Great Lakes Reports Second Quarter Results

  Great Lakes Reports Second Quarter Results

           Company receives full award for Dredge New York Allision

                          Backlog above $550 Million

  Company Records a Noncash Impairment of Goodwill in the Demolition Segment

Business Wire

OAK BROOK, Ill. -- August 8, 2013

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 three and six months ended June 30, 2013.

Commentary

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.”

Second Quarter 2013 Highlights

Total Company

  *Revenue decreased 6.3% to $152.9 million in the second quarter of 2013
    compared to the second quarter of 2012.
  *Gross profit margin decreased to 3.4% from 11.5% in the second quarter of
    2012 driven by lower fixed cost coverage in both segments, as well
    negative gross profit in the demolition segment and the reversal of $5.6
    million of revenues recorded pertaining to pending change orders.
  *General & Administrative expenses increased $6.9 million, year over year.
    Additional G&A expense in the quarter was primarily due to expenses
    related to the revenue recognition issues discovered at year end, bad debt
    expense, as well as the addition of Terra Contracting.
  *Operating loss was $21.4 million, $28.7 million worse than the prior year
    quarter.  This was driven by a goodwill impairment charge of $21.5
    million, as well as the decrease in operating results described above,
    partially offset by the $13.3 million in proceeds related to the dredge
    New York loss of use claim.
  *Net loss was $25.2 million in the quarter versus Net income of $1.3
    million in the prior year quarter.
  *Adjusted EBITDA was $11.0 million, a 35% decrease from the prior year
    quarter as a result of the operating losses described above.
  *Total contracted backlog at quarter end was $551.2 million. Excluded from
    this number is $143.4 million in domestic dredging low bids and options
    pending award.

Dredging

  *Dredging revenues were $136.5 million for the quarter, in line with the
    prior year. Coastal protection revenue and foreign capital revenue
    increased, but were offset by decreases in the other dredging markets.
  *Gross profit margin was 9.1%, versus 16.1% in the same quarter last year.
    Gross margin decreased due to lower fixed cost coverage, as well as an
    increase in plant expense.
  *Operating income increased nearly 25% to $14.6 million compared to $11.7
    million in the prior year quarter, driven by the $13.3 million of proceeds
    in connection with the dredge New York settlement.
  *The Company won 62%, or $346 million, of the domestic dredging bid market
    in the first six months of 2013.

Demolition

  *Demolition revenue decreased 40.4% to $16.6 million versus $27.9 million
    in the prior year quarter. The revenue in 2013 includes $10.1 million of
    Terra Contracting revenue. Revenue was impacted by the reversal of $5.6
    million in revenue related to pending change orders noted above.
  *Demolition recorded negative gross profit margin of 43.8% compared to
    negative gross profit margin of 11.2% in the prior year quarter as a
    result of the revenue reversal described above and cost overruns on
    projects. Declines at NASDI were slightly offset by positive results at
    Terra Contracting.
  *The demolition segment recorded an operating loss of $36.0 million versus
    an operating loss of $4.4 million in the prior year quarter. The loss was
    driven by negative gross margin, the $21.5 million impairment of goodwill,
    an increase in G&A expense primarily related to additional legal and
    consulting expenses, bad debt expense, as well as the addition of Terra
    Contracting at the end of 2012.
  *Backlog was $92.9 million at the end of the second quarter, an increase
    from year end, primarily related to the addition of a $30.0 million
    environmental contract at Terra Contracting.

Six Months Ended June 30, 2013 Highlights

Total Company

  *Revenue increased 7.5% to $341.7 million for the six months ended June 30,
    2013, compared to the six months ended June 30, 2012.
  *Gross profit margin decreased to 9.1% from 12.2% for the six months ended
    June 30, 2013. This was driven by negative results in the demolition
    segment and decline in dredging gross profit in the second quarter of
    2013.
  *General & Administrative expenses increased $12.8 million, year over year.
    Additional G&A expense was primarily due to expenses related to the
    revenue recognition issues discovered at year end, severance cost, bad
    debt expense, and the addition of Terra Contracting.
  *Operating loss was $14.8 million, down from operating income of $14.1
    million in the prior year.  Again, this was driven by the impairment of
    goodwill in the demolition segment.
  *Net loss for the six months ended June 30, 2013 was $24.8 million, versus
    Net income of $2.3 million in the prior year.
  *Adjusted EBITDA was $29.2 million for the six months ended June 30, 2013,
    a decrease of 8% over the same period in the prior year. Adjusted EBITDA
    for 2013 includes $13.3 million in proceeds related to the dredge New York
    claim.

Dredging

  *Revenue increased 19.9% to $310.4 million for the six months ended June
    30, 2013, compared to the six months ended June 30, 2012, driven by an
    increase in domestic and foreign capital and coastal protection revenue,
    offset by decreases in maintenance and rivers & lakes revenue.
  *Gross profit margin for the six months ended June 30, 2013 decreased to
    14.1% from 14.7% for the six months ended June 30, 2012. This was
    primarily due to weaker results in the second quarter of 2013.
  *General & Administrative expenses increased $2.1 million, year over year.
    Additional G&A expense primarily related to additional payroll expense and
    severance cost.
  *Operating income was $33.6 million, an increase from $16.6 million in the
    prior year.

Demolition

  *Revenue decreased 47.9% to $31.5 million for the six months ended June 30,
    2013, compared to the six months ended June 30, 2012, driven by a decrease
    in the number of large projects worked on during the year and the reversal
    of revenue of $5.6 million of revenue recognized previously, offset by the
    contribution from Terra Contracting.
  *Gross profit margin for the six months ended June 30, 2013 decreased to a
    negative 40.5% from gross profit margin of 1.6% for the six months ended
    June 30, 2012. This was primarily due to the decrease in revenue in 2013,
    along with cost overruns on projects and a decline in contract margin.
  *General & Administrative expenses increased $10.7 million, year over year.
    Additional G&A expense primarily related to the revenue recognition issues
    discovered at year end and bad debt expense, as well as $4.5 million
    related to Terra Contracting.
  *Demolition generated an operating loss of $48.4 million for the six months
    ended June 30, 2013, compared to an operating loss of $2.5 million in the
    prior year, driven by the write down of goodwill in this segment and the
    operating losses described above.

Outlook

Mr. Berger concluded, “Due to the project nature of our business, quarterly
results can sometimes vary significantly, as we saw this quarter. With
dredging backlog, including pending awards, at a record high, we expect high
utilization for the remainder of the year and into 2014. In addition, we are
currently in final negotiations for a project in the Middle East valued at
over $100 million.

“The domestic dredging bid market was very busy in the first six months of
2013. As noted, we won 62% of the market in the first six months, primarily
for capital and coastal protection projects. We previously announced we won
the PortMiami project in May. The base work of $122 million is included in
backlog and another $80 million of options are expected to be awarded by
January 2014. Dredging is expected to begin in the fourth quarter of this
year. The Company won 63% of the coastal protection projects bid this year.
This includes $75 million of projects needed due to Superstorm Sandy, and we
added a $19 million coastal protection project in the Northeast in July. As a
result of the high win rate, dredging backlog was $458 million, a nearly 18%
increase since year end. The Company was low bidder on an $81 million coastal
restoration project this week that will contribute to 2014 results. Three more
Sandy-related projects are expected to be bid in the next month. In addition,
later in the year we expect to bid more coastal protection work in the
Southeast. Beyond 2013, there are plans to use Sandy supplemental funding for
more long term coastal protection projects. Our TerraSea Joint Venture was
awarded its first contaminated sediment remediation dredging project on the
Passaic River in New Jersey and commenced operations last week.

“The demolition segment will require additional time and expense to improve
operations and deliver better results. We see numerous demolition and
environmental remediation opportunities on the horizon, and we will be
measured in our approach and selectively target those projects we believe that
we can execute well.”

The Company will be holding a conference call at 9:00 a.m. C.D.T today where
we will further discuss these results. Information on this conference call can
be found below.

Conference Call Information

The Company will conduct a quarterly conference call, which will be held on
Thursday, August 8, 2013 at 9:00 a.m. C.D.T (10:00 a.m. E.D.T.). The call in
number is 877-377-7553 and conference ID is 20061209. The conference call will
be available by replay until August 12, 2013, by calling 800-585-8367 and
providing passcode 20061209. 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.

Use of Adjusted EBITDA

Adjusted EBITDA, as provided herein, represents net income attributable to
Great Lakes Dredge & Dock Corporation, adjusted for net interest expense,
income taxes, depreciation and amortization expense, debt extinguishment,
accelerated maintenance expense for new international deployments and goodwill
impairment. In 2012, the Company modified the Adjusted EBITDA calculation for
accelerated maintenance expense for new international deployments that are not
directly recoverable under the related dredging contract and are therefore
expensed as incurred. The Company does not frequently incur significant
accelerated maintenance as a part of its international deployments. As such,
the exclusion of these accelerated maintenance expenses from the calculation
of Adjusted EBITDA allows users of the financial statements to more easily
compare our year-to-year results. Adjusted EBITDA is not a measure derived in
accordance with accounting principles generally accepted in the United States
of America (“GAAP”). The Company presents Adjusted EBITDA as an additional
measure by which to evaluate the Company’s operating trends. The Company
believes that Adjusted EBITDA is a measure frequently used to evaluate
performance of companies with substantial leverage and that the Company’s
primary stakeholders (i.e., its stockholders, bondholders and banks) use
Adjusted EBITDA to evaluate the Company’s period to period performance.
Additionally, management believes that Adjusted EBITDA provides a transparent
measure of the Company’s recurring operating performance and allows management
to readily view operating trends, perform analytical comparisons and identify
strategies to improve operating performance. For this reason, the Company uses
a measure based upon Adjusted EBITDA to assess performance for purposes of
determining compensation under the Company’s incentive plan. Adjusted EBITDA
should not be considered an alternative to, or more meaningful than, amounts
determined in accordance with 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
accelerated maintenance expense for new international deployments, goodwill
impairment, 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 the
Company’s operating performance and uses Adjusted EBITDA only as a supplement.
Adjusted EBITDA is reconciled to net income attributable to Great Lakes Dredge
& Dock Corporation in the table of financial results. For further explanation,
please refer to the Company’s SEC filings.

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 and remediation
services primarily in the Northeast and Midwest. 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
123-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 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 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 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, 2012, 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            Six Months Ended
                       June 30,                      June 30,
                       2013          2012            2013          2012
Contract               $ 152,863     $ 163,107       $ 341,710     $ 318,014
revenues
Gross profit             5,181         18,706          30,964        38,728
General and
administrative           18,311        11,456          37,498        24,723
expenses
Proceeds from
loss of use              (13,272 )     -               (13,272 )     -
claim
Impairment of            21,474        -               21,474        -
goodwill
(Gain) loss on
sale of                 58          (93     )      60          (124    )
assets—net
Operating income         (21,390 )     7,343           (14,796 )     14,129
(loss)
Other income
(expense)
Interest                 (5,396  )     (5,383  )       (11,129 )     (10,642 )
expense—net
Equity in loss
of joint                 (385    )     (8      )       (975    )     (24     )
ventures
Loss on foreign
currency                (261    )    (21     )      (225    )    (15     )
transactions—net
Income (loss)
before income            (27,432 )     1,931           (27,125 )     3,448
taxes
Income tax
(provision)             2,244       (751    )      2,348       (1,315  )
benefit
Net income               (25,188 )     1,180           (24,777 )     2,133
(loss)
Net (income)
loss
attributable to         (53     )    91            (31     )    206     
noncontrolling
interests
Net income
(loss)
attributable to        $ (25,241 )   $ 1,271        $ (24,808 )   $ 2,339   
Great Lakes
Dredge & Dock
Corporation
Basic earnings
(loss) per share
attributable to        $ (0.42   )   $ 0.02          $ (0.42   )   $ 0.04
Great Lakes
Dredge & Dock
Corporation
Basic weighted           59,436        59,171          59,403        59,105
average shares
Diluted earnings
(loss) per share
attributable to        $ (0.42   )   $ 0.02          $ (0.42   )   $ 0.04
Great Lakes
Dredge & Dock
Corporation
Diluted weighted         59,436        59,534          59,403        59,493
average shares
                                                                             

                                                              
                                                                        
Great Lakes Dredge & Dock Corporation
Reconciliation of Net Income (Loss) attributable to Great Lakes Dredge & Dock
Corporation to Adjusted EBITDA
(Unaudited and in thousands)
                                                                        
                             Three Months Ended         Six Months Ended
                             June 30,                   June 30,
                             2013          2012         2013          2012
Net income (loss)
attributable to Great        $ (25,241 )   $ 1,271      $ (24,808 )   $ 2,339
Lakes Dredge & Dock
Corporation
Adjusted for:
Accelerated                    -             1,276        -             1,276
maintenance expenses
Impairment of goodwill         21,474        -            21,474        -
Interest expense—net           5,396         5,383        11,129        10,642
Income tax provision           (2,244  )     751          (2,348  )     1,315
(benefit)
Depreciation and              11,660      8,359       23,735      16,123
amortization
Adjusted EBITDA              $ 11,045     $ 17,040     $ 29,182     $ 31,695
                                                                        

                                           
Great Lakes Dredge & Dock Corporation
Selected Balance Sheet Information
(Unaudited and in thousands)
                                                        
                                      Period Ended
                                      June 30,      December 31,
                                      2013          2012
Cash and cash equivalents             $ 21,623      $   24,440
Total current assets                    324,186         313,690
Total assets                            817,354         826,395
Total short-term debt                   2,515           13,098
Total current liabilities               147,471         185,950
Long-term debt                          291,000         250,000
Total equity                            249,800         273,425

                                                           
                                                                       
Great Lakes Dredge & Dock Corporation
Revenue and Backlog Data
(Unaudited and in thousands)
                                                                       
                     Three Months Ended              Six Months Ended
                     June 30,                        June 30,
Revenues             2013            2012            2013            2012
Dredging:
Capital -            $ 39,474        $ 45,184        $ 84,982        $ 72,091
U.S.
Capital -              33,348          20,848          71,733          38,873
foreign
Coastal                52,227          40,458          109,148         71,641
protection
Maintenance            6,639           20,068          34,403          60,613
Rivers &              4,799         8,757         10,180        15,770  
lakes
Total
dredging               136,487         135,315         310,446         258,988
revenues
Demolition             16,645          27,929          31,533          60,475
Intersegment          (269    )      (137    )      (269    )      (1,449  )
revenue
Total                $ 152,863      $ 163,107      $ 341,710      $ 318,014 
revenues
                                                                       

                                                                       
                     As of
                     June 30,        December        June 30,
                                     31,
Backlog              2013            2012            2012
Dredging:
Capital -            $ 185,351       $ 43,177        $ 104,283
U.S.
Capital -              163,577         218,953         225,999
foreign
Coastal                66,398          80,245          34,111
protection
Maintenance            20,950          22,406          10,907
Rivers &              21,975        24,510        23,167  
lakes
Total
dredging               458,251         389,291         398,467
backlog
Demolition            92,908        60,148   *    56,786  
Total                $ 551,159      $ 449,439      $ 455,253 
backlog
                                                                       

* December 31, 2012 demolition backlog includes backlog acquired by the
Company on December 31, 2012 in connection with the Terra acquisition.

Contact:

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