Great Lakes Dredge & Dock Corporation
) reported earnings per share of 1 cent in the first quarter of
2013, half the year-ago quarter's earnings and falling short of
the Zacks Consensus Estimate of 5 cents. Weak results at the
demolition segment offset improved performance in the dredging
Sales increased 22% year over year to $189 million in the
quarter, ahead of the Zacks Consensus Estimate of $181 million.
Dredging revenue surged 41% to $174 million, driven by an
increase in coastal protection revenue as well as domestic and
foreign capital revenue. However, demolition revenue declined 54%
to $14.8 million in the quarter, negatively impacted by delays in
three projects leading to a shift of $7 million of revenue into
the remainder of 2013. In addition, another project experienced
unexpected cost overruns.
Gross profit during the quarter increased 29% to $25.8
million. Gross margin expanded 80 basis points to 13.7% in the
quarter. In the Dredging segment, gross margin improved to 18% in
the quarter from 13% in the last year quarter, driven by an
increase in revenue and more favorable weather and better
production. On the other hand, the Demolition segment recorded
negative gross profit margin of 36.8% compared with 12.5% in the
prior year quarter, driven by the decrease in revenue and cost
overruns on certain projects.
General and administrative expenses surged 45% to $19 million,
primarily related to the revenue recognition issues discovered at
2012 end, as well as the addition of Terra Contracting. Total
operating income was $6.6 million; a 2% decline from the year-ago
quarter's operating income of $6.7 million. Operating margin
plunged 90 basis points to 3.5% in the quarter. Adjusted
EBITDA (Earnings before interest, taxes, depreciation and
amortization) was $18 million, up 24% from $14.6 million in the
Demolition operating income increased 288% to $19 million from
the prior year quarter, driven by increased gross profit,
partially offset by an increase in general and administrative
expenses. The demolition segment reported an operating loss of
$12.4 million compared with an operating profit of $1.9 million
in the prior year quarter. The segment incurred a loss due to
negative gross profit and additional general and administrative
expenses, primarily related to bad debt as well as the addition
of Terra Contracting at the end of 2012.
As of the first quarter end, Great Lakes had cash and cash
equivalents of $6.6 million, down from $24.4 million as of 2012
end. Total debt increased to $271 million as of the first quarter
end from $263 million as of 2012 end.
Total backlog as of the first quarter end stood at $417
million, down from $449 million as of 2012 end.
In Dec 2012, Great Lakes purchased the assets of Terra
Contracting, a provider of essential services for environmental,
maintenance and infrastructure-related applications. The
acquisition will enable Great Lakes to broaden the service
offerings of its demolition and environmental businesses and
expand their market reach.
Terra Contracting and Great Lakes' Rivers & Lakes group
are working together on a project in the Midwest valued at
approximately $25 million that will combine Terra Contracting's
services and Rivers & Lakes' dredging abilities. This
significant win should contribute to revenue of both the
groups. Furthermore, Great Lakes' environmental joint venture
company, TerraSea, is in final negotiations for an environmental
project in New Jersey.
After a record fourth quarter of 2012, the Dredging segment
delivered another strong quarter. This momentum is expected to
continue, going forward. Great Lakes' Australia and Brazil
projects will begin dredging in the second quarter. The domestic
dredging bid market continues to be active. Great Lakes has won
52% of the market in the first quarter and added a $30 million
coastal protection project in April. There continue to be
numerous prospective Superstorm Sandy related projects. The State
of Louisiana recently announced $340 million of potential
projects funded by the initial BP settlement.
The demolition segment will, however, require some time to
deliver a turnaround. Great Lakes foresees numerous demolition
and environmental remediation opportunities on the horizon, and
plans to selectively target those projects that it can execute
Great Lakes Dredge & Dock Corporation is the largest
provider of dredging services in the United States. Great Lakes
is also one of the largest U.S. providers of commercial and
industrial demolition and remediation services, mainly in the
Northeast. The company owns a 50% interest in a marine sand
mining operation in N.J. that supplies sand and aggregate for
road and building construction and a 50% interest in an
environmental service operation with the ability to remediate
soil and dredged sediment treatment. Great Lakes owns and
operates the largest and most diverse fleet in the U.S. industry,
comprising over 200 specialized vessels.
Great Lakes currently holds a Zacks Rank #5 (Strong Sell).
Other stocks to consider in the same industry with a favorable
Zacks Rank are
Primoris Services Corporation
) with a Zacks Rank #1 (Strong Buy) while
Orion Marine Group Inc.
Chicago Bridge & Iron
) retain a Zacks Rank #2 (Buy).
CHICAGO BRIDGE (CBI): Free Stock Analysis
GREAT LAKES DRG (GLDD): Free Stock Analysis
ORION MARINE GP (ORN): Free Stock Analysis
PRIMORIS SERVCS (PRIM): Free Stock Analysis
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