Great Lakes Reports Third Quarter 2012 Results

  Great Lakes Reports Third Quarter 2012 Results

                 Project Execution Shifted to Fourth Quarter

   Full Year Adjusted EBITDA Guidance Modified to $85 to $90 Million Due to
                               Hurricane Sandy

Business Wire

OAK BROOK, Ill. -- November 06, 2012

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), the largest provider of
dredging services in the United States and a major provider of commercial and
industrial demolition and remediation services, today reported financial
results for the quarter and nine months ended September 30, 2012.

Commentary

Chief Executive Officer Jonathan Berger said, “Our third quarter results were
hampered by certain factors we will outline. We entered the fourth quarter
with scheduled revenues and margin to achieve our previously stated annual
goals. Since then the epic Hurricane Sandy has had a significant impact on our
expected results for the fourth quarter as we will have lost a total of 25
working days over seven projects because we were forced to move our dredges
and support equipment to protected waters. Our operations team and crews did a
wonderful job of executing our emergency plans safely and efficiently. We were
able to ride out Sandy with minimal damage to our operating equipment and have
gotten the projects back up and running quickly. We currently estimate
approximately $6 million of revenue and $3 million of gross margin has been
pushed into next year, and we will incur $3 million of additional one time
expenditures in the fourth quarter due to the storm. We have therefore
modified our projected full-year adjusted EBITDA range to $85 to $90 million.

“Hurricane Sandy has significantly affected coastal communities along the East
Coast. As a Company, Great Lakes’ thoughts and prayers go out to each and
every one of the individuals and families impacted. The dredging industry has
performed beach nourishment and shore protection in these markets for decades.
We have received positive reports that the Nags Head Beach in North Carolina
weathered the storm well as a result of a large beach nourishment project we
completed last year. We believe Hurricanes Sandy, Debby, and Isaac should
result in increasing focus and demand for supplemental Federal funding
critical for coastal restoration and beach projects in the Gulf of Mexico and
on the East Coast.

“Our third quarter was challenging as our dredging segment utilization was
impacted by Hurricane Isaac, which not only delayed four large dredging
projects, but added costs and lowered expected margins on these projects. We
were further impacted by projects that were bid later than expected, therefore
the notice to proceed was received and work started late in third quarter and
early into the fourth. Also, $30 million in options on the projects in the
third quarter were not awarded until the fourth quarter. This shift in revenue
to the fourth quarter resulted in lower fixed cost coverage and compressed
gross margin in the third quarter. Although late bid award timing caused us a
short term challenge in the third quarter, the pickup in the domestic bid
market late in the quarter positions us well for a strong fourth quarter and
beyond. Approximately $134 million in projects were awarded to the Company
during the third quarter of 2012. These awards, along with the award of a $47
million project in the Middle East, helped drive total backlog up to $506
million.

“After several strong quarters, the demolition segment’s results were
negatively impacted by cost overruns caused by weather and scope changes
outside those allowed to be reimbursed under the contract. These impacts
lowered the demolition gross margin by over 9% and were limited to the third
quarter. On a positive note, the demolition segment was awarded a $3 million
power plant project in North Carolina prior to quarter end and another $12
million industrial demolition project in Ohio in October. Management continues
to focus on large complex projects with higher margins, such as bridge,
industrial, municipal and utility demolition and remediation.”

Mr. William Steckel, Senior Vice President and Chief Financial Officer added,
“Our management team is focused on delivering strong results in the upcoming
fourth quarter. The third quarter reflects the negative impact of the shift of
project execution into the fourth quarter. We have prepared our equipment and
personnel for the project workload planned in the upcoming quarter. As
planned, we have experienced a significant increase in our working capital,
and corresponding decrease in our cash this year. Two projects with the most
significant investment are Wheatstone and the Scofield coastal restoration.
Collectively we have invested nearly $40 million in these important projects
that we expect to be monetized in 2013. We have a strong focus going forward
on working capital management and generating positive cash flow.”

2012 Third Quarter Operating Results & Highlights

                                       Q3 2012             Q3 2011
Revenue                                 $166.8 million       $158.5 million
Increase                                5.2%
                                                             
Gross Profit                            $13.0 million        $27.4 million
Gross Profit Margin                     7.8%                 17.3%
                                                             
Operating Income                        $1.5 million         $14.8 million
Decrease                                89.9%
                                                             
Net Income (loss) attributable to       $ (2.1) million      $5.6 million
Great Lakes
Per Diluted Share                       $ (0.04)             $0.09
                                                             
Adjusted EBITDA                         $12.1 million        $26.0 million
Decrease                                53.5%
                                                             
                                        September 30, 2012   December 31, 2011
Total Debt                              $255.1 million       $255.6 million
                                                             
Net Debt (Debt less cash)               $216.8 million       $142.3 million
                                                             
Cash and cash equivalents               $38.3 million        $113.3 million
                                                             

Revenue & Gross Profit

  *Revenue increases in the quarter included:

       *66% increase in foreign dredging revenue driven by revenue recognized
         on our Australian project;
       *57% increase in maintenance dredging revenue driven by a large
         maintenance project in Louisiana as well as other projects on the
         Mississippi River that were unique due to the drought in the Midwest
         U.S. during 2012;
       *14% increase in capital dredging revenue;
       *Demolition revenue increased 17% due to concluding work on two New
         York projects;
       *The above increases were partially offset by decreases in beach
         nourishment revenue (50%) and rivers & lakes (32%)

  *Gross profit margin (gross profit divided by revenue) declined due to:

       *Weather impacts from Hurricane Isaac in the Gulf;
       *Dredge employment shifting out of third quarter and into the fourth,
         resulting in lower fixed cost coverage in the current quarter;
       *Increase in maintenance expense;
       *Weaker demolition results

Operating Income

  *Impacted by items noted above;

Cash and cash equivalents

  *Cash and cash equivalents declined due to continued investments in working
    capital on long term projects as well as capital investments in our fleet
    and new equipment.

Nine Months Ended September 30, 2012 Operating Results & Highlights

                                        YTD 9/30/12     YTD 9/30/11
Revenue                                  $488.2 million   $468.8 million
Increase                                 4.1%
                                                          
Gross Profit                             $56.9 million    $74.6 million
Gross Profit Margin                      11.7%            15.9%
                                                          
Operating Income                         $20.8 million    $39.1 million
Decrease                                 46.8%
                                                          
Net Income attributable to Great Lakes   $3.4 million     $9.7 million
Per Diluted Share                        $0.06            $0.16
                                                          
Adjusted EBITDA                          $47.7 million    $67.9 million
Decrease                                 29.7%
                                                          

Revenue & Gross Profit

  *Year to date 2012 revenue increased primarily due to higher demolition
    revenues year to date while dredging revenues were in line with the same
    period in 2011; however, gross profit margin was down due to weather
    impacts and lower dredge utilization during the 2012 first and third
    quarters.

Operating Income

  *Operating income was down for the nine months ended September 30, 2012
    compared to the comparable period in the prior year, due to lower gross
    profit, as discussed above. In addition, during the second quarter of 2011
    the Company sold an outdated, underutilized hopper dredge, which generated
    cash proceeds of $6.6 million and resulted in a gain of $2.1 million.

Net Income Attributable to Great Lakes

  *Net income attributable to Great Lakes for the nine months ended September
    30, 2012 decreased due to lower operating income. The first half of 2011
    included a debt restructuring expense of $5.1 million resulting from the
    retirement of old notes and the issuance of the $250 million of 7.375%
    senior unsecured notes.

Bid Market & Backlog

The domestic dredging bid market for the nine months ended September 30, 2012
totaled $678 million, compared to $847 million in the prior year. The Company
won 39% of the overall domestic bid market during this period, in line with
its prior three year average of 39%. For the first nine months of 2012 Great
Lakes won:

  *43%, or $48 million, of the beach nourishment projects awarded;
  *74%, or $84 million, of the capital projects awarded;
  *25%, or $92 million, of the maintenance projects awarded; and
  *45%, or $42 million, of the rivers & lakes projects awarded.

Similar to the prior year, third quarter bidding activity increased, though
not to the levels of third quarter of 2011. Through the first nine months of
2012, the maintenance and rivers & lakes markets have increased, offset by a
decrease in the capital and beach nourishment markets. The beach nourishment
market was atypically high in 2011, with the highest volume of beach work ever
awarded. Given the awards to date and the expected bid letting in the fourth
quarter, 2012 is still expected to be a solid year for beach awards. In
addition, we still expect more capital work to bid in the fourth quarter,
driving up the current capital market.

Great Lakes’ backlog remains at a high level given Great Lakes’ bidding
success year to date along with the addition of the Wheatstone LNG project in
Western Australia. Dredging backlog and pending domestic awards at September
30, 2012 reached $525 million, which compares favorably to $355 million at
December 31, 2011. The Company’s contracted dredging backlog was $463 million
at September 30, 2012 compared to $319 million at December 31, 2011.

Demolition segment backlog was $43 million and $51 million at September 30,
2012 and December 31, 2011, respectively. The demolition segment also added a
$12 million project in Columbus, OH in the fourth quarter.

Commentary

President and Chief Operating Officer Bruce Biemeck said, “Projects awarded
prior to September 30, 2012 provided sufficient backlog to meet our original
fourth quarter plan and previously reported earnings guidance. However, with
the impacts of Hurricane Sandy, we are lowering our full year Adjusted EBITDA
guidance to $85 to $90 million. We will need to execute well on projects in
backlog and experience average weather conditions going forward, but our
management and operations teams have a proven track record of delivering
results.

“We commend our team for the outstanding job in managing personnel and
equipment during the hurricane. Our personnel are safe, after successfully
protecting our equipment, and are back at work executing on projects. Our
readiness plans are well thought out, have been properly rehearsed and have
proven to be effective.

“We have made investments in our equipment, preparation for the Wheatstone LNG
project and we have increased our pipe inventory, resulting in continued
utilization of our working capital. With the high level of operating activity
expected in the fourth quarter, as well as dredging beginning in Australia in
2013, we expect to begin monetizing our working capital buildup and to
replenish the cash balance over the next several quarters.

“We continue to be excited about our near term market prospects. The timing of
the Miami award has moved into the first quarter of 2013 and we believe we are
well positioned for this project. In October, the U.S. Army Corps of Engineers
released specific details on this project and began to solicit proposals. In
addition, we currently expect three sizable beach projects, another New York
deepening project and a Gulf Coast project to be let to bid before year-end.
We also see several desirable bidding opportunities in the first half of 2013.

“Internationally, we expect to see significant impact to our results from the
Australian Wheatstone LNG project in 2013 and 2014. In the third quarter, we
added a land reclamation project in the Middle East for nearly $50 million. We
continue to identify other international dredging projects that may be a good
fit for our vessels, particularly in the Middle East, and we continue to
follow the many potential opportunities in Brazil. We are focusing on our
international sales and marketing effort as we see an abundance of
international opportunities ahead, which we believe can yield better, more
consistent results.

“The demolition management team is working diligently to add opportunities
leading to growth by elevating the range of professional services offered
through a more capable support team. The successful partnership of our
demolition and dredging businesses is an important component to our Company’s
growth as evidenced by the recent focus on bridge demolition and salvage work
required under some projects, which was formerly sub-contracted outside the
Company. Additionally, our dredging and demolition businesses collaborating
with our TerraSea joint venture on new prospects adds to the list of
opportunities.”

Mr. Berger concluded, “Our enthusiasm for the near and long term prospects for
Great Lakes has not been deterred by the short term challenges of the third
quarter. The recognition of the need for additional investment in U.S. ports
and waterways is expected to support an increase of appropriations to future
U.S. Army Corps of Engineers’ budgets for maintenance dredging. The public
investment in port infrastructure is necessary as the ongoing expansion of the
Panama Canal and initiatives to increase exports heightens the need for the
U.S. to deepen its East and Gulf Coast ports to facilitate larger draft
vessels from international trade. With regard to coastal restoration,
discussion continues between the Justice Department and BP regarding the fines
related to the Deepwater Horizon Oil Spill. Once settled, we expect a
significant amount of the resultant penalties will be allocated to restoration
that will involve dredging, and this could add well over $1 billion into the
dredging market over the next five years.

“Although we are modifying our full year guidance as noted above, we are
excited about a very strong fourth quarter and the prospects ahead. This
includes projects in backlog which will drive our fourth quarter and 2013
results, as well as projects on the horizon providing for continued long term
growth in both dredging and demolition. We continue to believe opportunities
for further growth coupled with our segment managements’ disciplined approach
to project execution will result in increased momentum in our financial
results starting in 2013. As always, we thank the Great Lakes dredging and
demolition teams for their continued efforts in providing world class service
and delivering strong results for our shareholders.”

Use of Adjusted EBITDA

Adjusted EBITDA, as provided herein, represents net income (loss) attributable
to Great Lakes Dredge & Dock Corporation, adjusted for net interest expense,
income taxes, depreciation and amortization expense and debt extinguishment.
Adjusted EBITDA should not be considered an alternative to, or more meaningful
than, amounts determined in accordance with accounting principles generally
accepted in the United States of America (“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 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 its
operating performance and uses Adjusted EBITDA only as a supplement. Adjusted
EBITDA is reconciled to net income (loss) attributable to Great Lakes Dredge &
Dock Corporation in the table of financial results. For further explanation,
please refer to the Company’s SEC filings.

Conference Call Information

The Company will conduct a quarterly conference call, which will be held on
Tuesday, November 6, 2012 at 9:00 a.m. C.S.T. The call in number is
877-377-7553 and conference ID is 44839922. The conference call will be
available by replay until November 9, 2012, by calling 800-585-8367 and
providing passcode 44839922. 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.

The Company

Great Lakes Dredge & Dock Corporation is the largest provider of dredging
services in the United States and the only U.S. dredging company with
significant international operations. The Company is also one of the largest
U.S. providers of commercial and industrial demolition services primarily in
the Northeast. The Company owns a 50% interest in a marine sand mining
operation in New Jersey 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 employs
over 150 degreed engineers, most specializing in civil and mechanical
engineering, which contributes to its 122-year history of never failing to
complete a marine project. Great Lakes has a disciplined training program for
engineers that ensures experienced-based performance as they advance through
Company operations. Great Lakes also owns and operates the largest and most
diverse fleet in the U.S. industry, comprised of over 200 specialized vessels.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this press release may constitute "forward-looking"
statements as defined in Section 27A of the Securities Act of 1933 (the
"Securities Act"), 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," 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 Securities Act, 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, risks associated with Great Lakes’ leverage, fixed price
contracts, dependence on government contracts and funding, bonding
requirements and obligations, international operations, backlog, severe
weather related costs, uncertainty related to pending litigation, government
regulation, restrictive debt covenants and fluctuations in quarterly
operations, and those factors, risks and uncertainties that are described in
Item 1A “Risk Factors” of Great Lakes’ Annual Report on Form 10-K for the year
ended December 31, 2011, 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,
                                2012       2011       2012        2011
                                                                      
Contract revenues              $ 166,763   $ 158,468   $ 488,202    $ 468,765
                                                                      
Gross profit                     13,020      27,391      56,931       74,599
                                                                      
General and administrative       11,667      12,736      36,390       38,447
expenses
Gain on sale of assets—net      (108)      (131)      (232)       (2,902)
                                                                      
Operating income                 1,461       14,786      20,773       39,054
                                                                      
Other income (expense)
Interest expense—net             (5,105)     (5,571)     (15,747)     (16,432)
Equity in earnings (loss) of     177         606         153          (108)
joint ventures
Loss on foreign currency         (40)        (544)       (55)         (544)
transactions—net
Loss on extinguishment of       -          -          -           (5,145)
debt
                                                                      
Income (loss) before income      (3,507)     9,277       5,124        16,825
taxes
                                                                      
Income tax (provision)          1,355      (3,618)    (1,977)     (6,600)
benefit
                                                                      
Net income (loss)                (2,152)     5,659       3,147        10,225
                                                                      
Net (income) loss
attributable to                 20         (57)       226         (525)
noncontrolling interests
                                                                      
Net income (loss)
attributable to Great Lakes    $ (2,132)   $ 5,602     $ 3,373      $ 9,700
Dredge & Dock Corporation
                                                                      
                                                                      
                                                                      
Basic earnings (loss) per
share attributable to Great    $ (0.04)    $ 0.10      $ 0.06       $ 0.16
Lakes Dredge & Dock
Corporation
Basic weighted average           59,253      58,930      59,154       58,863
shares
                                                                      
                                                                      
Diluted earnings (loss) per
share attributable to Great    $ (0.04)    $ 0.09      $ 0.06       $ 0.16
Lakes Dredge & Dock
Corporation
Diluted weighted average         59,253      59,161      59,567       59,533
shares

                                                                 
Great Lakes Dredge & Dock Corporation
Reconciliation of Net Income attributable to Great Lakes Dredge & Dock
Corporation to Adjusted EBITDA
(Unaudited and in thousands)
                                                                        
                                    Three Months Ended     Nine Months Ended
                                    September 30,          September 30,
                                    2012        2011       2012       2011
                                                             
                                                                        
Net income (loss) attributable to
Great Lakes Dredge & Dock           $ (2,132)   $ 5,602    $ 3,373    $ 9,700
Corporation
Adjusted for:
Loss on extinguishment of debt        -           -          -          5,145
Interest expense—net                  5,105       5,571      15,747     16,432
Income tax provision (benefit)        (1,355)     3,618      1,977      6,600
Depreciation and amortization        10,514     11,195    26,637    29,999
                                                                        
Adjusted EBITDA                     $ 12,132    $ 25,986   $ 47,734   $ 67,876

                                         
Great Lakes Dredge & Dock Corporation
Selected Balance Sheet Information
(Unaudited and in thousands)
                                                
                            Period Ended
                            September 30,   December 31,
                            2012            2011
                                
Cash and cash equivalents   $   38,324      $   113,288
Total current assets            322,224         325,778
Total assets                    796,686         788,460
Total short-term debt           2,587           3,033
Total current liabilities       139,328         130,526
Long-term debt                  252,500         252,558
Total equity                    293,752         292,537

                                                                 
Great Lakes Dredge & Dock Corporation
Supplementary financial data
(Unaudited and in thousands)
                                                                        
                                 Three Months Ended      Nine Months Ended
                                 September 30,           September 30,
                                 2012         2011       2012         2011
                                                                        
Net cash flows provided by       $ (24,025)   $ 24,071   $ (39,210)   $ 13,626
(used in) operating activities

                                                             
Great Lakes Dredge & Dock Corporation
Revenue and Backlog Data
(Unaudited and in thousands)
                                                                      
                        Three Months Ended             Nine Months Ended
                        September 30,                  September 30,
Revenues (in            2012          2011           2012         2011
thousands)
Dredging:
Capital - U.S.      $   45,456       $  39,778      $  117,066     $  130,287
Capital -               36,329          21,843         75,202         59,779
foreign
Beach                   20,935          41,714         92,576         87,947
nourishment
Maintenance             26,060          16,583         85,299         92,525
Rivers & lakes         10,031         14,673        25,801        25,735
Total dredging          138,811         134,591        395,944        396,273
revenues
Demolition             27,952         23,877        92,258        72,492
Total revenues      $   166,763      $  158,468     $  488,202     $  468,765
                                                                      
Note: Dredging contract revenues for the nine months ended September 30, 2012
are net of $1,374 in intersegment revenues. Demolition contract revenues for
the nine months ended September 30, 2012 are net of $75 in intersegment
revenues.
                                                                      
                    As of
                    September 30,    December       September
                                     31,            30,
Backlog (in         2012             2011           2011
thousands)
Dredging:
Capital - U.S.      $   96,354       $  109,897     $  109,568
Capital -               243,542         78,379         40,675
foreign
Beach                   41,875          84,607         117,543
nourishment
Maintenance             46,555          31,293         16,187
Rivers & lakes         34,827         15,256        13,391
Total dredging          463,153         319,432        297,364
backlog
Demolition             42,574         50,672        68,029
Total backlog       $   505,727      $  370,104     $  365,393

                                                                   
Great Lakes Dredge & Dock Corporation
Full Year Adjusted EBITDA Guidance Reconciliation to Net Income
For the Year Ended December 31, 2012
                                                                        
                                                           Lower      Upper
                                                                        
Estimated Net income attributable to Great Lakes Dredge    $ 15,060   $ 18,110
& Dock Corporation
Adjusted for estimated:
Interest expense—net                                         20,796     20,796
Income tax provision                                         9,628      11,578
Depreciation and amortization                               39,516    39,516
                                                                        
Adjusted EBITDA Guidance                                   $ 85,000   $ 90,000

Contact:

Great Lakes Dredge & Dock Corporation
Katie Hayes, Investor Relations
630-574-3012
 
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