Great Lakes Dredge & Dock Corporation
Nov 7, 2017

Great Lakes Reports Third Quarter Results

OAK BROOK, Ill., Nov. 07, 2017 (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 September 30, 2017.

For the quarter ended September 30, 2017, Great Lakes reported revenue of $163.3 million, net loss from continuing operations of $4.9 million and Adjusted EBITDA from continuing operations of $11.3 million.

Chief Executive Officer Lasse Petterson commented, "As communicated in our recent Business Update, we have completed an extensive analysis of the overall Company focused on improving the Company's results in both the domestic and international markets, allowing us to focus on reducing debt, improving return on capital and enhancing our fleet. In the third quarter of 2017, we recognized a $2.0 million restructuring charge, related entirely to severance. We anticipate that this restructuring charge will total approximately $42-47 million with $39-44 million projected to be non-cash. As stated, we estimate that this restructuring will result in annual EBITDA cost savings of approximately $40 million to be fully realized in 2019. These savings are expected to be approximately $16 million of operational improvement to direct costs, approximately $9 million of asset based optimization and approximately $15 million of streamlined overhead and G&A costs. As we remove assets from service, we expect that these cost savings will be realized. We are confident that this restructuring will allow us to be in the best position to capitalize on the strong bid markets that we expect in the coming years.

During October sea trials, a mechanical issue involving the port side gearbox on the Tug Mackie delayed delivery of the ATB. The ATB is scheduled to reconvene sea trials this week.  Upon successful completion of sea trials, we will take possession of the ATB and she will sail to the Mississippi Coastal Improvement Program project where she will begin work.  We will have a better assessment of the specific delivery date once commissioning and sea trials are completed."    

Chief Financial Officer Mark Marinko added, "During the third quarter of 2017, we experienced delays associated with Hurricanes Harvey, Irma, Maria and Jose, which caused work stoppage on our projects in the impacted areas."

Third Quarter Highlights

Great Lakes Dredge & Dock Corporation 
Select Income Statement Results 
(Unaudited in 000) 
                        
 Three Months Ended     
 September 30,     
 2017  2016     
 Dredging Environmental
&
infrastructure
 Total
Consolidated
  Dredging Environmental
&
infrastructure
 Total
Consolidated
  Total
Consol.
Variance
 
Revenue$133,862 $29,667 $163,317  $154,448 $44,565 $198,869  $(35,552)
                        
Gross Profit 16,427  268  16,695   16,522  3,522  20,045   (3,350)
Gross Profit Margin 12.3 % 0.9% 10.2%  10.7% 7.9%  10.1%    
                        
Operating Income (Loss) 2,725  (3,727) (1,002)  5,553  7,307   12,860   (13,862)
Operating Margin 2.0% -12.6% -0.6%  3.6% 16.4% 6.5%    
                         
Note: As a result of intersegment eliminations, the segment financial information will not sum to the total consolidated results. 

Dredging

Environmental & Infrastructure

Total Company

2017

Great Lakes Dredge & Dock Corporation 
Select Income Statement Results 
(Unaudited in 000) 
                        
 Nine Months Ended     
 September 30,     
 2017  2016     
 Dredging Environmental
&
infrastructure
 Total
Consolidated
  Dredging Environmental
&
infrastructure
 Total
Consolidated
  Total
Consol.
Variance
 
Revenue$439,423 $73,602 $510,762  $453,122 $103,437 $554,180  $(43,418)
                         
Gross Profit 52,386  6,265  58,651   63,943  348  64,291   (5,640)
Gross Profit Margin 11.9% 8.5% 11.5%  14.1% 0.3% 11.6%    
                        
Operating Income (Loss) 13,313  (6,601) 6,712   26,762  (10,173) 16,589   (9,877)
Operating Margin 3.0% -9.0% 1.3%  5.9%  -9.8% 3.0%    
                        
Note: As a result of intersegment eliminations, the segment financial information will not sum to the total consolidated results. 

Dredging

Environmental & Infrastructure

Total Company

             
Commentary
Mr. Petterson concluded, "The domestic dredging bid market totaled $809 million during the first nine months of 2017.  Our dredging segment won 40% of our addressable bid market, which is in line with our three year average win rate of 42%. During the third quarter, we were awarded $158 million in new work, including the Charleston 1 project valued at $47 million. The Company was also awarded four coastal protection projects ranging in value from $7 million to $19 million. Subsequent to the quarter end, we were awarded the $213 million Charleston 2 project. Domestically, the bid market continues to be focused on the large deepening projects with Boston Harbor Deepening expected to bid by the end of 2017. We expect the bid market for 2017 to be approximately $1.3 billion

"Internationally, we continue to see progress in the bid market and expect to keep our overseas plant utilized into 2018.

"During the first nine months of 2017, our E&I segment was awarded $77 million in new work. The type of work awarded is consistent with our strategy going forward, and we believe it continues to position the segment well. Subsequent to the end of the third quarter of 2017, we have been awarded $3.9 million in additional new work. Similar to prior quarters this year, we have seen lower volume of bids than expected with bidding and work pushed into 2018. Although operating income has improved in the segment year over year, we expect that it will remain in an operating loss position for the full year 2017." 

The Company will be holding a conference call at 9:00 a.m. C.S.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 Tuesday, November 7, 2017 at 9:00 a.m. C.S.T. (10:00 a.m. E.S.T.). The call in number is 877-377-7553 and Conference ID is 7898599. The conference call will be available by replay until Thursday, November 9, 2017, by calling 855-859-2056 and providing Conference ID 7898599. 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 from continuing operations

Adjusted EBITDA from continuing operations, as provided herein, represents net income 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 from continuing operations is not a measure derived in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The Company presents Adjusted EBITDA from continuing operations as an additional measure by which to evaluate the Company's operating trends. The Company believes that Adjusted EBITDA from continuing operations 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 from continuing operations to evaluate the Company's period to period performance. Additionally, management believes that Adjusted EBITDA from continuing operations 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 from continuing operations to assess performance for purposes of determining compensation under the Company's incentive plan. Adjusted EBITDA from continuing operations 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 from continuing operations, 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 from continuing operations only as a supplement. Adjusted EBITDA from continuing operations is reconciled to net loss 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 127-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 and risks associated with draws by the surety on outstanding bonds or calls by the beneficiary on outstanding 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; 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; losses attributable to our investments in privately financed projects and the likelihood of realizing, and amount of, expected restructuring charges to be realized in connection with the restructuring activities. 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, 2016, 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  Nine Months Ended 
 September 30,  September 30, 
  2017   2016   2017   2016 
Contract revenues$163,317  $198,869  $510,762  $554,180 
Gross profit 16,695   20,045   58,651   64,291 
General and administrative expenses  17,522   7,187   51,584   47,027 
(Gain) loss on sale of assets—net 175   (2)  355   675 
Operating income (loss) (1,002)  12,860   6,712   16,589 
Interest expense—net (6,417)  (4,819)  (18,440)  (16,443)
Equity in earnings (loss) of joint ventures 26   6   (1,441)  19 
Loss on extinguishment of debt -       (2,330)   
Other expense (266)  (637)  (343)  (1,918)
Income (loss) from continuing operations before income taxes (7,659)  7,410   (15,842)  (1,753)
Income tax (provision) benefit 2,714   (2,850)  6,112   559 
Income (loss) from continuing operations (4,945)  4,560   (9,730)  (1,194)
Loss from discontinued operations, net of income taxes -      (12,697)   
Net income (loss)$(4,945) $4,560  $(22,427) $(1,194)
                
Basic earnings (loss) per share attributable to continuing operations$(0.08) $0.08  $(0.16) $(0.02)
Basic loss per share attributable to discontinued operations, net of tax       (0.21)   
Basic earnings (loss) per share$(0.08) $0.08  $(0.37) $(0.02)
Basic weighted average shares  61,462   60,811   61,290   60,676 
                
Diluted earnings (loss) per share attributable to continuing operations$(0.08) $0.08  $(0.16) $(0.02)
Diluted loss per share attributable to discontinued operations, net of tax       (0.21)   
Diluted earnings (loss) per share$(0.08) $0.08  $(0.37) $(0.02)
Diluted weighted average shares 61,462   61,526   61,290   60,676 


  
Great Lakes Dredge & Dock Corporation 
Reconciliation of Net Loss to Adjusted EBITDA from Continuing Operations 
(Unaudited and in thousands) 
                
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
  2017   2016   2017   2016 
Net income (loss)$(4,945) $4,560  $(22,427) $(1,194)
Loss from discontinued operations, net of income taxes -      (12,697)   
Income (loss) from continuing operations (4,945)  4,560   (9,730)  (1,194)
Adjusted for:               
Interest expense—net 6,417   4,819   18,440   16,443 
Income tax benefit (2,714)  2,850   (6,112)  (559)
Depreciation and amortization 12,557   16,872   38,186   45,692 
Loss on extinguishment of debt -      2,330     
Adjusted EBITDA from continuing operations$11,315  $29,101  $43,114  $60,382 


  
Great Lakes Dredge & Dock Corporation 
Selected Balance Sheet Information 
(Unaudited and in thousands) 
        
 Period Ended 
 September 30,  December 31, 
  2017   2016 
        
Cash and cash equivalents$10,469  $11,167 
Total current assets 255,971   307,226 
Total assets 841,691   893,588 
Total current liabilities 126,691   179,834 
Long-term debt 423,226   390,402 
Total equity  228,724   247,890 


 
Great Lakes Dredge & Dock Corporation
Revenue and Backlog Data
(Unaudited and in thousands)
             
 Three Months Ended  Nine Months Ended   
 September 30,  September 30,   
Revenues 2017   2016   2017   2016    
Dredging:                 
Capital - U.S.$30,561  $59,811  $128,634   $152,083   
Capital - foreign 5,849   21,139    37,423   34,331   
Coastal protection 40,726   47,983   141,365   152,622   
Maintenance 42,282   11,320   98,532   77,544   
Rivers & lakes 14,444   14,195   33,469   36,542   
Total dredging revenues 133,862   154,448   439,423    453,122   
Environmental & infrastructure 29,667   44,565   73,602   103,437   
Intersegment revenue (212)  (144)  (2,263)  (2,379)  
Total revenues$163,317  $198,869  $510,762  $554,180   


 As of 
 September 30,  December 31,  September 30, 
Backlog 2017   2016   2016  
Dredging:           
Capital - U.S.$ 256,940  $234,575  $285,907 
Capital - foreign 12,720   22,025   33,834 
Coastal protection 78,670   109,871    152,167 
Maintenance 54,068   56,929   44,181 
Rivers & lakes 25,444   44,298   54,131 
Total dredging backlog 427,843   467,698   570,220 
Environmental & infrastructure 58,191   37,645   32,530 
Total backlog$486,034   $505,343  $602,750 

GLDD FIN

For further information contact:
Abby Sullivan
Investor Relations
630-574-3024

Source: Great Lakes Dredge & Dock Corporation

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