Great Lakes Dredge & Dock Corporation (Nasdaq:GLDD), the largest provider of dredging services in the United States, reported financial results for the quarter and year ended December 31, 2019.
Fourth Quarter 2019 Highlights
- Revenue was $164.3 million in the fourth quarter, a decrease of $8.9 million compared with the prior year fourth quarter.
- Gross profit margin percentage increased to 21.0% in the fourth quarter compared with 20.6% in the prior year fourth quarter.
- Total operating income from continuing operations was $22.2 million, an increase of $5.5 million over the prior year fourth quarter.
- Net income from continuing operations was $14.8 million, an increase of $9.8 million over the prior year fourth quarter.
- Adjusted EBITDA from continuing operations was $32.6 million, an increase of $4.2 million over the prior year fourth quarter.
Full Year 2019 Highlights
- Revenue was $711.5 million for the full year 2019, a $90.7 million or 14.6% increase over the prior year.
- Gross profit margin percentage increased to 21.6% in 2019 as compared to 18.0% in 2018.
- Total operating income from continuing operations was $98.1 million, a $45.5 million increase over the prior year.
- Net income from continuing operations was $55.7 million, a $44.7 million increase over the prior year.
- Adjusted EBITDA from continuing operations was $135.6 million as compared to $100.4 million in 2018.
- Balance Sheet & Capital Expenditures
- Cash at December 31, 2019 was $187.0 million with total debt of $322.8 million, compared to cash of $34.5 million and total debt of $333.5 million at December 31, 2018.
- Net debt at December 31, 2019 was $135.8 million, a $163.2 million reduction from December 31, 2018. The Company defines net debt as total debt less cash and cash equivalents.
- Ratio of net debt to adjusted EBITDA from continuing operations has been reduced to 1.00x compared to 2.98x at December 31, 2018.
- Total capital expenditures for 2019 were $44.4 million compared to $38.1 million in 2018.
Backlog
- Backlog was $589.4 million at December 31, 2019.
- Subsequent to year-end, the Company has been awarded an additional $44.8 million in project work.
"As we finished the fourth quarter of 2019, port deepening projects in Charleston, Jacksonville and Corpus Christi were in full operation with work continuing into 2020. Operationally, 2019 had lower dredging activity as compared to prior year, due to several planned vessel dry dockings. The impact of the increased dry dockings was partially offset by strong performance on the San Jacinto flood prevention project in Houston, Texas and the Jacksonville port deepening project in Florida. Although the bid market was lower than expected in the fourth quarter, the total bid market finished strong at $1.8 billion. We expect the dredging market to remain strong for the next two to three years. Our focus remains on port deepening projects as well as coastal protection projects which include the renourishment of coastal beaches that have been damaged after the heavy hurricane seasons of the past three years. Some of these projects are expected to bid in the first half of 2020. We look forward to working closely with the United States Army Corps of Engineers to ensure safe and successful execution and completion of these projects that are critical to protecting our Nation’s coastlines and strengthening our infrastructure. We remain confident in our strategy and will continue to utilize our strengths to drive greater shareholder value and returns,” CEO Lasse Petterson said.
Operational Update
Fourth Quarter 2019
- Revenue was $164.3 million, a decrease of $8.9 million over the fourth quarter of 2018. In the fourth quarter of 2019, the decrease in rivers & lakes and coastal protection revenue was partially offset by the increase in domestic capital and foreign dredging revenue. Vessel dry docks also contributed to the revenue decrease compared to the prior year quarter.
- Gross profit margin was $1.0 million lower than the prior year quarter, however the gross margin percentage increased to 21.0% in the fourth quarter of 2019 compared with 20.6% in the fourth quarter of 2018, due to consistent strong project performance despite the reduction in revenue.
- Operating income was $22.2 million, a $5.5 million increase over the prior year quarter. The increase is a result of $4.6 million received from the settlement of various claims related to vessel construction and a decrease of $2.7 million in loss from sales of assets, offset partially by lower gross profit.
- Net income from continuing operations for the quarter was $14.8 million compared to $5.0 million in the prior year quarter. The improvement in net income is a result of higher operating income, a decrease in net interest expense of $1.4 million, and a decrease in tax expenses primarily due to an adjustment in the overall blended state tax rate that was made in the fourth quarter of 2019.
- Full Year 2019
Revenue for the full year 2019 was $711.5 million, an increase of $90.7 million from 2018. This increase was primarily due to higher maintenance dredging, rivers & lakes, and foreign dredging revenue, offset partially by lower domestic capital revenue.
Gross profit for the full year 2019 was $153.8 million, an increase of $42.3 million from 2018. Gross profit margin percentage improved to 21.6% for the full year 2019 as compared to 18.0% for the full year 2018 based on the additional revenue and strong project performance. Positive results on the Jacksonville port deepening, San Jacinto and Delaware River projects contributed to this increase, which was partially offset by lower margin experienced on foreign projects.
Operating income was $98.1 million, an increase of $45.5 million over the prior year. The increase is a result of improved gross profit offset slightly by an increase in general and administrative expense due to higher incentive pay.
Net income from continuing operations for the full year was $55.7 million compared to $11.0 million in 2018, an increase of $44.7 million from 2018. This increase is a result of an increase in operating income, a decrease of interest expense, offset partially by an increase in taxes.
Market Update
The 2019 domestic dredging bid market remained strong with a total bid market for the year of $1.8 billion. The domestic market continues to be driven by the large-scale port deepening projects along the east and gulf coasts. 2020 will see bids for multiple project phases for port deepenings in Corpus Christi, Charleston, Jacksonville and Mobile that will continue for the next two to three years. Additionally, we have begun work on several beach renourishment projects on the New Jersey shoreline to assist in their recovery from the damage caused by coastal storms and to reduce the risk of future damage from flood and storm events. These projects are important in providing resilience to protect coastal communities and ecosystems as well as driving job creation and economic development. All of these projects have strong support from Congress, as evidenced in the approved U.S. Army Corps of Engineers fiscal year 2020 appropriations bill signed into law in December of 2019.
In addition to the deepening and coastal protection projects, several Liquefied Natural Gas, petrochemical and crude oil projects are creating the need for port development in support of energy exports. We expect several of these private client projects to progress to bid in 2020. Great Lakes’ fleet and safety performance position the Company well to perform in this growing segment of the market.
Classification of Environmental and Infrastructure Business
During the second quarter of 2019, the Company completed the sale of its historical environmental & infrastructure business. The historical environmental & infrastructure segment has been retrospectively presented as discontinued operations and assets and liabilities held for sale, and as such is no longer reflected in continuing operations.
About Great Lakes
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 129-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.