Great Lakes Dredge & Dock Corporation
Aug 4, 2016

Great Lakes Concludes Strategic Review With Greenhill & Co.; Reports Second Quarter Results

OAK BROOK, Ill., Aug. 04, 2016 (GLOBE NEWSWIRE) -- 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 ended June 30, 2016.

For the three months ended June 30, 2016, Great Lakes reported revenue of $192.2 million, net loss of $1.7 million and Adjusted EBITDA of $18.3 million.

Chairman of the Board of Directors, Mike Walsh, commented, "On October 16, 2015 the Company's Board of Directors initiated a process to review potential strategic alternatives for the Company.  Since that date, the Board undertook a deliberate and comprehensive evaluation of potential alternatives.  The process commenced with the understanding of our advisors that we would execute a transaction only if it provided for the value we see in our expectations for the ATB hopper dredge once it is operational in 2017, as well as our plan to turnaround the Environmental & infrastructure (E&I) segment.  The Board, in conjunction with its advisors, concluded that we best serve our stockholders by focusing on executing our current strategic plan, including having the ATB join our hopper fleet and returning the E&I segment to profitability by divesting non-profitable services and focusing on its core strengths.  As a result, after a thorough and fulsome analysis, the strategic review process has been concluded."

Chief Executive Officer Jonathan Berger stated, "Subsequent to the second quarter close, as part of our strategic plan, the Company entered into a definitive agreement to sell the assets associated with certain services lines of the Terra Contracting Services, LLC business - excluding the assets supporting the remediation service line - for a minimum $11.5 million.  Management believes that consolidating the E&I segment and focusing on its core competencies - remediation and geotechnical construction - fits with GLDD's strategic vision to be a leading provider of these services, with the pursuit of targeting large-scale contracts that best leverage the Company's operational expertise, financial, and brand strengths.  We expect the transaction to close by the end of the month.

"The Dredging segment performed well on several domestic projects during the second quarter, which partially offset the loss of the high margin foreign capital deepening work in the Suez Canal performed in the prior year quarter.  Due to the slowdown in the international market and as part of our strategy to optimize our fleet, the Company sold the Reem Island, an older, foreign-flagged hopper dredge, during the quarter resulting in net cash proceeds of $10 million.  There was a $0.7 million loss recorded on the income statement associated with the sale of this vessel.  However, we will save approximately $1.6 million in costs related to its operation in the second half of the year.   

"Finally, in the E&I segment, GLEI executed well on several projects and Terra is nearing completion of a legacy project that incurred additional losses in the quarter due to differing site conditions for which claims and change orders have been submitted.  This loss and lower revenue during the quarter was insufficient to cover the segment's fixed costs." 

Mark Marinko, Chief Financial Officer, added, "Through the first six months of the year, we invested $11.3 million of our free cash flow to finance the construction cost of our ATB.  As stated previously, we expect to continue to deploy our free cash flow for the remainder of the year to complete construction on this vessel."

Second Quarter 2016 Highlights

Great Lakes Dredge & Dock Corporation 
Select Income Statement Results 
(Unaudited in 000) 
                          
 Three Months Ended     
 June 30,     
 2016  2015     
 Dredging Environmental
&
infrastructure
 Total
Consolidated
  Dredging Environmental
&
infrastructure
 Total
Consolidated
   Total
Consol.
Variance
 
Revenue$153,661 $39,782 $192,192   $190,046 $49,926 $238,877  $(46,685)
                        
Gross Profit 24,070  186  24,256   30,384  1,903  32,287   (8,031)
Gross Profit Margin 15.7% 0.5% 12.6%  16.0% 3.8% 13.5%    
                        
Operating Income (Loss) 10,624  (6,806) 3,818   18,115  (4,126) 13,989   (10,171)
Operating Margin 6.9% -17.1 % 2.0%  9.5% -8.3% 5.9%    
                         
Note: As a result of intersegment eliminations, the segment financial information will not sum to the total consolidated results. 
  

Dredging

Environmental & Infrastructure

Total Company

Six Months Ended June 30, 2016 Highlights

Great Lakes Dredge & Dock Corporation 
Select Income Statement Results 
(Unaudited in 000) 
                        
 Six Months Ended      
 June 30,     
 2016  2015     
 Dredging Environmental
&
infrastructure
 Total
Consolidated
  Dredging Environmental
&
infrastructure
 Total
Consolidated
  Total
Consol.
Variance
 
Revenue$298,674  $58,872 $355,311  $344,174 $71,478 $413,434  $(58,123)
                        
Gross Profit 47,420  (3,174) 44,246   48,647  (5,679) 42,969    1,277 
Gross Profit Margin 15.9% -5.4% 12.5%  14.1% -7.9% 10.4%    
                        
Operating Income (Loss) 21,209  (17,480) 3,729   25,989  (19,258) 6,731   (3,002)
Operating Margin 7.1% -29.7% 1.0%  7.6%  -26.9% 1.6%    
                         
Note: As a result of intersegment eliminations, the segment financial information will not sum to the total consolidated results. 
  

Dredging

Environmental & Infrastructure

Total Company

Outlook

Mr. Berger concluded, "The domestic dredging bid market totaled $222 million during the second quarter of 2016.  Our dredging segment won 27% of our addressable bid market, which is below the average combined dredging bid market share over the prior three years.  The $39 million Dare County Beaches project is a significant portion of our awards for the second quarter.  As previously stated, we went into the year with significantly more of our vessels scheduled for work than is typical, which is partly why our percentage of bids won was below our average for the quarter.

"Subsequent to the quarter end, we were awarded approximately $93 million in additional work, including four coastal protection awards totaling $85 million and a rivers & lakes award valued at $8 million, with an additional $6 million in options that could be awarded.  With our backlog in place, we continue to expect to have a strong year in the domestic dredging market and will be safely executing on our projects.  

"We expect several large Superstorm Sandy-related coastal protection projects along the New Jersey and Long Island, New York shoreline to bid in the second half of the year, in addition to a deepening project in Philadelphia and coastal restoration projects in the Gulf of Mexico.

"Internationally, work commenced during the second quarter on two subcontracts in the Middle East valued at approximately $55 million.  We are pursuing additional opportunities in the region and also assessing sales or retirements of several older vessels in our fleet based outside of the United States.

"Within our E&I segment, we will continue to take meaningful steps to continue to align the cost structure with anticipated revenue.  With the sale of the non-core assets and exit from non-core business lines, we will focus on execution of our longer term strategy and return the segment to profitability."

The Company will be holding a conference call at 9:00 a.m. C.D.T. today where we will further discuss these results. Information on this conference call can be found below.

Conference Call Information

The Company will conduct a quarterly conference call, which will be held on Thursday, August 4, 2016 at 9:00 a.m. C.D.T. (10:00 a.m. E.D.T.). The call in number is 877-377-7553 and Conference ID is 44114349. The conference call will be available by replay until Friday, August 5, 2016, by calling 855-859-2056 and providing Conference ID 44114349. The live call and replay can also be heard on the Company's website, www.gldd.com, under Events & Presentations on the investor relations page. Information related to the conference call will also be available on the investor relations page of the Company's website.

Use of Adjusted EBITDA

Adjusted EBITDA, as provided herein, represents net income attributable to common stockholders of Great Lakes Dredge & Dock Corporation, Adjusted for net interest expense, income taxes, depreciation and amortization expense, debt extinguishment, accelerated maintenance expense for new international deployments, goodwill or asset impairments and gains on bargain purchase acquisitions. Adjusted EBITDA is not a measure derived in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company presents Adjusted EBITDA as an additional measure by which to evaluate the Company's operating trends. The Company believes that Adjusted EBITDA is a measure frequently used to evaluate performance of companies with substantial leverage and that the Company's primary stakeholders (i.e., its stockholders, bondholders and banks) use Adjusted EBITDA to evaluate the Company's period to period performance. Additionally, management believes that Adjusted EBITDA provides a transparent measure of the Company's recurring operating performance and allows management to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance. For this reason, the Company uses a measure based upon Adjusted EBITDA to assess performance for purposes of determining compensation under the Company's incentive plan. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, amounts determined in accordance with GAAP including: (a) operating income as an indicator of operating performance; or (b) cash flows from operations as a measure of liquidity. As such, the Company's use of Adjusted EBITDA, instead of a GAAP measure, has limitations as an analytical tool, including the inability to determine profitability or liquidity due to the exclusion of accelerated maintenance expense for new international deployments, goodwill or asset impairments, gains on bargain purchase acquisitions, interest and income tax expense and the associated significant cash requirements and the exclusion of depreciation and amortization, which represent significant and unavoidable operating costs given the level of indebtedness and capital expenditures needed to maintain the Company's business. For these reasons, the Company uses operating income to measure the Company's operating performance and uses Adjusted EBITDA only as a supplement. Adjusted EBITDA is reconciled to net income (loss) attributable to common stockholders of Great Lakes Dredge & Dock Corporation in the table of financial results. For further explanation, please refer to the Company's SEC filings.

The Company

Great Lakes Dredge & Dock Corporation ("Great Lakes" or the "Company") is the largest provider of dredging services in the United States and the only U.S. dredging company with significant international operations. The Company is also a significant provider of environmental and infrastructure services on land and water. The Company employs civil, ocean and mechanical engineering staff in its estimating, production and project management functions. In its over 126-year history, the Company has never failed to complete a marine project. Great Lakes has a disciplined training program for engineers that ensures experienced-based performance as they advance through Company operations. Great Lakes also owns and operates the largest and most diverse fleet in the U.S. dredging industry, comprised of over 200 specialized vessels.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release may constitute "forward-looking" statements as defined in Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and Exchange Commission (the "SEC"), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Great Lakes and its subsidiaries, or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words "plan," "believe," "expect," "anticipate," "intend," "estimate," "project," "may," "would," "could," "should," "seeks," or "scheduled to," or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These cautionary statements are being made pursuant to the Exchange Act and the PSLRA with the intention of obtaining the benefits of the "safe harbor" provisions of such laws. Great Lakes cautions investors that any forward-looking statements made by Great Lakes are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements with respect to Great Lakes, include, but are not limited to: our ability to obtain federal government dredging and other contracts; our ability to qualify as an eligible bidder under government contract criteria and to compete successfully against other qualified bidders; risks associated with cost over-runs, operating cost inflation and potential claims for liquidated damages, particularly with respect to our fixed cost contracts; the timing of our performance on contracts; significant liabilities that could be imposed were we to fail to comply with government contracting regulations; risks related to international dredging operations, including instability in the Middle East; a significant negative change to large, single customer contracts from which a significant portion of our international revenue is derived; changes in previously-recorded revenue and profit due to our use of the percentage-of-completion method of accounting; consequences of any lapse in disclosure controls and procedures or internal control over financial reporting; changes in the amount of our estimated backlog; our ability to obtain bonding or letters of credit; increasing costs to operate and maintain aging vessels; equipment or mechanical failures; acquisition integration and consolidation risks; liabilities related to our historical demolition business; impacts of legal and regulatory proceedings; unforeseen delays and cost overruns related to the construction of new vessels; our becoming liable for the obligations of joint ventures, partners and subcontractors; risks associated with the review and conclusion of potential strategic alternatives by our Board of Directors; capital and operational costs due to environmental regulations; unionized labor force work stoppages; maintaining an adequate level of insurance coverage; information technology security breaches; our substantial amount of indebtedness; restrictions imposed by financing covenants; the impact of adverse capital and credit market conditions; limitations on our hedging strategy imposed by new statutory and regulatory requirements for derivative transactions; foreign exchange risks; changes in macroeconomic indicators and the overall business climate; and losses attributable to our investments in privately financed projects. For additional information on these and other risks and uncertainties, please see Item 1A. "Risk Factors" of Great Lakes' Annual Report on Form 10-K for the year ended December 31, 2015, and in other securities filings by Great Lakes with the SEC.

Although Great Lakes believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any forward-looking statements. Great Lakes' future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this press release are made only as of the date hereof and Great Lakes does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.

Great Lakes Dredge & Dock Corporation 
Condensed Consolidated Statements of Operations 
(Unaudited and in thousands, except per share amounts) 
                
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
  2016    2015   2016   2015 
Contract revenues$192,192  $238,877   $355,311  $413,434 
Gross profit 24,256   32,287   44,246   42,969 
General and administrative expenses 19,751   15,543   39,840   33,491 
Impairment of goodwill     2,750      2,750 
(Gain) loss on sale of assets—net 687   5   677   (3)
Operating income 3,818   13,989   3,729   6,731 
Interest expense—net (5,903)  (5,567)  (11,624)  (11,197)
Equity in earnings (loss) of joint ventures 128   (2,616)  13   (3,714)
Other expense (518)  (618)  (1,281)  (1,059)
Income (loss) before income taxes (2,475)  5,188   (9,163)  (9,239)
Income tax (provision) benefit 756   (2,464)  3,409   3,573 
Net income (loss)$(1,719) $2,724  $(5,754) $(5,666)
                
Basic earnings (loss) per share$(0.03) $0.05   $(0.10) $(0.09)
Basic weighted average shares 60,711   60,473   60,609   60,369 
                
Diluted earnings (loss) per share$(0.03) $0.05  $(0.10) $(0.09)
Diluted weighted average shares 60,711   60,924   60,609   60,369 


Great Lakes Dredge & Dock Corporation 
Reconciliation of Net loss to Adjusted EBITDA 
(Unaudited and in thousands) 
                
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
  2016   2015    2016   2015 
Net income (loss)$(1,719) $2,724  $(5,754) $(5,666)
Adjusted for:               
Interest expense—net 5,903   5,567   11,624   11,197 
Income tax provision (benefit) (756)  2,464   (3,409)  (3,573)
Depreciation and amortization 14,892   19,872   28,820   33,025 
Impairment of goodwill    2,750       2,750 
Adjusted EBITDA$18,320  $33,377  $31,281  $37,733 


Great Lakes Dredge & Dock Corporation 
Selected Balance Sheet Information 
(Unaudited and in thousands) 
        
 Period Ended 
 June 30,  December 31, 
  2016   2015 
        
Cash and cash equivalents$21,236  $14,184 
Total current assets 318,251   329,733 
Total assets 879,909   898,124 
Total current liabilities 219,707   205,690 
Long-term debt 320,319   345,790 
Total equity 249,235   252,173 


Great Lakes Dredge & Dock Corporation 
Revenue and Backlog Data 
(Unaudited and in thousands) 
           
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
Revenues 2016   2015   2016   2015 
Dredging:               
Capital - U.S.$40,335  $57,742  $92,272  $105,099 
Capital - foreign 11,683   47,539   13,192   89,238 
Coastal protection 57,426   51,576   104,639   71,648 
Maintenance 28,641   26,129   66,224   68,276 
Rivers & lakes 15,576   7,060   22,347   9,913 
Total dredging revenues 153,661   190,046   298,674   344,174 
Environmental & infrastructure 39,782   49,926   58,872   71,478 
Intersegment revenue (1,251)  (1,095)   (2,235)  (2,218)
Total revenues$192,192   $238,877  $355,311  $413,434 
                


 As of 
 June 30,  December 31,  June 30, 
Backlog 2016   2015   2015 
Dredging:           
Capital - U.S.$344,230  $411,506  $253,462 
Capital - foreign 39,271   1,750   55,599 
Coastal protection 149,748   118,858   178,560 
Maintenance 21,077   77,995   28,990 
Rivers & lakes 68,263   67,589   85,939 
Total dredging backlog 622,589   677,698   602,550  
Environmental & infrastructure 54,014   73,349   149,498 
Total backlog$676,603  $751,047  $752,048 
            

GLDD FIN

 

For further information contact:

Mary Morrissey

Investor Relations

630-574-3467

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Source: Great Lakes Dredge & Dock Corp

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