Great Lakes Reports Third Quarter 2012 Results
Project Execution Shifted to Fourth Quarter
Full Year Adjusted EBITDA Guidance Modified to
Commentary
Chief Executive Officer
"Hurricane Sandy has significantly affected coastal communities along
the
"Our third quarter was challenging as our dredging segment utilization
was impacted by Hurricane Isaac, which not only delayed four large
dredging projects, but added costs and lowered expected margins on these
projects. We were further impacted by projects that were bid later than
expected, therefore the notice to proceed was received and work started
late in third quarter and early into the fourth. Also,
"After several strong quarters, the demolition segment's results were
negatively impacted by cost overruns caused by weather and scope changes
outside those allowed to be reimbursed under the contract. These impacts
lowered the demolition gross margin by over 9% and were limited to the
third quarter. On a positive note, the demolition segment was awarded a
Mr.
2012 Third Quarter Operating Results & Highlights
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Q3 2012 |
Q3 2011 |
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| Revenue |
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| Increase | 5.2% | |||
| Gross Profit |
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| Gross Profit Margin | 7.8% | 17.3% | ||
| Operating Income |
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| Decrease | 89.9% | |||
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Net Income (loss) attributable to Great Lakes |
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| Per Diluted Share |
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| Adjusted EBITDA |
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| Decrease | 53.5% | |||
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| Total Debt |
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| Net Debt (Debt less cash) |
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| Cash and cash equivalents |
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Revenue & Gross Profit
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Revenue increases in the quarter included:
- 66% increase in foreign dredging revenue driven by revenue recognized on our Australian project;
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57% increase in maintenance dredging revenue driven by a large
maintenance project in
Louisiana as well as other projects on theMississippi River that were unique due to the drought in the Midwest U.S. during 2012; - 14% increase in capital dredging revenue;
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Demolition revenue increased 17% due to concluding work on two
New York projects; - The above increases were partially offset by decreases in beach nourishment revenue (50%) and rivers & lakes (32%)
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Gross profit margin (gross profit divided by revenue) declined due to:
- Weather impacts from Hurricane Isaac in the Gulf;
- Dredge employment shifting out of third quarter and into the fourth, resulting in lower fixed cost coverage in the current quarter;
- Increase in maintenance expense;
- Weaker demolition results
Operating Income
- Impacted by items noted above;
Cash and cash equivalents
- Cash and cash equivalents declined due to continued investments in working capital on long term projects as well as capital investments in our fleet and new equipment.
Nine Months Ended
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YTD |
YTD |
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| Revenue |
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| Increase | 4.1% | |||
| Gross Profit |
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| Gross Profit Margin | 11.7% | 15.9% | ||
| Operating Income |
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| Decrease | 46.8% | |||
| Net Income attributable to Great Lakes |
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| Per Diluted Share |
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| Adjusted EBITDA |
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| Decrease | 29.7% | |||
Revenue & Gross Profit
- Year to date 2012 revenue increased primarily due to higher demolition revenues year to date while dredging revenues were in line with the same period in 2011; however, gross profit margin was down due to weather impacts and lower dredge utilization during the 2012 first and third quarters.
Operating Income
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Operating income was down for the nine months ended
September 30, 2012 compared to the comparable period in the prior year, due to lower gross profit, as discussed above. In addition, during the second quarter of 2011 the Company sold an outdated, underutilized hopper dredge, which generated cash proceeds of$6.6 million and resulted in a gain of$2.1 million .
Net Income Attributable to Great Lakes
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Net income attributable to Great Lakes for the nine months ended
September 30, 2012 decreased due to lower operating income. The first half of 2011 included a debt restructuring expense of$5.1 million resulting from the retirement of old notes and the issuance of the$250 million of 7.375% senior unsecured notes.
Bid Market & Backlog
The domestic dredging bid market for the nine months ended
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43%, or
$48 million , of the beach nourishment projects awarded; -
74%, or
$84 million , of the capital projects awarded; -
25%, or
$92 million , of the maintenance projects awarded; and -
45%, or
$42 million , of the rivers & lakes projects awarded.
Similar to the prior year, third quarter bidding activity increased, though not to the levels of third quarter of 2011. Through the first nine months of 2012, the maintenance and rivers & lakes markets have increased, offset by a decrease in the capital and beach nourishment markets. The beach nourishment market was atypically high in 2011, with the highest volume of beach work ever awarded. Given the awards to date and the expected bid letting in the fourth quarter, 2012 is still expected to be a solid year for beach awards. In addition, we still expect more capital work to bid in the fourth quarter, driving up the current capital market.
Great Lakes' backlog remains at a high level given Great Lakes' bidding
success year to date along with the addition of the Wheatstone LNG
project in
Demolition segment backlog was
Commentary
President and Chief Operating Officer
"We commend our team for the outstanding job in managing personnel and equipment during the hurricane. Our personnel are safe, after successfully protecting our equipment, and are back at work executing on projects. Our readiness plans are well thought out, have been properly rehearsed and have proven to be effective.
"We have made investments in our equipment, preparation for the
Wheatstone LNG project and we have increased our pipe inventory,
resulting in continued utilization of our working capital. With the high
level of operating activity expected in the fourth quarter, as well as
dredging beginning in
"We continue to be excited about our near term market prospects. The
timing of the
"Internationally, we expect to see significant impact to our results
from the Australian Wheatstone LNG project in 2013 and 2014. In the
third quarter, we added a land reclamation project in the
"The demolition management team is working diligently to add opportunities leading to growth by elevating the range of professional services offered through a more capable support team. The successful partnership of our demolition and dredging businesses is an important component to our Company's growth as evidenced by the recent focus on bridge demolition and salvage work required under some projects, which was formerly sub-contracted outside the Company. Additionally, our dredging and demolition businesses collaborating with our TerraSea joint venture on new prospects adds to the list of opportunities."
"Although we are modifying our full year guidance as noted above, we are excited about a very strong fourth quarter and the prospects ahead. This includes projects in backlog which will drive our fourth quarter and 2013 results, as well as projects on the horizon providing for continued long term growth in both dredging and demolition. We continue to believe opportunities for further growth coupled with our segment managements' disciplined approach to project execution will result in increased momentum in our financial results starting in 2013. As always, we thank the Great Lakes dredging and demolition teams for their continued efforts in providing world class service and delivering strong results for our shareholders."
Use of Adjusted EBITDA
Adjusted EBITDA, as provided herein, represents net income (loss)
attributable to
Conference Call Information
The Company will conduct a quarterly conference call, which will be held
on
The Company
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute
"forward-looking" statements as defined in Section 27A of the Securities
Act of 1933 (the "Securities Act"), 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
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.
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| Condensed Consolidated Statements of Operations | ||||||||||||
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| Three Months Ended | Nine Months Ended | |||||||||||
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| 2012 | 2011 | 2012 | 2011 | |||||||||
| Contract revenues | $ | 166,763 | $ | 158,468 | $ | 488,202 | $ | 468,765 | ||||
| Gross profit | 13,020 | 27,391 | 56,931 | 74,599 | ||||||||
| General and administrative expenses | 11,667 | 12,736 | 36,390 | 38,447 | ||||||||
| Gain on sale of assets—net | (108) | (131) | (232) | (2,902) | ||||||||
| Operating income | 1,461 | 14,786 | 20,773 | 39,054 | ||||||||
| Other income (expense) | ||||||||||||
| Interest expense—net | (5,105) | (5,571) | (15,747) | (16,432) | ||||||||
| Equity in earnings (loss) of joint ventures | 177 | 606 | 153 | (108) | ||||||||
| Loss on foreign currency transactions—net | (40) | (544) | (55) | (544) | ||||||||
| Loss on extinguishment of debt | - | - | - | (5,145) | ||||||||
| Income (loss) before income taxes | (3,507) | 9,277 | 5,124 | 16,825 | ||||||||
| Income tax (provision) benefit | 1,355 | (3,618) | (1,977) | (6,600) | ||||||||
| Net income (loss) | (2,152) | 5,659 | 3,147 | 10,225 | ||||||||
| Net (income) loss attributable to noncontrolling interests | 20 | (57) | 226 | (525) | ||||||||
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Net income (loss) attributable to |
$ | (2,132) | $ | 5,602 | $ | 3,373 | $ | 9,700 | ||||
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Basic earnings (loss) per share attributable to |
$ | (0.04) | $ | 0.10 | $ | 0.06 | $ | 0.16 | ||||
| Basic weighted average shares | 59,253 | 58,930 | 59,154 | 58,863 | ||||||||
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Diluted earnings (loss) per share attributable to |
$ | (0.04) | $ | 0.09 | $ | 0.06 | $ | 0.16 | ||||
| Diluted weighted average shares | 59,253 | 59,161 | 59,567 | 59,533 | ||||||||
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Reconciliation of Net Income attributable to |
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| (Unaudited and in thousands) | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
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September 30, | |||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||
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Net income (loss) attributable to |
$ | (2,132) | $ | 5,602 | $ | 3,373 | $ | 9,700 | ||||
| Adjusted for: | ||||||||||||
| Loss on extinguishment of debt | - | - | - | 5,145 | ||||||||
| Interest expense—net | 5,105 | 5,571 | 15,747 | 16,432 | ||||||||
| Income tax provision (benefit) | (1,355) | 3,618 | 1,977 | 6,600 | ||||||||
| Depreciation and amortization | 10,514 | 11,195 | 26,637 | 29,999 | ||||||||
| Adjusted EBITDA | $ | 12,132 | $ | 25,986 | $ | 47,734 | $ | 67,876 | ||||
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| Selected Balance Sheet Information | ||||||
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| Period Ended | ||||||
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December 31, | |||||
| 2012 | 2011 | |||||
| Cash and cash equivalents | $ | 38,324 | $ | 113,288 | ||
| Total current assets | 322,224 | 325,778 | ||||
| Total assets | 796,686 | 788,460 | ||||
| Total short-term debt | 2,587 | 3,033 | ||||
| Total current liabilities | 139,328 | 130,526 | ||||
| Long-term debt | 252,500 | 252,558 | ||||
| Total equity | 293,752 | 292,537 | ||||
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| Supplementary financial data | ||||||||||||
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| Three Months Ended | Nine Months Ended | |||||||||||
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September 30, | |||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||
| Net cash flows provided by (used in) operating activities | $ | (24,025) | $ | 24,071 | $ | (39,210) | $ | 13,626 | ||||
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| Revenue and Backlog Data | ||||||||||||
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| Three Months Ended | Nine Months Ended | |||||||||||
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| Revenues (in thousands) | 2012 | 2011 | 2012 | 2011 | ||||||||
| Dredging: | ||||||||||||
| Capital - U.S. | $ | 45,456 | $ | 39,778 | $ | 117,066 | $ | 130,287 | ||||
| Capital - foreign | 36,329 | 21,843 | 75,202 | 59,779 | ||||||||
| Beach nourishment | 20,935 | 41,714 | 92,576 | 87,947 | ||||||||
| Maintenance | 26,060 | 16,583 | 85,299 | 92,525 | ||||||||
| Rivers & lakes | 10,031 | 14,673 | 25,801 | 25,735 | ||||||||
| Total dredging revenues | 138,811 | 134,591 | 395,944 | 396,273 | ||||||||
| Demolition | 27,952 | 23,877 | 92,258 | 72,492 | ||||||||
| Total revenues | $ | 166,763 | $ | 158,468 | $ | 488,202 | $ | 468,765 | ||||
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Note: Dredging contract revenues for the nine months ended |
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| Backlog (in thousands) | 2012 | 2011 | 2011 | |||||||||
| Dredging: | ||||||||||||
| Capital - U.S. | $ | 96,354 | $ | 109,897 | $ | 109,568 | ||||||
| Capital - foreign | 243,542 | 78,379 | 40,675 | |||||||||
| Beach nourishment | 41,875 | 84,607 | 117,543 | |||||||||
| Maintenance | 46,555 | 31,293 | 16,187 | |||||||||
| Rivers & lakes | 34,827 | 15,256 | 13,391 | |||||||||
| Total dredging backlog | 463,153 | 319,432 | 297,364 | |||||||||
| Demolition | 42,574 | 50,672 | 68,029 | |||||||||
| Total backlog | $ | 505,727 | $ | 370,104 | $ | 365,393 | ||||||
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| Full Year Adjusted EBITDA Guidance Reconciliation to Net Income | ||||||
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For the Year Ended |
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| Lower | Upper | |||||
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Estimated Net income attributable to |
$ | 15,060 | $ | 18,110 | ||
| Adjusted for estimated: | ||||||
| Interest expense—net | 20,796 | 20,796 | ||||
| Income tax provision | 9,628 | 11,578 | ||||
| Depreciation and amortization | 39,516 | 39,516 | ||||
| Adjusted EBITDA Guidance | $ | 85,000 | $ | 90,000 | ||
630-574-3012
Source:
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