Great Lakes Dredge & Dock Corporation (“Great Lakes”)
(Nasdaq:GLDD), the largest provider of dredging services in the
United States, today reported financial results for the quarter
ended September 30, 2021.
Third Quarter 2021 Highlights
- Revenue was $168.6 million in the third quarter.
- Operating income was $21.4 million
in the third quarter.
- Net income was $13.8 million in the
third quarter.
- Adjusted EBITDA was $32.2 million
in the third quarter.
- Backlog at September 30, 2021 was
$598.5 million.
Management Commentary
Lasse Petterson, President and Chief Executive
Officer commented, “We ended the third quarter with improved
results and a solid backlog. In the first half of 2021, our
operations saw substantial negative impacts from the COVID-19
pandemic. Our priority has been and always will be to ensure the
safety and health of all our people, and we believe that in this
current situation vaccination is an important tool in achieving
this goal. As vaccines became widely available in the second
quarter, we set a target to have all parts of our organization
vaccinated and we are now close to reaching this target.
Although our stringent safety protocols and
increasing vaccination efforts were successful, we did experience
some lingering COVID-19 related costs in the third quarter. The
direct COVID-19 costs were $2.1 million in the third quarter, for a
total of $9.4 million year to date. Indirect COVID-19 cost impacts
are not easily quantified, however we have seen a decrease in our
realized project margins which we attribute in part due to
inefficiencies caused by COVID-19. Today our safety protocols and
our vaccination efforts have resulted in improved project
performance and we are confident that our continued efforts will
ensure reduced COVID-19 related impacts to our operations going
forward.
In addition to the COVID-19 impacts on our third
quarter results, we experienced project delays due to Hurricane
Ida. Several of our projects were impacted and experienced delays
returning to work due to the damage and debris in the ports. One of
our vessels, the Terrapin Island, was damaged in the storm and
resulted in a 6 week unplanned drydock. All vessels are back at
work in this fourth quarter.
We ended the quarter with net income of $13.8
million and Adjusted EBITDA of $32.2 million compared to the third
quarter of 2020 that ended with $12.5 million of net income and
$32.2 million in Adjusted EBITDA. 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 improved results in the fourth quarter of 2021.
Unfortunately, even with improving results we do not expect to
achieve our original expectations for 2021.
We continue to be confident in the domestic bid
market and 2021 is shaping up to be as strong as 2020. During the
third quarter, Great Lakes was awarded $300.5 million in work
resulting in a year to date 37.1% bid market share bringing our
third quarter backlog to $598.5 million. In addition, we ended the
quarter with $533.9 million in low bids and options pending award.
Post quarter end, Great Lakes was awarded the Oak Island beach
renourishment project for $17.1 million, the South Atlantic
Regional Harbor Dredging project for $25.8 million, and we have
added an additional $106.9 million to low bids pending award, which
includes the Houston Project 11 Deepening that was announced by the
Port of Houston.
The offshore wind power generation market will
provide GLDD with a good opportunity for growth. The Biden
administration’s 30-gigawatt target of offshore wind energy by 2030
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 fourth quarter of 2021 with expected delivery of the vessel
in the second half of 2024.”
Quarterly Results
- Revenue was $168.6 million, a
decrease of $7.2 million over the third quarter of 2020. The
decrease was caused by lower coastal protection and foreign
revenue, offset partially by higher domestic capital, maintenance,
and rivers and lakes revenue.
- Gross margin was $36.3 million,
which is relatively flat as compared with the prior year quarter.
Gross margin percentage was 21.5% in the third quarter of 2021 as
compared to 20.7% in the third quarter of 2020. Direct COVID-19
costs had an unfavorable impact of $2.1 million on gross profit
during the third quarter. During the third quarter of 2021, we had
the Dredge 53, the Alaska, and the Terrapin Island in drydock. The
Alaska returned to work in the third quarter, the Terrapin Island
returned to work earlier in the fourth quarter and the Dredge 53 is
preparing to start operations in Mobile, Alabama.
- Operating income was $21.4 million,
which is a $1.8 million decrease from the prior year quarter due in
large part to a $1.7 million loss of use claim credit received last
year.
- Net income for the quarter was
$13.8 million compared to $12.5 million in the prior year third
quarter as the decrease in operating income was more than offset by
the decrease in interest expense and income tax expense.
- At September 30, 2021, the Company
had $173.8 million in cash and total debt of $320.8 million.
- At September 30, 2021, the Company
had $598.5 million in backlog as compared to $661.3 million at
September 30, 2020.
- Capital expenditures for the third
quarter of 2021 were $21.1 million, which includes $8.3 million for
the construction of our new hopper dredge, $2.1 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 dredging bid market
reached $1.8 billion in projects bid. We continue to be confident
in the market for the remainder of the year and still anticipate it
to be as strong as 2020. The market continues to be driven by the
large-scale port deepening projects along the East and Gulf coasts.
We expect in 2022 to see bids for multiple project phases for port
deepenings in Norfolk, Freeport, Mobile, Sabine and the Houston
ship channel. In addition, our nation’s coasts are subject to
climate change, increasing severe weather events like Hurricane
Ida, and sea level rise, which can cause 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 Corps’ 2022 budget that was approved by the House
of Representatives and 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. In addition, the 2020
Water Resource Development Act included some additional reforms to
HMTF that will allow Congress to drawdown from the $9.3 billion
surplus in the HMTF. The U.S. government including the Corps are
presently operating under a continuing resolution with budget
approval anticipated before the end of the year. Included in the
continuing resolution are significant dollars for emergency funding
as a result of Hurricane Ida impacts. In addition, the US Senate
passed the $1.2 trillion infrastructure bill where the Corp will be
granted $11.6 billion in funding to improve the nations resilience
to the effects of climate change, including flood control and
waterway dredging.
We continue to see strong support for offshore
wind from the Biden administration. In March 2021, 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. As part of that initiative the Departments of the
Interior, Energy and Commerce committed to a shared goal of
installing 30 gigawatts of offshore wind power generation capacity
in U.S. waters by 2030. In May, the administration approved the
Vineyard Wind Project which is the nation’s first large-scale
offshore wind project estimated to include up to 84 turbines. The
administration also 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 support
of offshore wind.
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, November 2, 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 1187471. The conference call will be available by
replay until Tuesday, November 4, 2021 by calling (855)
859-2056 and providing Conference ID 1187471. 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 to the Company’s new
headquarters in Houston, TX, 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, Item 1A. “Risk Factors” of Great Lakes’ Quarterly Report
on Form 10-Q for the quarter ended June 30, 2021, 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, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Contract revenues |
$ |
168,638 |
|
|
$ |
175,841 |
|
|
$ |
516,185 |
|
|
$ |
561,456 |
|
Gross profit |
|
36,281 |
|
|
|
36,351 |
|
|
|
92,279 |
|
|
|
137,841 |
|
General and administrative
expenses |
|
15,167 |
|
|
|
14,888 |
|
|
|
45,713 |
|
|
|
45,263 |
|
Proceeds from loss of use
claim |
|
- |
|
|
|
(1,723 |
) |
|
|
- |
|
|
|
(1,723 |
) |
Gain on sale of
assets—net |
|
(291 |
) |
|
|
- |
|
|
|
(323 |
) |
|
|
(184 |
) |
Operating income |
|
21,405 |
|
|
|
23,186 |
|
|
|
46,889 |
|
|
|
94,485 |
|
Interest expense—net |
|
(4,214 |
) |
|
|
(6,719 |
) |
|
|
(17,457 |
) |
|
|
(20,074 |
) |
Other income (expense) |
|
(204 |
) |
|
|
156 |
|
|
|
692 |
|
|
|
(400 |
) |
Income before income taxes |
|
16,987 |
|
|
|
16,623 |
|
|
|
30,124 |
|
|
|
74,011 |
|
Income tax provision |
|
(3,181 |
) |
|
|
(4,076 |
) |
|
|
(5,399 |
) |
|
|
(18,517 |
) |
Net income |
$ |
13,806 |
|
|
$ |
12,547 |
|
|
$ |
24,725 |
|
|
$ |
55,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ |
0.21 |
|
|
$ |
0.19 |
|
|
$ |
0.38 |
|
|
$ |
0.86 |
|
Basic weighted average shares |
|
65,691 |
|
|
|
64,860 |
|
|
|
65,535 |
|
|
|
64,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share |
$ |
0.21 |
|
|
$ |
0.19 |
|
|
$ |
0.37 |
|
|
$ |
0.84 |
|
Diluted weighted average shares |
|
66,311 |
|
|
|
65,894 |
|
|
|
66,246 |
|
|
|
65,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great Lakes Dredge & Dock Corporation |
Reconciliation of Net Income to Adjusted
EBITDA |
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
Net income |
$ |
13,806 |
|
$ |
12,547 |
|
$ |
24,725 |
|
$ |
55,494 |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
Interest expense—net |
|
4,214 |
|
|
6,719 |
|
|
17,457 |
|
|
20,074 |
Income tax provision |
|
3,181 |
|
|
4,076 |
|
|
5,399 |
|
|
18,517 |
Depreciation and amortization |
|
10,993 |
|
|
8,877 |
|
|
31,674 |
|
|
27,584 |
Adjusted EBITDA |
$ |
32,194 |
|
$ |
32,219 |
|
$ |
79,255 |
|
$ |
121,669 |
|
|
|
|
|
|
|
|
|
|
|
|
Great Lakes Dredge & Dock Corporation |
Selected Balance Sheet Information |
(Unaudited and in thousands) |
|
|
|
|
|
|
|
Period Ended |
|
September 30, |
|
December 31, |
|
2021 |
|
2020 |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
173,838 |
|
$ |
216,510 |
Total current assets |
|
314,417 |
|
|
362,693 |
Total assets |
|
950,786 |
|
|
958,024 |
Total current liabilities |
|
145,002 |
|
|
176,287 |
Long-term debt |
|
320,834 |
|
|
323,735 |
Total equity |
|
374,780 |
|
|
346,668 |
|
|
|
|
|
|
Great Lakes Dredge & Dock Corporation |
Revenue and Backlog Data |
(Unaudited and in thousands) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
Revenues |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
Capital - U.S. |
$ |
111,481 |
|
$ |
98,194 |
|
$ |
268,486 |
|
$ |
245,183 |
Capital - foreign |
|
274 |
|
|
9,787 |
|
|
6,596 |
|
|
20,630 |
Coastal protection |
|
15,945 |
|
|
29,780 |
|
|
109,208 |
|
|
165,668 |
Maintenance |
|
35,052 |
|
|
33,453 |
|
|
117,631 |
|
|
117,806 |
Rivers & lakes |
|
5,886 |
|
|
4,627 |
|
|
14,265 |
|
|
12,169 |
Total revenues |
$ |
168,639 |
|
$ |
175,841 |
|
$ |
516,185 |
|
$ |
561,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
September 30, |
|
December 31, |
|
September 30, |
Backlog |
2021 |
|
2020 |
|
2020 |
Dredging: |
|
|
|
|
|
|
|
|
Capital - U.S. |
$ |
411,354 |
|
$ |
320,920 |
|
$ |
411,621 |
Capital - foreign |
|
— |
|
|
6,865 |
|
|
11,050 |
Coastal protection |
|
139,072 |
|
|
97,986 |
|
|
109,374 |
Maintenance |
|
39,155 |
|
|
125,090 |
|
|
110,879 |
Rivers & lakes |
|
8,900 |
|
|
8,515 |
|
|
18,357 |
Total
backlog |
$ |
598,481 |
|
$ |
559,376 |
|
$ |
661,281 |
|
|
|
|
|
|
|
|
|
For further information contact: Tina
BaginskisDirector, Investor
Relations630-574-3024
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