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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q

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

For the quarterly period ended June 30, 2003

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

(Exact name of registrant as specified in its charter)


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

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



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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x

As of
August 11, 2003, there were outstanding 16,169.82 shares of Class A
Common Stock, 33,639 shares of Class B Common Stock and 44,857 shares of Preferred Stock.



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TABLE OF CONTENTS



|                                                   |                                                                                              |                                                                                                       |  |  |  |  |  | 
|-------------------------------------------------- | -------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|Part I  Financial Information                     
|                                                   | Item 1 Financial Statements (Unaudited)                                                     
|                                                   |                                                                                              | Condensed Consolidated Balance Sheets at June 30, 2003 and December 31, 2002                         
|                                                   |                                                                                              | Condensed Consolidated Statements of Income for the Three and Six Months ended June 30, 2003 and 2002
|                                                   |                                                                                              | Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2003 and 2002      
|                                                   |                                                                                              | 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                           
|                                                   | Item 4 Controls and Procedures                                                              
|Part II Other Information                         
|                                                   | Item 6 Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                         
|EXHIBIT INDEX                                     
|EX-3.01 Restated Certificate of Incorporation     
|EX-31.1 Certification Pursuant to Rule 13a-14     
|EX-31.2 Certification Pursuant to Rule 13a-14     
|EX-32.1 Certification Pursuant to 18 USC, Sec 1350
|EX-32.2 Certification Pursuant to 18 USC, Sec 1350



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##### Table of Contents



Great Lakes Dredge & Dock Corporation and Subsidiaries
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period ended June 30, 2003

INDEX

|                                       |        |                                                 |                                          |  |    |    |    |      | 
|-------------------------------------- | ------ | ----------------------------------------------- | ---------------------------------------- |  | -- | -- | -- | ---- | 
|                                       |        |                                                 |                                          |  |    |    |    | Page
|Part I           Financial Information |        |                                                 |                                          |  |    |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       | Item 1 |                                                 | Financial Statements (Unaudited)         |  |    |    |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       |        | Condensed Consolidated Balance Sheets at        |                                          |  | 2  |   
|                                       |        | June 30, 2003 and December 31, 2002             |                                          |  |    |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       |        | Condensed Consolidated Statements of Income     |                                          |  | 3  |   
|                                       |        | for the Three and Six Months                    |                                          |  |    |   
|                                       |        | ended June 30, 2003 and 2002                    |                                          |  |    |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       |        | Condensed Consolidated Statements of Cash Flows |                                          |  | 4  |   
|                                       |        | for the Six Months ended June 30, 2003 and 2002 |                                          |  |    |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       |        | Notes to Unaudited Condensed Consolidated       |                                          |  | 5  |   
|                                       |        | Financial Statements                            |                                          |  |    |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       | Item 2 |                                                 | Management's Discussion and Analysis of  |  |    | 17 |   
|                                       |        | Financial Condition and Results of Operations   |                                          |  |    |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       | Item 3 |                                                 | Quantitative and Qualitative Disclosures |  |    |    |   
|                                       |        | About Market Risk                               |                                          |  | 23 |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       | Item 4 |                                                 | Controls and Procedures                  |  |    | 23 |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|Part II            Other Information   |        |                                                 |                                          |  |    |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|                                       | Item 6 |                                                 | Exhibits and Reports on Form 8-K         |  |    | 24 |   
|                                       |        |                                                 |                                          |  |    |    |    |     
|Signature                              |        |                                                 |                                          |  |    |    | 24 |     
|                                       |        |                                                 |                                          |  |    |    |    |     
|Exhibit Index                          |        |                                                 |                                          |  |    |    | 25 |     





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PART I  Financial Information




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

|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |          |         |         |              |         |         |  
|----------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------- | -------------------- | ------------------------------------------- | - | -------- | ------- | ------- | ------------ | ------- | ------- | -
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   | June 30, |         |         | December 31, |        
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   | 2003     |         |         | 2002         |        
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |          |         |         |              |        
|                                          |                                                                                                                                                                                                                    |                                                    |                      | Assets                                      |   |          |         |         |              |         |         |  
|Current assets:                           |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |          |         |        
|Cash and equivalents                      |                                                                                                                                                                                                                    | $                                                  | 1,297                |                                             |   | $        | 1,456   |        
|Accounts receivable, net                  |                                                                                                                                                                                                                    |                                                    | 61,870               |                                             |   |          | 52,125  |        
|Contract revenues in excess of billings   |                                                                                                                                                                                                                    |                                                    | 14,441               |                                             |   |          | 13,052  |        
|Inventories                               |                                                                                                                                                                                                                    |                                                    | 14,866               |                                             |   |          | 13,282  |        
|Prepaid expenses and other current assets |                                                                                                                                                                                                                    |                                                    | 19,043               |                                             |   |          | 18,283  |        
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |         
|                                          |                                                                                                                                                                                                                    |                                                    | Total current assets |                                             |   | 111,517  |         |         |              | 98,198  |        
|Property and equipment, net               |                                                                                                                                                                                                                    |                                                    | 137,705              |                                             |   |          | 139,419 |        
|Goodwill                                  |                                                                                                                                                                                                                    |                                                    | 29,405               |                                             |   |          | 29,405  |        
|Inventories                               |                                                                                                                                                                                                                    |                                                    | 10,173               |                                             |   |          | 9,828   |        
|Investments in joint ventures             |                                                                                                                                                                                                                    |                                                    | 6,668                |                                             |   |          | 5,552   |        
|Other assets                              |                                                                                                                                                                                                                    |                                                    | 4,506                |                                             |   |          | 5,084   |        
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |         
|                                          |                                                                                                                                                                                                                    |                                                    | Total assets         |                                             | $ | 299,974  |         |         | $            | 287,486 |        
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |         
|                                          |                                                                                                                                                                                                                    |                                                    |                      | Liabilities and Stockholders Deficit       |   |          |         |         |              |         |         |  
|Current liabilities:                      |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |          |         |        
|Accounts payable                          |                                                                                                                                                                                                                    | $                                                  | 44,636               |                                             |   | $        | 31,598  |        
|Accrued expenses                          |                                                                                                                                                                                                                    |                                                    | 25,678               |                                             |   |          | 30,114  |        
|Billings in excess of contract revenues   |                                                                                                                                                                                                                    |                                                    | 4,134                |                                             |   |          | 10,915  |        
|Current maturities of long-term debt      |                                                                                                                                                                                                                    |                                                    | 4,525                |                                             |   |          | 11,000  |        
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |         
|                                          |                                                                                                                                                                                                                    |                                                    |                      | Total current liabilities                   |   |          | 78,973  |         |              |         | 83,627  |  
|Long-term debt                            |                                                                                                                                                                                                                    |                                                    | 171,790              |                                             |   |          | 161,769 |        
|Deferred income taxes                     |                                                                                                                                                                                                                    |                                                    | 47,674               |                                             |   |          | 46,363  |        
|Other                                     |                                                                                                                                                                                                                    |                                                    | 5,595                |                                             |   |          | 5,787   |        
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |         
|                                          |                                                                                                                                                                                                                    |                                                    |                      | Total liabilities                           |   |          | 304,032 |         |              |         | 297,546 |  
|Minority interest                         |                                                                                                                                                                                                                    |                                                    | 2,276                |                                             |   |          | 2,346   |        
|Commitments and contingencies (Note 12)   |                                                                                                                                                                                                                    |                                                    |                     |                                             |   |          |        |        
|Stockholders deficit:                    |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |          |         |        
|                                          | Preferred stock, $.01 par value; 250,000 shares authorized:                                                                                                                                                        |                                                    |                      |                                             |   |          |         |         |             
|                                          |                                                                                                                                                                                                                    | 45,000 issued; 44,857 outstanding in 2003 and 2002 |                      |                                             | 1 |          |         |         | 1            |        
|                                          | Common stock, $.01 par value; 2003: 500,000 shares authorized,
50,000 shares issued and 49,808.82 shares outstanding;
2002: 50,000,000 shares authorized, 5,000,000 shares
issued and 4,980,882 shares outstanding |                                                    |                      | 50                                          |   |          |         | 50      |             
|                                          | Additional paid-in capital                                                                                                                                                                                         |                                                    |                      | 50,457                                      |   |          |         | 50,457  |             
|                                          | Accumulated deficit                                                                                                                                                                                                |                                                    |                      | (56,807                                     | ) |          |         | (62,787 | )           
|                                          | Accumulated other comprehensive income                                                                                                                                                                             |                                                    |                      | 176                                         |   |          |         | 103     |             
|                                          | Treasury stock, at cost; 143 preferred shares and 19,118
common shares in 2003 and 2002                                                                                                                            |                                                    |                      | (162                                        | ) |          |         | (162    | )           
|                                          | Note receivable from stockholder                                                                                                                                                                                   |                                                    |                      | (49                                         | ) |          |         | (68     | )           
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |         
|                                          |                                                                                                                                                                                                                    |                                                    |                      | Total stockholders deficit                 |   |          | (6,334  | )       |              |         | (12,406 | )
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |         
|                                          |                                                                                                                                                                                                                    |                                                    |                      | Total liabilities and stockholders deficit |   | $        | 299,974 |         |              | $       | 287,486 |  
|                                          |                                                                                                                                                                                                                    |                                                    |                      |                                             |   |         

See notes to unaudited condensed consolidated financial statements.

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

|                                    |                  |                            |         |                    |       |   |                  |        |       |      |         |        |        |   |         |        |       | 
|----------------------------------- | ---------------- | -------------------------- | ------- | ------------------ | ----- | - | ---------------- | ------ | ----- | ---- | ------- | ------ | ------ | - | ------- | ------ | ----- | 
|                                    |                  |                            |         | Three Months Ended |       |   | Six Months Ended |       
|                                    |                  |                            |         | June 30,           |       |   | June 30,         |       
|                                    |                  |                            |         |                    |       |   |                  |       
|                                    |                  |                            |         | 2003               |       |   | 2002             |        |       | 2003 |         |        | 2002   |  
|                                    |                  |                            |         |                    |       |   |                  |        |       |      |         |        |        |  
|Contract revenues                   |                  | $                          | 104,364 |                    |       | $ | 84,415           |        |       | $    | 204,057 |        |        | $ | 163,388 |       
|Costs of contract revenues          |                  |                            | 89,256  |                    |       |   | 69,619           |        |       |      | 170,911 |        |        |   | 134,376 |       
|                                    |                  |                            |         |                    |       |   |                  |        |       |      |         |       
|                                    | Gross profit     |                            |         | 15,108             |       |   |                  | 14,796 |       |      |         | 33,146 |        |   |         | 29,012 |      
|General and administrative expenses |                  |                            | 6,499   |                    |       |   | 6,606            |        |       |      | 13,440  |        |        |   | 13,326  |       
|                                    |                  |                            |         |                    |       |   |                  |        |       |      |         |       
|                                    | Operating income |                            |         | 8,609              |       |   |                  | 8,190  |       |      |         | 19,706 |        |   |         | 15,686 |      
|Interest expense, net               |                  |                            | (5,137  | )                  |       |   | (5,299           | )      |       |      | (10,193 | )      |        |   | (10,594 | )     
|Equity in earnings of joint venture |                  |                            | 677     |                    |       |   | 403              |        |       |      | 744     |        |        |   | 82      |       
|Minority interests                  |                  |                            | 91      |                    |       |   | 208              |        |       |      | 70      |        |        |   | 1,321   |       
|                                    |                  |                            |         |                    |       |   |                  |        |       |      |         |       
|                                    |                  | Income before income taxes |         |                    | 4,240 |   |                  |        | 3,502 |      |         |        | 10,327 |   |         |        | 6,495 | 
|Income tax benefit (expense)        |                  |                            | (1,747  | )                  |       |   | 2,342            |        |       |      | (4,347  | )      |        |   | 985     |       
|                                    |                  |                            |         |                    |       |   |                  |        |       |      |         |       
|                                    | Net income       |                            | $       | 2,493              |       |   | $                | 5,844  |       |      | $       | 5,980  |        |   | $       | 7,480  |      
|                                    |                  |                            |         |                    |       |   |                  |        |       |      |         |       

See notes to unaudited condensed consolidated financial statements.

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

|                                                                                 |                                                |                                           |                                          |                                          |        |                           |         |        |         |       |         |  
|-------------------------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ---------------------------------------- | ---------------------------------------- | ------ | ------------------------- | ------- | ------ | ------- | ----- | ------- | -
|                                                                                 |                                                |                                           |                                          |                                          |        | Six Months Ended June 30, |        
|                                                                                 |                                                |                                           |                                          |                                          |        |                           |        
|                                                                                 |                                                |                                           |                                          |                                          |        | 2003                      |         |        | 2002    |      
|                                                                                 |                                                |                                           |                                          |                                          |        |                           |         |        |         |      
|Operating Activities                                                             |                                                |                                           |                                          |                                          |        |                           |         |       
|Net income                                                                       |                                                | $                                         | 5,980                                    |                                          |        | $                         | 7,480   |       
|Adjustments to reconcile net income to net cash flows
from operating activities: |                                                |                                           |                                          |                                          |        |                           |         |       
|                                                                                 | Depreciation                                   |                                           |                                          | 8,135                                    |        |                           |         | 7,912  |        
|                                                                                 | Earnings of equity method investment           |                                           |                                          | (744                                     | )      |                           |         | (82    | )      
|                                                                                 | Minority interests                             |                                           |                                          | (70                                      | )      |                           |         | (1,321 | )      
|                                                                                 | Deferred income taxes                          |                                           |                                          | 495                                      |        |                           |         | 318    |        
|                                                                                 | Gain on dispositions of property and equipment |                                           |                                          | (110                                     | )      |                           |         | (406   | )      
|                                                                                 | Other, net                                     |                                           |                                          | 665                                      |        |                           |         | 809    |        
|                                                                                 | Changes in assets and liabilities:             |                                           |                                          |                                          |        |                           |         |        |        
|                                                                                 |                                                | Accounts receivable, net                  |                                          |                                          | (9,745 | )                         |         |        | (14,364 | )    
|                                                                                 |                                                | Contract revenues in excess of billings   |                                          |                                          | (1,389 | )                         |         |        | 8,252   |      
|                                                                                 |                                                | Inventories                               |                                          |                                          | (1,929 | )                         |         |        | 188     |      
|                                                                                 |                                                | Prepaid expenses and other current assets |                                          |                                          | 2,442  |                           |         |        | (1,616  | )    
|                                                                                 |                                                | Accounts payable and accrued expenses     |                                          |                                          | 8,602  |                           |         |        | (2,441  | )    
|                                                                                 |                                                | Billings in excess of contract revenues   |                                          |                                          | (6,781 | )                         |         |        | (1,976  | )    
|                                                                                 |                                                |                                           |                                          |                                          |        |                          
|                                                                                 |                                                |                                           | Net cash flows from operating activities |                                          |        | 5,551                     |         |        |         | 2,753 |        
|Investing Activities                                                             |                                                |                                           |                                          |                                          |        |                           |         |       
|Purchases of property and equipment                                              |                                                |                                           | (9,337                                   | )                                        |        |                           | (11,755 | )     
|Dispositions of property and equipment                                           |                                                |                                           | 129                                      |                                          |        |                           | 555     |       
|Disposition of interest in Riovia investment                                     |                                                |                                           | 1,200                                    |                                          |        |                           |        |       
|Equity investment in land acquisition                                            |                                                |                                           | (843                                     | )                                        |        |                           |        |       
|                                                                                 |                                                |                                           |                                          |                                          |        |                          
|                                                                                 |                                                |                                           |                                          | Net cash flows from investing activities |        |                           | (8,851  | )      |         |       | (11,200 | )
|Financing Activities                                                             |                                                |                                           |                                          |                                          |        |                           |         |       
|Repayments of long-term debt                                                     |                                                |                                           | (6,475                                   | )                                        |        |                           | (5,000  | )     
|Borrowings of revolving loans, net of repayments                                 |                                                |                                           | 10,000                                   |                                          |        |                           | 13,000  |       
|Financing fees                                                                   |                                                |                                           | (403                                     | )                                        |        |                           |        |       
|Repayment on note receivable from stockholder                                    |                                                |                                           | 19                                       |                                          |        |                           | 18      |       
|                                                                                 |                                                |                                           |                                          |                                          |        |                          
|                                                                                 |                                                |                                           |                                          | Net cash flows from financing activities |        |                           | 3,141   |        |         |       | 8,018   |  
|                                                                                 |                                                |                                           |                                          |                                          |        |                          
|Net change in cash and equivalents                                               |                                                |                                           | (159                                     | )                                        |        |                           | (429    | )     
|Cash and equivalents at beginning of period                                      |                                                |                                           | 1,456                                    |                                          |        |                           | 2,590   |       
|                                                                                 |                                                |                                           |                                          |                                          |        |                          
|Cash and equivalents at end of period                                            |                                                | $                                         | 1,297                                    |                                          |        | $                         | 2,161   |       
|                                                                                 |                                                |                                           |                                          |                                          |        |                          
|Supplemental Cash Flow Information                                               |                                                |                                           |                                          |                                          |        |                           |         |       
|                                                                                 | Cash paid for interest                         |                                           | $                                        | 9,528                                    |        |                           | $       | 9,751  |        
|                                                                                 |                                                |                                           |                                          |                                          |        |                          
|                                                                                 | Cash paid for taxes                            |                                           | $                                        | 6,010                                    |        |                           | $       | 3,980  |        
|                                                                                 |                                                |                                           |                                          |                                          |        |                          

See notes to unaudited condensed consolidated financial statements.

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



|1. |  | Basis of presentation
|-- |  | ---------------------

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the U.S. for interim financial information. Accordingly, these financial
statements do not include all the information in the notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, the unaudited condensed consolidated financial
statements include all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the financial position, results
of operations and cash flows as of and for the dates presented. The unaudited
condensed consolidated financial statements and notes herein should be read in
conjunction with the audited consolidated financial statements of Great Lakes
Dredge & Dock Corporation and Subsidiaries (the Company) and the notes
thereto, included in the Companys Annual Report filed on Form 10-K for the
year ended December 31, 2002.

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



|2. |  | Allocation of equipment cost
|-- |  | ----------------------------

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



|3. |  | Comprehensive income
|-- |  | --------------------

Total comprehensive income comprises net income and net unrealized gains
and losses on cash flow hedges. Total comprehensive income for the three
months ended June 30, 2003 and 2002 was $2,534 and $5,681, respectively. Total
comprehensive income for the six months ended June 30, 2003 and 2002 was $6,053
and $8,131, respectively.



|4. |  | Risk management activities
|-- |  | --------------------------

The Company uses derivative instruments to manage commodity price and
foreign currency exchange risks. Such instruments are not used for trading
purposes. As of June 30, 2003, the Company is party to various swap
arrangements to hedge the price of a portion of its diesel fuel purchase
requirements for work in its backlog to be performed through October 2004. As
of June 30, 2003, there were 8.6 million gallons remaining on these contracts.
Under these agreements, the Company will pay fixed prices ranging from $0.72 to
$0.75 per gallon. At June 30, 2003 and December 31, 2002, the fair value on
these contracts was estimated to be $290 and $169, respectively, based on
quoted market prices, and is recorded in other current assets. Ineffectiveness
related to these fuel hedge arrangements was determined to be immaterial. The
remaining gains included in accumulated other comprehensive income at June 30,
2003 will be reclassified into earnings over the next sixteen months,
corresponding to the period during which the hedged fuel is expected to be
utilized.
5Table of Contents

The carrying values of other financial instruments included in current
assets and current liabilities approximate fair values due to the short-term
maturities of these instruments. The carrying value of long-term bank debt is
a reasonable estimate of its fair value as interest rates are variable, based
on the prevailing market rates. At June 30, 2003 and December 31, 2002, the
Company had long-term subordinated notes outstanding with a recorded book value
of $154,790 and $154,769, respectively. The fair value of these notes was
$164,300 and $161,386 at June 30, 2003 and December 31, 2002, respectively,
based on quoted market prices.



|5. |  | Accounts receivable
|-- |  | -------------------

Accounts receivable at June 30, 2003 and December 31, 2002 are as
follows:

|                                |  |          |         |   |              |   |        |  
|------------------------------- |  | -------- | ------- | - | ------------ | - | ------ | -
|                                |  | June 30, |         |   | December 31, |  
|                                |  | 2003     |         |   | 2002         |  
|                                |  |          |         |   |              |  
|Completed contracts             |  | $        | 8,131   |   |              | $ | 15,134 |  
|Contracts in progress           |  |          | 43,653  |   |              |   | 31,466 |  
|Retainage                       |  |          | 11,123  |   |              |   | 6,511  |  
|                                |  |          |         |   |              |  
|                                |  |          | 62,907  |   |              |   | 53,111 |  
|Allowance for doubtful accounts |  |          | ( 1,037 | ) |              |   | ( 986  | )
|                                |  |          |         |   |              |  
|                                |  | $        | 61,870  |   |              | $ | 52,125 |  
|                                |  |          |         |   |              |  



|6. |  | Contracts in progress
|-- |  | ---------------------

The components of contracts in progress at June 30, 2003 and December 31,
2002 are as follows:

|                                                                               |                                              |   |          |          |   |              |         |          |  
|------------------------------------------------------------------------------ | -------------------------------------------- | - | -------- | -------- | - | ------------ | ------- | -------- | -
|                                                                               |                                              |   | June 30, |          |   | December 31, |        
|                                                                               |                                              |   | 2003     |          |   | 2002         |        
|                                                                               |                                              |   |          |          |   |              |        
|Costs and earnings in excess of billings:                                      |                                              |   |          |          |   |              |         |         
|                                                                               | Costs and earnings for contracts in progress |   | $        | 264,884  |   |              | $       | 190,837  |  
|                                                                               | Amounts billed                               |   |          | (250,932 | ) |              |         | (179,468 | )
|                                                                               |                                              |   |          |          |   |              |        
|Costs and earnings in excess of billings for
contracts in progress             |                                              |   | 13,952   |          |   |              | 11,369  |         
|Costs and earnings in excess of billings for
completed contracts               |                                              |   | 489      |          |   |              | 1,683   |         
|                                                                               |                                              |   |          |          |   |              |        
|                                                                               |                                              | $ | 14,441   |          |   | $            | 13,052  |         
|                                                                               |                                              |   |          |          |   |              |        
|Prepaid contract costs (included in prepaid
expenses and other current assets) |                                              | $ | 2,092    |          |   | $            | 3,218   |         
|                                                                               |                                              |   |          |          |   |              |        
|Billings in excess of costs and earnings:                                      |                                              |   |          |          |   |              |         |         
|                                                                               | Amounts billed                               |   | $        | (102,721 | ) |              | $       | (69,909  | )
|                                                                               | Costs and earnings for contracts in progress |   |          | 98,587   |   |              |         | 58,994   |  
|                                                                               |                                              |   |          |          |   |              |        
|                                                                               |                                              | $ | (4,134   | )        |   | $            | (10,915 | )       
|                                                                               |                                              |   |          |          |   |              |        

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|7. |  | Accrued expenses
|-- |  | ----------------

Accrued expenses at June 30, 2003 and December 31, 2002 are as follows:

|                              |  |          |        |  |              |   |        | 
|----------------------------- |  | -------- | ------ |  | ------------ | - | ------ | 
|                              |  | June 30, |        |  | December 31, |  
|                              |  | 2003     |        |  | 2002         |  
|                              |  |          |        |  |              |  
|Interest                      |  | $        | 6,762  |  |              | $ | 6,880  | 
|Insurance                     |  |          | 6,064  |  |              |   | 6,477  | 
|Payroll and employee benefits |  |          | 4,624  |  |              |   | 8,615  | 
|U.S. income and other taxes   |  |          | 4,219  |  |              |   | 4,721  | 
|Fixed equipment costs         |  |          | 1,650  |  |              |   |       | 
|Other                         |  |          | 2,359  |  |              |   | 3,421  | 
|                              |  |          |        |  |              |  
|                              |  | $        | 25,678 |  |              | $ | 30,114 | 
|                              |  |          |        |  |              |  



|8. |  | Long-term debt
|-- |  | --------------

In March 2003, the Company amended its Credit Agreement to increase its
revolving credit facility from $70,000 to $80,000. The revolving credit
facility may be used for borrowings or for letters of credit; it expires in
2006.



|9. |  | Reverse stock split
|-- |  | -------------------

On April 29, 2003, the Company affected a 100 for 1 reverse stock split of
its common stock, such that the number of authorized shares was reduced to
50,000 and the number of outstanding and issued shares reduced accordingly.



|10. |  | Sale of interest in Riovia S.A.
|--- |  | -------------------------------

In May 2003, the Company concluded the sale of its interest in Riovia
S.A., a venture whose sole business is the performance of a dredging contract
in Argentina and Uruguay. The Company realized a gain of $470, which is
reflected in equity from earnings of joint ventures in the statement of income.

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|11. |  | Segment information
|--- |  | -------------------

The Company and its subsidiaries operate in two reportable segments:
dredging and demolition. The Companys financial reporting systems present
various data for management to run the business, including profit and loss
statements prepared according to the segments presented. Segment information
for the periods presented is as follows:

|           |                   |  |                    |  |  |                  |      |         |   |  |  |  |  |      |   |        |  |  |  |  |  |  |  |  |      |  |   |         |  |  |  |      |  |  |   |         |  |  |  |  | 
|---------- | ----------------- |  | ------------------ |  |  | ---------------- | ---- | ------- | - |  |  |  |  | ---- | - | ------ |  |  |  |  |  |  |  |  | ---- |  | - | ------- |  |  |  | ---- |  |  | - | ------- |  |  |  |  | 
|           |                   |  | Three Months Ended |  |  | Six Months Ended |     
|           |                   |  | June 30,           |  |  | June 30,         |     
|           |                   |  |                    |  |  |                  |      |         |   |  |  |  |  |      |   |        |  |  |  |  |  |  | 
|           |                   |  |                    |  |  |                  | 2003 |         |   |  |  |  |  | 2002 |   |        |  |  |  |  |  |  |  |  | 2003 |  |   |         |  |  |  | 2002 |  |  |   |         | 
|           |                   |  |                    |  |  |                  |      |         |   |  |  |  |  |      |   |        |  |  |  |  |  |  |  |  |      |  |   |         |  |  |  |      |  |  |   |         | 
|Dredging   |                   |  |                    |  |  |                  |      |         |   |  |  |  |  |      |   |        |  |  |  |  |  |  |  |  |      |  |   |         |  |  |  |      |  |  |   |        
|           | Contract revenues |  |                    |  |  |                  | $    | 94,828  |   |  |  |  |  |      | $ | 72,047 |  |  |  |  |  |  |  |  |      |  | $ | 186,197 |  |  |  |      |  |  | $ | 142,350 | 
|           | Operating income  |  |                    |  |  |                  |      | 8,825   |   |  |  |  |  |      |   | 6,383  |  |  |  |  |  |  |  |  |      |  |   | 19,123  |  |  |  |      |  |  |   | 12,470  | 
|Demolition |                   |  |                    |  |  |                  |      |         |   |  |  |  |  |      |   |        |  |  |  |  |  |  |  |  |      |  |   |         |  |  |  |      |  |  |   |        
|           | Contract revenues |  |                    |  |  |                  | $    | 9,536   |   |  |  |  |  |      | $ | 12,368 |  |  |  |  |  |  |  |  |      |  | $ | 17,860  |  |  |  |      |  |  | $ | 21,038  | 
|           | Operating income  |  |                    |  |  |                  |      | (216    | ) |  |  |  |  |      |   | 1,807  |  |  |  |  |  |  |  |  |      |  |   | 583     |  |  |  |      |  |  |   | 3,216   | 
|Total      |                   |  |                    |  |  |                  |      |         |   |  |  |  |  |      |   |        |  |  |  |  |  |  |  |  |      |  |   |         |  |  |  |      |  |  |   |        
|           | Contract revenues |  |                    |  |  |                  | $    | 104,364 |   |  |  |  |  |      | $ | 84,415 |  |  |  |  |  |  |  |  |      |  | $ | 204,057 |  |  |  |      |  |  | $ | 163,388 | 
|           | Operating income  |  |                    |  |  |                  |      | 8,609   |   |  |  |  |  |      |   | 8,190  |  |  |  |  |  |  |  |  |      |  |   | 19,706  |  |  |  |      |  |  |   | 15,686  | 



|12. |  | Commitments and contingencies
|--- |  | -----------------------------

Commitments:

In the third quarter of 2003, the Company entered into an agreement to
construct a barge for approximately $5,000 to be delivered in December. The
Company also entered into an arrangement to sell two tugboats for approximately
$5,200, which is expected to result in a financial gain to the Company upon
receipt of the proceeds. The net book value of $2,897 related to the
tugboats has been reclassified to assets held for sale of
June 30, 2003.

Contingencies:

At June 30, 2003, the Company is contingently liable, in the normal course
of business, for $14,655 in undrawn letters of credit, with the majority
relating primarily to contract performance guarantees and one covering the
Companys insurance payment liabilities.

Amboy Aggregates, a joint venture in which the Company has a 50% equity
interest, has a mortgage loan with a bank, which contains certain restrictive
covenants, including limitations on the amount of distributions to its joint
venture partners. The Company has guaranteed 50% of the outstanding mortgage
principal and accrued interest, which totaled $720 at June 30, 2003.

In 1997, GLDD purchased rights to dispose of a certain quantity of dredged
material in upland disposal sites in New Jersey at an original cost of $3,150
(land rights). In 2002, the Company entered into an agreement with the owner
of the site setting forth amended terms and conditions that address the
quantity and use of the land rights, among other matters. In 2003, the site
owner utilized the remaining availability of the initial disposal site and
Company management has learned that it is uncertain when future disposal sites
will be made available for the Company to utilize its remaining disposal
rights. The Company is currently pursuing action against the owner of the
site, but based on the uncertainty of these circumstances, management believes
there is a possibility that the Companys recovery of the land rights at their
recorded

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amount may be impaired. The Company will continue its assessment of whether
its land rights may be impaired, as the outcome of these circumstances becomes
known. The unused portion of the land rights is recorded at cost of $2,371 and
is included in other current and non-current assets on the Companys
consolidated balance sheet at June 30, 2003.

The Company finances certain key vessels used in its operations with
off-balance sheet lease arrangements with unrelated lessors, requiring annual
rentals of $17 to $18 million. These off-balance sheet leases contain default
provisions which are triggered by an acceleration of debt maturity under the
terms of the Companys Credit Agreement. Additionally, the leases typically
contain provisions whereby the Company indemnifies the lessors for the tax
treatment attributable to such leases based on the tax rules in place at lease
inception. The tax indemnifications do not have a contractual dollar limit.
Additionally, it is impractical to develop an estimate of the maximum potential
exposure under these lease indemnification arrangements, since it is entirely
dependent on the unique tax circumstances of each lessor.

Borrowings under the Companys Credit Agreement are secured by first lien
mortgages on certain operating equipment of the Company with a net book value
of $35,892 at December 31, 2002. Additionally, the Company obtains its
performance and bid bonds through a bonding agreement with a surety company
that has been granted a security interest in a substantial portion of the
Companys operating equipment with a net book value of approximately $60,826 at
December 31, 2002. The net book value of equipment serving as collateral under
these agreements at June 30, 2003 does not materially differ from the values at
December 31, 2002. Both the Credit Agreement and bonding agreement contain
certain provisions and covenants; the Company is in compliance with such
covenants at June 30, 2003. The performance and bid bonds are customarily
required for dredging and marine construction projects, as well as some
demolition projects. Bid bonds are generally obtained for a percentage of bid
value and aggregate amounts outstanding typically range between $5 to $10
million. At June 30, 2003, the Company had outstanding performance bonds valued
at approximately $400 million; however the revenue value remaining in backlog
related to these projects totaled approximately $195 million at June 30, 2003.

Certain foreign projects performed by the Company have warranty periods,
typically spanning no more than three to five years beyond project completion,
whereby the Company retains responsibility to maintain the project site to
certain specifications during the warranty period. Generally, any potential
liability of the Company is mitigated by insurance, shared responsibilities
with consortium partners, and/or recourse to owner-provided specifications.

The Company considers it unlikely that it would have to perform under any
of these aforementioned contingent obligations and performance has never been
required in any of these circumstances in the past.

As is customary with negotiated contracts with the federal government, the
government has the right to audit the books and records of the Company to
ensure compliance with such contracts and applicable federal laws. The
government has the ability to seek a price adjustment based on the results of
such audit. Any such audits have not had and are not expected to have a
material adverse impact on the financial position or operations of the Company.

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

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|13. |  | Supplemental condensed consolidating financial information
|--- |  | ----------------------------------------------------------

Included
in the Companys long-term debt is $155,000 of 11 1/4% senior
subordinated notes which will mature on August 15, 2008. The payment
obligations of the Company under the senior subordinated notes are guaranteed
by the Companys domestic subsidiaries (the Subsidiary Guarantors). Such
guarantees are full, unconditional and joint and several. Separate financial
statements of the Subsidiary Guarantors are not presented because the Companys
management has determined that they would not be material to investors. The
following supplemental financial information sets forth, on a combined basis,
the balance sheets, statements of operations and statements of cash flows for
the Subsidiary Guarantors, the Companys non-guarantor subsidiaries and for the
Company (GLD Corporation). The Condensed Consolidating Statements of
Operations and Cash Flows for the three and six months ended June 30, 2002
include the operations of NATCO Limited Partnership and North American Trailing
Company within the non-guarantor subsidiary information. Pursuant to the
Companys acquisition of the minority partners remaining shares in November
2002, these entities were dissolved effective December 31, 2002 and all
subsequent activity is conducted by Great Lakes Dredge & Dock Company, a
wholly-owned subsidiary of the Company and a Subsidiary Guarantor.

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

Condensed Consolidating Balance Sheet at June 30, 2003

|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |          |         |              |   |         |        |         | 
|---------------------------------------------- | ----------------------------------------- | ------------------------- | ------- | --------- | ------------ | - | ----- | ----------- | ----- | --- | ------------ | ----- | ------- | ------ | -------- | ------- | ------------ | - | ------- | ------ | ------- | 
|                                               |                                           |                           |         | Guarantor |              |   | Other |             |       | GLD |              |       |         |        |          |         | Consolidated |  
|ASSETS                                         |                                           | Subsidiaries              |         |           | Subsidiaries |   |       | Corporation |       |     | Eliminations |       |         | Totals |         
|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |         
|Current assets:                                |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |          |         |              |   |         |       
|                                               | Cash and equivalents                      |                           | $       | 1,219     |              |   | $     | 78          |       |     | $            |      |         |        | $        |        |              |   | $       | 1,297  |        
|                                               | Accounts receivable, net                  |                           |         | 61,870    |              |   |       |            |       |     |              |      |         |        |          |        |              |   |         | 61,870 |        
|                                               | Receivables from affiliates               |                           |         | 14,629    |              |   |       | 2,900       |       |     |              | 6,000 |         |        |          | (23,529 | )            |   |         |       |        
|                                               | Contract revenues in excess of billings   |                           |         | 14,441    |              |   |       |            |       |     |              |      |         |        |          |        |              |   |         | 14,441 |        
|                                               | Inventories                               |                           |         | 14,866    |              |   |       |            |       |     |              |      |         |        |          |        |              |   |         | 14,866 |        
|                                               | Prepaid expenses and other current assets |                           |         | 17,270    |              |   |       |            |       |     |              | 1,773 |         |        |          |        |              |   |         | 19,043 |        
|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |         
|                                               |                                           | Total current assets      |         |           | 124,295      |   |       |             | 2,978 |     |              |       | 7,773   |        |          |         | (23,529      | ) |         |        | 111,517 | 
|Property and equipment, net                    |                                           |                           | 101,938 |           |              |   | 54    |             |       |     | 35,713       |       |         |        |         |         |              |   | 137,705 |       
|Goodwill                                       |                                           |                           | 29,405  |           |              |   |      |             |       |     |             |       |         |        |         |         |              |   | 29,405  |       
|Investments in subsidiaries                    |                                           |                           | 5,295   |           |              |   |      |             |       |     | 138,385      |       |         |        | (143,680 | )       |              |   |        |       
|Notes receivable from affiliates               |                                           |                           |        |           |              |   |      |             |       |     | 12,000       |       |         |        | (12,000  | )       |              |   |        |       
|Inventories                                    |                                           |                           | 10,173  |           |              |   |      |             |       |     |             |       |         |        |         |         |              |   | 10,173  |       
|Investments in joint ventures                  |                                           |                           | 6,668   |           |              |   |      |             |       |     |             |       |         |        |         |         |              |   | 6,668   |       
|Other assets                                   |                                           |                           | 2,397   |           |              |   |      |             |       |     | 2,109        |       |         |        |         |         |              |   | 4,506   |       
|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |         
|                                               |                                           | $                         | 280,171 |           |              | $ | 3,032 |             |       | $   | 195,980      |       |         | $      | (179,209 | )       |              | $ | 299,974 |       
|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |         
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |          |         |              |   |         |       
|Current liabilities:                           |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |          |         |              |   |         |       
|                                               | Accounts payable                          |                           | $       | 44,629    |              |   | $     |            |       |     | $            |      |         |        | $        | 7       |              |   | $       | 44,636 |        
|                                               | Payables to affiliates                    |                           |         | 10,428    |              |   |       |            |       |     |              | 7,101 |         |        |          | (17,529 | )            |   |         |       |        
|                                               | Accrued expenses                          |                           |         | 15,996    |              |   |       | 4           |       |     |              | 9,678 |         |        |          |        |              |   |         | 25,678 |        
|                                               | Billings in excess of contract revenues   |                           |         | 4,134     |              |   |       |            |       |     |              |      |         |        |          |        |              |   |         | 4,134  |        
|                                               | Current maturities of long-term debt      |                           |         | 6,000     |              |   |       |            |       |     |              | 4,525 |         |        |          | (6,000  | )            |   |         | 4,525  |        
|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |         
|                                               |                                           | Total current liabilities |         |           | 81,187       |   |       |             | 4     |     |              |       | 21,304  |        |          |         | (23,522      | ) |         |        | 78,973  | 
|Long-term debt                                 |                                           |                           | 3,000   |           |              |   |      |             |       |     | 168,790      |       |         |        |         |         |              |   | 171,790 |       
|Notes payable to affiliates                    |                                           |                           | 12,000  |           |              |   |      |             |       |     |             |       |         |        | (12,000  | )       |              |   |        |       
|Deferred income taxes                          |                                           |                           | 36,121  |           |              |   | 15    |             |       |     | 11,538       |       |         |        |         |         |              |   | 47,674  |       
|Other                                          |                                           |                           | 4,913   |           |              |   |      |             |       |     | 682          |       |         |        |         |         |              |   | 5,595   |       
|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |         
|                                               |                                           | Total liabilities         |         |           | 137,221      |   |       |             | 19    |     |              |       | 202,314 |        |          |         | (35,522      | ) |         |        | 304,032 | 
|Minority interests                             |                                           |                           |        |           |              |   |      |             |       |     |             |       |         |        | 2,276    |         |              |   | 2,276   |       
|Stockholders equity (deficit)                 |                                           |                           | 142,950 |           |              |   | 3,013 |             |       |     | (6,334       | )     |         |        | (145,963 | )       |              |   | (6,334  | )     
|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |         
|                                               |                                           | $                         | 280,171 |           |              | $ | 3,032 |             |       | $   | 195,980      |       |         | $      | (179,209 | )       |              | $ | 299,974 |       
|                                               |                                           |                           |         |           |              |   |       |             |       |     |              |       |         |        |         

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

Condensed Consolidating Balance Sheet at December 31, 2002

|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |          |         |              |   |         |        |         | 
|---------------------------------------------- | ----------------------------------------- | ------------------------- |  |  |  | - | ------------ | --------- | ------- | ------------ | ----- | ----- | ----------- | --- | ------- | ------------ | ------- | - | -------- | ------- | ------------ | - | ------- | ------ | ------- | 
|                                               |                                           |                           |  |  |  |   |              | Guarantor |         |              | Other |       |             | GLD |         |              |         |   |          |         | Consolidated |  
|                                               | ASSETS                                    |                           |  |  |  |   | Subsidiaries |           |         | Subsidiaries |       |       | Corporation |     |         | Eliminations |         |   | Totals   |        
|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |          |        
|Current assets:                                |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |          |         |              |   |         |       
|                                               | Cash and equivalents                      |                           |  |  |  |   | $            | 1,451     |         |              | $     | 5     |             |     | $       |             |         |   | $        |        |              |   | $       | 1,456  |        
|                                               | Accounts receivable, net                  |                           |  |  |  |   |              | 52,125    |         |              |       |      |             |     |         |             |         |   |          |        |              |   |         | 52,125 |        
|                                               | Receivables from affiliates               |                           |  |  |  |   |              | 7,970     |         |              |       | 2,983 |             |     |         |             |         |   |          | (10,953 | )            |   |         |       |        
|                                               | Contract revenues in excess of billings   |                           |  |  |  |   |              | 13,052    |         |              |       |      |             |     |         |             |         |   |          |        |              |   |         | 13,052 |        
|                                               | Inventories                               |                           |  |  |  |   |              | 13,282    |         |              |       |      |             |     |         |             |         |   |          |        |              |   |         | 13,282 |        
|                                               | Prepaid expenses and other current assets |                           |  |  |  |   |              | 17,132    |         |              |       |      |             |     |         | 1,151        |         |   |          |        |              |   |         | 18,283 |        
|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |         
|                                               |                                           | Total current assets      |  |  |  |   |              |           | 105,012 |              |       |       | 2,988       |     |         |              | 1,151   |   |          |         | (10,953      | ) |         |        | 98,198  | 
|Property and equipment, net                    |                                           |                           |  |  |  |   | 101,889      |           |         |              | 86    |       |             |     | 37,444  |              |         |   |         |         |              |   | 139,419 |       
|Goodwill                                       |                                           |                           |  |  |  |   | 29,405       |           |         |              |      |       |             |     |        |              |         |   |         |         |              |   | 29,405  |       
|Investments in subsidiaries                    |                                           |                           |  |  |  |   | 3,044        |           |         |              |      |       |             |     | 126,494 |              |         |   | (129,538 | )       |              |   |        |       
|Notes receivable from affiliates               |                                           |                           |  |  |  |   |             |           |         |              |      |       |             |     | 21,000  |              |         |   | (21,000  | )       |              |   |        |       
|Inventories                                    |                                           |                           |  |  |  |   | 9,828        |           |         |              |      |       |             |     |        |              |         |   |         |         |              |   | 9,828   |       
|Investments in joint ventures                  |                                           |                           |  |  |  |   | 5,552        |           |         |              |      |       |             |     |        |              |         |   |         |         |              |   | 5,552   |       
|Other assets                                   |                                           |                           |  |  |  |   | 2,671        |           |         |              |      |       |             |     | 2,413   |              |         |   |         |         |              |   | 5,084   |       
|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |         
|                                               |                                           |                           |  |  |  | $ | 257,401      |           |         | $            | 3,074 |       |             | $   | 188,502 |              |         | $ | (161,491 | )       |              | $ | 287,486 |       
|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |         
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |          |         |              |   |         |       
|Current liabilities:                           |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |          |         |              |   |         |       
|                                               | Accounts payable                          |                           |  |  |  |   | $            | 31,809    |         |              | $     |      |             |     | $       | (108         | )       |   | $        | (103    | )            |   | $       | 31,598 |        
|                                               | Payables to affiliates                    |                           |  |  |  |   |              | 3,945     |         |              |       |      |             |     |         | 7,008        |         |   |          | (10,953 | )            |   |         |       |        
|                                               | Accrued expenses                          |                           |  |  |  |   |              | 18,658    |         |              |       |      |             |     |         | 11,456       |         |   |          |        |              |   |         | 30,114 |        
|                                               | Billings in excess of contract revenues   |                           |  |  |  |   |              | 10,915    |         |              |       |      |             |     |         |             |         |   |          |        |              |   |         | 10,915 |        
|                                               | Current maturities of long-term debt      |                           |  |  |  |   |              | 6,000     |         |              |       |      |             |     |         | 11,000       |         |   |          | (6,000  | )            |   |         | 11,000 |        
|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |         
|                                               |                                           | Total current liabilities |  |  |  |   |              |           | 71,327  |              |       |       |            |     |         |              | 29,356  |   |          |         | (17,056      | ) |         |        | 83,627  | 
|Long-term debt                                 |                                           |                           |  |  |  |   | 3,000        |           |         |              |      |       |             |     | 158,769 |              |         |   |         |         |              |   | 161,769 |       
|Notes payable to affiliates                    |                                           |                           |  |  |  |   | 15,000       |           |         |              |      |       |             |     |        |              |         |   | (15,000  | )       |              |   |        |       
|Deferred income taxes                          |                                           |                           |  |  |  |   | 34,233       |           |         |              | 30    |       |             |     | 12,100  |              |         |   |         |         |              |   | 46,363  |       
|Other                                          |                                           |                           |  |  |  |   | 5,104        |           |         |              |      |       |             |     | 683     |              |         |   |         |         |              |   | 5,787   |       
|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |         
|                                               |                                           | Total liabilities         |  |  |  |   |              |           | 128,664 |              |       |       | 30          |     |         |              | 200,908 |   |          |         | (32,056      | ) |         |        | 297,546 | 
|Minority interests                             |                                           |                           |  |  |  |   |             |           |         |              |      |       |             |     |        |              |         |   | 2,346    |         |              |   | 2,346   |       
|Stockholders equity (deficit)                 |                                           |                           |  |  |  |   | 128,737      |           |         |              | 3,044 |       |             |     | (12,406 | )            |         |   | (131,781 | )       |              |   | (12,406 | )     
|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |         
|                                               |                                           |                           |  |  |  | $ | 257,401      |           |         | $            | 3,074 |       |             | $   | 188,502 |              |         | $ | (161,491 | )       |              | $ | 287,486 |       
|                                               |                                           |                           |  |  |  |   |              |           |         |              |       |       |             |     |         |              |         |   |         

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##### Table of Contents



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

Condensed Consolidating Statement of Income for the three months ended June 30, 2003

|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        |        |   |  |        |              |  |   |         |        | 
|----------------------------------------- | --------------------------------- | - | ------------ | ------ |  | ------------ | --- | --- | ----------- | - | ------ | ------------ | - | - | ------ | ------ | - |  | ------ | ------------ |  | - | ------- | ------ | 
|                                          |                                   |   | Guarantor    |        |  | Other        |     |     | GLD         |   |        |              |   |   |        |        |   |  |        | Consolidated | 
|                                          |                                   |   | Subsidiaries |        |  | Subsidiaries |     |     | Corporation |   |        | Eliminations |   |   |        |        |   |  | Totals |             
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        |        |   |  |        |             
|Contract revenues                         |                                   | $ | 104,364      |        |  | $            |    |     |             | $ |       |              |   | $ |       |        |   |  |        |              |  | $ | 104,364 |       
|Costs of contract revenues                |                                   |   | (88,974      | )      |  |              | (16 | )   |             |   | (266   | )            |   |   |       |        |   |  |        |              |  |   | (89,256 | )     
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        |        |   |  |       
|                                          | Gross profit (loss)               |   |              | 15,390 |  |              |     | (16 | )           |   |        | (266         | ) |   |        |       |   |  |        |              |  |   |         | 15,108 | 
|General and administrative expenses       |                                   |   | (6,464       | )      |  |              | (13 | )   |             |   | (22    | )            |   |   |       |        |   |  |        |              |  |   | (6,499  | )     
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        |        |   |  |       
|                                          | Operating income (loss)           |   |              | 8,926  |  |              |     | (29 | )           |   |        | (288         | ) |   |        |       |   |  |        |              |  |   |         | 8,609  | 
|Interest expense, net                     |                                   |   | (654         | )      |  |              |    |     |             |   | (4,483 | )            |   |   |       |        |   |  |        |              |  |   | (5,137  | )     
|Equity in earnings (loss) of subsidiaries |                                   |   | (28          | )      |  |              |    |     |             |   | 5,581  |              |   |   | (5,553 | )      |   |  |        |              |  |   |        |       
|Equity in earnings of joint ventures      |                                   |   | 677          |        |  |              |    |     |             |   |       |              |   |   |       |        |   |  |        |              |  |   | 677     |       
|Minority interests                        |                                   |   |             |        |  |              |    |     |             |   |       |              |   |   | 91     |        |   |  |        |              |  |   | 91      |       
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        |        |   |  |       
|                                          | Income (loss) before income taxes |   |              | 8,921  |  |              |     | (29 | )           |   |        | 810          |   |   |        | (5,462 | ) |  |        |              |  |   |         | 4,240  | 
|Income tax (expense) benefit              |                                   |   | (3,583       | )      |  |              | 12  |     |             |   | 1,824  |              |   |   |       |        |   |  |        |              |  |   | (1,747  | )     
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        |        |   |  |       
|                                          | Net income (loss)                 |   | $            | 5,338  |  |              | $   | (17 | )           |   | $      | 2,634        |   |   | $      | (5,462 | ) |  |        |              |  |   | $       | 2,493  | 
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        |        |   |  |       

Condensed Consolidating Statement of Income for the three months ended June 30, 2002

|                                          |                                   |   |              |        |  |              |         |       |             |   |        |              |   |   |        |              |   |   |         |        | 
|----------------------------------------- | --------------------------------- | - | ------------ | ------ |  | ------------ | ------- | ----- | ----------- | - | ------ | ------------ | - | - | ------ | ------------ | - | - | ------- | ------ | 
|                                          |                                   |   | Guarantor    |        |  | Other        |         |       | GLD         |   |        |              |   |   |        | Consolidated |  
|                                          |                                   |   | Subsidiaries |        |  | Subsidiaries |         |       | Corporation |   |        | Eliminations |   |   | Totals |             
|                                          |                                   |   |              |        |  |              |         |       |             |   |        |              |   |   |        |             
|Contract revenues                         |                                   | $ | 74,767       |        |  | $            | 16,656  |       |             | $ |       |              |   | $ | (7,008 | )            |   | $ | 84,415  |       
|Costs of contract revenues                |                                   |   | (60,580      | )      |  |              | (15,457 | )     |             |   | (590   | )            |   |   | 7,008  |              |   |   | (69,619 | )     
|                                          |                                   |   |              |        |  |              |         |       |             |   |        |              |   |   |       
|                                          | Gross profit (loss)               |   |              | 14,187 |  |              |         | 1,199 |             |   |        | (590         | ) |   |        |             |   |   |         | 14,796 | 
|General and administrative expenses       |                                   |   | (4,843       | )      |  |              | (1,671  | )     |             |   | (92    | )            |   |   |       |              |   |   | (6,606  | )     
|                                          |                                   |   |              |        |  |              |         |       |             |   |        |              |   |   |       
|                                          | Operating income (loss)           |   |              | 9,344  |  |              |         | (472  | )           |   |        | (682         | ) |   |        |             |   |   |         | 8,190  | 
|Interest expense, net                     |                                   |   | (597         | )      |  |              | (197    | )     |             |   | (4,505 | )            |   |   |       |              |   |   | (5,299  | )     
|Equity in (loss) earnings of subsidiaries |                                   |   | (604         | )      |  |              |        |       |             |   | 9,196  |              |   |   | (8,592 | )            |   |   |        |       
|Equity in earnings of joint ventures      |                                   |   | 403          |        |  |              |        |       |             |   |       |              |   |   |       |              |   |   | 403     |       
|Minority interests                        |                                   |   |             |        |  |              |        |       |             |   |       |              |   |   | 208    |              |   |   | 208     |       
|                                          |                                   |   |              |        |  |              |         |       |             |   |        |              |   |   |       
|                                          | Income (loss) before income taxes |   |              | 8,546  |  |              |         | (669  | )           |   |        | 4,009        |   |   |        | (8,384       | ) |   |         | 3,502  | 
|Income tax benefit (expense)              |                                   |   | 662          |        |  |              | (155    | )     |             |   | 1,835  |              |   |   |       |              |   |   | 2,342   |       
|                                          |                                   |   |              |        |  |              |         |       |             |   |        |              |   |   |       
|                                          | Net income (loss)                 |   | $            | 9,208  |  |              | $       | (824  | )           |   | $      | 5,844        |   |   | $      | (8,384       | ) |   | $       | 5,844  | 
|                                          |                                   |   |              |        |  |              |         |       |             |   |        |              |   |   |       

13



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##### Table of Contents



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

Condensed Consolidating Statement of Income for the six months ended June 30, 2003

|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |         |              |   |   |          |        | 
|----------------------------------------- | --------------------------------- | - | ------------ | ------ |  | ------------ | --- | --- | ----------- | - | ------ | ------------ | - | - | ------- | ------------ | - | - | -------- | ------ | 
|                                          |                                   |   | Guarantor    |        |  | Other        |     |     | GLD         |   |        |              |   |   |         | Consolidated |  
|                                          |                                   |   | Subsidiaries |        |  | Subsidiaries |     |     | Corporation |   |        | Eliminations |   |   | Totals  |             
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |         |             
|Contract revenues                         |                                   | $ | 204,057      |        |  | $            |    |     |             | $ |       |              |   | $ |        |              |   | $ | 204,057  |       
|Costs of contract revenues                |                                   |   | (170,147     | )      |  |              | (32 | )   |             |   | (622   | )            |   |   | (110    | )            |   |   | (170,911 | )     
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        
|                                          | Gross profit                      |   |              | 33,910 |  |              |     | (32 | )           |   |        | (622         | ) |   |         | (110         | ) |   |          | 33,146 | 
|General and administrative expenses       |                                   |   | (13,366      | )      |  |              | (22 | )   |             |   | (52    | )            |   |   |        |              |   |   | (13,440  | )     
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        
|                                          | Operating income                  |   |              | 20,544 |  |              |     | (54 | )           |   |        | (674         | ) |   |         | (110         | ) |   |          | 19,706 | 
|Interest expense, net                     |                                   |   | (1,337       | )      |  |              |    |     |             |   | (8,856 | )            |   |   |        |              |   |   | (10,193  | )     
|Equity in (loss) earnings of subsidiaries |                                   |   | (51          | )      |  |              |    |     |             |   | 12,035 |              |   |   | (11,984 | )            |   |   |         |       
|Equity in loss of joint ventures          |                                   |   | 744          |        |  |              |    |     |             |   |       |              |   |   |        |              |   |   | 744      |       
|Minority interests                        |                                   |   |             |        |  |              |    |     |             |   |       |              |   |   | 70      |              |   |   | 70       |       
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        
|                                          | Income (loss) before income taxes |   |              | 19,900 |  |              |     | (54 | )           |   |        | 2,505        |   |   |         | (12,024      | ) |   |          | 10,327 | 
|Income tax (expense) benefit              |                                   |   | (7,986       | )      |  |              | 23  |     |             |   | 3,616  |              |   |   |        |              |   |   | (4,347   | )     
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        
|                                          | Net income (loss)                 |   | $            | 11,914 |  |              | $   | (31 | )           |   | $      | 6,121        |   |   | $       | (12,024      | ) |   | $        | 5,980  | 
|                                          |                                   |   |              |        |  |              |     |     |             |   |        |              |   |   |        

Condensed Consolidating Statement of Income for the six months ended June 30, 2002

|                                          |                                   |   |              |        |  |              |         |        |             |   |        |              |   |   |         |              |   |   |          |        | 
|----------------------------------------- | --------------------------------- | - | ------------ | ------ |  | ------------ | ------- | ------ | ----------- | - | ------ | ------------ | - | - | ------- | ------------ | - | - | -------- | ------ | 
|                                          |                                   |   | Guarantor    |        |  | Other        |         |        | GLD         |   |        |              |   |   |         | Consolidated |  
|                                          |                                   |   | Subsidiaries |        |  | Subsidiaries |         |        | Corporation |   |        | Eliminations |   |   | Totals  |             
|                                          |                                   |   |              |        |  |              |         |        |             |   |        |              |   |   |         |             
|Contract revenues                         |                                   | $ | 143,411      |        |  | $            | 32,116  |        |             | $ |       |              |   | $ | (12,139 | )            |   | $ | 163,388  |       
|Costs of contract revenues                |                                   |   | (111,619     | )      |  |              | (33,962 | )      |             |   | (934   | )            |   |   | 12,139  |              |   |   | (134,376 | )     
|                                          |                                   |   |              |        |  |              |         |        |             |   |        |              |   |   |        
|                                          | Gross profit (loss)               |   |              | 31,792 |  |              |         | (1,846 | )           |   |        | (934         | ) |   |         |             |   |   |          | 29,012 | 
|General and administrative expenses       |                                   |   | (10,181      | )      |  |              | (3,053  | )      |             |   | (92    | )            |   |   |        |              |   |   | (13,326  | )     
|                                          |                                   |   |              |        |  |              |         |        |             |   |        |              |   |   |        
|                                          | Operating income (loss)           |   |              | 21,611 |  |              |         | (4,899 | )           |   |        | (1,026       | ) |   |         |             |   |   |          | 15,686 | 
|Interest expense, net                     |                                   |   | (1,281       | )      |  |              | (318    | )      |             |   | (8,995 | )            |   |   |        |              |   |   | (10,594  | )     
|Equity in (loss) earnings of subsidiaries |                                   |   | (4,143       | )      |  |              |        |        |             |   | 14,314 |              |   |   | (10,171 | )            |   |   |         |       
|Equity in earnings of joint ventures      |                                   |   | 82           |        |  |              |        |        |             |   |       |              |   |   |        |              |   |   | 82       |       
|Minority interests                        |                                   |   |             |        |  |              |        |        |             |   |       |              |   |   | 1,321   |              |   |   | 1,321    |       
|                                          |                                   |   |              |        |  |              |         |        |             |   |        |              |   |   |        
|                                          | Income (loss) before income taxes |   |              | 16,269 |  |              |         | (5,217 | )           |   |        | 4,293        |   |   |         | (8,850       | ) |   |          | 6,495  | 
|Income tax (expense) benefit              |                                   |   | (1,873       | )      |  |              | (329    | )      |             |   | 3,187  |              |   |   |        |              |   |   | 985      |       
|                                          |                                   |   |              |        |  |              |         |        |             |   |        |              |   |   |        
|                                          | Net income (loss)                 |   | $            | 14,396 |  |              | $       | (5,546 | )           |   | $      | 7,480        |   |   | $       | (8,850       | ) |   | $        | 7,480  | 
|                                          |                                   |   |              |        |  |              |         |        |             |   |        |              |   |   |        

14



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##### Table of Contents



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

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2003

|                                                                                        |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |         |        |              |   |        |        |        |  
|--------------------------------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ------ | ------------ | ------ | - | ------------ | --- | - | ----------- | ------ | ------- | ------------ | - | ------- | ------ | ------------ | - | ------ | ------ | ------ | -
|                                                                                        |                                                |                                           |        | Guarantor    |        |   | Other        |     |   | GLD         |        |         |              |   |         |        | Consolidated |  
|                                                                                        |                                                |                                           |        | Subsidiaries |        |   | Subsidiaries |     |   | Corporation |        |         | Eliminations |   |         | Totals |             
|                                                                                        |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |         |        |             
|Operating Activities                                                                    |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |         |        |              |   |        |       
|Net income (loss)                                                                       |                                                | $                                         | 11,914 |              |        | $ | (31          | )   |   | $           | 6,121  |         |              | $ | (12,024 | )      |              | $ | 5,980  |       
|Adjustments to reconcile net income (loss) to net
cash flows from operating activities: |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |         |        |              |   |        |       
|                                                                                        | Depreciation                                   |                                           |        | 6,372        |        |   |              | 32  |   |             |        | 1,731   |              |   |         |       |              |   |        | 8,135  |       
|                                                                                        | Earnings of subsidiaries and joint ventures    |                                           |        | (693         | )      |   |              |    |   |             |        | (12,145 | )            |   |         | 12,094 |              |   |        | (744   | )     
|                                                                                        | Minority interests                             |                                           |        |             |        |   |              |    |   |             |        |        |              |   |         | (70    | )            |   |        | (70    | )     
|                                                                                        | Deferred income taxes                          |                                           |        | 1,072        |        |   |              | (15 | ) |             |        | (562    | )            |   |         |       |              |   |        | 495    |       
|                                                                                        | Gain on dispositions of property
and equipment |                                           |        | (110         | )      |   |              |    |   |             |        |        |              |   |         |       |              |   |        | (110   | )     
|                                                                                        | Other, net                                     |                                           |        | 343          |        |   |              |    |   |             |        | 322     |              |   |         |       |              |   |        | 665    |       
|                                                                                        | Changes in assets and liabilities:             |                                           |        |              |        |   |              |    |   |             |        |         |              |   |         |        |              |   |        |        |       
|                                                                                        |                                                | Accounts receivable, net                  |        |              | (9,745 | ) |              |     |  |             |        |         |             |   |         |        |             |   |        |        | (9,745 | )
|                                                                                        |                                                | Contract revenues in excess of billings   |        |              | (1,389 | ) |              |     |  |             |        |         |             |   |         |        |             |   |        |        | (1,389 | )
|                                                                                        |                                                | Inventories                               |        |              | (1,929 | ) |              |     |  |             |        |         |             |   |         |        |             |   |        |        | (1,929 | )
|                                                                                        |                                                | Prepaid expenses and other current assets |        |              | 3,047  |   |              |     |  |             |        |         | (605         | ) |         |        |             |   |        |        | 2,442  |  
|                                                                                        |                                                | Accounts payable and accrued expenses     |        |              | 10,268 |   |              |     | 4 |             |        |         | (1,670       | ) |         |        |             |   |        |        | 8,602  |  
|                                                                                        |                                                | Billings in excess of contract revenues   |        |              | (6,781 | ) |              |     |  |             |        |         |             |   |         |        |             |   |        |        | (6,781 | )
|                                                                                        |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |        
|                                                                                        | Net cash flows from operating activities       |                                           |        | 12,369       |        |   |              | (10 | ) |             |        | (6,808  | )            |   |         |       |              |   |        | 5,551  |       
|Investing Activities                                                                    |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |         |        |              |   |        |       
|Purchases of property and equipment                                                     |                                                |                                           | (9,337 | )            |        |   |             |     |   |             |       |         |              |   |        |        |              |   | (9,337 | )     
|Dispositions of property and equipment                                                  |                                                |                                           | 129    |              |        |   |             |     |   |             |       |         |              |   |        |        |              |   | 129    |       
|Disposition of interest in Riovia investment                                            |                                                |                                           | 1,200  |              |        |   |             |     |   |             |       |         |              |   |        |        |              |   | 1,200  |       
|Equity investment in land acquisition                                                   |                                                |                                           | (843   | )            |        |   |             |     |   |             |       |         |              |   |        |        |              |   | (843   | )     
|                                                                                        |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |        
|                                                                                        | Net cash flows from investing activities       |                                           |        | (8,851       | )      |   |              |    |   |             |        |        |              |   |         |       |              |   |        | (8,851 | )     
|Financing Activities                                                                    |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |         |        |              |   |        |       
|Repayments of long-term debt                                                            |                                                |                                           |       |              |        |   |             |     |   |             | (6,475 | )       |              |   |        |        |              |   | (6,475 | )     
|Borrowings of revolving loans, net of repayments                                        |                                                |                                           |       |              |        |   |             |     |   |             | 10,000 |         |              |   |        |        |              |   | 10,000 |       
|Net change in accounts with affiliates                                                  |                                                |                                           | (3,769 | )            |        |   | 83           |     |   |             | 3,686  |         |              |   |        |        |              |   |       |       
|Financing fees                                                                          |                                                |                                           |       |              |        |   |             |     |   |             | (403   | )       |              |   |        |        |              |   | (403   | )     
|Repayments on notes receivable from stockholders                                        |                                                |                                           | 19     |              |        |   |             |     |   |             |       |         |              |   |        |        |              |   | 19     |       
|                                                                                        |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |        
|                                                                                        | Net cash flows from financing activities       |                                           |        | (3,750       | )      |   |              | 83  |   |             |        | 6,808   |              |   |         |       |              |   |        | 3,141  |       
|                                                                                        |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |        
|                                                                                        | Net change in cash and equivalents             |                                           |        | (232         | )      |   |              | 73  |   |             |        | (0      | )            |   |         |       |              |   |        | (159   | )     
|                                                                                        | Cash and equivalents at beginning of period    |                                           |        | 1,451        |        |   |              | 5   |   |             |        |        |              |   |         |       |              |   |        | 1,456  |       
|                                                                                        |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |        
|                                                                                        | Cash and equivalents at end of period          |                                           | $      | 1,219        |        |   | $            | 78  |   |             | $      | (0      | )            |   | $       |       |              |   | $      | 1,297  |       
|                                                                                        |                                                |                                           |        |              |        |   |              |     |   |             |        |         |              |   |        

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##### Table of Contents



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

Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2002

|                                                                                        |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |        |        |              |   |         |         |         |  
|--------------------------------------------------------------------------------------- | -------------------------------------------------- | ----------------------------------------- | ------- | ------------ | ------- | - | ------------ | ------ | ------ | ----------- | ------ | ------- | ------------ | - | ------ | ------ | ------------ | - | ------- | ------- | ------- | -
|                                                                                        |                                                    |                                           |         | Guarantor    |         |   | Other        |        |        | GLD         |        |         |              |   |        |        | Consolidated |  
|                                                                                        |                                                    |                                           |         | Subsidiaries |         |   | Subsidiaries |        |        | Corporation |        |         | Eliminations |   |        | Totals |             
|                                                                                        |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |        |        |             
|Operating Activities                                                                    |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |        |        |              |   |         |        
|Net income (loss)                                                                       |                                                    | $                                         | 14,396  |              |         | $ | (5,546       | )      |        | $           | 7,480  |         |              | $ | (8,850 | )      |              | $ | 7,480   |        
|Adjustments to reconcile net income (loss) to net
cash flows from operating activities: |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |        |        |              |   |         |        
|                                                                                        | Depreciation                                       |                                           |         | 5,528        |         |   |              | 1,059  |        |             |        | 1,325   |              |   |        |       |              |   |         | 7,912   |        
|                                                                                        | Loss (earnings) of subsidiaries and joint ventures |                                           |         | 4,143        |         |   |              |       |        |             |        | (14,396 | )            |   |        | 10,171 |              |   |         | (82     | )      
|                                                                                        | Minority interests                                 |                                           |         |             |         |   |              |       |        |             |        |        |              |   |        | (1,321 | )            |   |         | (1,321  | )      
|                                                                                        | Deferred income taxes                              |                                           |         | 801          |         |   |              | 4      |        |             |        | (487    | )            |   |        |       |              |   |         | 318     |        
|                                                                                        | Gain on dispositions of property
and equipment     |                                           |         | (406         | )       |   |              |       |        |             |        |        |              |   |        |       |              |   |         | (406    | )      
|                                                                                        | Other, net                                         |                                           |         | 304          |         |   |              | 5      |        |             |        | 500     |              |   |        |       |              |   |         | 809     |        
|                                                                                        | Changes in assets and liabilities:                 |                                           |         |              |         |   |              |        |        |             |        |         |              |   |        |        |              |   |         |         |        
|                                                                                        |                                                    | Accounts receivable, net                  |         |              | (11,384 | ) |              |        | (2,980 | )           |        |         |             |   |        |        |             |   |         |         | (14,364 | )
|                                                                                        |                                                    | Contract revenues in excess of billings   |         |              | 8,644   |   |              |        | (392   | )           |        |         |             |   |        |        |             |   |         |         | 8,252   |  
|                                                                                        |                                                    | Inventories                               |         |              | 380     |   |              |        | (192   | )           |        |         |             |   |        |        |             |   |         |         | 188     |  
|                                                                                        |                                                    | Prepaid expenses and other current assets |         |              | (3,723  | ) |              |        | 2,229  |             |        |         | (122         | ) |        |        |             |   |         |         | (1,616  | )
|                                                                                        |                                                    | Accounts payable and accrued expenses     |         |              | 3,322   |   |              |        | (2,852 | )           |        |         | (2,911       | ) |        |        |             |   |         |         | (2,441  | )
|                                                                                        |                                                    | Billings in excess of contract revenues   |         |              | (1,976  | ) |              |        |       |             |        |         |             |   |        |        |             |   |         |         | (1,976  | )
|                                                                                        |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |       
|                                                                                        | Net cash flows from operating activities           |                                           |         | 20,029       |         |   |              | (8,665 | )      |             |        | (8,611  | )            |   |        |       |              |   |         | 2,753   |        
|Investing Activities                                                                    |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |        |        |              |   |         |        
|Purchases of property and equipment                                                     |                                                    |                                           | (11,507 | )            |         |   | (248         | )      |        |             |       |         |              |   |       |        |              |   | (11,755 | )      
|Dispositions of property and equipment                                                  |                                                    |                                           | 555     |              |         |   |             |        |        |             |       |         |              |   |       |        |              |   | 555     |        
|                                                                                        |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |       
|                                                                                        | Net cash flows from investing activities           |                                           |         | (10,952      | )       |   |              | (248   | )      |             |        |        |              |   |        |       |              |   |         | (11,200 | )      
|Financing Activities                                                                    |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |        |        |              |   |         |        
|Repayments of long-term debt                                                            |                                                    |                                           |        |              |         |   |             |        |        |             | (5,000 | )       |              |   |       |        |              |   | (5,000  | )      
|Borrowings of revolving loans, net of repayments                                        |                                                    |                                           |        |              |         |   |             |        |        |             | 13,000 |         |              |   |       |        |              |   | 13,000  |        
|Principal receipts (payments) on capital leases                                         |                                                    |                                           |        |              |         |   | (1,153       | )      |        |             | 1,153  |         |              |   |       |        |              |   |        |        
|Net change in accounts with affiliates                                                  |                                                    |                                           | (9,513  | )            |         |   | 10,073       |        |        |             | (560   | )       |              |   |       |        |              |   |        |        
|Repayment on note receivable from stockholder                                           |                                                    |                                           |         |              |         |   |             |        |        |             | 18     |         |              |   |       |        |              |   | 18      |        
|                                                                                        |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |       
|                                                                                        | Net cash flows from financing activities           |                                           |         | (9,513       | )       |   |              | 8,920  |        |             |        | 8,611   |              |   |        |       |              |   |         | 8,018   |        
|                                                                                        |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |       
|                                                                                        | Net change in cash and equivalents                 |                                           |         | (436         | )       |   |              | 7      |        |             |        |        |              |   |        |       |              |   |         | (429    | )      
|                                                                                        | Cash and equivalents at beginning of period        |                                           |         | 2,515        |         |   |              | 75     |        |             |        |        |              |   |        |       |              |   |         | 2,590   |        
|                                                                                        |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |       
|                                                                                        | Cash and equivalents at end of period              |                                           | $       | 2,079        |         |   | $            | 82     |        |             | $      |        |              |   | $      |       |              |   | $       | 2,161   |        
|                                                                                        |                                                    |                                           |         |              |         |   |              |        |        |             |        |         |              |   |       

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

Statement Under the Private Securities Litigation Reform Act

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

General

The Company is the largest provider of dredging services in the United States.
Dredging generally involves the enhancement or preservation of the navigability
of waterways or the protection of shorelines through the removal or
replenishment of soil, sand or rock. The U.S. dredging market consists of
three primary types of work: Capital, Maintenance and Beach Nourishment, in
which the Company experienced an average combined U.S. bid market share of 42%
over the last three years. The Companys bid market is defined as the
population of projects on which it bid or could have bid if not for capacity
constraints (bid market). In addition, the Company has continued its role as
the only U.S. dredging contractor with significant international operations,
which averaged 16% of its contract revenues over the last three years.

The Company also owns 80% of the capital stock of North American Site
Developers, Inc. (NASDI), a demolition service provider located in the
Boston, Massachusetts area. NASDIs principal services consist of interior and
exterior demolition of commercial and industrial buildings, salvage and
recycling of related materials, and removal of hazardous substances and
materials. The NASDI management stockholders retain a 20% non-voting interest
in NASDI.

The Companys equity in earnings of joint ventures relates to the Companys 50%
ownership interest in Amboy Aggregates (Amboy) which is accounted for using
the equity method. Through November 2002, the Company conducted certain hopper
dredging activities, primarily maintenance and beach nourishment projects,
through the operations of NATCO Limited Partnership (NATCO) and North
American Trailing Company (North American). On November 25, 2002, the
Company purchased its foreign minority partners interests in NATCO and North
American for $4.5 million. These subsidiary entities were dissolved at the end
of 2002, and all hopper dredging activities are now being conducted by Great
Lakes Dredge & Dock Company, a wholly-owned dredging subsidiary of the Company.
Therefore, minority interest solely reflects NASDI management stockholders
20% interest in NASDI.

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##### Table of Contents



Results of Operations

The following table sets forth the components of net income and EBITDA as a
percentage of contract revenues for the three and six months ended June 30,
2003 and 2002:

|                                     |                            |  |                    |      |   |                  |       |      |      |  |       |      |   |  |       |      |  
|------------------------------------ | -------------------------- |  | ------------------ | ---- | - | ---------------- | ----- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | -
|                                     |                            |  | Three Months Ended |      |   | Six Months Ended |      
|                                     |                            |  | June 30,           |      |   | June 30,         |      
|                                     |                            |  |                    |      |   |                  |      
|                                     |                            |  | 2003               |      |   | 2002             |       |      | 2003 |  |       | 2002 |  
|                                     |                            |  |                    |      |   |                  |       |      |      |  |       |      |  
|Contract revenues                    |                            |  | 100.0              | %    |   |                  | 100.0 | %    |      |  | 100.0 | %    |   |  | 100.0 | %   
|Costs of contract revenues           |                            |  | (85.5              | )    |   |                  | (82.5 | )    |      |  | (83.8 | )    |   |  | (82.2 | )   
|                                     |                            |  |                    |      |   |                  |       |      |      |  |       |     
|                                     | Gross profit               |  |                    | 14.5 |   |                  |       | 17.5 |      |  |       | 16.2 |   |  |       | 17.8 |  
|General and administrative expenses  |                            |  | (6.2               | )    |   |                  | (7.8  | )    |      |  | (6.6  | )    |   |  | (8.1  | )   
|                                     |                            |  |                    |      |   |                  |       |      |      |  |       |     
|                                     | Operating income           |  |                    | 8.3  |   |                  |       | 9.7  |      |  |       | 9.6  |   |  |       | 9.7  |  
|Interest expense, net                |                            |  | (4.9               | )    |   |                  | (6.3  | )    |      |  | (5.0  | )    |   |  | (6.5  | )   
|Equity in earnings of joint ventures |                            |  | 0.6                |      |   |                  | 0.5   |      |      |  | 0.4   |      |   |  |      |     
|Minority interest                    |                            |  |                   |      |   |                  | 0.2   |      |      |  |      |      |   |  | 0.8   |     
|                                     |                            |  |                    |      |   |                  |       |      |      |  |       |     
|                                     | Income before income taxes |  |                    | 4.0  |   |                  |       | 4.1  |      |  |       | 5.0  |   |  |       | 4.0  |  
|Income tax expense                   |                            |  | (1.6               | )    |   |                  | 2.8   |      |      |  | (2.1  | )    |   |  | 0.6   |     
|                                     |                            |  |                    |      |   |                  |       |      |      |  |       |     
|                                     | Net income                 |  |                    | 2.4  | % |                  |       | 6.9  | %    |  |       | 2.9  | % |  |       | 4.6  | %
|                                     |                            |  |                    |      |   |                  |       |      |      |  |       |     
|EBITDA                               |                            |  | 12.1               | %    |   |                  | 14.5  | %    |      |  | 13.6  | %    |   |  | 14.4  | %   
|                                     |                            |  |                    |      |   |                  |       |      |      |  |       |     

EBITDA, as provided herein, represents earnings from continuing operations
before interest expense (net), income taxes and depreciation expense, and
excludes equity in earnings from joint ventures and minority interests. The
Companys EBITDA is included as it is a basis upon which the Company assesses
its financial performance, and certain covenants in the Companys borrowing
arrangements are tied to similar measures. The Company believes EBITDA is a
useful measure for the users of its financial statements because it provides
information that can be used to evaluate the effectiveness of the Companys
business from an operational perspective, exclusive of costs to finance its
activities, income taxes, depreciation of operating assets, and equity in
earnings from joint ventures and minority interests, none of which is directly
relevant to the efficiency of its operations. The Companys measure of EBITDA
may not be comparable to similar measurements used by other companies and
should not be construed as a substitute for other performance or liquidity
measures such as net income, operating income or operating cash flows reported
in accordance with accounting principles generally accepted in the United
States of America (GAAP).

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EBITDA is reconciled to net income, as follows:

|              |                              |   |                    |       |   |                  |        |        |      |   |        |        |   |   |        |        |  
|------------- | ---------------------------- | - | ------------------ | ----- | - | ---------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|              |                              |   | Three Months Ended |       |   | Six Months Ended |       
|              |                              |   | June 30,           |       |   | June 30,         |       
|              |                              |   |                    |       |   |                  |       
|              |                              |   | 2003               |       |   | 2002             |        |        | 2003 |   |        | 2002   |  
|              |                              |   |                    |       |   |                  |        |        |      |   |        |        |  
|Net income    |                              | $ | 2,493              |       |   | $                | 5,844  |        |      | $ | 5,980  |        |   | $ | 7,480  |       
|Adjusted for: |                              |   |                    |       |   |                  |        |        |      |   |        |        |   |   |        |       
|              | Interest expense, net        |   |                    | 5,137 |   |                  |        | 5,299  |      |   |        | 10,193 |   |   |        | 10,594 |  
|              | Income tax expense (benefit) |   |                    | 1,747 |   |                  |        | (2,342 | )    |   |        | 4,347  |   |   |        | (985   | )
|              | Depreciation                 |   |                    | 4,068 |   |                  |        | 4,057  |      |   |        | 8,135  |   |   |        | 7,912  |  
|              | Other income *               |   |                    | (768  | ) |                  |        | (611   | )    |   |        | (814   | ) |   |        | (1,403 | )
|              |                              |   |                    |       |   |                  |        |        |      |   |        |       
|EBITDA        |                              | $ | 12,677             |       |   | $                | 12,247 |        |      | $ | 27,841 |        |   | $ | 23,598 |       
|              |                              |   |                    |       |   |                  |        |        |      |   |        |       



---

|* |  | Represents equity in earnings of joint venture and minority interest expense.
|- |  | -----------------------------------------------------------------------------

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

|                        |                   |      |                    |        |      |                  |        |        |  |   |         |         |  |   |         |        | 
|----------------------- | ----------------- | ---- | ------------------ | ------ | ---- | ---------------- | ------ | ------ |  | - | ------- | ------- |  | - | ------- | ------ | 
|                        |                   |      | Three Months Ended |        |      | Six Months Ended |       
|                        |                   |      | June 30,           |        |      | June 30,         |       
|                        |                   |      |                    |        |      |                  |       
|Revenues (in thousands) |                   | 2003 |                    |        | 2002 |                  |        | 2003   |  |   | 2002    |        
|                        |                   |      |                    |        |      |                  |        |        |  |   |         |        
|Dredging:               |                   |      |                    |        |      |                  |        |        |  |   |         |         |  |   |         |       
|                        | Capital  U.S     |      | $                  | 56,615 |      |                  | $      | 18,632 |  |   | $       | 110,428 |  |   | $       | 45,046 | 
|                        | Capital  foreign |      |                    | 19,514 |      |                  |        | 17,421 |  |   |         | 29,551  |  |   |         | 27,935 | 
|                        | Beach             |      |                    | 11,283 |      |                  |        | 24,203 |  |   |         | 31,073  |  |   |         | 50,777 | 
|                        | Maintenance       |      |                    | 7,416  |      |                  |        | 11,791 |  |   |         | 15,145  |  |   |         | 18,592 | 
|Demolition              |                   |      | 9,536              |        |      |                  | 12,368 |        |  |   | 17,860  |         |  |   | 21,038  |       
|                        |                   |      |                    |        |      |                  |        |        |  |   |         |        
|                        |                   | $    | 104,364            |        |      | $                | 84,415 |        |  | $ | 204,057 |         |  | $ | 163,388 |       
|                        |                   |      |                    |        |      |                  |        |        |  |   |         |        

|                       |                   |      |          |         |      |   |         |         | 
|---------------------- | ----------------- | ---- | -------- | ------- | ---- | - | ------- | ------- | 
|                       |                   |      | June 30, |        
|                       |                   |      |          |        
|Backlog (in thousands) |                   | 2003 |          |         | 2002 |  
|                       |                   |      |          |         |      |  
|Dredging:              |                   |      |          |         |      |   |         |        
|                       | Capital  U.S     |      | $        | 177,126 |      |   | $       | 144,915 | 
|                       | Capital  foreign |      |          | 50,677  |      |   |         | 79,392  | 
|                       | Beach             |      |          | 2,883   |      |   |         | 25,671  | 
|                       | Maintenance       |      |          | 13,989  |      |   |         | 16,671  | 
|Demolition             |                   |      | 15,492   |         |      |   | 28,427  |        
|                       |                   |      |          |         |      |  
|                       |                   | $    | 260,167  |         |      | $ | 295,076 |        
|                       |                   |      |          |         |      |  

Second quarter 2003 revenues were $104.4 million, an increase of $20.0 million
or 23.6%, over second quarter 2002 revenues of $84.4 million. Revenues for the
first half of 2003 were $204.1 million, an increase of $40.7 million or 24.9%
over revenues for the first half of 2002 of $163.4 million. The increase in
second quarter and year to date revenues continues to be predominately a result
of additional domestic capital dredging work, much of which was added to the

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Companys backlog in the second half of 2002. Although revenues benefited from
this additional work, gross profit margins in the second quarter of 2003
declined to 14.5%, compared to 17.5% for the same period of 2002. This was due
to the mix of capital projects performed during the period as well as lower
margins achieved on certain demolition projects. NASDI continues to be impacted
by additional competition in the demolition industry as the economy has slowed,
and margins have been tightened accordingly. The second quarter results
impacted the year to date gross margins, bringing margins for the first half of
2003 to 16.2% compared to 17.8% for the first half of 2002.

Capital projects include large port deepenings and other infrastructure
projects. Domestic capital dredging revenue increased $38.0 million and $65.4
million and in the second quarter and first half of 2003, respectively, as
compared to the same periods of 2002. As mentioned previously, this is a
result of the significant amount of capital project backlog added in 2002. The
2002 domestic dredging bid market was significantly larger than in prior years
and heavily weighted toward Deep Port capital work. The Company successfully
bid and won over 60% of the 2002 Deep Port bid market and is performing on some
of these projects. As discussed in previous filings, the Deep Port projects
were authorized by the 1986 Water Resource Development Act (WRDA) and
subsequent bills. In 1997, the Army Corps of Engineers (Corps) announced
Deep Port work, authorized by WRDA, to be completed through 2005, with a value
in excess of $2.0 billion, and supplemental authorizations have increased this
amount to approximately $4.0 billion, with work to be completed through 2010.
Since the 1997 announcement, numerous projects with a combined revenue value of
over $1.3 billion have been let for bid and awarded through the second quarter
of 2003. The Company has been the low bidder on projects with a total value in
excess of $600 million, representing 46% of the total let for bid and awarded.

During the second quarter of 2003, the Company continued work on the Deep Port
projects in Kill Van Kull, New York; Jacksonville Harbor, Florida; Wilmington
Harbor, North Carolina; and Houston, Texas, which contributed combined revenue
to the quarter of $47.5 million. A new work capital project along the
Providence River and harbor in the Rhode Island area added another $4.3 million
of revenue to the quarter. During the quarter, the Company was awarded the
initial dredging phase in Umm Qasr, Iraq which was necessary to allow aid ships
to enter the port area to offload. Revenue for this work in Iraq, along with
continuing work on the projects in Bahrain and Ghana, totaled $15.1 million for
the quarter.

Beach nourishment projects include rebuilding of shoreline areas which have
been damaged by storm activity or ongoing erosion. Second quarter and year to
date 2003 revenues from beach nourishment projects decreased $12.9 million and
$19.7 million, respectively, as the Company utilized the majority of its
resources on capital work during the 2003 periods. During the second quarter,
the Company substantially completed beach nourishment projects in
Townsends/Hereford Inlet, New Jersey; Sebastian Inlet, Florida; Brevard County,
Florida and Ft. Pierce, Florida, adding combined revenue of $10.8 million to
the quarter.

Maintenance projects include routine dredging of ports, rivers and channels to
remove the regular build up of sediment. Maintenance revenues declined $4.4
million and $3.4 million in the second quarter and first half of 2003,
respectively, compared to the same periods of 2002. The decline in maintenance
revenue was anticipated as the Companys fleet continues to be highly utilized
performing capital dredging projects, which is generally higher margin work.
Second quarter maintenance revenues were primarily derived from five small
dredge rental projects along the Mississippi River.

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NASDIs demolition revenue for the second quarter and first half of 2003
declined $2.8 million and $3.2 million, respectively, from the same periods of
2002, as a result of the slow down in the economy. NASDIs second quarter
activity included demolition and site remediation projects at Oak Grove Village
and Quarry Street, as well as continuing work on the Suffolk County Courthouse,
Murphy Federal Building, and NECCO Candy facility, all of which are located in
the Boston area.

Net interest expense for the first quarter and second half of 2003 declined
slightly from the same periods of 2002, due to a reduction in the Companys
bank borrowings. Minority interests for the 2003 periods reflects a gain to
the Company due solely to NASDIs performance in the periods, whereas the 2002
minority interest amounts also include the impact of NATCOs performance.

The Companys effective income tax rate for the second quarter and first six
months of 2003 was approximately 42% compared to a benefit for the same periods
of 2002, which resulted from a significant tax deduction taken in the second
quarter of 2002. Net income was $2.5 million for the second quarter of 2003,
compared to $5.8 million for the second quarter of 2002. For the first half of
2003, net income was $6.0 million compared to $7.5 million for the same period
of 2002. Net income for the 2002 periods was favorably impacted by the tax
deduction mentioned previously. EBITDA (as defined on page 18) was $12.7
million and $27.8 million for the quarter and six months ended June 30, 2003,
compared to $12.2 million and $23.6 million for the same periods of 2002.
EBITDA improved in 2003 as a result of the increase in revenues, but was
impacted by the lower margins in the 2003 periods.

Backlog

The Companys contract backlog represents managements current estimate of the
revenues which will be realized under the portion of the contracts remaining to
be performed. Such estimates are subject to fluctuations based upon the amount
of material actually dredged, as well as factors affecting the time required to
complete the job. In addition, because a substantial portion of the Companys
backlog relates to government contracts, the Companys backlog can be canceled
at any time without penalty. However, the Company can generally recover the
actual committed costs and profit on work performed up to the date of
cancellation. Consequently, backlog is not necessarily indicative of future
revenues. The Companys backlog includes only those projects for which the
customer has provided an executed contract.

As of June 30, 2003, the Company had dredging backlog of $244.7 million, which
compares to dredging backlog of $266.6 million at June 30, 2002 and $281.8
million at March 31, 2003. The 2003 year to date bid market has totaled only
$162 million, which represents a relatively low level of activity compared to
typical years, which have averaged $250 million of bidding activity in the
first half. The near term result has been additional capacity in the industry
and therefore increased competition for the bids that have come out. As a
result, the Company has won only 16% of the work bid and awarded through June
of 2003. Based on recent bid schedules provided by the Corps, it appears that
bidding activity will accelerate over the second half of the year, which is
consistent with bidding patterns of recent years.

Backlog at June 30, 2003 continues to be concentrated in the capital dredging
market, both domestic and foreign. The Deep Port capital work, which is
generally higher margin work, makes up approximately 48% of total backlog and
much of this work will be performed throughout the remainder of 2003 and into
2004. Domestic capital backlog at June 30, 2003 includes work remaining on
Deep Port projects in Kill Van Kull, New York; Jacksonville,

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Florida; Los Angeles, California; Houston, Texas; and Manatee Harbor, Florida.
Foreign capital project backlog, which comprises $51 million or 19% of the June
30, 2003 backlog, relates primarily to the long-term projects in Ghana and
Bahrain, as well as a project in Alexandria, Egypt, which was bid and won in
the first quarter of 2003, and continuing work on the Iraq project.

Beach backlog at June 30, 2003 declined to $2.9 million, as only one small
project was bid and won by a competitor during the quarter. Project owners have
provided schedules identifying beach nourishment projects valued in excess of
$100 million, the majority of which are still expected to bid later in 2003.
This includes two large projects to renourish Hollywood and Venice Beaches in
Florida, as well as a number of smaller projects primarily in Florida and New
York. It appears that sufficient federal funding was appropriated in the
Corps 2003 budget which was finally passed in February of this year. However,
as seen in recent months, many of these projects keep being postponed due to
their specific permitting issues or lack of resolution regarding local/federal
cost-sharing arrangements. While it appears that the necessity for this work
is there, and that the localities have the incentive to perform these projects,
it is uncertain as to when these various issues will be resolved and therefore
when these projects will actually be let for bid.

The demolition backlog level at June 30, 2003 was $15.5 million, which compares
to $28.4 million at June 30, 2002 and $15.8 million at March 31, 2003. NASDI
has continued to encounter additional competition given the slow-down in the
economy; however, NASDI has still been able to obtain sufficient work to
maintain recent backlog levels. NASDI management continues to target a number
of significant projects for bidding in the near-term, which have the potential
to contribute to 2003 and 2004 earnings.

Liquidity and Capital Resources

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

The Companys net cash generated by operating activities for the six months
ended June 30, 2003 and 2002 totaled $5.6 million and $2.8 million,
respectively. The fluctuation between years is primarily a result of the
normal timing differences on the recognition and billing of revenues.

The Companys net cash flows used in investing activities were $8.9 million
compared to $11.2 million for the first half of 2003 and 2002, respectively.
The use of cash relates primarily to equipment acquisitions, which were
disproportionately high in the first half of 2002. In 2003, the Company also
utilized $0.8 million to purchase 50% of a real estate interest related to its
Amboy joint venture and received $1.2 million related to the sale of its joint
venture investment in Riovia.

In the third quarter of 2003, the Company entered into an agreement to
construct a barge for approximately $5.0 million to be delivered in December.
The Company has also entered into an arrangement to sell two tugboats for
approximately $5.2 million, which is expected to result in a financial gain to
the Company upon receipt of the proceeds.

The Companys net cash flows from financing activities for the first half of
2003 totaled $3.1 million compared to $8.0 million in the same period of 2002.
In 2003 period, the Company made

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increased payments on its term bank loan and borrowed less on its revolver
credit facility since its working capital investment was reduced.

Management believes cash flows from operations and available credit will be
sufficient to finance operations, planned capital expenditures and debt service
requirements for the foreseeable future. The Company is exploring options to
reduce its interest expense, including refinancing of certain operating lease
agreements and repurchase of a portion of its subordinated notes. The
Companys ability to fund its working capital needs, planned capital
expenditures and scheduled debt payments, to refinance its indebtedness, and to
comply with all of the financial covenants under its debt agreements, depends
on its future operating performance and cash flow, which in turn, are subject
to prevailing economic conditions and to financial, business and other factors,
some of which are beyond the Companys control.

Critical Accounting Policies and Estimates

In preparing its consolidated financial statements, the Company follows
accounting principles generally accepted in the United States of America. The
application of these principles requires significant judgments or an estimation
process that can affect the results of operations, financial position and cash
flows of the Company, as well as the related footnote disclosures. The Company
continually reviews its accounting policies and financial information
disclosures. There have been no material changes in policies or estimates
since December 31, 2002.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

The market risk of the Companys financial instruments as of June 30, 2003 has
not significantly changed since December 31, 2002. The market risk profile of
the Company on December 31, 2002 is disclosed in the Companys 2002 Annual
Report on Form 10-K.




Item 4. Controls and Procedures

(a)  Evaluation of Disclosure Controls and Procedures. The Companys
management, with the participation of its Chief Executive Officer and Chief
Financial Officer, have conducted an evaluation of the effectiveness of
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the
end of the period covered by this quarterly report.
Based on that evaluation, such officers have concluded that the disclosure
controls and procedures are effective in ensuring that all material information
required to be filed in this quarterly report has been made known to them in a
timely fashion.

(b) Changes in Internal Controls.There have been no changes in our internal
controls over financial reporting during the most recent fiscal quarter that
have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.

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PART II  Other Information




Item 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------

|     |  |                                                                                                                                                                    
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.01 |  | Amendment to Restated Certificate of Incorporation, dated April 29, 2003.*                                                                                         
|31.1 |  | Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|31.2 |  | Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*                                           
|32.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*                                           



---

|* |  | Filed or furnished herein.
|- |  | --------------------------



|(b) |  | Reports on Form 8-K                                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | A Current Report on Form 8-K filed on April 22, 2003 regarding a press
release announcing earnings information for the quarter ended March 31,
2003.




SIGNATURE

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

|                      |  |                                       |  |                            
|--------------------- |  | ------------------------------------- |  | ---------------------------
|                      |  | Great Lakes Dredge & Dock Corporation
|                      |  |                                       |  |                            
|Date: August 12, 2003 |  | By:                                   |  | /s/ Deborah A. Wensel      
|                      |  |                                       |  |                            
|                      |  |                                       |  | Deborah A. Wensel          
|                      |  |                                       |  | Senior Vice President      
|                      |  |                                       |  | and Chief Financial Officer



| | (Principal Financial and Accounting Officer and
Duly Authorized Officer)
| | ------------------------------------------------------------------------

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EXHIBIT INDEX

|       |  |                                                                                                                                                                    
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Document Description                                                                                                                                               
|3.01   |  | Amendment to Restated Certificate of Incorporation, dated April 29, 2003.*                                                                                         
|31.1   |  | Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|31.2   |  | Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities
Exchange Act of 1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|32.1   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*                                           
|32.2   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*                                           



---

|* |  | Filed or furnished herewith.
|- |  | ----------------------------

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