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Great Lakes Dredge & Dock Corp (GLDD -2.49%)
Q4Â 2018 Earnings Conference Call
Feb. 20, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Great Lakes Dredge & Dock Corporation Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's presentation, Ms. Abby Sullivan. Ma'am, please begin.
Abigail Sullivan -- Manager of Investor Relations
Thank you. And good morning. Welcome to our quarterly conference call. Joining me on the call this morning is our Chief Executive Officer, Lasse Petterson; and our Chief Financial Officer, Mark Marinko. Lasse will provide an update on the events of quarter and year, then Mark will continue with an update on our financial results of the quarter and year. Lasse will conclude with an update on the outlook for the business and market for the coming years.
Following their comments, there will be an opportunity for questions. During this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks, uncertainties and other risk factors that could cause actual results to differ materially from our expectations.
Certain risk factors inherent in our business are set forth in our earnings release and in filings with the SEC, including our 2017 Form 10-K and subsequent filings.
During this call, we will also refer to certain non-GAAP financial measures, including adjusted EBITDA from continuing operations, which are explained in the net income to adjusted EBITDA from continuing operations reconciliation attached to our earnings release and posted on our Investor Relations website, along with certain operating data.
During this call, we will also exclude our restructuring costs from certain financial measures to allow the user of the data to better evaluate our financial results from operations as compared to the prior year. Reconciliations regarding these non-GAAP measures are included in our fourth quarter earnings statement released this morning. And with that, I'll turn the call over to Lasse.
Lasse Petterson -- Chief Executive Officer and Director
Thank you, Abby. And good morning. As stated in our earnings release this morning, we had a strong fourth quarter and significantly improved full year results, with net income from continuing operations of $11 million and a full-year adjusted EBITDA from continuing operations, excluding restructuring of $109.8 million. Before discussing our financial results, I'll start with a moment on our safety culture.
We continue to improve our safety performance throughout the year, seeing a 27% decrease in recordable injuries year-over-year. A incident and injury free safety culture drives personal responsibility for safety, care and concern for one another. We strive to create the safest projects and facility sites in the dredging industry and I encourage to see that our employees use our safe work practices at home as well.
In addition to safety, the Company aspires to follow the best-in-class environmental, social and governance processes in everything that we do. Our business is focused on ensuring that our nation's shorelines and navigation channels are protected and potential risks associated with storms and sea change are mitigated. We are committed to ensuring that all projects are executed in strict conformance with project-specific environmental standards. And we strive to mitigate any impact to the environment and see life in the areas of work.
We look forward to sharing more details on these processes and environmental, social and governance report that we published later this year.
Now returning to ourselves for 2018, this year was one of significant transformation at Great Lakes. Our adjusted EBITDA from continuing operations, excluding restructuring nearly doubled to $109.8 million or 17.7% of revenue. Net income from continuing operations excluding restructuring was $22.9 million or nearly 4% of revenue. These improvements are a direct result of the restructuring program implemented in late 2017 and executed with energy and focus in 2018, in combination with our strong performance on projects in a solid domestic dredging market.
During the year, we also achieved a net debt reduction of $115 million, which resulted in a healthy net debt to adjusted EBITDA from continuing operations ratio of 2.98. As we finish the fourth quarter of 2018, the port deepening projects in Charleston, Tampa, Delaware , and Jacksonville were in full production with work continuing into 2019 and also into 2020.
While we are excited about the results of this year, we recognize that we must continue this disciplined performance for the years to come. We look forward to continue to work with the teams in Great Lakes to ensure we remain committed to a culture of excellence in operations and project execution, while we continue to reduce debt and improve our balance sheet.
Our expectations for the start of 2018 was a solid in market, which ended at a record of $1.8 billion, giving us a backlog at December 31st of $707 million, of which $447 million was capital work mainly comprised of port deepening projects.
On December 31st, the first phase of the Corpus Christi Port Deepening was awarded at $93 million, which added our fifth deepening project to our already strong project portfolio. In the first six weeks of 2019, we have added an additional $40.5 million in projects, project work to our backlog. We expect this strong domestic dredging market to continue for the next three to four years and our focus will be on port deepenings, on LNG export facilities port constructions and on beach renourishment projects. We look forward to continue partnerships with the United States Army Corps of Engineers, port authorities and energy companies to ensure the safe and successful completion on these projects on-time and on-budget.
As noted in our initial release this morning, we have reviewed the E&I segments and have concluded while it has experienced good improvements from prior years, the business itself does not align well enough with our core dredging business to continue operating it under our portfolio of assets. As a result of this review, we have determined that we will divest of the business and expect to complete the sale by the end of the second quarter in this year. I commend Chris Shea and the E&I team for the hard work over the last years in their improvement of processes and operational diligence, which we believe has positioned the segment for a strong future.
And with those updates. I'll turn the call over to Mark to discuss the results of the quarter and year-end and for an update on backlog development.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Okay, thank you, Lasse. Consistent with our most recent earnings releases, some of the financial results released this morning were in a slightly different format than the prior years. The results included the financials as reported, which includes restructuring charges as well as certain financial measures excluding restructuring charges to allow the reader to better evaluate our financial results as compared to the prior year. As noted by Lasse and disclosed in our earnings release, the E&I business has been discontinued and thus is not included in consolidated results from continuing operations.
I will start with the quarterly and annual consolidated results and then discuss some specifics related to our dredging business. Please note that all results discussed will be operationally focused and do not include restructuring charges. I will provide specific commentary on the restructuring charges near the end of my comments.
For the fourth quarter of 2018, revenues were $173.2 million, net income from continuing operations was $8.9 million and adjusted EBITDA from continuing operations was $33 million. Total Company's for the fourth quarter of 2018, represented a $20.5 million increase compared to the fourth quarter of 2017.
The revenue increase was caused by strong utilization on our vessels as they worked on capital and rivers and lakes projects. Total Company consolidated gross profit from continuing operations was $36.9 million compared to $16.7 million in the fourth quarter of 2017. Gross profit margin was 21.3% compared to a 11% in the prior year quarter.
Total Company operating income was $21.7 million, which is an increase of $18.7 million over the prior year quarter. The increase is driven by high utilization of our fleet, strong project performance, lower plant expense and savings from our asset rationalization and cost saving programs. These factors were partially offset by an increase in G&A expense in the fourth quarter related to incentive compensation.
Net income from continuing operations for the fourth quarter of 2018 was $8.9 million compared to net income from continuing operations of $11.8 million in the prior year quarter. The current quarter net income includes net interest expense of $7.9 million and an income tax expense of $4.6 million. Net income for the fourth quarter of 2017 included $7.6 million in net interest expense and a $16.6 million income tax benefit. Please note that the fourth quarter of 2017 was positively impacted by a tax benefit of $15.7 million related to the passing of the Tax Cuts and Jobs Act of 2017. Adjusted EBITDA from continuing operations for the fourth quarter of 2018 was $33 million compared to adjusted EBITDA from continuing operations of $16.6 million in the fourth quarter of 2017.
Now turning to our full year results for the year ended December 31, 2018, revenues were $620.8 million, net income from continuing operations was $22.9 million and adjusted EBITDA from continuing operations was $109.8 million. These results represent a $28.6 million increase in year-over-year revenue, an increase in net income from continuing operations of $20.7 million and an increase of $52.6 million and adjusted EBITDA from continuing operations. For the full year, the Company recognized a loss from discontinued operations, net of tax of $17.3 million. Compared to a loss from discontinued operations, net of tax of $15.9 million in 2017.
The 2018 full year loss includes a $14.1 million preliminary loss on disposal of assets held for sale. Excluded from the results I just discussed were charges related to our restructuring plan. During the fourth quarter of 2018, we recognized a charge of $5.3 million related to restructuring, which had a $4.6 million impact on adjusted EBITDA from continuing operations. For the full year 2018, we recognized a charge of $16.1 million, which had a $9.4 million impact on adjusted EBITDA from continuing operations. During 2018, we achieved $35 million of savings as a result of our cost reduction initiatives. As of December 31, 2018, we have completed this restructuring plan and do not expect to recognize any additional charges in 2019.
Next, we turn to our balance sheet where at December 31, 2018, we had $34.5 million in cash and had drawn $11.5 million on our revolver, leaving us with net debt of $299 million. As Lasse noted, we have discussed throughout the year, the focus in 2018 has been bringing health back to our balance sheet with debt pay-downs. We are pleased with the progress made thus far and expect the revolver balance to be paid down fully in the first quarter of 2019.
Our total capital expenditures for the year was $38.1 million. During the fourth quarter, the Company spent $13.6 million on a clamshell dredge that was purchased from a competitor, who is exiting that market. We will make a final payment of $10 million in the first half of 2019 for this dredge. This mechanical dredge will increase the Company's capabilities to perform deepening work under strict environmental water quality requirements in the Southeast United States.
Finally, the 2018 bid market totaled $1.8 billion compared to $1.2 billion in 2017. On December 31, 2018, we were awarded the first phase of the Corpus Christi deepening project and since year-end have been awarded an additional $40.5 million in project work, which will be added to backlog in the first quarter of 2019.
For the full year 2018, the Company won 45% of the overall domestic dredging bid market. This rate is in line with our prior three-year average win rate of 46%. Please remember that variability and contract wins from quarter-to-quarter or from year-to-year is not unusual and the win rate is not indicative of the win rate the Company is likely to achieve next year.
During 2018, Great Lakes won 62% or $476 million of capital projects awarded, 62% or $171 million of the coastal protection projects awarded, 13% or $82 million of maintenance projects awarded, and 53% or $82 million of the rivers and lakes projects awarded. Contracted backlog at December 31, 2018, was $707 million compared to backlog at December 31, 2017, of $511 million.
With that, I will turn the call back over to Lasse for his remarks on the outlook moving forward.
Lasse Petterson -- Chief Executive Officer and Director
Thank you, Mark. Turning to the outlook for 2019. We expect the domestic dredging markets to continue to be solid. Our focus to remain on the large and technically challenging port deepening projects where we can excel with our technical expertise, experience and diverse fleet.
Several additional phases of projects where we are already performing deepening works are expected to bid in the second half of 2019. Additionally, as a result of the extreme storm systems in 2017, involving hurricanes Harvey, Irma and Maria, the U.S. Senate Committee on Appropriations has supplemented appropriations for disaster relief and recovery, which includes $17.4 billion for the core to fund projects that will reduce the risk of future damage from flood and storm events. During the fourth quarter of 2018, Congress passed an additional $1.7 billion of supplemental appropriations for disaster relief funding as a result of Hurricane Florence. We expect new projects to be funded by these appropriations to start bidding in the third and fourth quarter of this year.
With regards to the government shutdown earlier this year and with a newly declared national emergency by President, Trump, we have not seen and at this point in time do not expect to see any major impact on the dredging market for 2019.
Moving to the international markets, we are mobilized on a project in Bahrain, which will keep up fleet busy in 2019. However, only at an expected breakeven contribution level. We expect the market to start improving in 2020 and beyond.
In conclusion, with a strong backlog, the new Ellis Island hopper dredge up to full production capacity for a full year, and an additional $5 million expected in cost savings from the restructuring, we anticipate 2019 to be another solid year. We expect high project activity in the first half of the year. However, 2019 is a heavier than normal dry docking year, which will impact the fleet utilization in the third and fourth quarters.
We anticipate the net adjusted EBITDA impact from higher dry docking activities to be approximately $10 million depending on timing. 2018 was a successful year showing that with the changes we implemented, we now have the opportunity to perform well in a good domestic market, delivering projects safely on-time and on-budget, resulting in quality work to our clients, a safe working environment for our employees, and improved positive returns to our shareholders.
And with that, I'll return the call over for questions.
Questions and Answers:
Operator
(Operator Instructions) Our first question or comment comes from the line of Andrew Casella from Deutsche Bank. Your line is open.
Andrew Casella -- Deutsche Bank -- Analyst
Hi, guys, thanks for taking the question, nice quarter. I guess can you first talk a little bit about what happened that you guys finally decided to kind of market E&I, I mean was I guess the prospect of turning the business around, I know it sounded like there was getting some foothold. But it sounded like it was came into a fork in the road and you decided to ultimately divest it, and then second question is as we think about potential proceeds from the business or if there is any other charges or what not to kind of prepare that for sale? And who potential buyers would be? Thanks.
Lasse Petterson -- Chief Executive Officer and Director
I think I'll comment on the process heading up to the decision on the E&I and then Mark will comment on the financial impacts. When I took the position here in the Company, well its now 18, 19 months ago. We started with the focus on the business to look at all aspects of our assets, including the businesses. We rationalized the fleet. We did cost reductions and that resulted in the restructuring plan, which has been implemented. And that took a lot of energy and focus, and as we were going through this process , the E&I led by Chris Shea, also improved the performance in that segment.
However, when we look at the future, we need to focus our energy and our capital resources where we believe it's -- give the best return for our shareholders and also the strategic alignment between the dredging and E&I, the synergies, the overlaps were not as prominent as I think was the seen in the outset. So, that led to the conclusion that we need to find a better place for E&I going forward. And we made that decision late last year.
And Mark, can you comment on..
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yes, on second half of your question, Andrew, so -- and we are in the middle of the process. So, we cannot disclose any kind of price or proceeds at this time. But included in the press release, we have booked a charge related to the estimated loss on the sale, as required by GAAP. We don't expect any material change from that number in the future.
Andrew Casella -- Deutsche Bank -- Analyst
Okay, got it. That's helpful. And then just my second question would be as we kind of think about 2019, I knew, I appreciate that you guys, so there's going to be $10 million of kind of like year-over-year headwind related to higher dry docking. But as we kind of think about the run rate as you guys exit 2018, I mean that this kind of second half was about $70 million. Can you just help us understand how we should think about the quarterly performance? Or the kind of direction and seasonality as we think about 2019 with notably with the second half of '19 having some headwinds related to the dry docking? Thanks.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yes, sure, this is Mark. So that's why we intentionally kind of talked where we had strong -- compared to, I say that when you look at 2018, the second half of the year was much better performance than in the first half of the year. So, we do expect as Lasse said higher utilization in the first half of the year related to the port deepening work we have. And then when you get to the back half of the year, we do have more dry dockings of vessels that lowers utilization. So you much have a much -- as opposed in the prior years where you have maybe our third quarter would be our strongest quarter. The third quarter would be for the year, a weaker quarter. But it's a much more smoother quarter -- quarterly -- quarter to quarter throughout the year as opposed to in the prior years.
Andrew Casella -- Deutsche Bank -- Analyst
Got it. And then, so I guess you know asking the question in a different way. So when we think about the first quarter relative to the third and fourth, so it sounds like third quarter was obviously a kind of banner, quarter -- fourth quarter had some downtime and whatnot I mean is kind of the new run rate we should think about or the new kind of like baseline for quarterly EBITDA that kind of with a three handle in your opinion or high two's.
Mark Marinko -- Senior Vice President and Chief Financial Officer
So a little bit. In terms of this quarter, when you look at, yes, the current quarter was really an exceptional quarter, and we talked about that last time that the fourth quarter would be a decent quarter. But not as good as that. But as you talk about the run rate, we did have in this quarter, some really exceptional performance on projects. Really, really good. So this is -- even this quarter is a still a little bit of, I would call an exceptional quarter for us. So, when you talk about looking forward, I don't give guidance, this is still a little bit of an exceptional quarter for us.
Andrew Casella -- Deutsche Bank -- Analyst
Okay, thanks so much. And I'll get back in queue.
Operator
Thank you. Our next question or comment comes from the line of Jon Tanwanteng from CJS Securities. Your line is open.
Jon Tanwanteng -- CJS Securities -- Analyst
Good morning, guys, nice quarter. And thanks for taking my questions.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Hi, Jon.
Jon Tanwanteng -- CJS Securities -- Analyst
Can you break out the operating income, and maybe the D&A for the E&I business in the quarter as well as the charge that you took from moving to discounts?
Mark Marinko -- Senior Vice President and Chief Financial Officer
So the charge is $14 million. So when we talk about the overall discounts breakdown, it was $9 million from operations for the entire segment, of the $14 million charge, and then tax of -- then you have a tax effect of that, I think it was about $6 million to net -- hold on Jon, I got it. Yes. So that's why we've got the $17.3 million charge. So $9 million from the operations, $14 million from the loss. And then the $6 million tax effect of that benefit from for a net of $17 million.
Jon Tanwanteng -- CJS Securities -- Analyst
Great. Thank you.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Sure.
Jon Tanwanteng -- CJS Securities -- Analyst
And have you been in contact with potential buyers for this asset yet? Or is it still too early in the process?
Mark Marinko -- Senior Vice President and Chief Financial Officer
No, we are in the middle of the process right now.
Jon Tanwanteng -- CJS Securities -- Analyst
Okay. That's -- are there potential bidders? Or -- (inaudible).
Mark Marinko -- Senior Vice President and Chief Financial Officer
I can't, I don't want to talk anymore about the process. But as we have stated, we expect to sell this or divest of it in the first half of 2019.
Jon Tanwanteng -- CJS Securities -- Analyst
Okay, fair enough. Lots of -- what are the major awards or lettings that, that you're expecting to come out in 2019 from a large port deepening perspective, major coastal work or even these large LNG facilities that you've been talking about?
Lasse Petterson -- Chief Executive Officer and Director
Yes. As you know, starting with LNG facilities, there is a huge increase in LNG exports from the U.S. So the previous build import terminals and now being reversed. And end up being exporting LNG to the world, which is a fantastic development for the U.S. and also for the energy business. And when you do this, you need to change the port facilities at the same time and that gives us a good opportunity to work for energy companies and then broaden our let's say portfolio of clients.
On the port deepening projects, we already are engaged in and we expect that Savannah will come out with additional work in the second quarter of this year and we also expect that Corpus Christi will follow up with an additional phase of their deepening project. And those are the main ones, there maybe additional work also on the Charleston and Jacksonville projects later in the year and for us, this is good, we already mobilized on the project. We are doing good work and we are hopeful to be able to then continue to work on these projects as the new phases are being bid.
There's also new large projects being announced for the Mississippi Coastal Improvement Program, the Phase 3, we did the Phase 1 of that project, that is also coming out sometime toward the end of the year.
Jon Tanwanteng -- CJS Securities -- Analyst
Great, thank you very much. And then just what happened in international in the quarter, I thought you might be doing some business there. It didn't look like you did, was there a delay of some sort and then kind of what gives you the confidence that 2020 will be that much better?
Lasse Petterson -- Chief Executive Officer and Director
Well, as we have reduced our activity in the international market over the last year, we do have backlog now for the fleet that we want to keep in the international markets for 2019. We do see good developments, oil prices up, which is a good indicator for the work that will come up in the Middle East. And then new large infrastructure projects are being planned to start up in 2020 and beyond, that will improve the general markets internationally. But as I said for 2019, we got our backlog covered, unfortunately not at margins that we would like to see, but it keeps the fleet busy.
Jon Tanwanteng -- CJS Securities -- Analyst
Okay, great. Finally, I'm just -- any closer to any capital spending decisions on new dredges. I know you've got the clamshell in the fourth quarter, is there anything else in the pipe for 2019?
Lasse Petterson -- Chief Executive Officer and Director
Well, what we do, we plan for the future and we are looking at concepts and the signs for new dredges. However, we will wait and see when it is prudent to invest in new capacity in the market and wait for those decisions when we see that our balance sheet is at a healthy level and this is a good time to invest.
Jon Tanwanteng -- CJS Securities -- Analyst
Great, thank you very much.
Operator
Thank you. Our next question or comment comes from the line of Joseph Farricielli from William Blair. Your line is open.
Joseph Farricielli -- William Blair -- Analyst
Good morning. Can you talk a little bit about working capital expectations for this year now that we're looking at just dredging operations?
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yeah, sure. So, this is Mark. So, we will see, with the backlog we have, at first I -- the overall working capital won't be that material to free cash flow next year, but it will be a little bit negative as we have a big backlog expect some increased revenues for next year. You have a little bit of a higher AR, you won't have the large positive impact that we had this year as we had some items coming into 2018 that we're sitting in our work in process that did turn into cash. So, we don't have a big work in process going into 2019. So, it'll be a little bit negative, but not a lot of material amount impacting free cash flow.
Joseph Farricielli -- William Blair -- Analyst
Okay, great. Thank you. And then next question would be with the dry docking, is this related to regular safety checks that you have to do on your equipment. Could you give me a little more color behind that?
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yeah, sure. Those are regulatory dry docks, you just have to some cycles that you have more in a certain year and we are in that cycle for 2018. But these are all regulatory through the Coast Guard to keep them in class.
Joseph Farricielli -- William Blair -- Analyst
Right. So what percentage do you think you're -- I'm sorry, you mean 2019, right for this?
Mark Marinko -- Senior Vice President and Chief Financial Officer
I though, yeah.
Joseph Farricielli -- William Blair -- Analyst
In what percentage do you think you're at of the fleet for 2019?
Mark Marinko -- Senior Vice President and Chief Financial Officer
You mean percentage of vessels that are in a dry dock?
Joseph Farricielli -- William Blair -- Analyst
Yes, just wondering what your cycle is for the safety -- the required safety checks and stuff like that?
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yeah, so generally these vessels go through a major regulatory dry dock every three years. So think of it from the aspect of, think of, 33% type of cycle on an average, and this one is just a little bit higher than 2018.
Joseph Farricielli -- William Blair -- Analyst
Okay. So maybe pushing a little closer to 40% this year instead of 33% (inaudible) that you traditionally see?
Mark Marinko -- Senior Vice President and Chief Financial Officer
And obviously, they don't take up the entire year. So you're generally in these dry docks for two to three months.
Joseph Farricielli -- William Blair -- Analyst
Okay and what -- historically what kind of, could we see higher CapEx from this that you don't anticipate because of Coast Guard saying fix this change that -- what's the traditional impact there?
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yeah, you do have CapEx, the $10 million number, we are talking about expense. You do have CapEx can be related to these dry docks, but that is when included in the $40 million number that we said was our expected CapEx for 2019.
Joseph Farricielli -- William Blair -- Analyst
Okay, got it. That's it from me. Thank you.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Good, thanks.
Operator
Thank you. Our next question of comment comes from the line of Poe Fratt from NOBLE Capital Markets, your line is open.
Poe Fratt -- NOBLE Capital Markets -- Analyst
Hi, good morning . Hey, could you give us the aging of your backlog, it went up to $707 million. If you can give us sort of what that 2009 timing -- or '19 versus 2020. Any color on the timing of the backlog would be helpful.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yeah , I can give you pretty close to what we expect. So we expect in the highs. So that $707 million, we expect in the high 70% to be earned in 2019.
Poe Fratt -- NOBLE Capital Markets -- Analyst
And then Mark, as far the (inaudible) project, is that all 2019 business or is that going to be spread out over a couple of years?
Mark Marinko -- Senior Vice President and Chief Financial Officer
It's all 2019.
Poe Fratt -- NOBLE Capital Markets -- Analyst
And then when you look at, there with a little bit of big draw down in coastal protection third quarter backlog to fourth quarter backlog. Do you see a continued draw over the course of the year? Do you think that the awards will be enough to stabilize that backlog and sort of just a color on where you think you maybe in your -- year end 2019 backlog might end up?
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yeah, so we expect that -- we will have some awards that will bring that back to where it was maybe even up a little bit.
Lasse Petterson -- Chief Executive Officer and Director
Yeah, I think to comment on that, there is -- through the supplemental appropriation that's been made already, those projects are coming to the market here during 2019 and we expect those projects to bid quite actively here toward the second half of the year and that will then replenish our backlog with beach restoration and Wetlands Improvement Projects.
Poe Fratt -- NOBLE Capital Markets -- Analyst
Great. Mark, could you bridge cash went up about $11 million over the course of the quarter, quarter-to-quarter. Can you just sort of bridge the cash flow for the quarter, it looks like you used about $20 million to pay down debt, operating cash flow look like was $21 million or so, can you just sort of fill in the plug there, was it all working capital or what. Could you just help me understand sort of the cash bridge for third quarter to fourth quarter?
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yeah. So we had the CapEx in the quarter with the new clamshell that almost $14 million, $13.6 million being the major CapEx piece of that, but yes, the rest of it was working capital. We had a little bit of limited, I'd call that material in terms of selling some assets related to our restructuring, but the rest of it would be the plug would generally be working capital there.
Poe Fratt -- NOBLE Capital Markets -- Analyst
Great, thanks, that's helpful. And then the $14.1 million charge what did that take the E&I business down toward, what's on the books right now?
Mark Marinko -- Senior Vice President and Chief Financial Officer
So, I get -- we're in the middle of the process, so I don't want to talk about any of the details around E&I numbers at this point in time. So just I'm going to have to leave it at that at this point.
Poe Fratt -- NOBLE Capital Markets -- Analyst
You can't give me the number that was written down too?
Mark Marinko -- Senior Vice President and Chief Financial Officer
No.
Poe Fratt -- NOBLE Capital Markets -- Analyst
Okay, great. Thanks a lot.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yes.
Operator
Thank you. (Operator Instructions) Our next question or comment comes from the line of DeForest Hinman from Walthausen and Company. Your line is open.
DeForest Hinman -- Walthausen & Co -- Analyst
Hello, good morning. Thanks for taking my questions. Congratulations on the margin performance, that's a pleasant surprise, I know you've been working very hard on improving the discipline and you had a nice tailwind with bids coming in from a volume perspective and winning some of those bids. When we look at the overall performance in the second half of 2018, and I know you stated that they -- that was some very strong performance. But with the full-year expectation of the Ellis Island, are we seeing a reset higher of what we should be thinking about from a gross margin perspective going forward versus what we've seen in over the last three or four years in the dredging business? That's my first question.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yes. So when we talk about the -- from a margin percentage -- perspective, the kind of the gross profit margin line. Our expectations for next year are to have pretty similar margins that we achieved this year for the full year. What's driving that is exactly what you said, you have kind of the full year effect of the Ellis Island with some offset from these additional dry dock expenses, which are above gross profit next year.
So from a margin percentage, it's going to be relatively flat with the full-year 2018.
DeForest Hinman -- Walthausen & Co -- Analyst
And I guess, maybe a different way going forward, is this a business that we think with some of the restructuring actions, we've taken, bid discipline, Ellis Island, is this ex (ph) dry docks. Is this a business we should expect to generate 20% gross margins? (multiple speakers).
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yes, think in that sense, this is a higher dry dock here. Yes, so I would say yes. You can -- we can approach that number, yes.
DeForest Hinman -- Walthausen & Co -- Analyst
In 2019 or you're saying ex -- (multiple speakers).
Mark Marinko -- Senior Vice President and Chief Financial Officer
We did 19.4% from continuing operations at that gross profit line. So, we think it's going to be similar next year.
DeForest Hinman -- Walthausen & Co -- Analyst
Okay, that's helpful. And then we give some of the CapEx numbers, we've given a broader outlook for 2019, just back of the envelope, I'm looking at the cash flow, I always think that's very important, especially with some of the goals you guys are trying to accomplish with reducing net debt, but $40 million of CapEx expectations you gave for revenue and backlog burn, gross margins. Is this a business that can do $65 million, $70 million of free cash flow next year, which will give us about a 10% free cash flow yield? Or sorry, much higher than that, plus 10% -- 13% free cash flow yield. Is that the type of forward free cash flow yield? Is it possible for this business right now?
Mark Marinko -- Senior Vice President and Chief Financial Officer
Those that -- the expectation at that level, that's -- I would say possible. But that's a lot of everything being fully utilized, I call it a lower dry dock here. We don't expect to be at that high of a level. But we do expect some really solid free cash flow in 2019.
DeForest Hinman -- Walthausen & Co -- Analyst
Okay, that's helpful. And then when we start to think about that cash, obviously a high level problem, because we can't call our bonds really I guess until 2020. And then if we even do that at 2020, it is at 104 (ph), what do we do with the cash? And it sounds like we're being patient with how we're looking at adding vessel capacity, and I think in previous statements where that's not something that's really even near term. What do we do with the free cash flow?
Mark Marinko -- Senior Vice President and Chief Financial Officer
So at this point, yes, that's a -- I think that's a nice problem to have. We haven't had that problem in the past. Obviously, if we focused on paying down debt. So there still is, yes, we've mentioned in the first quarter here, we want to pay off the remainder of that revolver. And that's the first piece of that.
But as we look forward, I would -- I think this is more of a discussion point for 2020, as opposed to 2019. But as Lasse said we're going to look. We do have to look at the options of prudent in our investments -- in our fleet in a similar way of how we've looked at the rationalization of our assets. And as we do invest in new assets, what do we do with the assets we have in terms of do we retire those type -- retire those, keep those, based on what the market looks going forward.
So, it's probably more of a discussion for 2020, as opposed to 2019. Because we still have a little bit more debt to pay down, and we are as Lasse said earlier, we are looking at designs related to where we want to invest in dredges in the future. And we're going to do that at the prudent time. But as far as that we still have some -- still we're definitely in much better position, but we still want to make sure we're prudent and disciplined and make sure we closes out to where we want to close it out to at this point.
DeForest Hinman -- Walthausen & Co -- Analyst
And thinking about that 2020 discussion, we look at some of the zones, dredges, the 79 vintages in early 80s, vintages. Is that -- that the areas where we need to think about doing replacements of those vessels? Or major overhauls of those vessels, or are we thinking more internationally make investments?
Lasse Petterson -- Chief Executive Officer and Director
Yes, we are looking at all those aspects. We, as the only U.S. based dredger who has international operations. That has been a good market for us, when that market is good. And when we look at new investments, we are considering both the domestic market and also the international markets.
But as Mark was saying, we want to be prudent with new investments. We are investing into our most productive vessels at this point in time. How do we improve the the availability, the reliability always existing fleet, make sure that we optimize our up-time, and through that optimize our earnings and production.
And then secondly, we're looking at new investments, which will be replacement investments in the domestic market. We are doing the design of new vessels at this point in time. However, investment decisions would come when we feel it's prudent.
DeForest Hinman -- Walthausen & Co -- Analyst
Okay, that's helpful. And then lastly on the -- sorry two more questions. You might have been answered it, I might have missed it. On the Bahrain project, is there -- what is the revenue recognition on that project going forward? Is it over 2019 or does that go into 2020.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yes, it's just 2019. Doesn't go into 2020.
DeForest Hinman -- Walthausen & Co -- Analyst
And then -- it should we -- pretty evenly weighted for the year or is it more first half.
Mark Marinko -- Senior Vice President and Chief Financial Officer
No, it's actually more in the first half of 2019.
DeForest Hinman -- Walthausen & Co -- Analyst
Okay. And then last question, E&I sales process, I know we're not making much of comments. But just my understanding of the businesses, it's some branch offices, some rental equipment, I believe some owned equipment, the sales process you've laid out seems to be pretty aggressive in terms of getting that finished in the first half of this year, only really four months remaining. When we think about the sale process, the business strikes me as a business that potentially could be sold as a whole. But given the mix of the business, it might even let itself to an auction process or just sell the assets and exit that business, is that a potential option that gives us the confidence that we're out of this business in the first half of 2019?
Mark Marinko -- Senior Vice President and Chief Financial Officer
So, as the press release said, I just want to stick to that press release at this point. We've hired an outside firm. We're in the middle of the process right now. And so I really can't comment anymore on that at this point in time.
DeForest Hinman -- Walthausen & Co -- Analyst
Okay. Once again, congratulations on the results, and keep up the good work. Thank you. guys.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Thank you.
Lasse Petterson -- Chief Executive Officer and Director
Thank you.
Operator
Thank you. Our next question or comment comes from the line of Nelson Obus from Wynnefield Capital. Your line is open.
Nelson Obus -- Wynnefield -- Analyst
Hey Lasse, a remarkable paydown of debt, extremely remarkable. Just a couple of questions and I know you want to keep avoiding questions about the environmental side, but you do have a number in the K of $78.8 million, I believe for the total assets in that division. And so would that be appropriate to use as a number that we would subtract the write-off from. I mean it's just a technical question, it's just a yes or no.
Lasse Petterson -- Chief Executive Officer and Director
I don't recognize that number Nelson.
Nelson Obus -- Wynnefield -- Analyst
Well it's under segment information in your K. Environmental and infrastructure that's note 18, it shows total assets of $78.8 million for the environmental and infrastructure business.
Mark Marinko -- Senior Vice President and Chief Financial Officer
Yes.
Nelson Obus -- Wynnefield -- Analyst
So, that means it's in there. If you don't want to deal with it, we can forget it, but I mean there was debate -- (multiple speakers)
Mark Marinko -- Senior Vice President and Chief Financial Officer
That's only obviously a technically that calculation, no, that's not right. You have to look at the assets and liabilities of the business, but they obviously -- that numbers from last year's K, things have moved from there. But anyway, that's just to answer your technical question. No, that's not how you would calculate it.
Nelson Obus -- Wynnefield -- Analyst
Alright, fine. If you were to make a decision to invest in a fleet. I guess it may depend on exactly which type of dredge or whatever that you determine you wanted to order and you put the order in, how long would it take on average between when you put the order in and when it would be ship-ready?
Lasse Petterson -- Chief Executive Officer and Director
Depends on the size and the type of vessel, but the reason for doing the design now is we are then accelerating the schedule. So, we have everything ready to put it into a shipyard when we make the investment decision. So, from this point on, when we have the design ready, it will take between two and two and half years.
Nelson Obus -- Wynnefield -- Analyst
Lasse, it's a long lead time and, OK, interesting. And finally, what is it in the international market, obviously the competitive picture there, is quite different. But can you give us a sense of why you have a level of confidence that things will improve and that we can be competitive there. Is it simply capacity utilization of your competitors or is there -- are there any other factors to take into consideration internationally. Because it is a tougher slog?
Lasse Petterson -- Chief Executive Officer and Director
Yeah, it's a -- for us as U.S. based dredger, I do believe that from 128-year-old history that we have competence and the knowledge to be able to compete head on with the international competitors on projects. It depends on the nature of the project, it depends on the nature of the equipment that is being utilized.
So the fact that we have been successful working internationally for many years, I think that is something that should we recognize and we are at this point in time in the international market looking at fleet utilization, that is probably in the range between 50% and 60% and in order to move the needle on that international market, you need a good oil price, which drives the Middle East market. And then you need larger infrastructure projects that are being discussed, but has not been funded.
There is a huge project going on in Europe linking the northern part of Europe to the southern part of Europe, which includes work in between Denmark and Germany, that's one of these projects. There is discussions about a second canal between the Med and the Caspian Sea. Once these larger projects, such as it happened with the Panama Canal and Suez canal when they kick off, requires a huge fleet of oil dredges to carry them through. And that is what I think will be the signs of recovering international markets.
Nelson Obus -- Wynnefield -- Analyst
Okay, thanks. Finally, just to reiterate, I think the greatest challenge, at least from my perspective was debt reduction and the magnitude of that reduction is sort of unprecedented in terms of my experience, and congratulations. It really has some transformational implications.
Lasse Petterson -- Chief Executive Officer and Director
Thank you, Nelson.
Operator
Thank you. Our next question or comment comes from William Feeley, from Feeley Capital Markets your line is open.
William Feeley -- Feeley Capital Markets -- Analyst
Good morning, gentlemen. I'm just curious in the Mid-Atlantic, this winter we had kind of a couple of hilarious weather events, coal in one case and a lot of snow in another. I'm curious how you're utilization on projects in that area worked out vis-a-vis you're planning for weather days.
Lasse Petterson -- Chief Executive Officer and Director
Yeah, we have a long track record in the dredging business and we've been doing these projects over and over in the different ports. So, we have a good estimates on how weather impacts us. Clearly, there are years where the weather impact is stronger and years where you have less weather, but over time it evens out. So we include that in our estimates for the project. And that's really how you handle it.
William Feeley -- Feeley Capital Markets -- Analyst
So nothing unusual in this year's cycle from heavy weather exceeding your allowances or the other way around?
Lasse Petterson -- Chief Executive Officer and Director
Well, on average I would say, no. But we have seen some very strong weather on the East Coast of the U.S. here during -- let's say the latter part of the year on Charleston for instance, the sea state has been extraordinary. But we've been able to work around that and get good performance on the project. And then on other geographies, we've seen better weathers, but on the average, I will say, it's an average year.
William Feeley -- Feeley Capital Markets -- Analyst
Great, thanks very much.
Operator
Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.
Abigail Sullivan -- Manager of Investor Relations
Thank you. We appreciate the support of our shareholders, employees, and business partners and we thank you for joining us in this discussion about the important developments and initiatives in our business. We look forward to speaking with you again during our next earnings discussion this spring. Thank you.
Operator
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.
Duration: 54 minutes
Call participants:
Abigail Sullivan -- Manager of Investor Relations
Lasse Petterson -- Chief Executive Officer and Director
Mark Marinko -- Senior Vice President and Chief Financial Officer
Andrew Casella -- Deutsche Bank -- Analyst
Jon Tanwanteng -- CJS Securities -- Analyst
Joseph Farricielli -- William Blair -- Analyst
Poe Fratt -- NOBLE Capital Markets -- Analyst
DeForest Hinman -- Walthausen & Co -- Analyst
Nelson Obus -- Wynnefield -- Analyst
William Feeley -- Feeley Capital Markets -- Analyst
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