Great Lakes Dredge & Dock Corporation, the largest provider of dredging services in the United States and a major provider of environmental and remediation services, today reported financial results for the quarter ended June 30, 2014.
For the three months ended June 30, 2014, Great Lakes reported Revenue of $184.7 million, Income from continuing operations of $3.9 million and Adjusted EBITDA from continuing operations of $19.8 million.
“Dredging had a solid quarter with $157.1 million in revenue, driven by increased activity in all of our domestic markets, and improved gross profit margin to 14.4%. During the second quarter, we benefited from improved weather and higher productivity as well as greater fixed cost coverage. Although foreign revenue was down from the second quarter in 2013, we worked on projects in Saudi Arabia, Brazil and Australia during the quarter and are pleased to have been recently awarded a $35.5 million land reclamation job in Bahrain that will utilize four of our vessels through the rest of the year,” stated Jonathan Berger, Chief Executive Officer.
Mark Marinko, Chief Financial Officer, added: “The environmental & remediation segment continues to successfully execute on several large projects across the United States and has backlog booked to meet our 2014 expectations. Having sold our demolition business, we are looking forward to focusing on strategically and methodically growing this segment and pursuing opportunities that leverage our combined platform of expertise.”
Second Quarter 2014 Highlights
• Revenue increased 25.5% to $184.7 million in the second quarter of 2014 compared to $147.1 million in the second quarter of 2013;
• Gross profit margin increased to 14.2% from 9.4% in same period in the prior year, primarily driven by improved contract margin, which is attributed to improved project execution on several contracts, partially offset by an increase in plant expenses;
• Operating income decreased 11.7% to $10.3 million from $11.6 million in the same period in 2013. The second quarter of 2014 experienced improved gross profit, however the 2013 second quarter benefited from proceeds of $13.3 million from the settlement of the dredge New York loss of use claim;
• Income from continuing operations was $3.9 million, $0.1 million higher than the same period in the prior year and includes a $2.2 million noncash bargain purchase gain related to a small acquisition in the environmental & remediation segment. Net loss (which includes both continuing and discontinued businesses) was $1.4 million and was driven by a $5.3 million loss on discontinued operations. In the prior year period, Net loss was $25.2 million, which included a noncash charge for goodwill impairment related to the historical demolition business;
• Adjusted EBITDA from continuing operations was $19.8 million, a 9.9% decrease from $22.0 million in the same period in the prior year, with the prior year quarter positively impacted from the $13.3 million settlement proceeds discussed previously.
• Dredging revenues were $157.1 million for the quarter, a 15.1% increase over the prior year revenue of $136.5 million on higher maintenance and rivers & lakes revenue partially offset by lower foreign revenue;
• Gross profit margin was 14.4% versus 9.1% in the same quarter last year. Gross profit margin increased primarily due to strong contract margin on several jobs, somewhat offset by higher fixed costs;
• Operating income decreased to $11.0 million for the quarter from $14.6 million in the same period in the prior year. As noted above, the second quarter of 2014 had improved gross profit margin, however the prior year period benefited from the $13.3 million loss of use claim noted above.
Environmental & Remediation
• Revenue increased 168.7% to $29.3 million from $10.9 million in the same period of the prior year driven by the inclusion of several large-scale projects, including a larger phase of work for Enbridge and more revenue generated at a brownfield redevelopment project in New Jersey;
• Gross profit margin of 12.4% for the second quarter slightly increased from 12.0% in the prior year with overall gross profit margin higher on the increase in revenue;
• Operating loss was $0.7 million, a significant improvement over the prior year period loss of $2.9 million. Higher gross margin was offset by an increase in G&A, which is attributed to additional headcount to manage the segment’s substantial growth.
Six Months Ended June 30, 2014 Highlights
• Revenue increased 9.7% to $359.1 million for the six months ended June 30, 2014, compared to $327.3 million in six months ended June 30, 2013;
• Gross profit margin decreased slightly to 13.1%, for the six months ended June 30, 2014, compared to 13.6% for the six months ended June 30, 2013 due to higher plant expenses partially offset by higher contract margins;
• Operating income was $13.2 million, down from $26.1 million in the prior year. The $13.3 million loss of use claim in the prior year primarily accounts for the decrease in 2014;
• Income from continuing operations was $1.4 million compared to $8.5 million in the prior year, with the primary driver being the $13.3 million settlement proceeds in 2013 previously discussed, offset by a current year $2.2 noncash bargain purchase gain. Net loss (which includes both continuing and discontinued businesses) was $6.6 million compared to a loss of $24.8 million in the same period in the prior year. Net loss resulted from a loss from discontinued operations of $8.1 million compared to a loss from discontinued operations of $33.3 million in the prior year;
• Adjusted EBITDA from continuing operations was $31.8 million, a decrease of 32.9% from $47.4 million over the same period in the prior year with the prior year positively impacted from the $13.3 million settlement proceeds discussed previously.
• Revenue increased 2.8% to $319.1 million for the six months ended June 30, 2014 driven by an increase in domestic maintenance, coastal protection revenue and rivers & lakes revenue, which was partially offset by lower revenue in the Middle East and fewer capital jobs domestically;
• Gross profit margin for the six months ended June 30, 2014 decreased slightly to 13.6% from 14.1% for the six months ended June 30, 2013;
• Operating income was $18.4 million through June 30, 2014 versus $33.6 million in the prior year same period. The results for the same period last year include the $13.3 million in settlement proceeds related to the loss of use claim;
• The Company won 39.4%, or $227.1 million, of the domestic dredging bid market through the first six months of 2014.
Environmental & Remediation
• Revenue increased 145.8% to $42.0 million for the six months ended June 30, 2014, compared to the six months ended June 30, 2013, driven by an increase in the number of larger-sized projects;
• Gross profit margin increased to 8.7% from 4.5% due to higher contract margins;
• Operating loss was $5.3 million, down from the operating loss of $7.4 million in the same period during the prior year. Higher gross profit was offset by increased G&A expenses discussed previously.
Mr. Berger concluded: “With dredging backlog of $456.4 million at June 30, 2014, we expect strong fleet utilization in the second half of the year. As expected, the domestic dredging bid market was light in the first six months. We won $227.1 million, or approximately 39%, of the market with domestic capital and rivers & lakes work being a significant portion. Excluded from backlog are amounts in which we were low bid pending formal award on an additional $38.0 million in work and the Middle East project awarded subsequent to the quarter. In addition to coastal protection projects on the East Coast, we will be utilizing our fleet on the PortMiami deepening, the Delaware River deepening, a large lake project in Illinois, and several maintenance projects in the Gulf region. Looking forward into the second half of the year, we remain optimistic that we will see an increase in bidding activity, which will enable us to keep backlog high.
“Longer term, we consider President Obama’s signing of the Water Resources Reform and Development Act a positive catalyst for the domestic dredging industry as it authorizes over thirty major projects, reforms and expedites the U.S. Corps’ process for tendering bids and calls for full use of Harbor Maintenance Trust Fund for maintenance of ports and waterways within ten years.
“Internationally, four vessels will be utilized for the $35.5 million land reclamation job in the Middle East mentioned earlier, and we expect the Wheatstone project in Australia to continue into early 2015. As we finalize our long-term international strategy, we continue to pursue opportunities in Brazil and elsewhere throughout the world to utilize our fleet.
“Finally, at $52.1 million, the Company’s environmental & remediation segment continues to have a robust backlog that will be worked off through the rest of the year. We continue to see opportunities to grow this segment and are confident that we will further establish our position in this market.”
Press Release, August 5, 2014