<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ------- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
----------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ------- SECURITIES EXCHANGE ACT OF 1934
For the transition period from
----------------------------------
Commission File Number 333-64687
GREAT LAKES DREDGE & DOCK CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3634726
- - --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2122 YORK ROAD, OAK BROOK, ILLINOIS 60521
- -----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (630) 574-3000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------------ ------------
As of April 28, 1999, there were outstanding 1,636,100 shares of Class A
Common Stock, 3,363,900 shares of Class B Common Stock and 45,000 shares of
Preferred Stock.
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
Page
----
INDEX
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 1999 and December 31, 1998 2
Condensed Consolidated Statements of Income
for the Three Months ended March 31, 1999 and 1998 3
Condensed Consolidated Statements of Cash Flows
for the Three Months ended March 31, 1999 and 1998 4
Notes to Unaudited Condensed Consolidated Financial
Statements 5
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 3 Quantitative and Qualitative Disclosures About Market
Risk 21
PART II OTHER INFORMATION
Item 1 Legal Proceedings 22
Item 6 Exhibits and Reports on Form 8-K 22
SIGNATURE 22
EXHIBIT INDEX 23
1
<PAGE>
PART I - FINANCIAL INFORMATION
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents ......................................... $ 1,115 $ 758
Accounts receivable, net ..................................... 36,667 37,396
Contract revenues in excess of billings ...................... 16,195 15,936
Inventories .................................................. 14,376 13,427
Prepaid and other current assets ............................. 6,250 7,176
--------- -----------
Total current assets................................... 74,603 74,693
Property and equipment, net .................................. 134,298 134,237
Inventories .................................................. 7,121 6,905
Investments in joint ventures ................................ 7,451 10,507
Other assets ................................................. 8,584 8,745
--------- -----------
Total assets .......................................... $ 232,057 $ 235,087
--------- -----------
--------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable ............................................. $ 28,063 $ 26,220
Accrued expenses ............................................. 13,835 18,630
Billings in excess of contract revenues ...................... 5,448 4,842
Current maturities of long-term debt ......................... 3,950 2,700
--------- -----------
Total current liabilities ............................ 51,296 52,392
Long-term debt ............................................... 167,450 167,700
Deferred income taxes......................................... 45,428 45,695
Foreign income taxes ......................................... 4,833 6,944
Other ........................................................ 6,850 6,496
--------- -----------
Total liabilities .................................... 275,857 279,227
Minority interests ........................................... 2,694 4,594
Commitments and contingencies (Note 9) ....................... - -
Stockholders' deficit:
Preferred stock, $.01 par value; 250,000 shares authorized:
45,000 issued and outstanding .......................... 1 1
Common stock, $.01 par value; 50,000,000 shares authorized:
5,000,000 issued and outstanding ....................... 50 50
Additional paid-in capital ................................ 50,457 50,457
Accumulated deficit ....................................... (97,002) (99,242)
--------- -----------
Total stockholders' deficit ....................... (46,494) (48,734)
--------- -----------
Total liabilities and stockholders' deficit ......... $ 232,057 $ 235,087
--------- -----------
--------- -----------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
2
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 1998
--------- ---------
<S> <C> <C>
Contract revenues ......................................... $ 72,319 $ 56,634
Costs of contract revenues ................................ 59,105 47,952
--------- ---------
Gross profit ........................................... 13,214 8,682
General and administrative expenses ....................... 4,939 4,912
--------- ---------
Operating income ....................................... 8,275 3,770
Interest expense, net ..................................... (4,363) (1,158)
Equity in earnings of joint ventures ...................... (324) (13)
--------- ---------
Income before income taxes and minority interests ...... 3,588 2,599
Income tax expense ....................................... (1,518) (929)
Minority interests ....................................... 170 (389)
--------- ---------
Net income ....................................... $ 2,240 $ 1,281
--------- ---------
--------- ---------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ............................................................ $ 2,240 $ 1,281
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation ....................................................... 2,928 3,663
Earnings of joint ventures ......................................... 324 13
Minority interests ................................................. (170) 389
Deferred income taxes .............................................. (293) -
Gain on dispositions of property and equipment ..................... (81) (1)
Other, net ......................................................... 515 49
Changes in assets and liabilities:
Accounts receivable ............................................. 729 (1,852)
Contract revenues in excess of billings ......................... (259) 10,461
Inventories ..................................................... (1,165) (829)
Prepaid expenses and other current assets ....................... 952 1,971
Accounts payable and accrued expenses ........................... (5,063) (13,389)
Billings in excess of contract revenues ......................... 606 624
----------- ------------
Net cash flows from operating activities ....................... 1,263 2,380
INVESTING ACTIVITIES
Purchases of property and equipment ................................... (3,112) (2,129)
Dispositions of property and equipment ................................ 204 1
Distributions from joint ventures ..................................... 2,732 -
Distributions to minority interests ................................... (1,730) -
----------- ------------
Net cash flows from investing activities .................... (1,906) (2,128)
FINANCING ACTIVITIES
Borrowings (repayments) of revolving loans, net ....................... 1,000 (1,500)
----------- ------------
Net cash flows from financing activities .................... 1,000 (1,500)
----------- ------------
Net increase (decrease) in cash and equivalents ....................... 357 (1,248)
Cash and equivalents at beginning of period ........................... 758 1,717
----------- ------------
Cash and equivalents at end of period ................................. $ 1,115 $ 469
----------- ------------
----------- ------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest ............................................. $ 7,528 $ 1,186
----------- ------------
----------- ------------
Cash paid for taxes ................................................ $ 190 $ 846
----------- ------------
----------- ------------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, these financial statements do
not include all the information in the notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the unaudited condensed consolidated financial statements include
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation of the financial position, results of
operations and cash flows. The unaudited condensed consolidated financial
statements and notes herein should be read in conjunction with the audited
consolidated financial statements of Great Lakes Dredge & Dock Corporation and
Subsidiaries (the Company) and the notes thereto, included in the Company's
Special Financial Report filed on Form 10-K for the year ended December 31,
1998.
2. ALLOCATION OF EQUIPMENT COST
The Company can have significant fluctuations in equipment utilization
throughout the year. Accordingly, for interim reporting, the Company defers or
accrues fixed equipment costs and amortizes the expenses in proportion to
revenues recognized over the year to better match revenues and expenses.
3. CHANGE IN ACCOUNTING ESTIMATE
Effective January 1, 1999, the Company made changes in the estimated
useful lives of certain operating equipment to better reflect the remaining
period over which the Company anticipates utilizing this equipment, with normal
repairs and maintenance. This change resulted in depreciation expense for the
three months ended March 31, 1999 being approximately $750 less than it would
have been if the prior useful lives had been used.
4. ACCOUNTS RECEIVABLE
Accounts receivable at March 31, 1999 and December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
Completed contracts $ 12,872 $ 12,682
Contracts in progress 21,656 21,420
Retainage 3,038 4,193
----------- ------------
37,566 38,295
Allowance for doubtful accounts (899) (899)
----------- ------------
$ 36,667 $ 37,396
----------- ------------
----------- ------------
</TABLE>
5
<PAGE>
5. CONTRACTS IN PROGRESS
The components of contracts in progress at March 31, 1999 and December 31,
1998 are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Costs and earnings in excess of billings:
Accumulated costs and earnings for
contracts in progress $ 114,942 $ 108,064
Amounts billed (102,245) (93,431)
------------ ------------
Costs and earnings in excess of billings for
contracts in progress 12,697 14,633
Costs and earnings in excess of billings for
completed contracts 3,498 1,303
------------ ------------
$ 16,195 $ 15,936
------------ ------------
------------ ------------
Billings in excess of costs and earnings:
Amounts billed $ (84,066) $ (45,808)
Accumulated costs and earnings for
contracts in progress 78,618 40,966
------------ ------------
Billings in excess of costs and earnings for
contracts in progress $ (5,448) $ (4,842)
------------ ------------
------------ ------------
</TABLE>
6. INVESTMENTS IN JOINT VENTURES
The Company has a 50% ownership interest in Amboy Aggregates Joint
Venture (Amboy), whose primary business is the dredge mining and sale of fine
aggregate, and a 17% ownership interest in Riovia S.A. (Riovia), a venture whose
sole business is the performance of a dredging contract in Argentina and
Uruguay. The Company's share of earnings in these joint ventures is included in
income as earned. The following presents summarized income statement information
for Amboy, based on its significance to the Company's annual pre-tax income.
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ 2,474 $ 2,727
Costs and expenses (3,165) (3,312)
----------- -----------
Net loss $ (691) $ (585)
----------- -----------
----------- -----------
</TABLE>
Amboy has a mortgage loan with a bank, which contains certain restrictive
covenants, including limitations on the amount of distributions to its joint
venture partners. The Company has guaranteed 50% of the outstanding mortgage
principal and accrued interest, which totaled $4,759 at March 31, 1999.
6
<PAGE>
7. ACCRUED EXPENSES
Accrued expenses at March 31, 1999 and December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ------------
<S> <C> <C>
Insurance $ 4,809 $ 5,424
Income and other taxes 3,390 1,174
Payroll and employee benefits 1,933 5,817
Interest 1,916 5,195
Other 1,787 1,020
-------- -------
$13,835 $18,630
-------- -------
-------- -------
</TABLE>
8. SEGMENT INFORMATION
The Company and its subsidiaries operate in one reportable segment of
providing dredging services, which includes three primary types of work:
capital, maintenance and beach nourishment. Revenues by type of work for the
three-month periods ended March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
March 31, March 31,
1999 1998
----------- ------------
<S> <C> <C>
Capital $36,201 $27,284
Maintenance 25,399 18,140
Beach nourishment 10,719 10,199
Other - 1,011
-------- --------
$72,319 $56,634
-------- --------
-------- --------
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
At March 31, 1999, the Company is contingently liable, in the normal
course of business, for $13,591 in letters of credit related to contract
performance guarantees.
In the normal course of business, the Company is a defendant in various
other legal proceedings. Resolution of these claims is not expected to have a
material impact on the financial position or operations of the Company.
7
<PAGE>
10. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Included in the Company's long-term debt is $115 million of 11-1/4%
senior subordinated notes which will mature on August 15, 2008. The payment
obligations of the Company under the senior subordinated notes are guaranteed by
certain of the Company's wholly owned domestic subsidiaries ("Subsidiary
Guarantors"). Such guarantees are full, unconditional and joint and several.
Separate financial statements of the Subsidiary Guarantors are not presented
because the Company's management has determined that they would not be material
to investors. The following supplemental financial information sets forth, on a
combined basis, the balance sheets, statements of operations and statements of
cash flows for the Subsidiary Guarantors, the Company's non-guarantor
subsidiaries and for the Company (GLD Corporation). During the fourth quarter of
1998, Great Lakes International, Inc. (GLI), a wholly owned guarantor subsidiary
of the Company, was merged into GLD Corporation. Therefore, the 1998 amounts
presented in the following columns for GLD Corporation include GLI amounts and
activity as if GLI had been merged into GLD Corporation at the beginning of
1998.
8
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING BALANCE SHEET AT MARCH 31, 1999
GUARANTOR OTHER GLD CONSOLIDATED
ASSETS SUBSIDIARIES SUBSIDIARIES CORPORATION ELIMINATIONS TOTALS
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and equivalents ....................... $ 1,031 $ 84 $ -- $ -- $ 1,115
Accounts receivable ........................ 32,119 4,542 6 -- 36,667
Receivables from affiliates ................ 5,159 6,404 -- (11,563) --
Current portion of net investment in
direct financing leases .............. -- 4,946 3,305 (8,251) --
Contract revenues in excess of billings .... 14,691 1,504 -- -- 16,195
Inventories ................................ 11,288 3,088 -- -- 14,376
Prepaid expenses and other current assets 5,450 359 768 (327) 6,250
--------- --------- --------- --------- ---------
Total current assets ....... 69,738 20,927 4,079 (20,141) 74,603
Property and equipment, net .................. 71,301 15,959 47,038 -- 134,298
Net investment in direct financing leases .... -- 7,523 4,910 (12,433) --
Investments in subsidiaries .................. 12,717 -- 125,230 (137,947) --
Notes receivable from affiliates ............. 31,250 1,033 -- (32,283) --
Inventories .................................. 7,121 -- -- -- 7,121
Investments in joint ventures ................ 7,451 -- -- -- 7,451
Other ........................................ 3,598 -- 4,986 -- 8,584
--------- --------- --------- --------- ---------
$ 203,176 $ 45,442 $ 186,243 $(202,804) $ 232,057
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ........................... $ 23,861 $ 4,143 $ 50 $ 9 $ 28,063
Payables to affiliates ..................... 7,717 1,405 2,441 (11,563) --
Accrued expenses ........................... 8,391 1,305 4,466 (327) 13,835
Current portion of obligations
under capital leases ..................... -- 8,251 -- (8,251) --
Billings in excess of contract revenues .... 4,488 960 -- -- 5,448
Current maturities of long-term debt ....... 200 -- 3,750 -- 3,950
--------- --------- --------- --------- ---------
Total current liabilities .. 44,657 16,064 10,707 (20,132) 51,296
Long-term debt ............................... 200 -- 167,250 -- 167,450
Obligations under capital leases ............. -- 12,433 -- (12,433) --
Note payable to affiliate .................... -- -- 32,283 (32,283) --
Deferred income taxes ........................ 26,627 2,637 16,184 -- 45,428
Foreign income taxes ......................... -- -- 4,833 -- 4,833
Other ........................................ 4,935 415 1,500 -- 6,850
--------- --------- --------- --------- ---------
Total liabilities ......... 76,419 31,549 232,737 (64,848) 275,857
Minority interests ........................... -- -- -- 2,694 2,694
Stockholders' equity (deficit) ............... 126,757 13,893 (46,494) (140,650) (46,494)
--------- --------- --------- --------- ---------
$ 203,176 $ 45,442 $ 186,243 $(202,804) $ 232,057
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
9
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING BALANCE SHEET AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR OTHER GLD CONSOLIDATED
ASSETS SUBSIDIARIES SUBSIDIARIES CORPORATION ELIMINATIONS TOTALS
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and equivalents .................... $ 490 $ 268 $ - $ - $ 758
Accounts receivable ..................... 33,601 3,789 6 - 37,396
Receivables from affiliates ............. 5,664 16,148 111 (21,923) -
Current portion of net investment in
direct financing leases ........... - 4,767 3,228 (7,995) -
Contract revenues in excess of billings . 13,350 2,586 - - 15,936
Inventories ............................. 10,111 3,316 - - 13,427
Prepaid expenses and other current assets 4,856 168 2,152 - 7,176
--------- --------- --------- --------- ---------
Total current assets .... 68,072 31,042 5,497 (29,918) 74,693
Property and equipment, net .................... 71,021 16,265 46,951 - 134,237
Net investment in direct financing leases ...... - 8,829 5,766 (14,595) -
Investments in subsidiaries .................... 18,957 - 120,177 (139,134) -
Notes receivable from affiliates ............... 27,902 1,204 - (29,106) -
Inventories .................................... 6,905 - - - 6,905
Investments in joint ventures .................. 10,507 - - - 10,507
Other .......................................... 3,647 - 5,098 - 8,745
--------- --------- --------- --------- ---------
$ 207,011 $ 57,340 $ 183,489 $(212,753) $ 235,087
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ........................ $ 21,578 $ 4,509 $ 123 $ 10 $ 26,220
Payables to affiliates .................. 16,624 2,747 2,552 (21,923) -
Accrued expenses and other............... 11,757 1,165 5,708 - 18,630
Current portion of obligations under
capital leases .................... - 7,995 - (7,995) -
Billings in excess of contract revenues.. 3,533 1,309 - - 4,842
Current maturities of long-term debt .... 200 - 2,500 - 2,700
--------- --------- --------- --------- ---------
Total current liabilities ...... 53,692 17,725 10,883 (29,908) 52,392
Long-term debt ................................. 200 - 167,500 - 167,700
Obligations under capital leases ............... - 14,595 - (14,595) -
Note payable to affiliate ...................... - - 29,106 (29,106) -
Deferred income taxes .......................... 26,833 2,572 16,290 - 45,695
Foreign income taxes ........................... - - 6,944 - 6,944
Other .......................................... 4,567 429 1,500 - 6,496
--------- --------- --------- --------- ---------
Total liabilities .............. 85,292 35,321 232,223 (73,609) 279,227
Minority interests ............................. - - - 4,594 4,594
Stockholders' equity (deficit) ................. 121,719 22,019 (48,734) (143,738) (48,734)
--------- --------- --------- --------- ---------
$ 207,011 $ 57,340 $ 183,489 $(212,753) $ 235,087
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
10
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1999
GUARANTOR OTHER GLD CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ELIMINATIONS TOTALS
------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract revenues ......................... $ 63,317 $ 9,769 $ - $ (767) $ 72,319
Costs of contract revenues ................ (51,163) (8,819) 110 767 (59,105)
-------- -------- -------- -------- --------
Gross profit ....................... 12,154 950 110 - 13,214
General and administrative expenses ....... (3,570) (1,313) (56) - (4,939)
-------- -------- -------- -------- --------
Operating income (loss) ............ 8,584 (363) 54 - 8,275
Interest, net ............................. (107) (2) (4,254) - (4,363)
Equity in earnings of subsidiaries ........ (563) - 5,050 (4,487) -
Equity in earnings of joint ventures ...... (324) - - - (324)
-------- -------- -------- -------- --------
Income(loss) before income taxes and
minority interests ............ 7,590 (365) 850 (4,487) 3,588
Income tax (expense) benefit .............. (2,688) (220) 1,390 - (1,518)
Minority interests ........................ - - - 170 170
-------- -------- -------- -------- --------
Net income (loss) .................. $ 4,902 $ (585) $ 2,240 $ (4,317) $ 2,240
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
11
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998
GUARANTOR OTHER GLD CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ELIMINATIONS TOTALS
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract revenues ................... $ 45,544 $ 11,474 $ -- $ (384) $ 56,634
Costs of contract revenues .......... (39,437) (8,335) (564) 384 (47,952)
-------- -------- -------- -------- --------
Gross profit ................. 6,107 3,139 (564) - 8,682
General and administrative expenses.. (3,598) (1,188) (126) - (4,912)
-------- -------- -------- -------- --------
Operating income (loss) ...... 2,509 1,951 (690) - 3,770
Interest, net ....................... (101) (83) (974) - (1,158)
Equity in earnings of subsidiaries .. 878 - 2,455 (3,333) -
Equity in earnings of joint ventures (13) - - - (13)
-------- -------- -------- -------- --------
Income before income taxes and
minority interests ....... 3,273 1,868 791 (3,333) 2,599
Income tax (expense) benefit ........ (1,185) (234) 490 - (929)
Minority interests .................. - - - (389) (389)
-------- -------- -------- -------- --------
Net income ................... $ 2,088 $ 1,634 $ 1,281 $ (3,722) $ 1,281
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
12
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1999
GUARANTOR OTHER GLD CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ELIMINATIONS TOTALS
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ....................................... $ 4,902 $ (585) $ 2,240 $(4,317) $ 2,240
Adjustments to reconcile net income (loss) to net
cash flows from operating activities:
Depreciation ....................................... 2,037 977 (86) - 2,928
Earnings of subsidiaries and joint ventures ........ 887 - (5,050) 4,487 324
Minority interests ................................. - - - (170) (170)
Deferred income taxes .............................. (222) (77) 6 - (293)
Loss(gain) on dispositions of property and equipment (204) 123 - - (81)
Other, net ......................................... 430 - 85 - 515
Changes in assets and liabilities:
Accounts receivable ............................ (8,282) 9,011 - - 729
Contract revenues in excess of billings ........ (1,341) 1,082 - - (259)
Inventories .................................... (1,393) 228 - - (1,165)
Prepaid expenses and other current assets ...... (1,034) 37 1,949 - 952
Accounts payable and accrued expenses .......... 893 (1,831) (4,125) - (5,063)
Billings in excess of contract revenues ........ 955 (349) - - 606
-------- -------- -------- -------- --------
Net cash flows from operating activities ........... (2,372) 8,616 (4,981) - 1,263
INVESTING ACTIVITIES
Purchases of property and equipment ...................... (2,318) (794) - - (3,112)
Proceeds from dispositions of property
and equipment ...................................... 204 - - - 204
Distributions from joint ventures ....................... 2,732 - - - 2,732
Distributions to minority interests ..................... - (1,730) - - (1,730)
Principal payments (receipts) on direct
financing leases ................................... - 1,127 (1,127) - -
Payments (receipts) on note with affiliate .............. - 172 (172) - -
-------- -------- -------- -------- --------
Net cash flows from investing activities ........... 618 (1,225) (1,299) - (1,906)
FINANCING ACTIVITIES
Borrowing (repayments) of revolving loans, net .......... - - 1,000 - 1,000
Principal receipts (payments) on capital leases ......... - (1,906) 1,906 - -
Net change in accounts with affiliates .................. (3,374) - 3,374 - -
Dividends ............................................... 5,670 (5,670) - - -
-------- -------- -------- -------- --------
Net cash flows from financing activities ........... 2,296 (7,576) 6,280 - 1,000
-------- -------- -------- -------- --------
Net increase (decrease) in cash and equivalents .... 542 (185) - - 357
Cash and equivalents at beginning of year 490 268 - - 758
-------- -------- -------- -------- --------
Cash and equivalents at end of year ................ $ 1,032 $ 83 $ -- $ -- $ 1,115
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
13
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATING CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
GUARANTOR OTHER GLD CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ELIMINATIONS TOTALS
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income .............................................. $ 2,088 $ 1,634 $ 1,281 $ (3,722) $ 1,281
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation ....................................... 2,097 1,003 563 -- 3,663
Earnings of subsidiaries and joint ventures ........ (865) -- (2,455) 3,333 13
Minority interests ................................. -- -- -- 389 389
Loss (gain) on dispositions of property and equipment (1) -- -- -- (1)
Other, net ......................................... -- -- 49 -- 49
Changes in assets and liabilities:
Accounts receivable ............................ 1,817 (3,680) 11 -- (1,852)
Contract revenues in excess of billings ........ 9,865 596 -- -- 10,461
Inventories .................................... (591) (238) -- -- (829)
Prepaid expenses and other current assets ...... 2,732 (608) (153) -- 1,971
Accounts payable and accrued expenses .......... (13,826) 1,786 (1,349) -- (13,389)
Billings in excess of contract revenues ........ 400 224 -- -- 624
-------- -------- -------- -------- --------
Net cash flows from operating activities ........... 3,716 717 (2,053) -- 2,380
INVESTING ACTIVITIES
Purchases of property and equipment ..................... (1,580) (549) -- -- (2,129)
Proceeds from dispositions of property
and equipment ...................................... 1 -- -- -- 1
Principal payments (receipts) on direct
financing leases ................................... -- 975 (975) -- --
Payments (receipts) on notes with affiliate ............. -- 173 (173) -- --
-------- -------- -------- -------- --------
Net cash flows from investing activities ........... (1,579) 599 (1,148) -- (2,128)
FINANCING ACTIVITIES
Borrowing (repayments) of revolving loans, net .......... -- -- (1,500) -- (1,500)
Principal receipts (payments) on capital leases ......... -- (1,684) 1,684 -- --
Net change in accounts with affiliates .................. (3,017) -- 3,017 -- --
-------- -------- -------- -------- --------
Net cash flows from financing activities ........... (3,017) (1,684) 3,201 -- (1,500)
-------- -------- -------- -------- --------
Net decrease in cash and equivalents ............... (880) (368) -- -- (1,248)
Cash and equivalents at beginning of year .......... 1,285 432 -- -- 1,717
-------- -------- -------- -------- --------
Cash and equivalents at end of year ................ $ 405 $ 64 $ -- $ -- $ 469
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
Certain information in this quarterly report on Form 10-Q, including but not
limited to the Management's Discussion and Analysis of Financial Condition
and Results of Operations, may constitute forward-looking statements as such
term is defined in Section 27A of the Securities Exchange Act of 1933 (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934.
Certain forward-looking statements can be identified by the use of
forward-looking terminology such as, "believes," "expects," "may," "will,"
"should," "seeks," "approximately," "intends," "plans," "estimates,"
"anticipates," or "hopeful," or the negative thereof or other comparable
terminology, or by discussions of strategy, plans or intentions.
Forward-looking statements involve risks and uncertainties, including sales
initiatives and those described in the Risk Factors section of Item 1 of the
Company's Form S-4 Registration Statement (Registration No. 333-64687), which
could cause actual results to be materially different than those in the
forward-looking statements, which speak only as of the date hereof. The
Company assumes no obligation to update such information.
GENERAL
The Company is the largest provider of dredging services in the United
States. Dredging generally involves the enhancement or preservation of
navigability of waterways or the protection of shorelines through the removal
or replenishment of soil, sand or rock. The U.S. dredging market consists of
three primary types of work: Capital, Maintenance (including controlled
disposal dredging) and Beach Nourishment, in which areas the Company has
experienced a combined bid market share in the U.S. of 52% in 1998. In
addition, the Company has continued its role as the only U.S. dredging
contractor with significant international operations, which represented
approximately 20% of its contract revenues in 1998.
Most dredging contracts are obtained through competitive bidding on terms
specified by the party inviting the bid. The nature of the specified services
dictates the types of equipment, material and labor involved, all of which
affect the cost of performing the contract and the price that dredging
contractors will bid.
The Company recognizes contract revenues under the percentage-of-completion
method, based on the Company's engineering estimates of the physical
percentage completed of each project. Billings on contracts are generally
submitted after verification with the customers of physical quantities
completed. Costs of contract revenues are adjusted to reflect the gross
profit percentage expected to be achieved upon ultimate completion of each
project. Significant expenditures incurred incidental to major contracts are
deferred and recognized as costs of contracts based on contract performance
over the duration of the related project. These expenditures are reported as
prepaid expenses. Provisions for estimated losses on contracts in progress
are made in the period in which such losses are determined. Claims for
additional compensation due the Company are not recognized in contract
revenues until such claims are settled.
The components of costs of contract revenues are labor, equipment,
subcontracts, rentals, lease expense, other assets employed (including
depreciation, insurance, fuel, maintenance and supplies) and project
overhead. The hourly labor generally is hired on a project basis and laid-off
upon completion of the project. Costs of contract revenues vary significantly
depending on the type and location of work performed and assets utilized.
15
<PAGE>
Generally, Capital projects have the lowest costs of contract revenues as a
percent of contract revenues and Beach Nourishment have the highest.
The Company's cost structure includes significant fixed costs, averaging
approximately 18% to 20% of total costs of contract revenues. The Company can
have significant fluctuations in equipment utilization throughout the year.
Accordingly, for interim reporting, the Company prepays or accrues fixed
equipment costs and amortizes the expenses in proportion to revenues
recognized over the year to better match revenues and expenses. Costs of
contract revenues also include the net gain or loss on dispositions of
property and equipment.
The Company's equity in earnings of joint ventures relates to the Company's
50% ownership interest in Amboy and the Company's 17% interest in Riovia. The
Company accounts for its investments in each of Amboy and Riovia using the
equity method. The Company conducts certain hopper dredging activities,
primarily Maintenance and Beach Nourishment projects, through the operations
of NATCO Limited Partnership ("NATCO") and North American Trailing Company
("North American"). Minority interests reflects Ballast Nedam Group N.V.'s
respective 25% and 20% interest in NATCO and North American.
RESULTS OF OPERATIONS
The following table sets forth the components of net income and EBITDA as a
percentage of contract revenues for the three-months ended March 31, 1999 and
1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Contract revenues ....................................... 100.0% 100.0%
Costs of contract revenues .............................. (81.7) (84.7)
----- -----
Gross profit .................................... 18.3 15.3
General and administrative expenses ..................... (6.8) (8.7)
----- -----
Operating income ................................ 11.5 6.6
Interest expense, net ................................... (6.0) (2.0)
Equity in earnings of joint ventures .................... (0.5) (0.0)
----- -----
Income before income taxes and minority interests 5.0 4.6
Income tax expense ...................................... (2.1) (1.6)
Minority interests ...................................... 0.2 (0.7)
----- -----
Net income ...................................... 3.1% 2.3%
----- -----
----- -----
EBITDA .................................................. 15.5% 13.1%
----- -----
----- -----
</TABLE>
16
<PAGE>
"EBITDA," as provided herein, represents earnings from continuing operations
before net interest expense, income taxes and depreciation expense and
excludes equity earnings of joint ventures and minority interests. EBITDA is
not intended to represent cash flow from operations as defined by generally
accepted accounting principles. The Company's EBITDA is included as it is a
basis upon which the Company assesses its financial performance, and certain
covenants in the Company's borrowing arrangements are tied to similar
measures. EBITDA should not be considered in isolation or as an alternative
to net income, cash flows from continuing operations, or other consolidated
income or cash flow data prepared in accordance with generally accepted
accounting principles as measures of the Company's profitability or
liquidity. EBITDA as defined herein may differ from similarly titled measures
presented by other companies.
COMPONENTS OF CONTRACT REVENUES
The following table sets forth, by type of work, the Company's contract
revenues for the three months ended and backlog as of the periods indicated:
<TABLE>
<CAPTION>
MARCH 31,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
REVENUES (IN THOUSANDS)
Capital - U.S. $ 25,159 $ 11,949
Capital - foreign 11,042 15,335
Maintenance 25,399 18,140
Beach 10,719 10,199
Other -- 1,011
-------- --------
$ 72,319 $ 56,634
-------- --------
-------- --------
BACKLOG (IN THOUSANDS)
Capital - U.S. $215,653 $ 77,797
Capital - foreign 22,096 30,706
Maintenance 17,968 18,601
Beach 15,307 13,301
-------- --------
$271,024 $140,405
-------- --------
-------- --------
</TABLE>
The Company's strong performance for the first quarter of 1999 is the result
of successful execution of projects, favorable weather conditions and
increasing backlog margins resulting from the improving domestic market
during 1998. First quarter revenues of $72.3 million and gross profit of
$13.2 million were up 27.7% and 52.2%, respectively, from the first quarter
of 1998.
The growth in revenues and earnings is primarily attributable to capital
dredging projects. Capital projects include large port deepenings and other
infrastructure projects. The capital market has been expanding since 1998,
with the announcement by the Army Corps of Engineers of the scheduling of 18
new Deep Port projects to be completed over the next seven years. The Corps
estimates these projects will have an aggregate value in excess of $2.2
billion. During 1998, approximately $80.0 million of Deep Port work was let
for bid. The Company was the successful bidder on 64% of this work. In the
first quarter of 1999, Deep Port projects valued at $106.0 million were let
for bid. The Company was the successful bidder on 84% of this work. During
this quarter, contract revenues from capital projects included $8.7 million
from a deepening and reclamation project in Los Angeles which began work in
1997, and $4.5 million and $3.8 million from channel deepening projects in
Boston and Houston, respectively.
17
<PAGE>
Maintenance projects include routine dredging of ports, rivers and channels
to remove the regular build up of sediment. Revenues from maintenance
projects for the three months ended March 31, 1999 increased $7.3 million
over the same period of 1998. The increase in maintenance dredging revenues
is partly attributed to a large project on the Mississippi River Gulf Outlet,
which contributed $4.8 million in revenue and employed the newly-acquired
hydraulic dredge "Texas".
Beach nourishment projects include rebuilding of shoreline areas which have
been damaged by storm activity or ongoing erosion. First quarter 1999
revenues from beach projects were relatively unchanged compared to the first
quarter of 1998.
During the three months ended March 31, 1999, revenues of the Company's NATCO
hopper dredging subsidiary declined due to lower than historical emergency
Mississippi River work.
Revenues from foreign operations for the three months ended March 31, 1999,
declined $4.3 million, or 28.0%, compared to the same period of 1998, due to
the timing of foreign projects. During the 1999 quarter, the Company
completed a large project in Copenhagen, which contributed $2.3 million to
quarterly revenues. The Company also started a joint venture project in
Egypt, which contributed revenue of $4.1 million during the period. The
Company is currently low bidder on two significant foreign projects scheduled
to begin in 2000, and it is anticipated that foreign revenues will continue
to represent approximately 20% of total revenues in 1999.
BACKLOG
The Company's contract backlog represents management's estimate of the
revenues which will be realized under the portion of the contracts remaining
to be performed based upon current estimates. Such estimates are subject to
fluctuations based upon the amount of material actually dredged, as well as
factors affecting the time required to complete the job. In addition, because
substantially all of the Company's backlog relates to government contracts,
the Company's backlog can be canceled at any time without penalty. However,
the Company will recover actual committed costs and profit on work performed
up to the date of cancellation. Consequently, backlog is not necessarily
indicative of future revenues. The Company's backlog includes only those
projects for which the customer has provided an executed contract.
As of March 31, 1999, the Company had backlog of $271.0 million, which
represents an increase of $130.6 million, or 93.0% compared to backlog as of
March 31, 1998. Domestic capital projects make up $215.7 million or 79.6% of
the March 31, 1999 backlog, which is an increase of $137.9 million compared
to March 31, 1998. Significant Deep Port capital projects added to backlog
during the first quarter of 1999 include a $51.2 million project in
Charleston, a $14.4 million project in Houston, and a $23.6 million project
in New York which will employ the newly-constructed backhoe dredge "New York".
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998
CONTRACT REVENUES. Contract revenues increased $15.7 million or 27.7% from
$56.6 million for the three months ended March 31, 1998 to $72.3 million for
the three months ended March 31, 1999. The increase in 1999 was due primarily
to contributions from capital dredging projects and favorable weather
conditions which caused less downtime than experienced during the same period
of the prior year.
18
<PAGE>
COSTS OF CONTRACT REVENUES. Costs of contract revenues increased $11.1
million or 23.3%, from $48.0 million for the three months ended March 31,
1998 to $59.1 million for the three months ended March 31, 1999, as a result
of increased revenues. As a percentage of contract revenues, costs of
contract revenues were 81.7% for the three months ended March 31, 1999
compared to 84.7% in the same 1998 period. The improvement in costs of
contract revenues as a percentage of revenues in 1999 was primarily
attributable to higher margins on capital projects performed during the
quarter and favorable weather conditions.
GROSS PROFIT. Gross profit increased $4.5 million or 52.2%, from $8.7 million
for the three months ended March 31, 1998 to $13.2 million for the three
months ended March 31, 1999. The improvement in 1999 was attributable to the
increased volume of higher margin work and favorable weather conditions.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
remained essentially unchanged from the first quarter 1998 to the first
quarter 1999.
OPERATING INCOME. Operating income increased $4.5 million from $3.8 million
for the three months ended March 31, 1998 to $8.3 million for the three
months ended March 31, 1999, as a result of the increased volume of higher
margin work and favorable weather conditions.
EBITDA. EBITDA increased $3.8 million or 50.7%, from $7.4 million for the
three months ended March 31, 1998 to $11.2 million for the three months ended
March 31, 1999. The increase was primarily due to increased earnings related
to higher project revenues and margins in 1999.
INTEREST EXPENSE, NET. Net interest expense increased $3.2 million or 276.8%,
from $1.2 million for the three months ended March 31, 1998 to $4.4 million
for the three months ended March 31, 1999. The increase in interest expense
is primarily related to interest on the additional debt incurred in
connection with the Company's recapitalization effected in August 1998.
EQUITY IN EARNINGS OF JOINT VENTURES. Equity in earnings of joint ventures
declined $0.3 million from a negligible loss for the three months ended March
31, 1998 to a loss of $0.3 million for the three months ended March 31, 1999.
The decrease was primarily attributable to a temporary reduction in demand
for Amboy's products for the period, combined with commencement of the second
phase of the Riovia project. The second phase is anticipated to have lower
revenues and margins than the first phase, which was substantially complete
by the end of 1998.
INCOME TAX EXPENSE. Income tax expense increased $0.5 million from $1.0
million for the three months ended March 31, 1998 to $1.5 million for the
three months ended March 31, 1999, due to increased earnings in the first
quarter of 1999.
MINORITY INTERESTS. Earnings attributable to minority interests decreased
$0.6 million from $0.4 million for the three months ended March 31, 1998 to a
loss of $0.2 million for the three months ended March 31, 1999. The decrease
is due to lower earnings from the NATCO hopper dredging operations during the
first quarter 1999 as compared to the same period of 1998.
NET INCOME. Net income increased $0.9 million from $1.3 million for the three
months ended March 31, 1998 to $2.2 million for the three months ended March
31, 1999. The increase is a result of improved operating earnings related to
higher project revenues and margins in the first quarter of 1999, partially
offset by increased interest expense.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows from operations and
borrowings under the revolving line of credit with the Company's senior
lenders. The Company's primary uses of cash are funding working capital,
capital expenditures and debt service.
The Company generated net cash flows from operating activities for the three
months ended March 31, 1999 and 1998 of $1.3 million and $2.4 million,
respectively. The reduction in cash flows from operating activities for the
first quarter of 1999 was due to an increase in working capital related to
the normal fluctuations in working capital requirements.
Effective January 1, 1999, the Company changed the accounting estimates
regarding the useful lives of certain of its operating equipment, which
reduced depreciation expense for the first quarter of 1999, compared to the
same period of 1998, by approximately $0.8 million.
The Company's net cash uses for investing activities for the three months
ended March 31, 1999 and 1998, totaled $1.9 million and $2.1 million,
respectively. Additional funds were used in the first quarter of 1999 to make
distributions of $1.7 million to minority interests related to 1998 earnings;
such distributions were made during the fourth quarter of 1997 for 1997
earnings. Additionally, first quarter 1999 capital expenditures were $1.0
million greater than during the same period of 1998. The use of cash for
investing activities in the first quarter of 1999 was offset by distributions
of $1.9 million received from Riovia and a distribution of earnings from
Amboy of approximately $0.8 million.
For the three month periods ended March 31, 1999 and 1998, the Company had a
net cash inflow of $1.0 million and net cash outflow of $1.5 million,
respectively, related to its borrowings and repayments under its revolving
credit facilities for the related periods.
Management believes cash flows from operations and available credit will be
sufficient to finance operations, planned capital expenditures and debt
service requirements for the foreseeable future. The Company's ability to
fund its working capital needs, planned capital expenditures, scheduled debt
payments and to comply with all of the financial covenants under its debt
agreements, depends on its future operating performance and cash flows, which
in turn, are subject to prevailing economic conditions and to financial,
business and other factors, some of which are beyond the Company's control.
YEAR 2000 ISSUE
Historically, many computer programs have been written using two digits
rather than four to define the applicable year, which could result in the
program failing to recognize a year that begins with "20" instead of "19".
This, in turn, could result in major system failures or miscalculations, and
is generally referred to as the "Year 2000 issue".
In June 1996, the Company's MIS Department developed a plan to identify and
address issues related to Year 2000 compliance. The Company's internal
systems were the primary focus of the plan. At that time, the Company
compiled an inventory of its internally developed and third party software.
The Company also evaluated various solutions and techniques for making its
internally developed databases and programs Year 2000 ready. The Company
prioritized the tasks taking into account the likelihood of Year 2000
failure, the impact of Year 2000 failure on
20
<PAGE>
the business, and the effort required to complete the task. In March 1997,
senior management of the Company reviewed the tasks and approved the plan.
The Company's Year 2000 Plan contemplated four phases - assessment,
implementation, testing and release/installation - which overlap to a degree.
The Company has completed all phases for its most critical systems. The
Company has continued with the implementation, testing and installation phase
for its less critical systems and completed the final installation phase for
most of its non-critical systems. Some non-critical systems are being
addressed during 1999, and the Company believes such systems are not material
to its operations.
The Company has also considered and addressed the impact of the Year 2000 on
other aspects of the Company's operations, such as equipment navigational
systems.
The Company has received information concerning the Year 2000 status of
certain critical suppliers and is satisfied such suppliers have remediated
issues that have the potential to adversely affect the Company.
The Company currently estimates that the total cost of implementing its Year
2000 Plan, consisting primarily of increased staffing requirements and
outside consulting services, will not be material. This estimate is based on
presently available information and will be updated as the Company continues
its assessment and completes its implementation.
If the Company's computer systems fail with respect to the Year 2000 Issue,
or if any applications or embedded chips critical to the Company's reporting
process are overlooked, there could be a material adverse effect on the
business, results of operations or financial condition of the Company.
Additionally, there can be no assurance that the systems of other companies
on which the Company's systems rely will be timely converted, or that failure
to convert by another company would not have material adverse effect on the
business, results of operations or financial condition of the Company. The
Company has not yet established a contingency plan in this regard, but
intends to formulate one to address unavoided or unavoidable risks and
expects to have the contingency plan formulated by July 1999.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133), which is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. SFAS 133 requires
that all derivatives be recognized as either assets or liabilities in the
statement of financial position and be measured at fair value. SFAS 133
additionally requires changes in the fair value of derivatives be recorded in
current earnings or comprehensive income based on the intended use of the
derivatives. Management is in the process of evaluating the impact on the
Company's financial position from adoption of SFAS 133.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A substantial portion of the Company's current operations are conducted
outside of the U.S. In the first quarter of 1999, 15% of contract revenues
were attributable to overseas operations. It is the Company's policy to hedge
foreign currency exchange risk on contracts denominated in currencies other
than the U.S. dollar, if available. Forward currency exchange contracts,
typically with durations less than one year, are used to minimize the impact
of foreign currency fluctuations on operations. The Company does not purchase
forward exchange contracts for
21
<PAGE>
trading purposes. At March 31, 1999, the Company had no foreign currency
hedging contracts outstanding.
A significant operating cost for the Company is diesel fuel. The Company uses
fuel commodity forward contracts, typically with durations less than one
year, to reduce the impacts of changing fuel prices on operations. The
Company does not purchase fuel hedges for trading purposes. At March 31,
1999, the Company had no fuel hedge contracts outstanding.
Changes in market interest rates from December 31, 1998 do not have a
significant impact on the fair value of the Company's term and revolving bank
debt or fixed rate debt at March 31, 1999.
PART II
ITEM 1 LEGAL PROCEEDINGS
The Company is not involved in any pending legal proceedings other than legal
proceedings occurring in the normal course of business, which resolution of
are not expected to have a material impact on the financial position or
operations of the Company.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.01 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of
1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Great Lakes Dredge & Dock Corporation
Date: 5-13-99 By: /s/ Deborah A. Wensel
--------------------------------------
Deborah A. Wensel
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer and
Duly Authorized Officer)
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Document Description
- ------ --------------------
<S> <C>
2.01 Plan and Agreement of Merger dated as of August 19, 1998 between the
Company and Great Lakes Dredge & Dock Acquisition, Inc. (1)
3.01 Restated Certificate of Incorporation of the Company. (1)
3.02 Bylaws of the Company. (1)
4.01 Indenture dated as of August 19, 1998 among the Company, the
Subsidiary Guarantors and the Bank of New York, as Trustee. (1)
4.02 Registration Rights Agreement dated as of August 19, 1998 among the
Company, the Subsidiary Guarantors and the Initial Purchaser. (1)
4.03 Form of 11-1/4% Senior Subordinated Note due 2008 (included in
Exhibit 4.01). (1)
10.01 Credit Agreement dated as of August 19, 1998 among the Company and
the other loan parties thereto, as Borrowers, the financial
institutions from time to time party thereto, as Lenders, Bank of
Montreal, Chicago Branch, as Documentation Agent, Bank of America
National Trust and Savings Association, as Issuing Lender and
Administrative Agent and BancAmerica Robertson Stephens, as Lead
Arranger. (1)
10.02 Second Amended and Restated Underwriting and Continuing Indemnity
Agreement dated August 19, 1998 among the Company, certain of its
Subsidiaries, Reliance Insurance Company, United Pacific Insurance
Company, Reliance National Insurance Company and Reliance Surety
Company. (1)
10.05 Employment Agreement between the Company and Douglas B. Mackie. (2)
10.06 Great Lakes Annual Cash Bonus Plan.(2)
10.07 Securities Purchase and Holders Agreement dated August 19, 1998 among
the Company, Vectura and the Management Investors. (2)
10.08 Registration Rights Agreement dated August 19, 1998 among the
Company, Vectura, and the Management Investors. (2)
10.09 Employment Agreement between the Company and Richard Lowry. (2)
10.10 Employment Agreement between the Company and Bruce Biemeck. (2)
27.01 Financial Data Schedule (filed only electronically with the SEC). (3)
</TABLE>
(1) Incorporated by reference to Form S-4 Registration Statement of the
Company (File No. 333-64687) filed with the Commission on September 29,
1998.
(2) Incorporated by reference to Amendment No. 1 to Form S-4 Registration
Statement of the Company (File No. 333-64687) filed with the
Commission on December 14, 1998.
(3) Filed herewith.
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,115
<SECURITIES> 0
<RECEIVABLES> 53,761
<ALLOWANCES> 899
<INVENTORY> 21,497
<CURRENT-ASSETS> 74,603
<PP&E> 222,106
<DEPRECIATION> 87,808
<TOTAL-ASSETS> 232,057
<CURRENT-LIABILITIES> 51,296
<BONDS> 167,490
0
1
<COMMON> 50
<OTHER-SE> (46,545)
<TOTAL-LIABILITY-AND-EQUITY> 232,057
<SALES> 0
<TOTAL-REVENUES> 72,319
<CGS> 0
<TOTAL-COSTS> 59,105
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,431
<INCOME-PRETAX> 3,588
<INCOME-TAX> 1,518
<INCOME-CONTINUING> 2,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,240
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
