UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý |
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
For the quarterly period ended June 30, 2004
OR
o |
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
For the transition period from to
Commission file number:
333-64687
(Exact name of registrant as specified in its charter)
Delaware |
|
13-3634726 |
(State
or other jurisdiction of |
|
(I.R.S.
Employer |
|
|
|
2122 York Road, Oak Brook, IL |
|
60523 |
(Address of principal executive offices) |
|
(Zip Code) |
|
|
|
(630) 574-3000 |
||
(Registrants telephone number, including area code) |
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.
ý Yes o No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
o Yes ý No
All of the Companys common stock is held by a holding company.
As of August 10, 2004, there were outstanding 1,000 shares of Common Stock and zero shares of Preferred Stock.
Great
Lakes Dredge & Dock Corporation and Subsidiaries
Quarterly Report Pursuant to
Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended June 30, 2004
INDEX
PART I Financial Information
Great
Lakes Dredge & Dock Corporation and Subsidiaries
Condensed Consolidated Balance
Sheets
(Unaudited)
(in thousands, except share and per share amounts)
|
|
Successor Basis |
|
||||
|
|
June 30, |
|
December 31, |
|
||
Assets |
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
||
Cash and equivalents |
|
$ |
720 |
|
$ |
2,775 |
|
Accounts receivable, net |
|
47,212 |
|
64,869 |
|
||
Contract revenues in excess of billings |
|
18,112 |
|
11,236 |
|
||
Inventories |
|
15,080 |
|
13,603 |
|
||
Prepaid expenses and other current assets |
|
20,662 |
|
21,178 |
|
||
Total current assets |
|
101,786 |
|
113,661 |
|
||
Property and equipment, net |
|
263,132 |
|
264,132 |
|
||
Goodwill |
|
103,972 |
|
103,917 |
|
||
Other intangible assets, net |
|
4,529 |
|
7,441 |
|
||
Inventories |
|
11,266 |
|
10,968 |
|
||
Investments in joint ventures |
|
8,382 |
|
7,551 |
|
||
Other assets |
|
12,122 |
|
15,274 |
|
||
Total assets |
|
$ |
505,189 |
|
$ |
522,944 |
|
|
|
|
|
|
|
||
Liabilities and Stockholders Equity |
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
||
Accounts payable |
|
$ |
31,482 |
|
$ |
36,991 |
|
Accrued expenses |
|
12,967 |
|
15,456 |
|
||
Billings in excess of contract revenues |
|
6,577 |
|
8,808 |
|
||
Current maturities of long-term debt |
|
1,950 |
|
1,950 |
|
||
Total current liabilities |
|
52,976 |
|
63,205 |
|
||
Long-term debt |
|
254,275 |
|
256,750 |
|
||
Deferred income taxes |
|
94,515 |
|
96,626 |
|
||
Other |
|
8,113 |
|
7,632 |
|
||
Total liabilities |
|
409,879 |
|
424,213 |
|
||
Minority interest |
|
1,719 |
|
1,731 |
|
||
Commitments and contingencies (Note 9) |
|
|
|
|
|
||
Stockholders equity: |
|
|
|
|
|
||
Common stock, $.01 par value; 1,000 shares issued and outstanding |
|
|
|
|
|
||
Additional paid-in capital |
|
97,000 |
|
97,000 |
|
||
Accumulated deficit |
|
(3,679 |
) |
|
|
||
Accumulated other comprehensive income |
|
270 |
|
|
|
||
Total stockholders equity |
|
93,591 |
|
97,000 |
|
||
Total liabilities and stockholders equity |
|
$ |
505,189 |
|
$ |
522,944 |
|
See notes to unaudited condensed consolidated financial statements.
2
Great
Lakes Dredge & Dock Corporation and Subsidiaries
Condensed Consolidated Statements
of Operations
(Unaudited)
(in thousands)
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
Successor |
|
Predecessor |
|
Successor |
|
Predecessor |
|
||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Contract revenues |
|
$ |
72,104 |
|
$ |
104,364 |
|
$ |
176,051 |
|
$ |
204,057 |
|
Costs of contract revenues |
|
66,259 |
|
89,256 |
|
153,807 |
|
170,911 |
|
||||
Gross profit |
|
5,845 |
|
15,108 |
|
22,244 |
|
33,146 |
|
||||
General and administrative expenses |
|
6,257 |
|
6,499 |
|
13,380 |
|
13,440 |
|
||||
Amortization of intangible assets |
|
1,120 |
|
|
|
2,912 |
|
|
|
||||
Operating income (loss) |
|
(1,532 |
) |
8,609 |
|
5,952 |
|
19,706 |
|
||||
Interest expense, net |
|
(6,996 |
) |
(5,137 |
) |
(11,606 |
) |
(10,193 |
) |
||||
Equity in earnings of joint venture |
|
682 |
|
677 |
|
831 |
|
744 |
|
||||
Minority interests |
|
6 |
|
91 |
|
12 |
|
70 |
|
||||
Income (loss) before income taxes |
|
(7,840 |
) |
4,240 |
|
(4,811 |
) |
10,327 |
|
||||
Income tax benefit (expense) |
|
2,403 |
|
(1,747 |
) |
1,132 |
|
(4,347 |
) |
||||
Net income (loss) |
|
$ |
(5,437 |
) |
$ |
2,493 |
|
$ |
(3,679 |
) |
$ |
5,980 |
|
See notes to unaudited condensed consolidated financial statements.
3
Great
Lakes Dredge & Dock Corporation and Subsidiaries
Condensed Consolidated Statements
of Cash Flows
(Unaudited)
(in thousands)
|
|
Six Months Ended |
|
||||
|
|
Successor |
|
Predecessor |
|
||
|
|
2004 |
|
2003 |
|
||
Operating Activities |
|
|
|
|
|
||
Net income (loss) |
|
$ |
(3,679 |
) |
$ |
5,980 |
|
Adjustments to reconcile net income (loss) to net cash flows from operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
13,576 |
|
8,135 |
|
||
Earnings of joint ventures |
|
(831 |
) |
(744 |
) |
||
Minority interests |
|
(12 |
) |
(70 |
) |
||
Deferred income taxes |
|
(2,069 |
) |
495 |
|
||
Gain on dispositions of property and equipment |
|
(144 |
) |
(110 |
) |
||
Other, net |
|
820 |
|
665 |
|
||
Changes in assets and liabilities: |
|
|
|
|
|
||
Accounts receivable |
|
17,657 |
|
(9,745 |
) |
||
Contract revenues in excess of billings |
|
(6,876 |
) |
(1,389 |
) |
||
Inventories |
|
(1,775 |
) |
(1,929 |
) |
||
Prepaid expenses and other current assets |
|
408 |
|
2,442 |
|
||
Accounts payable and accrued expenses |
|
(7,998 |
) |
8,602 |
|
||
Billings in excess of contract revenues |
|
(2,231 |
) |
(6,781 |
) |
||
Other noncurrent assets and liabilities |
|
2,931 |
|
|
|
||
Net cash flows from operating activities |
|
9,777 |
|
5,551 |
|
||
|
|
|
|
|
|
||
Investing Activities |
|
|
|
|
|
||
Purchases of property and equipment |
|
(9,892 |
) |
(9,337 |
) |
||
Dispositions of property and equipment |
|
144 |
|
129 |
|
||
Adjustment to acquisition price of Predecessor common and preferred shares |
|
527 |
|
|
|
||
Disposition of interest in Riovia investment |
|
|
|
1,200 |
|
||
Equity investment in land |
|
|
|
(843 |
) |
||
Net cash flows from investing activities |
|
(9,221 |
) |
(8,851 |
) |
||
|
|
|
|
|
|
||
Financing Activities |
|
|
|
|
|
||
Repayments of long-term debt |
|
(3,475 |
) |
(6,475 |
) |
||
Borrowings under revolving loans, net of repayments |
|
1,000 |
|
10,000 |
|
||
Financing fees |
|
(136 |
) |
(403 |
) |
||
Repayment on notes receivable from stockholders |
|
|
|
19 |
|
||
Net cash flows from financing activities |
|
(2,611 |
) |
3,141 |
|
||
Net change in cash and equivalents |
|
(2,055 |
) |
(159 |
) |
||
Cash and equivalents at beginning of period |
|
2,775 |
|
1,456 |
|
||
Cash and equivalents at end of period |
|
$ |
720 |
|
$ |
1,297 |
|
|
|
|
|
|
|
||
Supplemental Cash Flow Information |
|
|
|
|
|
||
Cash paid for interest |
|
$ |
8,557 |
|
$ |
9,528 |
|
Cash paid for taxes |
|
$ |
|
|
$ |
6,010 |
|
See notes to unaudited condensed consolidated financial statements.
4
GREAT LAKES DREDGE &
DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
(dollars in thousands)
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. 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 as of and for the dates presented. 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 Companys Annual Report filed on Form 10-K for the year ended December 31, 2003.
The acquisition of the Company by Madison Dearborn Capital Partners IV, L.P. in December 2003 was accounted for as a purchase in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, resulting in a new basis of accounting subsequent to the transaction. For presentation herein, the financial statements up to the date of the sale are denoted as Predecessor Basis, while the financial statements prepared subsequent to the sale are denoted as Successor Basis. See Note 4 for a description of the transaction.
The condensed consolidated results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year.
2. Comprehensive income (loss)
Total comprehensive income (loss) comprises net income (loss) and net unrealized gains and losses on cash flow hedges. Total comprehensive income (loss) for the three months ended June 30, 2004 and 2003 was $(5,155) and $2,534, respectively. Total comprehensive income (loss) for the six months ended June 30, 2004 and 2003 was $(3,410) and $6,053, respectively.
3. Risk management activities
The Company uses derivative instruments to manage commodity price and foreign currency exchange risks. Such instruments are not used for trading purposes. As of June 30, 2004, the Company is party to various swap arrangements to hedge the price of a portion of its diesel fuel purchase requirements for work in its backlog to be performed through September 2005. As of June 30, 2004, there were 9.0 million gallons remaining on these contracts. Under these agreements, the Company will pay fixed prices ranging from $0.75 to $0.92 per gallon. At June 30, 2004 and December 31, 2003, the fair value on these contracts was estimated to be $950 and $509, respectively, based on quoted market prices, and is recorded in other current assets. Ineffectiveness related to these fuel hedge arrangements was determined to be immaterial. The remaining gains included in accumulated other comprehensive income at June 30, 2004 will be reclassified into earnings over the next fifteen months, corresponding to the period during which the hedged fuel is expected to be utilized.
5
In February 2004, the Company entered into an interest rate swap arrangement to swap a notional amount of $50 million from a fixed rate of 7.75% to a floating LIBOR-based rate in order to manage the interest rate paid with respect to the Companys 7¾% senior subordinated debt. The fair value of the swap at June 30, 2004 was $(1,757) and is recorded in accrued expenses. The swap is not accounted for as a hedge; therefore, the changes in fair value are recorded as adjustments to interest expense in each reporting period.
The carrying values of other financial instruments included in current assets and current liabilities approximate 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 Companys $175,000 of 7¾% senior subordinated notes was $148,750 and $180,250 at June 30, 2004 and December 31, 2003, respectively, based on quoted market prices.
4. Sale transaction
On December 22, 2003, the Company was acquired by Madison Dearborn Capital Partners IV, L.P. (MDP), an affiliate of Chicago-based private equity investment firm Madison Dearborn Partners, LLC. The initial purchase price totaled $362,111, including fees and expenses, and was financed by new equity contributions of $97,000; term loan and revolver borrowings under a new senior credit facility of approximately $60,300 and $2,000, respectively; the issuance of $175,000 of 7.75% Senior Subordinated Notes due 2013; the rollover of term loan borrowings under a new equipment financing facility of $23,400; the rollover of approximately $1,558 million of capital leases; and cash on hand of $2,853. The purchase price was subject to certain working capital and debt adjustments to be finalized approximately three months subsequent to the transaction, as defined per the merger agreement. The adjustments were finalized in April of 2004, resulting in a decrease to the initial purchase price of $527.
The acquisition was accounted for by the purchase method of accounting and, accordingly, the purchase price was allocated to the Companys assets and liabilities based on their fair values at the date of acquisition. The allocation of purchase price to property and equipment and identifiable intangible assets has been prepared on a preliminary basis, using valuation information that was available up to the point of financial statement preparation. This allocation is therefore subject to adjustment.
At June 30, 2004, the net book value of intangible assets identified with respect to the transaction is as follows:
|
|
Estimated |
|
Cost |
|
Accumulated |
|
Net |
|
|||
Customer contract backlog |
|
13-15 mos. |
|
$ |
4,237 |
|
$ |
2,700 |
|
$ |
1,537 |
|
Demolition customer relationships |
|
7-10 years |
|
1,995 |
|
142 |
|
1,853 |
|
|||
Software and databases |
|
7 years |
|
1,209 |
|
70 |
|
1,139 |
|
|||
|
|
|
|
$ |
7,441 |
|
$ |
2,912 |
|
$ |
4,529 |
|
6
The following pro forma results for the three and six months ended June 30, 2003 have been prepared as if the acquisition took place at the beginning of the period and include certain adjustments such as additional depreciation and amortization charges resulting from the allocation of purchase price to property and equipment and intangible assets, and reductions to interest expense resulting from the terms of the new debt structure. The pro forma operating results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations that may occur in the future or that would have occurred had this acquisition been consummated at the beginning of the period presented.
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
Actual |
|
Pro forma |
|
Actual |
|
Pro forma |
|
||||
Contract revenues |
|
$ |
72,104 |
|
$ |
104,364 |
|
$ |
176,051 |
|
$ |
204,057 |
|
Operating income (loss) |
|
(1,532 |
) |
6,045 |
|
5,952 |
|
14,258 |
|
||||
Income (loss) before income taxes |
|
(7,840 |
) |
2,054 |
|
(4,811 |
) |
5,628 |
|
||||
Net income (loss) |
|
(5,437 |
) |
1,186 |
|
(3,679 |
) |
3,170 |
|
||||
5. Accounts receivable
Accounts receivable at June 30, 2004 and December 31, 2003 are as follows:
|
|
Successor Basis |
|
||||
|
|
June 30, |
|
December 31, |
|
||
Completed contracts |
|
$ |
19,819 |
|
$ |
15,962 |
|
Contracts in progress |
|
21,770 |
|
40,737 |
|
||
Retainage |
|
6,498 |
|
8,969 |
|
||
|
|
48,087 |
|
65,668 |
|
||
Allowance for doubtful accounts |
|
(875 |
) |
(799 |
) |
||
|
|
|
|
|
|
||
|
|
$ |
47,212 |
|
$ |
64,869 |
|
7
6. Contracts in progress
The components of contracts in progress at June 30, 2004 and December 31, 2003 are as follows:
|
|
Successor Basis |
|
||||
|
|
June 30, |
|
December 31, |
|
||
Costs and earnings in excess of billings: |
|
|
|
|
|
||
Costs and earnings for contracts in progress |
|
$ |
213,239 |
|
$ |
261,013 |
|
Amounts billed |
|
(196,764 |
) |
(251,034 |
) |
||
Costs and earnings in excess of billings for contracts in progress |
|
16,475 |
|
9,979 |
|
||
Costs and earnings in excess of billings for completed contracts |
|
1,637 |
|
1,257 |
|
||
|
|
|
|
|
|
||
|
|
$ |
18,112 |
|
$ |
11,236 |
|
|
|
|
|
|
|
||
Prepaid contract costs (included in prepaid expenses and other current assets) |
|
$ |
1,842 |
|
$ |
570 |
|
|
|
|
|
|
|
||
Billings in excess of costs and earnings: |
|
|
|
|
|
||
Amounts billed |
|
$ |
(182,218 |
) |
$ |
(180,096 |
) |
Costs and earnings for contracts in progress |
|
175,641 |
|
171,288 |
|
||
|
|
|
|
|
|
||
|
|
$ |
(6,577 |
) |
$ |
(8,808 |
) |
7. Accrued expenses
Accrued expenses at June 30, 2004 and December 31, 2003 are as follows:
|
|
Successor Basis |
|
||||
|
|
June 30, |
|
December 31, |
|
||
Insurance |
|
$ |
3,274 |
|
$ |
4,736 |
|
Payroll and employee benefits |
|
2,472 |
|
6,658 |
|
||
U.S. income and other taxes |
|
2,429 |
|
1,252 |
|
||
Interest rate swap liability |
|
1,757 |
|
|
|
||
Interest |
|
1,095 |
|
339 |
|
||
Equipment leases |
|
885 |
|
882 |
|
||
Foreign income taxes |
|
80 |
|
210 |
|
||
Other |
|
975 |
|
1,379 |
|
||
|
|
|
|
|
|
||
|
|
$ |
12,967 |
|
$ |
15,456 |
|
8
8. Segment information
The Company and its subsidiaries operate in two reportable segments: dredging and demolition. The Companys financial reporting systems present various data for management to run the business, including profit and loss statements prepared according to the segments presented. Segment information for the periods presented is as follows:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
Successor |
|
Predecessor |
|
Successor |
|
Predecessor |
|
||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
Dredging |
|
|
|
|
|
|
|
|
|
||||
Contract revenues |
|
$ |
62,271 |
|
$ |
94,828 |
|
$ |
159,071 |
|
$ |
186,197 |
|
Operating income (loss) |
|
(2,275 |
) |
8,825 |
|
4,961 |
|
19,123 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Demolition |
|
|
|
|
|
|
|
|
|
||||
Contract revenues |
|
$ |
9,833 |
|
$ |
9,536 |
|
$ |
16,980 |
|
$ |
17,860 |
|
Operating income (loss) |
|
743 |
|
(216 |
) |
991 |
|
583 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
||||
Contract revenues |
|
$ |
72,104 |
|
$ |
104,364 |
|
$ |
176,051 |
|
$ |
204,057 |
|
Operating income (loss) |
|
(1,532 |
) |
8,609 |
|
5,952 |
|
19,706 |
|
9. Commitments and contingencies
At June 30, 2004, the Company is contingently liable, in the normal course of business, for $15,182 in undrawn letters of credit, relating to contract performance guarantees or covering the Companys insurance payment liabilities.
Amboy Aggregates, a joint venture in which the Company has a 50% equity interest, has a $2,000 revolving credit facility 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 borrowings and accrued interest, which totaled $200 at June 30, 2004.
The Company finances certain key vessels used in its operations with operating lease arrangements with unrelated lessors, requiring annual rentals decreasing from $14 to $9 million over the next five years. These operating leases contain default provisions which are triggered by an acceleration of debt maturity under the terms of the Companys Credit Agreement. Additionally, the leases typically contain provisions whereby the Company indemnifies the lessors for the tax treatment attributable to such leases based on the tax rules in place at lease inception. The tax indemnifications do not have a contractual dollar limit. It is impractical to develop an estimate of the maximum potential exposure under these lease indemnification arrangements, since it is entirely dependent on the unique tax circumstances of each lessor. The Company has additional rental commitments for office facilities and dozer leases totaling approximately $1 million to $2 million, annually.
Borrowings under the Companys Credit Agreement are secured by first lien mortgages on certain operating equipment of the Company with a net book value of $77,845 at December 31, 2003. Additionally, the Company obtains its performance and bid bonds through a bonding
9
agreement with a surety company that has been granted a security interest in a substantial portion of the Companys operating equipment with a net book value of approximately $92,340 at December 31, 2003. The net book value of equipment serving as collateral under these agreements at June 30, 2004 does not materially differ from the values at December 31, 2003. Both the Credit Agreement and bonding agreement contain certain provisions and covenants; the Company is in compliance with such covenants at June 30, 2004. The performance and bid bonds are customarily required for dredging and marine construction projects, as well as some demolition projects. Bid bonds are generally obtained for a percentage of bid value and aggregate amounts outstanding typically range between $5 to $10 million. Performance bonds typically cover 100% of the contract value with no maximum bond amounts. At June 30, 2004, the Company had outstanding performance bonds valued at approximately $490 million; however the revenue value remaining in backlog related to these projects totaled approximately $235 million at June 30, 2004.
Certain foreign projects performed by the Company have warranty periods, typically spanning no more than three to five years beyond project completion, whereby the Company retains responsibility to maintain the project site to certain specifications during the warranty period. Generally, any potential liability of the Company is mitigated by insurance, shared responsibilities with consortium partners, and/or recourse to owner-provided specifications.
The Company considers it unlikely that it would have to perform under any of these aforementioned contingent obligations and performance has never been required in any of these circumstances in the past.
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 federal laws. The government has the ability to seek a price adjustment based on the results of such audit. Any such audits have not had and are not expected to have a material adverse impact on the financial position or operations of the Company.
In the normal course of business, the Company is a defendant in various legal proceedings. Except as described below, the Company is not currently a party to any material legal proceedings or environmental claims.
A joint venture in which the Company holds an approximately 36% interest was subject to a counterclaim filed by the Red Sea Ports Authority relating to a contract performed in Al Sukhna, Egypt between 1999 and 2001. The joint venture instituted arbitration proceedings against the Red Sea Ports Authority for monetary claims arising out of the contract and sought approximately $40 million in damages. The Red Sea Ports Authority counterclaimed for $74 million in damages, alleging environmental damage from the project, including damage to coastline, fisheries and coral reefs, and misuse of the designated disposal site. In July 2003, an arbitration hearing was held in Egypt regarding the joint ventures claim and the Red Sea Ports Authoritys counterclaim. A decision was rendered in June of 2004, whereby the joint venture was awarded approximately $8 million for its claims, including approximately $4 million for outstanding invoices which had previously been settled through non-payment risk insurance. All counterclaims against the joint venture were dismissed. The Company recognized $1.3 million of revenue in the second quarter of 2004 related to this settlement.
10
10. Supplemental condensed consolidating financial information
Included in the Companys long-term debt is $175,000 of 7¾% senior subordinated notes which will mature on December 15, 2013. The payment obligations of the Company under the senior subordinated notes are guaranteed by the Companys domestic subsidiaries (the Subsidiary Guarantors). Such guarantees are full, unconditional and joint and several. Separate financial statements of the Subsidiary Guarantors are not presented because the Companys 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 Companys non-guarantor subsidiary and for the Company (GLD Corporation).
11
Condensed Consolidating Balance Sheet at June 30, 2004
Successor Basis
|
|
Guarantor |
|
Other |
|
GLD |
|
Eliminations |
|
Consolidated |
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and equivalents |
|
$ |
712 |
|
$ |
8 |
|
$ |
|
|
$ |
|
|
$ |
720 |
|
Accounts receivable, net |
|
47,212 |
|
|
|
|
|
|
|
47,212 |
|
|||||
Receivables from affiliates |
|
3,555 |
|
2,922 |
|
4,540 |
|
(11,017 |
) |
|
|
|||||
Contract revenues in excess of billings |
|
18,112 |
|
|
|
|
|
|
|
18,112 |
|
|||||
Inventories |
|
15,080 |
|
|
|
|
|
|
|
15,080 |
|
|||||
Prepaid expenses and other current assets |
|
17,801 |
|
|
|
2,861 |
|
|
|
20,662 |
|
|||||
Total current assets |
|
102,472 |
|
2,930 |
|
7,401 |
|
(11,017 |
) |
101,786 |
|
|||||
Property and equipment, net |
|
248,366 |
|
19 |
|
14,747 |
|
|
|
263,132 |
|
|||||
Goodwill |
|
103,972 |
|
|
|
|
|
|
|
103,972 |
|
|||||
Other intangible assets |
|
4,529 |
|
|
|
|
|
|
|
4,529 |
|
|||||
Investments in subsidiaries |
|
2,944 |
|
|
|
285,369 |
|
(288,313 |
) |
|
|
|||||
Notes receivable from affiliates |
|
|
|
|
|
24,972 |
|
(24,972 |
) |
|
|
|||||
Inventories |
|
11,266 |
|
|
|
|
|
|
|
11,266 |
|
|||||
Investments in joint ventures |
|
8,382 |
|
|
|
|
|
|
|
8,382 |
|
|||||
Other assets |
|
329 |
|
|
|
11,793 |
|
|
|
12,122 |
|
|||||
|
|
$ |
482,260 |
|
$ |
2,949 |
|
$ |
344,282 |
|
$ |
(324,302 |
) |
$ |
505,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable |
|
$ |
31,482 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
31,482 |
|
Payables to affiliates |
|
|
|
|
|
6,477 |
|
(6,477 |
) |
|
|
|||||
Accrued expenses |
|
8,174 |
|
|
|
4,793 |
|
|
|
12,967 |
|
|||||
Billings in excess of contract revenues |
|
6,577 |
|
|
|
|
|
|
|
6,577 |
|
|||||
Current maturities of long-term debt |
|
6,490 |
|
|
|
|
|
(4,540 |
) |
1,950 |
|
|||||
Total current liabilities |
|
52,723 |
|
|
|
11,270 |
|
(11,017 |
) |
52,976 |
|
|||||
Long-term debt |
|
20,475 |
|
|
|
233,800 |
|
|
|
254,275 |
|
|||||
Notes payable to affiliates |
|
24,972 |
|
|
|
|
|
(24,972 |
) |
|
|
|||||
Deferred income taxes |
|
89,059 |
|
5 |
|
5,451 |
|
|
|
94,515 |
|
|||||
Other |
|
7,429 |
|
|
|
684 |
|
|
|
8,113 |
|
|||||
Total liabilities |
|
194,658 |
|
5 |
|
251,205 |
|
(35,989 |
) |
409,879 |
|
|||||
Minority interests |
|
|
|
|
|
|
|
1,719 |
|
1,719 |
|
|||||
Stockholders equity |
|
287,602 |
|
2,944 |
|
93,077 |
|
(290,032 |
) |
93,591 |
|
|||||
|
|
$ |
482,260 |
|
$ |
2,949 |
|
$ |
344,282 |
|
$ |
(324,302 |
) |
$ |
505,189 |
|
12
Condensed Consolidating Balance Sheet at December 31, 2003
Successor Basis
|
|
Guarantor |
|
Other |
|
GLD |
|
Eliminations |
|
Consolidated |
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and equivalents |
|
$ |
2,766 |
|
$ |
9 |
|
$ |
|
|
$ |
|
|
$ |
2,775 |
|
Accounts receivable, net |
|
64,869 |
|
|
|
|
|
|
|
64,869 |
|
|||||
Receivables from affiliates |
|
7,867 |
|
2,941 |
|
4,540 |
|
(15,348 |
) |
|
|
|||||
Contract revenues in excess of billings |
|
11,236 |
|
|
|
|
|
|
|
11,236 |
|
|||||
Inventories |
|
13,603 |
|
|
|
|
|
|
|
13,603 |
|
|||||
Prepaid expenses and other current assets |
|
14,558 |
|
|
|
6,620 |
|
|
|
21,178 |
|
|||||
Total current assets |
|
114,899 |
|
2,950 |
|
11,160 |
|
(15,348 |
) |
113,661 |
|
|||||
Property and equipment, net |
|
241,594 |
|
38 |
|
22,500 |
|
|
|
264,132 |
|
|||||
Goodwill |
|
103,917 |
|
|
|
|
|
|
|
103,917 |
|
|||||
Other intangible assets |
|
7,441 |
|
|
|
|
|
|
|
7,441 |
|
|||||
Investments in subsidiaries |
|
2,976 |
|
|
|
281,967 |
|
(284,943 |
) |
|
|
|||||
Note receivable from affiliate |
|
|
|
|
|
27,242 |
|
(27,242 |
) |
|
|
|||||
Inventories |
|
10,968 |
|
|
|
|
|
|
|
10,968 |
|
|||||
Investments in joint ventures |
|
7,551 |
|
|
|
|
|
|
|
7,551 |
|
|||||
Other assets |
|
3,605 |
|
|
|
11,669 |
|
|
|
15,274 |
|
|||||
|
|
$ |
492,951 |
|
$ |
2,988 |
|
$ |
354,538 |
|
$ |
(327,533 |
) |
$ |
522,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable |
|
$ |
36,911 |
|
$ |
|
|
$ |
80 |
|
$ |
|
|
$ |
36,991 |
|
Payables to affiliates |
|
9 |
|
|
|
10,919 |
|
(10,928 |
) |
|
|
|||||
Accrued expenses |
|
14,587 |
|
|
|
869 |
|
|
|
15,456 |
|
|||||
Billings in excess of contract revenues |
|
8,808 |
|
|
|
|
|
|
|
8,808 |
|
|||||
Current maturities of long-term debt |
|
6,490 |
|
|
|
|
|
(4,540 |
) |
1,950 |
|
|||||
Total current liabilities |
|
66,805 |
|
|
|
11,868 |
|
(15,468 |
) |
63,205 |
|
|||||
Long-term debt |
|
21,450 |
|
|
|
235,300 |
|
|
|
256,750 |
|
|||||
Note payable to affiliate |
|
27,242 |
|
|
|
|
|
(27,242 |
) |
|
|
|||||
Deferred income taxes |
|
86,927 |
|
12 |
|
9,687 |
|
|
|
96,626 |
|
|||||
Other |
|
6,949 |
|
|
|
683 |
|
|
|
7,632 |
|
|||||
Total liabilities |
|
209,373 |
|
12 |
|
257,538 |
|
(42,710 |
) |
424,213 |
|
|||||
Minority interests |
|
|
|
|
|
|
|
1,731 |
|
1,731 |
|
|||||
Stockholders equity |
|
283,578 |
|
2,976 |
|
97,000 |
|
(286,554 |
) |
97,000 |
|
|||||
|
|
$ |
492,951 |
|
$ |
2,988 |
|
$ |
354,538 |
|
$ |
(327,533 |
) |
$ |
522,944 |
|
13
Condensed Consolidating Statement of Operations for the three months ended June 30, 2004
Successor Basis
|
|
Guarantor |
|
Other |
|
GLD |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Contract revenues |
|
$ |
72,104 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
72,104 |
|
Costs of contract revenues |
|
(66,578 |
) |
(9 |
) |
328 |
|
|
|
(66,259 |
) |
|||||
Gross profit (loss) |
|
5,526 |
|
(9 |
) |
328 |
|
|
|
5,845 |
|
|||||
General and administrative expenses |
|
(6,243 |
) |
(15 |
) |
1 |
|
|
|
(6,257 |
) |
|||||
Amortization of intangible assets |
|
(1,120 |
) |
|
|
|
|
|
|
(1,120 |
) |
|||||
Operating income (loss) |
|
(1,837 |
) |
(24 |
) |
329 |
|
|
|
(1,532 |
) |
|||||
Interest expense, net |
|
(967 |
) |
|
|
(6,029 |
) |
|
|
(6,996 |
) |
|||||
Equity in loss of subsidiaries |
|
(16 |
) |
|
|
(3,751 |
) |
3,767 |
|
|
|
|||||
Equity in earnings of joint venture |
|
682 |
|
|
|
|
|
|
|
682 |
|
|||||
Minority interests |
|
|
|
|
|
|
|
6 |
|
6 |
|
|||||
Income (loss) before income taxes |
|
(2,138 |
) |
(24 |
) |
(9,451 |
) |
3,773 |
|
(7,840 |
) |
|||||
Income tax (expense) benefit |
|
538 |
|
8 |
|
3,969 |
|
(2,112 |
) |
2,403 |
|
|||||
Net income (loss) |
|
$ |
(1,600 |
) |
$ |
(16 |
) |
$ |
(5,482 |
) |
$ |
1,661 |
|
$ |
(5,437 |
) |
Condensed Consolidating Statement of Operations for the three months ended June 30, 2003
Predecessor Basis
|
|
Guarantor |
|
Other |
|
GLD |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Contract revenues |
|
$ |
104,364 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
104,364 |
|
Costs of contract revenues |
|
(88,974 |
) |
(16 |
) |
(266 |
) |
|
|
(89,256 |
) |
|||||
Gross profit (loss) |
|
15,390 |
|
(16 |
) |
(266 |
) |
|
|
15,108 |
|
|||||
General and administrative expenses |
|
(6,464 |
) |
(13 |
) |
(22 |
) |
|
|
(6,499 |
) |
|||||
Operating income (loss) |
|
8,926 |
|
(29 |
) |
(288 |
) |
|
|
8,609 |
|
|||||
Interest expense, net |
|
(654 |
) |
|
|
(4,483 |
) |
|
|
(5,137 |
) |
|||||
Equity in earnings (loss) of subsidiaries |
|
(28 |
) |
|
|
5,581 |
|
(5,553 |
) |
|
|
|||||
Equity in earnings of joint ventures |
|
677 |
|
|
|
|
|
|
|
677 |
|
|||||
Minority interests |
|
|
|
|
|
|
|
91 |
|
91 |
|
|||||
Income (loss) before income taxes |
|
8,921 |
|
(29 |
) |
810 |
|
(5,462 |
) |
4,240 |
|
|||||
Income tax (expense) benefit |
|
(3,583 |
) |
12 |
|
1,824 |
|
|
|
(1,747 |
) |
|||||
Net income (loss) |
|
$ |
5,338 |
|
$ |
(17 |
) |
$ |
2,634 |
|
$ |
(5,462 |
) |
$ |
2,493 |
|
14
Condensed Consolidating Statement of Operations for the six months ended June 30, 2004
Successor Basis
|
|
Guarantor |
|
Other |
|
GLD |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Contract revenues |
|
$ |
176,051 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
176,051 |
|
Costs of contract revenues |
|
(154,311 |
) |
(19 |
) |
523 |
|
|
|
(153,807 |
) |
|||||
Gross profit (loss) |
|
21,740 |
|
(19 |
) |
523 |
|
|
|
22,244 |
|
|||||
General and administrative expenses |
|
(13,267 |
) |
(30 |
) |
(83 |
) |
|
|
(13,380 |
) |
|||||
Amortization of intangible assets |
|
(2,912 |
) |
|
|
|
|
|
|
(2,912 |
) |
|||||
Operating income (loss) |
|
5,561 |
|
(49 |
) |
440 |
|
|
|
5,952 |
|
|||||
Interest expense, net |
|
(2,091 |
) |
|
|
(9,515 |
) |
|
|
(11,606 |
) |
|||||
Equity in earnings (loss) of subsidiaries |
|
(32 |
) |
|
|
2,306 |
|
(2,274 |
) |
|
|
|||||
Equity in earnings of joint venture |
|
831 |
|
|
|
|
|
|
|
831 |
|
|||||
Minority interests |
|
|
|
|
|
|
|
12 |
|
12 |
|
|||||
Income (loss) before income taxes |
|
4,269 |
|
(49 |
) |
(6,769 |
) |
(2,262 |
) |
(4,811 |
) |
|||||
Income tax (expense) benefit |
|
(2,000 |
) |
17 |
|
2,843 |
|
272 |
|
1,132 |
|
|||||
Net income (loss) |
|
$ |
2,269 |
|
$ |
(32 |
) |
$ |
(3,926 |
) |
$ |
(1,990 |
) |
$ |
(3,679 |
) |
Condensed Consolidating Statement of Operations for the six months ended June 30, 2003
Predecessor Basis
|
|
Guarantor |
|
Other |
|
GLD |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Contract revenues |
|
$ |
204,057 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
204,057 |
|
Costs of contract revenues |
|
(170,147 |
) |
(32 |
) |
(622 |
) |
(110 |
) |
(170,911 |
) |
|||||
Gross profit (loss) |
|
33,910 |
|
(32 |
) |
(622 |
) |
(110 |
) |
33,146 |
|
|||||
General and administrative expenses |
|
(13,366 |
) |
(22 |
) |
(52 |
) |
|
|
(13,440 |
) |
|||||
Operating income (loss) |
|
20,544 |
|
(54 |
) |
(674 |
) |
(110 |
) |
19,706 |
|
|||||
Interest expense, net |
|
(1,337 |
) |
|
|
(8,856 |
) |
|
|
(10,193 |
) |
|||||
Equity in earnings (loss) of subsidiaries |
|
(51 |
) |
|
|
12,035 |
|
(11,984 |
) |
|
|
|||||
Equity in earnings of joint ventures |
|
744 |
|
|
|
|
|
|
|
744 |
|
|||||
Minority interests |
|
|
|
|
|
|
|
70 |
|
70 |
|
|||||
Income (loss) before income taxes |
|
19,900 |
|
(54 |
) |
2,505 |
|
(12,024 |
) |
10,327 |
|
|||||
Income tax (expense) benefit |
|
(7,986 |
) |
23 |
|
3,616 |
|
|
|
(4,347 |
) |
|||||
Net income (loss) |
|
$ |
11,914 |
|
$ |
(31 |
) |
$ |
6,121 |
|
$ |
(12,024 |
) |
$ |
5,980 |
|
15
Condensed Consolidating Cash Flows for the six months ended June 30, 2004
Successor Basis
|
|
Guarantor |
|
Other |
|
GLD |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash flows from operating activities |
|
$ |
7,305 |
|
$ |
(20 |
) |
$ |
2,492 |
|
$ |
|
|
$ |
9,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Purchases of property and equipment |
|
(10,077 |
) |
|
|
|
|
|
|
(10,077 |
) |
|||||
Dispositions of property and equipment |
|
329 |
|
|
|
|
|
|
|
329 |
|
|||||
Adjustment to acquisition price of Predecessor common and preferred shares |
|
527 |
|
|
|
|
|
|
|
527 |
|
|||||
Net cash flows from investing activities |
|
(9,221 |
) |
|
|
|
|
|
|
(9,221 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Repayments of long-term debt |
|
(975 |
) |
|
|
(2,500 |
) |
|
|
(3,475 |
) |
|||||
Borrowings under revolving loans, net of repayments |
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|||||
Net change in accounts with affiliates |
|
837 |
|
19 |
|
(856 |
) |
|
|
|
|
|||||
Financing fees |
|
|
|
|
|
(136 |
) |
|
|
(136 |
) |
|||||
Net cash flows from financing activities |
|
(138 |
) |
19 |
|
(2,492 |
) |
|
|
(2,611 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net change in cash and equivalents |
|
(2,054 |
) |
(1 |
) |
|
|
|
|
(2,055 |
) |
|||||
Cash and equivalents at beginning of period |
|
2,766 |
|
9 |
|
|
|
|
|
2,775 |
|
|||||
Cash and equivalents at end of period |
|
$ |
712 |
|
$ |
8 |
|
$ |
|
|
$ |
|
|
$ |
720 |
|
Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2003
Predecessor Basis
|
|
Guarantor |
|
Other |
|
GLD |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash flows from operating activities |
|
$ |
12,369 |
|
$ |
(10 |
) |
$ |
(6,808 |
) |
$ |
|
|
$ |
5,551 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Purchases of property and equipment |
|
(9,337 |
) |
|
|
|
|
|
|
(9,337 |
) |
|||||
Dispositions of property and equipment |
|
129 |
|
|
|
|
|
|
|
129 |
|
|||||
Disposition of interest in Riovia investment |
|
1,200 |
|
|
|
|
|
|
|
1,200 |
|
|||||
Equity investment in land acquistion |
|
(843 |
) |
|
|
|
|
|
|
(843 |
) |
|||||
Net cash flows from investing activities |
|
(8,851 |
) |
|
|
|
|
|
|
(8,851 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|||||
Repayments of long-term debt |
|
|
|
|
|
(6,475 |
) |
|
|
(6,475 |
) |
|||||
Borrowings under revolving loans, net of repayments |
|
|
|
|
|
10,000 |
|
|
|
10,000 |
|
|||||
Net change in accounts with affiliates |
|
(3,769 |
) |
83 |
|
3,686 |
|
|
|
|
|
|||||
Financing fees |
|
|
|
|
|
(403 |
) |
|
|
(403 |
) |
|||||
Repayments on notes receivable from stockholders |
|
19 |
|
|
|
|
|
|
|
19 |
|
|||||
Net cash flows from financing activities |
|
(3,750 |
) |
83 |
|
6,808 |
|
|
|
3,141 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net change in cash and equivalents |
|
(232 |
) |
73 |
|
|
|
|
|
(159 |
) |
|||||
Cash and equivalents at beginning of period |
|
1,451 |
|
5 |
|
|
|
|
|
1,456 |
|
|||||
Cash and equivalents at end of period |
|
$ |
1,219 |
|
$ |
78 |
|
$ |
|
|
$ |
|
|
$ |
1,297 |
|
16
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Certain information in this quarterly report on Form 10-Q, including but not limited to the Managements 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 those described in the Risk Factors section of the Companys Form S-4 Registration Statement (Registration No. 333-114059), 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.
The Company is the largest provider of dredging services in the United States. Dredging generally involves the enhancement or preservation of the 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 and Beach Nourishment, in which the Company experienced an average combined U.S. bid market share of 42% over the last three years (2001 to 2003). The Companys bid market is defined as the population of projects on which it bid or could have bid if not for capacity constraints (bid market). In addition, the Company has continued its role as the only U.S. dredging contractor with significant international operations, which averaged 13% of its contract revenues over the last three years.
The Company was acquired by Madison Dearborn Capital Partners IV, L.P. (MDP) in December 2003. In accordance with U.S. generally accepted accounting principles, a new basis of accounting resulted from the acquisition. Therefore, within this report, the three and six month periods ended June 30, 2004 have been identified as the Successor Basis and the three and six month periods ended June 30, 2003 as the Predecessor Basis. The significant differences between periods as a result of the new basis of accounting are discussed in the following Results of Operations section.
The Company also owns 85% of the capital stock of North American Site Developers, Inc. (NASDI), a demolition service provider located in the Boston, Massachusetts area. NASDIs principal services consist of interior and exterior demolition of commercial and industrial buildings, salvage and recycling of related materials, and removal of hazardous substances and materials. One NASDI management stockholder retains a 15% non-voting interest in NASDI, which is reflected as a minority interest within the financial statements.
The Companys equity in earnings of joint ventures relates to the Companys 50% ownership interest in Amboy Aggregates (Amboy) which is accounted for using the equity method.
17
The following table sets forth the components of net income (loss) and EBITDA as a percentage of contract revenues for the three and six months ended June 30, 2004 and 2003:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||
|
|
Successor |
|
Predecessor |
|
Successor |
|
Predecessor |
|
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
Contract revenues |
|
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
Costs of contract revenues |
|
(91.9 |
) |
(85.5 |
) |
(87.4 |
) |
(83.8 |
) |
Gross profit |
|
8.1 |
|
14.5 |
|
12.6 |
|
16.2 |
|
General and administrative expenses |
|
(8.6 |
) |
(6.2 |
) |
(7.6 |
) |
(6.6 |
) |
Amortization of intangible assets |
|
(1.6 |
) |
|
|
(1.6 |
) |
|
|
Operating income (loss) |
|
(2.1 |
) |
8.3 |
|
3.4 |
|
9.6 |
|
Interest expense, net |
|
(9.6 |
) |
(4.9 |
) |
(6.6 |
) |
(5.0 |
) |
Equity in earnings of joint ventures |
|
0.9 |
|
0.6 |
|
0.5 |
|
0.4 |
|
Minority interest |
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
(10.8 |
) |
4.0 |
|
(2.7 |
) |
5.0 |
|
Income tax benefit (expense) |
|
3.3 |
|
(1.6 |
) |
0.6 |
|
(2.1 |
) |
Net income (loss) |
|
(7.5 |
)% |
2.4 |
% |
(2.1 |
)% |
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
7.8 |
% |
12.9 |
% |
11.6 |
% |
14.0 |
% |
EBITDA, as provided herein, represents earnings from continuing operations before net interest expense, income taxes, depreciation and amortization expense. EBITDA should not be considered an alternative to, or more meaningful than, amounts determined in accordance with GAAP including: (a) operating income as an indicator of operating performance; or (b) cash flows from operations as a measure of liquidity. The Company presents EBITDA as additional information because it is among the bases upon which the Company assesses its financial performance, and certain covenants in its borrowing arrangements are tied to similar measures. The Company believes EBITDA is a useful measure for the users of its financial statements because it provides information that can be used to evaluate the effectiveness of the Companys business from an operational perspective, exclusive of costs to finance its activities, income taxes, depreciation of operating assets and amortization of intangible assets, none of which is directly relevant to the efficiency of its operations. EBITDA is not calculated identically by all companies; therefore, the Companys presentation of EBITDA may not be comparable to similarly titled measures of other companies. The following table reconciles net income (loss) to EBITDA for the periods indicated:
18
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
Successor |
|
Predecessor |
|
Successor |
|
Predecessor |
|
||||
|
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
(5,437 |
) |
$ |
2,493 |
|
$ |
(3,679 |
) |
$ |
5,980 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
6,996 |
|
5,137 |
|
11,606 |
|
10,193 |
|
||||
Income tax expense (benefit) |
|
(2,403 |
) |
1,747 |
|
(1,132 |
) |
4,347 |
|
||||
Depreciation and amortization |
|
6,451 |
|
4,068 |
|
13,576 |
|
8,135 |
|
||||
EBITDA |
|
$ |
5,607 |
|
$ |
13,445 |
|
$ |
20,371 |
|
$ |
28,655 |
|
The following table sets forth, by segment and dredging type of work, the Companys contract revenues for the three and six months ended and backlog as of the periods indicated:
|
|
Three Months Ended |
|
Six Months Ended |
|
||||||||
|
|
Successor |
|
Predecessor |
|
Successor |
|
Predecessor |
|
||||
Revenues (in thousands) |
|
2004 |
|
2003 |
|
2004 |
|
2003 |
|
||||
Dredging: |
|
|
|
|
|
|
|
|
|
||||
Capital - U.S. |
|
$ |
22,753 |
|
$ |
56,615 |
|
$ |
48,672 |
|
$ |
110,428 |
|
Capital - foreign |
|
17,395 |
|
19,514 |
|
45,161 |
|
29,551 |
|
||||
Beach |
|
12,120 |
|
11,283 |
|
42,478 |
|
31,073 |
|
||||
Maintenance |
|
10,003 |
|
7,416 |
|
22,760 |
|
15,145 |
|
||||
Demolition |
|
9,833 |
|
9,536 |
|
16,980 |
|
17,860 |
|
||||
|
|
$ |
72,104 |
|
$ |
104,364 |
|
$ |
176,051 |
|
$ |
204,057 |
|
|
|
June 30, |
|
||||
|
|
Successor Basis |
|
||||
Backlog (in thousands) |
|
2004 |
|
2003 |
|
||
Dredging: |
|
|
|
|
|
||
Capital - U.S. |
|
$ |
94,953 |
|
$ |
177,126 |
|
Capital - foreign |
|
19,165 |
|
50,677 |
|
||
Beach |
|
3,660 |
|
2,883 |
|
||
Maintenance |
|
11,274 |
|
13,989 |
|
||
Demolition |
|
12,596 |
|
15,492 |
|
||
|
|
$ |
141,648 |
|
$ |
260,167 |
|
Consolidated revenues for the second quarter of 2004 were $72.1 million, representing a decrease of $32.3 million or 30.9% over second quarter 2003 revenues of $104.4 million. Revenues for the first half of 2004 were $176.1 million, a decrease of $28.0 million or 13.7% over revenues for the first half of 2003 of $204.1 million. The decline in 2004 revenues was anticipated due to the slow-down in domestic dredging bid activity that began in the second half of 2003 and has continued through the first half of 2004. This continuing lower level of bid activity has led to intense competition within the industry for work that has been bid this year, which has
19
significantly compressed margins. Most of the decline in revenues is due to reduced levels of domestic capital dredging revenues. Although the Company has continued to maintain a higher percentage of capital dredging work in backlog, performance on certain of these projects is being postponed by the Army Corps of Engineers (Corps) due to a lack of current funding. This combination of the reduced bid market and the postponement of work within the Companys backlog resulted in decreased utilization of the Companys fleet.
The Companys gross profit margin declined to 8.1% and 12.6% for the quarter and six months ended June 30, 2004, respectively, compared to 14.5% and 16.2% for the same periods of 2003. The margin decline is partly attributable to some reduction in contract margin resulting from the mix of work, including a higher percentage of foreign work, which is typically bid and performed at lower margins. However, more significantly, the margin decline is a result of the impact of fixed costs relative to the reduced level of utilization, as well as the impact of approximately $1.3 million of additional quarterly depreciation in 2004 resulting from the revaluation of the Companys operating assets in connection with the sale of the Company in December of 2003.
Capital projects include large port deepenings and other infrastructure projects. Domestic capital dredging revenue declined $33.9 million and $61.8 million in the second quarter and first half of 2004, respectively, as compared to the same periods of 2003. As mentioned previously, this is a result of a slow-down in domestic bidding activity, coupled with the postponement of certain capital project work within backlog. As discussed in previous filings, the capital market includes Deep Port projects that have been authorized by the 1986 Water Resource Development Act (WRDA) and subsequent bills. In 1997, the Corps announced Deep Port work, authorized by WRDA, to be completed through 2005, with an aggregate value in excess of $2.0 billion, and supplemental authorizations have increased this amount to approximately $4.0 billion, with work to be completed through 2010. Currently, over $2.4 billion of these authorized Deep Port projects have yet to be let for bid. Deep Port work has comprised a substantial portion of recent bid markets, averaging 36% of the bid market over the last three years (2001 to 2003). The Companys bid market share of Deep Port projects averaged 45% over the last three years.
During the second quarter of 2004, the Companys domestic capital revenues included continuing work on Deep Port projects in Kill Van Kull, New York; Houston, Texas; and Manatee Harbor, Florida. These projects contributed combined revenue to the quarter of $15.6 million. The new work capital project along the Providence River and harbor in the Rhode Island area added another $5.5 million of revenue to the quarter. Foreign capital revenues in the second quarter of 2004 totaled $17.4 million, which was generated by a number of projects in the Middle East, including the ongoing port terminal project in Bahrain and a maintenance project performed in Umm Qasr, Iraq, which is the second project the Company has completed in that country. Additionally, the Company recorded revenue of $1.3 million relating to the second quarter 2004 settlement of certain claims with respect to the Al Sukhna, Egypt joint venture project which was concluded in 2001.
Beach nourishment projects include rebuilding of shoreline areas that have been damaged by storm activity or ongoing erosion. Second quarter 2004 revenues from beach nourishment projects totaled $12.1 million, which primarily relates to a single project performed in Absecon Island/Atlantic Beach, New Jersey.
Maintenance projects include routine dredging of ports, rivers and channels to remove the regular build up of sediment. Maintenance revenues totaled $10.0 million in the second quarter of 2004, reflecting a typical level for the Company. The second quarter maintenance revenues included $2.9 million generated by a project in Tampa Harbor and the Alafia Rivers, as well as $1.1 million in mobilization revenue on the Oakland/Richmond Harbor project. This is a three-year
20
maintenance project, and the Company will perform the current years portion of the work in the second half of 2004.
NASDIs demolition revenues for the second quarter of 2004 totaled $9.8 million, which is consistent with the comparable period of 2003. NASDIs second quarter revenues were generated by numerous small projects; however, a few larger projects made a significant contribution to the quarter, including $1.1 million for the ongoing take-down of the South Boston power plant and receipts for the sale of steel and metal scrap salvaged from this project; $1.3 million from two demolition projects recently won in Florida; and $2.1 million from the first phase of a $3 million project entailing select interior demolition and asbestos removal within a Boston office building.
Net interest expense for the second quarter and first half of 2004 was $7.0 million and $11.6 million, respectively, compared to $5.1 million and $10.2 million for the same periods of 2003. As a result of the sale transaction in December 2003, the Companys debt level increased to approximately $260 million at December 31, 2003, compared to approximately $173 million at the beginning of 2003. However, despite the increased debt level, the 2004 cash interest expense related to the Companys senior and subordinated debt has remained relatively consistent with the 2003 expense, due to significantly lower interest rates on the new debt structure. In February 2004, the Company entered into an interest rate swap arrangement to swap a portion of its fixed-rate debt to floating, to manage the interest rate paid with respect to the Companys 7¾% senior subordinated debt. At June 30, 2004, the fair value accounting for the swap resulted in $1.8 million of an additional non-cash charge to interest expense.
The Company generated a net loss of $5.4 million and $3.7 million for the second quarter and first six months of 2004, respectively, compared to net income of $2.5 million and $6.0 million for the same periods of 2003. The net loss in the 2004 periods reflects the reduced dredging volume and the impact of fixed costs relative to the levels of revenue generated, given the lower than typical utilization levels for the Company. The 2004 periods also include additional depreciation and amortization expense resulting from the revaluation of the Companys assets and liabilities in connection with sale of the Company in December of 2003, as well as non-cash interest expense resulting from the interest rate swap arrangement, mentioned above. EBITDA (as defined on page 18) was $5.6 million and $20.4 million for the quarter and six months ended June 30, 2004, compared to $13.4 million and $28.7 million for the same periods of 2003. EBITDA declined due to the reduction in revenues and earnings as discussed previously.
Backlog
The Companys contract backlog represents managements current estimate of the revenues that will be realized under the portion of the contracts remaining to be performed. 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 a substantial portion of the Companys backlog relates to government contracts, the Companys backlog can be canceled at any time without penalty. However, the Company can generally recover the actual committed costs and profit on work performed up to the date of cancellation. Consequently, backlog is not necessarily indicative of future revenues. The Companys backlog includes only those projects for which the Company has obtained a signed contract with the customer.
The Companys backlog continues to be impacted by the slow domestic dredging bid market. Due to the minimal backlog added during the quarter, dredging backlog declined to $129.1 million at June 30, 2004 as the Company primarily worked off backlog during the second quarter. This compares to $189.2 million at March 31, 2004 and $244.7 million at June 30, 2003. The second quarter 2004 domestic dredging bid market, representing work awarded during the period, totaled $113 million and brings the year-to-date market to $221 million. The 2004 bidding
21
activity has remained sluggish, coming off a low bid market for 2003 which totaled only $425 million. This compares to a domestic bid market of over $900 million in 2002, and an average over the five preceding years (1998 to 2002) of approximately $650 million. Although the Corps budgets have remained at similar levels in recent years, management continues to believe that the market is being impacted by the diversion of Corps personnel and financial resources to the reconstruction efforts in Iraq, as well as distractions related to reorganization within the Corps and general uncertainty surrounding the upcoming elections and the impact on the Corps 2005 fiscal year budget.
The decline in the current bid market has significantly impacted pricing in the short-term, as competition within the industry has increased for the work that is being bid. In fact, some of the work recently bid has been won by competitors at prices equal to the Companys cash costs. The Company, however, is selective in its bidding and its does not want to take on work and put wear and tear on its equipment without some level of recovery. Thus, for the second quarter, Great Lakes was awarded only $5 million for two small maintenance projects, representing only 4% of the quarters awards. During the quarter, the final phase of the 43 foot Arthur Kill Deep Port project was bid. This was the only Deep Port project bid during the quarter, and the Company was the successful low bidder at $66 million. Award of the project is pending approval of Great Lakes disposal plans, as is typical for this type of project. In the meantime, a competitor protested award of this project to the Company; however, the protest has since been dismissed by the Corps and the Company still anticipates receiving award of this project in the third quarter. Additionally, at the end of July 2004, the Company was awarded the $66 million Brunswick Inner Channel project, which the Company bid in 2002 and recently obtained court resolution in the its favor on its disagreement with the Corps estimate. Dredging is expected to commence on both of these projects in the fourth quarter of 2004.
At June 30, 2004, over 65% of backlog is comprised of domestic capital dredging projects, which are generally higher margin work. This includes the work remaining on Deep Port capital projects in Kill Van Kull, New York; Los Angeles, California; Houston, Texas; Wilmington, North Carolina; Manatee Harbor, Florida; and Port Jersey Channel, New Jersey. As mentioned above, the Company was low bidder on a $66 million Deep Port project in Arthur Kill, New York, and the Company received a positive court ruling on the $66 million Brunswick, Georgia Deep Port project. These projects, along with an additional $48 million of low bids pending award and other options pending on projects in backlog, will significantly increase the Companys domestic backlog, once awarded.
Foreign capital project backlog, which comprises $19.2 million or 14% of the June 30, 2004 backlog, relates primarily to work remaining on the long-term port terminal project in Bahrain and the channel deepening project for a liquid natural gas plant in Egypt. In July 2004, the Company received a signed letter of intent for award of a $30 million LNG terminal project in Ocean Cay Bahamas. This project will increase foreign backlog, once the final contract is signed.
Beach backlog at June 30, 2004 declined to $3.7 million, as the Company performed on work in its year-end backlog. Beach work is often bid in the second half of the year, since the work is generally performed between the months of September to March, due to environmental restrictions. During the quarter, only three beach nourishment projects were bid and awarded with a value of approximately $19 million, all of which were won by competitors.
Maintenance backlog at June 30, 2004 was $11.3 million, which includes the first years portion of the $31 million Oakland Harbor project, as well as remaining work on a few smaller projects. There were over fifteen maintenance projects bid during the quarter, the majority of which was won by competitors. The pricing of maintenance work bid recently has been very low, as the industry attempts to employ its assets that are not currently employed on capital or beach projects.
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The demolition services backlog at June 30, 2004 was $12.6 million, compared to $14.7 million at March 31, 2004 and $15.5 million at June 30, 2003. The June backlog includes five projects with over $1 million of revenue remaining, as well as a typical complement of mid-size projects. The New England demolition market continues to be competitive; however, the demolition bidding activity has increased in recent months. NASDIs management anticipates that a few larger projects will be awarded within the next six months, which should enable NASDI to maintain its operations at a level consistent with the first half of 2004.
The slow down in the domestic dredging bid market that began in 2003 and has continued through the second quarter of 2004 has led to increasing uncertainty with respect to funding of all projects in the Corps program. Additionally, there is ongoing debate on the Corps budget for fiscal year 2005. In February of 2004, the President presented his Civil Works Budget for 2005, announcing lower budget levels. Then, as typically happens when it reached the House appropriations committee, the committee added an additional $700 million to the appropriation request, but the bills increased funding may face opposition as it moves through the full House and Senate for final approval. Even if the appropriation level is agreed to, it is unclear whether a budget will even be passed in the current year due to the impending elections, in which case the Corps will be forced to operate under a continuing resolution, as was the case going into 2003.
The current legislation also targets changes to beach nourishment funding, proposing that the administration no longer honor any cost-sharing agreements for shoreline protection and no longer provide funding for investigations, studies or the preparation of plans and specifications for such projects. Thus, the local communities and State agencies would be required to fund and administer these projects in the future. The federal funding of shoreline protection has often been the target of administrations seeking to control spending, but the resulting congressional lobbies generally have been successful in amending the budget and restoring federal funding. However, given the state of the deficit and the diversion of funds to support the nations efforts in Iraq, many continue to be concerned for the future of the beach program. Although funds have been appropriated for the fiscal year 2004 program, the Company continues to receive indications that projects are on hold pending a decision on funding. If the current legislation is successful and federal funding is not made available, in managements view, the local agencies are not prepared either financially or administratively to execute their contracts in the near term. The effects on the industry of this uncertain funding environment continue to be evident entering the third quarter, and it appears that most of the industrys hopper dredge fleet may remain idle through the third quarter.
Despite the uncertainty surrounding the current bid market and funding environment, authorizations for future work continue to move forward. The WRDA legislation, which forms the basis for authorizing the Corps civil works projects, including the Deep Port projects, is generally enacted every other year. The most recent WRDA bill was passed by Congress in 2000 and the recent Deep Port work that has come out for bid and those projects expected for 2004 and 2005 bidding have already been authorized by this or prior WRDA legislation. While no bill was passed in 2002 or 2003, a 2004 WRDA has been introduced. The 2004 WRDA bill includes a change to increase the federal cost sharing percentages as ports are brought to greater depths, which should provide some incentive for certain state legislatures to push for its adoption. However, the bill in its current form as approved by the Senate Environment and Public Works Committee, includes a proposal to create additional environmental regulations for beach nourishment projects. This provision was apparently added to the bill even though the Committee held no hearings on the environmental effects of beach nourishment projects. Thus, the American Shore and Beach Preservation Association has objected to the legislation and has requested that such provision be removed from the bill. Given the controversial nature of this
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new language, it is expected that the bill will be tabled in hopes the political environment will be more friendly next year for passage of a WRDA bill.
As discussed in the Companys 2003 Form 10-K, in an effort to provide a more level playing field for all competitors, the industry has been pursuing a legislative solution to close the grandfather clause loophole which has allowed Bean/Stuyvesant to expand its domestic dredging operations, despite its control by Boskalis, a Dutch company and one of the largest dredging contractors in the world. In the third quarter of 2003, one of the industrys domestic dredging companies protested a bid which it lost to Bean/Stuyvesant on the grounds that the bid couldnt be awarded to Bean/Stuyvesant, since they are operating illegally in the U.S., on the basis that they are less than 75% owned by U.S. citizens. The case was heard in the court of claims where it was decided that Bean/Stuyvesant was not operating under the intent of the law. As expected, Bean/Stuyvesant appealed this decision. The appeal was heard in the second quarter of 2004 and the ruling was overturned. The domestic competitor has requested a rehearing, but it is unclear as to whether the courts will respond. Therefore, the industry will continue to pursue a legislative solution to this matter.
In summary, the Company is currently operating in an industry market unlike any experienced in recent years. While there are a number of factors contributing to uncertainty regarding project funding and timing, the work continues to be required. At some point in the future, all the work deferred currently will need to be performed. The Deep Port projects underway are not fully functional until all parts of the channels are taken to their final depths, and other authorized projects have been proven to be necessary to accommodate the deeper draft vessels in use throughout the world. Similarly, the maintenance dredging, if not performed currently, will accumulate and grow in volume as channels continue to fill with sedimentation, eventually to the point were ships can no longer safely navigate into the ports, and beach nourishment work will reach a point of urgency as waterfront assets and recreational communities become jeopardized. Therefore, Company management believes that the current environment represents only a deferral of work, and not any permanent reduction in the industry. In fact, at a recent Corps industry meeting, the Corps expressed concern as to whether private industry has sufficient capacity to take on all the work that is in the pipeline. However, it still remains unclear as to how long this deferral will continue.
Given the continued uncertainty in the industry, it is apparent that the third quarter of 2004 will also be impacted by the reduced bid market and slow down in funding, with the Companys utilization levels expected to be similar to levels experienced in the second quarter. Although the Company has a solid backlog level going into the third quarter and has recently won a couple of major projects to be added to backlog, given the timing of the bidding and awards, and requested deferral of certain projects such as the Wilmington and Los Angeles deepening projects, much of the Companys backlog cannot be performed until the fourth quarter of 2004 and future quarters.
The Companys principal sources of liquidity are cash flow generated from operations and borrowings under its new senior credit facility. The Companys principal uses of cash are to meet debt service requirements, finance its capital expenditures, provide working capital and meet other general corporate purposes.
The Companys net cash generated by operating activities for the six months ended June 30, 2004 and 2003 totaled $9.8 million and $5.6 million, respectively. The fluctuation between periods results from the normal timing differences on the recognition and billing of revenues relative to the current level of activity, as well as the receipt of income tax refunds in connection with the
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payment of expenses related to the sale in December of 2003, which also increased the cash generated by operations in the 2004 period.
The Companys net cash flows used in investing activities were $9.2 million compared to $8.9 million for first half of 2004 and 2003, respectively. The use of cash relates primarily to equipment acquisitions and capital improvements to existing equipment. With respect to the 2004 equipment acquisitions, approximately $1.9 million was funded by proceeds received in 2003 from the sale of two tugboats as part of like-kind exchange transaction, and the Company intends to offset approximately $3.1 million of its year-to-date spending on construction of two new barges with the proceeds from a sale-leaseback transaction to take place in the fourth quarter. In May of 2004, the Company received cash of approximately $0.5 million from its former shareholders, representing the final adjustment to the purchase price with respect to the acquisition of the Company by MDP in December 2003. In the 2003 period, the Company also utilized $0.8 million to purchase 50% of a real estate interest related to its Amboy joint venture and received proceeds of $1.2 million related to the sale of its interest in the Riovia S.A. joint venture.
The Companys net cash used in financing activities for six months ended June 30, 2004 totaled $2.6 million, compared to a source of cash of $3.1 million for the six months ended June 30, 2003. In the 2004 period, the Company paid down debt, while it borrowed funds in the 2003 period, based on its working capital needs in the respective periods.
In February 2004, the Company entered into an interest rate swap arrangement to swap a notional amount of $50 million from a fixed rate of 7.75% to a floating LIBOR-based rate in order to manage the interest rate paid with respect to the Companys 7¾% senior subordinated debt. At June 30, 2004, the fair value accounting for the swap resulted in $1.8 million of an additional non-cash charge to interest expense. While this represents the current fair value of the swap arrangement based on the anticipated future rates, the Company did receive a payment of approximately $0.3 million in the second quarter on this swap arrangement, such that cash flow has been positively impacted to date.
Given the current uncertainty surrounding the bidding and funding environment discussed previously, the Company has begun taking steps to reduce discretionary overhead and maintenance costs and capital spending. With these reductions, the Company believes the anticipated cash flows from operations and available credit under its revolving credit facility will be sufficient to fund the Companys operations and its revised capital expenditures, and meet its current debt service requirements of approximately $20 million for the year. The Company is currently in compliance with all financial covenants contained in its Credit Agreement and Equipment Term Loan (collectively, senior credit agreements) at June 30, 2004 and expects to be in the compliance at the end of the third quarter as well. However, if the difficult market conditions continue through the remainder of 2004, the Company may not remain in compliance with all of the financial covenants contained in its senior credit agreements beginning with the financial covenants for the fourth quarter of 2004. Therefore, the Company has commenced discussions with its senior lenders to seek an amendment or waiver to avoid violating these financial covenants for the fourth quarter through 2005. Based on these initial discussions, the Company anticipates that its senior lenders will provide such an amendment or waiver, if necessary. However, if there is a violation of any of the financial covenants and the Company is not successful in obtaining an amendment or waiver, a default would occur under the Companys senior credit agreements, which could result in a material adverse impact on the Companys financial condition.
The Companys ability to fund its working capital needs, planned capital expenditures and scheduled debt payments, and to comply with all of the financial covenants under its debt agreements, depends on its future operating performance and cash flow, which in turn, are subject
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to prevailing economic conditions and to financial, business and other factors, some of which are beyond the Companys control.
In preparing its consolidated financial statements, the Company follows accounting principles generally accepted in the United States of America. The application of these principles requires significant judgments or an estimation process that can affect the results of operations, financial position and cash flows of the Company, as well as the related footnote disclosures. The Company continually reviews its accounting policies and financial information disclosures. There have been no material changes in policies or estimates since December 31, 2003.
The market risk of the Companys financial instruments as of June 30, 2004 has not significantly changed since December 31, 2003. The market risk profile of the Company on December 31, 2003 is disclosed in the Companys 2003 Annual Report on Form 10-K.
(a) Evaluation of Disclosure Controls and Procedures. The Companys management, with the participation of its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report. Based on that evaluation, such officers have concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion.
(b) Changes in Internal Controls. There have been no changes in our internal controls over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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(a) |
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Exhibits |
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31.1 |
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Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 |
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Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 |
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Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
32.2 |
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Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
* Filed or furnished herein.
(b) Reports on Form 8-K
1. A Current Report on Form 8-K filed on April 21, 2004 regarding a press release announcing earnings information for the quarter ended March 31, 2004.
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.
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Great Lakes Dredge & Dock Corporation |
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Date: August 12, 2004 |
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By: |
/s/ Deborah A. Wensel |
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Deborah A. Wensel |
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Senior
Vice President |
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(Principal
Financial and Accounting Officer and |
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Number |
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Document Description |
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31.1 |
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Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 |
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Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 |
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Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
32.2 |
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Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
* Filed or furnished herewith.
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