent source of bid opportunities and we expect this trend to continue. We are hopeful the federal budget deal approved in January will lead to normalized bid lettings from the Army Corps of Engineers, although we don’t expect to see any potential benefit until the second half of the year. We are also hopeful that other industry catalysts, such as the WRDA/WRRDA legislation currently in conference and the RESTORE Act funds, will show meaningful developments in 2014 and eventually lead to material bid opportunities in the next 12 to 24 months.”
“Our bid activity and success rate in the fourth quarter is also an encouraging sign as we begin the new year,” said Mark Stauffer, Orion Marine Group’s President. “During the fourth quarter we bid on approximately $498 million worth of opportunities and were successful on approximately $137 million. This represents a 28% win rate or a book-to-bill ratio of 1.29 times for the quarter. Currently, we have over $271 million worth of bids outstanding, including approximately $107 million on which we are apparent low bidder. We continue to observe pockets of pricing improvement, but as we have mentioned in the past, this trend has not yet become widespread.
“We are still confident that we can achieve positive results in 2014, as sustained improvement in fleet utilization will lead to some gross margin improvement. However, as mentioned previously, the stronger than expected fourth quarter was partly a result of the acceleration of project schedules, which will result in less production in the first quarter. As a reminder, many of the large projects we recently announced will not begin until the second quarter of 2014. Additionally, we must closely monitor how the recent budget agreement impacts the choppiness of Corps lettings. However, we still expect a healthy amount of bid opportunities from the private sector, state agencies, and local port authorities. Overall, we are comfortable with the level of potential bid activity from all of our end markets and are excited to build upon the accomplishments of 2013.”
Purchase of Dredge Material Placement Area (DMPA)
Earlier this week, the Company finalized the purchase of a piece of property in the upper Houston Ship Channel to be used as a dredge material placement area. The approximately 340 acre parcel of land was purchased for approximately $22 million in cash, funded through the Company’s existing credit facility.
The purchase of the DMPA will allow the Company to service private customers along the Houston Ship Channel, deploy some of the Company’s dredging assets more efficiently, and generate additional revenue from disposal fees.
This purchase provides the Company with one of the only operating private dredge material placement areas along the upper end of the Houston Ship Channel and should provide enough capacity to meet the needs of the Company’s customers in this area for at least the next decade.
Press Release, February 27, 2014