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, reported financial results for the three and six months ended June 30, 2013.
Jonathan Berger, Chief Executive Officer stated, “For the three months ended June 30, 2013, Great Lakes reported Revenue of $152.9 million, a Net Loss of $25.2 million and Adjusted EBITDA of $11.0 million. Included in the Net Loss is a $21.5 million noncash charge for goodwill impairment related to the demolition segment.
“Our dredging segment won $346 million or 62% of the domestic bid market through the first six months of 2013. This win rate, driven by the award of the first phase of the PortMiami project and capturing 63% of the coastal protection market, sets the stage for a busy second half of this year and into 2014. Our Terra Contracting and Rivers & lakes teams have commenced working together on a project in the Midwest valued at approximately $30 million. We also began execution on two of the larger projects in our demolition segment backlog, with one scheduled for completion in 2013 and the other continuing into next year.
“We are making structural changes within the organization to bring more operational skills into executive leadership. We continue to focus on our NASDI subsidiary in our demolition segment. We are also upgrading our project management capabilities. We have dedicated significant resources at corporate and in the field to improve execution and internal controls and we have made strides since the beginning of the year. We are also evaluating opportunities to combine operations to reduce support costs, and focusing on improving margins through more selective bidding and better project execution.
“As noted, we recorded a noncash goodwill impairment of $21.5 million in the second quarter for our demolition segment. We are committed to validating our strategy for this business by year end.”
William Steckel, Chief Financial Officer stated, “After six months of near record revenue levels, dredging activity slowed in the second quarter as several vessels were offline for scheduled maintenance and some projects expected to contribute were delayed into the second half of the year. Gross margin was lower due to lower fixed cost coverage. As we look forward, dredging has nearly $460 million in backlog and another $143 million in low bids and options pending award. We currently expect an increase in activity in the dredging segment for the remainder of 2013.
“Our second quarter results included $13.3 million for the proceeds resulting from the settlement of our dredge New York loss of use claim. We were pleased to receive payment on this judgment more than five years after our dredge New York was struck by a cargo vessel in Port Newark, New Jersey. Quarter results also included an estimated noncash charge of $21.5 million, which represented all the goodwill associated with our NASDI and Yankee demolition subsidiaries. We typically test goodwill for impairment in the third quarter, however, due to a decline in the overall financial performance and declining cash flows in the demolition reporting unit, we concluded there was a triggering event that required us to accelerate the test to the second quarter. We wrote down the value of goodwill related to this reporting unit by $21.5 million, reflecting our best estimate of impairment at this time. We are currently completing our detailed valuation of the demolition segment assets and liabilities, and will finalize the impairment measurement in the third quarter.
“Additionally, we determined that certain pending change orders for one demolition project no longer qualify for revenue recognition according to the Company’s accounting policy. In June we filed a lawsuit against the project’s general contractor to preserve our contractual rights while we pursue payment for the work performed under these change orders. As a result of the new developments related to the project, which also include recent communications with the general contractor and site owner, we reversed revenue of $5.6 million that was previously recognized for the project. We continue our efforts to achieve a favorable outcome related to these change orders.”
Press Release, August 9, 2013