Great Lakes Dredge & Dock Corporation (GLDD) is currently facing investigation by shareholders rights firm, Robbins Arroyo LLP, relating to the alleged involvement of the officers and directors for producing false and misleading statements about its internal controls and improperly recognizing revenue, thus violating their duties toward shareholders.
On Mar 14, 2013, Great Lakes reported fourth quarter earnings per share of 1 cent, falling way short of the Zacks Consensus Estimate of 18 cents and the year-ago quarter’s earnings of 12 cents per share. Sales increased 31% year over year to $207.1 million in the quarter, ahead of the Zacks Consensus Estimate of $195 million. Dredging revenue surged 54% to a record $190 million while demolition revenue declined 52% to $16.6 million in the quarter.
Great Lakes disclosed that it had recognized 2012 revenues in a manner, which is not consistent with its accounting policy and admitted failure of internal controls to detect or prevent misstatements in its financial statements. Great Lakes further revealed that second and third quarter 2012 demolition segment revenues were overstated by $3.9 million and $4.3 million, respectively. As a reminder, Great Lakes had reported demolition revenue of $27.9 million in the second quarter and $31.8 million in the third quarter of 2012.
The restatement announcement was followed by the resignation of President and Chief Operating Officer, Bruce J. Biemeck. Furthermore, Great Lakes stated that its inability to timely file its 2012 annual financial results with the U.S. Securities and Exchange Commission.
Great Lakes’ shares declined $1.62 or 18%, to close on Mar 15, 2013, at $7.36 per share, on unusually heavy volume. The shares have even dipped to as low as $6.68 thereafter in contrast to the range of $9 to $10 prior to the earnings release.
Following this, Robbins Arroyo LLP, a nationally recognized leader in securities litigation and shareholder rights law initiated its investigation whether Great Lakes' financial reporting for the second and third quarter 2012 may have been false and misleading.
The scrutiny is being carried out to ascertain whether its officers and directors indulged in misconduct, allowing premature recognition of revenue, permitting Great Lakes to overstate its revenue and earnings for the quarters in question in violation of Generally Accepted Accounting Principles and failing to establish adequate internal controls to prevent such misconduct.
Robbins Arroyo LLP highlights that Great Lakes shareholders have the option to pursue a shareholder derivative action, through which they can hold insider wrongdoers accountable for their actions, prevent future misconduct.
Great Lakes Dredge & Dock Corporation is the largest provider of dredging services in the United States. Great Lakes is also one of the largest U.S. providers of commercial and industrial demolition and remediation services, mainly in the Northeast. Great Lakes owns and operates the largest and most diverse fleet in the U.S. industry, comprising over 200 specialized vessels.
The ongoing investigation remains a overhang on the company. Great Lakes currently holds a short-term Zacks Rank #5 (Strong Sell).
Other stocks to consider in the same industry with a favorable Zacks Rank are Orion Marine Group Inc. (ORN) , with a Zacks Rank #1 (Strong Buy), Chicago Bridge & Iron (CBI) and AECOM Technology Corp (ACM), both of which carry a Zacks Rank #2 (Buy).
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