Great Lakes Dredge & Dock Corporation reported revenue of $126.7 million for the quarter ended March 31 2007 a 17 percent increase from first quarter 2006 revenue of $108.4 million.
Results in the first quarter were driven primarily by maintenance projects and work in the Middle East. Great Lakes began work on another project in Bahrain while continuing its large Diyaar land reclamation project among others.
Gross profit growth in the first quarter of both 2007 and 2006 was hindered by increases in self-insured claims reserves. Despite these two factors gross profit grew by more than 18 percent from a year ago producing a slight increase in the gross profit margin to 10.8 percent.
Strong revenue growth enabled the company to effectively leverage its operating expenses resulting in more than a 46 percent increase in operating income during the first quarter of 2007. Interest expense was $4.3 million for the quarter a decrease of $1.9 million from the first quarter 2006 primarily due to the pay down in the fourth quarter of 2006 of the company’s term debt. In addition non-cash adjustments to the market value of the company’s interest rate swap were favorable between the quarters. EBITDA (earnings before interest taxes depreciation and amortization) of $12.4 million for the 2007 quarter was up more than 20 percent from $10.2 million in the previous year.
Net income was $1 million in the first quarter of 2007 compared with a net loss of $1.5 million in the first quarter of 2006.
At the beginning of the second quarter Great Lakes signed definitive agreements to purchase two dredges from two domestic dredging service providers. (See Great Lakes Dredge & Dock Purchases Eagle I and Meridian from C.F. Bean LLC IDR March/April 2007 page 8.) The increase in capacity will enhance the company’s competitive position in capital and beach dredging and enable it to take on additional domestic and foreign work.
The first quarter domestic bid market produced approximately $116.5 million of contract awards higher than the first quarter of 2006 but less than the average quarterly bid markets over the past few years. However during the quarter the company was low bidder on a $64 million capital project in New Jersey that has not yet been awarded and is not included in the quarter’s bid market.
On March 31 2007 dredging backlog was $267.2 million compared with $204.1 million a year ago and $352.6 million on December 31 2006. Demolition services backlog was $15.2 million compared with $16.6 million on December 31 2006. The company’s March 31 2007 recorded backlog does not reflect approximately $256 million of low bids pending award or additional phases (“options”) pending on projects in backlog.
For example contract options of approximately $156 million are expected to be awarded for the second phase of the Diyaar land reclamation contract in the next 12 to 18 months. Additionally the capital project in New Jersey for $64 million is expected to be awarded in this month (May).
Douglas B. Mackie president and chief executive officer said “We are pleased with our first quarter operating results particularly given the challenges that inclement weather presented along the East Coast.
“Equally encouraging is the increased capacity we will gain with the acquisition of two existing dredges which had been operated in the domestic market by competitors. We have enlarged our fleet while not increasing overall market capacity enhancing our competitive position domestically” he said.