Posted on May 3, 2017
Great Lakes Dredge & Dock Corporation (GLDD), the largest provider of dredging services in the United States and a major provider of environmental and infrastructure services, today reported financial results for the quarter ended March 31, 2017.
For the three months ended March 31, 2017, Great Lakes reported revenue of $170.6 million, net loss from continuing operations of $3.7 million and Adjusted EBITDA from continuing operations of $14.2 million.
Chief Financial Officer Mark Marinko commented, “The Company’s first quarter 2017 results were in line with our expectations. The Dredging segment’s performance was solid despite some softness in the international market and delays on some domestic projects. Keep in mind that the first quarter in 2016 was quite strong for the Dredging segment, driven by robust performances on several coastal protection and capital projects. We continued to see the benefits of our realigned and refocused Environmental & infrastructure (E&I) segment, with a marked improvement in results compared to the first quarter of 2016, though still at a loss due to the seasonality of the business.”
Chief Executive Officer Lasse Petterson, added, “I am pleased to have recently taken over as Chief Executive Officer at Great Lakes. My appointment to the Board of Directors at the end of last year has allowed me to begin to build a foundation of knowledge on the Company’s business and has enabled me to hit the ground running as CEO. I look forward to the future opportunities at GLDD, particularly our expectation that our new ATB hopper dredge, the Ellis Island, will be operational in the third quarter of this year. I’d like to thank Mark for his willingness to step in as interim CEO while my U.S. citizenship was finalized. His steady leadership is much appreciated.”
Dredging
- Revenue in the first quarter 2017 increased over the prior year period primarily due to higher domestic capital and foreign capital revenue, partially offset by lower maintenance and coastal protection revenues.
- Gross profit decreased 38.0% during the first quarter compared to the same quarter 2016 primarily due to delays in domestic projects and higher plant costs associated with several dry docks.
- Operating income decreased 80.1% in the first quarter 2017 compared to the prior year quarter, primarily due to lower gross profit margin.
- Dredging backlog was $456.6 million at the end of the first quarter, which is a decrease of $11.1 million compared to backlog at December 31, 2016.
Environmental & Infrastructure
- Revenue was flat in the first quarter 2017 compared to the first quarter of 2016. The loss of revenue associated with the divested Terra services assets was offset by larger projects that were executed throughout the United States, including on the West Coast and in Florida and New Jersey.
- The 150.9% improvement in gross profit in the first quarter 2017 is a result of significantly stronger contract margin, lower overhead, primarily related to improved absorption of our downsized equipment spread, and to lower labor and benefits costs. In addition, the current quarter in 2017 benefitted from the absence of non-recurring job losses that occurred in the first quarter of 2016.
- Operating loss improved 74.4% in the first quarter of 2017 due to improved gross profit margin and lower G&A, primarily related to reduced personnel costs stemming from the divested Terra services assets and other cost reduction initiatives.
- Backlog was $59.7 million at the end of the first quarter, which is an increase of $22.1 million compared to backlog at December 31, 2016.
Total Company
- Net loss from continuing operations was $3.7 million compared to net loss from continuing operations of $4.0 million in the first quarter of 2016. The loss in the current period includes income tax benefit of $2.3 million and interest expense of $5.6 million. The loss in the first quarter of 2016 includes income tax benefit of $2.7 million and interest expense of $5.7 million.
- The Company recorded a $13.1 million net loss from discontinued operations during the first quarter of 2017. The loss is related to a historical demolition project for which a surety bond remained in place and a letter of credit was issued as security for the bond. The surety has informed us that they intend to draw on the letter of credit. Currently, we do not expect any significant additional losses related to this project.
- Adjusted EBITDA from continuing operations was $14.2 million, a $1.2 million increase from $13.0 million in the first quarter of 2016.
- Total capital expenditures for the quarter were $19.6 million. Capital expenditures include $13.4 million for construction of new ATB hopper dredge, the Ellis Island, and the majority of the remainder for improvements to the dredging fleet. Capital expenditures during the first quarter of 2016 were $17.5 million and included $12.0 million to support growth, including $8.4 million for the ATB, with the majority of the remainder for improvements to the dredging fleet.
- Cash at March 31, 2017 was $6.9 million, with total debt of $404.1 million ($2.4 million short-term debt and $401.7 million long-term debt).
- Total company backlog at March 31, 2017 was $516.3 million.
Commentary
Mr. Marinko concluded, “The domestic dredging bid market totaled $178 million during the first quarter of 2017. Our dredging segment won 63% of our addressable bid market, which is above the average combined dredging bid market share over the prior three years. The $88 million MSCIP Barrier Island capital restoration project in Mississippi is a significant portion of our awards during the first quarter.
“Subsequent to quarter-end, we were awarded the $17 million Corps of Engineers West Coast Regional Contract that has approximately $3 million in additional options. In addition, we were low bid on a $10 million project in the Gulf of Mexico. We expect this contract to be awarded soon.
“Internationally, we continued to work on two projects in the Middle East during the first quarter. Work on these projects is expected to end later this year. We are tracking several opportunities in the Middle East, which is encouraging given the recent softness in the market.
“During the first quarter, our E&I segment was awarded $33 million in new work. The awarded work is at attractive margins within our risk criteria, which we believe positions the segment well for the year.
“In Washington, D.C., Congress (CACOX) recently agreed to a budget for fiscal year 2017. We expect it to be sent to President Trump for his signature later this week or next. Despite the delay, we are quite pleased that Congress has reached an agreement as it provides for a record budget for the Army Corps of $6 billion and exceeds the increase in Harbor Maintenance Trust Fund spending for maintenance dredging as required by the 2014 Water Resources and Development Act. We continue to monitor progress on President Trump’s infrastructure bill and remain optimistic that port and coastal infrastructure will be included in the eventual bill.”
Source: Seeking Alpha
