Posted on February 22, 2018
Great Lakes Dredge & Dock Corporation (NASDAQ: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 and year ended December 31, 2017.
For the three months ended December 31, 2017, Great Lakes reported revenue of $191.7 million, net loss from continuing operations of $8.8 million and negative Adjusted EBITDA from continuing operations of $8.4 million. Excluding the charges relating to our previously announced restructuring, for the three months ended December 31, 2017, Great Lakes reported net income from continuing operations of $8.0 million and Adjusted EBITDA from continuing operations of $12.2 million. These results compare to revenue of $213.4 million, net loss from continuing operations of $7.0 million and Adjusted EBITDA from continuing operations of $11.6 million for the same quarter in 2016.
For the year ended December 31, 2017, Great Lakes reported revenue of $702.5 million, net loss from continuing operations of $18.6 million and Adjusted EBITDA from continuing operations of $34.7 million. Excluding the charges relating to our previously announced restructuring, for the year ended December 31, 2017, Great Lakes reported net loss from continuing operations of $0.5 million and Adjusted EBITDA from continuing operations of $57.3 million. These results compare to revenue of $767.6 million, net loss from continuing operations of $8.2 million and Adjusted EBITDA from continuing operations of $72.0 million in the prior year.
Company Update
Chief Executive Officer Lasse Petterson commented, “For the year ended December 31, 2017, we recognized a $29.5 million charge related to the previously announced restructuring. This charge was comprised of $23.0 million in cost of contract revenues, $1.8 million in general and administrative expenses and a $4.7 million loss on sale of assets. We expect to recognize an additional $13 – $18 million of restructuring charges during 2018. We are also pleased to confirm that our cost savings initiatives are on track, and we continue to expect to recognize approximately $20 million of cost savings in 2018 with the full run rate of $40 million in cost savings starting in 2019.
During the fourth quarter of 2017, we also successfully commenced operations of the Ellis Island which is currently working and earning revenue on the Mississippi Coastal Improvement Program project in the Gulf of Mexico. As stated in previous communications, we expect there to be a three month run in period for the Ellis Island to achieve her design production capacity. We continue to expect the Ellis Island to provide an incremental $20-$30 million of EBITDA on an annual basis.”
Chief Financial Officer Mark Marinko commented, “The fourth quarter of 2017 remained consistent with the results we experienced in the first nine months of 2017. Additionally, the fourth quarter of 2017 was negatively impacted by additional costs on our smaller domestic inland projects as well as overall domestic weather delays. The fourth quarter of 2017 included final payments for the Ellis Island, yet net debt remained flat with the third quarter of 2017. With our increasing backlog over the last six months, the Ellis Island in operation and the restructuring plan in place, we expect our results to improve in 2018.”
Consolidated Company – Fourth Quarter 2017
– Net income excluding restructuring was $8.0 million for the fourth quarter of 2017 as compared to a net loss of $7.0 million for the same period in 2016. The current period includes net interest expense of $7.6 million and an income tax benefit excluding restructuring of $18.8 million. $15.7 million of this benefit was a result of the Tax Cuts and Jobs Act of 2017. Net loss for the fourth quarter of 2016 included $6.5 million in net interest expense and a $5.2 million income tax benefit.
– Adjusted EBITDA excluding the impact of restructuring was $12.2 million for the fourth quarter of 2017 as compared to $11.6 million for the same period in 2016. The variance is primarily related to a decrease in expenses related to the equity in joint ventures quarter over quarter.
Consolidated Company – Full Year 2017
– Net loss excluding restructuring was $0.5 million for the year ended December 31, 2017 as compared to a net loss of $8.2 million for the same period in 2016. The current period includes net interest expense of $26.0 million and an income tax benefit excluding restructuring of $24.2 million, $15.7 million of which is driven by the recent tax law change. Net loss for the year ended December 31, 2016 included $22.9 million in net interest expense and a $5.8 million income tax benefit.
– Adjusted EBITDA excluding restructuring was $57.3 million for the year ended December 31, 2017 as compared to $72.0 million for the same period in 2016. The decrease is a result of the $8.7 million decrease in operating profit excluding restructuring year over year, offset by a decrease in other expense and loss in equity joint venture when comparing 2017 to 2016.
– Cash at December 31, 2017 was $15.9 million, with total debt of $430.9 million ($2.8 million short-term debt and $428.1 million long-term debt).
– Total Company backlog at year end was $546.7 million, including $238 million related to the Charleston I and II projects which were awarded during 2017.
– Total capital expenditures for 2017 were $66.1 million, of which $43.3 million was spent for the completion of the Ellis Island. In the prior year, total capital expenditures were $85.2 million, including $53.9 million for the Ellis Island.
Segment Update
For the three months ended December 31, 2017, the dredging segment reported revenue of $152.7 million, negative gross profit of $9.7 million and operating loss of $26.7 million. Excluding the charges relating to our previously announced restructuring, for the three months ended December 31, 2017, the dredging segment reported gross profit of $13.0 million and operating income of $0.6 million. These results compare to revenue of $184.3 million, gross profit of $21.4 million and operating income of $7.3 million for the same quarter in 2016.
For the year ended December 31, 2017, the dredging segment reported revenue of $592.2 million, gross profit of $42.7 million and operating loss of $13.4 million. Excluding the charges relating to our previously announced restructuring, for the year ended December 31, 2017, the dredging segment reported gross profit of $65.7 million and operating income of $15.5 million. These results compare to revenue of $637.5 million, gross profit of $85.3 million and operating income of $34.1 million in the prior year.
Dredging Segment – Fourth Quarter 2017
– Revenue in the fourth quarter of 2017 decreased over the prior year period primarily due to lower foreign capital, coastal protection, domestic capital and river and lakes revenues, slightly offset by higher maintenance revenues.
– Gross profit excluding restructuring decreased by $8.4 million in the fourth quarter of 2017 as compared to the same period in 2016 as a result of weather delays, idle plant, additional costs on our smaller domestic inland and foreign projects.
– Operating income excluding restructuring decreased by $6.8 million in the fourth quarter of 2017 compared to the prior year quarter primarily due to lower gross profit offset by lower loss on sale of assets. General and administrative expenses excluding restructuring increased slightly quarter over quarter.
– Dredging backlog was $511.3 million at the end of the year, an increase of $43.6 million compared to backlog at December 31, 2016. This includes $238 million related to the Charleston I and II projects awarded during 2017.
Dredging Segment – Full Year 2017
– Revenue decreased $45.3 million in the twelve months ended December 31, 2017 compared to the prior year, primarily driven by lower domestic capital, coastal protection, foreign capital and rivers and lakes revenues. Maintenance revenues were $42.6 million higher than the prior year, which slightly offset the decreased revenues in the segment. The international division continued to see the impact of a slow international market with an annual decrease of $17.1 million year over year.
– Gross profit excluding restructuring decreased by $19.6 million in 2017 as compared to 2016 on lower contract margin, specifically on our smaller domestic inland projects, and decreased absorption of fixed costs due to lower utilization of the fleet.
– Operating income excluding restructuring decreased by $18.6 million in 2017 compared to 2016, driven by lower gross profit as well as increased general and administrative expenses excluding restructuring.
For the three months ended December 31, 2017, the environmental & infrastructure (“E&I”) segment reported revenue of $39.0 million, gross profit of $0.9 million and operating loss of $3.6 million. Excluding the charges relating to our previously announced restructuring, for the three months ended December 31, 2017, the E&I segment reported gross profit of $0.9 million and operating loss of $3.3 million. These results compare to revenue of $30.2 million, gross profit of $0.7 million and operating loss of $9.3 million for the same quarter in 2016.
For the year ended December 31, 2017, the E&I segment reported revenue of $112.6 million, gross profit of $7.2 million and operating loss of $10.2 million. Excluding the charges relating to our previously announced restructuring, for the year ended December 31, 2017, the E&I segment reported gross profit of $7.2 million and operating loss of $9.6 million. These results compare to revenue of $133.6 million, gross profit of $1.0 million and operating loss of $19.4 million in the prior year.
Environmental & Infrastructure Segment – Fourth Quarter 2017
– Revenue increased in the fourth quarter of 2017 compared to the same quarter of 2016 on higher revenues in the core E&I business, offset slightly by the absence of the historical Terra business unit in the fourth quarter of 2017.
– Gross profit excluding restructuring in the fourth quarter of 2017 was flat in comparison to the same quarter in 2016, driven by the lack of project losses in the historical Terra business unit, offset slightly by lower contract margin in the core E&I business stemming from one project loss which negatively impacted gross profit by $2.5 million in the quarter. The segment also had a $1.6 million reduction in plant and overhead costs excluding restructuring when comparing the fourth quarter of 2017 to the same quarter in 2016.
– Operating loss excluding restructuring improved by $5.9 million in the fourth quarter of 2017 compared to the prior year quarter due to lower general and administrative expenses and loss on sale of assets, excluding restructuring. In the fourth quarter of 2016, E&I incurred $2.3 million in loss on sale of assets related to the divesture of the Terra business. This divesture also resulted in the majority of the improvement in general and administrative expenses.
– Backlog was $35.4 million at the end of the year, which is a decrease of $2.3 million compared to backlog at December 31, 2016.
Environmental & Infrastructure Segment – Full Year 2017
– Revenue decreased in the twelve months ended December 31, 2017 over the same period of the prior year, due to the absence of revenue related to the divested Terra business unit offset by higher year over year revenues in the core E&I business.
– Gross profit excluding restructuring improved by $6.1 million in 2017 over 2016 primarily as a result the absence of the Terra business unit losses that did not reoccur in 2017, partially offset by a $6.1 million loss associated with one project in the core E&I business. Excluding this one project loss, the core E&I business had a strong contract margin overall.
– Operating loss excluding restructuring improved by $9.9 million in 2017 compared to the prior year due to the improvement in gross profit margin and a reduction of $2.8 million related to the loss on sale of assets related to the Terra divestiture which occurred in 2016. This improvement was slightly offset by an increase in general and administrative expenses in 2017 due to an $8.6 million benefit related to the reversal of a potential earn-out and restricted stock units in the third quarter of 2016. Excluding the impact of this reversal in 2016, general and administrative expenses in the segment decreased year over year on the absence of costs associated with our divested Terra business unit.
Mr. Petterson concluded, “The domestic dredging bid market continues to strengthen and totaled $1.3 billion at year end. Our dredging segment won 52% of our addressable bid market, which is above our 42% average combined dredging bid market share over the prior three years. Our capital dredging awards totaled $414 million, including $260 million for the combined Charleston I and II projects. Maintenance dredging awards totaled $94 million; coastal protection awards totaled $155 million and rivers and lakes awards totaled $3 million. We expect to continue to see a strong bid market in 2018 with several large port deepening and coastal protection projects bidding. We expect the current momentum in the market to continue into 2019 and onward.
The recent budget activity in Washington D.C. provides further optimism about the domestic market in the coming years. President Trump’s infrastructure plan looks to expedite the permitting process and eases the use of state and local funds in projects such as port deepenings and beach restoration. Additionally, the United States Senate Committee on Appropriations recently announced the supplemental appropriations for disaster relief and recovery which includes $17.4 billion for the United States Army Corps of Engineers to fund projects that will reduce the risk of future damage from flood and storm events. Although it is uncertain the impact that this will have on the dredging market, we believe it is a positive indicator for work in the coastal protection and restoration markets.
In the international market, we have secured projects to keep our fleet utilized throughout 2018. We remain optimistic about an uptick in the international market starting in 2019.
Profitability improved in the E&I segment in 2017 as compared to 2016, but not to the levels to which we expected. With a backlog of $35.4 million and additional new work of $19.3 million awarded since year end, we expect further improvement in the E&I segment in 2018. We continue to focus on projects where we have expertise and where we have had positive outcomes with the client in the past.”
Source: GlobeNewswire
