<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
SPECIAL FINANCIAL REPORT
__________________
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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)
(630) 574-3000
(Registrant's telephone number, including area code)
__________________
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
__________________
Pursuant to Rule 15d-2 of the Act, this annual report contains only financial
statements for the fiscal year ended December 31, 1998.
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant is $120,300 based on a price of $1.00/share.
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.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
Part II
Item 8. Financial Statements and Supplementary Data.
This Annual Report on Form 10-K for the fiscal year ended December 31, 1998 is
being filed pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 and
contains only certified financial statements as required by Rule 15d-2. Rule
15d-2 provides generally that, if a registrant files a registration statement
under the Securities Act of 1933, as amended, which does not contain certified
financial statements for the registrant's last full fiscal year (or for the life
of the registrant if less than a full year), than the registrant shall, within
90 days of the effective date of the registration statement, file a special
report furnishing certified financial statements for such last fiscal year or
other period as the case may be. Rule 15d-2 further provides that such special
financial report is to be filed under cover of the facing sheet appropriate for
the annual report of the registrant. Great Lakes Dredge & Dock Corporation's
Registration Statement on Form S-4 (Registration No. 333-64687), declared
effective February 5, 1999, did not contain the certified financial statements
for the Registrant's last full fiscal year, that is, the fiscal year ended
December 31, 1998. Therefore, as required by Rule 15d-2, certified financial
statements for the year ended December 31, 1998 are filed herewith.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements:
INDEX TO FINANCIAL STATEMENTS
Great Lakes Dredge & Dock Corporation
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
for the years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997, and 1996
Notes to Consolidated Financial Statements
<PAGE>
2. Financial Statement Schedules:
All schedules are omitted because they are not required or the required
information is shown in the financial statements or notes thereto.
3. Exhibits:
(27) Financial Data Schedule
All other schedules and exhibits are omitted because they are either not
applicable or not required in this filing.
(b) Reports on Form 8-K
No reports were filed by the Company during the fiscal year ended December 31,
1998.
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
and
INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Great Lakes Dredge & Dock Corporation:
We have audited the accompanying consolidated balance sheets of Great Lakes
Dredge & Dock Corporation and Subsidiaries (the "Company") as of December 31,
1998 and 1997, and the related consolidated statements of operations, changes in
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of Amboy Aggregates (Amboy) joint venture for the year
ended December 31, 1998, the Company's investment in which is accounted for
using the equity method. The Company's equity of $6.5 million in Amboy's net
assets at December 31, 1998 and of $1.0 million in Amboy's net income for the
year then ended is included in the accompanying financial statements. The
financial statements of Amboy were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for such joint venture, is based solely on the report of such other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Great Lakes Dredge & Dock Corporation and Subsidiaries as
of December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Chicago, IL
January 28, 1999
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS 1998 1997
--------- --------
<S> <C> <C>
Current assets:
Cash and equivalents $ 758 $ 1,717
Accounts receivable 37,396 40,299
Contract revenues in excess of billings 15,936 15,508
Inventories 13,427 9,195
Settlement advance - 11,000
Prepaid expenses 1,257 1,968
Other current assets 5,919 8,319
--------- --------
Total current assets 74,693 88,006
Property and equipment, net 134,237 138,716
Inventories 6,905 6,326
Investments in joint ventures 10,507 7,569
Other 8,745 4,938
--------- --------
$ 235,087 $245,555
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 26,220 $ 31,001
Accrued expenses 18,630 15,419
Billings in excess of contract revenues 4,842 2,974
Current maturities of long-term debt 2,700 200
--------- --------
Total current liabilities 52,392 49,594
Long-term debt 167,700 57,400
Deferred income taxes 45,695 48,322
Foreign income taxes 6,944 5,078
Other 6,496 5,149
--------- --------
Total liabilities 279,227 165,543
Minority interests 4,594 1,856
Commitments and contingencies (Note 17) - -
Stockholders' equity (deficit):
Preferred stock - 1998: $.01 par value; 250,000 shares
authorized; 45,000 issued and outstanding. 1997:
100 shares authorized; none issued. 1 -
Common stock - 1998: $.01 par value; 50,000,000 shares
authorized; 5,000,000 issued and outstanding. 1997:
No par value; 200 shares authorized; 100 issued
and outstanding. 50 60,000
Additional paid-in capital 50,457 -
Retained earnings (deficit) ( 99,242) 18,156
--------- --------
Total stockholders' equity (deficit) ( 48,734) 78,156
--------- --------
$ 235,087 $245,555
========= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Contract revenues $289,212 $258,296 $235,871
Costs of contract revenues 240,578 228,383 208,717
-------- -------- --------
Gross profit 48,634 29,913 27,154
General and administrative expenses 22,672 18,922 16,391
Equity incentive plan and other compensation
expenses 8,169 - -
Recapitalization related expenses 9,527 - -
-------- -------- --------
Operating income 8,266 10,991 10,763
Other income (expense):
Interest income 312 316 138
Interest expense (10,175) ( 6,303) ( 6,182)
Equity in earnings of joint ventures 1,218 3,132 1,139
-------- -------- --------
Income (loss) before income taxes, minority
interests, discontinued operations and
extraordinary item ( 379) 8,136 5,858
Income tax expense ( 636) ( 2,667) ( 2,324)
Minority interests ( 2,738) ( 1,667) ( 419)
-------- -------- --------
Income (loss) from continuing operations
before extraordinary item ( 3,753) 3,802 3,115
Discontinued operations, net of tax
benefit of $739 - - ( 1,109)
Extraordinary item, net of tax benefit of $543 ( 925) - -
-------- -------- --------
Net income (loss) $( 4,678) $ 3,802 $ 2,006
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Years ended December 31, 1998, 1997 and 1996
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Number of shares
-------------------
Additional
Common Preferred Paid-in Retained
Common Preferred Stock Stock Capital Earnings Total
----------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 100 - $ 60,000 $ - $ - $ 12,348 $ 72,348
Net income - - - - - 2,006 2,006
---------- --------- --------- ---------- --------- --------- ---------
Balance at December 31, 1996 100 - 60,000 - - 14,354 74,354
Net income - - - - - 3,802 3,802
---------- --------- --------- ---------- --------- --------- ---------
Balance at December 31, 1997 100 - 60,000 - - 18,156 78,156
Exercise of stock options 8 - 4,516 - - - 4,516
Tax benefit on tax compensation
expense related to stock options
exercised - - 944 - - - 944
Assignment of settlement advance
receivable - - - - - (11,000) ( 11,000)
Common stock purchased 3,552,190 - 8,704 - - - 8,704
Issuance of preferred stock - 34,420 - 34,420 - - 34,420
Conversion of common shares to
preferred shares ( 7) 10,580 ( 8,656) 10,580 - ( 1,924) -
Redemption of common shares (100) - (60,000) - - (99,796) (159,796)
Record shares at par value 1,447,809 - ( 5,458) (44,999) 50,457 - -
Net loss - - - - - ( 4,678) ( 4,678)
---------- --------- --------- --------- --------- --------- ---------
Balance at December 31, 1998 5,000,000 45,000 $ 50 $ 1 $ 50,457 $ (99,242) $( 48,734)
========== ========= ========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997 and 1996
(in thousands)
1998 1997 1996
--------- ---------- ---------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $( 4,678) $ 3,802 $ 2,006
Adjustments to reconcile net income (loss) to net cash flows
from operating activities:
Depreciation 13,950 13,615 13,881
Earnings of joint ventures ( 1,218) ( 3,132) ( 1,139)
Minority interests 2,738 1,667 419
Deferred income taxes ( 2,733) ( 3,963) ( 3,796)
Foreign income taxes 1,866 2,696 2,382
Pension curtailment and settlement - - ( 1,688)
Loss (gain) on dispositions of property and equipment 717 ( 3,308) ( 467)
Compensation expense related to exercise of options 5,152 - -
Extraordinary item 925 - -
Other, net 921 ( 238) 217
Changes in assets and liabilities:
Accounts receivable 2,903 (12,242) 20,945
Contract revenues in excess of billings ( 428) ( 4,256) 3,094
Inventories ( 4,811) 1,264 3,915
Prepaid expenses and other current assets 4,712 ( 250) 3,107
Accounts payable and accrued expenses ( 1,654) 15,315 (15,881)
Billings in excess of contract revenues 1,868 2,648 ( 2,321)
--------- --------- ---------
Net cash flows from operating activities 20,230 13,618 24,674
INVESTING ACTIVITIES
Purchases of property and equipment ( 29,129) (11,494) ( 5,411)
Dispositions of property and equipment 20,213 5,437 7,820
Distributions from joint ventures - 1,000 750
Investments in joint ventures ( 1,720) ( 630) ( 755)
Distributions to minority interests - ( 3,025) ( 700)
Deposit - 2,500 ( 2,500)
--------- ---------- ---------
Net cash flows from investing activities ( 10,636) ( 6,212) ( 796)
FINANCING ACTIVITIES
Proceeds from long-term debt issued 55,000 8,000 -
Repayments of long-term debt ( 200) (28,836) (18,317)
Borrowing (repayments) of revolving loans, net ( 57,000) 26,000 ( 6,000)
Proceeds from 11 1/4% subordinated debt issued 115,000 - -
Exercise of options 4,516 - -
Common stock purchased 3,552 - -
Issuance of preferred stock 34,420 - -
Financing fees ( 6,045) ( 1,740) -
Redemption of shares (159,796) - -
Settlement advance - (11,000) -
--------- --------- ---------
Net cash flows from financing activities ( 10,553) ( 7,576) (24,317)
--------- --------- ---------
Net decrease in cash and equivalents ( 959) ( 170) ( 439)
Cash and equivalents at beginning of year 1,717 1,887 2,326
--------- --------- ---------
Cash and equivalents at end of year $ 758 $ 1,717 $ 1,887
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 4,928 $ 5,407 $ 6,131
========= ========= =========
Cash paid for taxes $ 3,276 $ 4,588 $ 1,492
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
1. Summary of significant accounting policies
Organization and recapitalization
Great Lakes Dredge & Dock Corporation and its subsidiaries (the Company) are in
the business of marine construction, primarily dredging. The Company's primary
customers are domestic and foreign government agencies.
Prior to August 19, 1998, Great Lakes Dredge & Dock Corporation (GLD
Corporation) was wholly owned by Blackstone Limited Partnerships (Blackstone).
On August 19, 1998, Great Lakes Dredge & Dock Corporation effected a
recapitalization whereby (i) management exercised vested options representing 7%
of the Company's then outstanding common stock, (ii) a portion of those shares
of common stock held by management was purchased directly by Vectura Holding
Company, LLC (Vectura), (iii) newly issued common stock and preferred stock was
sold to Vectura and certain additional members of management, (iv) the common
stock formerly held by Blackstone was redeemed, and (v) a portion of the common
stock held by management and Vectura was converted into preferred stock. The
redemption of the common stock formerly held by Blackstone was financed using a
portion of the proceeds from $115,000 of senior subordinated debt, $110,000 new
bank credit facility, and $45,000 of preferred stock and $3,552 of common stock
sold to Vectura and certain members of management. As a result of the
recapitalization, certain members of Company management own approximately 16% of
the outstanding common stock and Vectura owns approximately 84%.
Principles of consolidation and basis of presentation
The consolidated financial statements include the accounts of GLD Corporation
and its subsidiaries. All significant intercompany accounts and transactions are
eliminated. The Company is a joint venture partner in Amboy Aggregates and
Riovia S.A., which are accounted for under the equity method.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
<PAGE>
Revenue and cost recognition on contracts
Contract revenues are recognized 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 contract costs 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.
Classification of current assets and liabilities
The Company includes in current assets and liabilities amounts realizable and
payable in the normal course of contract completion unless completion of such
contracts extends significantly beyond one year.
Cash equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Inventories
Inventories are recorded at the lower of first-in, first-out cost or market.
Inventories consist mainly of pipe, purchased spare parts and supplies.
Depreciation
Depreciation is provided over the estimated useful lives of property and
equipment using the straight-line method. The estimated useful lives by class of
assets are 5 to 10 years for furniture and fixtures and 3 to 25 years for
operating equipment.
Income Taxes
The Company records income taxes based upon SFAS 109, "Accounting for Income
Taxes," which requires the use of the liability method of accounting for
deferred income taxes. The provision for income taxes includes federal, foreign
and state income taxes currently payable and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities.
<PAGE>
Fair value of financial instruments
The carrying value of financial instruments included in current assets and
liabilities approximates fair values due to the short-term maturities of these
instruments. The carrying value of long-term bank debt is a reasonable estimate
of its fair value as interest rates are variable, based on the prevailing market
rates. The fair value of the Company's $115,000 long term subordinated notes was
$117,875 at December 31, 1998, based on quoted market prices. The contract
amount of letters of credit and guarantees is a reasonable estimate of their
fair value as the value for each is fixed over the life of the commitment.
Long-lived assets
Long-lived assets are reviewed for possible impairment whenever events indicate
that the carrying amount of such assets may not be recoverable by comparing the
undiscounted cash flows associated with the assets to their carrying amounts. If
such a review indicates an impairment, the carrying amount would be reduced to
estimated recoverable value.
Capital stock
As part of the recapitalization, the Company authorized and issued 250,000 and
45,000 shares, respectively, of preferred stock. The preferred stock is entitled
to annual dividends, if declared, which dividends are cumulative, whether or not
earned or declared, and accrue at the rate of 12%, compounding annually. At
December 31, 1998, dividends in arrears on the preferred stock were $1,982.
Additionally, the Company authorized and issued 25,000,000 and 1,636,100 shares,
respectively, of class A voting common stock, and 25,000,000 and 3,363,900
shares, respectively, of class B nonvoting common stock, with a par value of
$.01 per share. Previously, authorized and issued common stock had no par value.
Recent accounting pronouncements
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
for fiscal years beginning after June 15, 1999. SFAS 133 requires that all
derivative instruments 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 to 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 of SFAS 133
on the Company's financial position, results of operations and cash flows.
<PAGE>
Reclassifications
Certain amounts in the 1997 balance sheet and the 1997 and 1996 statements of
cash flows have been reclassified to conform to the 1998 presentation.
2. Accounts receivable
Accounts receivable are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Completed contracts $12,682 $13,797
Contracts in progress 21,420 22,831
Retainage 4,193 4,121
------- -------
38,295 40,749
Allowance for doubtful accounts (899) (450)
------- -------
$37,396 $40,299
======= =======
</TABLE>
3. Contracts in progress
The components of contracts in progress are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Costs and earnings in excess of billings:
Costs and earnings for contracts in progress $108,064 $ 56,981
Prepaid contract costs - (1,053)
Amounts billed (93,431) (45,575)
-------- --------
Costs and earnings in excess of billings for
contracts in progress 14,633 10,353
Costs and earnings in excess of billings for
completed contracts 1,303 5,155
-------- --------
$ 15,936 $ 15,508
======== ========
Billings in excess of costs and earnings:
Amounts billed $(45,808) $(44,870)
Costs and earnings for contracts in progress 40,966 41,896
-------- --------
$ (4,842) $ (2,974)
======== ========
</TABLE>
<PAGE>
4. Property and equipment
Property and equipment are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
Land $ 3,066 $ 2,604
Furniture and fixtures 4,546 5,652
Operating equipment 212,390 203,784
--------- ---------
220,002 212,040
Accumulated depreciation ( 85,765) ( 73,324)
--------- ---------
$ 134,237 $ 138,716
========= =========
</TABLE>
Performance bonds are customarily required for dredging and marine construction
projects. The Company obtains its performance bonds through a bonding agreement
with a group of insurance companies that have been granted a security interest
in a substantial portion of the Company's operating equipment with a net book
value of approximately $62,198 at December 31, 1998. The bonding agreement
contains financial and operating covenants that limit the ability of the Company
to incur indebtedness, create liens, pay dividends and take certain other
actions.
In 1996, the Company paid $2,500 for an option to purchase a used hopper dredge.
In 1997, the Company recovered this amount through a lease transaction.
5. Investments in joint ventures
The Company has a 50% ownership interest in Amboy Aggregates (Amboy), whose
primary business is the dredge mining and sale of fine aggregate, and a 17%
ownership interest in Riovia S.A., a venture whose sole business is the
performance of a dredging contract in Argentina and Uruguay. The Company's share
of earnings of these joint ventures is included in income as earned. Financial
information for Riovia S.A. is provided as of November 30, 1998 and for the
eleven months ended November 30, 1998, the most recently available information
for preparation of the Company's 1998 financial statements.
<PAGE>
Summarized information for the joint ventures is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current assets $ 44,310 $ 37,121
Non-current assets 15,928 18,098
-------- --------
Total assets 60,238 55,219
Current liabilities (14,807) (17,875)
Non-current liabilities ( 8,545) (10,737)
-------- --------
Equity $ 36,886 $ 26,607
======== ========
Revenue 55,207 68,125 23,927
Costs and expenses (52,739) (58,070) (20,691)
-------- -------- --------
Net income $ 2,468 $ 10,055 $ 3,236
======== ======== ========
</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 at December 31, 1998 totaled $4,989.
In 1997, the Company paid royalties of $1,549 to Amboy for the right to mine
sand related to the performance of a contract of the Company. In 1996, the
Company provided dredging and towing services to Amboy and recorded revenues of
$735.
6. Accrued expenses
Accrued expenses are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Payroll and employee benefits $ 5,817 $ 2,835
Insurance 5,424 5,501
Interest 5,195 429
Income and other taxes 1,174 5,138
Other 1,020 1,516
-------- --------
$ 18,630 $ 15,419
======== ========
</TABLE>
<PAGE>
7. Long-term debt
Long-term debt is as follows:
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Bank debt:
Revolving loan (prior credit agreement) $ - $ 57,000
New term loan 55,000 -
New revolving loan - -
11 1/4% subordinated debt 115,000 -
Other debt 400 600
--------- --------
170,400 57,600
Current maturities of long-term debt ( 2,700) ( 200)
--------- --------
$ 167,700 $ 57,400
========= ========
</TABLE>
In August 1998, the Company entered into a new bank credit agreement (Credit
Agreement). The Credit Agreement, expiring in 2004, consists of a $55,000 term
loan and a $55,000 aggregate revolving credit facility which may be used for
borrowings or for letters of credit. At December 31, 1998, availability under
the aggregate revolving credit facility was $49,145. The terms of the Credit
Agreement provide for interest rate spreads based on the Company's debt level
compared to earnings, as defined, and allow for various interest rate options
for loan amounts and periods that are selected at the discretion of the Company.
At December 31, 1998 and 1997, the average borrowing rate was 8.8% and 8.0%,
respectively, including amortization of financing fees. The Company also pays an
annual commitment fee of up to 0.5% on the average daily unused capacity
available under the revolving credit facility.
The Credit Agreement contains provisions that require the Company to maintain a
minimum net worth and certain other financial ratios, limit payment of dividends
and restrict certain other transactions. Borrowings under the Credit Agreement
are secured by first lien mortgages on certain operating equipment of the
Company with a net book value of $34,159 at December 31, 1998 and are guaranteed
by certain subsidiaries of the Company.
Beginning September 30, 1999, quarterly principal payments of the term loan are
required as specified in the Credit Agreement. Annual prepayments of principal
may be required to the extent the Company has excess cash, as defined, and
voluntary prepayments are allowed. All prepayments modify the requirements for
scheduled principal payments.
<PAGE>
Scheduled long-term debt maturities for the five years ending December 31 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 2,700
2000 6,700
2001 9,000
2002 11,000
2003 12,000
</TABLE>
On August 19, 1998, the Company issued $115,000 of senior subordinated notes
(Notes) which will mature on August 15, 2008. Interest on the Notes accrues at a
rate of 11 1/4% per annum and is payable semi-annually beginning on February 15,
1999. The Notes are general unsecured obligations of the Company, subordinated
in right of payment to all existing and future senior debt, including borrowings
under the Credit Agreement. The Company's obligation under the Notes are
guaranteed on a senior subordinated basis by the Company's wholly owned domestic
subsidiaries.
8. Income taxes
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Federal:
Current $ 703 $ 2,372 $ 3,070
Current foreign 1,741 3,112 2,268
Deferred (2,451) (3,386) (3,396)
State:
Current 925 1,146 782
Deferred ( 282) ( 577) ( 400)
------- ------- -------
Income tax expense $ 636 $ 2,667 $ 2,324
======= ======= =======
</TABLE>
The Company's income tax provision reconciles to the provision at the statutory
U.S. federal income tax rate as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Tax (benefit) expense at statutory
U.S federal income tax rate $ ( 108) $ 2,848 $ 2,050
State income tax, net of federal income
tax benefit 367 370 253
Partnership gain allocated to minority
interest ( 863) ( 485) ( 35)
Nondeductable recapitalization related
expenses 1,185 - -
Other 55 ( 66) 56
------- ------- -------
Income tax provision $ 636 $ 2,667 $ 2,324
======= ======= =======
</TABLE>
<PAGE>
The deferred tax liabilities (assets) are as follows:
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Gross deferred tax liabilities:
Depreciation $ 45,094 $ 47,435
Other 3,177 2,509
-------- --------
48,271 49,944
Gross deferred tax assets:
Accrued liabilities ( 4,979) ( 3,919)
-------- --------
43,292 46,025
Net current deferred tax assets
(included in other current assets) 2,403 2,297
-------- --------
Net non-current deferred tax liabilities $ 45,695 $ 48,322
======== ========
</TABLE>
9. Recapitalization related expenses
In August 1998, pursuant to the terms of the agreement for the recapitalization,
the Company paid fees and expenses of $3,606 and bonuses to certain members of
management of $5,921.
10. Other compensation expenses
In September 1998, the Company approved and paid discretionary bonuses of $3,017
to certain members of management.
11. Discontinued operations
In April 1997, the Company completed the sale of its non-core aggregate towing
business. Revenues from the discontinued segment were $1,575 for 1996. The loss
on sale of the assets of the discontinued operations, recorded in 1996, was not
material.
12. Extraordinary item
In August 1998, as a result of entering into a new credit agreement, deferred
financing fees associated with the Company's prior credit agreement of $1,468
($925 net of income tax benefit) were written off as an extraordinary item.
<PAGE>
13. Lease commitments
The Company leases certain operating equipment and office facilities under long-
term operating leases expiring at various dates through 2011. The leases contain
renewal or purchase options which specify prices at the then fair market value
upon the expiration of the equipment leases. Future minimum lease payments for
the year ending December 31 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 7,978
2000 7,942
2001 7,893
2002 7,830
2003 7,834
Thereafter 32,227
--------
Total minimum lease payments $ 71,704
========
</TABLE>
Total rent expense for the years ended December 31, 1998, 1997 and 1996 was
$12,651, $16,457 and $19,926, respectively.
14. Retirement plans
The Company sponsors a 401(k) savings plan (Plan) covering substantially all
non-union employees. Under the Plan, individual employees may contribute a
percentage of compensation and the Company will match a portion of the
employees' contributions. Additionally, the Plan includes a profit-sharing
component, permitting the Company to make discretionary employer contributions
to all eligible employees of the Plan. The Company's expense for matching and
discretionary contributions for 1998, 1997 and 1996 was $2,087, $1,732 and $716,
respectively.
The Company also contributes to various multi-employer pension plans pursuant to
collective bargaining agreements. In the event of a plan's termination or
Company withdrawal from a plan, the Company may be liable for a portion of the
plan's unfunded vested benefits. As of December 31, 1998, unfunded amounts, if
any, are not significant. Contributions to multi-employer pension plans for the
years ended December 31, 1998, 1997 and 1996 were $1,816 , $2,173 and $2,593,
respectively.
During 1996, the Company terminated a non-contributory defined benefit pension
plan that covered substantially all non-union employees. The pension plan's
liabilities were settled in 1996 through a combination of lump sum payouts and
rollovers, and a group annuity contract. The Company recognized a $2,440
curtailment gain and a $752 settlement loss on the termination of the pension
plan.
<PAGE>
15. Stock plans
The Equity Incentive Plan of Great Lakes Dredge & Dock Corporation provided for
the grant of options and other stock-based awards to management personnel. On
January 1, 1992, options were granted for approximately 7.5 shares of common
stock at an exercise price of $600,000 per share, representing the estimated
fair market value of the shares on the grant date (as defined in the Agreement).
As of December 31, 1997, all options granted were fully vested and outstanding.
On August 19, 1998, all options granted under the Equity Incentive Plan were
exercised which represented 7% of the common stock outstanding after the
exercise. Subsequently, a portion of these shares, representing 4.8% of common
stock outstanding, was sold to Vectura in conjunction with the recapitalization,
resulting in non-cash compensation expense of $5,152. The Equity Incentive Plan
was terminated as of the date of recapitalization.
Additionally, in August as part of the recapitalization, the Great Lakes Dredge
& Dock Corporation Employee Stock Purchase Plan was terminated. There were no
options granted or outstanding at the time of termination.
The Company used Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," in accounting for its employee stock options.
Statements of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123) requires disclosures of the effect to net income
as if SFAS 123 had been adopted. The effects of applying SFAS 123 were not
material to the Company's financial statements.
16. Segment information and concentrations of risk
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 years ended
December 31, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Capital $ 146,253 $ 111,482 $ 92,588
Beach nourishment 80,947 59,036 65,838
Maintenance 60,593 74,379 47,014
Other 1,419 13,399 30,431
--------- --------- ---------
$ 289,212 $ 258,296 $ 235,871
========= ========= =========
</TABLE>
<PAGE>
In 1998, 1997 and 1996, 44.2%, 47.4% and 35.8%, respectively, of contract
revenues were earned from contracts with federal government agencies. In 1998,
1997 and 1996, 17.1%, 10.1% and 11.8%, respectively, of contract revenues were
earned from a contract with a state port authority. In 1997 and 1996, an
additional 9.5% and 10.9%, respectively, were earned from contracts with a
foreign government.
The Company derived revenues and gross profit from foreign project operations
for the years ended December 31, as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Contract revenues $ 57,591 $ 55,919 $ 58,166
Costs of contract revenues (54,292) (48,695) (49,324)
--------- --------- ---------
Gross profit $ 3,299 $ 7,224 $ 8,842
========= ========= =========
</TABLE>
17. Commitments and contingencies
At December 31, 1998, the Company is liable, in the normal course of business,
for $1,237 in letters of credit related to contract performance guarantees.
During 1998, the Company entered into a contract to build a backhoe dredge for
approximately $18,000 for delivery in mid 1999. In October 1998, the Company
sold $5,687 of related construction in progress expenditures and entered into a
construction agency agreement to complete the backhoe construction and a long
term operating lease to operate the dredge upon completion.
In 1992, an underwater utility tunnel failed adjacent to a construction site
completed by Great Lakes Dredge & Dock Company (GLDD), a wholly owned subsidiary
of GLD Corporation. The failure resulted in a flooding of the tunnel and
building basements serviced by the tunnel. Numerous suits were filed against
GLDD for claims of flood damage to building basements and losses due to business
interruption. During 1997, all outstanding claims were settled related to the
flood litigation. Settlement payments totaling $11,000 were advanced by the
Company. As part of the recapitalization, the right to receive the $11,000
settlement advance was retained by the Blackstone Limited Partnerships.
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.
As is customary with negotiated contracts with the federal government, the
government has the right to audit the books and records of the Company to ensure
compliance with such contracts and applicable
<PAGE>
federal laws. The government has the ability to seek a price adjustment based on
the results of such audit. Any such audits are not expected to have a material
impact on the financial position or operations of the Company.
18. Related party transactions
In August 1998, the Company made recourse loans totaling $4,516 to certain
members of management in connection with the exercise of their options. The
loans were immediately repaid to the Company from proceeds received by
management upon the sale of a portion of their common stock to Vectura.
19. Supplemental condensed consolidating financial information
The payment obligations of the Company under the 11 1/4% subordinated debt are
guaranteed by 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, balance sheets, statements of income and statements of cash
flows for the Subsidiary Guarantors, the Company's non-guarantor subsidiaries
and for 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 amounts presented in the
following columns for GLD Corporation include GLI amounts and activity as if it
had been merged into GLD Corporation as of January 1, 1996.
<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 -- 7,995 -- (7,995) --
leases.........................................
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>
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet at December 31, 1997
<TABLE>
<CAPTION>
Guarantor Other GLD Consolidated
ASSETS Subsidiaries Subsidiaries Corporation Eliminations Totals
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and equivalents................................... $ 1,285 $ 432 $ -- $ -- $ 1,717
Accounts receivable.................................... 37,043 3,132 124 -- 40,299
Receivables from affiliates............................ 18,716 9,713 -- (28,429) --
Current portion of net investment in
direct financing leases............................ -- 4,121 2,938 (7,059) --
Contract revenues in excess of billings................ 14,623 885 -- -- 15,508
Inventories............................................ 7,016 2,179 -- -- 9,195
Settlement advance..................................... 11,000 -- -- -- 11,000
Prepaid expenses and other current assets.............. 9,280 178 829 -- 10,287
-------- ------- -------- --------- --------
Total current assets...................... 98,963 20,640 3,891 (35,488) 88,006
Property and equipment, net............................... 73,208 16,574 48,934 -- 138,716
Net investment in direct financing leases................. -- 13,596 8,994 (22,590) --
Investments in subsidiaries............................... 11,921 -- 131,229 (143,150) --
Note receivable from affiliate............................ 26,717 1,893 -- (28,610) --
Inventories............................................... 6,326 -- -- -- 6,326
Investments in joint ventures............................. 7,569 -- -- -- 7,569
Other..................................................... 3,633 -- 1,305 -- 4,938
-------- ------- -------- --------- --------
$228,337 $52,703 $194,353 $(229,838) $245,555
======== ======= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 26,879 $ 4,106 $ 16 $ -- $ 31,001
Payables to affiliates................................. 23,614 2,371 2,444 (28,429) --
Accrued expenses and other............................. 9,853 2,144 3,422 -- 15,419
Billings in excess of contract revenues................ 2,974 -- -- -- 2,974
Current portion of obligations under capital leases.... -- 7,059 -- (7,059) --
Current maturities of long-term debt................... 200 -- -- -- 200
-------- ------- -------- --------- --------
Total current liabilities................. 63,520 15,680 5,882 (35,488) 49,594
Long-term debt............................................ 400 -- 57,000 -- 57,400
Obligations under capital leases.......................... -- 22,590 -- (22,590) --
Note payable to affiliate................................. -- -- 28,610 (28,610) --
Deferred income taxes..................................... 27,110 3,023 18,189 -- 48,322
Foreign income taxes...................................... -- -- 5,078 -- 5,078
Other..................................................... 3,643 68 1,438 -- 5,149
-------- ------- -------- --------- --------
Total liabilities......................... 94,673 41,361 116,197 (86,688) 165,543
Minority interests........................................ -- -- -- 1,856 1,856
Stockholders' equity...................................... 133,664 11,342 78,156 (145,006) 78,156
-------- ------- -------- --------- --------
$228,337 $52,703 $194,353 $(229,838) $245,555
======== ======= ======== ========= ========
</TABLE>
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income for the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Guarantor Other GLD Consolidated
Subsidiaries Subsidiaries Corporation Eliminations Totals
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract revenues......................................... $ 238,894 $ 51,118 $ - $ (800) $ 289,212
Costs of contract revenues................................ (203,954) (34,967) (2,457) 800 (240,578)
--------- -------- -------- -------- ---------
Gross profit........................................... 34,940 16,151 (2,457) - 48,634
General and administrative expenses....................... (17,774) (4,558) (340) - (22,672)
Equity incentive plan and other
compensation expenses................................... - - (8,169) - (8,169)
Recapitalization related expenses......................... (5,922) - (3,605) - (9,527)
--------- -------- -------- -------- ---------
Operating income (loss)................................ 11,244 11,593 (14,571) - 8,266
Interest, net............................................. (385) (204) (9,274) - (9,863)
Equity in earnings of subsidiaries........................ 6,929 - 12,867 (19,796) -
Equity in earnings of joint ventures...................... 1,218 - - - 1,218
--------- -------- -------- -------- ---------
Income (loss) before income taxes,
minority interests and extraordinary item............. 19,006 11,389 (10,978) (19,796) (379)
Income tax (expense) benefit.............................. (7,151) (710) 7,225 - (636)
Minority interests........................................ - - - (2,738) (2,738)
--------- -------- -------- -------- ---------
Net income (loss) before extraordinary item............ 11,855 10,679 (3,753) (22,534) (3,753)
Extraordinary item (net of income tax
benefit of $543)........................................ - - (925) - (925)
--------- -------- -------- -------- ---------
Net income (loss)..................................... $ 11,855 $ 10,679 $ (4,678) $(22,534) $ (4,678)
========= ======== ======== ======== =========
</TABLE>
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income for the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Guarantor Other GLD Consolidated
Subsidiaries Subsidiaries Corporation Eliminations Totals
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Contract revenues....................................... $ 216,388 $ 53,504 $ -- $(11,596) $ 258,296
Costs of contract revenues.............................. (195,954) (41,552) (2,473) 11,596 (228,383)
--------- -------- ------- -------- ---------
Gross profit........................................ 20,434 11,952 (2,473) -- 29,913
General and administrative expenses..................... (14,544) (3,863) (515) -- (18,922)
--------- -------- ------- -------- ---------
Operating income (loss)............................. 5,890 8,089 (2,988) -- 10,991
Interest, net........................................... (1,254) 148 (4,881) -- (5,987)
Equity in earnings of subsidiaries...................... 1,559 -- 8,913 (10,472) --
Equity in earnings of joint ventures.................... 3,132 -- -- -- 3,132
--------- -------- ------- -------- ---------
Income before income taxes and
minority interests............................... 9,327 8,237 1,044 (10,472) 8,136
Income tax (expense) benefit............................ (4,335) (1,090) 2,758 -- (2,667)
Minority interests...................................... -- -- -- (1,667) (1,667)
--------- -------- ------- -------- ---------
Net income ......................................... $ 4,992 $ 7,147 $ 3,802 $(12,139) $ 3,802
========= ======== ======= ======== =========
</TABLE>
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Income for the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Guarantor Other GLD Consolidated
Subsidiaries Subsidiaries Corporation Eliminations Totals
------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Contract revenues.......................................... $ 202,863 $ 44,720 $ 1 $(11,713) $ 235,871
Costs of contract revenues................................. (180,178) (37,805) (2,447) 11,713 (208,717)
--------- --------- ------- -------- ---------
Gross profit........................................... 22,685 6,915 (2,446) -- 27,154
General and administrative expenses........................ (13,802) (3,298) 709 -- (16,391)
--------- --------- ------- -------- ---------
Operating income....................................... 8,883 3,617 (1,737) -- 10,763
Interest, net.............................................. (1,249) (271) (4,524) -- (6,044)
Equity in earnings of subsidiaries......................... 948 -- 7,299 (8,247)
Equity in earnings of joint ventures....................... 1,139 -- -- -- 1,139
--------- --------- ------- -------- ---------
Income before income taxes, minority interests
and discontinued operations............................ 9,721 3,346 1,038 (8,247) 5,858
Income tax (expense) benefit............................... (3,290) (1,111) 2,077 -- (2,324)
Minority interests......................................... -- -- -- (419) (419)
--------- --------- ------- -------- ---------
Income from continuing operations...................... 6,431 2,235 3,115 (8,666) 3,115
Discontinued operations, net of tax benefit of $695........ -- -- (1,109) -- (1,109)
--------- --------- ------- -------- ---------
Net income ............................................ $ 6,431 $ 2,235 $ 2,006 $ (8,666) $ 2,006
========= ======== ======= ======== =========
</TABLE>
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Cash Flows for the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Guarantor Other GLD Consolidated
Subsidiaries Subsidiaries Corporation Eliminations Totals
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income (loss)................................... $ 11,855 $ 10,679 $ (4,678) $ (22,534) $ (4,678)
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation..................................... 7,649 4,049 2,252 -- 13,950
Earnings of subsidiaries and joint ventures...... (8,147) -- (12,867) 19,796 (1,218)
Minority interests............................... -- -- -- 2,738 2,738
Deferred income taxes............................ (382) (451) (1,900) -- (2,733)
Gain on dispositions of property and equipment... 717 -- -- -- 717
Foreign income taxes............................. -- -- 1,866 -- 1,866
Compensation expense related to
exercise of options........................... -- -- 5,152 -- 5,152
Extraordinary item............................... -- -- 925 -- 925
Other, net....................................... 439 -- 482 -- 921
Changes in assets and liabilities:
Accounts receivable........................... 9,878 (7,093) 118 -- 2,903
Contract revenues in excess of billings....... 1,273 (1,701) -- -- (428)
Inventories................................... (3,674) (1,137) -- -- (4,811)
Prepaid expenses and other current assets..... 4,269 185 258 -- 4,712
Accounts payable and accrued expenses......... (4,553) 389 2,510 -- (1,654)
Billings in excess of contract revenues....... 559 1,309 -- -- 1,868
------------ ------------ ----------- ------------ ------------
Net cash flows from operating activities......... 19,883 6,229 (5,882) -- 20,230
Investing Activities
Purchases of property and equipment.................. (24,985) (4,144) -- -- (29,129)
Proceeds from dispositions of property
and equipment.................................... 20,213 -- -- -- 20,213
Investments in and distributions from joint venture.. (1,720) -- -- -- (1,720)
Principal (payments) receipts on direct
financing leases................................. -- 4,121 (4,121) -- --
(Payments) receipts on note with affiliate........... -- 689 (689) -- --
------------ ------------ ----------- ------------ ------------
Net cash flows from investing activities......... (6,492) 666 (4,810) -- (10,636)
Financing Activities
Proceeds from long-term debt......................... -- -- 55,000 -- 55,000
Repayments of long-term debt......................... (200) -- -- -- (200)
Borrowing (repayments) of revolving loans, net....... -- -- (57,000) -- (57,000)
Proceeds from 11 1/4% subordinated debt.............. -- -- 115,000 -- 115,000
Exercise of options.................................. -- -- 4,516 -- 4,516
Common stock purchased............................... -- -- 3,552 -- 3,552
Issuance of preferred stock.......................... -- -- 34,420 -- 34,420
Financing fees....................................... -- -- (6,045) -- (6,045)
Principal receipts (payments) on capital leases...... -- (7,059) 7,059 -- --
Net change in accounts with affiliates............... (1,186) -- 1,186 -- --
Redemption of shares ................................ -- -- (159,796) -- (159,796)
Dividends............................................ (12,800) -- 12,800 -- --
------------ ------------ ----------- ------------ ------------
Net cash flows from financing activities......... (14,186) (7,059) 10,692 -- (10,553)
------------ ------------ ----------- ------------ ------------
Net increase (decrease) in cash and equivalents.. (795) (164) -- -- (959)
Cash and equivalents at beginning of year........ 1,285 432 -- -- 1,717
------------ ------------ ----------- ------------ ------------
Cash and equivalents at end of year.............. $ 490 $ 268 $ -- $ -- $ 758
============ ============ =========== ============ ============
</TABLE>
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Cash Flows for the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Guarantor Other GLD Consolidated
Subsidiaries Subsidiaries Corporation Eliminations Totals
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income ................................................... $ 4,992 $ 7,147 $ 3,802 $(12,139) $ 3,802
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation.............................................. 7,638 3,716 2,261 -- 13,615
Earnings of subsidiaries and joint ventures............... (4,691) -- (8,913) 10,472 (3,132)
Minority interests........................................ -- -- -- 1,667 1,667
Deferred income taxes..................................... (1,639) (355) (1,969) -- (3,963)
(Gain) loss on dispositions of property
and equipment........................................ (3,468) -- 160 -- (3,308)
Foreign income taxes...................................... -- -- 2,696 -- 2,696
Other, net................................................ (873) -- 635 -- (238)
Changes in assets and liabilities:
Accounts receivable................................... (13,655) 1,469 (56) -- (12,242)
Contract revenues in excess of billings............... (5,729) 1,473 -- -- (4,256)
Inventories........................................... 1,264 -- -- -- 1,264
Prepaid expenses and other current assets............. 564 (482) (332) -- (250)
Accounts payable and accrued expenses................. 10,838 2,064 2,413 -- 15,315
Billings in excess of contract revenues............... 2,772 (124) -- -- 2,648
-------- -------- -------- -------- --------
Net cash flows from operating activities.................. (1,987) 14,908 697 -- 13,618
Investing Activities
Purchases of property and equipment........................... (7,703) (3,791) -- -- (11,494)
Proceeds from dispositions of property
and equipment.............................................. 5,437 -- -- -- 5,437
Distributions from joint venture.............................. 1,000 -- -- -- 1,000
Investments in joint venture.................................. (630) -- -- -- (630)
Distributions to minority interests........................... -- (3,025) -- -- (3,025)
Deposit....................................................... 2,500 -- -- -- 2,500
Principal (payments) receipts on direct
financing leases........................................... -- 3,570 (3,570) -- --
(Payments) receipts on notes with affiliate................... -- 1,371 (1,371) -- --
-------- -------- -------- -------- --------
Net cash flows from investing activities.................. 604 (1,875) (4,941) -- (6,212)
Financing Activities
Proceeds from long--term debt.................................. -- -- 8,000 -- 8,000
Repayments of long--term debt.................................. -- -- (28,836) -- (28,836)
Borrowing (repayments) of revolving loans, net................ -- -- 26,000 -- 26,000
Principal receipts (payments) on capital leases............... -- (6,243) 6,243 -- --
Net change in accounts with affiliates........................ 5,423 -- (5,423) -- --
Financing fees................................................ -- -- (1,740) -- (1,740)
Settlement advance............................................ (11,000) -- -- -- (11,000)
Dividends .................................................... 7,675 (7,675) -- -- --
-------- -------- -------- -------- --------
Net cash flows from financing activities................... 2,098 (13,918) 4,244 -- (7,576)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and equivalents............ 715 (885) -- -- (170)
Cash and equivalents at beginning of year.................. 570 1,317 -- -- 1,887
-------- -------- -------- -------- --------
Cash and equivalents at end of year........................ $ 1,285 $ 432 $ -- $ -- $ 1,717
======== ======== ======== ======== ========
</TABLE>
<PAGE>
GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Cash Flows for the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Guarantor Other GLD Consolidated
Subsidiaries Subsidiaries Corporation Eliminations Totals
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income ........................................... $ 6,431 $ 2,235 $ 2,006 $(8,666) $ 2,006
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation...................................... 7,933 3,690 2,258 -- 13,881
Earnings of subsidiaries and joint ventures....... (2,087) -- (7,299) 8,247 (1,139)
Minority interests................................ -- -- -- 419 419
Deferred income taxes............................. (2,596) (335) (865) -- (3,796)
(Gain) loss on dispositions of property
and equipment.................................. (640) -- 173 -- (467)
Foreign income taxes.............................. -- -- 2,382 -- 2,382
Pension curtailment and settlement................ -- -- (1,688) -- (1,688)
Other, net........................................ 104 -- 113 -- 217
Changes in assets and liabilities: -- -- --
Accounts receivable............................ 20,942 (11) 14 -- 20,945
Contract revenues in excess of billings........ 3,033 61 -- -- 3,094
Inventories.................................... 3,915 -- -- -- 3,915
Prepaid expenses and other current assets...... (7) (121) 3,235 -- 3,107
Accounts payable and accrued expenses.......... (16,822) 1,193 (252) -- (15,881)
Billings in excess of contract revenues........ (2,445) 124 -- -- (2,321)
------------ ------------ ----------- ------------ ------------
Net cash flows from operating activities.......... 17,761 6,836 77 -- 24,674
Investing Activities
Purchases of property and equipment................... (4,023) (1,388) -- -- (5,411)
Proceeds from dispositions of property
and equipment..................................... 7,820 -- -- -- 7,820
Distributions from joint venture...................... 750 -- -- -- 750
Investments in joint venture.......................... (755) -- -- -- (755)
Distributions to minority interests................... -- (700) -- -- (700)
Deposit............................................... (2,500) -- -- -- (2,500)
Principal (payments) receipts on direct
financing leases.................................. -- 3,100 (3,100) -- --
(Payments) receipts on notes with affiliate........... -- 1,371 (1,371) -- --
------------ ------------ ----------- ------------ ------------
Net cash flows from investing activities.......... 1,292 2,383 (4,471) -- (796)
Financing Activities
Proceeds from long-term debt.......................... -- -- -- -- --
Repayments of long-term debt.......................... (2,817) -- (15,500) -- (18,317)
Borrowing (repayments) of revolving loans, net........ -- -- (6,000) -- (6,000)
Principal receipts (payments) on capital leases....... -- (5,533) 5,533 -- --
Net change in accounts with affiliates................ (13,844) -- 13,844 -- --
Dividends ............................................ (3,700) (2,800) 6,500 -- --
------------ ------------ ----------- ------------ ------------
Net cash flows from financing activities.......... (20,361) (8,333) 4,377 -- (24,317)
------------ ------------ ----------- ------------ ------------
Net increase (decrease) in cash and equivalents... (1,308) 886 (17) -- (439)
Cash and equivalents at beginning of year......... 1,878 431 17 -- 2,326
------------ ------------ ----------- ------------ ------------
Cash and equivalents at end of year............... $ 570 $ 1,317 $ -- $ -- $ 1,887
============ ============ =========== ============ ============
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Douglas B. Mackie
----------------------------------
Douglas B. Mackie
President, Chief Executive Officer and Director
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Signature Date Title
/s/ Douglas B. Mackie
- -------------------------
Douglas B. Mackie 5/4/99 President, Chief Executive
Officer and Director
/s/ Deborah A. Wensel
- -------------------------
Deborah A. Wensel 5/3/99 Vice President, Chief
Financial Officer and
Treasurer
/s/ Michael A. Delaney
- --------------------------
Michael A. Delaney 5/4/99 Director
/s/ David Wagstaff III
- --------------------------
David Wagstaff III 5/3/99 Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 758
<SECURITIES> 0
<RECEIVABLES> 54,231
<ALLOWANCES> 899
<INVENTORY> 20,322
<CURRENT-ASSETS> 74,693
<PP&E> 220,002
<DEPRECIATION> 85,765
<TOTAL-ASSETS> 235,087
<CURRENT-LIABILITIES> 52,392
<BONDS> 167,700
0
1
<COMMON> 50
<OTHER-SE> (48,785)
<TOTAL-LIABILITY-AND-EQUITY> 235,087
<SALES> 0
<TOTAL-REVENUES> 289,212
<CGS> 0
<TOTAL-COSTS> 240,578
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 783
<INTEREST-EXPENSE> 10,175
<INCOME-PRETAX> (379)
<INCOME-TAX> 636
<INCOME-CONTINUING> (3,753)
<DISCONTINUED> 0
<EXTRAORDINARY> (925)
<CHANGES> 0
<NET-INCOME> (4,678)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
