**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**ý****                                ****QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**For the quarterly period ended March 31, 2006**

 

**OR**

 

**o****                                ****TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**For the transition period from             to             **

 

**Commission file number:**

**333-64687**

 

### **GreatLakes Dredge & Dock Corporation**

(Exact name of registrant as specified in its charter)

 

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

 

**(630) 574-3000**

(Registrant’s telephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

ý  Yes   o  No

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelaerated filer, ora non-acceperated filer. See definition of accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

| Large Accelerated  Filer  o |   | Accelerated  Filer  o |   | Non-Accelerated  Filer  ý |
|---------------------------------------|--------|---------------------------------|--------|------------------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-z of theExchange Act).

o  Yes   ý  No

 

All of the Company’s commonstock is held by a holding company.

 

As of May 10, 2006,there were outstanding 1,000 shares of Common Stock and zero shares ofPreferred Stock.

 

 

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**Great LakesDredge & Dock Corporation and Subsidiaries**

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

### **SecuritiesExchange Act of 1934**

### **For theQuarterly Period ended March 31, 2006**

###  

##### **INDEX**

##### ** **

| **Part I**        | **Financial  Information** |                                                                                                      |
|------------------------|----------------------------|-----------------------------------------------------------------------------------------------------------|
|                   |                       |                                                                                                      |
|                   | Item 1                     | Financial Statements (Unaudited)                                                                          |   |
|                   |                       |                                                                                                      |   |
|                   |                       | Condensed  Consolidated Balance Sheets at March 31, 2006 and December 31, 2005                  |   |
|                   |                       |                                                                                                      |   |
|                   |                       | Condensed  Consolidated Statements of Operations for the Three Months ended  March 31, 2006 and 2005 |   |
|                   |                       |                                                                                                      |   |
|                   |                       | Condensed  Consolidated Statements of Cash Flows for the Three Months ended  March 31, 2006 and 2005 |   |
|                   |                       |                                                                                                      |   |
|                   |                       | 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 1                     | Legal Proceedings                                                                                         |   |
|                   |                       |                                                                                                      |   |
|                   | Item 1A                    | Risk Factors                                                                                              |   |
|                   |                       |                                                                                                      |   |
|                   | Item 6                     | Exhibits                                                                                                  |   |
|                   |                       |                                                                                                      |   |
| **Signature**          |                       |                                                                                                      |
|                   |                       |                                                                                                      |   |
| **Exhibit Index** |                       |

 

----

 

###### **PART I – FinancialInformation**

###### ** **

**Great LakesDredge & Dock Corporation and Subsidiaries**

### **Condensed Consolidated Balance Sheets**

**(Unaudited)**

**(inthousands, except share and per share amounts)**

 
| ** **                                                         | ** ** | **March 31  2006** | ** ** | **December 31,  2005** | ** ** |
|--------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| **Assets**                                                         | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current  assets:                                                   |       |                    |       |                        |       |
| Cash and  equivalents                                              |       | $                       | 514        |                        | $          | 601 |   |
| Accounts  receivable, net                                          |       | 87,663                  |       | 85,114                      |       |
| Contract  revenues in excess of billings                           |       | 13,889                  |       | 14,352                      |       |
| Inventories                                                        |       | 16,917                  |       | 17,084                      |       |
| Prepaid  expenses and other current assets                         |       | 18,910                  |       | 17,113                      |       |
| Total  current assets                                              |       | 137,893                 |       | 134,264                     |       |
| Property and  equipment, net                                       |       | 242,348                 |       | 240,849                     |       |
| Goodwill                                                           |       | 98,747                  |       | 98,747                      |       |
| Other  intangible assets, net                                      |       | 1,503                   |       | 1,579                       |       |
| Inventories                                                        |       | 11,206                  |       | 11,206                      |       |
| Investments  in joint ventures                                     |       | 8,472                   |       | 8,605                       |       |
| Other assets                                                       |       | 11,570                  |       | 11,987                      |       |
| Total assets                                                       |       | $                       | 511,739    |                        | $          | 507,237 |   |
|                                                               |       |                    |       |                        |       |
| **Liabilities  and Stockholder’s Equity**                     | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current  liabilities:                                              |       |                    |       |                        |       |
| Accounts  payable                                                  |       | $                       | 49,066     |                        | $          | 50,836 |   |
| Accrued  expenses                                                  |       | 26,881                  |       | 24,264                      |       |
| Billings in  excess of contract revenues                           |       | 9,501                   |       | 8,108                       |       |
| Current  maturities of long-term debt                              |       | 1,950                   |       | 1,950                       |       |
| Total  current liabilities                                         |       | 87,398                  |       | 85,158                      |       |
| Long-term  debt                                                    |       | 251,363                 |       | 248,850                     |       |
| Deferred  income taxes                                             |       | 88,581                  |       | 88,154                      |       |
| Other                                                              |       | 5,007                   |       | 4,473                       |       |
| Total  liabilities                                                 |       | 432,349                 |       | 426,635                     |       |
| Minority  interest                                                 |       | 1,888                   |       | 1,850                       |       |
| Commitments  and contingencies (Note 10)                           |       | —                  |       | —                      |       |
| Stockholder’s  equity:                                        |       |                    |       |                        |       |
| Common  stock, $.01 par value; 1,000 shares issued and outstanding |       | —                  |       | —                      |       |
| Additional  paid-in capital                                        |       | 97,000                  |       | 97,000                      |       |
| Accumulated  deficit                                               |       | (19,573                 | )          | (18,039                     | )          |
| Accumulated  other comprehensive income (loss)                     |       | 75                      |       | (209                        | )          |
| Total  stockholder’s equity                                   |       | 77,502                  |       | 78,752                      |       |
| Total  liabilities and stockholder’s equity                   |       | $                       | 511,739    |                        | $          | 507,237 |   |

 

See notes to unaudited condensed consolidatedfinancial statements.

 

2

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**Great LakesDredge & Dock Corporation and Subsidiaries**

### **Condensed Consolidated Statements of Operations**

**(Unaudited)**

**(inthousands)**

 
| ** **                            | ** ** | **Three Months Ended  March 31** | ** ** |
|---------------------------------------|------------|-------------------------------------------------|------------|
| ** **                            | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
|                                  |       |                                            |       |   |   |
| Contract  revenues                    |       | $                                               | 108,427    |   | $ | 99,903 |   |
| Costs of  contract revenues           |       | 96,816                                          |       | 92,863 |   |
| Gross profit                          |       | 11,611                                          |       | 7,040 |   |
| General and  administrative expenses  |       | 7,309                                           |       | 6,755 |   |
| Subpoena-related  expenses            |       | 360                                             |       | 879 |   |
| Amortization  of intangible assets    |       | 76                                              |       | 180 |   |
| Operating  income (loss)              |       | 3,866                                           |       | (774 | ) |
| Interest  expense, net                |       | (6,201                                          | )          | (6,273 | ) |
| Equity in  earnings of joint ventures |       | 117                                             |       | (166 | ) |
| Minority  interests                   |       | (38                                             | )          | (28 | ) |
| Loss before  income taxes             |       | (2,256                                          | )          | (7,241 | ) |
| Income tax benefit                    |       | 722                                             |       | 2,569 |   |
| Net loss                              |       | $                                               | (1,534     | ) | $ | (4,672 | ) |

 

See notes to unaudited condensed consolidatedfinancial statements.

 

3

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**Great LakesDredge & Dock Corporation and Subsidiaries**

### **Condensed Consolidated Statements of Cash Flows**

**(Unaudited)**

**(inthousands)**

 
| ** **                                                                      | ** ** | **Three Months Ended  March 31** | ** ** |
|---------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                                      | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| **Operating  Activities**                                                       |       |                                            |       |   |   |
| Net loss                                                                        |       | $                                               | (1,534     | ) | $ | (4,672 | ) |
| Adjustments  to reconcile net loss to net cash flows from operating activities: |       |                                            |       |   |   |
| Depreciation  and amortization                                                  |       | 6,250                                           |       | 6,145 |   |
| Loss  (earnings) of joint ventures                                              |       | (117                                            | )          | 166 |   |
| Distribution  from equity joint ventures                                        |       | 250                                             |       | — |   |
| Minority  interests                                                             |       | 38                                              |       | 28 |   |
| Deferred  income taxes                                                          |       | (1,494                                          | )          | (2,701 | ) |
| (Gain) on  dispositions of property and equipment                               |       | (195                                            | )          | (93 | ) |
| Other, net                                                                      |       | 449                                             |       | 392 |   |
| Changes in  assets and liabilities:                                             |       |                                            |       |   |   |
| Accounts  receivable                                                            |       | (2,549                                          | )          | 5,308 |   |
| Contract  revenues in excess of billings                                        |       | 463                                             |       | (9,076 | ) |
| Inventories                                                                     |       | 167                                             |       | (941 | ) |
| Prepaid  expenses and other current assets                                      |       | 34                                              |       | (743 | ) |
| Accounts  payable and accrued expenses                                          |       | 926                                             |       | 6,530 |   |
| Billings in  excess of contract revenues                                        |       | 1,393                                           |       | (2,066 | ) |
| Other  noncurrent assets and liabilities                                        |       | 34                                              |       | 77 |   |
| Net cash  flows from operating activities                                       |       | 4,115                                           |       | (1,646 | ) |
|                                                                            |       |                                            |       |   |   |
| **Investing  Activities**                                                       |       |                                            |       |   |   |
| Purchases of  property and equipment                                            |       | (6,897                                          | )          | (3,264 | ) |
| Dispositions  of property and equipment                                         |       | 564                                             |       | 94 |   |
| Net cash  flows from investing activities                                       |       | (6,333                                          | )          | (3,170 | ) |
|                                                                            |       |                                            |       |   |   |
| **Financing  Activities**                                                       |       |                                            |       |   |   |
| Repayments  of long-term debt                                                   |       | (488                                            | )          | (487 | ) |
| Borrowings  under revolving loans, net of repayments                            |       | 3,000                                           |       | 4,000 |   |
| Repayment of  capital lease debt                                                |       | (381                                            | )          | (231 | ) |
| Net cash  flows from financing activities                                       |       | 2,131                                           |       | 3,282 |   |
| Net change  in cash and equivalents                                             |       | (87                                             | )          | (1,534 | ) |
| Cash and  equivalents at beginning of period                                    |       | 601                                             |       | 1,962 |   |
| Cash and  equivalents at end of period                                          |       | $                                               | 514        |   | $ | 428 |   |
|                                                                            |       |                                            |       |   |   |
| **Supplemental  Cash Flow Information**                                         |       |                                            |       |   |   |
| Cash paid  for interest                                                         |       | $                                               | 1,874      |   | $ | 781 |   |
| Cash paid  for taxes                                                            |       | $                                               | 306        |   | $ | 178 |   |

 

See notes to unaudited condensed consolidatedfinancial statements.

 

4

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GREAT LAKES DREDGE & DOCKCORPORATION AND SUBSIDIARIES

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(dollars in thousands)

 

**1.****             ****Basis of presentation**

 

The accompanying unauditedcondensed consolidated financial statements have been prepared in accordance withaccounting principles generally accepted in the U.S. for interim financialinformation. Accordingly, these financial statements do not include all theinformation in the notes required by generally accepted accounting principlesfor complete financial statements. In the opinion of management, the unauditedcondensed consolidated financial statements include all adjustments (consistingof normal recurring adjustments) considered necessary for a fair presentationof the financial position, results of operations and cash flows as of and forthe dates presented. The unaudited condensed consolidated financial statementsand notes herein should be read in conjunction with the audited consolidatedfinancial statements of Great Lakes Dredge & Dock Corporation andSubsidiaries (the “Company”) and the notes thereto, included in the Company’sAnnual Report filed on Form 10-K for the year ended December 31, 2005.

 

The condensed consolidatedresults of operations for the interim periods presented herein are not necessarilyindicative of the results to be expected for the full year.

 

**2.****             ****Comprehensive loss**

 

Total comprehensive loss iscomprised of the Company’s net loss and net unrealized gains on cash flowhedges. Total comprehensive loss for the three months ended March 31, 2006and 2005 was $1,250 and $3,633, respectively.

 

**3.****             ****Risk management activities**

 

The Company uses derivative instruments to managecommodity price, interest rate, and foreign currency exchange risks. Suchinstruments are not used for trading purposes. As of March 31, 2006, theCompany was party to various swap arrangements to hedge the price of a portionof its diesel fuel purchase requirements for work in its backlog to beperformed through December 2006. As of March 31, 2006, there were 3.8million gallons remaining on these contracts. Under these agreements, theCompany will pay fixed prices ranging from $1.75 to $1.85 per gallon. At March 31,2006 and December 31, 2005, the fair value asset (liability) on thesecontracts was estimated to be $125 and $(344), respectively, based on quotedmarket prices, and is recorded in other current assets and accrued liabilities,respectively. Ineffectiveness related to these fuel hedge arrangements wasdetermined to be immaterial. The remaining gains included in accumulated othercomprehensive income at March 31, 2006 will be reclassified into earningsover the next nine months, corresponding to the period during which the hedgedfuel is expected to be utilized.

 

In February 2004, the Company entered into aninterest rate swap arrangement to swap a notional amount of $50 million from afixed rate of 7.75% to a floating LIBOR-based rate in order to manage theinterest rate paid with respect to the Company’s 73⁄4% senior subordinated debt. Thefair value asset (liability) of the swap at March 31, 2006 and December 31,2005 was $(2,194) and $(1,598), respectively, and is recorded in accruedexpenses. The swap is not accounted for as a hedge; therefore, the changes infair value are recorded as adjustments to interest expense in each reportingperiod.

 

5

----

 

The carrying values of otherfinancial instruments included in current assets and current liabilitiesapproximate fair values due to the short-term maturities of these instruments. Thecarrying value of long-term bank debt is a reasonable estimate of its fairvalue as interest rates are variable, based on the prevailing market rates. Thefair value of the Company’s $175,000 of 73⁄4% senior subordinated notes was $162,750and $157,500 at March 31, 2006 and December 31, 2005, respectively,based on quoted market prices.

 

**4.****             ****Accounts receivable**

 

Accounts receivable at March 31, 2006 and December 31,2005 are as follows:

 
| ** **                       | ** ** | **March 31  2006** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Completed  contracts             |       | $                       | 28,899     |                        | $          | 33,818 |   |
| Contracts in  progress           |       | 48,158                  |       | 41,885                      |       |
| Retainage                        |       | 11,246                  |       | 10,016                      |       |
|                             |       | 88,303                  |       | 85,719                      |       |
| Allowance  for doubtful accounts |       | (640                    | )          | (605                        | )          |
|                             |       |                    |       |                        |       |
|                             |       | $                       | 87,663     |                        | $          | 85,114 |   |

 

6

----

 

**5.****             ****Contracts in progress**

 

The components of contractsin progress at March 31, 2006 and December 31, 2005 are as follows:

 
| ** **                                                                      | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Costs and  earnings in excess of billings:                                      |       |                     |       |                        |       |
| Costs and  earnings for contracts in progress                                   |       | $                        | 90,795     |                        | $          | 196,846 |   |
| Amounts  billed                                                                 |       | (80,244                  | )          | (185,635                    | )          |
| Costs and  earnings in excess of billings for contracts in progress             |       | 10,551                   |       | 11,211                      |       |
| Costs and  earnings in excess of billings for completed contracts               |       | 3,338                    |       | 3,141                       |       |
|                                                                            |       |                     |       |                        |       |
|                                                                            |       | $                        | 13,889     |                        | $          | 14,352 |   |
|                                                                            |       |                     |       |                        |       |
| Prepaid  contract costs (included in prepaid expenses and other current assets) |       | $                        | 1,341      |                        | $          | 1,541 |   |
|                                                                            |       |                     |       |                        |       |
| Billings in  excess of costs and earnings:                                      |       |                     |       |                        |       |
| Amounts  billed                                                                 |       | $                        | (281,166   | )                           | $          | (113,243 | ) |
| Costs and  earnings for contracts in progress                                   |       | 271,665                  |       | 105,135                     |       |
|                                                                            |       |                     |       |                        |       |
|                                                                            |       | $                        | (9,501     | )                           | $          | (8,108 | ) |

 

**6.****             ****Intangible assets**

 

The net book value of intangible assets is asfollows:  

 
| ** **                         | ** ** | **Estimated  Life** | ** ** | **Cost** | ** ** | **Accumulated  Amortization** | ** ** | **Net** | ** ** |
|------------------------------------|------------|---------------------|------------|----------|------------|-------------------------------|------------|---------|------------|
| As of March 31,  2006:        |       |                |       |     |       |                          |       |    |       |
|                               |       |                |       |     |       |                          |       |    |       |
| Customer contract  backlog         |       | 13-15 mos.          |       | $        | 4,237      |                          | $          | 4,200   |       | $ | 37 |   |
| Demolition  customer relationships |       | 6 years             |       | 1,093    |       | 518                           |       | 575     |       |
| Software and  databases            |       | 7-10 years          |       | 1,209    |       | 318                           |       | 891     |       |
|                               |       |                |       | $        | 6,539      |                          | $          | 5,036   |       | $ | 1,503 |   |

 

7

----

 

**7. Accrued expenses**

 

Accrued expenses at March 31, 2006 and December 31,2005 are as follows:

 
| ** **                     | ** ** | **March 31  2006** | ** ** | **December 31,  2005** | ** ** |
|--------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Insurance                      |       | $                       | 10,159     |                        | $          | 6,387 |   |
| Interest                       |       | 4,398                   |       | 1,115                       |       |
| Payroll and  employee benefits |       | 3,708                   |       | 8,927                       |       |
| U.S. income  and other taxes   |       | 3,416                   |       | 3,170                       |       |
| Interest  rate swap liability  |       | 2,194                   |       | 1,598                       |       |
| Equipment  leases              |       | 1,198                   |       | 933                         |       |
| Other                          |       | 1,808                   |       | 2,134                       |       |
|                           |       | $                       | 26,881     |                        | $          | 24,264 |   |

 

**8****. Segment information**

 

The Company operates in two reportablesegments: dredging and demolition. The Company’s financial reporting systemspresent various data for management to run the business, including profit andloss statements prepared according to the segments presented. Segmentinformation for the periods presented is as follows:  

 
| ** **               | ** ** | **Three Months Ended  March 31** | ** ** |
|--------------------------|------------|-------------------------------------------------|------------|
| ** **               | ** ** | **2006**                                        | ** ** | **2005** | ** ** |
| **Dredging**             |       |                                            |       |   |   |
| Contract  revenues       |       | $                                               | 97,382     |   | $ | 88,264 |   |
| Operating  income (loss) |       | 2,932                                           |       | (1,518 | ) |
|                     |       |                                            |       |   |   |
| **Demolition**           |       |                                            |       |   |   |
| Contract  revenues       |       | $                                               | 11,045     |   | $ | 11,639 |   |
| Operating  income (loss) |       | 934                                             |       | 744 |   |
|                     |       |                                            |       |   |   |
| **Total**                |       |                                            |       |   |   |
| Contract  revenues       |       | $                                               | 108,427    |   | $ | 99,903 |   |
| Operating  income (loss) |       | 3,866                                           |       | (774 | ) |

 

In addition, foreigndredging revenue of $17,227 for the quarter was primarily attributable to workdone in Bahrain. The majority of theCompany’s long-lived assets are marine vessels and related equipment. At anypoint in time, the Company may employ certain assets outside of the U.S.,as needed, to perform work on the Company’s foreign projects. As of December 31,2005 long-lived assets with a net book value of $48,878 were employed outsideof the U.S.

 

8

----

 

**9. Commitments and contingencies**

 

At March 31, 2006, the Company was contingentlyliable, in the normal course of business, for $17,643 in undrawn letters ofcredit, relating to foreign contract performance guarantees and insurancepayment liabilities.

 

The Company finances certain key vessels used in itsoperations and office facilities with operating lease arrangements withunrelated lessors, requiring annual rentals decreasing from $14,000 to $8,000over the next five years. Certain of these operating leases contain defaultprovisions that are triggered by an acceleration of debt maturity under theterms of the Company’s Credit Agreement. Additionally, the leases typicallycontain provisions whereby the Company indemnifies the lessors for the taxtreatment attributable to such leases based on the tax rules in place atlease inception. The tax indemnifications do not have a contractual dollarlimit. To date, no lessors have asserted any claims against the Company underthese tax indemnification provisions.

 

Borrowings under the Company’s Credit Agreement aresecured by first lien mortgages on certain operating equipment of the Companywith a net book value of approximately $80,000 at December 31, 2005. Additionally,the Company obtains its performance and bid bonds through an underwriting andindemnity agreement with a surety company that has been granted a securityinterest in a substantial portion of the Company’s operating equipment with anet book value of approximately $84,000 at December 31, 2005. The Companyalso has an equipment term loan, which is secured by a first lien mortgage oncertain operating equipment with a net book value of approximately $20,000 at December 31,2005. The net book value of equipment serving as collateral under theseagreements at March 31, 2006 does not materially differ from the values atDecember 31, 2005. These agreements contain provisions requiring theCompany to maintain certain financial ratios and restricting the Company’sability to pay dividends, incur indebtedness, create liens, and take certainother actions. The Company was in compliance with all required covenants at March 31,2006.

 

The performance and bid bonds issued under thebonding agreement are customarily required for dredging and marine constructionprojects, as well as some demolition projects. Bid bonds are generally obtainedfor a percentage of bid value and aggregate amounts outstanding typically rangefrom $5,000 to $10,000. Performance bonds typically cover 100% of the contractvalue with no maximum bond amounts. At March 31, 2006, the Company hadoutstanding performance bonds valued at approximately $337,963; however therevenue value remaining in backlog related to these projects totaledapproximately $116,881 at March 31, 2006.

 

Certain foreign projects performed by the Companyhave warranty periods, typically spanning no more than three to five yearsbeyond project completion, whereby the Company retains responsibility tomaintain 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 toowner-provided specifications.

 

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

 

As is customary with negotiated contracts andmodifications or claims to competitively-bid contracts with the federalgovernment, the government has the right to audit the books and records of theCompany to ensure compliance with such contracts, modifications or claims and theapplicable federal laws. The government has the ability to seek a priceadjustment based on the results of such audit. Any such audits have not had andare not expected to have a material impact on the financial position, operationsor cash flows of the Company.

 

9

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In the normal course of business, the Company is a defendant in variouslegal proceedings. Except as described below, the Company is not currently aparty to any material legal proceedings or environmental claims.

 

On February 10, 2004, the Company was served with a subpoena toproduce documents in connection with a federal grand jury convened in theUnited States District Court for the District of South Carolina. The Companybelieves the grand jury has been convened to investigate the United Statesdredging industry in connection with work performed for the U.S. Army Corp ofEngineers. The Company complied with the Justice department’s requests andCompany management believes that it has provided substantially all of thedocuments that have been requested to this point. In addition to the documentsrequested, seven employees or former employees of the Company have now beeninterviewed or have testified before the grand jury. In connection with theinvestigation, the Company continues to incur legal expenses, which totaled $360for the three months ended March 31, 2006 and $879 for the same period of2005.

 

In the normal course of business, the Company is a party to variouspersonal injury lawsuits. The Company maintains insurance to cover claims thatarise from injuries to its hourly workforce subject to a deductible. Recentlythere has been an increase in suits filed in Texas. Two Texas law firms areaggressively pursuing personal injury claims on behalf of dredging workersresident in certain areas of Texas. An unprecedented number of lawsuits arebeing filed for incidents that would not have likely escalated to claims in thepast. However, aggressive legal representation and medical advice is increasingthe seriousness of claimed injuries and the amount demanded in settlement. Basedon the outcomes of three lawsuits the Company settled in 2006 to date andstatistics gathered from other companies in the industry a $2.0 million charge wasrecorded to increase the Company’s reserves for its self-insured portion ofthese liabilities. The Company’s recorded self insurance reserves represent itsbest estimate of the outcome of these claims. Additionally, should these trendspersist, the Company could continue to be impacted negatively in the future.

 

**10.Subsequent Event**

 

On April 24, 2006, a class action complaint was filed in the USDistrict Court for the Eastern District of Louisiana, on behalf of citizens ofLouisiana who suffered property damage from the waters that flooded New Orleansafter Hurricane Katrina hit the area. The suit names Great Lakes Dredge &Dock Company, along with numerous other dredging companies who have completedprojects on behalf of the Army Corps of Engineers in the Mississippi River GulfOutlet (“MRGO”), and the Federal government as defendants. The complaintalleges that dredging of MRGO caused the destruction of the Louisiana wetlandswhich provide a natural barrier against storms and hurricanes. This loss ofnatural barriers then contributed to the failure of the levees upon the impactof Hurricane Katrina which allowed the floodwaters to damage plaintiffs’property. Among other assertions is negligence in violation of the WaterPollution Control Act. The amount of damages is not stated but would bepresumed to be significant. The Company believes it has meritorious defensesand does not believe this claim will have a material adverse impact on thebusiness.

 

**11. Supplemental condensed consolidating financialinformation**

 

Included in the Company’slong-term debt is $175,000 of 73⁄4% senior subordinated notes which will matureon December 15, 2013. The payment obligations of the Company under thesenior subordinated notes are guaranteed by the Company’s domestic subsidiaries(the “Subsidiary Guarantors”). Such guarantees are full, unconditional andjoint and several. Separate financial statements of the Subsidiary Guarantorsare not presented because the Company’s management has determined that theywould not be material to investors. The following supplemental financialinformation sets forth, on a combined basis, the balance sheets, statements ofoperations and statements of cash flows for the Subsidiary Guarantors, theCompany’s non-guarantor subsidiary and for the Company (“GLD Corporation”).

 

10

----

 

**CondensedConsolidating Balance Sheet at March 31, 2006**

 

**SuccessorBasis**

 
| ** **                                     | ** ** | **Guarantor  Subsidiaries** | ** ** | **Other  Subsidiary** | ** ** | **GLD  Corporation** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|------------------------------------------------|------------|-----------------------------|------------|-----------------------|------------|----------------------|------------|------------------|------------|--------------------------|------------|
| **ASSETS**                                     | ** ** | ** **                  | ** ** | ** **            | ** ** | ** **           | ** ** | ** **       | ** ** | ** **               | ** ** |
| Current  assets:                               |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Cash and  equivalents                          |       | $                           | 509        |                  | $          | 5                    |       | $                | —     |                     | $          | — |   | $ | 514 |   |
| Accounts  receivable, net                      |       | 87,663                      |       | —                |       | —               |       | —           |       | 87,663                   |       |
| Receivables  from affiliates                   |       | 7,984                       |       | 2,862                 |       | 4,540                |       | (15,386          | )          | —                   |       |
| Contract  revenues in excess of billings       |       | 13,889                      |       | —                |       | —               |       | —           |       | 13,889                   |       |
| Inventories                                    |       | 16,917                      |       | —                |       | —               |       | —           |       | 16,917                   |       |
| Prepaid  expenses and other current assets     |       | 10,747                      |       | —                |       | 8,163                |       | —           |       | 18,910                   |       |
| Total  current assets                          |       | 137,709                     |       | 2,867                 |       | 12,703               |       | (15,386          | )          | 137,893                  |       |
| Property and  equipment, net                   |       | 232,606                     |       | —                |       | 9,742                |       | —           |       | 242,348                  |       |
| Goodwill.                                      |       | 98,747                      |       | —                |       | —               |       | —           |       | 98,747                   |       |
| Other  intangible assets, net                  |       | 1,503                       |       | —                |       | —               |       | —           |       | 1,503                    |       |
| Investments  in subsidiaries                   |       | 2,867                       |       | —                |       | 360,354              |       | (363,221         | )          | —                   |       |
| Notes  receivable from affiliates              |       | —                      |       | —                |       | 22,702               |       | (22,702          | )          | —                   |       |
| Inventories                                    |       | 11,206                      |       | —                |       | —               |       | —           |       | 11,206                   |       |
| Investments  in joint ventures                 |       | 8,472                       |       | —                |       | —               |       | —           |       | 8,472                    |       |
| Other assets                                   |       | 1,995                       |       | —                |       | 9,575                |       | —           |       | 11,570                   |       |
|                                           |       | $                           | 495,105    |                  | $          | 2,867                |       | $                | 415,076    |                     | $          | (401,309 | ) | $ | 511,739 |   |
|                                           |       |                        |       |                  |       |                 |       |             |       |                     |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY** | ** ** | ** **                  | ** ** | ** **            | ** ** | ** **           | ** ** | ** **       | ** ** | ** **               | ** ** |
| Current  liabilities:                          |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Accounts  payable                              |       | $                           | 49,066     |                  | $          | —               |       | $                | —     |                     | $          | — |   | $ | 49,066 |   |
| Payables to  affiliates                        |       | 8,750                       |       | —                |       | 6,636                |       | (15,386          | )          | —                   |       |
| Accrued  expenses                              |       | 18,093                      |       | —                |       | 8,788                |       | —           |       | 26,881                   |       |
| Billings in  excess of contract revenues       |       | 9,501                       |       | —                |       | —               |       | —           |       | 9,501                    |       |
| Current  maturities of long-term debt          |       | 1,950                       |       | —                |       | —               |       | —           |       | 1,950                    |       |
| Total  current liabilities                     |       | 87,360                      |       | —                |       | 15,424               |       | (15,386          | )          | 87,398                   |       |
| Long-term  debt                                |       | 17,063                      |       | —                |       | 234,300              |       | —           |       | 251,363                  |       |
| Notes  payable to affiliates                   |       | 22,702                      |       | —                |       | —               |       | (22,702          | )          | —                   |       |
| Deferred  income taxes                         |       | 1,205                       |       | —                |       | 87,376               |       | —           |       | 88,581                   |       |
| Other                                          |       | 4,457                       |       | —                |       | 550                  |       | —           |       | 5,007                    |       |
| Total  liabilities                             |       | 132,787                     |       | —                |       | 337,650              |       | (38,088          | )          | 432,349                  |       |
| Minority  interests                            |       | —                      |       | —                |       | —               |       | 1,888            |       | 1,888                    |       |
| Stockholder’s  equity                     |       | 362,318                     |       | 2,867                 |       | 77,426               |       | (365,109         | )          | 77,502                   |       |
|                                           |       | $                           | 495,105    |                  | $          | 2,867                |       | $                | 415,076    |                     | $          | (401,309 | ) | $ | 511,739 |   |

 

11

----

 

**CondensedConsolidating Balance Sheet at December 31, 2005**

 
| ** **                                     | ** ** | **Guarantor  Subsidiaries** | ** ** | **Other  Subsidiaries** | ** ** | **GLD  Corporation** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|------------------------------------------------|------------|-----------------------------|------------|-------------------------|------------|----------------------|------------|------------------|------------|--------------------------|------------|
| **ASSETS**                                     | ** ** | ** **                  | ** ** | ** **              | ** ** | ** **           | ** ** | ** **       | ** ** | ** **               | ** ** |
| Current  assets:                               |       |                        |       |                    |       |                 |       |             |       |                     |       |
| Cash and  equivalents                          |       | $                           | 596        |                    | $          | 5                    |       | $                | —     |                     | $          | — |   | $ | 601 |   |
| Accounts  receivable, net                      |       | 85,114                      |       | —                  |       | —               |       | —           |       | 85,114                   |       |
| Receivables  from affiliates                   |       | 9,202                       |       | 2,876                   |       | 4,542                |       | (16,620          | )          | —                   |       |
| Contract  revenues in excess of billings       |       | 14,352                      |       | —                  |       | —               |       | —           |       | 14,352                   |       |
| Inventories                                    |       | 17,084                      |       | —                  |       | —               |       | —           |       | 17,084                   |       |
| Prepaid  expenses and other current assets     |       | 10,742                      |       | —                  |       | 6,371                |       | —           |       | 17,113                   |       |
| Total  current assets                          |       | 137,090                     |       | 2,881                   |       | 10,913               |       | (16,620          | )          | 134,264                  |       |
| Property and  equipment, net                   |       | 228,393                     |       | —                  |       | 12,456               |       | —           |       | 240,849                  |       |
| Goodwill.                                      |       | 98,747                      |       | —                  |       | —               |       | —           |       | 98,747                   |       |
| Other  intangible assets, net                  |       | 1,579                       |       | —                  |       | —               |       | —           |       | 1,579                    |       |
| Investments  in subsidiaries                   |       | 2,881                       |       | —                  |       | 355,388              |       | (358,269         | )          | —                   |       |
| Notes  receivable from affiliates              |       | —                      |       | —                  |       | 22,702               |       | (22,702          | )          | —                   |       |
| Inventories                                    |       | 11,206                      |       | —                  |       | —               |       | —           |       | 11,206                   |       |
| Investments  in joint ventures                 |       | 8,605                       |       | —                  |       | —               |       | —           |       | 8,605                    |       |
| Other assets                                   |       | 2,010                       |       | —                  |       | 9,977                |       | —           |       | 11,987                   |       |
|                                           |       | $                           | 490,511    |                    | $          | 2,881                |       | $                | 411,436    |                     | $          | (397,591 | ) | $ | 507,237 |   |
|                                           |       |                        |       |                    |       |                 |       |             |       |                     |       |
| **LIABILITIES  AND STOCKHOLDER’S EQUITY** | ** ** | ** **                  | ** ** | ** **              | ** ** | ** **           | ** ** | ** **       | ** ** | ** **               | ** ** |
| Current  liabilities:                          |       |                        |       |                    |       |                 |       |             |       |                     |       |
| Accounts  payable                              |       | $                           | 50,836     |                    | $          | —               |       | $                | —     |                     | $          | — |   | $ | 50,836 |   |
| Payables to  affiliates                        |       | 7,754                       |       | —                  |       | 8,866                |       | (16,620          | )          | —                   |       |
| Accrued  expenses                              |       | 19,460                      |       | —                  |       | 4,804                |       | —           |       | 24,264                   |       |
| Billings in  excess of contract revenues       |       | 8,108                       |       | —                  |       | —               |       | —           |       | 8,108                    |       |
| Current  maturities of long-term debt          |       | 1,950                       |       | —                  |       | —               |       | —           |       | 1,950                    |       |
| Total  current liabilities                     |       | 88,108                      |       | —                  |       | 13,670               |       | (16,620          | )          | 85,158                   |       |
| Long-term  debt                                |       | 17,550                      |       | —                  |       | 231,300              |       | —           |       | 248,850                  |       |
| Notes  payable to affiliates                   |       | 22,702                      |       | —                  |       | —               |       | (22,702          | )          | —                   |       |
| Deferred  income taxes                         |       | 1,199                       |       | —                  |       | 86,955               |       | —           |       | 88,154                   |       |
| Other                                          |       | 3,923                       |       | —                  |       | 550                  |       | —           |       | 4,473                    |       |
| Total  liabilities                             |       | 133,482                     |       | —                  |       | 332,475              |       | (39,322          | )          | 426,635                  |       |
| Minority  interests                            |       | —                      |       | —                  |       | —               |       | 1,850            |       | 1,850                    |       |
| Stockholder’s  equity                     |       | 357,029                     |       | 2,881                   |       | 78,961               |       | (360,119         | )          | 78,752                   |       |
|                                           |       | $                           | 490,511    |                    | $          | 2,881                |       | $                | 411,436    |                     | $          | (397,591 | ) | $ | 507,237 |   |

 

12

----

 

**CondensedConsolidating Statement of Income for the three months ended March 31,2006**

 

**SuccessorBasis**

 
| ** **                                 | ** ** | **Guarantor  Subsidiaries** | ** ** | **Other  Subsidiary** | ** ** | **GLD  Corporation** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|--------------------------------------------|------------|-----------------------------|------------|-----------------------|------------|----------------------|------------|------------------|------------|--------------------------|------------|
|                                       |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Contract  revenues                         |       | $                           | 108,427    |                  | $          | —               |       | $                | —     |                     | $          | — |   | $ | 108,427 |   |
| Costs of  contract revenues                |       | (96,966                     | )          | —                |       | 150                  |       | —           |       | (96,816                  | )          |
| Gross profit                               |       | 11,461                      |       | —                |       | 150                  |       | —           |       | 11,611                   |       |
| General and  administrative expenses       |       | (7,289                      | )          | (15                   | )          | (5                   | )          | —           |       | (7,309                   | )          |
| Subpoena-related  expenses.                |       | (360                        | )          | —                |       | —               |       | —           |       | (360                     | )          |
| Amortization  of intangible assets         |       | (76                         | )          | —                |       | —               |       | —           |       | (76                      | )          |
| Impairment  of intangible assets           |       | —                      |       | —                |       | —               |       | —           |       | —                   |       |
| Operating  income (loss)                   |       | 3,736                       |       | (15                   | )          | 145                  |       | —           |       | 3,866                    |       |
| Interest  expense, net                     |       | (1,065                      | )          | —                |       | (5,136               | )          | —           |       | (6,201                   | )          |
| Equity in  earnings (loss) of subsidiaries |       | (14                         | )          | —                |       | 2,561                |       | (2,547           | )          | —                   |       |
| Equity in  earnings of joint venture       |       | 117                         |       | —                |       | —               |       | —           |       | 117                      |       |
| Minority  interests                        |       | —                      |       | —                |       | —               |       | (38              | )          | (38                      | )          |
| Income  (loss) before income taxes         |       | 2,774                       |       | (15                   | )          | (2,430               | )          | (2,585           | )          | (2,256                   | )          |
| Provision  for income taxes                |       | (119)                       |       | 1                     |       | (246                 | )          | 1,086            |       | 722                      |       |
| Net income  (loss)                         |       | $                           | 2,655      |                  | $          | (14                  | )          | $                | (2,676     | )                        | $          | (1,499 | ) | $ | (1,534 | ) |

 

**CondensedConsolidating Statement of Income for the three months ended March 31,2005**

 
| ** **                           | ** ** | **Guarantor  Subsidiaries** | ** ** | **Other  Subsidiary** | ** ** | **GLD  Corporation** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|-----------------------|------------|----------------------|------------|------------------|------------|--------------------------|------------|
|                                 |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Contract  revenues                   |       | $                           | 99,903     |                  | $          | —               |       | $                | —     |                     | $          | — |   | $ | 99,903 |   |
| Costs of  contract revenues          |       | (93,013                     | )          | —                |       | 150                  |       | —           |       | (92,863                  | )          |
| Gross profit  (loss)                 |       | 6,890                       |       | —                |       | 150                  |       | —           |       | 7,040                    |       |
| General and  administrative expenses |       | (6,727                      | )          | (15                   | )          | (13                  | )          | —           |       | (6,755                   | )          |
| Subpoena-related  expenses           |       | (879                        | )          | —                |       | —               |       | —           |       | (879                     | )          |
| Amortization  of intangible assets   |       | (180                        | )          | —                |       | —               |       | —           |       | (180                     | )          |
| Operating  (loss) income             |       | (896                        | )          | (15                   | )          | 137                  |       | —           |       | (774                     | )          |
| Interest  expense, net               |       | (964                        | )          | —                |       | (5,309               | )          | —           |       | (6,273                   | )          |
| Equity in  loss of subsidiaries      |       | (10                         | )          | —                |       | (1,304               | )          | 1,314            |       | —                   |       |
| Equity in  loss of joint venture     |       | (166                        | )          | —                |       | —               |       | —           |       | (166                     | )          |
| Minority  interests                  |       | —                      |       | —                |       | —               |       | (28              | )          | (28                      | )          |
| (Loss)  income before income taxes   |       | (2,036                      | )          | (15                   | )          | (6,476               | )          | 1,286            |       | (7,241                   | )          |
| Income tax  benefit                  |       | 798                         |       | 5                     |       | 2,306                |       | (540             | )          | 2,569                    |       |
| Net loss                             |       | $                           | (1,238     | )                     | $          | (10                  | )          | $                | (4,170     | )                        | $          | 746 |   | $ | (4,672 | ) |

 

13

----

 

**CondensedConsolidating Cash Flows for the three months ended March 31, 2006**

 

**SuccessorBasis**

 
| ** **                                               | ** ** | **Guarantor  Subsidiaries** | ** ** | **Other  Subsidiary** | ** ** | **GLD  Corporation** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|----------------------------------------------------------|------------|-----------------------------|------------|-----------------------|------------|----------------------|------------|------------------|------------|--------------------------|------------|
|                                                     |       |                        |       |                  |       |                 |       |             |       |                     |       |
| **Operating  Activities**                                |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Net cash  flows from operating activities                |       | $                           | 8,051      |                  | $          | (14                  | )          | $                | (3,922     | )                        | —     |   | $ | 4,115 |   |
| **Investing  Activities**                                |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Purchases of  property and equipment                     |       | (6,897                      | )          | —                |       | —               |       | —           |       | (6,897                   | )          |
| Dispositions  of property and equipment                  |       | 564                         |       | —                |       | —               |       | —           |       | 564                      |       |
| Cash  released from (funded to) equipment escrow         |       | —                      |       | —                |       | —               |       | —           |       | —                   |       |
| Acquisition  of Predecessor common and preferred shares. |       | —                      |       | —                |       | —               |       | —           |       | —                   |       |
| Net cash  flows from investing activities                |       | (6,333                      | )          | —                |       | —               |       | —           |       | (6,333                   | )          |
| **Financing  Activities**                                |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Repayments  of long-term debt                            |       | (488                        | )          | —                |       | —               |       | —           |       | (488                     | )          |
| Borrowings  under revolving loans, net of repayments     |       | —                      |       |                  |       | 3,000                |       |             |       | 3,000                    |       |
| Net change  in accounts with affiliates                  |       | 2,216                       |       | 14                    |       | (2,230               | )          | —           |       | —                   |       |
| Repayment of  capital lease debt                         |       | (381                        | )          | —                |       | —               |       | —           |       | (381                     | )          |
| Net cash  flows from financing activities                |       | 1,347                       |       | 14                    |       | 770                  |       | —           |       | 2,131                    |       |
| Net change  in cash and equivalents                      |       | 3,065                       |       | 0                     |       | (3,152               | )          | —           |       | (87                      | )          |
| Cash and  equivalents at beginning of year               |       | 2,457                       |       | 5                     |       | (1,861               | )          | —           |       | 601                      |       |
| Cash and  equivalents at end of year                     |       | $                           | 5,522      |                  | $          | 5                    |       | $                | (5,013     | )                        | $          | — |   | $ | 514 |   |
|                                                          |            |                             |            |                       |            |                      |            |                  |            |                          |            |  |  |  |  |  |

 

**CondensedConsolidating Cash Flows for the three months ended March 31, 2005**

 
| ** **                                           | ** ** | **Guarantor  Subsidiaries** | ** ** | **Other  Subsidiary** | ** ** | **GLD  Corporation** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|------------------------------------------------------|------------|-----------------------------|------------|-----------------------|------------|----------------------|------------|------------------|------------|--------------------------|------------|
|                                                 |       |                        |       |                  |       |                 |       |             |       |                     |       |
| **Operating  Activities**                            |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Net cash  flows from operating activities            |       | $                           | (4,652     | )                     | $          | (15                  | )          | $                | 3,021      |                     | $          | — |   | $ | (1,646 | ) |
|                                                 |       |                        |       |                  |       |                 |       |             |       |                     |       |
| **Investing  Activities**                            |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Purchases of  property and equipment                 |       | (3,264                      | )          | —                |       | —               |       | —           |       | (3,264                   | )          |
| Dispositions  of property and equipment              |       | 94                          |       | —                |       | —               |       | —           |       | 94                       |       |
| Net cash  flows from investing activities            |       | (3,170                      | )          | —                |       | —               |       | —           |       | (3,170                   | )          |
|                                                 |       |                        |       |                  |       |                 |       |             |       |                     |       |
| **Financing  Activities**                            |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Repayments  of long-term debt                        |       | (487                        | )          | —                |       | —               |       | —           |       | (487                     | )          |
| Borrowings  under revolving loans, net of repayments |       | —                      |       | —                |       | 4,000                |       | —           |       | 4,000                    |       |
| Net change  in accounts with affiliates              |       | 7,006                       |       | 15                    |       | (7,021               | )          | —           |       | —                   |       |
| Repayment of  capital lease debt                     |       | (231                        | )          | —                |       | —               |       | —           |       | (231                     | )          |
| Net cash  flows from financing activities            |       | 6,288                       |       | 15                    |       | (3,021               | )          | —           |       | 3,282                    |       |
|                                                 |       |                        |       |                  |       |                 |       |             |       |                     |       |
| Net change  in cash and equivalents                  |       | (1,534                      | )          | —                |       | —               |       | —           |       | (1,534                   | )          |
| Cash and  equivalents at beginning of period         |       | 1,957                       |       | 5                     |       | —               |       | —           |       | 1,962                    |       |
| Cash and  equivalents at end of period               |       | $                           | 423        |                  | $          | 5                    |       | $                | —     |                     | $          | — |   | $ | 428 |   |

 

14

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**Item 2. Management’s Discussion andAnalysis of Financial Condition and Results of Operations**

 

###### **Statement Under the PrivateSecurities Litigation Reform Act**

###### ** **

Certaininformation in this Quarterly Report on Form 10-Q, including but notlimited to the Management’s Discussion and Analysis of Financial Condition andResults of Operations, may constitute forward-looking statements as suchterm 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. Certainforward-looking statements can be identified by the use of forward-lookingterminology such as, “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,”“intends,” “plans,” “estimates,” “anticipates,” or “hopeful,” or the negativethereof or other comparable terminology, or by discussions of strategy, plansor intentions. Forward-looking statements involve risks and uncertainties,including those described in the Risk Factors section of the Company’s AnnualReport on Form 10-K for the year ended December 31, 2005, which couldcause actual results to be materially different than those in theforward-looking statements, which speak only as of the date hereof. The Companyassumes no obligation to update such forward-looking information.

 

###### **General**

###### ** **

TheCompany is the largest provider of dredging services in the United States.Dredging generally involves the enhancement or preservation of the navigabilityof waterways or the protection of shorelines through the removal orreplenishment of soil, sand or rock. The U.S. dredging market consists of threeprimary types of work:  Capital,Maintenance and Beach Nourishment, in which the Company experienced an averagecombined U.S. bid market share of 36% over the last three fiscal years (2003 to2005). The Company’s bid market is defined as the population of projects onwhich it bid or could have bid if not for capacity constraints (“bid market”). Inaddition, the Company has continued its role as the only U.S. dredgingcontractor with significant international operations, which averaged 16% of itscontract revenues over the last three fiscal years.

 

TheCompany also owns 85% of the capital stock of North American Site Developers, Inc.(“NASDI”), a demolition service provider located in the Boston, Massachusettsarea. NASDI’s principal services consist of interior and exterior demolition ofcommercial and industrial buildings, salvage and recycling of relatedmaterials, and removal of hazardous substances and materials. One NASDImanagement stockholder retains a 15% non-voting interest in NASDI, which isreflected as a minority interest within the financial statements.

 

TheCompany’s equity in earnings of joint ventures relates to the Company’s 50%ownership interests in Amboy Aggregates (“Amboy”) and an adjoining landinvestment, which are accounted for using the equity method.

 

15

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###### **Results of Operations**

###### ** **

Thefollowing table sets forth the components of net loss and EBITDA as apercentage of contract revenues for the three months ended March 31, 2006and 2005:   

 
| ** **                            | ** ** | **Three Months Ended  March 31,** | ** ** |
|---------------------------------------|------------|--------------------------------------------------|------------|
| ** **                            | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
|                                  |       |                                             |       |   |   |
| Contract  revenues                    |       | 100.0                                            | %          | 100.0 | % |
| Costs of  contract revenues           |       | (89.3                                            | )          | (93.0 | ) |
| Gross profit                          |       | 10.7                                             |       | 7.0 |   |
| General and  administrative expenses  |       | (6.7                                             | )          | (6.7 | ) |
| Subpoena-related  expenses            |       | (0.3                                             | )          | (0.9 | ) |
| Amortization  of intangible assets    |       | (0.1                                             | )          | (0.2 | ) |
| Operating  income (loss)              |       | 3.6                                              |       | (0.8 | ) |
| Interest  expense, net                |       | (5.7                                             | )          | (6.2 | ) |
| Equity in  earnings of joint ventures |       | 0.1                                              |       | (0.2 | ) |
| Minority  interest                    |       | —                                           |       | — |   |
| Loss before  income taxes             |       | (2.0                                             | )          | (7.2 | ) |
| Income tax  (expense) benefit         |       | 0.7                                              |       | 2.6 |   |
| Net loss                              |       | (1.3                                             | )%         | (4.6 | )% |
|                                  |       |                                             |       |   |   |
| EBITDA                                |       | 10.2                                             | %          | 5.2 | % |

 

EBITDA,as provided herein, represents net income (loss), adjusted for net interestexpense, income taxes, depreciation and amortization expense. The Companypresents EBITDA as an additional measure by which to evaluate the Company’soperating trends. The Company believes that EBITDA is a measure frequently usedto evaluate performance of companies with substantial leverage and that all ofits primary stakeholders (i.e. its bondholders, banks and investors) use EBITDAto evaluate the Company’s period to period performance. Additionally, managementbelieves that EBITDA provides a transparent measure of the Company’s recurringoperating performance and allows management to readily view operating trends,perform analytical comparisons and identify strategies to improve operatingperformance. For this reason, EBITDA is the measure the Company uses to assessperformance for purposes of determining compensation under its incentive plan.EBITDA should not be considered an alternative to, or more meaningful than,amounts determined in accordance with GAAP including: (a) operating income asan indicator of operating performance; or (b) cash flows from operations as ameasure of liquidity. As such, the Company’s use of EBITDA, instead of a GAAPmeasure, has limitations as an analytical tool, including the inability todetermine profitability or liquidity due to the exclusion of interest expenseand the associated significant cash requirements and the exclusion ofdepreciation and amortization, which represent significant and unavoidableoperating costs given the level of indebtedness and capital expenditures neededto maintain the Company’s business. For these reasons, the Company usesoperating income to measure its operating performance and uses EBITDA only as asupplement. EBITDA is reconciled to net income (loss) in the table of financialresults.

 

16

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The following tablereconciles net loss to EBITDA for the periods indicated:

 
| ** **                     | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------|------------|--------------------------------------------------|------------|
| ** **                     | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
|                           |       |                                             |       |   |   |
| Net loss                       |       | $                                                | (1,534     | ) | $ | (4,672 | ) |
| Adjusted  for:                 |       |                                             |       |   |   |
| Interest  expense, net         |       | 6,201                                            |       | 6,273 |   |
| Income tax  expense (benefit)  |       | (722                                             | )          | (2,569 | ) |
| Depreciation  and amortization |       | 6,250                                            |       | 6,145 |   |
| EBITDA                         |       | $                                                | 10,195     |   | $ | 5,177 |   |

 

Thefollowing table sets forth, by segment and dredging type of work, the Company’scontract revenues for the three months ended and backlog as of the periodsindicated:

 
| ** **                            | ** ** | **Three Months Ended  March 31,** | ** ** |
|---------------------------------------|------------|--------------------------------------------------|------------|
| **Revenues (in thousands)** | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Dredging:                             |       |                                             |       |   |   |
| Capital -  U.S.                       |       | $                                                | 23,035     |   | $ | 29,657 |   |
| Capital -  foreign                    |       | 17,227                                           |       | 5,903 |   |
| Beach                                 |       | 40,698                                           |       | 22,411 |   |
| Maintenance                           |       | 16,422                                           |       | 30,293 |   |
| Demolition                            |       | 11,045                                           |       | 11,639 |   |
|                                  |       | $                                                | 108,427    |   | $ | 99,903 |   |

 
| ** **                           | ** ** | **March 31,** | ** ** |
|--------------------------------------|------------|--------------------|------------|
| **Backlog (in thousands)** | ** ** | **2006**           | ** ** | **2005** | ** ** |
| Dredging:                            |       |               |       |   |   |
| Capital -  U.S.                      |       | $                  | 81,272     |   | $ | 154,225 |   |
| Capital -  foreign                   |       | 74,123             |       | 38,091 |   |
| Beach                                |       | 43,934             |       | 37,120 |   |
| Maintenance                          |       | 4,740              |       | 12,274 |   |
| Demolition                           |       | 13,810             |       | 15,504 |   |
|                                 |       | $                  | 217,879    |   | $ | 257,214 |   |

 

Consolidatedrevenues for the first quarter of 2006 were $108.4 million, representing anincrease of $8.5 million, or 8.5%, over first quarter 2005 revenues of $99.9million. 2006 revenues increased as the Company continued to experience good utilizationof its dredging fleet especially with regard to beach nourishment and foreigncapital work. Along with an increase in revenue, margins in 2006 improved overthe 2005 period. The Company’s consolidated gross profit margin for the quarterended March 31, 2006 improved to 10.7%, compared to 7.0% for the samequarter of 2005. The lower profit margin generated during the first quarter of2005 was a result of performing on work that was won during the first half of2004 when there was a slow down in bidding activity. During this period theenvironment was highly competitive due to the uncertainty over fundingconstraints within the Army Corps of Engineers. The bidding activity levelsimproved throughout 2005 and pricing improved, although not to the levels seenin years

 

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priorto 2004. The margins in the first quarter of 2006 continued to reflect theimprovement seen in the second half of 2005, but were negatively impacted by1.9% due to an increase in self-insured claims reserves recorded during thequarter.

 

Capitalprojects include large port deepenings and other infrastructure projects. Domesticcapital dredging revenue decreased $6.6 million in the first quarter of 2006,compared to the same period of 2005. The Company’s domestic capital revenues of$23 million in the first quarter of 2005 were substantially generated bycontinuing work on port deepening projects in Brunswick, Georgia; Arthur KillChannel, New York; and Wilmington, North Carolina. The Company also began dredgingon the LNG terminal project in Freeport, Texas. Foreign capital revenue in the firstquarter increased $11.3 million, compared to the first quarter of 2005. The 2006first quarter’s foreign revenues were substantially generated by continuingwork on the Durrat land development project in Bahrain, which will continuethrough the end of 2006.

 

Beachnourishment projects include rebuilding of shoreline areas that have beendamaged by storm activity or ongoing erosion. First quarter 2006 revenues frombeach nourishment projects totaled $40.7 million, an $18.3 million increaseover the same period of 2005. The increase is to be expected, given that beachnourishment work has represented approximately 41% of the 2005 bid market and51% of the first quarter 2006 bid market, compared to only 15% over the lastthree years (2002 to 2004), because of the extensive damage wrought byhurricanes in 2004. The Company’s 2006 first quarter beach revenues were substantiallygenerated by four large projects in Broward County, Destin, Palm Beach andCaptiva/Sanibal Island, Florida.

 

Maintenanceprojects include routine dredging of ports, rivers and channels to remove theregular build up of sediment. Maintenance revenues totaled $16.4 million in thefirst quarter of 2006, compared to $30.3 million for the same 2005 period. Firstquarter 2005’s maintenance revenues were higher than typical quarters primarilydue to work on a few large projects that spanned the entire quarter. Maintenancerevenue in the first quarter 2006 is consistent with the previous year’s quarterlyaverage.

 

TheCompany’s general and administrative expenses totaled $7.3 million for the firstquarter of 2006, which compares to $6.7 million for same quarter of 2005. Theincrease is primarily a result of higher incentive compensation, driven by theimprovement in the dredging segment performance, along with additionalincentive compensation required in the demolition segment.

 

Netinterest expense for the first quarter 2006 was $6.2 million, which wascomparable to $6.3 million for the same period in 2005. Underlying interestrates on the variable portion of debt did increase from period to period,resulting in an increase in expense of $0.3 million. However, this was offsetby a decrease in expense related to the fixed to floating interest rate swap.Expense related to this swap was $0.6 million for the quarter ended March 31,2006 compared to $1.0 million for the same period in 2005.

 

Incometax benefit for the first quarter of 2006 was $0.7 million compared to a $2.6million benefit for the same period in 2005. The relative reduction in benefitin 2006 is a result of improved operating income between the two quarters.

 

TheCompany generated a net loss of $1.5 million for the quarter ended March 31,2006, compared to a net loss of $4.7 million for the same 2005 period. Theimprovement in 2006 is a result of increased revenues and margins as discussed.

 

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EBITDA(as defined on page 16) was $10.2 million for the quarter ended March 31,2006, compared to $5.2 million for the same period of 2005, again reflectingthe improvement in operating income.

 

**Results by segment**

 

***Dredging***

 

Dredgingrevenues for the three months ended March 31, 2006 were $97.4 million,compared to $88.3 million for the same period of 2005, with the increase in 2006driven by greater utilization of the Company’s dredging fleet. Operating incomegenerated by the dredging operations for the quarter ended March 31, 2006 was$2.9 million and compares to an operating loss of $1.5 million for the sameperiod of 2005. The improvement in the 2006 was due to the increased revenue andhigher margins on the projects performed during the period.

 

***Demolition***

 

NASDI’sdemolition revenue for the quarter ended March 31, 2006 totaled $11.0 millionand compares to $11.6 million for the same period of 2005. Both periods resultfrom a solid market, whereby NASDI has experienced less competition on theprojects bid than was the experience prior to 2005. The demolition segmentgenerated operating income for the quarter ended March 31, 2006 of $0.9million, compared to operating income of $0.7 million for the same period of2005.

 

**Bidding Activity and Backlog**

 

TheCompany’s contract backlog represents management’s current estimate of therevenues that will be realized under the portion of the contracts remaining tobe performed. Such estimates are subject to fluctuations based upon the amountof material actually dredged, as well as factors affecting the time required tocomplete the job. In addition, because a substantial portion of the Company’sbacklog relates to government contracts, the Company’s backlog can be canceledat any time without penalty. However, the Company can generally recover theactual committed costs and profit on work performed up to the date ofcancellation. Consequently, backlog is not necessarily indicative of futurerevenues. The Company’s backlog includes only those projects for which theCompany has obtained a signed contract with the customer.

 

Thefirst quarter 2006 domestic dredging bid market, representing work awardedduring the period, totaled $55.1 million. This was a small bid market comparedto previous quarters, but Great Lakes did win 42% of the market. Of the 10projects bid in the quarter, three were beach projects and Great Lakes won twoof these for a total of $21.7 million. Additionally, Great Lakes was low bidderon another beach project in Florida, which had not been awarded at quarter-end,and therefore is not reflected in the Company’s quarter-end backlog. Theremainder of the first quarter bid market was maintenance work with no deepport work bid this quarter.

 

Althoughthe overall bid market was down during the first quarter, the Company continuedto bid 2006 opportunities with margins comparable to 2005 bid margins. Based onthe Company’s sizable market share for the first quarter, it appears thecompetition has continued to moderate from their previously aggressive pricingbehavior.

 

Thereduction in deep port work and the significance of beach nourishment work inthe domestic bid market appears to be continuing in 2006. In 2005, a substantialportion of this market, 41%,

 

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camefrom the beach nourishment sector. This was the result of the active hurricane seasonin 2004 and the special appropriations approved to fund this work. Previously(2002 – 2004) beach work averaged only 15% of the market. Offsetting thisincrease in beach work in 2005 was a decline in the amount of capital projects.Last year’s capital market was just over $200 million and represented only 28%of the market. Previously (2002 – 2004) capital work averaged over 45% of themarket.

 

Giventhe recent dynamics in the domestic market, in October of 2005 the Companypositioned an additional hydraulic dredge overseas that will be utilized all of2006 on the land development project in Bahrain. The uncertainty of the USdredging market requires the Company look more aggressively to the strongmarket in the Middle East for additional opportunities to deploy potentiallyidle assets from its US fleet.

 

Dredgingbacklog at March 31, 2006 totaled $204.1 million, which compares to $260.8million at December 31, 2005, and $241.7 million at March 31, 2005. Consistentwith prior periods, the majority of the Company’s March 31, 2006 dredgingbacklog, $155.4 million, is comprised of domestic and foreign capital dredgingwork, including continuing domestic deepening projects in New York, NY,Brunswick, GA and Wilmington, NC, and the overseas land reclamation project inBahrain. The decrease in total backlog at March 31, 2006 compared to priorperiods is due to a decline in domestic capital work which is consistent withthe decrease in the amount of capital projects in the 2005 and first quarter2006 bid markets. The Company’s March 31, 2006 beach backlog totaling$43.9 million continues to represent a solid level and is consistent with 2005periods. And as noted earlier, the Company’s first quarter recorded backlogdoes not reflect approximately $14 million for an additional Florida beachnourishment project pending award, as well as other options pending on projectscurrently in backlog. The Company’s maintenance backlog totaled $4.7 million atMarch 31, 2006, which is lower then comparative periods but notsignificantly. Demolition services backlog was a solid $13.8 million at March 31,2006 compared to $17.4 million at December 31, 2005 and $15.5 million at March 31,2006.

 

###### **Market Outlook**

###### ** **

TheCorps’ fiscal 2006 budget was passed at a level higher then in prior years. However,the dredging industry has seen only $211 million in work awarded to date for fiscal2006. In addition there are the special appropriations related to the clean-upand reconstruction efforts along the Gulf coast, due to the destruction fromHurricanes Katrina and Rita but the dredging work related to these funds hasnot materialized and very little dredging work has been added to the recent bidmarket.

 

Forfiscal 2006, Congress has mandated that Corps projects must be fully funded inthe year bid. In the past a dredging project could be bid if appropriations wereavailable for only the current year’s spending and the contract could becontinued into the next year. The remaining funding to complete the project wouldthen be taken out of the following years appropriations. The restriction imposedby Congress on the Corps’ right to utilize this “continuing contracts”mechanism has thrown their dredging procurement process into disarray. As couldbe expected, this change impacts larger size projects, such as capitalcontracts, more significantly. Presently, the Corps and industry are in debateover how to accommodate these new requirements. Ultimately the work needs to beperformed, but in the near term this policy change is disrupting the orderlyflow of activity in the bid market.

 

Witha view to the longer term, the Water Resources Development Act, or WRDAlegislation, which includes authorization of the Corps’ civil works projects, appearslikely to pass in 2006. There are several positives for the industryincorporated in the current WRDA bill including the retirement of the Corps’Dredge McFarland which should add work for industry, the reduction in

 

20

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localcost sharing required on projects that go below 50 feet and authorization for12 priority projects under the Louisiana Coastal Restoration Plan, as well asthe authorization of various additional harbor deepening projects. Passage ofthis bill will give assurance of continuing commitment to capital dredging workout in the future.

 

Thereare a number of Deep Port projects that have been authorized to date, certain ofwhich should provide contracts valued in excess of $300 million to the bidmarket over the next few quarters. These include the next phases of theColumbia River, OR, Oakland, CA,  PortJersey, NJ and Jacksonville Harbor, FL deepening projects, two additional phasesof the New York Harbor 50’ deepening project and potentially two port expansionprojects in Tampa, FL.

 

The2005 beach nourishment market benefited from the supplemental federal fundingpassed in 2004. However, outside of these special appropriations, federalsupport for beach funding continues to be uncertain. The president’s fiscal2007 budget includes some beach work but clearly does not preserve beachfunding when the benefit is considered to be only local. Fortunately, morebeach communities are developing funding sources to meet their beachnourishment needs and current schedules indicate beach projects valued atapproximately $100 million for bidding through the end of 2006.

 

Dredgingrelated to the development of liquefied natural gas (“LNG’) terminals,particularly along the Gulf coast of Texas and Louisiana continues to gainmomentum. The Company is involved in three project solicitations with privatecustomers for work valued at over $50 million in dredging services that lookpromising for starting by year end. With the higher prices ofdomestically-produced natural gas and the increased cost-competitiveness ofimporting LNG, management expects this work will add to the domestic dredgingmarket in the near term.

 

Withrespect to the foreign dredging markets, the Company now has two largehydraulic dredges working in Bahrain on the Durrat land development project,which will provide good utilization for these vessels for the next nine months.Additionally, the Company continues to follow a number of large landreclamation projects in the Middle East – particularly in Qatar and Bahrain. Giventhe volume of work being generated in this region, there are opportunities forthe Company to take on additional work for its equipment positioned overseas. Moreover,given the continuing Corps funding issues in the US, the Company is exploringprospects in all markets to increase and maintain higher utilization of itsfleet.

 

Insummary, the first quarter of 2006 was a solid quarter from operations and whileearnings were down from the third and fourth quarters of last year it was asubstantial improvement from the first quarter of 2005. Given the reduced levelof the bid market in the first quarter, Company backlog at March 31, 2006is down from recent periods. However, work has been identified that should provideadequate opportunities to add backlog for this year. Also, based on recent bidresults, pricing appears to be at more reasonable levels, although not up topre 2004 levels. In addition, very good opportunities exist to add foreignbacklog, as well to enhance utilization for some of the Company’s currentdomestic fleet.

 

###### **Liquidity and CapitalResources**

###### ** **

TheCompany’s principal sources of liquidity are cash flow generated fromoperations and borrowings under its senior credit facility. The Company’sprincipal uses of cash are to meet debt service requirements, finance itscapital expenditures, provide working capital and meet other general corporatepurposes.

 

TheCompany’s net cash flows from operating activities for the three months ended March 31,2006 totaled $4.1 million, compared to a use of cash of $1.6 million for the threemonths ended

 

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March 31,2005. The fluctuation between periods results primarily from the normal timingdifferences on the recognition and billing of revenues relative to the currentlevel of activity.

 

TheCompany’s net cash flows used in investing activities for the three monthsended March 31, 2006 totaled $6.3 million, compared to $3.2 million for thethree months ended March 31, 2005. The use of cash relates primarily toequipment acquisitions and capital improvements to existing equipment. TheCompany’s capital spending in the first quarter of 2006 included $2.6 millionto purchase the dredge Victoria Island that had been operated under a long termoperating lease arrangement.

 

TheCompany’s net cash flows generated by financing activities for the three monthsended March 31, 2006 totaled $2.1 million, compared to $3.3 million forthe three months ended March 31, 2005. In both periods, the Company hadnet borrowings on its revolver to fund working capital needs during thequarters. The Company had $37.4 million of borrowing availability at March 31,2006.

 

TheCompany’s Credit Agreement contains various restrictive covenants. It prohibitsthe Company from prepaying other indebtedness, including the seniorsubordinated notes, and it requires the Company to satisfy financial conditiontests and to maintain specified financial ratios, such as a maximum totalleverage ratio, maximum senior leverage ratio, minimum interest coverage ratioand maximum capital expenditures. It also prohibits the Company from declaringor paying any dividends and from making any payments with respect to the seniorsubordinated notes if it fails to perform its obligations under, or failsto meet the conditions of, the Credit Agreement or if payment creates a defaultunder the Credit Agreement. The Company’s bonding agreement and Equipment TermLoan contain similar restrictive covenants and financial conditions tests. At March 31,2006, the Company was in compliance with all of the financial covenants underits senior credit agreements and bonding agreement.

 

Therequired financial covenant levels under the senior credit agreements and the bondingagreement are restrictive but Company management believes the Company has positiverelationships with its senior lenders and surety provider, should it benecessary to request an additional amendment or waiver to the financialcovenants. However, if there is a future violation of any of the financialcovenants and the Company is not successful in obtaining an additionalamendment or waiver, a default could occur under the Company’s senior creditagreements or bonding agreement, which could result in a material adverseimpact on the Company’s financial condition.

 

TheCompany has continued to experience some timing issues on certain Corpsreceivables, but Company management believes its anticipated cash flows fromoperations and current available credit under its revolving credit facilitywill be sufficient to fund the Company’s operations and its revised capitalexpenditures, and meet its current annual debt service requirements ofapproximately $22 million for the remainder of the year. The Company’s abilityto fund its working capital needs, planned capital expenditures and scheduleddebt payments, and to comply with all of the financial covenants under itssenior credit agreements and bonding agreement, depends on its future operatingperformance and cash flow, which in turn, are subject to prevailing economicconditions and to financial, business and other factors, some of which arebeyond the Company’s control.

 

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###### **Critical Accounting Policiesand Estimates**

###### ** **

Inpreparing its consolidated financial statements, the Company follows accountingprinciples generally accepted in the United States of America. The applicationof these principles requires significant judgments or an estimation processthat can affect the results of operations, financial position and cash flows ofthe Company, as well as the related footnote disclosures. The Companycontinually reviews its accounting policies and financial informationdisclosures. There have been no material changes in policies or estimates sinceDecember 31, 2005.

 

###### **Item 3. Quantitative andQualitative Disclosures About Market Risk**

###### ** **

Themarket risk of the Company’s financial instruments as of March 31, 2006has not significantly changed since December 31, 2005. The market riskprofile of the Company on December 31, 2005 is disclosed in the Company’s2005 Annual Report on Form 10-K.

 

###### **Item 4. Controls andProcedures**

###### ** **

*(a) Evaluation of Disclosure Controls and Procedures*. As required each quarter, the Company’smanagement, with the participation of its Chief Executive Officer and ChiefFinancial Officer, have conducted an evaluation of the effectiveness of disclosurecontrols and procedures (as such term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, as amended) as of theend of the period covered by this quarterly report. Based on that evaluation,such officers have concluded that the disclosure controls and procedures areeffective.

 

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

 

###### **PART II – OtherInformation**

###### ** **

###### **Item 1. Legal Proceedings**

 

On April 24, 2006, a class action complaint was filed in the USDistrict Court for the Eastern District of Louisiana, on behalf of citizens ofLouisiana who suffered property damage from the waters that flooded New Orleansafter Hurricane Katrina hit the area. The suit names Great Lakes Dredge &Dock Company, along with numerous other dredging companies who have completedprojects on behalf of the Army Corps of Engineers in the Mississippi River GulfOutlet (“MRGO”), and the Federal government as defendants. The complaintalleges that dredging of MRGO caused the destruction of the Louisiana wetlandswhich provide a natural barrier against storms and hurricanes. This loss ofnatural barriers then contributed to the failure of the levees upon the impactof Hurricane Katrina which allowed the floodwaters to damage plaintiffs’property. Among other assertions is negligence in violation of the WaterPollution Control Act. The amount of damages is not stated but would bepresumed to be significant. The Company believes it has meritorious defensesand does not believe this claim will have a material adverse impact on thebusiness.

 

**Item 1A. Risk Factors**

 

There have been no material changes to the risk factors previouslydisclosed in the Company’s Form 10-K for the year ended December 31,2006

 

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###### **Item 6. Exhibits**

###### ** **

31.1         Certification Pursuant to Rules 13a-14and 15d-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002.

31.2         Certification Pursuant to Rules 13a-14and 15d-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302of 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.

 

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##### **SIGNATURE**

##### ** **

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
|   |              | Great Lakes Dredge & Dock Corporation  |
|--------|-------------------|-------------------------------------------------|
|   |              |                                            |   |
|   |              |                                            |   |
| Date:  | May 15, 2006 | 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**                                                                                                                                                       |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                           |
| 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.                                             |

 

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