**UNITED STATES****SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 
| **ý**                                        |   | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|---------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                              |   |                                                                                          |
| **For the quarterly period ended March 31, 2004** |
|                                              |   |                                                                                          |
| **OR**                                            |
|                                              |
| **o**                                             |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition periodfrom            to          **

 

**Commission file number:**

**333-64687**

 

**Great Lakes Dredge & Dock Corporation**

(Exactname of registrant as specified in its charter)

 

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

 

**(630) 574-3000**

(Registrant’stelephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

ý Yes  o  No

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theAct).

o  Yes  ý  No

 

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

 

As of May 10, 2004, therewere outstanding 1,000 shares of Common Stock and zero shares of PreferredStock.

 

 

----

 

**GreatLakes Dredge & Dock Corporation and Subsidiaries**

**Quarterly Report Pursuant to Section 13 or15(d) of the**

### **SecuritiesExchange Act of 1934**

### **Forthe Quarterly Period ended March 31, 2004**

 

##### **INDEX**

 
|               |   |                       |                                                                                                 | **Page** |
|--------------------|--------|----------------------------|------------------------------------------------------------------------------------------------------|----------|
| **Part I**         |   | **Financial  Information** |                                                                                                 |     |
|               |   |                       |                                                                                                 |     |
|               |   | Item  1                    | Financial  Statements (Unaudited)                                                                    |     |   |
|               |   |                       |                                                                                                 |     |   |
|               |   |                       | Condensed  Consolidated Balance Sheets at March 31, 2004 and December 31, 2003                       |     | 2 |
|               |   |                       |                                                                                                 |     |   |
|               |   |                       | Condensed  Consolidated Statements of Income for the Three Months ended March 31, 2004  and 2003     |     | 3 |
|               |   |                       |                                                                                                 |     |   |
|               |   |                       | Condensed  Consolidated Statements of Cash Flows for the Three Months ended March 31,  2004 and 2003 |     | 4 |
|               |   |                       |                                                                                                 |     |   |
|               |   |                       | Notes  to Unaudited Condensed Consolidated Financial Statements                                      |     | 5 |
|               |   |                       |                                                                                                 |     |   |
|               |   | Item 2                     | Management’s Discussion and  Analysis of Financial Condition and Results of Operations          |     | 15 |
|               |   |                       |                                                                                                 |     |   |
|               |   | Item  3                    | Quantitative  and Qualitative Disclosures About Market Risk                                          |     | 23 |
|               |   |                       |                                                                                                 |     |   |
|               |   | Item 4                     | Controls and  Procedures                                                                             |     | 23 |
|               |   |                       |                                                                                                 |     |   |
| **Part II**        |   | **Other Information**      |                                                                                                 |     |
|               |   |                       |                                                                                                 |     |   |
|               |   | Item 6                     | Exhibits and  Reports on Form 8-K                                                                    |     | 24 |
|               |   |                       |                                                                                                 |     |
| **Signature**      |   | 25                         |
|               |   |                       |                                                                                                 |     |
| **Exhibit  Index** |   | 26                         |

 

----

 

###### **PARTI** – Financial Information

 

**Great Lakes Dredge &Dock Corporation and Subsidiaries**

### **CondensedConsolidated Balance Sheets**

** (Unaudited)**

**(in thousands, except shareand per share amounts)**

 
|                                                               |   | **Successor  Basis** |    |
|--------------------------------------------------------------------|--------|----------------------|---------|
|                                                               |   | **March 31,  2004**  |    | **December  31,  2003** |   |
| **Assets**                                                         |   |                 |    |   |   |
| Current assets:                                                    |   |                 |    |   |   |
| Cash and equivalents                                               |   | $                    | 3,664   |   | $ | 2,775 |   |
| Accounts receivable, net                                           |   | 57,864               |    | 64,869 |   |
| Contract revenues in excess of billings                            |   | 15,796               |    | 11,236 |   |
| Inventories                                                        |   | 14,629               |    | 13,603 |   |
| Prepaid expenses and other current assets                          |   | 17,339               |    | 21,178 |   |
| Total current assets                                               |   | 109,292              |    | 113,661 |   |
| Property and equipment, net                                        |   | 264,503              |    | 264,132 |   |
| Goodwill                                                           |   | 103,917              |    | 103,917 |   |
| Other intangible assets, net                                       |   | 5,649                |    | 7,441 |   |
| Inventories                                                        |   | 10,973               |    | 10,968 |   |
| Investments in joint ventures                                      |   | 7,700                |    | 7,551 |   |
| Other assets                                                       |   | 12,436               |    | 15,274 |   |
| Total assets                                                       |   | $                    | 514,470 |   | $ | 522,944 |   |
|                                                               |   |                 |    |   |   |
| **Liabilities and Stockholder’s Equity**                      |   |                 |    |   |   |
| Current liabilities:                                               |   |                 |    |   |   |
| Accounts payable                                                   |   | $                    | 28,557  |   | $ | 36,991 |   |
| Accrued expenses                                                   |   | 17,022               |    | 15,456 |   |
| Billings in excess of contract revenues                            |   | 8,991                |    | 8,808 |   |
| Current maturities of long-term debt                               |   | 1,950                |    | 1,950 |   |
| Total current liabilities                                          |   | 56,520               |    | 63,205 |   |
| Long-term debt                                                     |   | 253,763              |    | 256,750 |   |
| Deferred income taxes                                              |   | 96,032               |    | 96,626 |   |
| Other                                                              |   | 7,685                |    | 7,632 |   |
| Total liabilities                                                  |   | 414,000              |    | 424,213 |   |
| Minority interest                                                  |   | 1,725                |    | 1,731 |   |
| Commitments and contingencies (Note 9)                             |   | —               |    | — |   |
| Stockholder’s equity:                                         |   |                 |    |   |   |
| Common stock, $.01 par value; 1,000 shares  issued and outstanding |   | —               |    | — |   |
| Additional paid-in capital                                         |   | 97,000               |    | 97,000 |   |
| Retained earnings                                                  |   | 1,758                |    | — |   |
| Accumulated other comprehensive income                             |   | (13                  | )       | — |   |
| Total stockholder’s equity                                    |   | 98,745               |    | 97,000 |   |
| Total liabilities and stockholder’s deficit                   |   | $                    | 514,470 |   | $ | 522,944 |   |

 

See notes to unaudited condensed consolidated financial statements.

 

2

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**Great Lakes Dredge &Dock Corporation and Subsidiaries**

### **CondensedConsolidated Statements of Income**

**(Unaudited)**

**(in thousands)**

 
|                                |   | **Three  Months Ended  March 31,** |    |
|-------------------------------------|--------|------------------------------------|---------|
|                                |   | **Successor  Basis**               |    | **Predecessor  Basis** |   |
|                                |   | **2004**                           |    | **2003** |   |
|                                |   |                               |    |   |   |
| Contract revenues                   |   | $                                  | 103,947 |   | $ | 99,693 |   |
| Costs of contract revenues          |   | 87,548                             |    | 81,655 |   |
| Gross profit                        |   | 16,399                             |    | 18,038 |   |
| General and administrative expenses |   | 7,123                              |    | 6,941 |   |
| Amortization of intangible assets   |   | 1,792                              |    | — |   |
| Operating income                    |   | 7,484                              |    | 11,097 |   |
| Interest expense, net               |   | (4,610                             | )       | (5,056 | ) |
| Equity in earnings of joint venture |   | 149                                |    | 67 |   |
| Minority interests                  |   | 6                                  |    | (21 | ) |
| Income before income taxes          |   | 3,029                              |    | 6,087 |   |
| Income tax expense                  |   | (1,271                             | )       | (2,600 | ) |
| Net income                          |   | $                                  | 1,758   |   | $ | 3,487 |   |

 

See notes to unaudited condensedconsolidated financial statements.

 

3

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**Great Lakes Dredge &Dock Corporation and Subsidiaries**

### **CondensedConsolidated Statements of Cash Flows**

** (Unaudited)**

**(in thousands)**

 
|                                                                              |   | **Three Months  Ended  March 31,** |   |
|-----------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                              |   | **Successor  Basis**               |   | **Predecessor  Basis** |   |
|                                                                              |   | **2004**                           |   | **2003** |   |
| **Operating  Activities**                                                         |   |                               |   |   |   |
| Net income                                                                        |   | $                                  | 1,758  |   | $ | 3,487 |   |
| Adjustments to reconcile net income to net  cash flows from operating activities: |   |                               |   |   |   |
| Depreciation and amortization                                                     |   | 7,125                              |   | 4,067 |   |
| Earnings of joint ventures                                                        |   | (149                               | )      | (67 | ) |
| Minority interests                                                                |   | (6                                 | )      | 21 |   |
| Deferred income taxes                                                             |   | (802                               | )      | (137 | ) |
| Loss (gain) on dispositions of property and  equipment                            |   | 12                                 |   | (3 | ) |
| Other, net                                                                        |   | 398                                |   | 391 |   |
| Changes in assets and liabilities:                                                |   |                               |   |   |   |
| Accounts receivable                                                               |   | 7,005                              |   | 6,928 |   |
| Contract revenues in excess of billings                                           |   | (4,560                             | )      | (4,690 | ) |
| Inventories                                                                       |   | (1,031                             | )      | (1,030 | ) |
| Prepaid expenses and other current assets                                         |   | 3,701                              |   | 596 |   |
| Accounts payable and accrued expenses                                             |   | (6,868                             | )      | (6,464 | ) |
| Billings in excess of contract revenues                                           |   | 183                                |   | (4,553 | ) |
| Other noncurrent assets and liabilities                                           |   | 2,545                              |   | (77 | ) |
| Net cash flows from operating activities                                          |   | 9,311                              |   | (1,531 | ) |
|                                                                              |   |                               |   |   |   |
| **Investing  Activities**                                                         |   |                               |   |   |   |
| Purchases of property and equipment                                               |   | (5,361                             | )      | (3,371 | ) |
| Dispositions of property and equipment                                            |   | —                             |   | 3 |   |
| Equity investment in land                                                         |   | —                             |   | (843 | ) |
| Net cash flows from investing activities                                          |   | (5,361                             | )      | (4,211 | ) |
|                                                                              |   |                               |   |   |   |
| **Financing  Activities**                                                         |   |                               |   |   |   |
| Repayments of long-term debt                                                      |   | (2,987                             | )      | (3,713 | ) |
| Borrowings under revolving loans, net of  repayments                              |   | —                             |   | 9,000 |   |
| Financing fees                                                                    |   | (74                                | )      | (403 | ) |
| Repayment on notes receivable from  stockholders                                  |   | —                             |   | 19 |   |
| Net cash flows from financing activities                                          |   | (3,061                             | )      | 4,903 |   |
| Net change in cash and equivalents                                                |   | 889                                |   | (839 | ) |
| Cash and equivalents at beginning of period                                       |   | 2,775                              |   | 1,456 |   |
| Cash and equivalents at end of period                                             |   | $                                  | 3,664  |   | $ | 617 |   |
|                                                                              |   |                               |   |   |   |
| **Supplemental Cash  Flow Information**                                           |   |                               |   |   |   |
| Cash paid for interest                                                            |   | $                                  | 1,380  |   | $ | 8,977 |   |
| Cash paid for taxes                                                               |   | $                                  | — |   | $ | 2,432 |   |

 

See notes to unaudited condensedconsolidated financial statements.

 

4

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GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES

NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(dollars in thousands)

 

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

 

The accompanying unaudited condensedconsolidated financial statements have been prepared in accordance withaccounting principles generally accepted in the U.S. for interim financialinformation.  Accordingly, these financialstatements do not include all the information in the notes required bygenerally accepted accounting principles for complete financialstatements.  In the opinion ofmanagement, the unaudited condensed consolidated financial statements includeall adjustments (consisting of normal recurring adjustments) considerednecessary for a fair presentation of the financial position, results ofoperations and cash flows as of and for the dates presented.  The unaudited condensed consolidatedfinancial statements and notes herein should be read in conjunction with theaudited consolidated financial statements of Great Lakes Dredge & DockCorporation and Subsidiaries (the “Company”) and the notes thereto, included inthe Company’s Annual Report filed on Form 10-K for the year ended December 31,2003.

 

The acquisition of the Company by MadisonDearborn Capital Partners IV, L.P. in December 2003 was accounted for as apurchase in accordance with Statement of Financial Accounting Standards (SFAS)No. 141, “Business Combinations,” resulting in a new basis of accountingsubsequent to the transaction.  Forpresentation herein, the financial statements up to the date of the sale aredenoted as Predecessor Basis, while the financial statements preparedsubsequent to the sale are denoted as Successor Basis.   See Note 4 for a description of thetransaction.

 

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

 

**2.****    ****Comprehensive income**

 

Total comprehensive income comprises netincome and net unrealized gains and losses on cash flow hedges.  Total comprehensive income for the threemonths ended March 31, 2004 and 2003 was $1,745 and $3,519, respectively.

 

 

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

 

TheCompany uses derivative instruments to manage commodity price and foreigncurrency exchange risks.  Suchinstruments are not used for trading purposes. As of March 31, 2004, the Company is party to various swap arrangementsto hedge the price of a portion of its diesel fuel purchase requirements forwork in its backlog to be performed through April 2005.  As of March 31, 2004, there were 5.9 milliongallons remaining on these contracts. Under these

 

5

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agreements,the Company will pay fixed prices ranging from $0.75 to $0.89 per gallon.  At March 31, 2004 and December 31, 2003, thefair value on these contracts was estimated to be $487 and $509, respectively,based on quoted market prices, and is recorded in other current assets.Ineffectiveness related to these fuel hedge arrangements was determined to beimmaterial.  The remaining gainsincluded in accumulated other comprehensive income at March 31, 2004 will bereclassified into earnings over the next thirteen months, corresponding to theperiod during which the hedged fuel is expected to be utilized.

 

InFebruary 2004, the Company entered into an interest rate swap arrangement toswap a notional amount of $50 million from a fixed rate of 7.75% to a floatingLIBOR-based rate in order to manage the interest rate paid with respect to theCompany’s 73⁄4% senior subordinated debt. The fair value of the swap at March 31, 2004 was $655.  The swap is not accounted for as a hedge, sothe fair value is recorded directly as a reduction to interest expense.

 

The carrying values of other financial instrumentsincluded in current assets and current liabilities approximate fair values dueto the short-term maturities of these instruments.  The carrying value of long-term bank debt is a reasonableestimate of its fair value as interest rates are variable, based on theprevailing market rates.  The fair valueof the Company’s $175,000 of 73⁄4% senior subordinated notes was $176,750 and$180,250 at March 31, 2004 and December 31, 2003, respectively, based on quotedmarket prices.

 

**4.****    ****Sale transaction**

 

OnDecember 22, 2003, the Company was acquired by Madison Dearborn CapitalPartners IV, L.P. (MDP), an affiliate of Chicago-based private equityinvestment firm Madison Dearborn Partners, LLC.  The purchase price totaled $362,111, including fees and expenses,and was financed by new equity contributions of $97,000; term loan and revolverborrowings under a new senior credit facility of approximately $60,300 and$2,000, respectively; the issuance of $175,000 of 7.75% Senior SubordinatedNotes due 2013; the rollover of term loan borrowings under a new equipmentfinancing facility of $23,400; the rollover of approximately $1,558 million ofcapital leases; and cash on hand of $2,853. The purchase price was subject to certain working capital and debtadjustments to be finalized approximately three months subsequent to thetransaction, as defined per the merger agreement.  The adjustments were finalized in April of 2004, resulting in adecrease to the purchase price of $527.

 

Theacquisition was accounted for by the purchase method of accounting and,accordingly, the purchase price was allocated to the Company’s assets andliabilities based on their fair values at the date of acquisition.  The allocation of purchase price to propertyand equipment and identifiable intangible assets has been prepared on apreliminary basis, using valuation information that was available up to thepoint of financial statement preparation. This allocation is therefore subject to adjustment.

 

AtMarch 31, 2004, the net book value of intangible assets identified with respectto the transaction is as follows:

 
|                              |   | **Estimated  Life** |   | **Cost** |   | **Accumulated  Amortization** |   | **Net** |   |
|-----------------------------------|--------|---------------------|--------|----------|--------|-------------------------------|--------|---------|--------|
| Customer contract backlog         |   | 13-15 mos.          |   | $        | 4,237  |                          | $      | 1,686   |   | $ | 2,551 |   |
| Demolition customer relationships |   | 7-10 years          |   | 1,995    |   | 71                            |   | 1,924   |   |
| Software and databases            |   | 7 years             |   | 1,209    |   | 35                            |   | 1,174   |   |
|                              |   |                |   | $        | 7,441  |                          | $      | 1,792   |   | $ | 5,649 |   |

 

6

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Thefollowing pro forma results for the three months ended March 31, 2003 have beenprepared as if the acquisition took place at the beginning of the period andinclude certain adjustments such as additional depreciation and amortizationcharges resulting from the allocation of purchase price to property andequipment and intangible assets, and reductions to interest expense resultingfrom the terms of the new debt structure. The pro forma operating results have been prepared forcomparative purposes only and are not necessarily indicative of the results ofoperations that may occur in the future or that would have occurred had thisacquisition been consummated at the beginning of the period presented.

 
|                       |   | **Three  Months Ended  March 31,** |    |
|----------------------------|--------|------------------------------------|---------|
|                       |   | **Actual  2004**                   |    | **Pro forma  2003** |   |
| Contract revenues          |   | $                                  | 103,947 |   | $ | 99,693 |   |
| Operating income           |   | 7,484                              |    | 8,213 |   |
| Income before income taxes |   | 3,029                              |    | 3,571 |   |
| Net income                 |   | 1,758                              |    | 1,982 |   |
|                            |        |                                    |         |  |  |  |  |

 

**5.****    ****Accounts receivable**

 

Accountsreceivable at March 31, 2004 and December 31, 2003 are as follows:

 
|                            |   | **Successor  Basis** |   |
|---------------------------------|--------|----------------------|--------|
|                            |   | **March 31,  2004**  |   | **December  31,  2003** |   |
| Completed contracts             |   | $                    | 17,626 |   | $ | 15,962 |   |
| Contracts in progress           |   | 33,371               |   | 40,737 |   |
| Retainage                       |   | 7,685                |   | 8,969 |   |
|                            |   | 58,682               |   | 65,668 |   |
| Allowance for doubtful accounts |   | (818                 | )      | (799 | ) |
|                            |   |                 |   |   |   |
|                            |   | $                    | 57,864 |   | $ | 64,869 |   |

 

7

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**6.****    ****Contracts in progress**

 

The components of contracts in progress atMarch 31, 2004 and December 31, 2003 are as follows:

 
|                                                                            |   | **Successor  Basis** |     |
|---------------------------------------------------------------------------------|--------|----------------------|----------|
|                                                                            |   | **March 31,  2004**  |     | **December  31,  2003** |   |
| Costs and earnings in excess of billings:                                       |   |                 |     |   |   |
| Costs and earnings for contracts in progress                                    |   | $                    | 159,036  |   | $ | 261,013 |   |
| Amounts billed                                                                  |   | (145,084             | )        | (251,034 | ) |
| Costs and earnings in excess of billings for  contracts in progress             |   | 13,952               |     | 9,979 |   |
| Costs and earnings in excess of billings for  completed contracts               |   | 1,844                |     | 1,257 |   |
|                                                                            |   |                 |     |   |   |
|                                                                            |   | $                    | 15,796   |   | $ | 11,236 |   |
|                                                                            |   |                 |     |   |   |
| Prepaid contract costs (included in prepaid  expenses and other current assets) |   | $                    | 475      |   | $ | 570 |   |
|                                                                            |   |                 |     |   |   |
| Billings in excess of costs and earnings:                                       |   |                 |     |   |   |
| Amounts billed                                                                  |   | $                    | (224,399 | ) | $ | (180,096 | ) |
| Costs and earnings for contracts in progress                                    |   | 215,408              |     | 171,288 |   |
|                                                                            |   |                 |     |   |   |
|                                                                            |   | $                    | (8,991   | ) | $ | (8,808 | ) |

 

**7.****    ****Accrued expenses**

 

Accrued expenses at March 31, 2004 and December 31, 2003 are as follows:

 
|                          |   | **Successor  Basis** |   |
|-------------------------------|--------|----------------------|--------|
|                          |   | **March 31,  2004**  |   | **December  31,  2003** |   |
| Insurance                     |   | $                    | 4,920  |   | $ | 4,736 |   |
| Interest                      |   | 3,815                |   | 339 |   |
| U.S. income and other taxes   |   | 3,075                |   | 1,252 |   |
| Payroll and employee benefits |   | 2,613                |   | 6,658 |   |
| Equipment leases              |   | 873                  |   | 882 |   |
| Foreign income taxes          |   | 578                  |   | 210 |   |
| Other                         |   | 1,148                |   | 1,379 |   |
|                          |   |                 |   |   |   |
|                          |   | $                    | 17,022 |   | $ | 15,456 |   |

 

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

 

The Company and its subsidiaries operate intwo reportable segments: dredging and demolition.  The Company’s financial reporting systems present various datafor management to run the business, including profit and loss statementsprepared according to the segments presented.  Segment information for the periods presented is as follows:

 

8

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|              |   | **Three  Months Ended  March 31,** |    |
|-------------------|--------|------------------------------------|---------|
|              |   | **Successor  Basis**               |    | **Predecessor  Basis** |   |
|              |   | **2004**                           |    | **2003** |   |
| **Dredging**      |   |                               |    |   |   |
| Contract revenues |   | $                                  | 96,800  |   | $ | 91,369 |   |
| Operating income  |   | 7,236                              |    | 10,298 |   |
|              |   |                               |    |   |   |
| **Demolition**    |   |                               |    |   |   |
| Contract revenues |   | $                                  | 7,147   |   | $ | 8,324 |   |
| Operating income  |   | 248                                |    | 799 |   |
|              |   |                               |    |   |   |
| **Total**         |   |                               |    |   |   |
| Contract revenues |   | $                                  | 103,947 |   | $ | 99,693 |   |
| Operating income  |   | 7,484                              |    | 11,097 |   |

 

**9.****    ****Commitments andcontingencies**

 

At March 31, 2004, the Company is contingently liable, in the normalcourse of business, for $15,281 in undrawn letters of credit, relating tocontract performance guarantees or covering the Company’s insurance paymentliabilities.

 

Amboy Aggregates, a joint venture in which the Company has a 50% equityinterest, has a $2,000 revolving credit facility with a bank, which containscertain restrictive covenants, including limitations on the amount ofdistributions to its joint venture partners. The Company has guaranteed 50% of the outstanding borrowings and accruedinterest, which totaled $350 at March 31, 2004.

 

The Company finances certain key vessels used in its operations withoff-balance sheet lease arrangements with unrelated lessors, requiring annualrentals decreasing from $14 to $9 million over the next five years.  These off-balance sheet leases contain defaultprovisions which 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 at leaseinception. The tax indemnifications do not have a contractual dollarlimit.  It is impractical to develop anestimate of the maximum potential exposure under these lease indemnificationarrangements, since it is entirely dependent on the unique tax circumstances ofeach lessor.  The Company has additionalrental commitments for office facilities and dozer leases totalingapproximately $1 million to $2 million, annually.

 

Borrowings under the Company’s Credit Agreement are secured by firstlien mortgages on certain operating equipment of the Company with a net bookvalue of $77,845 at December 31, 2003. Additionally, the Company obtains itsperformance and bid bonds through a bonding agreement with a surety companythat has been granted a security interest in a substantial portion of theCompany’s operating equipment with a net book value of approximately $92,340 atDecember 31, 2003. The net book value of equipment serving as collateral underthese agreements at March 31, 2004 does not materially differ from the valuesat December 31, 2003.  Both the CreditAgreement and bonding agreement contain certain provisions and covenants; theCompany is in compliance with such covenants at March 31, 2004. The performanceand bid

 

9

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bondsare customarily required for dredging and marine construction projects, as wellas some demolition projects.  Bid bondsare generally obtained for a percentage of bid value and aggregate amountsoutstanding typically range between $5 to $10 million.  Performance bonds typically cover 100% ofthe contract value with no maximum bond amounts.  At March 31, 2004, the Company had outstanding performance bondsvalued at approximately $410 million; however the revenue value remaining inbacklog related to these projects totaled approximately $156 million at March31, 2004.

 

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

 

The Company considers it unlikely that it would have to perform underany of these aforementioned contingent obligations and performance has neverbeen required in any of these circumstances in the past.

 

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

 

In the normal course of business, the Company is a defendant in variouslegal proceedings.  Except as describedbelow, the Company is not currently a party to any material legal proceedingsor environmental claims.

 

A joint venture in which the Company holds an approximately 36% interestis subject to a counterclaim filed by the Red Sea Ports Authority relating to acontract performed in Egypt between 1999 and 2001. The joint venture institutedarbitration proceedings against the Red Sea Ports Authority for monetary claimsarising out of the contract and sought approximately $40 million indamages.  The Red Sea Ports Authoritycounterclaimed for $74 million in damages, alleging environmental damage fromthe project, including damage to coastline, fisheries and coral reefs, andmisuse of the designated disposal site. In July 2003, an arbitration hearing was held in Egypt regarding thejoint venture’s claim and the Red Sea Ports Authority’s counterclaim.  A decision is expected to be rendered in thesecond quarter of 2004.  Managementbelieves that the allegations in the counterclaim are baseless and does notbelieve that it will have a material adverse impact on the Company’s business.

 

**10.**** ****Supplemental condensed consolidating financialinformation**

 

Includedin the Company’s long-term debt is $175,000 of 73⁄4% senior subordinated noteswhich will mature on December 15, 2013. The payment obligations of the Company under the senior subordinatednotes are guaranteed by the Company’s domestic subsidiaries (the “SubsidiaryGuarantors”).  Such guarantees are full,unconditional and joint and several. Separate financial statements of the Subsidiary Guarantors are notpresented because the Company’s management has determined that they would notbe material to investors.  The followingsupplemental financial information sets forth, on a combined basis, the balancesheets, statements of operations and statements of cash flows for theSubsidiary Guarantors, the Company’s non-guarantor subsidiary and for theCompany (“GLD Corporation”).

 

10

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**GREAT LAKES DREDGE & DOCK CORPORATION ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**(In thousands)**

 

**Condensed Consolidating Balance Sheet at March 31, 2004**

 

**Successor Basis**

 
|                                           |   | **Guarantor  Subsidiaries** |    | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |    | **Consolidated  Totals** |   |
|------------------------------------------------|--------|-----------------------------|---------|-------------------------|--------|----------------------|--------|------------------|---------|--------------------------|--------|
| **ASSETS**                                     |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Current assets:                                |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Cash and equivalents                           |   | $                           | 3,656   |                    | $      | 8                    |   | $                | —  |                     | $      | — |   | $ | 3,664 |   |
| Accounts receivable, net                       |   | 57,864                      |    | —                  |   | —               |   | —           |    | 57,864                   |   |
| Receivables from affiliates                    |   | 1,672                       |    | 2,931                   |   | 4,540                |   | (9,143           | )       | —                   |   |
| Contract revenues in excess of billings        |   | 15,796                      |    | —                  |   | —               |   | —           |    | 15,796                   |   |
| Inventories                                    |   | 14,629                      |    | —                  |   | —               |   | —           |    | 14,629                   |   |
| Prepaid expenses and other current assets      |   | 13,939                      |    | —                  |   | 3,400                |   | —           |    | 17,339                   |   |
| Total current assets                           |   | 107,556                     |    | 2,939                   |   | 7,940                |   | (9,143           | )       | 109,292                  |   |
| Property and equipment, net                    |   | 249,407                     |    | 29                      |   | 15,067               |   | —           |    | 264,503                  |   |
| Goodwill                                       |   | 103,917                     |    | —                  |   | —               |   | —           |    | 103,917                  |   |
| Other intangible assets                        |   | 5,649                       |    | —                  |   | —               |   | —           |    | 5,649                    |   |
| Investments in subsidiaries                    |   | 2,960                       |    | —                  |   | 286,298              |   | (289,258         | )       | —                   |   |
| Note receivable from affiliate                 |   | —                      |    | —                  |   | 26,107               |   | (26,107          | )       | —                   |   |
| Inventories                                    |   | 10,973                      |    | —                  |   | —               |   | —           |    | 10,973                   |   |
| Investments in joint ventures                  |   | 7,700                       |    | —                  |   | —               |   | —           |    | 7,700                    |   |
| Other assets                                   |   | 1,108                       |    | —                  |   | 11,328               |   | —           |    | 12,436                   |   |
|                                           |   | $                           | 489,270 |                    | $      | 2,968                |   | $                | 346,740 |                     | $      | (324,508 | ) | $ | 514,470 |   |
|                                           |   |                        |    |                    |   |                 |   |             |    |                     |   |
| **LIABILITIES AND  STOCKHOLDER’S EQUITY** |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Current liabilities:                           |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Accounts payable                               |   | $                           | 28,551  |                    | $      | —               |   | $                | —  |                     | $      | 6 |   | $ | 28,557 |   |
| Payables to affiliates                         |   | —                      |    | —                  |   | 4,839                |   | (4,839           | )       | —                   |   |
| Accrued expenses                               |   | 10,282                      |    | —                  |   | 6,740                |   | —           |    | 17,022                   |   |
| Billings in excess of contract revenues        |   | 8,991                       |    | —                  |   | —               |   | —           |    | 8,991                    |   |
| Current maturities of long-term debt           |   | 6,490                       |    | —                  |   | —               |   | (4,540           | )       | 1,950                    |   |
| Total current liabilities                      |   | 54,314                      |    | —                  |   | 11,579               |   | (9,373           | )       | 56,520                   |   |
| Long-term debt                                 |   | 20,963                      |    | —                  |   | 232,800              |   | —           |    | 253,763                  |   |
| Note payable to affiliate                      |   | 26,107                      |    | —                  |   | —               |   | (26,107          | )       | —                   |   |
| Deferred income taxes                          |   | 86,964                      |    | 8                       |   | 9,060                |   | —           |    | 96,032                   |   |
| Other                                          |   | 7,001                       |    | —                  |   | 684                  |   | —           |    | 7,685                    |   |
| Total liabilities                              |   | 195,349                     |    | 8                       |   | 254,123              |   | (35,480          | )       | 414,000                  |   |
| Minority interests                             |   | —                      |    | —                  |   | —               |   | 1,725            |    | 1,725                    |   |
| Stockholder’s equity                      |   | 293,921                     |    | 2,960                   |   | 92,617               |   | (290,753         | )       | 98,745                   |   |
|                                           |   | $                           | 489,270 |                    | $      | 2,968                |   | $                | 346,740 |                     | $      | (324,508 | ) | $ | 514,470 |   |

 

11

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** **

**GREAT LAKES DREDGE & DOCK CORPORATION ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

** **

**Condensed Consolidating Balance Sheet at December 31, 2003**

** **

**Successor Basis**

 
|                                           |   | **Guarantor  Subsidiaries** |    | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |    | **Consolidated  Totals** |   |
|------------------------------------------------|--------|-----------------------------|---------|-------------------------|--------|----------------------|--------|------------------|---------|--------------------------|--------|
| **ASSETS**                                     |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Current assets:                                |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Cash and equivalents                           |   | $                           | 2,766   |                    | $      | 9                    |   | $                | —  |                     | $      | — |   | $ | 2,775 |   |
| Accounts receivable, net                       |   | 64,869                      |    | —                  |   | —               |   | —           |    | 64,869                   |   |
| Receivables from affiliates                    |   | 7,867                       |    | 2,941                   |   | 4,540                |   | (15,348          | )       | —                   |   |
| Contract revenues in excess of billings        |   | 11,236                      |    | —                  |   | —               |   | —           |    | 11,236                   |   |
| Inventories                                    |   | 13,603                      |    | —                  |   | —               |   | —           |    | 13,603                   |   |
| Prepaid expenses and other current assets      |   | 14,558                      |    | —                  |   | 6,620                |   | —           |    | 21,178                   |   |
| Total current assets                           |   | 114,899                     |    | 2,950                   |   | 11,160               |   | (15,348          | )       | 113,661                  |   |
| Property and equipment, net                    |   | 241,594                     |    | 38                      |   | 22,500               |   | —           |    | 264,132                  |   |
| Goodwill                                       |   | 103,917                     |    | —                  |   | —               |   | —           |    | 103,917                  |   |
| Other intangible assets                        |   | 7,441                       |    | —                  |   | —               |   | —           |    | 7,441                    |   |
| Investments in subsidiaries                    |   | 2,976                       |    | —                  |   | 281,967              |   | (284,943         | )       | —                   |   |
| Note receivable from affiliate                 |   | —                      |    | —                  |   | 27,242               |   | (27,242          | )       | —                   |   |
| Inventories                                    |   | 10,968                      |    | —                  |   | —               |   | —           |    | 10,968                   |   |
| Investments in joint ventures                  |   | 7,551                       |    | —                  |   | —               |   | —           |    | 7,551                    |   |
| Other assets                                   |   | 3,605                       |    | —                  |   | 11,669               |   | —           |    | 15,274                   |   |
|                                           |   | $                           | 492,951 |                    | $      | 2,988                |   | $                | 354,538 |                     | $      | (327,533 | ) | $ | 522,944 |   |
|                                           |   |                        |    |                    |   |                 |   |             |    |                     |   |
| **LIABILITIES AND  STOCKHOLDER’S EQUITY** |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Current liabilities:                           |   |                        |    |                    |   |                 |   |             |    |                     |   |
| Accounts payable                               |   | $                           | 36,911  |                    | $      | —               |   | $                | 80      |                     | $      | — |   | $ | 36,991 |   |
| Payables to affiliates                         |   | 9                           |    | —                  |   | 10,919               |   | (10,928          | )       | —                   |   |
| Accrued expenses                               |   | 14,587                      |    | —                  |   | 869                  |   | —           |    | 15,456                   |   |
| Billings in excess of contract revenues        |   | 8,808                       |    | —                  |   | —               |   | —           |    | 8,808                    |   |
| Current maturities of long-term debt           |   | 6,490                       |    | —                  |   | —               |   | (4,540           | )       | 1,950                    |   |
| Total current liabilities                      |   | 66,805                      |    | —                  |   | 11,868               |   | (15,468          | )       | 63,205                   |   |
| Long-term debt                                 |   | 21,450                      |    | —                  |   | 235,300              |   | —           |    | 256,750                  |   |
| Note payable to affiliate                      |   | 27,242                      |    | —                  |   | —               |   | (27,242          | )       | —                   |   |
| Deferred income taxes                          |   | 86,927                      |    | 12                      |   | 9,687                |   | —           |    | 96,626                   |   |
| Other                                          |   | 6,949                       |    | —                  |   | 683                  |   | —           |    | 7,632                    |   |
| Total liabilities                              |   | 209,373                     |    | 12                      |   | 257,538              |   | (42,710          | )       | 424,213                  |   |
| Minority interests                             |   | —                      |    | —                  |   | —               |   | 1,731            |    | 1,731                    |   |
| Stockholder’s equity                      |   | 283,578                     |    | 2,976                   |   | 97,000               |   | (286,554         | )       | 97,000                   |   |
|                                           |   | $                           | 492,951 |                    | $      | 2,988                |   | $                | 354,538 |                     | $      | (327,533 | ) | $ | 522,944 |   |

 

12

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**GREAT LAKES DREDGE & DOCK CORPORATION ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**(In thousands)**

** **

**Condensed Consolidating Statement of Income for the threemonths ended March 31, 2004**

** **

**Successor Basis**

 
|                                |   | **Guarantor  Subsidiaries** |    | **Other  Subsidiary** |   | **GLD  Corporation** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|-------------------------------------|--------|-----------------------------|---------|-----------------------|--------|----------------------|--------|------------------|--------|--------------------------|--------|
|                                |   |                        |    |                  |   |                 |   |             |   |                     |   |
| Contract revenues                   |   | $                           | 103,947 |                  | $      | —               |   | $                | — |                     | $      | — |   | $ | 103,947 |   |
| Costs of contract revenues          |   | (87,733                     | )       | (10                   | )      | 195                  |   | —           |   | (87,548                  | )      |
| Gross profit (loss)                 |   | 16,214                      |    | (10                   | )      | 195                  |   | —           |   | 16,399                   |   |
| General and administrative expenses |   | (7,024                      | )       | (15                   | )      | (84                  | )      | —           |   | (7,123                   | )      |
| Amortization of intangible assets   |   | (1,792                      | )       | —                |   | —               |   | —           |   | (1,792                   | )      |
| Operating income (loss)             |   | 7,398                       |    | (25                   | )      | 111                  |   | —           |   | 7,484                    |   |
| Interest expense, net               |   | (1,124                      | )       | —                |   | (3,486               | )      | —           |   | (4,610                   | )      |
| Equity in loss of subsidiaries      |   | (16                         | )       | —                |   | 6,057                |   | (6,041           | )      | —                   |   |
| Equity in earnings of joint venture |   | 149                         |    | —                |   | —               |   | —           |   | 149                      |   |
| Minority interests                  |   | —                      |    | —                |   | —               |   | 6                |   | 6                        |   |
| Income (loss) before income taxes   |   | 6,407                       |    | (25                   | )      | 2,682                |   | (6,035           | )      | 3,029                    |   |
| Income tax (expense) benefit        |   | (2,538                      | )       | 9                     |   | (1,126               | )      | 2,384            |   | (1,271                   | )      |
| Net income (loss)                   |   | $                           | 3,869   |                  | $      | (16                  | )      | $                | 1,556  |                     | $      | (3,651 | ) | $ | 1,758 |   |

 

**Condensed Consolidating Statement of Incomefor the three months ended March 31, 2003**

 

**Predecessor Basis**

 
|                                      |   | **Guarantor  Subsidiaries** |   | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|-------------------------------------------|--------|-----------------------------|--------|-------------------------|--------|----------------------|--------|------------------|--------|--------------------------|--------|
|                                      |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Contract revenues                         |   | $                           | 99,693 |                    | $      | —               |   | $                | — |                     | $      | — |   | $ | 99,693 |   |
| Costs of contract revenues                |   | (81,173                     | )      | (16                     | )      | (356                 | )      | (110             | )      | (81,655                  | )      |
| Gross profit (loss)                       |   | 18,520                      |   | (16                     | )      | (356                 | )      | (110             | )      | 18,038                   |   |
| General and administrative expenses       |   | (6,902                      | )      | (9                      | )      | (30                  | )      | —           |   | (6,941                   | )      |
| Operating income (loss)                   |   | 11,618                      |   | (25                     | )      | (386                 | )      | (110             | )      | 11,097                   |   |
| Interest expense, net                     |   | (683                        | )      | —                  |   | (4,373               | )      | —           |   | (5,056                   | )      |
| Equity in (loss) earnings of subsidiaries |   | (23                         | )      | —                  |   | 6,454                |   | (6,431           | )      | —                   |   |
| Equity in earnings of joint venture       |   | 67                          |   | —                  |   | —               |   | —           |   | 67                       |   |
| Minority interest                         |   | —                      |   | —                  |   | —               |   | (21              | )      | (21                      | )      |
| Income (loss) before income taxes         |   | 10,979                      |   | (25                     | )      | 1,695                |   | (6,562           | )      | 6,087                    |   |
| Income tax (expense) benefit              |   | (4,403                      | )      | 11                      |   | 1,792                |   | —           |   | (2,600                   | )      |
| Net income (loss)                         |   | $                           | 6,576  |                    | $      | (14                  | )      | $                | 3,487  |                     | $      | (6,562 | ) | $ | 3,487 |   |

 

13

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**GREAT LAKES DREDGE & DOCK CORPORATION ANDSUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**(In thousands)**

** **

**Condensed Consolidating Cash Flows for the three months endedMarch 31, 2004**

 

**Successor Basis**

 
|                                        |   | **Guarantor  Subsidiaries** |   | **Other  Subsidiary** |   | **GLD  Corporation** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|---------------------------------------------|--------|-----------------------------|--------|-----------------------|--------|----------------------|--------|------------------|--------|--------------------------|--------|
|                                        |   |                        |   |                  |   |                 |   |             |   |                     |   |
| **Operating  Activities**                   |   |                        |   |                  |   |                 |   |             |   |                     |   |
| Net cash flows from operating activities    |   | $                           | 5,893  |                  | $      | (11                  | )      | $                | 3,429  |                     | $      | — |   | $ | 9,311 |   |
|                                        |   |                        |   |                  |   |                 |   |             |   |                     |   |
| **Investing  Activities**                   |   |                        |   |                  |   |                 |   |             |   |                     |   |
| Purchases of property and equipment         |   | (5,361                      | )      | —                |   | —               |   | —           |   | (5,361                   | )      |
| Net cash flows from investing activities    |   | (5,361                      | )      | —                |   | —               |   | —           |   | (5,361                   | )      |
|                                        |   |                        |   |                  |   |                 |   |             |   |                     |   |
| **Financing  Activities**                   |   |                        |   |                  |   |                 |   |             |   |                     |   |
| Repayments of long-term debt                |   | (487                        | )      | —                |   | (2,500               | )      | —           |   | (2,987                   | )      |
| Net change in accounts with affiliates      |   | 845                         |   | 10                    |   | (855                 | )      | —           |   | —                   |   |
| Financing fees                              |   | —                      |   | —                |   | (74                  | )      | —           |   | (74                      | )      |
| Net cash flows from financing activities    |   | 358                         |   | 10                    |   | (3,429               | )      | —           |   | (3,061                   | )      |
|                                        |   |                        |   |                  |   |                 |   |             |   |                     |   |
| Net change in cash and equivalents          |   | 890                         |   | (1                    | )      | —               |   | —           |   | 889                      |   |
| Cash and equivalents at beginning of period |   | 2,766                       |   | 9                     |   | —               |   | —           |   | 2,775                    |   |
| Cash and equivalents at end of period       |   | $                           | 3,656  |                  | $      | 8                    |   | $                | — |                     | $      | — |   | $ | 3,664 |   |

 

**Condensed Consolidating Statement of CashFlows for the three months ended March 31, 2003**

 

**Predecessor Basis**

 
|                                              |   | **Guarantor  Subsidiaries** |   | **Other  Subsidiaries** |   | **GLD  Corporation** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|---------------------------------------------------|--------|-----------------------------|--------|-------------------------|--------|----------------------|--------|------------------|--------|--------------------------|--------|
|                                              |   |                        |   |                    |   |                 |   |             |   |                     |   |
| **Operating  Activities**                         |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Net cash flows from operating activities          |   | $                           | 4,658  |                    | $      | 24                   |   | $                | (6,213 | )                        | $      | — |   | $ | (1,531 | ) |
|                                              |   |                        |   |                    |   |                 |   |             |   |                     |   |
| **Investing  Activities**                         |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Purchases of property and equipment               |   | (3,371                      | )      | —                  |   | —               |   | —           |   | (3,371                   | )      |
| Dispositions of property and equipment            |   | 3                           |   | —                  |   | —               |   | —           |   | 3                        |   |
| Investment in joint venture                       |   | (843                        | )      | —                  |   | —               |   | —           |   | (843                     | )      |
| Net cash flows from investing activities          |   | (4,211                      | )      | —                  |   | —               |   | —           |   | (4,211                   | )      |
|                                              |   |                        |   |                    |   |                 |   |             |   |                     |   |
| **Financing  Activities**                         |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Repayments of long-term debt                      |   | —                      |   | —                  |   | (3,713               | )      | —           |   | (3,713                   | )      |
| Borrowings of revolving loans, net of  repayments |   | —                      |   | —                  |   | 9,000                |   | —           |   | 9,000                    |   |
| Net change in accounts with affiliates            |   | (1,337                      | )      | 8                       |   | 1,329                |   | —           |   | —                   |   |
| Financing fees                                    |   | —                      |   | —                  |   | (403                 | )      | —           |   | (403                     | )      |
| Repayment on note receivable from  stockholder    |   | 19                          |   | 19                      |   |                 |   |             |   |                     |   |
| Net cash flows from financing activities          |   | (1,318                      | )      | 8                       |   | 6,213                |   | —           |   | 4,903                    |   |
|                                              |   |                        |   |                    |   |                 |   |             |   |                     |   |
| Net change in cash and equivalents                |   | (871                        | )      | 32                      |   | —               |   | —           |   | (839                     | )      |
| Cash and equivalents at beginning of period       |   | 1,451                       |   | 5                       |   | —               |   | —           |   | 1,456                    |   |
| Cash and equivalents at end of period             |   | $                           | 580    |                    | $      | 37                   |   | $                | — |                     | $      | — |   | $ | 617 |   |
|                                                   |        |                             |        |                         |        |                      |        |                  |        |                          |        |  |  |  |  |  |  |

 

14

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**Item 2****.  Management’s Discussion and Analysis of Financial Condition andResults of Operations**

 

###### **Statement Under the Private Securities LitigationReform Act**

 

Certaininformation in this quarterly report on Form 10-Q, including but not limited tothe Management’s Discussion and Analysis of Financial Condition and Results ofOperations, may constitute forward-looking statements as such term is definedin Section 27A of the Securities Exchange Act of 1933 (the “Securities Act”)and Section 21E of the Securities Exchange Act of 1934.  Certain forward-looking statements can beidentified by the use of forward-looking terminology such as, “believes,”“expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,”“plans,” “estimates,” “anticipates,” or “hopeful,” or the negative thereof orother comparable terminology, or by discussions of strategy, plans orintentions.  Forward-looking statementsinvolve risks and uncertainties, including those described in the Risk Factorssection of the Company’s Form S-4 Registration Statement (Registration No.333-114059), which could cause actual results to be materially different thanthose in the forward-looking statements, which speak only as of the datehereof.  The Company assumes noobligation to update such information.

 

###### **General**

 

TheCompany is the largest provider of dredging services in the United States.  Dredging generally involves the enhancementor preservation of the navigability of waterways or the protection ofshorelines through the removal or replenishment 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 42% over the last three years.  The Company’s bid market is defined as thepopulation of projects on which it bid or could have bid if not for capacityconstraints (“bid market”).  Inaddition, the Company has continued its role as the only U.S. dredgingcontractor with significant international operations, which averaged 13% of itscontract revenues over the last three years.

 

The Company was acquired by Madison Dearborn Capital Partners IV, L.P.in December 2003. In accordance with U.S. generally accepted accountingprinciples, a new basis of accounting resulted from the acquisition. Therefore,within this report, the three month period ended March 31, 2004 has beenidentified as the Successor Basis and the three month period ended March 31,2003 as the Predecessor Basis. The significant differences between periods as aresult of the new basis of accounting are discussed in the following Results ofOperations section.

 

TheCompany also owns 85% of the capital stock of North American Site Developers,Inc. (“NASDI”), a demolition service provider located in the Boston,Massachusetts area.  NASDI’s principalservices consist of interior and exterior demolition of commercial andindustrial buildings, salvage and recycling of related materials, and removalof hazardous substances and materials. One NASDI management stockholder retains a 15% non-voting interest inNASDI.

 

TheCompany’s equity in earnings of joint ventures relates to the Company’s 50%ownership interest in Amboy Aggregates (“Amboy”) which is accounted for usingthe equity method.  Therefore, theminority interest reflects the NASDI management stockholder’s 15% interest inNASDI.

 

15

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

 

Thefollowing table sets forth the components of net income and EBITDA as apercentage of contract revenues for the three months ended March 31, 2004 and2003:

 
|                                 |   | **Three  Months Ended  March 31,** |   |
|--------------------------------------|--------|------------------------------------|--------|
|                                 |   | **Successor  Basis**               |   | **Predecessor  Basis** |   |
|                                 |   | **2004**                           |   | **2003** |   |
|                                 |   |                               |   |   |   |
| Contract revenues                    |   | 100.0                              | %      | 100.0 | % |
| Costs of contract revenues           |   | (84.2                              | )      | (81.9 | ) |
| Gross profit                         |   | 15.8                               |   | 18.1 |   |
| General and administrative expenses  |   | (6.9                               | )      | (7.0 | ) |
| Amortization of intangible assets    |   | (1.7                               | )      | — |   |
| Operating income                     |   | 7.2                                |   | 11.1 |   |
| Interest expense, net                |   | (4.4                               | )      | (5.0 | ) |
| Equity in earnings of joint ventures |   | 0.1                                |   | — |   |
| Minority interest                    |   | —                             |   | — |   |
| Income before income taxes           |   | 2.9                                |   | 6.1 |   |
| Income tax expense                   |   | (1.2                               | )      | (2.6 | ) |
| Net income                           |   | 1.7                                | %      | 3.5 | % |
|                                 |   |                               |   |   |   |
| EBITDA                               |   | 14.2                               | %      | 15.2 | % |

 

“EBITDA,” as provided herein, represents earnings from continuingoperations before net interest expense, income taxes, depreciation andamortization expense.  EBITDA should notbe considered an alternative to, or more meaningful than, amounts determined inaccordance with GAAP including: (a) operating income as an indicator ofoperating performance; or (b) cash flows from operations as a measure ofliquidity.  The Company presents EBITDAas additional information because it is among the bases upon which the Companyassesses its financial performance, and certain covenants in its borrowing arrangementsare tied to similar measures. The Company believes EBITDA is a useful measurefor the users of its financial statements because it provides information thatcan be used to evaluate the effectiveness of the Company’s business from anoperational perspective, exclusive of costs to finance its activities, incometaxes, depreciation of operating assets and amortization of intangible assets,none of which is directly relevant to the efficiency of its operations.  EBITDA is not calculated identically by allcompanies; therefore, the Company’s presentation of EBITDA may not becomparable to similarly titled measures of other companies. The following tablereconciles net income to EBITDA for the periods indicated:

 

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|                          |   | **Three  Months Ended  March 31,** |   |
|-------------------------------|--------|------------------------------------|--------|
|                          |   | **Successor  Basis**               |   | **Predecessor  Basis** |   |
|                          |   | **2004**                           |   | **2003** |   |
|                          |   |                               |   |   |   |
| Net income                    |   | $                                  | 1,758  |   | $ | 3,487 |   |
| Adjusted for:                 |   |                               |   |   |   |
| Interest expense, net         |   | 4,610                              |   | 5,056 |   |
| Income tax expense            |   | 1,271                              |   | 2,600 |   |
| Depreciation and amortization |   | 7,125                              |   | 4,067 |   |
| EBITDA                        |   | $                                  | 14,764 |   | $ | 15,210 |   |

 

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,** |    |
|-----------------------------|--------|------------------------------------|---------|
|                        |   | **Successor  Basis**               |    | **Predecessor  Basis** |   |
| **Revenues (in thousands)** |   | **2004**                           |    | **2003** |   |
| Dredging:                   |   |                               |    |   |   |
| Capital - U.S.              |   | $                                  | 25,919  |   | $ | 53,813 |   |
| Capital - foreign           |   | 27,766                             |    | 10,037 |   |
| Beach                       |   | 30,358                             |    | 19,790 |   |
| Maintenance                 |   | 12,757                             |    | 7,729 |   |
| Demolition                  |   | 7,147                              |    | 8,324 |   |
|                        |   | $                                  | 103,947 |   | $ | 99,693 |   |

 
|                       |   | **March 31,**        |    |
|----------------------------|--------|----------------------|---------|
|                       |   | **Successor  Basis** |    |
| **Backlog (in thousands)** |   | **2004**             |    | **2003** |   |
| Dredging:                  |   |                 |    |   |   |
| Capital - U.S.             |   | $                    | 112,544 |   | $ | 214,790 |   |
| Capital - foreign          |   | 31,145               |    | 50,212 |   |
| Beach                      |   | 12,914               |    | 11,287 |   |
| Maintenance                |   | 32,607               |    | 5,483 |   |
| Demolition                 |   | 14,696               |    | 15,770 |   |
|                       |   | $                    | 203,906 |   | $ | 297,542 |   |

 

Consolidatedrevenues for the first quarter of 2004 were $103.9 million, which compares tothe first quarter 2003 amount of $99.7 million.  The increase in 2004 revenues was due to higher levels of foreigncapital dredging revenue and domestic beach nourishment revenue.  However, gross profit margin declined to15.8% in the first quarter of 2004 compared to 18.1% for the same period of2003.  The Company had reduced marginson certain of the domestic dredging projects performed along the east coast, asthese projects experienced one of the worst winter seasons in recent years,causing weather delays and equipment operating inefficiencies during theperiod.  Fortunately, the foreign dredgingprojects performed during the 2004 quarter achieved strong margins, whichhelped to mitigate the reduced margins in the other dredging sectors.

 

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Capital projects includelarge port deepenings and other infrastructure projects.  Domestic capital dredging revenue declined$27.9 million to $25.9 million in the first quarter of 2004, as compared to thesame period of 2003.  This is primarilya result of a slow-down in domestic bidding activity, as will be furtherdiscussed in the sections, Backlog and Market Outlook, which follow.  As discussed in previous filings, thecapital market includes “Deep Port” projects that have been authorized by the1986 Water Resource Development Act (“WRDA”) and subsequent bills.  In 1997, the Army Corps of Engineers(“Corps”) announced Deep Port work, authorized by WRDA, to be completed through2005, with an aggregate value in excess of $2.0 billion, and supplementalauthorizations have increased this amount to approximately $4.0 billion, withwork to be completed through 2010. Currently, over $2.5 billion of these authorized Deep Port projects haveyet to be let for bid.  Deep Port workhas comprised a substantial portion of recent bid markets, averaging 36% of thebid market over the last three years (2001 to 2003).  The Company’s bid market share of Deep Port projects averaged 45%over the last three years (2001 to 2003).

 

Duringthe first quarter of 2004, the Company’s domestic capital revenues includedcontinuing work on Deep Port projects in Kill Van Kull, New York; WilmingtonHarbor, North Carolina; Manatee Harbor, Florida; Houston, Texas; and LosAngeles, California.  These projectscontributed combined revenue to the quarter of $14.0 million.  The new work capital project along theProvidence River and harbor in the Rhode Island area added another $9.7 millionof revenue to the quarter.  Foreigncapital revenues in the first quarter of 2004 totaled $27.8 million,representing an increase of $17.7 million over the same period of 2003.  The foreign revenues were substantiallygenerated by the ongoing project in Bahrain and a joint venture project whichentailed dredging a channel and turning basin for an expanded port facility inIndia.

 

Beachnourishment projects include rebuilding of shoreline areas which have beendamaged by storm activity or ongoing erosion. First quarter 2004 revenues frombeach nourishment projects increased $10.6 million to $30.4 million, as theCompany performed on various beach projects bid and won in the latter half of2003. Unfortunately, performance on certain beach projects executed during theperiod was negatively impacted by adverse weather along the east coast,contributing to delays and poor operating conditions.

 

Maintenanceprojects include routine dredging of ports, rivers and channels to remove theregular build up of sediment. Maintenance revenues totaled $12.8 million in the first quarter of 2004,representing an increase of $5.0 million over the same period of 2003, butreflecting a typical level for the Company. The majority of first quarter maintenance revenues were derived fromCorps’ projects to dredge harbors in Kings Bay, Georgia; Charleston, SouthCarolina; New Haven, Connecticut; and Savannah, Georgia.

 

NASDI’sdemolition revenues for the first quarter of 2004 totaled $7.1 million, adecline of $1.2 million from the same period of 2003. NASDI’s first quarterrevenues were generated by numerous small projects, with only four projectseach adding over $0.5 million to the quarter. Additionally, NASDI received approximately $1.0 million in scrap revenuefor steel and metal salvaged from an ongoing power plant take-down, whichimproved the demolition gross margins for the quarter.

 

Netinterest expense for the first quarter of 2004 was $4.6 million compared to$5.0 million for the same period of 2003. As a result of the sale transaction in December 2003, the Company’s debtlevel increased to approximately $260 million at December 31, 2003, compared toapproximately $173 million at the beginning of 2003.  However, despite the increased debt level, interest expenserelated to the Company’s senior and subordinated debt declined due tosignificantly lower interest rates on the new debt structure.

 

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Netincome for the first quarter of 2004 was $1.8 million, which compares to $3.5million for the same period of 2003 and reflects additional depreciation andamortization expense of approximately $3.0 million resulting from therevaluation of the Company’s assets and liabilities in connection with sale ofthe Company in December of 2003.  EBITDA(as defined on page 16) was $14.8 million for the quarter ended March 31, 2004,compared to $15.2 million for the same period of 2003.  EBITDA declined slightly in 2004 dueprimarily to the impact of inclement weather on project performance during theperiod, as discussed previously.

 

**Backlog**

 

TheCompany’s contract backlog represents management’s current estimate of therevenues which 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 the actual committed costs and profit on workperformed up to the date of cancellation. Consequently, backlog is not necessarily indicative of future revenues.The Company’s backlog includes only those projects for which the customer hasprovided an executed contract.

 

AtMarch 31, 2004, the Company had dredging backlog of $189.2 million, whichcompares to dredging backlog of $190.2 million at December 31, 2003 and $281.8million at March 31, 2003.  The dredgingbacklog has remained at a reduced level relative to the earlier 2003 and 2002 quartersas a result of a stagnant domestic bidding market.  The first quarter 2004 awards totaled $108 million, and thefull-year bid market for 2003 totaled only $425 million.  This compares to a domestic bid market ofover $900 million in 2002, and an average over the five preceding years (1998to 2002) of approximately $650 million. Although the Corps’ budgets haveremained at similar levels in recent years, management believes the mostsignificant impact to the recent bid market has been the diversion of Corps’personnel and financial resources to the war and reconstruction efforts inIraq.  Thus, although funds arebudgeted, there is uncertainty as to when funds will actually be made availableto the various domestic Corps’ districts, which have responded by delayingproject bids and awards and postponing construction activities on currentprojects.  The decline in the currentbid market is likely to impact pricing in the short-term, as competition withinthe industry has increased for the work that is being bid. The Company did win65% of the work bid and awarded in the first quarter of 2004, including awardof the $35 million Port Jersey Deep Port project, which was bid in the fourthquarter of 2003.  Additionally, theCompany won a $31 million maintenance project in Oakland Harbor, Californiathat was bid by request-for-proposal.

 

Over50% of backlog at March 31, 2004 is comprised of domestic capital dredgingprojects, which are generally higher margin work.  This includes the work remaining on Deep Port capital projects inKill Van Kull, New York; Los Angeles, California; Houston, Texas; Wilmington,North Carolina; Manatee Harbor, Florida; and Port Jersey Channel, NewJersey.  In April, the Company was lowbidder on a $66 million Deep Port project in Arthur Kill, New York.  Additionally, the Company received apositive court ruling on the $66 million Brunswick, Georgia Deep Port project,requiring the Corps to award this project to the Company.  The Company had been low bidder on thisproject in the fourth quarter of 2002, but over the Corps’ estimate.  When the Corps’ indicated that they wouldcancel the project and rebid it, the Company contested the Corps’ estimate andfiled suit in the Federal Court of Claims, which has now settled in theCompany’s favor.  These projects, alongwith an additional $21 million of low bids pending award and other optionspending on projects in backlog, will significantly increase the Company’sdomestic backlog, once awarded.

 

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Foreigncapital project backlog, which comprises $31.1 million or 15% of the March 31,2004 backlog, relates primarily to the long-term project in Bahrain, as well aswork remaining on the channel deepening project for a liquid natural gas plantin Egypt and the joint venture project for an expanded port facility in India.

 

Beach backlog at March 31,2004 declined to $12.9 million, as the Company performed on work in itsyear-end backlog.  Beach work is oftenbid in the second half of the year, since the work is generally performed betweenthe months of September to March, due to environmental restrictions.  During the quarter, only two beach projectswere bid and awarded with a value of approximately $13 million, both of whichwere won by competitors.

 

Maintenance backlog at March31, 2004 was $32.6 million, which includes award of the Oakland Harbor projectmentioned previously, as well as remaining work on a few smaller projects.

 

Thedemolition services backlog at March 31, 2004 was $14.7 million, compared to$10.6 million at December 31, 2003 and $15.8 million at March 31, 2003.  The March backlog reflects the addition oftwo new demolition projects valued $4.4 million to be performed in Florida forone of NASDI’s existing customers. While the New England demolition market hascontinued to be competitive due to the slow down in the economy, the demolitionbidding activity has increased in recent months and NASDI’s managementanticipates that a few larger projects will be awarded within the next sixmonths, which will have the potential to improve margins in this segment.

 

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

 

Theslow down in the domestic dredging bid market that began in 2003 and hascontinued into the first quarter 2004 has led to increasing uncertainty withrespect to funding of all projects in the Corps’ program. In February of 2004,the President presented his Civil Works Budget for 2005, announcing lowerbudget levels, explaining that his budget reflects that of a “country atwar”.  Of concern to the dredging industryis his position on federal funding of beach nourishment programs, whereby theadministration proposed to no longer honor any cost-sharing agreements forshoreline protection and to no longer provide funding for investigations,studies or the preparation of plans and specifications for such projects.  If the federal input were eliminated, itwould be necessary for the local communities and State agencies to fund andadminister these projects in the future. The Federal funding of shoreline protection has often been the target ofnew administrations seeking to control spending, but the resultingcongressional lobbies generally have been successful in amending the budget andrestoring federal funding.  However,given the state of the deficit and the diversion of funds to support thenation’s efforts in Iraq, this position causes concern among the industry forthe future of the beach program. Although funds have been appropriated for fiscal year 2004, the Companycontinues to receive indications that projects are on hold pending a decisionon funding.  If the federal funding isnot made available, in management’s view, the local agencies are not preparedeither financially or administratively to execute their contracts in anexpeditious manner.  The effects on theindustry of this uncertain funding environment are becoming more evident goinginto the second quarter, as much of the industry’s hopper dredging fleetbecomes idle with no backlog and no indication of when the environment mightchange.

 

Further,there currently appears to be a shortage of funding within the Corps’ districtsto cover even their existing obligations on ongoing projects, and their plannedprojects for authorized capital works, routine maintenance dredging oremergency contracts, based on information provided by various Corps’ districts.  The Company’s ongoing Deep Port projects inWilmington and Los Angeles have been directly impacted, as the Company wasadvised to postpone its scheduled dredging works due to the shortage of fundsfor 2004.

 

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However,despite the uncertainty surrounding the current bid market and fundingenvironment, authorizations for future work continue to move forward.  The WRDA legislation, which forms the basisfor authorizing the Corps’ civil works projects, including the Deep Portprojects, is generally enacted every other year.  The most recent WRDA bill was passed by Congress in 2000 and therecent Deep Port work that has come out for bid and those projects expected for2004 bidding have already been authorized by this or prior WRDA legislation.While no WRDA bill was passed in 2002 or 2003, a 2004 WRDA has been introducedand is expected to be passed, as this type of legislation is typically passedin election years when particular projects gain support of their sponsors.  Additionally, the 2004 WRDA bill includes achange to the federal cost sharing percentages.  Currently, the cost-sharing formula for the Deep Port work providesfor the federal share of funds to decrease as the ports go deeper, with thestate and local share increasing.  The2004 WRDA legislation revises this cost-sharing formula to increase the currentfederal share as the ports are brought to greater depths, which should providesome incentive for certain state legislatures to push for its adoption.  The Company continues to monitor theprogress of the 2004 WRDA legislation, as it is important for future years’ bidmarkets.

 

Insummary, while the industry is currently impacted by increased uncertainty withrespect to project funding and timing, the work continues to be required.  At some point in the future, all the workdeferred currently will need to be performed. The Deep Port projects underway are not fully functional until all partsof the channels are taken to their final depths, and the projects have beenproven to be necessary to accommodate the deeper draft vessels in usethroughout the world.  Similarly, themaintenance dredging, if not performed currently, will accumulate and grow in volumeas channels continue to fill with sedimentation, and beach nourishment workwill reach a point of urgency as waterfront assets and recreational communitiesbecome jeopardized.  Therefore, Companymanagement believes that the current environment represents only a deferral ofwork, and not any permanent reduction in the industry.  In fact, management believes the currentdeferral is likely to result in strong industry performance in the future, aspricing should improve once the volume of work picks up.  However, it is already apparent that thesecond quarter of 2004 will be impacted by the reduced bid market and slow downin funding.  Although the Company has asolid backlog level going into the second quarter and has recently won a coupleof major projects to be added to backlog, given the timing of the bidding andawards, and requested deferral of certain projects such as the Wilmington andLos Angeles deepening projects, much of the Company’s backlog cannot beperformed until future quarters.

 

###### **Liquidity and Capital Resources**

 

TheCompany’s principal sources of liquidity are cash flow generated fromoperations and borrowings under its new senior credit facility.  The Company’s principal uses of cash are tomeet debt service requirements, finance its capital expenditures, provideworking capital and meet other general corporate purposes.

 

TheCompany’s net cash generated by operating activities for the three months endedMarch 31, 2004 totaled $9.3 million compared to a use of $1.5 million for thethree months ended March 31, 2003. The fluctuation between periods results fromthe normal timing differences on the recognition and billing of revenues.  In the first quarter of 2004 the Companyreceived income tax refunds of approximately $6.0 million in connection withpayment of expenses related to the sale in December of 2003, which alsoincreased the cash generated by operations in the 2004 period.  Additionally, in February of 2003, theCompany utilized cash to pay $8.7 million of its subordinated debt interest.  The initial semiannual interest paymentunder the new subordinated debt issue is payable in June 2004.

 

TheCompany’s net cash flows used in investing activities were $5.4 millioncompared to $4.2 million for three months ended March 31, 2004 and 2003,respectively.  The use of cash relates

 

21

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primarilyto equipment acquisitions and capital improvements to existing equipment.  In the 2003 period, the Company alsoutilized $0.8 million to purchase 50% of a real estate interest related to itsAmboy joint venture.

 

TheCompany’s net cash used in financing activities for three months ended March31, 2004 totaled $3.0 million, compared to a source of cash of $4.9 million forthe three months ended March 31, 2003. In the 2004 period, the Company paid down debt, while it borrowed fundsin the 2003 period, based on its working capital needs in the respectiveperiods.

 

InFebruary 2004, the Company entered into an interest rate swap arrangement toswap a notional amount of $50 million from a fixed rate of 7.75% to a floatingLIBOR-based rate in order to manage the interest rate paid with respect to theCompany’s 73⁄4% senior subordinated debt.

 

Giventhe current uncertainty surrounding the bidding and funding environmentdiscussed previously, management has begun taken steps to reduce discretionaryoverhead and maintenance costs and capital spending.  With these reductions, management believes the anticipated cashflows from operations and available credit under its revolving credit facilitywill be sufficient to fund the Company’s operations and its revised capitalexpenditures, and meet its current debt service requirements of approximately$20 million for the year.  The Company’sability to fund its working capital needs, planned capital expenditures andscheduled debt payments, and to comply with all of the financial covenantsunder its debt agreements, depends on its future operating performance and cashflow, which in turn, are subject to prevailing economic conditions and tofinancial, business and other factors, some of which are beyond the Company’scontrol.

 

###### **Critical Accounting Policies and Estimates**

 

Inpreparing its consolidated financial statements, the Company follows accountingprinciples generally accepted in the United States of America.  The application of these principles requiressignificant judgments or an estimation process that can affect the results ofoperations, financial position and cash flows of the Company, as well as therelated footnote disclosures.  TheCompany continually reviews its accounting policies and financial informationdisclosures.  There have been nomaterial changes in policies or estimates since December 31, 2003.

 

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###### **Item3.  Quantitative and QualitativeDisclosures About Market Risk**

 

Themarket risk of the Company’s financial instruments as of March 31, 2004 has notsignificantly changed since December 31, 2003. The market risk profile of the Company on December 31, 2003 is disclosedin the Company’s 2003 Annual Report on Form 10-K.

 

###### **Item4.  Controls and Procedures**

 

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

 

*(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.

 

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###### **PART II** – OtherInformation

 

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

 
| *(a)*  |   | *Exhibits*                                                                                                                                                            |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                  |
| 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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*  Filed or furnished herein.

 

*(b)**         **Reports on Form 8-K*

 

1.     A Current Report on Form 8-K filed on January 6, 2004 announcingconsummation of the acquisition by Madison Dearborn Partners IV, L.P. onDecember 22, 2003.

 

2.     A Current Report on Form 8-K filed on February 2, 2004 regarding apress release announcing earnings information for the quarter ended December31, 2003.

 

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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  14, 2004 | 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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**EXHIBITINDEX**

 
| **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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*Filed or furnished herewith.

 

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