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 June 30, 2021.
Second Quarter 2021 Highlights
- Revenue was $169.9 million in the second quarter.
- Operating income was $8.8 million
in the second quarter.
- Net income was $2.1 million in the
second quarter.
- Adjusted EBITDA was $20.2 million
in the second quarter.
- Backlog at June 30, 2021 was $454.4
million.
Management Commentary
Lasse Petterson, President and Chief Executive
Officer commented, “In the first half of 2021, our operations saw a
substantial impact as a result of the COVID-19 pandemic. 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. An important part of
our mitigation and recovery plan was to initiate an extensive
vaccination effort of our crews and staff as vaccines became
available in the second quarter and set an ambitious target to have
a majority vaccinated by the end of the second quarter. Our company
wide vaccinations currently stand at 71% of our staff being fully
vaccinated or partially vaccinated. However, as we rolled out our
vaccination initiative we continued to incur COVID related costs
and experienced increased operational challenges during the second
quarter of the year.
The direct COVID costs of at home and on site
testing and costs of quarantining were $4.3 million in the first
quarter, with an additional $3.0 million incurred in the second
quarter. Direct costs can be easily tracked, but the impact on
projects and operational performance related to COVID are not
easily quantified. However, these impacts could be seen in lower
than expected margins on several jobs. The majority of the projects
affected in the second quarter have now been completed. As we
continue to push our vaccination efforts and reach closer to toward
our 100% staff vaccinations, we are hopeful this will reduce the
COVID impacts to our operations.
We ended the quarter with net income of $2.1
million and Adjusted EBITDA of $20.2 million compared to the second
quarter of 2020 that ended with $9.0 million of net income and
$28.1 million in Adjusted EBITDA. Our first half of 2021 results
did not meet expectations due to the COVID impacts and related
project performance mentioned. Given project activity in which we
are currently engaged, coupled with our backlog, new project
awards, and fewer vessel drydocks for the remainder of the year, we
expect much stronger results in the second half of 2021.
Unfortunately, we do not expect the stronger second half to fully
allow us to achieve our original expectations for 2021.
We expect the domestic bid market to be just as
strong this year as it was in 2020. In the second quarter, Great
Lakes announced awards for $112.8 million in new work that adds to
our 2021 backlog, resulting in a 34.5% market share for the first
half of 2021. Backlog at June 30, 2021 was $454.4 million versus
$423.4 million at June 30, 2020. In addition, Great Lakes was
awarded the Mississippi River Hopper Dredge Rental Project for
$24.3 million in the second quarter. After the end of the quarter,
we were awarded the Cape May Beach Renourishment Project for $12.1
million, and we were low bidder on the Corpus Christi Phase III
Deepening Project for $151.9 million and the Thimble Shoal
deepening and renourishment project for $39.5 million.
Turning to our balance sheet, in May 2021, Great
Lakes successfully refinanced our five year, 8% senior notes for
$325 million at 5.25% for a term of 8 years. These new, more
favorable financial and business terms give the Company a stable
debt structure for a longer term and result in approximately $9
million in interest expense savings on an annual basis.
We continue to focus on our future growth strategy in our core
dredging business through the renewal and upgrade of our fleet and
in the upcoming offshore wind power generation market. The Biden
administration has pushed to accelerate renewable energy
developments and has set a target to install 30GW of offshore wind
energy generation capacity by 2030 on the U.S. east coast. This
target confirms our plans to enter this new market by building the
first U.S. flagged Jones Act compliant, inclined fall-pipe vessel
for subsea rock installation for wind turbine foundations. 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. We anticipate making an
investment decision in the later part of this year for expected
delivery in early 2024. Additionally, we are considering further
steps to participate in this market and have elected to re-engage
with the Boston Consulting Group (“BCG”) to this time assist us in
confirming our offshore wind market strategy as well as reviewing
other long-term growth strategies for GLDD. BCG commenced work on
this initiative in the second quarter of 2021.”
Quarterly Results
- Revenue was $169.9 million, an
increase of $2.0 million over the second quarter of 2020. The
increase was caused by higher domestic capital and rivers and lakes
revenue, offset partially by lower maintenance, coastal protection
and foreign revenue.
- Gross margin was $22.9 million,
which is a $10.1 million decrease from the prior year quarter.
Gross margin percentage was 13.5% in the second quarter of 2021 as
compared to 19.7% in the second quarter of 2020. Direct COVID-19
costs had an unfavorable impact of $3.0 million on gross profit
during the second quarter. Multiple projects, the majority of which
have now completed, performed below expectations in the first half
of the year. The projects included an international project, two
coastal beach projects in the southeast, one beach project in the
northeast and one capital project in the gulf. During the second
quarter of 2021, we had the New York, Alaska, Texas, Liberty and
Terrapin in drydock. All vessels, except the Terrapin, are
returning to work in the third quarter.
- Operating income was $8.8 million,
which is a $9.5 million decrease from the prior year quarter. The
decrease is a result of lower gross margin due to lower than
expected project performance on multiple jobs offset by a slight
decrease in general and administrative expense compared with prior
year second quarter.
- Net income for the quarter was $2.1
million compared to $9.0 million in the prior year second quarter.
The decrease in operating income is offset slightly by the decrease
in interest expense and income tax expense.
- At June 30, 2021, the Company had
$180.8 million in cash and total debt of $320.7 million.
- At June 30, 2021, the Company had
$454.4 million in backlog as compared to $423.4 million at June 30,
2020.
- Capital expenditures for the second
quarter of 2021 were $27.5 million, which includes $8.1 million for
the construction of our new hopper dredge, $5.4 million for the
construction of new multicats, and $0.6 million for the design of
our rock installation vessel.
Market Update
In 2020, the domestic bid market reached $1.8
billion in projects bid. We continue to be optimistic and believe
the 2021 domestic market will remain strong as it 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,
Freeport and the Houston ship channel that will continue for the
next several years. In addition, our nation’s coasts are subject to
climate change, increasing severe weather events, and sea level
rise, which results in an increase in beach erosion and other
damage that adds to the recurring nature of our business and the
need for more frequent coastal protection and port maintenance
projects. We saw continued support for the dredging industry in the
U.S. Army Corps of Engineers’ (the “Corps”) 2021 budget that was
approved at record high levels. In July of this year, the House of
Representatives approved the Corps 2022 proposed budget that is
slated to be $8.66 billion, an 11% increase over prior year levels.
In this bill the Harbor Maintenance Fund (the “HMTF”) would receive
$2.05 billion, which is $370 million over 2021 budget
appropriations. This record funding is in addition to the annual
cap being lifted from the HMTF in 2020 and the 2020 Water Resource
Development Act which included some additional reforms to HMTF that
will allow Congress to drawdown from the $9.3 billion surplus in
the HMTF.
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. In June of this year, the Reinvesting in Shoreline
Economies and Ecosystems Act, a bipartisan legislation, was
introduced. This legislation would be funded from future off shore
wind and energy revenue and would be used to fund solutions that
build resiliency for communities and ecosystems across the
country.
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, August 3, 2021 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 1152128. The conference call will be available by
replay until Tuesday, August 10, 2021 by calling (855)
859-2056 and providing Conference ID 1152128. 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 131-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, reputational damage and potential inability to
bid, enter into or complete certain government projects 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 |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Contract revenues |
$ |
169,914 |
|
|
$ |
167,920 |
|
|
$ |
347,547 |
|
|
$ |
385,615 |
|
Gross profit |
|
22,922 |
|
|
|
33,016 |
|
|
|
55,998 |
|
|
|
101,490 |
|
General and administrative
expenses |
|
14,224 |
|
|
|
14,804 |
|
|
|
30,546 |
|
|
|
30,375 |
|
Gain on sale of
assets—net |
|
(138 |
) |
|
|
(39 |
) |
|
|
(32 |
) |
|
|
(184 |
) |
Operating income |
|
8,836 |
|
|
|
18,251 |
|
|
|
25,484 |
|
|
|
71,299 |
|
Interest expense—net |
|
(6,657 |
) |
|
|
(6,725 |
) |
|
|
(13,243 |
) |
|
|
(13,355 |
) |
Other income (expense) |
|
755 |
|
|
|
565 |
|
|
|
896 |
|
|
|
(556 |
) |
Income before income taxes |
|
2,934 |
|
|
|
12,091 |
|
|
|
13,137 |
|
|
|
57,388 |
|
Income tax provision |
|
(829 |
) |
|
|
(3,131 |
) |
|
|
(2,218 |
) |
|
|
(14,441 |
) |
Net income |
$ |
2,105 |
|
|
$ |
8,960 |
|
|
$ |
10,919 |
|
|
$ |
42,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ |
0.03 |
|
|
$ |
0.14 |
|
|
$ |
0.17 |
|
|
$ |
0.66 |
|
Basic weighted average shares |
|
65,646 |
|
|
|
64,864 |
|
|
|
65,458 |
|
|
|
64,659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share |
$ |
0.03 |
|
|
$ |
0.14 |
|
|
$ |
0.16 |
|
|
$ |
0.65 |
|
Diluted weighted average shares |
|
66,137 |
|
|
|
65,758 |
|
|
|
66,187 |
|
|
|
65,802 |
|
Great Lakes Dredge & Dock Corporation |
Reconciliation of Net Income to Adjusted
EBITDA |
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net income |
$ |
2,105 |
|
|
$ |
8,960 |
|
|
$ |
10,919 |
|
|
$ |
42,947 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense—net |
|
6,657 |
|
|
|
6,725 |
|
|
|
13,243 |
|
|
|
13,355 |
|
Income tax provision |
|
829 |
|
|
|
3,131 |
|
|
|
2,218 |
|
|
|
14,441 |
|
Depreciation and amortization |
|
10,628 |
|
|
|
9,256 |
|
|
|
20,681 |
|
|
|
18,707 |
|
Adjusted EBITDA |
$ |
20,219 |
|
|
$ |
28,072 |
|
|
$ |
47,061 |
|
|
$ |
89,450 |
|
Great Lakes Dredge & Dock Corporation |
Selected Balance Sheet Information |
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
Period Ended |
|
|
June 30, |
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
180,767 |
|
$ |
216,510 |
Total current assets |
|
|
323,152 |
|
|
362,693 |
Total assets |
|
|
949,633 |
|
|
958,024 |
Total current liabilities |
|
|
160,181 |
|
|
176,287 |
Long-term debt |
|
|
320,696 |
|
|
323,735 |
Total equity |
|
|
360,097 |
|
|
346,668 |
Great Lakes Dredge & Dock Corporation |
Revenue and Backlog Data |
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
Revenues |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
Capital - U.S. |
$ |
79,399 |
|
$ |
63,440 |
|
$ |
157,005 |
|
$ |
146,989 |
Capital - foreign |
|
1,613 |
|
|
3,981 |
|
|
6,322 |
|
|
10,843 |
Coastal protection |
|
46,631 |
|
|
56,038 |
|
|
93,262 |
|
|
135,888 |
Maintenance |
|
37,278 |
|
|
41,968 |
|
|
82,579 |
|
|
84,353 |
Rivers & lakes |
|
4,993 |
|
|
2,493 |
|
|
8,379 |
|
|
7,542 |
Total revenues |
$ |
169,914 |
|
$ |
167,920 |
|
$ |
347,547 |
|
$ |
385,615 |
|
|
As of |
|
|
June 30, |
|
December 31, |
|
June 30, |
Backlog |
|
|
2021 |
|
|
2020 |
|
|
2020 |
Dredging: |
|
|
|
|
|
|
|
|
|
Capital - U.S. |
|
$ |
320,820 |
|
$ |
320,920 |
|
$ |
345,901 |
Capital - foreign |
|
|
269 |
|
|
6,865 |
|
|
19,717 |
Coastal protection |
|
|
51,204 |
|
|
97,986 |
|
|
21,967 |
Maintenance |
|
|
67,440 |
|
|
125,090 |
|
|
25,782 |
Rivers & lakes |
|
|
14,669 |
|
|
8,515 |
|
|
10,036 |
Total
backlog |
|
$ |
454,402 |
|
$ |
559,376 |
|
$ |
423,403 |
For further information contact: Tina
BaginskisDirector, Investor
Relations630-574-3024 |
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