GLDD Posts Third Quarter Results
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 September 30, 2014.
Chief Executive Officer Jonathan Berger stated: “Recently, we were low bidder on a record volume of bids, commenced construction on the new ATB hopper dredge, and completed the acquisition of Magnus Pacific Corporation. The acquisition positions us well to achieve our goal of being a leading full service, environmental and geotechnical contractor on both land and water.”
Commenting on the quarter, Mr. Berger continued: “For the three months ended September 30, 2014, Great Lakes reported revenue of $202.2 million, loss from continuing operations of $1.0 million and adjusted EBITDA from continuing operations of $13.4 million. For the third quarter, dredging recorded revenues of $167.1 million, a 7.5% increase over the same period in 2013, and gross profit margin declined to 10.7%. The environmental & remediation segment had revenues of $37.2 million, a 2.9% increase over the same period in 2013, and gross profit margin increased to 17.7%.
“Our dredging division’s third quarter results were impacted by several factors, the most significant of which was lower utilization in the coastal protection market due to Superstorm Sandy work largely having been deferred until recent October tenders. We expect to benefit in the coming months, as our backlog has grown substantially with this and other work. We took advantage of the deferral of Superstorm Sandy work in the coastal protection market by pulling forward a regulatory dry dock for a second hopper dredge in the third quarter. During the quarter, we had major dry docks for two hopper dredges, which generated significant costs while taking two major assets off-line during the period. While in dry dock, we added a bulbous bow to the dredge, Liberty Island, which will improve the vessel’s fuel efficiency and carrying capacity on projects in the busier market that we are now experiencing.
“In the Middle East, work did not begin on the $32.5 million Hidd Phase 1 & 2 land reclamation job until mid-August, and the cutter dredge, Carolina, completed its project in Saudi Arabia in July and entered a dry dock period, not working the remainder of the quarter.
“Third quarter results were also impacted by a $5.5 million charge related to cost overruns on a project in one of our joint ventures. The cost overruns resulted mainly from start-up delays that are preventing the job from being completed in one season, as originally estimated, forcing the joint venture to demobilize and remobilize the equipment.
“Our environmental & remediation segment continued to execute well on several large jobs during the third quarter, contributing to improved gross profit margin. Our strategy has included growing this segment, and we are very pleased with the strong organic growth that we have realized. The fourth quarter acquisition of Magnus Pacific will contribute to continued growth of this segment.”
Mark Marinko, Chief Financial Officer, added: “In September, we amended our existing credit facility in order to provide greater flexibility as we operate our business. The amendment increased the total facility to $210.0 million, secured and collateralized the facility with liens on certain vessels and our domestic accounts receivable (subject to permitted liens and prior interests of other parties), decreased the required ratio of aggregate orderly liquidation value of pledged collateral from 1.5 times to 1.27 times the aggregate revolving commitment, and enabled the full use of the facility for the issuance of letters of credit. This last modification provides us more flexibility in pursuing international jobs.”
Third Quarter 2014 Highlights
– Revenue increased 7.6% to $202.2 million in the third quarter of 2014 compared to $187.9 million in the third quarter of 2013.
– Gross profit margin decreased to 12.1% from 14.8% in same period in the prior year. Gross profit margin was impacted by an increase in unearned plant expense and operating overhead, the latter of which is primarily attributed to increased labor costs, and was partially offset by improved contract margins in the environmental & remediation segment.
– Operating income decreased 42.5% to $8.0 million from $13.9 million in the same period in 2013. Lower general and administrative costs related to payroll and benefits partially offset the decline in gross profit margin in the third quarter of 2014. The prior year period also included a $3.2 million gain from the sale of an underutilized dredge in the Middle East, the Manhattan Island.
– Loss from continuing operations was $1.0 million, driven by a $5.8 million equity in loss of joint ventures. Net loss (which includes both continuing and discontinued businesses) was $2.1 million and includes a $1.1 million income tax benefit and loss on discontinued operations of $1.1 million. In the prior year period, net income was $1.4 million, which included an income tax provision of $3.1 million and loss on discontinued operations of $5.3 million.
– Adjusted EBITDA from continuing operations was $13.4 million, a 49.3% decrease from $26.5 million in the same period in the prior year.
– Dredging revenues were $167.1. million for the quarter, a 7.5% increase over the prior year revenues on higher domestic capital, maintenance and foreign capital revenues, partially offset by lower coastal protection and rivers & lakes revenues.
– Gross profit margin was 10.7% versus 14.5% in the same quarter last year. Gross profit margin decreased primarily due to higher unearned plant costs driven by two hopper dredges being taken off-line for dry docks and underutilized dredges in the Middle East. Higher overhead costs, including higher labor and purchased services costs, also contributed to the decrease in gross profit margin.
– Operating income decreased to $5.7 million for the quarter from $13.1 million in the same period in the prior year. The third quarter of 2014 had lower gross profit margin, and the third quarter of the prior year period had benefitted from a $3.2 million gain on sale of the Manhattan Island.
Environmental & Remediation
– Revenue increased 2.9% to $37.2 million in the third period of 2014 from $36.1 million in the prior year period.
– Gross profit margin improved to 17.7% in the third quarter, an increase from 14.6% in the prior year, with improved contract margin partially offset by higher unearned plant expense – related to maintenance costs on the assets acquired during the acquisition of the Trucking & Field Services division of Team Services, LLC, which occurred in the second quarter of 2014, and equipment rentals on delayed jobs – and overhead costs mainly attributed to higher labor costs.
– Operating profit was $2.3 million, a $1.5 million improvement compared to the third quarter 2013. Higher gross profit margin was partially offset by an increase in general & administrative costs, which is attributed to additional headcount to manage the segment’s growth.
Nine Months Ended September 30, 2014 Highlights
– Revenue increased 9.0% to $561.3 million for the nine months ended September 30, 2014, compared to $515.1 million in nine months ended September 30, 2013.
– Gross profit margin decreased to 12.8% for the nine months ended September 30, 2014, compared to 14.0% for the nine months ended September 30, 2013 due to higher plant expenses and operating overhead, partially offset by higher contract margins in both segments.
– Operating income was $21.2 million, down from $40.1 million in the prior year. The lower gross profit margin and higher general & administrative expenses in the current year, as well as the $13.3 million in proceeds from loss of use claim in the prior year, were the main drivers for the difference between 2014 and 2013 results.
– Income from continuing operations was $0.4 million compared to income from continuing operations of $15.1 million in the prior year, with the main drivers of the difference being a $9.1 million charge in equity in loss of joint ventures in 2014 and $13.3 million settlement proceeds in 2013, along with a prior year $3.1 million gain on sale of assets.
– Net loss (which includes both continuing and discontinued businesses) was $8.7 million in 2014, compared to a loss of $23.4 million in the same period in the prior year. Net loss in 2013 included a net loss from discontinued operations of $38.6 million, compared to a net loss from discontinued operations of $9.1 million in the current year.
– Adjusted EBITDA from continuing operations was $45.2 million, a decrease of 38.8% from $73.9 million over the same period in the prior year.
– Revenue increased 4.3% to $486.2 million for the nine months ended September 30, 2014, driven by an increase in domestic capital, maintenance and rivers & lakes revenues, which was partially offset by lower revenue in the Middle East and lower coastal protection revenue in the United States.
– Gross profit margin for the nine months ended September 30, 2014 decreased to 12.6% from 14.2% for the nine months ended September 30, 2013, driven by higher unearned plant costs due to two hopper dredges being taken off-line for dry docks and underutilized dredges in the Middle East. Higher overhead costs, including higher labor and purchased services costs, also contributed to the decrease in gross profit margin, while higher contract margin partially offset these cost increases.
– Operating income was $24.2 million through September 30, 2014 versus $46.7 million in the prior year same period. In addition to lower gross profit margin in 2014, general & administrative expenses increased. 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 30%, or $336.0 million, of the domestic dredging bid market through the first nine months of 2014.
Environmental & Remediation
– Revenue increased 48.9% to $79.2 million for the nine months ended September 30, 2014, compared to the nine months ended September 30, 2013, driven by a greater number of environmental remediation projects, including the large remediation projects in Michigan and New Jersey.
– Gross profit margin increased to 13.0% from 11.4% due to higher contract margin, partially offset by higher plant expenses driven by equipment rental costs associated with delayed projects and increased costs to maintain the equipment acquired during the acquisition of the Trucking & Field Services division of Team Services, LLC, which occurred in the second quarter of 2014.
– Operating loss was $3.0 million, improved from the operating loss of $6.6 million in the same period during the prior year. Higher gross profit margin was offset by increased general & administrative expenses discussed previously.