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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q/A

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2001

OR

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from

Commission File Number 333-64687

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GREAT LAKES DREDGE & DOCK CORPORATION(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction
of incorporation or organization)

13-3634726(IRS Employer Identification No.)2122 York Road, Oak Brook, Illinois(Address of principal executive offices)

60523(Zip Code)


Registrant's telephone number, including area code:(630) 574-3000

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes /x/  No / /

As
of August 10, 2001, there were outstanding 1,538,800 shares of Class A Common Stock, 3,363,900 shares of Class B Common Stock and 44,675 shares
of Preferred Stock.

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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, 2001

INDEX

|              |  |                       |  |                                                                                                       |  | Page
|------------- |  | --------------------- |  | ----------------------------------------------------------------------------------------------------- |  | ----
|Part I        |  | Financial Information |  |                                                                                                      
|              |  | Item 1                |  | Financial Statements (Unaudited)                                                                      |  |     
|              |  |                       |  | Condensed Consolidated Balance Sheets at June 30, 2001 and December 31, 2000                          |  | 2   
|              |  |                       |  | Condensed Consolidated Statements of Income for the Three and Six Months ended June 30, 2001 and 2000 |  | 3   
|              |  |                       |  | Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2001 and 2000       |  | 4   
|              |  |                       |  | Notes to Unaudited Condensed Consolidated Financial Statements                                        |  | 5   
|              |  | Item 2                |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                 |  | 17  
|              |  | Item 3                |  | Quantitative and Qualitative Disclosures About Market Risk                                            |  | 22  
|Part II       |  | Other Information     |  |                                                                                                      
|              |  | Item 6                |  | Exhibits and Reports on Form 8-K                                                                      |  | 23  
|Signature     |  | 24                   
|Exhibit Index |  | 25                   

1

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Part IFinancial Information

Great Lakes Dredge & Dock Corporation and Subsidiaries  Condensed Consolidated Balance Sheets  (Unaudited)  (in thousands, except share and per share amounts)

|                                          |                                                                                                     | June 30,
2001                               |                             | December 31,
2000 |        
|----------------------------------------- | --------------------------------------------------------------------------------------------------- | ------------------------------------------- | --------------------------- | ----------------- | -------
|Assets                                    |                                                                                                     |                                             |                             |                   |        
|Current assets:                           |                                                                                                     |                                             |                             |                   |        
|Cash and equivalents                      |                                                                                                     | $                                           | 1,490                       |                   | $      
|Accounts receivable, net                  |                                                                                                     |                                             | 51,129                      |                   |        
|Contract revenues in excess of billings   |                                                                                                     |                                             | 17,087                      |                   |        
|Inventories                               |                                                                                                     |                                             | 16,510                      |                   |        
|Prepaid expenses and other current assets |                                                                                                     |                                             | 20,335                      |                   |        
|                                          |                                                                                                     |                                             |                             |                   |        
|                                          |                                                                                                     | Total current assets                        |                             |                   | 106,551
|Property and equipment, net               |                                                                                                     |                                             | 139,737                     |                   |        
|Goodwill, net of amortization of $421     |                                                                                                     |                                             | 29,867                      |                   |        
|Inventories                               |                                                                                                     |                                             | 7,351                       |                   |        
|Investments in joint ventures             |                                                                                                     |                                             | 6,511                       |                   |        
|Other assets                              |                                                                                                     |                                             | 7,091                       |                   |        
|                                          |                                                                                                     |                                             |                             |                   |        
|                                          |                                                                                                     | Total assets                                |                             | $                 | 297,108
|                                          |                                                                                                     |                                             |                             |                   |        
|Liabilities and Stockholders' Deficit     |                                                                                                     |                                             |                             |                   |        
|Current liabilities:                      |                                                                                                     |                                             |                             |                   |        
|Accounts payable                          |                                                                                                     | $                                           | 32,639                      |                   | $      
|Accrued expenses                          |                                                                                                     |                                             | 24,438                      |                   |        
|Billings in excess of contract revenues   |                                                                                                     |                                             | 6,395                       |                   |        
|Current maturities of long-term debt      |                                                                                                     |                                             | 10,930                      |                   |        
|                                          |                                                                                                     |                                             |                             |                   |        
|                                          |                                                                                                     | Total current liabilities                   |                             |                   | 74,402 
|Long-term debt                            |                                                                                                     |                                             | 194,708                     |                   |        
|Deferred income taxes                     |                                                                                                     |                                             | 44,774                      |                   |        
|Other                                     |                                                                                                     |                                             | 7,079                       |                   |        
|                                          |                                                                                                     |                                             |                             |                   |        
|                                          |                                                                                                     | Total liabilities                           |                             |                   | 320,963
|Minority interests                        |                                                                                                     |                                             | 6,178                       |                   |        
|Commitments and contingencies (Note 10)   |                                                                                                     |                                             |                            |                   |        
|Stockholders' deficit:                    |                                                                                                     |                                             |                             |                   |        
|                                          | Preferred stock, $.01 par value; 250,000 shares authorized:
45,000 issued; 44,675 outstanding       |                                             |                             | 1                 |        
|                                          | Common stock, $.01 par value; 50,000,000 shares authorized:
5,000,000 issued; 4,902,700 outstanding |                                             |                             | 50                |        
|                                          | Additional paid-in capital                                                                          |                                             |                             | 50,457            |        
|                                          | Accumulated deficit                                                                                 |                                             |                             | (79,575           | )      
|                                          | Accumulated other comprehensive loss                                                                |                                             |                             | (458              | )      
|                                          | Treasury stock, at cost (325 preferred shares, 97,300 common shares)                                |                                             |                             | (422              | )      
|                                          | Note receivable from stockholder                                                                    |                                             |                             | (86               | )      
|                                          |                                                                                                     |                                             |                             |                   |        
|                                          |                                                                                                     |                                             | Total stockholders' deficit |                   |        
|                                          |                                                                                                     |                                             |                             |                   |        
|                                          |                                                                                                     | Total liabilities and stockholders' deficit |                             | $                 | 297,108
|                                          |                                                                                                     |                                             |                             |                   |        

See
notes to unaudited condensed consolidated financial statements.

2

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Great Lakes Dredge & Dock Corporation and Subsidiaries  Condensed Consolidated Statements of Income  (Unaudited)  (in thousands)

|                                                  |                                                   | Three Months Ended
June 30, |        | Six Months Ended
June 30, |  
|------------------------------------------------- | ------------------------------------------------- | --------------------------- | ------ | ------------------------- | -
|
|Contract revenues                                 |                                                   | $                           | 78,301 |                           | $
|Costs of contract revenues                        |                                                   |                             | 63,925 |                           |  
|                                                  |                                                   |                             |        |                           |  
|                                                  | Gross profit                                      |                             |        | 14,376                    |  
|General and administrative expenses               |                                                   |                             | 6,564  |                           |  
|                                                  |                                                   |                             |        |                           |  
|                                                  | Operating income                                  |                             |        | 7,812                     |  
|Interest expense, net                             |                                                   |                             | (5,286 | )                         |  
|Equity in earnings (loss) of joint venture        |                                                   |                             | 307    |                           |  
|                                                  |                                                   |                             |        |                           |  
|                                                  | Income before income taxes and minority interests |                             |        | 2,833                     |  
|Income tax expense                                |                                                   |                             | (1,224 | )                         |  
|Minority interests                                |                                                   |                             | (480   | )                         |  
|                                                  |                                                   |                             |        |                           |  
|                                                  | Net income                                        |                             | $      | 1,129                     |  
|                                                  |                                                   |                             |        |                           |  
|Other comprehensive income, net of tax:           |                                                   |                             |        |                           |  
|Cumulative effect of adopting SFAS 133            |                                                   |                             |       |                           |  
|Reclassification of derivative losses to earnings |                                                   |                             | 128    |                           |  
|Net gain (loss) on derivative instruments         |                                                   |                             | 15     |                           |  
|                                                  |                                                   |                             |        |                           |  
|                                                  | Comprehensive income                              |                             | $      | 1,272                     |  
|                                                  |                                                   |                             |        |                           |  

See
notes to unaudited condensed consolidated financial statements.

3

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Great Lakes Dredge & Dock Corporation and Subsidiaries  Condensed Consolidated Statements of Cash Flows  (Unaudited)  (in thousands)

|                                                                                                                                                                                                                   |                                                       | Six Months Ended June 30,                 |                                         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------- | ----------------------------------------- | ----------------------------------------
|
|Operating Activities                                                                                                                                                                                               |                                                       |                                           |                                         
|Net income                                                                                                                                                                                                         |                                                       | $                                         | 2,693                                   
|Adjustments to reconcile net income to net cash flows from operating activities:                                                                                                                                   |                                                       |                                           |                                         
|                                                                                                                                                                                                                   | Depreciation and amortization                         |                                           |                                         
|                                                                                                                                                                                                                   | (Income) loss of joint venture                        |                                           |                                         
|                                                                                                                                                                                                                   | Minority interests                                    |                                           |                                         
|                                                                                                                                                                                                                   | Deferred income taxes                                 |                                           |                                         
|                                                                                                                                                                                                                   | (Gain) loss on dispositions of property and equipment |                                           |                                         
|                                                                                                                                                                                                                   | Other, net                                            |                                           |                                         
|                                                                                                                                                                                                                   | Changes in assets and liabilities:                    |                                           |                                         
|                                                                                                                                                                                                                   |                                                       | Accounts receivable, net                  |                                         
|                                                                                                                                                                                                                   |                                                       | Contract revenues in excess of billings   |                                         
|                                                                                                                                                                                                                   |                                                       | Inventories                               |                                         
|                                                                                                                                                                                                                   |                                                       | Prepaid expenses and other current assets |                                         
|                                                                                                                                                                                                                   |                                                       | Accounts payable and accrued expenses     |                                         
|                                                                                                                                                                                                                   |                                                       | Billings in excess of contract revenues   |                                         
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|                                                                                                                                                                                                                   |                                                       |                                           | Net cash flows from operating activities
|Investing Activities                                                                                                                                                                                               |                                                       |                                           |                                         
|Purchases of property and equipment                                                                                                                                                                                |                                                       |                                           | (3,798                                  
|Dispositions of property and equipment                                                                                                                                                                             |                                                       |                                           | 606                                     
|Distributions from and investments in joint ventures, net                                                                                                                                                          |                                                       |                                           |                                        
|Purchase of NASDI stock, net of cash                                                                                                                                                                               |                                                       |                                           | (33,800                                 
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|                                                                                                                                                                                                                   |                                                       |                                           | Net cash flows from investing activities
|Financing Activities                                                                                                                                                                                               |                                                       |                                           |                                         
|Repayments of long-term debt                                                                                                                                                                                       |                                                       |                                           | (4,175                                  
|Borrowings (repayments) of revolving loans, net                                                                                                                                                                    |                                                       |                                           | 11,000                                  
|Proceeds from issuance of 111/4% subordinated notes                                                                                                                                                                |                                                       |                                           | 39,700                                  
|Issuance of NASDI stockholder notes                                                                                                                                                                                |                                                       |                                           | 3,000                                   
|Financing fees                                                                                                                                                                                                     |                                                       |                                           | (2,500                                  
|Repayment on notes receivable from stockholders                                                                                                                                                                    |                                                       |                                           | 15                                      
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|                                                                                                                                                                                                                   |                                                       |                                           | Net cash flows from financing activities
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|Net change in cash and equivalents                                                                                                                                                                                 |                                                       |                                           | 353                                     
|Cash and equivalents at beginning of period                                                                                                                                                                        |                                                       |                                           | 1,137                                   
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|Cash and equivalents at end of period                                                                                                                                                                              |                                                       | $                                         | 1,490                                   
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|Supplemental Cash Flow Information                                                                                                                                                                                 |                                                       |                                           |                                         
|                                                                                                                                                                                                                   | Cash paid for interest                                |                                           | $                                       
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|                                                                                                                                                                                                                   | Cash paid for taxes                                   |                                           | $                                       
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|Supplemental Schedule of Noncash Investing and Financing ActivitiesThe Company purchased 80% of the capital stock of NASDI for $38,800. In conjunction with the acquisition, liabilities were
assumed, as follows: |                                                      
|Fair value of assets acquired                                                                                                                                                                                      |                                                       | $                                         | 47,107                                  
|Cash paid for the capital stock                                                                                                                                                                                    |                                                       |                                           | (38,800                                 
|                                                                                                                                                                                                                   |                                                       |                                           |                                         
|Liabilities assumed                                                                                                                                                                                                |                                                       | $                                         | 8,307                                   
|                                                                                                                                                                                                                   |                                                       |                                           |                                         

See
notes to unaudited condensed consolidated financial statements.

4

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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 generally accepted accounting principles for
interim financial information. Accordingly, these financial statements do not include all the information in the notes required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair
presentation of the financial position, results of operations and cash flows 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 Company's
Annual Report filed on Form 10-K for the year ended December 31, 2000.

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.  Allocation of equipment cost

The Company can have significant fluctuations in dredging equipment utilization throughout the year. Accordingly, for interim reporting, the Company defers or
accrues fixed equipment costs and amortizes the expenses in proportion to revenues recognized over the year to better match revenues and expenses.

3.  Financial instruments and risk management

Effective January 1, 2001, the Company adopted Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133), as amended, which requires that all derivative instruments be reported in the balance sheet at fair value and establishes criteria for designation and effectiveness of
hedge relationships. Changes in the fair value of derivative instruments designated as cash flow hedges are recognized in other comprehensive income until the hedged item is recognized in earnings.
Changes in the fair value of derivative instruments which do not qualify for hedge treatment or are designated as fair value hedges are recorded in earnings as the changes occur. Any change in fair
value resulting from ineffectiveness, as defined by SFAS 133, is recognized immediately in earnings.

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, 2001,
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 January 2002. As of
June 30, 2001, there were 7.3 million gallons remaining on these contracts. Under these agreements, the Company will pay fixed prices ranging from $0.80 to $0.84 per gallon. At
June 30, 2001 and December 31, 2000, the unrealized loss on these contracts was estimated to be $754 and $1,200, respectively, based on quoted market prices. The unrealized loss at
June 30, 2001 is recorded in accrued liabilities on the balance sheet.

5

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Upon adoption of SFAS 133, the Company designated these fuel hedge arrangements as cash flow hedges, resulting in the following activity in accumulated other comprehensive loss
(net of income taxes):

Cumulative effect of adopting SFAS 133 as of January 1, 2001

$
(745
)Losses reclassified into earnings from accumulated other comprehensive loss


402Change in fair value of derivatives


(115
)Accumulated other comprehensive loss as of June 30, 2001

$
(458
)


Ineffectiveness related to these fuel hedge arrangements was determined to be immaterial. The remaining losses included in accumulated other comprehensive loss
at June 30, 2001 will be reclassified into earnings over the next seven months, the remaining term of the hedge arrangements.

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. At June 30,
2001 and December 31, 2000, the Company had long-term subordinated notes outstanding with a recorded book value of $154,708 and $115,000, respectively. The fair value of these notes
was $158,100 and $114,425 at June 30, 2001 and December 31, 2000, respectively, based on quoted market prices. The Company is contingently liable under letters of credit and other
financial guarantees. It is not practicable to estimate the fair value of these financial instruments; however, the Company does not expect any material losses to result from these financial
instruments since performance is not likely to be required.

4.  Acquisition of North American Site Developers, Inc.

In April 2001, the Company purchased 80% of the capital stock of North American Site Developers, Inc. ("NASDI") a demolition service provider
located in the Boston, Massachusetts area. The purchase consideration for the acquisition included (1) $35,000 in cash payable to the stockholders of NASDI, and (2) two junior
subordinated promissory notes totaling $3,000 from NASDI payable to the NASDI management stockholders. The total purchase price including acquisition costs was $38,800. The Company issued $40,000 of
its 111/4% senior subordinated notes due 2008 to fund the cash portion of the acquisition price and pay related fees and expenses.

The
acquisition was accounted for by the purchase method of accounting and, accordingly, the results of operations of NASDI are included in the Company's consolidated statements of
income from the date of the acquisition. The purchase price has been allocated on a preliminary basis while the Company completes its final evaluation of the fair value of assets acquired and
liabilities assumed. Therefore, the allocation of purchase price is subject to adjustment; however, the Company does not expect that such adjustments will have a material effect on its consolidated
financial statements. Preliminary goodwill in the amount of $30,288 million has been recognized for the amount of the excess of the purchase price paid over the fair market value of the net
assets acquired and is being amortized on a straight-line basis over 15 years.

The
following unaudited pro forma combined results of operations for the six months ended June 30, 2001 and 2000 have been prepared assuming the acquisition had occurred as of
the beginning of the periods presented. The pro forma amounts include adjustments to reflect amortization of goodwill, increased interest on debt incurred to finance the acquisition, and adjustment of
certain bonus compensation paid to NASDI stockholders to reflect bonus amounts as allowed per the terms of the purchase agreement. The unaudited 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 periods presented.

6

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Six Months Ended
June 30,2001

2000Contract revenues

$
161,995

$
218,770Operating income


18,736


31,313Income before income taxes and minority interests


7,518


19,719Net income


2,418


8,587


5.  Accounts receivable

Accounts receivable at June 30, 2001 and December 31, 2000 are as follows:

June 30, 2001

December 31, 2000Completed contracts

$
20,665

$
8,935Contracts in progress


27,453


29,102Retainage


4,036


3,52852,154


41,565Allowance for doubtful accounts


(1,025
)

(987
)$
51,129

$
40,578


6.  Contracts in progress

The components of contracts in progress at June 30, 2001 and December 31, 2000 are as follows:

June 30,
2001

December 31,
2000Costs and earnings in excess of billings:Costs and earnings for contracts in progress

$
87,993

$
265,765Prepaid contract costs


(5,305
)

(2,788
)Amounts billed


(68,374
)

(246,000
)Costs and earnings in excess of billings for contracts in progress


14,314


16,977Costs and earnings in excess of billings for completed contracts


2,773


1,565$
17,087

$
18,542Billings in excess of costs and earnings:Amounts billed

$
(187,251
)
$
(77,837
)Costs and earnings for contracts in progress


179,865


69,217$
(7,386
)
$
(8,620
)


The
Company received advanced payments related to a long-term foreign contract that are considered billings in excess of costs and earnings. The contract commenced in 1999
and is expected to be completed over approximately four years. These advance payment amounts are being earned as the work is performed over the duration of the contract. The amounts of $991 and $757
related to contract performance anticipated to be beyond one year are included in other long-term liabilities at June 30, 2001 and December 31, 2000, respectively.

7

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7.  Accrued expenses

Accrued expenses at June 30, 2001 and December 31, 2000 are as follows:

June 30,
2001

December 31,
2000Interest

$
6,187

$
5,310Foreign income taxes


5,202


6,341Insurance


4,416


4,341Payroll and employee benefits


3,956


5,787U.S. income and other taxes


2,736


2,518Derivative liability


754


Other


1,187


1,339$
24,438

$
25,636


8.  Long-term debt

In April 2001, the Company issued $40,000 of its 111/4% senior subordinated notes due 2008 to finance the acquisition of NASDI. The notes
were issued at a discount of $300, which is being amortized to interest expense over the remaining term of the notes. At the time of the acquisition, the Company amended its bank credit agreement to
allow for the issuance of additional debt and revise certain
financial covenants to be consistent with the increased debt levels and activity resulting from the acquisition.

Also
in connection with the acquisition, the Company issued two junior subordinated promissory notes totaling $3,000 from NASDI payable to the NASDI management stockholders. Interest
on these notes is calculated at the rate of 6.0%, payable annually; the principal is payable in a single installment on March 31, 2004.

9.  Segment information

Segment information is presented in accordance with SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." The Company and its
subsidiaries operate in two reportable segments: dredging and demolition. These segments were determined based on the type of service provided by each segment. The Company's financial reporting
systems present various data for

8

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management to run the business, including profit and loss statements prepared according to the segments presented.

|           |                               | Three Months Ended
June 30, |   | Six Months Ended
June 30,
|---------- | ----------------------------- | --------------------------- | - | -------------------------
|
|Dredging   |                               |                             |   |                          
|           | Contract revenues             |                             | $ | 69,630                   
|           | Operating income              |                             |   | 6,893                    
|           | Depreciation and amortization |                             |   | 3,193                    
|Demolition |                               |                             |   |                          
|           | Contract revenues             |                             | $ | 8,671                    
|           | Operating income              |                             |   | 1,340                    
|           | Depreciation and amortization |                             |   | 613                      
|Total      |                               |                             |   |                          
|           | Contract revenues             |                             | $ | 78,301                   
|           | Operating income              |                             |   | 8,233                    
|           | Depreciation and amortization |                             |   | 3,806                    

|           |                                     |  |  |  |  | As of
|---------- | ----------------------------------- |  |  |  |  | -----
|
|Dredging   |                                     |  |  |  |  |      
|           | Working capital                     |  |  |  |  |      
|           | Property and equipment, net         |  |  |  |  |      
|           | Additions to property and equipment |  |  |  |  |      
|Demolition |                                     |  |  |  |  |      
|           | Working capital                     |  |  |  |  |      
|           | Property and equipment, net         |  |  |  |  |      
|           | Additions to property and equipment |  |  |  |  |      
|Total      |                                     |  |  |  |  |      
|           | Working capital                     |  |  |  |  |      
|           | Property and equipment, net         |  |  |  |  |      
|           | Additions to property and equipment |  |  |  |  |      

10. Commitments and contingencies

In November 1999, the Company entered into a construction agency agreement to manage the construction of a 5,000 cubic meter hopper dredge. The dredge
is expected to cost approximately $50 million and be delivered by the end of 2001. The Company has indemnified the owner up to 85% of the costs during construction and has entered into a
long-term operating lease to operate the dredge upon completion.

At
June 30, 2001, the Company is contingently liable, in the normal course of business, for $14,151 in letters of credit related primarily to contract performance guarantees.

The
Company's joint venture equity investee, Amboy Aggregates, has a mortgage loan with a bank, which contains certain restrictive covenants, including limitations on the amount of
distributions to its joint venture partners. The Company has guaranteed 50% of the outstanding mortgage principal and accrued interest, which totaled $2,523 at June 30, 2001.

9

---

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 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. Resolution of these claims is not expected to have a material impact on the financial
position or operations of the Company.

11. Effect of recently issued accounting pronouncements

In
June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141) and
No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and
eliminates the pooling-of-interests method. Additionally, SFAS 141 has transition provisions which apply to business combinations accounted for by the purchase method that were completed prior
to July 1, 2001 which could require possible reclassification of certain separately recognized intangible assets or goodwill components. SFAS 142 requires that goodwill and other
intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. The Company will be required to adopt SFAS 142 at the beginning of
2002, with any transitional impairment loss being recognized as the effect of a change in accounting principle. Management is currently evaluating the impact of the adoption of these standards, but
does not anticipate that the adoption of these statements will have a material impact on the Company's financial position or results of operations or cash flows.

12. Supplemental condensed consolidating financial information

Included in the Company's long-term debt is $155,000 of 111/4% senior subordinated notes which will mature on August 15,
2008. The payment obligations of the Company under the senior subordinated notes are guaranteed by certain of the Company's wholly owned domestic subsidiaries ("Subsidiary Guarantors"). Such
guarantees are full, unconditional and joint and several. Separate financial statements of the Subsidiary Guarantors are not presented because the Company's management has determined that they would
not be material to investors. The following supplemental financial information sets forth, on a combined basis, the balance sheets, statements of operations and statements of cash flows for the
Subsidiary Guarantors, the Company's non-guarantor subsidiaries and for the Company ("GLD Corporation").

10

---

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)

Condensed Consolidating Balance Sheet at June 30, 2001

|                                               |                                                              | Guarantor
Subsidiaries |                           | Other
Subsidiaries |   | GLD
Corporation |        | Eliminations |         | Consolidated
Totals |  
|---------------------------------------------- | ------------------------------------------------------------ | ---------------------- | ------------------------- | ------------------ | - | --------------- | ------ | ------------ | ------- | ------------------- | -
|ASSETS                                         |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|Current assets:                                |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|                                               | Cash and equivalents                                         |                        | $                         | 1,429              |   | $               | 61     |              | $       |                    |  
|                                               | Accounts receivable, net                                     |                        |                           | 38,407             |   |                 | 12,722 |              |         |                    |  
|                                               | Receivables from affiliates                                  |                        |                           | 7,488              |   |                 | 4,946  |              |         |                    |  
|                                               | Current portion of net investment in direct financing leases |                        |                           |                   |   |                 | 1,869  |              |         | 1,918               |  
|                                               | Contract revenues in excess
of billings                      |                        |                           | 16,912             |   |                 | 175    |              |         |                    |  
|                                               | Inventories                                                  |                        |                           | 11,685             |   |                 | 4,825  |              |         |                    |  
|                                               | Prepaid expenses and other current assets                    |                        |                           | 19,976             |   |                 | (479   | )            |         | 838                 |  
|                                               |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|                                               |                                                              |                        | Total current assets      |                    |   | 95,897          |        |              | 24,119  |                     |  
|Property and equipment, net                    |                                                              |                        | 83,525                    |                    |   | 14,559          |        |              | 41,653  |                     |  
|Goodwill, net of amortization                  |                                                              |                        | 29,867                    |                    |   |                |        |              |        |                     |  
|Net investment in direct financing leases      |                                                              |                        |                          |                    |   | 971             |        |              | 680     |                     |  
|Investments in subsidiaries                    |                                                              |                        | 18,712                    |                    |   |                |        |              | 134,138 |                     |  
|Notes receivable from affiliate                |                                                              |                        | 17,077                    |                    |   |                |        |              | 24,407  |                     |  
|Inventories                                    |                                                              |                        | 7,351                     |                    |   |                |        |              |        |                     |  
|Investments in joint ventures                  |                                                              |                        | 6,511                     |                    |   |                |        |              |        |                     |  
|Other assets                                   |                                                              |                        | 3,175                     |                    |   |                |        |              | 3,916   |                     |  
|                                               |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|                                               |                                                              | $                      | 262,115                   |                    | $ | 39,649          |        | $            | 207,550 |                     | $
|                                               |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|Current liabilities:                           |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|                                               | Accounts payable                                             |                        | $                         | 28,354             |   | $               | 3,726  |              | $       | 550                 |  
|                                               | Payables to affiliates                                       |                        |                           | 15,295             |   |                 | 6,994  |              |         | (9,855              | )
|                                               | Accrued expenses                                             |                        |                           | 9,605              |   |                 | 1,870  |              |         | 12,963              |  
|                                               | Current portion of obligations under capital leases          |                        |                           |                   |   |                 | 3,787  |              |         |                    |  
|                                               | Billings in excess of contract
revenues                      |                        |                           | 6,007              |   |                 | 388    |              |         |                    |  
|                                               | Current maturities of long-term debt                         |                        |                           | 930                |   |                 |       |              |         | 10,000              |  
|                                               |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|                                               |                                                              |                        | Total current liabilities |                    |   | 60,191          |        |              | 16,765  |                     |  
|Long-term debt                                 |                                                              |                        | 3,000                     |                    |   |                |        |              | 191,708 |                     |  
|Obligations under capital leases               |                                                              |                        |                          |                    |   | 1,651           |        |              |        |                     |  
|Note payable to affiliate                      |                                                              |                        | 24,407                    |                    |   |                |        |              | 17,077  |                     |  
|Deferred income taxes                          |                                                              |                        | 31,359                    |                    |   | 67              |        |              | 13,348  |                     |  
|Other                                          |                                                              |                        | 5,352                     |                    |   | 393             |        |              | 1,334   |                     |  
|                                               |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|                                               |                                                              |                        | Total liabilities         |                    |   | 124,309         |        |              | 18,876  |                     |  
|Minority interests                             |                                                              |                        |                          |                    |   |                |        |              |        |                     |  
|Stockholders' equity (deficit)                 |                                                              |                        | 137,806                   |                    |   | 20,773          |        |              | (29,575 | )                   |  
|                                               |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  
|                                               |                                                              | $                      | 262,115                   |                    | $ | 39,649          |        | $            | 207,550 |                     | $
|                                               |                                                              |                        |                           |                    |   |                 |        |              |         |                     |  

11

---

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)

Condensed Consolidating Balance Sheet at December 31, 2000

|                                               |                                                              | Guarantor
Subsidiaries |                           | Other
Subsidiaries |   | GLD
Corporation |       | Eliminations |         | Consolidated
Totals |  
|---------------------------------------------- | ------------------------------------------------------------ | ---------------------- | ------------------------- | ------------------ | - | --------------- | ----- | ------------ | ------- | ------------------- | -
|ASSETS                                         |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|Current assets:                                |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|                                               | Cash and equivalents                                         |                        | $                         | (654               | ) | $               | 1,791 |              | $       |                    |  
|                                               | Accounts receivable, net                                     |                        |                           | 37,558             |   |                 | 3,020 |              |         |                    |  
|                                               | Receivables from affiliates                                  |                        |                           | 7,956              |   |                 | 6,186 |              |         | 9                   |  
|                                               | Current portion of net investment in direct financing leases |                        |                           |                   |   |                 | 1,714 |              |         | 1,830               |  
|                                               | Contract revenues in excess
of billings                      |                        |                           | 17,254             |   |                 | 1,288 |              |         |                    |  
|                                               | Inventories                                                  |                        |                           | 10,694             |   |                 | 3,963 |              |         |                    |  
|                                               | Prepaid expenses and other current assets                    |                        |                           | 15,651             |   |                 | 844   |              |         | 748                 |  
|                                               |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|                                               |                                                              |                        | Total current assets      |                    |   | 88,459          |       |              | 18,806  |                     |  
|Property and equipment, net                    |                                                              |                        | 79,881                    |                    |   | 14,454          |       |              | 43,327  |                     |  
|Net investment in direct financing leases      |                                                              |                        |                          |                    |   | 1,946           |       |              | 1,661   |                     |  
|Investments in subsidiaries                    |                                                              |                        | 16,105                    |                    |   |                |       |              | 119,326 |                     |  
|Notes receivable from affiliate                |                                                              |                        | 15,815                    |                    |   |                |       |              |        |                     |  
|Inventories                                    |                                                              |                        | 6,773                     |                    |   |                |       |              |        |                     |  
|Investments in joint ventures                  |                                                              |                        | 6,394                     |                    |   |                |       |              |        |                     |  
|Other assets                                   |                                                              |                        | 2,109                     |                    |   |                |       |              | 3,640   |                     |  
|                                               |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|                                               |                                                              | $                      | 215,536                   |                    | $ | 35,206          |       | $            | 170,541 |                     | $
|                                               |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|Current liabilities:                           |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|                                               | Accounts payable                                             |                        | $                         | 34,901             |   | $               | 2,903 |              | $       |                    |  
|                                               | Payables to affiliates                                       |                        |                           | 5,310              |   |                 | 5,482 |              |         | 3,359               |  
|                                               | Accrued expenses                                             |                        |                           | 10,141             |   |                 | 2,005 |              |         | 13,490              |  
|                                               | Current portion of obligations under capital leases          |                        |                           |                   |   |                 | 3,544 |              |         |                    |  
|                                               | Billings in excess of contract
revenues                      |                        |                           | 7,863              |   |                 |      |              |         |                    |  
|                                               | Current maturities of long-term debt                         |                        |                           |                   |   |                 |      |              |         | 9,000               |  
|                                               |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|                                               |                                                              |                        | Total current liabilities |                    |   | 58,215          |       |              | 13,934  |                     |  
|Long-term debt                                 |                                                              |                        |                          |                    |   |                |       |              | 146,000 |                     |  
|Obligations under capital leases               |                                                              |                        |                          |                    |   | 3,607           |       |              |        |                     |  
|Note payable to affiliate                      |                                                              |                        |                          |                    |   |                |       |              | 15,815  |                     |  
|Deferred income taxes                          |                                                              |                        | 30,310                    |                    |   | 168             |       |              | 13,824  |                     |  
|Other                                          |                                                              |                        | 5,416                     |                    |   | 280             |       |              | 1,336   |                     |  
|                                               |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|                                               |                                                              |                        | Total liabilities         |                    |   | 93,941          |       |              | 17,989  |                     |  
|Minority interests                             |                                                              |                        |                          |                    |   |                |       |              |        |                     |  
|Stockholders' equity (deficit)                 |                                                              |                        | 121,595                   |                    |   | 17,217          |       |              | (32,283 | )                   |  
|                                               |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  
|                                               |                                                              | $                      | 215,536                   |                    | $ | 35,206          |       | $            | 170,541 |                     | $
|                                               |                                                              |                        |                           |                    |   |                 |       |              |         |                     |  

12

---

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)

Condensed Consolidating Statement of Income for the three months ended June 30, 2001

|                                                  |                                                          | Guarantor
Subsidiaries |         | Other
Subsidiaries |       | GLD
Corporation |       | Eliminations |        | Consolidated
Totals |      
|------------------------------------------------- | -------------------------------------------------------- | ---------------------- | ------- | ------------------ | ----- | --------------- | ----- | ------------ | ------ | ------------------- | -----
|Contract revenues                                 |                                                          | $                      | 61,232  |                    | $     | 17,416          |       | $            |       |                     | $    
|Costs of contract revenues                        |                                                          |                        | (48,838 | )                  |       | (14,825         | )     |              | (609   | )                   |      
|                                                  |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                                  | Gross profit                                             |                        |         | 12,394             |       |                 | 2,591 |              |        | (609                | )    
|General and administrative expenses               |                                                          |                        | (5,564  | )                  |       | (930            | )     |              | (70    | )                   |      
|                                                  |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                                  | Operating income (loss)                                  |                        |         | 6,830              |       |                 | 1,661 |              |        | (679                | )    
|Interest expense, net                             |                                                          |                        | (627    | )                  |       | (180            | )     |              | (4,479 | )                   |      
|Equity in earnings of subsidiaries                |                                                          |                        | 986     |                    |       |                |       |              | 4,337  |                     |      
|Equity in earnings of joint ventures              |                                                          |                        | 307     |                    |       |                |       |              |       |                     |      
|                                                  |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                                  | Income (loss) before income taxes and minority interests |                        |         | 7,496              |       |                 | 1,481 |              |        | (821                | )    
|Income tax (expense) benefit                      |                                                          |                        | (2,982  | )                  |       | (192            | )     |              | 1,950  |                     |      
|Minority interests                                |                                                          |                        |        |                    |       |                |       |              |       |                     |      
|                                                  |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                                  |                                                          | Net income             |         | $                  | 4,514 |                 | $     | 1,289        |        | $                   | 1,129
|                                                  |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|Other comprehensive income, net of tax:           |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|Reclassification of derivative losses to earnings |                                                          |                        | 128     |                    |       |                |       |              |       |                     |      
|Net gain (loss) on derivative instruments         |                                                          |                        | 15      |                    |       |                |       |              |       |                     |      
|                                                  |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                                  | Comprehensive income                                     |                        | $       | 4,657              |       | $               | 1,289 |              | $      | 1,129               |      
|                                                  |                                                          |                        |         |                    |       |                 |       |              |        |                     |      

Condensed Consolidating Statement of Income for the three months ended June 30, 2000

|                                     |                                                          | Guarantor
Subsidiaries |         | Other
Subsidiaries |       | GLD
Corporation |       | Eliminations |        | Consolidated
Totals |      
|------------------------------------ | -------------------------------------------------------- | ---------------------- | ------- | ------------------ | ----- | --------------- | ----- | ------------ | ------ | ------------------- | -----
|Contract revenues                    |                                                          | $                      | 88,802  |                    | $     | 6,459           |       | $            |       |                     | $    
|Costs of contract revenues           |                                                          |                        | (77,815 | )                  |       | (5,221          | )     |              | (86    | )                   |      
|                                     |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                     | Gross profit                                             |                        |         | 10,987             |       |                 | 1,238 |              |        | (86                 | )    
|General and administrative expenses  |                                                          |                        | (4,598  | )                  |       | (811            | )     |              | 106    |                     |      
|                                     |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                     | Operating income                                         |                        |         | 6,389              |       |                 | 427   |              |        | 20                  |      
|Interest expense, net                |                                                          |                        | (359    | )                  |       | (140            | )     |              | (4,122 | )                   |      
|Equity in earnings of subsidiaries   |                                                          |                        | 586     |                    |       |                |       |              | 3,602  |                     |      
|Equity in earnings of joint ventures |                                                          |                        | 68      |                    |       |                |       |              |       |                     |      
|                                     |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                     | Income (loss) before income taxes and minority interests |                        |         | 6,684              |       |                 | 287   |              |        | (500                | )    
|Income tax (expense) benefit         |                                                          |                        | (2,508  | )                  |       | (247            | )     |              | 1,744  |                     |      
|Minority interests                   |                                                          |                        |        |                    |       |                |       |              |       |                     |      
|                                     |                                                          |                        |         |                    |       |                 |       |              |        |                     |      
|                                     |                                                          | Net income             |         | $                  | 4,176 |                 | $     | 40           |        | $                   | 1,244
|                                     |                                                          |                        |         |                    |       |                 |       |              |        |                     |      

13

---

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)

Condensed Consolidating Statement of Income for the six months ended June 30, 2001

|                                                  |                                                          | Guarantor
Subsidiaries |          | Other
Subsidiaries |   | GLD
Corporation |       | Eliminations |        | Consolidated
Totals |  
|------------------------------------------------- | -------------------------------------------------------- | ---------------------- | -------- | ------------------ | - | --------------- | ----- | ------------ | ------ | ------------------- | -
|Contract revenues                                 |                                                          | $                      | 128,641  |                    | $ | 30,867          |       | $            |       |                     | $
|Costs of contract revenues                        |                                                          |                        | (105,827 | )                  |   | (24,177         | )     |              | (1,051 | )                   |  
|                                                  |                                                          |                        |          |                    |   |                 |       |              |        |                     |  
|                                                  | Gross profit (loss)                                      |                        |          | 22,814             |   |                 | 6,690 |              |        | (1,051              | )
|General and administrative expenses               |                                                          |                        | (9,981   | )                  |   | (1,974          | )     |              | (70    | )                   |  
|                                                  |                                                          |                        |          |                    |   |                 |       |              |        |                     |  
|                                                  | Operating income (loss)                                  |                        |          | 12,833             |   |                 | 4,716 |              |        | (1,121              | )
|Interest expense, net                             |                                                          |                        | (471     | )                  |   | (383            | )     |              | (8,861 | )                   |  
|Equity in earnings of subsidiaries                |                                                          |                        | 3,007    |                    |   |                |       |              | 9,012  |                     |  
|Equity in earnings of joint venture               |                                                          |                        | 117      |                    |   |                |       |              |       |                     |  
|                                                  |                                                          |                        |          |                    |   |                 |       |              |        |                     |  
|                                                  | Income (loss) before income taxes and minority interests |                        |          | 15,486             |   |                 | 4,333 |              |        | (970                | )
|Income tax (expense) benefit                      |                                                          |                        | (6,305   | )                  |   | (377            | )     |              | 3,663  |                     |  
|Minority interests                                |                                                          |                        |         |                    |   |                |       |              |       |                     |  
|                                                  |                                                          |                        |          |                    |   |                 |       |              |        |                     |  
|                                                  | Net income                                               |                        | $        | 9,181              |   | $               | 3,956 |              | $      | 2,693               |  
|                                                  |                                                          |                        |          |                    |   |                 |       |              |        |                     |  
|Other comprehensive income, net of tax:           |                                                          |                        |          |                    |   |                 |       |              |        |                     |  
|Cumulative effect of adopting SFAS 133            |                                                          |                        | (745     | )                  |   |                |       |              |       |                     |  
|Reclassification of derivative losses to earnings |                                                          |                        | 402      |                    |   |                |       |              |       |                     |  
|Net gain (loss) on derivative instruments         |                                                          |                        | (115     | )                  |   |                |       |              |       |                     |  
|                                                  |                                                          |                        |          |                    |   |                 |       |              |        |                     |  
|                                                  | Comprehensive income                                     |                        | $        | 8,723              |   |                 | 3,956 |              | $      | 2,693               |  
|                                                  |                                                          |                        |          |                    |   |                 |       |              |        |                     |  

Condensed Consolidating Statement of Income for the six months ended June 30, 2000

|                                    |                                                   | Guarantor
Subsidiaries |          | Other
Subsidiaries |   | GLD
Corporation |       | Eliminations |        | Consolidated
Totals |  
|----------------------------------- | ------------------------------------------------- | ---------------------- | -------- | ------------------ | - | --------------- | ----- | ------------ | ------ | ------------------- | -
|Contract revenues                   |                                                   | $                      | 169,411  |                    | $ | 20,409          |       | $            |       |                     | $
|Costs of contract revenues          |                                                   |                        | (145,749 | )                  |   | (15,666         | )     |              | (305   | )                   |  
|                                    |                                                   |                        |          |                    |   |                 |       |              |        |                     |  
|                                    | Gross profit (loss)                               |                        |          | 23,662             |   |                 | 4,743 |              |        | (305                | )
|General and administrative expenses |                                                   |                        | (8,864   | )                  |   | (1,782          | )     |              |       |                     |  
|                                    |                                                   |                        |          |                    |   |                 |       |              |        |                     |  
|                                    | Operating income (loss)                           |                        |          | 14,798             |   |                 | 2,961 |              |        | (305                | )
|Interest expense, net               |                                                   |                        | (302     | )                  |   | (117            | )     |              | (8,670 | )                   |  
|Equity in earnings of subsidiaries  |                                                   |                        | 2,396    |                    |   |                |       |              | 9,148  |                     |  
|Equity in loss of joint ventures    |                                                   |                        | (126     | )                  |   |                |       |              |       |                     |  
|                                    |                                                   |                        |          |                    |   |                 |       |              |        |                     |  
|                                    | Income before income taxes and minority interests |                        |          | 16,766             |   |                 | 2,844 |              |        | 173                 |  
|Income tax (expense) benefit        |                                                   |                        | (6,763   | )                  |   | (571            | )     |              | 3,622  |                     |  
|Minority interests                  |                                                   |                        |         |                    |   |                |       |              |       |                     |  
|                                    |                                                   |                        |          |                    |   |                 |       |              |        |                     |  
|                                    | Net income                                        |                        | $        | 10,003             |   | $               | 2,273 |              | $      | 3,795               |  
|                                    |                                                   |                        |          |                    |   |                 |       |              |        |                     |  

14

---

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2001

|                                                                                 |                                                 | Guarantor
Subsidiaries                    |          | Other
Subsidiaries |        | GLD
Corporation |        | Eliminations |         | Consolidated
Totals |    
|-------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------- | -------- | ------------------ | ------ | --------------- | ------ | ------------ | ------- | ------------------- | ---
|Operating Activities                                                             |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|Net income                                                                       |                                                 | $                                         | 9,181    |                    | $      | 3,956           |        | $            | 2,693   |                     | $  
|Adjustments to reconcile net income to net cash flows from operating activities: |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|                                                                                 | Depreciation and amortization                   |                                           |          | 4,635              |        |                 | 940    |              |         | 1,418               |    
|                                                                                 | Earnings of subsidiaries and joint venture      |                                           |          | (2,955             | )      |                 |       |              |         | (9,181              | )  
|                                                                                 | Minority interests                              |                                           |          |                   |        |                 |       |              |         |                    |    
|                                                                                 | Deferred income taxes                           |                                           |          | 504                |        |                 | (100   | )            |         | (476                | )  
|                                                                                 | Gain on dispositions of property and equipment. |                                           |          | (292               | )      |                 |       |              |         |                    |    
|                                                                                 | Other, net                                      |                                           |          | 1,601              |        |                 | 126    |              |         | (1,170              | )  
|                                                                                 | Changes in assets and liabilities:              |                                           |          |                    |        |                 |       |              |         |                     |    
|                                                                                 |                                                 | Accounts receivable                       |          |                    | 6,658  |                 |        | (9,702       | )       |                     |   
|                                                                                 |                                                 | Contract revenues in excess of billings   |          |                    | 2,304  |                 |        | 1,113        |         |                     |   
|                                                                                 |                                                 | Inventories                               |          |                    | (1,569 | )               |        | (862         | )       |                     |   
|                                                                                 |                                                 | Prepaid expenses and other current assets |          |                    | (3,428 | )               |        | 1,323        |         |                     | 410
|                                                                                 |                                                 | Accounts payable and accrued              |          |                    |        |                 |        |              |         |                     |    
|                                                                                 |                                                 |                                           | expenses |                    |        | (15,010         | )      |              | 676     |                     |    
|                                                                                 |                                                 | Billings in excess of contract revenues   |          |                    | (2,157 | )               |        | 388          |         |                     |   
|                                                                                 |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|                                                                                 | Net cash flows from operating activities        |                                           |          | (528               | )      |                 | (2,142 | )            |         | (7,025              | )  
|Investing Activities                                                             |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|Purchases of property and equipment                                              |                                                 |                                           | (2,753   | )                  |        | (1,045          | )      |              |        |                     |    
|Proceeds from dispositions of property and equipment                             |                                                 |                                           | 502      |                    |        |                |        |              | 104     |                     |    
|Purchase of NASDI stock, net of cash                                             |                                                 |                                           |         |                    |        |                |        |              | (33,800 | )                   |    
|Principal payments (receipts) on direct financing leases                         |                                                 |                                           |         |                    |        | 820             |        |              | (820    | )                   |    
|Payments (receipts) on note with affiliate                                       |                                                 |                                           |         |                    |        | 344             |        |              | (344    | )                   |    
|                                                                                 |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|                                                                                 | Net cash flows from investing activities        |                                           |          | (2,251             | )      |                 | 119    |              |         | (34,860             | )  
|Financing Activities                                                             |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|Repayments of long-term debt                                                     |                                                 |                                           | (175     | )                  |        |                |        |              | (4,000  | )                   |    
|Borrowing (repayments) of revolving loans, net                                   |                                                 |                                           |         |                    |        |                |        |              | 11,000  |                     |    
|Proceeds from issuance of 111/4% subordinated notes                              |                                                 |                                           |         |                    |        |                |        |              | 39,700  |                     |    
|Issuance of NASDI stockholder notes                                              |                                                 |                                           |         |                    |        |                |        |              | 3,000   |                     |    
|Financing fees                                                                   |                                                 |                                           |         |                    |        |                |        |              | (2,500  | )                   |    
|Principal receipts (payments) on capital leases                                  |                                                 |                                           |         |                    |        | (1,714          | )      |              | 1,714   |                     |    
|Net change in accounts with affiliates                                           |                                                 |                                           | 4,637    |                    |        | 2,407           |        |              | (7,044  | )                   |    
|Repayment on notes receivable from stockholders                                  |                                                 |                                           |         |                    |        |                |        |              | 15      |                     |    
|Dividends                                                                        |                                                 |                                           | 1,600    |                    |        | (2,000          | )      |              |        |                     |    
|Contributions from partners                                                      |                                                 |                                           | (1,200   | )                  |        | 1,600           |        |              |        |                     |    
|                                                                                 |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|                                                                                 | Net cash flows from financing activities        |                                           |          | 4,862              |        |                 | 293    |              |         | 41,885              |    
|                                                                                 |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|                                                                                 | Net change in cash and equivalents              |                                           |          | 2,083              |        |                 | (1,730 | )            |         |                    |    
|                                                                                 | Cash and equivalents at beginning of year       |                                           |          | (654               | )      |                 | 1,791  |              |         |                    |    
|                                                                                 |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    
|                                                                                 | Cash and equivalents at end of year             |                                           | $        | 1,429              |        | $               | 61     |              | $       |                    |    
|                                                                                 |                                                 |                                           |          |                    |        |                 |        |              |         |                     |    

15

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GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)

Condensed Consolidating Cash Flows for the six months ended June 30, 2000

|                                                                                 |                                                | Guarantor Subsidiaries                    |          | Other Subsidiaries |         | GLD Corporation |        | Eliminations |        | Consolidated Totals |       
|-------------------------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | -------- | ------------------ | ------- | --------------- | ------ | ------------ | ------ | ------------------- | ------
|Operating Activities                                                             |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|Net income                                                                       |                                                | $                                         | 10,003   |                    | $       | 2,273           |        | $            | 3,795  |                     | $     
|Adjustments to reconcile net income to net cash flows from operating activities: |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|                                                                                 | Depreciation                                   |                                           |          | 3,360              |         |                 | 1,642  |              |        | 1,371               |       
|                                                                                 | Earnings of subsidiaries and joint             |                                           |          |                    |         |                 |        |              |        |                     |       
|                                                                                 |                                                | ventures                                  |          |                    | (2,270  | )               |        |             |        |                     | (9,148
|                                                                                 | Minority interests                             |                                           |          |                   |         |                 |       |              |        |                    |       
|                                                                                 | Deferred income taxes                          |                                           |          | (71                | )       |                 | (105   | )            |        | (796                | )     
|                                                                                 | Loss on dispositions of property and equipment |                                           |          | 97                 |         |                 |       |              |        | 287                 |       
|                                                                                 | Other, net                                     |                                           |          | (1,097             | )       |                 | (170   | )            |        | 1,944               |       
|                                                                                 | Changes in assets and liabilities:             |                                           |          |                    |         |                 |       |              |        |                     |       
|                                                                                 |                                                | Accounts receivable                       |          |                    | (18,580 | )               |        | 2,001        |        |                     |      
|                                                                                 |                                                | Contract revenues in excess of billings   |          |                    | (5,495  | )               |        | 708          |        |                     |      
|                                                                                 |                                                | Inventories                               |          |                    | 948     |                 |        | (28          | )      |                     |      
|                                                                                 |                                                | Prepaid expenses and other current assets |          |                    | (43     | )               |        | (81          | )      |                     | (326  
|                                                                                 |                                                | Accounts payable and accrued              |          |                    |         |                 |        |              |        |                     |       
|                                                                                 |                                                |                                           | expenses |                    |         | 14,941          |        |              | (457   | )                   |       
|                                                                                 |                                                | Billings in excess of contract revenues   |          |                    | 4,381   |                 |        | (1,956       | )      |                     |      
|                                                                                 |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|                                                                                 | Net cash flows from operating activities       |                                           |          | 6,174              |         |                 | 3,827  |              |        | (8,196              | )     
|Investing Activities                                                             |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|Purchases of property and equipment                                              |                                                |                                           | (5,000   | )                  |         | (2,021          | )      |              |       |                     |       
|Dispositions of property and equipment                                           |                                                |                                           | 261      |                    |         |                |        |              |       |                     |       
|Distributions from and investments in joint ventures, net                        |                                                |                                           | (84      | )                  |         |                |        |              |       |                     |       
|Principal payments (receipts) on direct financing leases                         |                                                |                                           |         |                    |         | 2,660           |        |              | (2,660 | )                   |       
|Payments (receipts) on note with affiliate                                       |                                                |                                           |         |                    |         | 344             |        |              | (344   | )                   |       
|                                                                                 |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|                                                                                 | Net cash flows from investing activities       |                                           |          | (4,823             | )       |                 | 983    |              |        | (3,004              | )     
|Financing Activities                                                             |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|Repayments of long-term debt                                                     |                                                |                                           |         |                    |         |                |        |              | (2,500 | )                   |       
|Borrowing (repayments) of revolving loans, net                                   |                                                |                                           |         |                    |         |                |        |              | 6,500  |                     |       
|Principal receipts (payments) on capital leases                                  |                                                |                                           | 2,660    |                    |         | (4,082          | )      |              | 1,422  |                     |       
|Net change in accounts with affiliates                                           |                                                |                                           | (4,714   | )                  |         | (1,040          | )      |              | 5,754  |                     |       
|Repayment on notes receivable from stockholders                                  |                                                |                                           |         |                    |         |                |        |              | 24     |                     |       
|Dividends                                                                        |                                                |                                           | 1,440    |                    |         | (1,800          | )      |              |        |                     |       
|Contributions from partners                                                      |                                                |                                           | (1,080   | )                  |         | 1,440           |        |              |        |                     |       
|                                                                                 |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|                                                                                 | Net cash flows from financing activities       |                                           |          | (1,694             | )       |                 | (5,482 | )            |        | 11,200              |       
|                                                                                 |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|                                                                                 | Net change in cash and equivalents             |                                           |          | (343               | )       |                 | (672   | )            |        |                    |       
|                                                                                 | Cash and equivalents at beginning of year      |                                           |          | 284                |         |                 | 1,249  |              |        |                    |       
|                                                                                 |                                                |                                           |          |                    |         |                 |        |              |        |                     |       
|                                                                                 | Cash and equivalents at end of year            |                                           | $        | (59                | )       | $               | 577    |              | $      |                    |       
|                                                                                 |                                                |                                           |          |                    |         |                 |        |              |        |                     |       

16

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Statement Under the Private Securities Litigation Reform Act

Certain information in this quarterly report on Form 10-Q, including but not limited to the Management's Discussion and Analysis of
Financial Condition and Results of Operations, may constitute forward-looking statements as such term is defined in Section 27A of the Securities Exchange Act of 1933 (the "Securities Act") and
Section 21E of the Securities Exchange Act of 1934. Certain forward-looking statements can be identified by the use of forward-looking terminology such as, "believes," "expects," "may," "will,"
"should," "seeks," "approximately," "intends," "plans," "estimates," "anticipates," or "hopeful," or the negative thereof or other comparable terminology, or by discussions of strategy, plans or
intentions. Forward-looking statements involve risks and uncertainties, including sales initiatives and those described in the Risk Factors section of Item 1 of the Company's
Form S-4 Registration Statement (Registration No. 333-64687), which could cause actual results to be materially different than those in the forward-looking
statements, which speak only as of the date hereof. The Company assumes no obligation to update such information.

General

The Company is the largest provider of dredging services in the United States. Dredging generally involves the enhancement or preservation of navigability of
waterways or the protection of shorelines through the removal or replenishment of soil, sand or rock. The U.S. dredging market consists of three primary types of work: Capital, Maintenance (including
controlled disposal dredging) and Beach Nourishment, in which the Company experienced a combined U.S. market share of the projects on which it bids ("bid market") of 37% in 2000. In addition, the
Company has continued its role as the only U.S. dredging contractor with significant international operations, which averaged 17% of its contract revenues over the last three years.

In
April 2001, the Company purchased 80% of the capital stock of North American Site Developers, Inc. ("NASDI"), a demolition service provider located in the Boston,
Massachusetts area. The purchase consideration for the acquisition included (1) $35.0 million in cash payable to the stockholders of NASDI, and (2) two junior subordinated
promissory notes totaling $3.0 million from NASDI payable to the NASDI management stockholders. The Company issued $40.0 million of its 111/4% senior
subordinated notes due 2008 to fund the cash portion of the acquisition price and pay related fees and expenses.

The
Company's equity in earnings (loss) of joint ventures relates to the Company's 50% ownership interest in Amboy Aggregates ("Amboy"), which is accounted for using the equity
method. The Company conducts certain hopper dredging activities, primarily maintenance and beach nourishment projects, through the operations of NATCO Limited Partnership ("NATCO") and North American
Trailing Company ("North American"). Minority interests reflects Ballast Nedam Group N.V.'s respective 25% and 20% interest in NATCO and North American, as well as NASDI management stockholders' 20%
interest in NASDI.

17

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Results of Operations

The following table sets forth the components of net income and EBITDA as a percentage of contract revenues for the three and six months ended June 30,
2001 and 2000:

|                                           |                                                   | Three Months Ended
June 30, |      | Six Months Ended
June 30, |     
|------------------------------------------ | ------------------------------------------------- | --------------------------- | ---- | ------------------------- | ----
|
|Contract revenues                          |                                                   | 100.0                       | %    | 100.0                     | %   
|Costs of contract revenues                 |                                                   | (81.6                       | )    | (85.8                     | )   
|                                           |                                                   |                             |      |                           |     
|                                           | Gross profit                                      |                             | 18.4 |                           | 14.2
|General and administrative expenses        |                                                   | (8.4                        | )    | (6.2                      | )   
|                                           |                                                   |                             |      |                           |     
|                                           | Operating income                                  |                             | 10.0 |                           | 8.0 
|Interest expense, net                      |                                                   | (6.8                        | )    | (5.4                      | )   
|Equity in earnings (loss) of joint venture |                                                   | 0.4                         |      | 0.1                       |     
|                                           |                                                   |                             |      |                           |     
|                                           | Income before income taxes and minority interests |                             | 3.6  |                           | 2.7 
|Income tax expense                         |                                                   | (1.6                        | )    | (1.2                      | )   
|Minority interests                         |                                                   | (0.6                        | )    |                          |     
|                                           |                                                   |                             |      |                           |     
|                                           | Net income                                        |                             | 1.4  | %                         | 1.5 
|                                           |                                                   |                             |      |                           |     
|EBITDA                                     |                                                   | 14.8                        | %    | 11.8                      | %   
|                                           |                                                   |                             |      |                           |     

"EBITDA,"
as provided herein, represents earnings from continuing operations before net interest expense, income taxes and depreciation and amortization expense and excludes equity
earnings of joint ventures and minority interests. EBITDA is not intended to represent cash flows from operations as defined by generally accepted accounting principles in the United States of
America. The Company's EBITDA is included as it is a basis upon which the Company assesses its financial performance, and certain covenants in the Company's borrowing arrangements are tied to similar
measures. EBITDA should not be considered in isolation or as an alternative to net income, cash flows from continuing operations, or other consolidated income or cash flow data prepared in accordance
with generally accepted accounting principles in the United States of America as measures of the Company's profitability or liquidity. EBITDA as defined herein may differ from similarly titled
measures presented by other companies.

18

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The following table sets forth, by segment and dredging type of work, the Company's contract revenues for the three and six months ended and backlog as of the periods indicated:

|                        |                 | Three Months
June 30, |        | Six Months Ended
June 30,
|----------------------- | --------------- | --------------------- | ------ | -------------------------
|
|Revenues (in thousands) |                 |                       |        |                          
|Dredging:               |                 |                       |        |                          
|                        | CapitalU.S.    |                       | $      | 26,569                   
|                        | Capitalforeign |                       |        | 7,405                    
|                        | Beach           |                       |        | 22,095                   
|                        | Maintenance     |                       |        | 13,561                   
|Demolition              |                 |                       | 8,671  |                          
|                        |                 |                       |        |                          
|                        |                 | $                     | 78,301 |                          
|                        |                 |                       |        |                          

|                       |                 |  |  |  |  | June 30,
|---------------------- | --------------- |  |  |  |  | --------
|
|Backlog (in thousands) |                 |  |  |  |  |         
|Dredging:              |                 |  |  |  |  |         
|                       | CapitalU.S.    |  |  |  |  |         
|                       | Capitalforeign |  |  |  |  |         
|                       | Beach           |  |  |  |  |         
|                       | Maintenance     |  |  |  |  |         
|Demolition             |                 |  |  |  |  |         
|                       |                 |  |  |  |  |         
|                       |                 |  |  |  |  | $       
|                       |                 |  |  |  |  |         

Second
quarter 2001 revenues, which include the revenues of NASDI since its acquisition on April 17, totaled $78.3 million. This represents a decline of
$7.2 million from second quarter 2000 revenues. Revenues for the first half of 2001 were $150.9 million compared to $174.4 for the first half of 2000. The decline in both second quarter
and year to date 2001 revenues is attributable primarily to a reduction in foreign dredging revenue, which decreased $18.0 million and $22.0 million in the respective periods. Gross
profit of $14.4 million for the second quarter of 2001 represents an increase of 18.4% over the second quarter of 2000, while gross profit for the first six months of 2001 approximated the 2000
level. Although revenues have decreased in 2001, gross profit has been positively impacted by the mix of projects. Specifically, 2001 has had less revenue from lower margin foreign dredging projects
and has benefited from good margins obtained on the increased level of beach and maintenance revenues.

Capital
projects include large port deepenings and other infrastructure projects. Capital dredging revenue declined $32.0 million and $47.1 million during the second
quarter and first half of 2001, respectively, as compared to the same periods of 2000, due to the timing of performing certain capital projects in backlog. However, the Company expects the domestic
capital market to remain strong as Deep Port projects, authorized by the 1986 Water Resource Development Act and subsequent bills, continue to be announced by the Army Corps of Engineers ("Corps").
Since 1997, the Corps has announced new Deep Port work and expanded existing projects with a revenue value in excess of $2.0 billion, to be completed through 2005. Since this time, 25 projects
with a total revenue value of $733.6 million, have been let for bid through the second quarter of 2001. The Company was the low bidder on twelve of these projects, with a value of
$345.4 million, representing 47.1% of the total let for bid. The Company's bid market share of total U.S. capital projects, including Deep Port and other domestic infrastructure projects, was
35% in 2000.

19

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During the second quarter of 2001, contract revenues from domestic capital projects included $12.2 million, $6.8 million, $4.0 million, and $2.2 million
from channel deepening projects in Baltimore; San Juan; Charleston, South Carolina; and Wilmington, North Carolina; respectively. Additionally, foreign capital projects in India and Ghana contributed
$3.3 million and $2.9 million, respectively, to second quarter 2001 revenues.

Beach
nourishment projects include rebuilding of shoreline areas which have been damaged by storm activity or ongoing erosion. Second quarter and year to date 2001 revenues from beach
nourishment projects increased $18.8 million and $34.7 million, respectively, compared to the same periods of 2000, as the Company continued to perform on numerous beach projects won in
the third and fourth quarters of 2000 and the first quarter of 2001. Significant beach nourishment projects in Ocean Isle, North Carolina; Kure Beach, North Carolina; Sunny Isles, Florida; and San
Diego, California contributed $3.4 million, $4.1 million, $5.0 million, and $5.1 million, respectively, to second quarter revenues.

Maintenance
projects include routine dredging of ports, rivers and channels to remove the regular build up of sediment. Revenues from maintenance projects for the first half of 2001
decreased $19.9 million compared to the same period of 2000, primarily due to the low level of maintenance backlog at year-end. Only $2.6 million of this decrease related to
the second quarter maintenance activity, as several projects were bid and won during the first half of 2001 due to the increased maintenance requirements resulting from the significant precipitation
experienced in the Midwest this spring. Second quarter 2001 maintenance revenues included $5.5 million from three river rental projects.

Second
quarter 2001 and year to date revenues of the Company's NATCO hopper dredging subsidiary increased $10.8 million and $10.3 million, respectively, due to the
increase in beach work and the recent improvement in the maintenance market. NATCO's 2001 gross profit margins have increased through the second quarter of 2001, due primarily to performance of
projects recently bid at improved pricing levels.

NASDI's
demolition revenue subsequent to the April 2001 acquisition by the Company totaled $8.7 million. NASDI's full second quarter 2001 revenues were
$11.1 million, which exceeded its first quarter revenues of $8.5 million.

General
and administrative expenses increased $1.3 million and $1.4 million for the three and six month periods ended June 30, 2001, primarily due to the
inclusion of $0.6 million of NASDI's general and administrative costs and goodwill amortization of $0.4 million related to the NASDI acquisition.

Non-operating
expenses have increased for the quarter and first half of 2001 as a result of interest expense on the additional $40.0 million subordinated debt
issuance used to fund the NASDI acquisition. Minority interest expense has increased for the 2001 periods as compared to 2000 due to the inclusion of NASDI minority interests and increased expense to
NATCO's minority interests resulting from NATCO's improved earnings.

Net
income was $1.1 million for the second quarter of 2001 compared to $1.2 million for the same period of 2000. For the first half of 2001, net income was
$2.7 million compared to $3.8 million for the first half of 2000. Net income in 2001 has declined due to the impact of goodwill amortization, additional interest, and other costs
resulting from the NASDI acquisition. EBITDA (as defined on page 18) was $10.1 million and $23.4 million for the quarter and six months ended June 30, 2001, respectively,
which is consistent with the 2000 levels of $10.1 million and $23.8 million, respectively, despite the decline in revenues in the 2001 periods. The improvement in 2001 EBITDA relative to
the reduced level of revenues reflects the improved margins realized in the 2001 periods resulting from the lower proportion of foreign dredging revenues and improved pricing achieved on certain 2001
bids.

20

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Liquidity and Capital Resources

The Company's primary sources of liquidity are cash flows from operations and borrowings under the revolving line of credit with the Company's senior lenders.
The Company's primary uses of cash are funding working capital, capital expenditures and debt service.

The
Company's net cash used in operating activities for the six months ended June 30, 2001 totaled $9.7 million compared to net cash generated from operating activities
in the comparable period of 2000 of $1.8 million. The increased usage of cash in 2001 was due to increased working capital requirements associated with normal timing differences on the
recognition and billing of revenues on certain projects, including the Wilmington, North Carolina Deep Port project and the Ghana project.

In
the six month period ended June 30, 2001, the Company used $33.8 million to purchase the stock of NASDI, which was funded by the issuance of additional subordinated
notes and NASDI stockholder notes, as reflected by the increased cash flows used for investing activities and generated by financing activities in the period.

Management
believes cash flows from operations and available credit will be sufficient to finance operations, planned capital expenditures and debt service requirements for the
foreseeable future. The Company's ability to fund its working capital needs, planned capital expenditures, scheduled debt payments and to comply with all of the financial covenants under its debt
agreements, depends on its
future operating performance and cash flows, which in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond the Company's control.

Backlog

The Company's contract backlog represents management's current estimate of the revenues which 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
substantially all of the Company's dredging backlog relates to government contracts, the Company's backlog can be canceled at any time without penalty. However, the Company will recover actual
committed costs and profit on work performed up to the date of cancellation. Consequently, backlog is not necessarily indicative of future revenues. The Company's backlog includes only those projects
for which the customer has provided an executed contract.

As
of June 30, 2001, the Company had dredging backlog of $143.4 million. The addition of projects which were bid late in the second quarter and pending award at
June 30 would bring the Company's total dredging backlog up to $208.9 million, which compares to dredging backlog of $185.9 million at March 31, 2001 and
$172.6 million at June 30, 2000. During the second quarter, domestic projects valued at $152.7 million were let for bid, of which the Company won approximately 37%. Additionally,
awards pending at June 30, 2001 includes a large New York Deep Port project which had been bid and won by a competitor in the first quarter. The Company and its venture partner had protested
the qualifications of this competitor, who has since withdrawn its bid. Thus, it is expected that in the third quarter this project will be awarded to the Company and its venture partner, who were
second lowest bidder, with a revenue value to the Company of $28.7 million. Overall, bidding activity picked up towards the end of the second quarter and is expected to remain robust through
the third quarter, in line with historical experience.

Domestic
capital projects make up $55.4 million or 30.7% of the June 30, 2001 backlog. This includes work remaining on Deep Port capital projects in San Juan;
Charleston, South Carolina; Wilmington, North Carolina and Baltimore. The majority of foreign capital project backlog is attributable to the project in Ghana. Additionally, Deep Port projects pending
award at June 30, 2001

21

---

include capital projects in Jacksonville and New York with a revenue value to the Company of $54.6 million.

The
beach market remains strong; however, only one of the four expected projects was bid during the second quarter, which was lost to a competitor. Thus, beach backlog declined to
$17.3 million from
$39.1 million at March 31, 2001. According to recent schedules provided by the Corps, additional beach projects, which the Company estimates are valued in excess of $70 million,
are expected to bid in the third quarter. In July 2001, the Company won one of these projects valued at $15.4 million.

Maintenance
backlog of $21.5 million at June 30, 2001, continues to improve over 2000 levels. The abundant precipitation experienced in the Midwest this spring has
resulted in increased work along the Mississippi River, which is providing maintenance dredge utilization and improving maintenance margins.

The
demolition backlog level at June 30, 2001 was $37.2 million, representing an increase of $16.0 million from NASDI's backlog at March 31, 2001.

Effect of Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations"
(SFAS 141) and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141 requires the purchase method of accounting for business combinations initiated after
June 30, 2001 and eliminates the pooling-of-interests method. Additionally, SFAS 141 has transition provisions which apply to business combinations accounted for by the purchase method
that were completed prior to July 1, 2001 which could require possible reclassification of certain separately recognized intangible assets or goodwill components. SFAS 142 requires that
goodwill and other intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. The Company will be required to adopt SFAS 142 at
the beginning of 2002, with any transitional impairment loss being recognized as the effect of a change in accounting principle. Management is currently evaluating the impact of the adoption of these
standards, but does not anticipate that the adoption of these statements will have a material impact on the Company's financial position or results of operations or cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The market risk of the Company's financial instruments as of June 30, 2001 has not significantly changed since December 31, 2000. The market risk
profile of the Company on December 31, 2000 is disclosed in the Company's 2000 Annual Report on Form 10-K.

22

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Part II

Item 6 Exhibits and Reports on Form 8-K

(a)
Exhibits

(b)
Reports on Form 8-K

On
April 17, 2001, the Company filed a Current Report on Form 8-K containing information pursuant to Item 5 ("Other Events") relating to the
announcement of its plans to acquire North American Site Developers, Inc. (NASDI) and its intention to issue an additional $40.0 million of its 111/4% senior subordinated
notes to fund the acquisition. The historical financial statements of NASDI for the eleven months ended December 31, 1998 and each of the two fiscal years in the period ended
December 31, 2000 and required pro forma financial information were filed therewith. On April 24, 2001, the Company filed a Current Report on Form 8-K containing
information pursuant to Item 2 ("Acquisition or Disposition of Assets") relating to the acquisition of NASDI.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                         |  | GREAT LAKES DREDGE & DOCK CORPORATION
|------------------------ |  | -------------------------------------
|Date: September 24, 2001 |  | By:                                  
|                         |  |                                      

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EXHIBIT INDEX

|Number |  | Document Description                                                                                                                                                                                                                      
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.01   |  | Plan and Agreement of Merger dated as of August 19, 1998 between the Company and Great Lakes Dredge & Dock Acquisition, Inc. (1)                                                                                                          
|2.02   |  | Stock Purchase Agreement by and among Great Lakes Dredge & Dock Corporation and Great Lakes/North American Site Developers, Inc. and North American Site Developers, Inc. and the Stockholders of North
American Site Developers, Inc. (3)
|3.01   |  | Restated Certificate of Incorporation of the Company. (1)                                                                                                                                                                                 
|3.02   |  | Bylaws of the Company. (1)                                                                                                                                                                                                                
|4.01   |  | Indenture dated as of August 19, 1998 among the Company, the Subsidiary Guarantors and the Bank of New York, as Trustee. (1)                                                                                                              
|4.02   |  | Form of 111/4% Senior Subordinated Note due 2008 (included in Exhibit 4.01). (1)                                                                                                                                                          
|10.01  |  | Amended and Restated Credit Agreement dated as of April 24, 2001 among the Company, the other loan parties thereto, the financial institutions party thereto and Bank of America, N.A. as administrative
agent. (2)                       
|10.02  |  | Second Amendment to Second Amended and Restated Underwriting and Continuing Indemnity Agreement dated as of April 24, 2001. (2)                                                                                                           
|10.03  |  | Stockholders Agreement dated as of April 17, 2001, between Great Lakes Dredge & Dock Corporation, Christopher A. Berardi, Joseph K. Berardi, and Great Lakes/North American Site Developers,
 Inc. (3)                                    
|10.04  |  | Junior Subordinated Promissory Note dated as of April 17, 2001 between Great Lakes/North American Site Developers, Inc. and Christopher A. Berardi. (3)                                                                                   
|10.05  |  | Junior Subordinated Promissory Note dated as of April 17, 2001 between Great Lakes/North American Site Developers, Inc. and Joseph K. Berardi. (3)                                                                                        

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