Great Lakes Dredge & Dock Corporation (Nasdaq:GLDD), the
largest provider of dredging services in the United States, today
reported financial results for the quarter ended March 31, 2021.
First Quarter 2021 Highlights
- Revenue was $177.6 million in the first quarter
- Total operating income was $16.6
million in the first quarter
- Net income was $8.8 million in the
first quarter
- Adjusted EBITDA was $26.8 million
in the first quarter
Management Commentary
Lasse Petterson, President and Chief Executive
Officer commented, “During 2020 as the COVID-19 pandemic hit our
nation, Great Lakes was able to adjust and navigate the
difficulties and challenges the pandemic posed to our operations.
However, as the 3rd wave of the pandemic spread through our
population, we started to see significant additional direct costs
and operational interruptions in the first quarter of 2021. Several
of our vessel crews were infected despite our extensive testing and
isolation protocols. Vessels were required to go to shore for crew
changes and the vessels had to be disinfected before returning to
work. This impacted the vessels’ scheduling and availability, which
impacted our productivity on several projects and led to delays
which pushed revenue from the first quarter into remaining quarters
of 2021. Today the projects and vessels that were impacted are back
in operation and with our solid backlog, vaccinations increasing,
and stronger performance expectations in the third and fourth
quarters, we do not see adjusting our full year expectations at
this time. Approximately twenty three revenue days were lost due to
COVID outbreaks. Downtime for the vessels impacted directly by
COVID delays equated to $3.9 million of revenue and $1.2 million of
gross margin. The direct COVID costs of at home and on site testing
and costs of quarantining were $4.3 million in the quarter. We have
initiated an extensive vaccination effort of our crews and staff
and as of today we have approximately 20% of our staff either fully
vaccinated or partially vaccinated. Our target is to have the
majority of all staff and crew vaccinated in the second quarter of
2021, which we hope will greatly reduce or even potentially
eliminate further impacts on our operations.
We ended the quarter with net income of $8.8
million and Adjusted EBITDA of $26.8 million compared to the first
quarter of 2020 that ended with $34 million of net income and $61.4
million in Adjusted EBITDA. The first quarter of 2020 was a record
breaking quarter for Great Lakes, driven by robust performance on
several projects and no vessels in drydock, therefore comparison to
this quarter was expected to be difficult. In addition
to the COVID related impacts, in the first quarter of 2021 we
experienced some extended drydocks and equipment failure which
impacted project schedules.
We expect the domestic bid market to be just as
strong this year as it was in 2020. In the first quarter, Great
Lakes announced awards for the Boston Phase 3 Deepening Project and
the Panama City beach renourishment totaling $90.3 million. We also
were the low bidder on the Mobile Deepening Phase 3 project that
was pending award for $53.9 million at the end of the first
quarter, but has since been awarded. In addition, in April of this
year we were awarded the Golden Triangle Marsh Creation Project in
Louisiana for $32.4 million and we were the low bidder on the
Captiva Island Project for $15.6 million.
In the offshore wind market, the Biden
administration has pushed to accelerate wind energy development and
has set a target to install 30GW of offshore wind energy by 2030.
This target confirms our plans and determination to evaluate future
investments in the offshore wind market. In December of last year,
we announced the design and development of the first U.S. flagged
Jones Act compliant, inclined fall-pipe vessel for subsea rock
installation for wind turbine foundations and in March we awarded
the integration engineering and detail design package to Ulstein.
This vessel would represent a significant critical advancement in
building the U.S. logistics infrastructure to support the future of
the new U.S. offshore wind industry. Delivery of the vessel is
expected in late 2023.”
Quarterly Results
- Revenue was $177.6 million, a
decrease of $40.1 million from the first quarter of 2020. The lower
revenue in the first quarter of 2021 was due to lower coastal
protection and capital dredging revenue, offset by an increase in
revenue from maintenance dredging projects. The decrease in revenue
compared to the first quarter of 2020 is mainly attributed to the
fact that in last year’s first quarter there were no vessels in
drydock, which allowed for more revenue generation, and we also had
exceptional performance on several projects.
- Gross margin percentage declined to
18.6% in the first quarter of 2021 from 31.5% in the first quarter
of 2020. Direct COVID-19 costs had an unfavorable impact of $4.3
million on gross profit during the first quarter and $1.2 million
of opportunity lost related to the impacted vessels. In addition,
productivity impacts and delays affected several projects. Also
both the Dredge 55 and the Carolina remained in drydock for the
entire quarter but are expected to return to work in the second
quarter of 2021.
- Operating income was $16.6 million,
which is a $36.4 million decrease from the prior year quarter. The
decrease is a direct result of lower gross margin. General and
administrative expenses was $0.7 million higher than prior year.
The increase in general and administrative expenses for the quarter
was due to higher relocation expense in current year related to
regional office and headquarter partially offset by a decrease in
incentive pay.
- Net income for the quarter was $8.8
million compared to $34.0 million in the prior year quarter. The
shortfall in operating income was offset partially by lower tax
expense and interest expense.
- At March 31, 2021, the Company had
$177.6 million in cash and total debt of $324.0 million.
- At March 31, 2021, the Company had
$486.0 million in backlog, a decrease of $73.4 million from
December 31, 2020. This decrease was expected as bidding activity
is historically low in the first quarter of the year.
- Capital expenditures for the first
quarter of 2021 were $16.5 million, which includes $5.4 million for
our new hopper dredge, $1.0 million for our rock installation
vessel, and $1.4 million for our new multicats.
Market Update
At the end of 2020, the domestic bid market for
the year had reached $1.8 billion in projects bid. We continue to
be optimistic and believe the 2021 domestic market will remain
strong. The bid market continues to be driven by the large-scale
port deepening projects along the East and Gulf coasts. We expect
that 2021 will see bids for multiple project phases for port
deepenings in Corpus Christi, Norfolk and the Houston ship channel
that will continue for the next several years. Strong hurricane and
storm seasons have resulted in an increase in beach erosion and
other damage which adds to the recurring nature of our business and
the need for more frequent coastal protection and port maintenance
projects. 2021 will also see several major coastal marsh creation
projects in Louisiana. These projects are needed as they help to
reduce the risk of future damage from flood and storm events and
are important in providing resilience to protect coastal
communities and ecosystems as well as driving job creation and
economic development. We have seen support for the dredging
industry in the U.S. Army Corps of Engineers’ 2021 budget that was
approved at a record high of $7.3 billion. In addition, the 2020
Water Resource Development Act (the “WRDA”) was signed into law and
included some additional reforms to the Harbor Maintenance Trust
Fund (the “HMTF”). These reforms will allow Congress to, for the
first time, drawdown from the $9.3 billion surplus in the HMTF.
This is in addition to having the annual cap lifted on the HMTF
earlier in the year in the Coronavirus Aid, Relief and Economic
Security Act. WRDA also includes significant language encouraging
more beneficial use of dredged material and natural infrastructure,
both of which are important environmental issues.
As noted above, we see strong support for
offshore wind from the Biden administration. In March, the White
House announced new initiatives that will advance the
administration’s goals to expand the nation’s offshore wind energy
capacity in the coming decade by opening new areas of development,
improving environmental permitting, and increasing public financing
for projects. The administration committed to approving 16 offshore
wind projects by 2025 and stated it would direct $230 million in
federal transportation dollars to fund port infrastructure and
earmark $3 billion in loan guarantees from the Department of
Energy. President Biden has set a target to install 30GW of
offshore wind energy by 2030. In addition, in January, the White
House released a Buy America fact sheet that emphasized President
Biden’s strong support for the Jones Act and its importance to
renewable offshore energy.
Great Lakes remains committed to maintaining the
health and safety of our team members through an Incident &
Injury Free® (IIF®) safety management program. This value-based
approach has allowed us to respond quickly and effectively to the
COVID-19 pandemic and any challenges resulting from the pandemic,
and has helped us to minimize the financial impact.
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 Tuesday, May 4, 2021 at 9:00 a.m. C.D.T
(10:00 a.m. E.S.T.). The call in number is (877) 377-7553 and
Conference ID is 8696297. The conference call will be available by
replay until Thursday, May 6, 2021 by calling (855)
859-2056 and providing Conference ID 8696297. 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 Non-GAAP measures
Adjusted EBITDA, as provided herein, represents
net income (loss) from continued operations, 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 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 and investors 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 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. In addition, the Company
has a long history of performing significant international
projects. The Company employs experienced civil, ocean and
mechanical engineering staff in its estimating, production and
project management functions. In its over 130-year history, the
Company has never failed to complete a marine project. Great Lakes
owns and operates the largest and most diverse fleet in the U.S.
dredging industry, comprised of over 200 specialized vessels. Great
Lakes has a disciplined training program for engineers that ensures
experienced-based performance as they advance through Company
operations. The Company’s Incident-and Injury-Free® (IIF®) safety
management program is integrated into all aspects of the Company’s
culture. The Company’s commitment to the IIF® culture promotes a
work environment where employee safety is paramount.
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," “are optimistic,” 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: impacts resulting from or
attributable to the COVID-19 pandemic, our ability to obtain
federal government dredging and other contracts; uncertainties in
federal government budgeting; extended federal government
shutdowns, which may lead to funding issues, the incurrence of
costs without payment or reimbursement under our contracts, and
delays or cancellations of key projects; the risk that the
President of the United States may divert funds away from the Army
Corps of Engineers in response to a national emergency; 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
and declining relationships amongst certain governments in the
Middle East and the impact this may have on infrastructure
investment, asset value of such operations, and local licensing,
permitting and royalty issues; increased cost of certain material
used in our operations due to tariffs; a significant negative
change to large, single customer contracts from which a significant
portion of our international revenue is derived; changes in
previous-recorded net revenue and profit as a result of the
significant estimates made in connection with our methods of
accounting for recognizing revenue; 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; impacts of legal and regulatory proceedings, including
potential penalties and reputational damage as a result of such
proceedings: unforeseen delays and cost overruns related to the
construction of new vessels, including potential mechanical and
engineering issues; our becoming liable for the obligations of
joint ventures, partners and subcontractors; capital and
operational costs due to environmental regulations; market and
regulatory responses to climate change; our potential entry into
the offshore wind market; unionized labor force work stoppages;
increased costs associated with the transition and risks related to
employee retention; 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
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, 2020, 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 |
|
|
March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
Contract revenues |
$ |
177,633 |
|
|
$ |
217,695 |
|
Gross profit |
|
33,076 |
|
|
|
68,474 |
|
General and administrative
expenses |
|
16,322 |
|
|
|
15,571 |
|
(Gain) loss on sale of
assets—net |
|
106 |
|
|
|
(145 |
) |
Operating income |
|
16,648 |
|
|
|
53,048 |
|
Interest expense—net |
|
(6,586 |
) |
|
|
(6,630 |
) |
Other income (expense) |
|
141 |
|
|
|
(1,121 |
) |
Income before income taxes |
|
10,203 |
|
|
|
45,297 |
|
Income tax provision |
|
(1,389 |
) |
|
|
(11,310 |
) |
Net income |
$ |
8,814 |
|
|
$ |
33,987 |
|
|
|
|
|
|
|
|
|
Basic
earnings per share |
$ |
0.14 |
|
|
$ |
0.53 |
|
Basic weighted average shares |
|
65,269 |
|
|
|
64,455 |
|
|
|
|
|
|
|
|
|
Diluted earnings per
share |
$ |
0.13 |
|
|
$ |
0.52 |
|
Diluted weighted average shares |
|
66,159 |
|
|
|
65,717 |
|
|
|
|
|
|
|
|
|
Great Lakes Dredge & Dock Corporation |
|
Reconciliation of Net Income to Adjusted
EBITDA |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
Net income |
$ |
8,814 |
|
|
$ |
33,987 |
|
Adjusted for: |
|
|
|
|
|
|
|
Interest expense—net |
|
6,586 |
|
|
|
6,630 |
|
Income tax provision |
|
1,389 |
|
|
|
11,310 |
|
Depreciation and amortization |
|
10,053 |
|
|
|
9,451 |
|
Adjusted EBITDA |
$ |
26,842 |
|
|
$ |
61,378 |
|
|
|
|
|
|
|
|
|
Great Lakes Dredge & Dock Corporation |
|
Selected Balance Sheet Information |
|
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
Period Ended |
|
|
March 31, |
|
|
December 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
177,708 |
|
|
$ |
216,510 |
|
Total current assets |
|
349,677 |
|
|
|
362,693 |
|
Total assets |
|
959,982 |
|
|
|
958,024 |
|
Total current liabilities |
|
169,297 |
|
|
|
176,287 |
|
Long-term debt |
|
323,958 |
|
|
|
323,735 |
|
Total equity |
|
356,610 |
|
|
|
346,668 |
|
|
|
|
|
|
|
|
|
Great Lakes Dredge & Dock Corporation |
Revenue and Backlog Data |
(Unaudited and in thousands) |
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
Revenues |
|
2021 |
|
|
|
2020 |
|
Dredging: |
|
|
|
|
|
|
|
Capital - U.S. |
$ |
77,606 |
|
|
$ |
83,549 |
|
Capital - foreign |
|
4,709 |
|
|
|
6,862 |
|
Coastal protection |
|
46,631 |
|
|
|
79,850 |
|
Maintenance |
|
45,301 |
|
|
|
42,385 |
|
Rivers & lakes |
|
3,386 |
|
|
|
5,049 |
|
Total revenues |
$ |
177,633 |
|
|
$ |
217,695 |
|
|
|
|
|
|
|
|
|
|
As of |
|
|
March 31, |
|
|
December 31, |
|
|
March 31, |
|
Backlog |
|
2021 |
|
|
|
2020 |
|
|
|
2020 |
|
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
Capital - U.S. |
$ |
310,163 |
|
|
$ |
320,920 |
|
|
$ |
303,637 |
|
Capital - foreign |
|
2,077 |
|
|
|
6,865 |
|
|
|
23,896 |
|
Coastal protection |
|
82,589 |
|
|
|
97,986 |
|
|
|
76,786 |
|
Maintenance |
|
84,820 |
|
|
|
125,090 |
|
|
|
58,945 |
|
Rivers & lakes |
|
6,334 |
|
|
|
8,515 |
|
|
|
11,631 |
|
Total
backlog |
$ |
485,983 |
|
|
$ |
559,376 |
|
|
$ |
474,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
For further information contact: Tina
BaginskisDirector, Investor
Relations630-574-3024
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