**UNITED STATESSECURITIES AND EXCHANGE COMMISSION********Washington, D.C. 20549**

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**FORM 10-Q**
| ý | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--------|----------------------------------------------------------------------------------------------|

**For the quarterly period ended March 31,2002**

**OR**
| o | **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******(Exactname of registrant as specified in its charter) 

 

| **Delaware**                              |   | **13-3634726**                     |
|-------------------------------------------|--------|------------------------------------|
| (State or other  jurisdiction             |   | (IRS Employer  Identification No.) |
| of incorporation or  organization)        |   |                               |
|                                      |   |                               |
| **2122  York Road, Oak Brook, Illinois**  |   | **60523**                          |
| (Address of principal  executive offices) |   | (Zip Code)                         |

 

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

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                Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ý  No o

                As of May 6, 2002, there wereoutstanding 1,556,982 shares of Class A Common Stock, 3,363,900 shares of ClassB Common Stock and 44,857 shares of Preferred Stock.

 

**GreatLakes Dredge & Dock Corporation and Subsidiaries**

**QuarterlyReport Pursuant to Section 13 or 15(d) of the**

**SecuritiesExchange Act of 1934**

**For theQuarterly Period ended March 31, 2002**

 

**INDEX**

 
| **Part I**        | **Financial Information** |                                                                                                 |
|-------------------|---------------------------|------------------------------------------------------------------------------------------------------|
|              |                      |                                                                                                 |   |
|              | Item  1                   | Financial Statements  (Unaudited)                                                                    |   |
|              |                      |                                                                                                 |   |
|              |                      | Condensed  Consolidated Balance Sheets at March 31, 2002 and December 31, 2001                       |   |
|              |                      |                                                                                                 |   |
|              |                      | Condensed  Consolidated Statements of Income for the Three Months ended March 31, 2002  and 2001     |   |
|              |                      |                                                                                                 |   |
|              |                      | Condensed  Consolidated Statements of Cash Flows for the Three Months ended March 31,  2002 and 2001 |   |
|              |                      |                                                                                                 |   |
|              |                      | Notes  to Unaudited Condensed Consolidated Financial Statements                                      |   |
|              |                      |                                                                                                 |   |
|              | Item  2                   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations          |   |
|              |                      |                                                                                                 |   |
|              | Item  3                   | Quantitative  and Qualitative Disclosures About Market Risk                                          |   |
|              |                      |                                                                                                 |   |
| **Part II**       | **Other Information**     |                                                                                                 |
|              |                      |                                                                                                 |
|              | Item 1                    | Legal Proceedings                                                                                    |
|              |                      |                                                                                                 |
|              | Item 6                    | Exhibits and  Reports on Form 8-K                                                                    |
|              |                      |                                                                                                 |
| **Signature**     |                      |                                                                                                 |
|              |                      |                                                                                                 |
| **Exhibit Index** |                      |

 

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)**

 
|                                                                                                                                 |       | **March 31,****2002** |    | **December 31,****2001** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|---------|--------------------------|------------|
| **Assets**                                                                                                                           | ** ** |
| Current assets:                                                                                                                      |       |                  |    |                     |       |
| Cash and  equivalents                                                                                                                |       | $                     | 1,188   |                     | $          | 2,590 |   |
| Accounts  receivable, net                                                                                                            |       | 51,346                |    | 30,407                   |       |
| Contract  revenues in excess of billings                                                                                             |       | 13,584                |    | 23,215                   |       |
| Inventories                                                                                                                          |       | 14,772                |    | 14,291                   |       |
| Prepaid expenses  and other current assets                                                                                           |       | 20,682                |    | 18,486                   |       |
| Total current  assets                                                                                                                |       | 101,572               |    | 88,989                   |       |
| Property and  equipment, net                                                                                                         |       | 144,894               |    | 141,313                  |       |
| Goodwill, net of  amortization of $1,455                                                                                             |       | 29,405                |    | 29,405                   |       |
| Inventories                                                                                                                          |       | 9,414                 |    | 9,229                    |       |
| Investments in  joint ventures                                                                                                       |       | 6,010                 |    | 6,331                    |       |
| Other assets                                                                                                                         |       | 6,587                 |    | 6,956                    |       |
| Total assets                                                                                                                         |       | $                     | 297,882 |                     | $          | 282,223 |   |
|                                                                                                                                 |       |                  |    |                     |       |
| **Liabilities  and Stockholders’ Deficit**                                                                                      | ** ** |
| Current  liabilities:                                                                                                                |       |                  |    |                     |       |
| Accounts payable                                                                                                                     |       | $                     | 33,702  |                     | $          | 30,913 |   |
| Accrued expenses                                                                                                                     |       | 17,193                |    | 28,497                   |       |
| Billings in  excess of contract revenues                                                                                             |       | 3,117                 |    | 4,873                    |       |
| Current  maturities of long-term debt                                                                                                |       | 11,500                |    | 11,000                   |       |
| Total current  liabilities                                                                                                           |       | 65,512                |    | 75,283                   |       |
| Long-term debt                                                                                                                       |       | 197,238               |    | 173,728                  |       |
| Deferred income  taxes                                                                                                               |       | 45,986                |    | 45,593                   |       |
| Other                                                                                                                                |       | 8,089                 |    | 7,917                    |       |
| Total  liabilities                                                                                                                   |       | 316,825               |    | 302,521                  |       |
| Minority  interests                                                                                                                  |       | 4,583                 |    | 5,696                    |       |
| Commitments and  contingencies (Note 10)                                                                                             |       | —                |    | —                   |       |
| Stockholders’  deficit:                                                                                                         |       |                  |    |                     |       |
| Preferred stock,  $.01 par value; 250,000 shares authorized:  45,000 issued; 44,857 and 44,675 outstanding in 2002 and 2001          |       | 1                     |    | 1                        |       |
| Common stock,  $.01 par value; 50,000,000 shares authorized:  5,000,000 issued; 4,920,882 and 4,902,700 outstanding in 2002 and 2001 |       | 50                    |    | 50                       |       |
| Additional  paid-in capital                                                                                                          |       | 50,457                |    | 50,457                   |       |
| Accumulated  deficit                                                                                                                 |       | (74,151               | )       | (75,787                  | )          |
| Accumulated  other comprehensive income (loss)                                                                                       |       | 407                   |    | (407                     | )          |
| Treasury stock,  at cost; 143 preferred shares and 79,118 common shares in 2002 and 2001                                             |       | (222                  | )       | (222                     | )          |
| Note receivable  from stockholder                                                                                                    |       | (68                   | )       | (86                      | )          |
| Total  stockholders’ deficit                                                                                                    |       | (23,526               | )       | (25,994                  | )          |
| Total  liabilities and stockholders’ deficit                                                                                    |       | $                     | 297,882 |                     | $          | 282,223 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

2

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**GreatLakes Dredge & Dock Corporation and Subsidiaries**

**CondensedConsolidated Statements of Income**

**(Unaudited)**

**(in thousands)**

 
|                                               |   | **Three Months Ended  March 31,** |   |
|----------------------------------------------------|--------|-----------------------------------|--------|
|                                               |   | **2002**                          |   | **2001** |   |
|                                               |   |                              |   |   |   |
| Contract  revenues                                 |   | $                                 | 78,973 |   | $ | 72,560 |   |
| Costs of  contract revenues                        |   | 64,757                            |   | 58,483 |   |
| Gross profit                                       |   | 14,216                            |   | 14,077 |   |
| General and  administrative expenses               |   | 6,720                             |   | 5,461 |   |
| Operating income                                   |   | 7,496                             |   | 8,616 |   |
| Interest  expense, net                             |   | (5,295                            | )      | (4,429 | ) |
| Equity in loss  of joint ventures                  |   | (321                              | )      | (190 | ) |
| Income before  income taxes and minority interests |   | 1,880                             |   | 3,997 |   |
| Income tax  expense                                |   | (1,357                            | )      | (1,795 | ) |
| Minority  interests                                |   | 1,113                             |   | (638 | ) |
| Net income                                         |   | $                                 | 1,636  |   | $ | 1,564 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

3

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**GreatLakes Dredge & Dock Corporation and Subsidiaries**

**CondensedConsolidated Statements of Cash Flows**

**(Unaudited)**

**(in thousands)**

 
|                                                                              |   | **Three Months Ended  March 31,** |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                              |   | **2002**                          |   | **2001** |   |
| **Operating  Activities**                                                         |   |                              |   |   |   |
| Net income                                                                        |   | $                                 | 1,636  |   | $ | 1,564 |   |
| Adjustments to  reconcile net income to net cash flows from operating activities: |   |                              |   |   |   |
| Depreciation                                                                      |   | 3,855                             |   | 3,187 |   |
| Loss of joint  ventures                                                           |   | 321                               |   | 190 |   |
| Minority  interests                                                               |   | (1,113                            | )      | 638 |   |
| Deferred income  taxes                                                            |   | (219                              | )      | 80 |   |
| Gain on  dispositions of property and equipment                                   |   | (61                               | )      | (56 | ) |
| Other, net                                                                        |   | 552                               |   | 216 |   |
| Changes in  assets and liabilities:                                               |   |                              |   |   |   |
| Accounts  receivable, net                                                         |   | (20,939                           | )      | 2,478 |   |
| Contract  revenues in excess of billings                                          |   | 9,631                             |   | 693 |   |
| Inventories                                                                       |   | (666                              | )      | (456 | ) |
| Prepaid expenses  and other current assets                                        |   | (1,441                            | )      | 1,885 |   |
| Accounts payable  and accrued expenses                                            |   | (7,845                            | )      | (16,323 | ) |
| Billings in  excess of contract revenues                                          |   | (1,756                            | )      | (1,383 | ) |
| Net cash flows  from operating activities                                         |   | (18,045                           | )      | (7,287 | ) |
| **Investing  Activities**                                                         |   |                              |   |   |   |
| Purchases of  property and equipment                                              |   | (7,530                            | )      | (550 | ) |
| Dispositions of  property and equipment                                           |   | 155                               |   | 56 |   |
| Net cash flows  from investing activities                                         |   | (7,375                            | )      | (494 | ) |
| **Financing  Activities**                                                         |   |                              |   |   |   |
| Repayments of  long-term debt                                                     |   | (2,500                            | )      | (2,000 | ) |
| Borrowings of  revolving loans, net of repayments                                 |   | 26,500                            |   | 9,500 |   |
| Repayment on  note receivable from stockholder                                    |   | 18                                |   | 15 |   |
| Net cash flows  from financing activities                                         |   | 24,018                            |   | 7,515 |   |
| Net change in  cash and equivalents                                               |   | (1,402                            | )      | (266 | ) |
| Cash and  equivalents at beginning of period                                      |   | 2,590                             |   | 1,137 |   |
| Cash and  equivalents at end of period                                            |   | $                                 | 1,188  |   | $ | 871 |   |
| **Supplemental  Cash Flow Information**                                           |   |                              |   |   |   |
| Cash paid for  interest                                                           |   | $                                 | 9,126  |   | $ | 7,440 |   |
| Cash paid for  taxes                                                              |   | $                                 | 4,137  |   | $ | 1,934 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

4

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GREAT LAKES DREDGE &DOCK CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(dollars in thousands)

 

**1.             Basis of presentation**

 

The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the U.S. for interim financialinformation.  Accordingly, thesefinancial statements do not include all the information in the notes requiredby generally accepted accounting principles for complete financialstatements.  In the opinion of management,the unaudited condensed consolidated financial statements include alladjustments (consisting of normal recurring adjustments) considered necessaryfor a fair presentation of the financial position, results of operations andcash flows as of and for the dates presented. The unaudited condensed consolidated financial statements and notesherein should be read in conjunction with the audited consolidated financialstatements of Great Lakes Dredge & Dock Corporation and Subsidiaries (the“Company”) and the notes thereto, included in the Company’s Annual Report filedon Form 10-K for the year ended December 31, 2001.

 

The condensed consolidated results of operations forthe interim periods presented herein are not necessarily indicative of theresults to be expected for the full year.

 

**2.             Allocation of equipment cost**

 

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

 

**3.             Comprehensive income**

 

Total comprehensive income is comprised of net incomeand net unrealized gains and losses on cash flow hedges.  Total comprehensive income for the threemonths ended March 31, 2002 and 2001 was $2,450 and $963, respectively.

 

**4.             Risk management activities**

 

The Company uses derivative instruments to managecommodity price and foreign currency exchange risks.  Such instruments are not used for trading purposes.  As of March 31, 2002, the Company is partyto various swap arrangements to hedge the price of a portion of its diesel fuelpurchase requirements for work in its backlog to be performed through December2002.  As of March 31, 2002, there were7.0 million gallons remaining on these contracts.  Under these agreements, the Company will pay fixed prices rangingfrom $0.55 to $0.71 per gallon.  AtMarch 31, 2002 and December 31, 2001, the fair value on these contracts wasestimated to be a gain (loss) of $665 and $(670), respectively, based on quotedmarket prices.  The fair value at March31, 2002 and December 31, 2001 is recorded in other current assets and accruedliabilities, respectively. Ineffectiveness related to these fuel hedge arrangements was determinedto be immaterial.  The remaining gainsincluded in accumulated other comprehensive income at March 31, 2002 will bereclassified into earnings over the next nine months, corresponding to theperiod during which the hedged fuel is expected to be utilized.

 

5

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The carrying values of other financial instrumentsincluded in current assets and current liabilities approximate fair values dueto the short-term maturities of these instruments.  The carrying value of long-term bank debt is a reasonableestimate of its fair value as interest rates are variable, based on theprevailing market rates.  At March 31,2002 and December 31, 2001, the Company had long-term subordinated notesoutstanding with a recorded book value of $154,738 and $154,728,respectively.  The fair value of thesenotes was $165,075 and $158,294 at March 31, 2002 and December 31, 2001,respectively, based on quoted market prices. The Company is contingently liable under letters of credit and otherfinancial guarantees.  It is notpracticable to estimate the fair value of these financial instruments; however,the Company does not expect any material losses to result from these financialinstruments since performance is not likely to be required.

** **

**5.             Acquisition of North American SiteDevelopers, Inc.**

** **

In April 2001, the Companypurchased 80% of the capital stock of North American Site Developers, Inc.(“NASDI”), a demolition service provider located in the Boston, Massachusettsarea.  The acquisition was accounted forby the purchase method of accounting and, accordingly, the results ofoperations of NASDI are included in the Company’s consolidated statements of incomefrom the date of the acquisition.  

 

The results of operations for the three months endedMarch 31, 2002 include the results of NASDI. The following pro forma combined results of operations for the threemonths ended March 31, 2001 has been prepared assuming the acquisition hadoccurred as of the beginning of the period. The pro forma amounts primarily include adjustments to reflect increasedinterest on debt incurred to finance the acquisition.  The pro forma operating results have been prepared forcomparative purposes only and are not necessarily indicative of the results ofoperations that may occur in the future or that would have occurred had thisacquisition been consummated at the beginning of the period presented. 

 
|                                               |   | **Three  Months Ended  March 31,** |   |
|----------------------------------------------------|--------|------------------------------------|--------|
|                                               |   | **Actual  2002**                   |   | **Pro forma  2001** |   |
| Contract  revenues                                 |   | $                                  | 78,973 |   | $ | 81,266 |   |
| Operating income                                   |   | 7,496                              |   | 11,087 |   |
| Income before  income taxes and minority interests |   | 1,880                              |   | 5,245 |   |
| Net income                                         |   | 1,636                              |   | 1,939 |   |
|                                                    |        |                                    |        |  |  |  |  |

 

6

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**6.             Accounts receivable**

 

Accounts receivable at March 31, 2002 and December 31,2001 are as follows:

 

|                             |   | **March 31,  2002** |   | **December  31,  2001** |   |
|----------------------------------|--------|---------------------|--------|-------------------------|--------|
| Completed  contracts             |   | $                   | 17,870 |                    | $      | 11,776 |   |
| Contracts in  progress           |   | 29,869              |   | 16,774                  |   |
| Retainage                        |   | 4,978               |   | 3,228                   |   |
|                             |   | 52,717              |   | 31,778                  |   |
| Allowance for  doubtful accounts |   | (1,371              | )      | (1,371                  | )      |
|                             |   |                |   |                    |   |
|                             |   | $                   | 51,346 |                    | $      | 30,407 |   |

 

**7.             Contracts in progress**

 

The components of contracts in progress at March 31,2002 and December 31, 2001 are as follows:

 

|                                                                            |   | **March 31,  2002** |    | **December  31,  2001** |   |
|---------------------------------------------------------------------------------|--------|---------------------|---------|-------------------------|--------|
| Costs and  earnings in excess of billings:                                      |   |                |    |                    |   |
| Costs and  earnings for contracts in progress                                   |   | $                   | 124,868 |                    | $      | 156,539 |   |
| Amounts billed                                                                  |   | (113,359            | )       | (136,401                | )      |
|                                                                            |   |                |    |                    |   |
| Costs and  earnings in excess of billings for contracts in progress             |   | 11,509              |    | 20,138                  |   |
| Costs and  earnings in excess of billings for completed contracts               |   | 2,075               |    | 3,077                   |   |
|                                                                            |   |                |    |                    |   |
|                                                                            |   | $                   | 13,584  |                    | $      | 23,215 |   |
|                                                                            |   |                |    |                    |   |
|                                                                            |   |                |    |                    |   |
| Prepaid contract  costs (included in prepaid expenses and other current assets) |   | $                   | 5,381   |                    | $      | 5,390 |   |
|                                                                            |   |                |    |                    |   |
| Billings in  excess of costs and earnings:                                      |   |                |    |                    |   |
| Amounts billed                                                                  |   | $                   | (21,347 | )                       | $      | (77,860 | ) |
| Costs and  earnings for contracts in progress                                   |   | 18,230              |    | 72,987                  |   |
|                                                                            |   |                |    |                    |   |
|                                                                            |   | $                   | (3,117  | )                       | $      | (4,873 | ) |

 

7

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**8.             Accrued expenses**

 

Accrued expenses at March 31, 2002 and December 31,2001 are as follows:

 

|                           |   | **March 31,  2002** |   | **December  31,  2001** |   |
|--------------------------------|--------|---------------------|--------|-------------------------|--------|
| Insurance                      |   | $                   | 5,137  |                    | $      | 5,386 |   |
| U.S. income and  other taxes   |   | 4,140               |   | 6,492                   |   |
| Payroll and  employee benefits |   | 3,143               |   | 6,273                   |   |
| Interest                       |   | 2,621               |   | 6,721                   |   |
| Equipment leases               |   | 1,093               |   | 1,313                   |   |
| Other                          |   | 1,059               |   | 2,312                   |   |
|                           |   |                |   |                    |   |
|                           |   | $                   | 17,193 |                    | $      | 28,497 |   |

 

**9.             Segment information**

 

The Company and its subsidiaries operate in tworeportable segments: dredging and demolition. Prior to the acquisition of NASDI in the second quarter of 2001, theCompany’s only reportable segment was dredging.  The Company’s financial reporting systems present various datafor management to run the business, including profit and loss statementsprepared according to the segments presented. Segment information for the three months ended March 31, 2002 isprovided as follows:

 

|                                  |   | **Dredging** |   | **Demolition** |   | **Total** |   |
|---------------------------------------|--------|--------------|--------|----------------|--------|-----------|--------|
|                                  |   |         |   |           |   |      |   |
| Contract revenues                     |   | $            | 70,303 |           | $      | 8,670     |   | $ | 78,973 |   |
|                                  |   |         |   |           |   |      |   |
| Operating income                      |   | 6,087        |   | 1,409          |   | 7,496     |   |
|                                  |   |         |   |           |   |      |   |
| Depreciation                          |   | 3,619        |   | 236            |   | 3,855     |   |
|                                  |   |         |   |           |   |      |   |
| Total assets                          |   | 250,250      |   | 47,632         |   | 297,882   |   |
|                                  |   |         |   |           |   |      |   |
| Property and equipment, net           |   | 140,762      |   | 4,132          |   | 144,894   |   |
|                                  |   |         |   |           |   |      |   |
| Investment in equity method investees |   | 6,010        |   | —         |   | 6,010     |   |
|                                  |   |         |   |           |   |      |   |
| Capital expenditures                  |   | 7,149        |   | 381            |   | 7,530     |   |
|                                       |        |              |        |                |        |           |        |  |  |  |

 

**10.          Commitments and contingencies**

 

At March 31, 2002, the Company is contingently liable,in the normal course of business, for $11,585 in letters of credit relatedprimarily to contract performance guarantees.

 

8

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The Company’s joint venture equity investee, AmboyAggregates, has a mortgage loan with a bank, which contains certain restrictivecovenants, including limitations on the amount of distributions to its jointventure partners.  The Company hasguaranteed 50% of the outstanding mortgage principal and accrued interest,which totaled $1,745 at March 31, 2002.

 

In 1997, the Company purchased rights to dispose of acertain quantity of dredged material in an upland disposal site in New Jerseyat a cost of $3,150 (land rights).  Theland rights are recorded at cost and are included in other current andnon-current assets on the Company’s consolidated balance sheet at March 31,2002.  On March 11, 2002, the Companyentered into an agreement with the owner of the site setting forth amendedterms and conditions that address the quantity and use of the land rights,among other matters.  Coincident withentering into the agreement, a significant upland disposal project was bid.  The low bidder was a competitor whose bidindicated the use of an alternate disposal site that may be at a lower cost,which could, therefore, impact the value of the Company’s land rights, if thecompetitor’s bid meets the conditions for award.  Based on the uncertainty of these circumstances, managementbelieves there is a reasonable possibility that the Company’s recovery of theland rights at their recorded amount may be impaired in the range of  $0 to $800. The Company will continue its assessment of whether its land rights maybe impaired, as the outcome of these circumstances becomes known.

 

As is customary with negotiated contracts with thefederal government, the government has the right to audit the books and recordsof the Company to ensure compliance with such contracts and applicable federallaws.  The government has the ability toseek a price adjustment based on the results of such audit.  Any such audits have not had and are notexpected to have a material impact on the financial position or operations ofthe Company.

 

In the normal course of business, the Company is adefendant in various legal proceedings. Resolution of these claims is not expected to have a material impact onthe financial position or operations of the Company.

 

**11.          Effects of recently issued accountingpronouncements**

 

The Company has adoptedStatement of Financial Accounting Standards (SFAS) No. 141, “BusinessCombinations” as of January 1, 2002. This statement requires the purchase method of accounting for businesscombinations initiated after June 30, 2001 and eliminates the pooling-of-interestsmethod.

 

The Company has also adoptedSFAS No. 142, “Goodwill and Other Intangible Assets” as of January 1,2002.  This statement requires thatgoodwill and other intangible assets with indefinite useful lives no longer beamortized, but instead be assessed annually for impairment with the initialassessment to be completed within the first six months following adoption ofthe standard.  The Company’s goodwillrelates solely to its acquisition of NASDI, which took place in the second quarterof 2001; therefore, no goodwill amortization is reflected in the three monthperiods ended March 31, 2002 and 2001. The required initial impairment evaluation was performed in the firstquarter of 2002 resulting in no impairment in the value of the Company’sgoodwill.

 

In June 2001, the FinancialAccounting Standards Board (FASB) also issued SFAS No. 143, “Accounting forAsset Retirement Obligations,” which addresses the recognition andremeasurement of obligations associated with the retirement of tangiblelong-lived assets.  SFAS No. 143 iseffective for financial statements issued for fiscal years beginning after June15, 2002.  The Company is currentlyassessing the impact of adopting this statement, but does not anticipate thatadoption will have a material effect on its financial position or results ofoperations.

 

9

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In August 2001, the FASBissued SFAS No. 144, “Accounting for Impairment or Disposal of Long-LivedAssets,” which supersedes previous guidance and provides additionalclarification as to when and how to measure a loss upon impairment or disposalof long-lived assets.  The Companyadopted SFAS No. 144 effective January 1, 2002, and its initial evaluationresulted in no impairment in the value of the Company’s long-lived assets.

 

**12.          Subsequent event**

 

In1992, an underwater utility tunnel failed adjacent to a construction sitecompleted by Great Lakes Dredge & Dock Company (GLDD), a wholly-ownedsubsidiary of the Company.  The failureresulted in a flooding of the tunnel and building basements serviced by thetunnel.  Numerous suits were filedagainst GLDD for claims of flood damage to building basements and losses due tobusiness interruption. During 1997, all outstanding claims were settled relatedto the flood litigation and settlement payments totaling $11,000 were made bythe Company.  Based on a favorablejudgment by the U.S. District Court, the Company recorded a receivable forreimbursement by its insurer of the settlement amounts paid.  As part of the recapitalization in 1998, theright to receive any insurance reimbursement for these amounts was assigned tothe Company's former owner for book purposes. In 2001, the favorable decision was overturned and was upheld andfinalized by the Supreme Court of the United States on April 15, 2002,confirming that amounts paid by the Company will not be recovered from theinsurer.  As a result, the Company's taxprovision for the second quarter of 2002 will reflect a permanent differencerelated to these settlement payments, resulting in a lower effective tax ratefor 2002.

 

**13.          Supplemental condensed consolidatingfinancial information**

 

Included in the Company’s long-term debt is $155,000of 111⁄4% senior subordinated notes which will mature on August 15, 2008.  The payment obligations of the Company underthe senior subordinated notes are guaranteed by the Company’s wholly owneddomestic subsidiaries and NASDI (the “Subsidiary Guarantors”).  Such guarantees are full, unconditional andjoint and several.  Separate financialstatements of the Subsidiary Guarantors are not presented because the Company’smanagement has determined that they would not be material to investors.  The following supplemental financialinformation sets forth, on a combined basis, the balance sheets, statements ofoperations and statements of cash flows for the Subsidiary Guarantors, theCompany’s non-guarantor subsidiaries and for the Company (“GLD Corporation”).

 

10

----

 

**GREATLAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES**

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**(Inthousands)**

 

**Condensed Consolidating Balance Sheetat March 31, 2002**

** **
|                                                          |   | **Guarantor  Subsidiaries** |    | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |    | **Consolidated  Totals** |   |
|---------------------------------------------------------------|--------|-----------------------------|---------|-------------------------|--------|----------------------|--------|------------------|---------|--------------------------|--------|
| **ASSETS**                                                    |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Current assets:                                               |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Cash and  equivalents                                         |   | $                           | 1,136   |                    | $      | 52                   |   | $                | —  |                     | $      | — |   | $ | 1,188 |   |
| Accounts  receivable, net                                     |   | 41,913                      |    | 9,433                   |   | —               |   | —           |    | 51,346                   |   |
| Receivables from  affiliates                                  |   | 20,993                      |    | 7,183                   |   | 6,294                |   | (34,470          | )       | —                   |   |
| Current portion  of net investment in direct financing leases |   | —                      |    | 1,380                   |   | 1,005                |   | (2,385           | )       | —                   |   |
| Contract  revenues in excess of billings                      |   | 10,631                      |    | 2,953                   |   | —               |   | —           |    | 13,584                   |   |
| Inventories                                                   |   | 10,014                      |    | 4,758                   |   | —               |   | —           |    | 14,772                   |   |
| Prepaid expenses  and other current assets                    |   | 20,038                      |    | (275                    | )      | 919                  |   | —           |    | 20,682                   |   |
| Total current  assets                                         |   | 104,725                     |    | 25,484                  |   | 8,218                |   | (36,855          | )       | 101,572                  |   |
| Property and  equipment, net                                  |   | 90,674                      |    | 14,670                  |   | 39,550               |   | —           |    | 144,894                  |   |
| Goodwill, net of  accumulated amortization of $1,455          |   | 29,405                      |    | —                  |   | —               |   | —           |    | 29,405                   |   |
| Investments in  subsidiaries                                  |   | 14,302                      |    | —                  |   | 127,554              |   | (141,856         | )       | —                   |   |
| Notes receivable  from affiliates                             |   | —                      |    | —                  |   | 24,209               |   | (24,209          | )       | —                   |   |
| Inventories                                                   |   | 9,414                       |    | —                  |   | —               |   | —           |    | 9,414                    |   |
| Investments in  joint ventures                                |   | 6,010                       |    | —                  |   | —               |   | —           |    | 6,010                    |   |
| Other assets                                                  |   | 3,550                       |    | —                  |   | 3,037                |   | —           |    | 6,587                    |   |
|                                                          |   | $                           | 258,080 |                    | $      | 40,154               |   | $                | 202,568 |                     | $      | (202,920 | ) | $ | 297,882 |   |
|                                                          |   |                        |    |                    |   |                 |   |             |    |                     |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)**      |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Current  liabilities:                                         |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Accounts payable                                              |   | $                           | 29,029  |                    | $      | 4,673                |   | $                | —  |                     | $      | — |   | $ | 33,702 |   |
| Payables to  affiliates                                       |   | 17,678                      |    | 16,792                  |   | —               |   | (34,470          | )       | —                   |   |
| Accrued expenses                                              |   | 9,223                       |    | 2,225                   |   | 5,745                |   | —           |    | 17,193                   |   |
| Current portion  of obligations under capital leases          |   | —                      |    | 2,385                   |   | —               |   | (2,385           | )       | —                   |   |
| Billings in  excess of contract revenues                      |   | 3,117                       |    | —                  |   | —               |   | —           |    | 3,117                    |   |
| Current  maturities of long-term debt                         |   | —                      |    | —                  |   | 11,500               |   | —           |    | 11,500                   |   |
| Total current  liabilities                                    |   | 59,047                      |    | 26,075                  |   | 17,245               |   | (36,855          | )       | 65,512                   |   |
| Long-term debt                                                |   | 3,000                       |    | —                  |   | 194,238              |   | —           |    | 197,238                  |   |
| Note payable to  affiliate                                    |   | 24,209                      |    | —                  |   | —               |   | (24,209          | )       | —                   |   |
| Deferred income  taxes                                        |   | 33,523                      |    | (151                    | )      | 12,614               |   | —           |    | 45,986                   |   |
| Other                                                         |   | 5,263                       |    | 490                     |   | 2,336                |   | —           |    | 8,089                    |   |
| Total  liabilities                                            |   | 125,042                     |    | 26,414                  |   | 226,433              |   | (61,064          | )       | 316,825                  |   |
| Minority  interests                                           |   | —                      |    | —                  |   | —               |   | 4,583            |    | 4,583                    |   |
| Stockholders’  equity (deficit)                          |   | 133,038                     |    | 13,740                  |   | (23,865              | )      | (146,439         | )       | (23,526                  | )      |
|                                                          |   | $                           | 258,080 |                    | $      | 40,154               |   | $                | 202,568 |                     | $      | (202,920 | ) | $ | 297,882 |   |

 

11

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** **

**Condensed Consolidating Balance Sheetat December 31, 2001**

** **
|                                                          |   | **Guarantor  Subsidiaries** |    | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |    | **Consolidated  Totals** |   |
|---------------------------------------------------------------|--------|-----------------------------|---------|-------------------------|--------|----------------------|--------|------------------|---------|--------------------------|--------|
| **ASSETS**                                                    |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Current assets:                                               |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Cash and  equivalents                                         |   | $                           | 2,515   |                    | $      | 75                   |   | $                | —  |                     | $      | — |   | $ | 2,590 |   |
| Accounts receivable,  net                                     |   | 27,629                      |    | 2,778                   |   | —               |   | —           |    | 30,407                   |   |
| Receivables from  affiliates                                  |   | 5,051                       |    | 6,613                   |   | 6,000                |   | (17,664          | )       | —                   |   |
| Current portion  of net investment in direct financing leases |   | —                      |    | 1,946                   |   | 1,661                |   | (3,607           | )       | —                   |   |
| Contract  revenues in excess of billings                      |   | 21,120                      |    | 2,095                   |   | —               |   | —           |    | 23,215                   |   |
| Inventories                                                   |   | 9,691                       |    | 4,600                   |   | —               |   | —           |    | 14,291                   |   |
| Prepaid expenses  and other current assets                    |   | 16,878                      |    | 778                     |   | 830                  |   | —           |    | 18,486                   |   |
| Total current  assets                                         |   | 82,884                      |    | 18,885                  |   | 8,491                |   | (21,271          | )       | 88,989                   |   |
| Property and  equipment, net                                  |   | 85,942                      |    | 15,118                  |   | 40,253               |   | —           |    | 141,313                  |   |
| Goodwill, net of  accumulated amortization of $1,455          |   | 29,405                      |    | —                  |   | —               |   | —           |    | 29,405                   |   |
| Net investment  in direct financing leases                    |   | —                      |    | —                  |   | —               |   | —           |    |                     |   |
| Investments in  subsidiaries                                  |   | 18,932                      |    | —                  |   | 121,345              |   | (140,277         | )       | —                   |   |
| Notes receivable  from affiliate                              |   | 12,796                      |    | —                  |   | 21,000               |   | (33,796          | )       | —                   |   |
| Inventories                                                   |   | 9,229                       |    | —                  |   | —               |   | —           |    | 9,229                    |   |
| Investments in  joint ventures                                |   | 6,331                       |    | —                  |   | —               |   | —           |    | 6,331                    |   |
| Other assets                                                  |   | 3,651                       |    | —                  |   | 3,305                |   | —           |    | 6,956                    |   |
|                                                          |   | $                           | 249,170 |                    | $      | 34,003               |   | $                | 194,394 |                     | $      | (195,344 | ) | $ | 282,223 |   |
|                                                          |   |                        |    |                    |   |                 |   |             |    |                     |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)**      |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Current  liabilities:                                         |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Accounts payable                                              |   | $                           | 26,294  |                    | $      | 4,619                |   | $                | —  |                     | $      | — |   | $ | 30,913 |   |
| Payables to  affiliates                                       |   | 14,966                      |    | 2,698                   |   | —               |   | (17,664          | )       | —                   |   |
| Accrued expenses                                              |   | 14,294                      |    | 3,951                   |   | 10,252               |   | —           |    | 28,497                   |   |
| Current portion  of obligations under capital leases          |   | —                      |    | 3,607                   |   | —               |   | (3,607           | )       | —                   |   |
| Billings in  excess of contract revenues                      |   | 4,873                       |    | —                  |   | —               |   | —           |    | 4,873                    |   |
| Current  maturities of long-term debt                         |   | —                      |    | —                  |   | 11,000               |   | —           |    | 11,000                   |   |
| Total current  liabilities                                    |   | 60,427                      |    | 14,875                  |   | 21,252               |   | (21,271          | )       | 75,283                   |   |
| Long-term debt                                                |   | 3,000                       |    | —                  |   | 170,728              |   | —           |    | 173,728                  |   |
| Note payable to  affiliate                                    |   | 21,000                      |    | —                  |   | 12,796               |   | (33,796          | )       | —                   |   |
| Deferred income  taxes                                        |   | 32,549                      |    | 172                     |   | 12,872               |   | —           |    | 45,593                   |   |
| Foreign income  taxes                                         |   | —                      |    | —                  |   | —               |   | —           |    | —                   |   |
| Other                                                         |   | 5,090                       |    | 494                     |   | 2,333                |   | —           |    | 7,917                    |   |
| Total  liabilities                                            |   | 122,066                     |    | 15,541                  |   | 219,981              |   | (55,067          | )       | 302,521                  |   |
| Minority  interests                                           |   | —                      |    | —                  |   | —               |   | 5,696            |    | 5,696                    |   |
| Stockholders’  equity (deficit)                          |   | 127,104                     |    | 18,462                  |   | (25,587              | )      | (145,973         | )       | (25,994                  | )      |
|                                                          |   | $                           | 249,170 |                    | $      | 34,003               |   | $                | 194,394 |                     | $      | (195,344 | ) | $ | 282,223 |   |

 

12

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**Condensed Consolidating Statement ofIncome for the three months ended March 31, 2002**

 
|                                                      |   | **Guarantor  Subsidiaries** |   | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|-----------------------------------------------------------|--------|-----------------------------|--------|-------------------------|--------|----------------------|--------|------------------|--------|--------------------------|--------|
|                                                      |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Contract  revenues                                        |   | $                           | 68,644 |                    | $      | 15,460               |   | $                | — |                     | $      | (5,131 | ) | $ | 78,973 |   |
| Costs of  contract revenues                               |   | (51,039                     | )      | (18,505                 | )      | (344                 | )      | 5,131            |   | (64,757                  | )      |
| Gross profit  (loss)                                      |   | 17,605                      |   | (3,045                  | )      | (344                 | )      | —           |   | 14,216                   |   |
| General and  administrative expenses                      |   | (5,338                      | )      | (1,382                  | )      | —               |   | —           |   | (6,720                   | )      |
| Operating income  (loss)                                  |   | 12,267                      |   | (4,427                  | )      | (344                 | )      | —           |   | 7,496                    |   |
| Interest  expense, net                                    |   | (684                        | )      | (121                    | )      | (4,490               | )      | —           |   | (5,295                   | )      |
| Equity in (loss)  earnings of subsidiaries                |   | (3,539                      | )      | —                  |   | 5,118                |   | (1,579           | )      | —                   |   |
| Equity in loss  of joint ventures                         |   | (321                        | )      | —                  |   | —               |   | —           |   | (321                     | )      |
| Income (loss)  before income taxes and minority interests |   | 7,723                       |   | (4,548                  | )      | 284                  |   | (1,579           | )      | 1,880                    |   |
| Income tax  (expense) benefit                             |   | (2,535                      | )      | (174                    | )      | 1,352                |   | —           |   | (1,357                   | )      |
| Minority  interests                                       |   | —                      |   | —                  |   | —               |   | 1,113            |   | 1,113                    |   |
| Net income  (loss)                                        |   | $                           | 5,188  |                    | $      | (4,722               | )      | $                | 1,636  |                     | $      | (466 | ) | $ | 1,636 |   |

 

**Condensed Consolidating Statement ofIncome for the three months ended March 31, 2001**

 
|                                                      |   | **Guarantor  Subsidiaries** |   | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|-----------------------------------------------------------|--------|-----------------------------|--------|-------------------------|--------|----------------------|--------|------------------|--------|--------------------------|--------|
|                                                      |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Contract  revenues                                        |   | $                           | 67,409 |                    | $      | 13,451               |   | $                | — |                     | $      | (8,300 | ) | $ | 72,560 |   |
| Costs of  contract revenues                               |   | (56,989                     | )      | (9,352                  | )      | (442                 | )      | 8,300            |   | (58,483                  | )      |
| Gross profit  (loss)                                      |   | 10,420                      |   | 4,099                   |   | (442                 | )      | —           |   | 14,077                   |   |
| General and  administrative expenses                      |   | (4,417                      | )      | (1,044                  | )      | —               |   | —           |   | (5,461                   | )      |
| Operating income  (loss)                                  |   | 6,003                       |   | 3,055                   |   | (442                 | )      | —           |   | 8,616                    |   |
| Interest  expense, net                                    |   | 158                         |   | (203                    | )      | (4,382               | )      | —           |   | (4,429                   | )      |
| Equity in (loss)  earnings of subsidiaries                |   | 2,021                       |   | —                  |   | 4,675                |   | (6,696           | )      | —                   |   |
| Equity in loss  of joint ventures                         |   | (190                        | )      | —                  |   | —               |   | —           |   | (190                     | )      |
| Income (loss)  before income taxes and minority interests |   | 7,990                       |   | 2,852                   |   | (149                 | )      | (6,696           | )      | 3,997                    |   |
| Income tax  (expense) benefit                             |   | (3,323                      | )      | (185                    | )      | 1,713                |   | —           |   | (1,795                   | )      |
| Minority  interests                                       |   | —                      |   | —                  |   | —               |   | (638             | )      | (638                     | )      |
| Net income  (loss)                                        |   | $                           | 4,667  |                    | $      | 2,667                |   | $                | 1,564  |                     | $      | (7,334 | ) | $ | 1,564 |   |

 

13

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**Condensed Consolidating Statement ofCash Flows for the three months ended March 31, 2002**

 
|                                                                                     |   | **Guarantor  Subsidiaries** |   | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|------------------------------------------------------------------------------------------|--------|-----------------------------|--------|-------------------------|--------|----------------------|--------|------------------|--------|--------------------------|--------|
|                                                                                     |   |                        |   |                    |   |                 |   |             |   |                     |   |
| **Operating  Activities**                                                                |   | $                           | 5,188  |                    | $      | (4,722               | )      | $                | 1,636  |                     | $      | (466 | ) | $ | 1,636 |   |
| Net income  (loss)                                                                       |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Adjustments to  reconcile net income (loss) to net cash flows from operating activities: |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Depreciation                                                                             |   | 2,664                       |   | 529                     |   | 662                  |   | —           |   | 3,855                    |   |
| Earnings (loss)  of subsidiaries and joint ventures                                      |   | 3,930                       |   | —                  |   | (5,188               | )      | 1,579            |   | 321                      |   |
| Minority  interests                                                                      |   | —                      |   | —                  |   | —               |   | (1,113           | )      | (1,113                   | )      |
| Deferred income  taxes                                                                   |   | 382                         |   | (323                    | )      | (258                 | )      | —           |   | (219                     | )      |
| Gain on  dispositions of property and equipment                                          |   | (61                         | )      | —                  |   | —               |   | —           |   | (61                      | )      |
| Other, net                                                                               |   | 247                         |   | (4                      | )      | 309                  |   | —           |   | 552                      |   |
| Changes in assets  and liabilities:                                                      |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Accounts  receivable, net                                                                |   | (14,284                     | )      | (6,655                  | )      | —               |   | —           |   | (20,939                  | )      |
| Contract  revenues in excess of billings                                                 |   | 10,489                      |   | (858                    | )      | —               |   | —           |   | 9,631                    |   |
| Inventories                                                                              |   | (508                        | )      | (158                    | )      | —               |   | —           |   | (666                     | )      |
| Prepaid expenses  and other current assets                                               |   | (2,405                      | )      | 1,053                   |   | (89                  | )      | —           |   | (1,441                   | )      |
| Accounts payable  and accrued expenses                                                   |   | (1,685                      | )      | (1,672                  | )      | (4,508               | )      | —           |   | (7,845                   | )      |
| Billings in  excess of contract revenues                                                 |   | (1,756                      | )      | —                  |   | —               |   | —           |   | (1,756                   | )      |
| Net cash flows  from operating activities                                                |   | 2,201                       |   | (12,810                 | )      | (7,436               | )      | —           |   | (18,045                  | )      |
| **Investing  Activities**                                                                |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Purchases of  property and equipment                                                     |   | (7,449                      | )      | (81                     | )      | —               |   | —           |   | (7,530                   | )      |
| Dispositions of  property and equipment                                                  |   | 155                         |   | —                  |   | —               |   | —           |   | 155                      |   |
| Net cash flows  from investing activities                                                |   | (7,294                      | )      | (81                     | )      | —               |   | —           |   | (7,375                   | )      |
| **Financing  Activities**                                                                |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Repayments of  long-term debt                                                            |   | —                      |   | —                  |   | (2,500               | )      | —           |   | (2,500                   | )      |
| Borrowing of  revolving loans, net of repayments                                         |   | —                      |   | —                  |   | 26,500               |   | —           |   | 26,500                   |   |
| Principal  receipts (payments) on capital leases                                         |   | —                      |   | (656                    | )      | 656                  |   | —           |   | —                   |   |
| Net change in  accounts with affiliates                                                  |   | 3,696                       |   | 13,524                  |   | (17,220              | )      | —           |   | —                   |   |
| Repayment on  note receivable from stockholder                                           |   | 18                          |   | —                  |   | —               |   | —           |   | 18                       |   |
| Net cash flows  from financing activities                                                |   | 3,714                       |   | 12,868                  |   | 7,436                |   | —           |   | 24,018                   |   |
| Net changes in cash  and equivalents                                                     |   | (1,379                      | )      | (23                     | )      | —               |   | —           |   | (1,402                   | )      |
| Cash and  equivalents at beginning of period                                             |   | 2,515                       |   | 75                      |   | —               |   | —           |   | 2,590                    |   |
| Cash and  equivalents at end of period                                                   |   | $                           | 1,136  |                    | $      | 52                   |   | $                | — |                     | $      | — |   | $ | 1,188 |   |

 

14

----

 

**Condensed Consolidating Statement ofCash Flows for the three months ended March 31, 2001**

 
|                                                                              |   | **Guarantor  Subsidiaries** |   | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------|--------|-------------------------|--------|----------------------|--------|------------------|--------|--------------------------|--------|
| **Operating Activities**                                                          |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Net income                                                                        |   | $                           | 4,667  |                    | $      | 2,667                |   | $                | 1,564  |                     | $      | (7,334 | ) | $ | 1,564 |   |
| Adjustments to  reconcile net income to net cash flows from operating activities: |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Depreciation                                                                      |   | 2,135                       |   | 388                     |   | 664                  |   | —           |   | 3,187                    |   |
| (Loss) earnings  of subsidiaries and joint ventures                               |   | (1,839                      | )      | —                  |   | (4,667               | )      | 6,696            |   | 190                      |   |
| Minority  interests                                                               |   | —                      |   | —                  |   | —               |   | 638              |   | 638                      |   |
| Deferred income  taxes                                                            |   | 210                         |   | (51                     | )      | (79                  | )      | —           |   | 80                       |   |
| Gain on  dispositions of property and equipment                                   |   | (56                         | )      | —                  |   | —               |   | —           |   | (56                      | )      |
| Other, net                                                                        |   | (249                        | )      | 71                      |   | 394                  |   | —           |   | 216                      |   |
| Changes in  assets and liabilities:                                               |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Accounts  receivable, net                                                         |   | 766                         |   | 1,712                   |   | —               |   | —           |   | 2,478                    |   |
| Contract  revenues in excess of billings                                          |   | 2,273                       |   | (1,580                  | )      | —               |   | —           |   | 693                      |   |
| Inventories                                                                       |   | (66                         | )      | (390                    | )      | —               |   | —           |   | (456                     | )      |
| Prepaid expenses  and other current assets                                        |   | 1,799                       |   | (150                    | )      | 236                  |   | —           |   | 1,885                    |   |
| Accounts payable  and accrued expenses                                            |   | (12,637                     | )      | 59                      |   | (3,745               | )      | —           |   | (16,323                  | )      |
| Billings in  excess of contract revenues                                          |   | (1,101                      | )      | —                  |   | (282                 | )      | —           |   | (1,383                   | )      |
| Net cash flows  from operating activities                                         |   | (4,098                      | )      | 2,726                   |   | (5,915               | )      | —           |   | (7,287                   | )      |
| **Investing  Activities**                                                         |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Purchase of  property and equipment                                               |   | (511                        | )      | (39                     | )      | —               |   | —           |   | (550                     | )      |
| Proceeds from  dispositions of property and equipment                             |   | 56                          |   | —                  |   | —               |   | —           |   | 56                       |   |
| Principal  payments (receipts) on direct financing leases                         |   | —                      |   | 402                     |   | (402                 | )      | —           |   | —                   |   |
| Net cash flows  from investing activities                                         |   | (455                        | )      | 363                     |   | (402                 | )      | —           |   | (494                     | )      |
| **Financing  Activities**                                                         |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Repayments of  long-term debt                                                     |   | —                      |   | —                  |   | (2,000               | )      | —           |   | (2,000                   | )      |
| Borrowing of  revolving loans, net of repayments                                  |   | —                      |   | —                  |   | 9,500                |   | —           |   | 9,500                    |   |
| Principal  receipts (payments) on capital leases                                  |   | —                      |   | (843                    | )      | 843                  |   | —           |   | —                   |   |
| Net change in  accounts with affiliation                                          |   | 6,005                       |   | (3,964                  | )      | (2,041               | )      | —           |   | —                   |   |
| Repayment on  note receivable from stockholder                                    |   | —                      |   | —                  |   | 15                   |   | —           |   | 15                       |   |
| Net cash flows  from financing activities                                         |   | 6,005                       |   | (4,807                  | )      | 6,317                |   | —           |   | 7,515                    |   |
| Net change in  cash and equivalents                                               |   | 1,452                       |   | (1,718                  | )      | —               |   | —           |   | (266                     | )      |
| Cash and  equivalents at beginning of period                                      |   | (654                        | )      | 1,791                   |   | —               |   | —           |   | 1,137                    |   |
| Cash and  equivalents at end of period                                            |   | $                           | 798    |                    | $      | 73                   |   | $                | — |                     | $      | — |   | $ | 871 |   |

 

15

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**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

**Statement Under the PrivateSecurities Litigation Reform Act**

 

Certain information in this quarterly report on Form 10-Q, includingbut not limited to the Management’s Discussion and Analysis of FinancialCondition and Results of Operations, may constitute forward-looking statementsas 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 of1934.  Certain forward-lookingstatements 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 negativethereof or other comparable terminology, or by discussions of strategy, plansor intentions.  Forward-lookingstatements involve risks and uncertainties, including those described in theRisk Factors section of Item 1 of the Company’s Form S-4 Registration Statement(Registration No. 333-60300), which could cause actual results to be materiallydifferent than those in the forward-looking statements, which speak only as ofthe date hereof.  The Company assumes noobligation to update such information.

 

**General**

 

The Company is the largest provider of dredging services in the UnitedStates.  Dredging generally involves theenhancement or preservation of the navigability of waterways or the protectionof shorelines through the removal or replenishment of soil, sand or rock.  The U.S. dredging market consists of threeprimary types of work:  Capital, Maintenanceand Beach Nourishment, in which the Company experienced a combined U.S. marketshare of the projects on which it bids (“bid market”) of 39% in 2001.  In addition, the Company has continued itsrole as the only U.S. dredging contractor with significant internationaloperations, which averaged 14% of its contract revenues over the last threeyears.

 

In April 2001, the Company purchased 80% of the capital stock of NorthAmerican Site Developers, Inc. (“NASDI”), a demolition service provider locatedin the Boston, Massachusetts area.  Thepurchase consideration for the acquisition included (1) $35.0 million in cashpayable to the stockholders of NASDI, and (2) two junior subordinatedpromissory notes totaling $3.0 million from NASDI payable to the NASDImanagement stockholders.  The Companyissued $40.0 million of its senior subordinated notes to fund the cash portionof the acquisition price and pay related fees and expenses.  The NASDI management stockholders retained a20% non-voting interest in NASDI.

 

The Company’s equity in earnings (loss) of joint ventures relates tothe Company’s 50% ownership interest in Amboy Aggregates (“Amboy”) and 20%ownership interest in Riovia S.A. (“Riovia”), which are accounted for using theequity method.  The Company conductscertain hopper dredging activities, primarily maintenance and beach nourishmentprojects, through the operations of NATCO Limited Partnership (“NATCO”) andNorth American Trailing Company (“North American”).  Minority interests reflects Ballast Nedam Group N.V.’s respective25% and 20% interest in NATCO and North American, as well as NASDI managementstockholders’ 20% interest in NASDI.

 

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**Resultsof Operations**

** **

The following table sets forth the components of net income and EBITDAas a percentage of contract revenues for the three months ended March 31, 2002and 2001:

 
|                                               |   | **Three Months Ended  March 31,** |   |
|----------------------------------------------------|--------|-----------------------------------|--------|
|                                               |   | **2002**                          |   | **2001** |   |
|                                               |   |                              |   |   |   |
| Contract  revenues                                 |   | 100.0                             | %      | 100.0 | % |
| Costs of  contract revenues                        |   | (82.0                             | )      | (80.6 | ) |
| Gross profit                                       |   | 18.0                              |   | 19.4 |   |
| General and  administrative expenses               |   | (8.5                              | )      | (7.5 | ) |
| Operating income                                   |   | 9.5                               |   | 11.9 |   |
| Interest  expense, net                             |   | (6.7                              | )      | (6.1 | ) |
| Equity in loss  of joint ventures                  |   | (0.4                              | )      | (0.2 | ) |
| Income before  income taxes and minority interests |   | 2.4                               |   | 5.8 |   |
| Income tax  expense                                |   | (1.7                              | )      | (2.5 | ) |
| Minority  interests                                |   | 1.4                               |   | (0.9 | ) |
| Net income                                         |   | 2.1                               | %      | 2.2 | % |
|                                               |   |                              |   |   |   |
| EBITDA                                             |   | 14.4                              | %      | 16.3 | % |

 

“EBITDA,” as provided herein, represents earnings from continuingoperations before net interest expense, income taxes and depreciation andamortization expense and excludes equity earnings of joint ventures andminority interests.  EBITDA is notintended to represent cash flows from operations as defined by accountingprinciples generally accepted in the United States of America.  The Company’s EBITDA is included as it is abasis upon which the Company assesses its financial performance, and certaincovenants in the Company’s borrowing arrangements are tied to similarmeasures.  EBITDA should not beconsidered in isolation or as an alternative to net income, cash flows fromcontinuing operations, or other consolidated income or cash flow data preparedin accordance with generally accepted accounting principles in the UnitedStates of America as measures of the Company’s profitability or liquidity.  EBITDA as defined herein may differ fromsimilarly titled measures presented by other companies.

 

17

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

 
|                         |   | **Three Months Ended  March 31,** |       |
|------------------------------|--------|-----------------------------------|------------|
|                         |   | **2002**                          |       | **2001** |   |
| **Revenues  (in thousands)** |   |                              |       |   |   |
| Dredging:                    |   |                              | ** ** |   | ** ** |
| Capital – U.S.          |   | $                                 | 26,414     |   | $ | 29,658 |   |
| Capital –  foreign      |   | 10,514                            |       | 11,442 |   |
| Beach                        |   | 26,574                            |       | 24,095 |   |
| Maintenance                  |   | 8,801                             |       | 7,365 |   |
| Demolition                   |   | 8,670                             |       | — |   |
|                         |   | $                                 | 78,973     |   | $ | 72,560 |   |

 
|                        |   | **March 31,** | ** ** |
|-----------------------------|--------|---------------|------------|
|                        |   | **2002**      | ** ** | **2001** | ** ** |
| **Backlog  (in thousands)** |   |          |       |   |   |
| Dredging:                   |   |          | ** ** |   | ** ** |
| Capital – U.S.         |   | $             | 76,994     |   | $ | 73,352 |   |
| Capital –  foreign     |   | 93,093        |       | 55,999 |   |
| Beach                       |   | 38,293        |       | 39,064 |   |
| Maintenance                 |   | 2,153         |       | 17,490 |   |
| Demolition                  |   | 26,689        |       | — |   |
|                        |   | $             | 237,222    |   | $ | 185,905 |   |

 

First quarter 2002 revenues, which include the revenues of NASDI,totaled $79.0 million, which compares to $72.6 million for the first quarter of2001.  Excluding NASDI, dredgingrevenues were $70.3 million, representing a nominal decline of $2.3 millioncompared to the prior year, which is primarily a result of the timing and mixof projects performed in the respective periods.  Gross profit was comparable in the two quarters; however, as apercentage of revenue it declined from 19.4% in the first quarter of 2001 to18.0% in the first quarter of 2002.  Thedecline was due to increased costs on certain of the Company’s east coastdredging projects which encountered adverse weather and operating conditions.

 

Capital projects include large port deepenings and other infrastructureprojects.  Domestic capital dredgingrevenues of $26.4 million in the first quarter of 2002 declined $3.2 millionfrom the same period of 2001.  Thissmall decline was due primarily to a shift to beach nourishment revenues duringthe 2002 period.  The Company continuesto expect the domestic capital market to remain strong throughout 2002 as DeepPort projects, authorized by the 1986 Water Resource Development Act andsubsequent bills, continue to be scheduled and let for bid by the Army Corps ofEngineers (“Corps”).  In 1997, the Corpsannounced new Deep Port work and in subsequent years has expanded existingprojects with a combined revenue value in excess of $2.0 billion, to be completedthrough 2005.  Since this time, 28projects with a total revenue value of $876.6 million, have been let for bidand awarded through the first quarter of 2002. The Company was the low bidder on thirteen of these projects, with avalue of $374.8 million, representing 42.8% of the total let for bid andawarded.  In April 2002, the Corpsannounced that it will be reevaluating the justification for certain of theDeep Port projects which have not yet commenced.  Although substantial work remains on Deep Port projects that arecurrently 

 

18

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underway, this recent announcement could affect the program in futureyears if certain projects are postponed or suspended.

 

During the first quarter of 2002, contract revenues from domesticcapital projects included $9.4 million, $7.5 million and $5.3 million fromchannel deepening projects in Wilmington, North Carolina; Kill Van Kull, NewYork; and Jacksonville, Florida. Additionally, first quarter 2002 foreign capital revenues, which werecomparable to the first quarter of 2001, included $6.2 million and $4.4 millionattributable to capital projects in Bahrain and Ghana, respectively.

 

Beach nourishment projects include rebuilding of shoreline areas whichhave been damaged by storm activity or ongoing erosion.  First quarter 2002 revenues from beachnourishment projects were $26.6 million, representing an increase of $2.5million compared to the same period of 2001. However, during the first quarter of 2002, certain beach projects wereaffected by adverse weather and project operating conditions, resulting inlower margins.  There are inherent risksin the performance of beach nourishment work, including the need to workoffshore exposed to sea conditions and the environmental restrictions relatedto sea turtles.  These risks can causeproject delays and additional costs to the contractor, as the Companyexperienced in the first quarter of 2002. Significant beach nourishment projects in Brevard County, Florida;Jupiter, Florida; and Pine Knoll Shores, North Carolina contributed $6.2million, $5.2 million and $5.1 million, respectively, to 2002 first quarterrevenues.

 

Maintenance projects include routine dredging of ports, rivers andchannels to remove the regular build up of sediment.  First quarter 2002 revenues from maintenance projects were $6.8million compared to $7.4 million, representing typical first quartermaintenance dredging volume.  Firstquarter 2002 maintenance revenues included $3.0 million from a project for theYorktown, Virginia Naval Weapons Station, as well as $2.3 million from aproject on the Calcasieu River in Louisiana.

 

NASDI’s demolition revenue for the first quarter of 2002 totaled $8.7million and included approximately $2.0 million from the South Boston PowerPlant takedown, with the remaining revenue being generated by numerous smallerprojects.  Demolition activity startedslowly in the first quarter but picked up in March and is expected to continueat a higher level into the second and third quarters.

 

First quarter 2002 revenues of the Company’s NATCO hopper dredgingsubsidiary were $12.7 million, which compares to $13.5 million for the firstquarter of 2001.  However, NATCOexperienced an operating loss during the 2002 quarter due to the poorperformance discussed previously on certain beach nourishment projects on whichNATCO was employed.

 

General and administrative expenses were $6.7 million in the firstquarter of 2002 compared to $5.5 million for the same period of 2001.  The increase is primarily attributable tothe inclusion of NASDI’s general and administrative costs in the 2002 period.

** **

Non-operating expenses increased in the first quarter of 2002 as aresult of interest expense on the additional $40.0 million subordinated debtissuance used to fund the NASDI acquisition and increased revolving debtrequired to fund additional working capital requirements and capital spendingon equipment.  This increase waspartially offset by a decline in the interest rates on the Company’s variablerate bank debt.  Minority interestsresulted in a gain to the Company in the first quarter of 2002, primarily dueto the allocation of NATCO’s loss to its minority partner.

 

19

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Net income was $1.6 million for the first quarter of both 2002 and2001.  Although revenues were higher inthe 2002 period, additional operating costs incurred on certain of the beachnourishment projects and additional interest and financing costs from the NASDIacquisition offset the revenue gain. EBITDA (as defined on page 17) was $11.4 million and $11.8 million forthe quarters ended March 31, 2002 and 2001, respectively.  While first quarter 2002 EBITDA benefitedfrom the addition of NASDI, the EBITDA from dredging operations was impacted bythe adverse weather and operating conditions on certain beach nourishmentprojects, as mentioned previously.

 

**Liquidityand Capital Resources**

 

The Company’s primary sources of liquidity are cash flows fromoperations and borrowings under the revolving line of credit with the Company’ssenior lenders.  The Company’s primaryuses of cash are funding working capital, capital expenditures and debtservice.

 

The Company’s net cash flows used in operating activities for thequarter ended March 31, 2002 totaled $18.0 million compared to $7.3 million inthe comparable period of 2001.  Theincreased use of cash in operating activities for the 2002 period was due toincreased working capital requirements associated with normal timingdifferences on the recognition and billing of revenues, as well as additionaloperating cash outlays typical for the first quarter.

 

The Company’s net cash flows used in investing activities increased to$7.4 million in the first quarter of 2002 compared to $0.5 million in the firstquarter of 2001, primarily due to a disproportionately high amount of capitalspending on equipment in the first quarter of 2002.  The higher level of spending is expected to continue into thesecond quarter.  The 2002 annual capitalspending budget of $17 million is higher than in recent years, due to anincrease in dry dockings necessary to meet certification requirements oncertain hopper vessels.

 

The Company’s net cash flows from financing activities for the quarterended March 31, 2002 totaled $24.0 million compared to $7.5 million in the sameperiod of 2001.  The Company incurredadditional revolver borrowings in the 2002 quarter in order to fund theadditional working capital investment and capital spending experienced duringthe quarter.

 

Management believes cash flows from operations and available creditwill be sufficient to finance operations, planned capital expenditures and debtservice requirements for the foreseeable future.  The Company’s ability to fund its working capital needs, plannedcapital expenditures, scheduled debt payments and to comply with all of thefinancial covenants under its debt agreements, depends on its future operatingperformance and cash flows, which in turn, are subject to prevailing economicconditions and to financial, business and other factors, some of which arebeyond the Company’s control.

 

**Backlog**

 

The Company’s contract backlog represents management’s current estimateof the revenues which will be realized under the portion of the contractsremaining to be performed.  Suchestimates are subject to fluctuations based upon the amount of materialactually dredged, as well as factors affecting the time required to completethe job.  In addition, becausesubstantially all of the Company’s dredging backlog relates to governmentcontracts, the Company’s backlog can be canceled at any time withoutpenalty.  However, the Company willrecover actual committed

 

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costs and profit on work performed up to the date of cancellation.  Consequently, backlog is not necessarilyindicative of future revenues.  TheCompany’s backlog includes only those projects for which the customer hasprovided an executed contract.

 

As of March 31, 2002, the Company had dredging backlog of $210.5million, which compares to dredging backlog of $185.9 million at March 31,2001.  During the first quarter,domestic projects valued in excess of $250.0 million were let for bid,representing a strong first quarter level. However, an unusually high dollar volume of projects were pending awardat March 31, 2002.  This was dueprimarily to two projects bid during the quarter:  1) a Wilmington, North Carolina Deep Port project which wassolicited as a request-for-proposal and is expected to be awarded in the secondquarter with a revenue value in excess of $75.0 million and 2) a Kill Van Kull,New York Deep Port project, on which a competitor was low bidder atapproximately $44.0 million, but is pending award because the low bidder didnot have a permitted disposal site as required in the projectspecifications.  The low bidder has beenallowed a prescribed time-frame in which to provide a permitted disposal sitefor the dredged material, so this project should also be awarded in the secondquarter.  Projects valued atapproximately $115.0 million were awarded during the first quarter of 2002, andthe Company obtained $64.0 million, or 56%, of this work.

 

Backlog at March 31, 2002 continues to be concentrated in the capitaland beach nourishment.  markets, with areduced level of maintenance dredging backlog due to low levels ofprecipitation in the Midwest.  Domesticcapital projects make up $77.0 million or 32.5% of the March 31, 2002 backlog.  This includes two projects won in the firstquarter on a request-for-proposal basis: 1) a Deep Port project in Jacksonville, Florida valued at $29.4 millionand 2) a new work capital project in St. Lucie Inlet, Florida with a value of$15.6 million.  In addition, domesticcapital backlog includes $30.5 million remaining on Deep Port work in Kill VanKull, New York.  Foreign capital projectbacklog, which comprises $93.1 million or 39.2% of the March 31, 2002 backlog,relates primarily to the long-term project in Ghana and a significant projectin Bahrain, which was formally awarded in the fourth quarter of 2001.  Beach backlog at March 31, 2002 was $38.3million, which is comparable to the beach backlog level at March 31, 2001 of$39.1 million.  While the 2001 beachnourishment bid market exceeded $160 million in revenues, only one project wasbid during the first quarter of 2002, and was won by a competitor.  Despite the slow start, recent schedulesprovided by the Corps indicate that the 2002 beach nourishment bid market couldapproach $200 million.

 

The demolition backlog level at March 31, 2002 was $27.0 million, whichcompares to $31.1 million at December 31, 2001.

 

**Effects of Recently Issued AccountingStandards**

 

The Company has adopted Statement ofFinancial Accounting Standards (SFAS) No. 141, “Business Combinations” as ofJanuary 1, 2002.  This statementrequires the purchase method of accounting for business combinations initiatedafter June 30, 2001 and eliminates the pooling-of-interests method.

 

The Company has also adopted SFAS No. 142,“Goodwill and Other Intangible Assets” as of January 1, 2002.  This statement requires that goodwill andother intangible assets with indefinite useful lives no longer be amortized,but instead be assessed annually for impairment with the initial assessment tobe completed within the first six months following adoption of thestandard.  The Company’s goodwillrelates solely to its acquisition of NASDI, which took place in the

 

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second quarter of 2001; therefore, nogoodwill amortization is reflected in either of the three month periods endedMarch 31, 2002 and 2001.  The requiredinitial impairment evaluation was performed in the first quarter of 2002resulting in no impairment in the value of the Company’s goodwill.

 

In June 2001, the Financial AccountingStandards Board (FASB) also issued SFAS No. 143, “Accounting for AssetRetirement Obligations,” which addresses the recognition and remeasurement ofobligations associated with the retirement of tangible long-lived assets.  SFAS No. 143 is effective for financialstatements issued for fiscal years beginning after June 15, 2002.  The Company is currently assessing theimpact of adopting this statement, but does not anticipate that adoption willhave a material effect on its financial position or results of operations.

 

In August 2001, the FASB issued SFAS No. 144,“Accounting for Impairment or Disposal of Long-Lived Assets,” which supersedesprevious guidance and provides additional clarification as to when and how tomeasure a loss upon impairment or disposal of long-lived assets.  The Company adopted SFAS No. 144 effectiveJanuary 1, 2002, and its initial evaluation resulted in no impairment in thevalue of the Company’s long-lived assets.

 

**Item 3.  Quantitative and Qualitative Disclosures About Market Risk**

 

The market risk of the Company’s financial instruments as of March 31,2002 has not significantly changed since December 31, 2001.  The market risk profile of the Company onDecember 31, 2001 is disclosed in the Company’s 2001 Annual Report on Form10-K.

 

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**Part II**

 

**Item 1.  Legal Proceedings**

 

In April 2002, the Company agreed to pay apenalty of $150,000 to the South Coast Air Quality Management District, a Stateof California environmental authority, as full settlement of alleged violationsconcerning the removal and disposal of asbestos containing materials on one ofits hydraulic dredges.

 

**Item6.  Exhibits and Reports on Form 8-K**

 

(a)           Exhibits

 

(b)           Reports on Form 8-K

 

No reports on Form 8-Kwere filed during the first quarter of 2002.

 

**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 theundersigned thereunto duly authorized.

 
|   |        | Great Lakes Dredge & Dock Corporation                                 |
|--------|-------------|---------------------------------------------------------------------------|
|   |        |                                                                      |   |
| Date:  | May 9, 2002 |                                                                      | By: | /s/Deborah A.  Wensel |   |
|   |        | Deborah A. Wensel                                                         |
|   |        | Vice President and Chief Financial Officer                                |
|   |        |                                                                      |
|   |        | (Principal Financial and Accounting Officer and  Duly Authorized Officer) |
|        |             |                                                                           |  |  |  |

 

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**EXHIBITINDEX**

 
| **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. (2) |
| 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 11 1⁄4% Senior Subordinated Note due 2008  (included in Exhibit 4.01). (1)                                                                                                                                                             |
| 4.03       |   | First Supplemental Indenture dated as of June 15,  2000 among Great Lakes Caribbean Dredging, Inc., the Company, the other  Subsidiary Guarantors and the Bank of New York, as Trustee. (3)                                                       |
| 4.04       |   | Supplemental Indenture dated as of April 24, 2001  among the Company, North American Site Developers, Inc., the other subsidiary  Company and the Bank of New York, as Trustee. (4)                                                               |

 

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| (1)    | Incorporated by reference to Form S-4 Registration  Statement of the Company (File No. 333-64687) filed with the Securities and  Exchange Commission on September 29, 1998. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                        |
| (2)    | Incorporated by reference to the Company’s Current  Report on Form 8-K filed with the Securities and Exchange Commission on April  24, 2001.                           |
|   |                                                                                                                                                                        |
| (3)    | Incorporated by reference to the Company’s Annual  Report on Form 10-K for the Year Ended December 31, 2000 filed with the  Commission on March 21, 2001.              |
|   |                                                                                                                                                                        |
| (4)    | Incorporated by reference to From S-4 Registration  Statement of the Company (File No. 333-60300) filed with the Commission on  May 4, 2001.                                |

 

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