UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

 

For the quarterly period ended June 30, 2021March 31, 2022

OR

 

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

 

For the transition period from                  to                 

Commission file number: 001-33225

Great Lakes Dredge & Dock Corporation

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-5336063

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

9811 Katy Freeway, Suite 1200, Houston, TX

 

77024

(Address of principal executive offices)

 

(Zip Code)

(346) 359-1010

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock (Par Value $0.0001)

 

GLDD

 

Nasdaq Stock Market, LLC

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of July 28, 2021, 65,657,699April 29, 2022, 66,065,420 shares of the Registrant’s Common Stock, par value $.0001 per share, were outstanding.

 

 

 


 

 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the Quarterly Period ended June 30, 2021March 31, 2022

INDEX

 

 

 

 

 

Page

 

 

 

 

 

 

 

Part I Financial Information (Unaudited)

 

3

 

 

 

 

 

Item 1

 

Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at June 30, 2021March 31, 2022 and December 31, 20202021

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30,March 31, 2022 and 2021 and 2020

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended June 30,March 31, 2022 and 2021 and 2020

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Equity for the Three and Six Months ended June 30,March 31, 2022 and 2021 and 2020

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the SixThree Months Ended June 30,March 31, 2022 and 2021 and 2020

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

15

 

 

 

 

 

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

22

 

 

 

 

 

Item 4

 

Controls and Procedures

 

2322

 

 

 

 

 

 

 

Part II Other Information

 

2423

 

 

 

 

 

Item 1

 

Legal Proceedings

 

2423

 

 

 

 

 

Item 1A

 

Risk Factors

 

2423

 

 

 

 

 

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

2423

 

 

 

 

 

Item 3

 

Defaults Upon Senior Securities

 

2523

 

 

 

 

 

Item 4

 

Mine Safety Disclosures

 

2523

 

 

 

 

 

Item 5

 

Other Information

 

2523

 

 

 

 

 

Item 6

 

Exhibits

 

2624

 

 

 

 

 

 

 

Signature

 

2725

 

 

 

 

 

 

 

 


 

PART I — Financial Information

Item 1.

Financial Statements.

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share amounts)

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

180,767

 

 

$

216,510

 

 

$

142,583

 

 

$

145,459

 

Accounts receivable—net

 

 

35,741

 

 

 

38,990

 

 

 

37,162

 

 

 

82,953

 

Contract revenues in excess of billings

 

 

34,556

 

 

 

32,106

 

 

 

74,535

 

 

 

39,844

 

Inventories

 

 

32,758

 

 

 

34,689

 

 

 

30,394

 

 

 

30,760

 

Prepaid expenses and other current assets

 

 

39,330

 

 

 

40,398

 

 

 

43,368

 

 

 

28,416

 

Total current assets

 

 

323,152

 

 

 

362,693

 

 

 

328,042

 

 

 

327,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT—Net

 

 

422,552

 

 

 

383,042

 

 

 

468,555

 

 

 

455,102

 

OPERATING LEASE ASSETS

 

 

52,777

 

 

 

65,188

 

 

 

63,345

 

 

 

62,233

 

GOODWILL

 

 

76,576

 

 

 

76,576

 

 

 

76,576

 

 

 

76,576

 

INVENTORIES—Noncurrent

 

 

61,578

 

 

 

58,413

 

 

 

71,117

 

 

 

65,049

 

OTHER

 

 

12,998

 

 

 

12,112

 

 

 

11,204

 

 

 

11,278

 

TOTAL

 

$

949,633

 

 

$

958,024

 

 

$

1,018,839

 

 

$

997,670

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

79,863

 

 

$

71,308

 

 

$

98,182

 

 

$

85,566

 

Accrued expenses

 

 

37,230

 

 

 

52,899

 

 

 

33,949

 

 

 

37,626

 

Operating lease liabilities

 

 

14,255

 

 

 

19,472

 

 

 

16,036

 

 

 

16,729

 

Billings in excess of contract revenues

 

 

28,833

 

 

 

32,608

 

 

 

3,687

 

 

 

14,814

 

Total current liabilities

 

 

160,181

 

 

 

176,287

 

 

 

151,854

 

 

 

154,735

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LONG-TERM DEBT

 

 

320,696

 

 

 

323,735

 

 

 

321,108

 

 

 

320,971

 

OPERATING LEASE LIABILITIES—Noncurrent

 

 

38,877

 

 

 

45,879

 

 

 

47,839

 

 

 

45,986

 

DEFERRED INCOME TAXES

 

 

59,458

 

 

 

56,466

 

 

 

73,888

 

 

 

68,497

 

OTHER

 

 

10,324

 

 

 

8,989

 

 

 

8,746

 

 

 

8,484

 

Total liabilities

 

 

589,536

 

 

 

611,356

 

 

 

603,435

 

 

 

598,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock—$.0001 par value; 90,000 authorized, 65,654 and 65,023 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively.

 

 

6

 

 

 

6

 

Common stock—$.0001 par value; 90,000 authorized, 66,046 and 65,746 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

304,977

 

 

 

304,757

 

 

 

307,597

 

 

 

308,482

 

Retained earnings

 

 

51,856

 

 

 

40,937

 

 

 

101,426

 

 

 

90,369

 

Accumulated other comprehensive income

 

 

3,258

 

 

 

968

 

 

 

6,375

 

 

 

140

 

Total equity

 

 

360,097

 

 

 

346,668

 

 

 

415,404

 

 

 

398,997

 

TOTAL

 

$

949,633

 

 

$

958,024

 

 

$

1,018,839

 

 

$

997,670

 

 

See notes to unaudited condensed consolidated financial statements.

 


 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

March 31,

 

 

June 30,

 

 

June 30,

 

 

2022

 

 

2021

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

Contract revenues

 

$

169,914

 

 

$

167,920

 

 

$

347,547

 

 

$

385,615

 

 

$

194,349

 

 

$

177,633

 

Costs of contract revenues

 

 

146,992

 

 

 

134,904

 

 

 

291,549

 

 

 

284,125

 

 

 

161,294

 

 

 

144,557

 

Gross profit

 

 

22,922

 

 

 

33,016

 

 

 

55,998

 

 

 

101,490

 

 

 

33,055

 

 

 

33,076

 

General and administrative expenses

 

 

14,224

 

 

 

14,804

 

 

 

30,546

 

 

 

30,375

 

 

 

14,604

 

 

 

16,322

 

Gain on sale of assets—net

 

 

(138

)

 

 

(39

)

 

 

(32

)

 

 

(184

)

(Gain) loss on sale of assets—net

 

 

(321

)

 

 

106

 

Operating income

 

 

8,836

 

 

 

18,251

 

 

 

25,484

 

 

 

71,299

 

 

 

18,772

 

 

 

16,648

 

Interest expense—net

 

 

(6,657

)

 

 

(6,725

)

 

 

(13,243

)

 

 

(13,355

)

 

 

(4,025

)

 

 

(6,586

)

Other income (expense)

 

 

755

 

 

 

565

 

 

 

896

 

 

 

(556

)

 

 

(405

)

 

 

141

 

Income before income taxes

 

 

2,934

 

 

 

12,091

 

 

 

13,137

 

 

 

57,388

 

 

 

14,342

 

 

 

10,203

 

Income tax provision

 

 

(829

)

 

 

(3,131

)

 

 

(2,218

)

 

 

(14,441

)

 

 

(3,285

)

 

 

(1,389

)

Net income

 

$

2,105

 

 

$

8,960

 

 

$

10,919

 

 

$

42,947

 

 

$

11,057

 

 

$

8,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.03

 

 

$

0.14

 

 

$

0.17

 

 

$

0.66

 

 

$

0.17

 

 

$

0.14

 

Basic weighted average shares

 

 

65,646

 

 

 

64,864

 

 

 

65,458

 

 

 

64,659

 

 

 

65,847

 

 

 

65,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.03

 

 

$

0.14

 

 

$

0.16

 

 

$

0.65

 

 

$

0.17

 

 

$

0.13

 

Diluted weighted average shares

 

 

66,137

 

 

 

65,758

 

 

 

66,187

 

 

 

65,802

 

 

 

66,436

 

 

 

66,159

 

 

See notes to unaudited condensed consolidated financial statements.

 


 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

2,105

 

 

$

8,960

 

 

$

10,919

 

 

$

42,947

 

 

$

11,057

 

 

$

8,814

 

Net change in cash flow derivative hedges—net of tax (1)

 

 

404

 

 

 

3,440

 

 

 

2,290

 

 

 

(3,686

)

 

 

6,235

 

 

 

1,886

 

Comprehensive income

 

$

2,509

 

 

$

12,400

 

 

$

13,209

 

 

$

39,261

 

 

$

17,292

 

 

$

10,700

 

 

(1)

Net of income tax (provision) benefit of $(136)$(2,106) and $1,162$637 for the three months ended June 30,March 31, 2022 and 2021, and 2020 respectively.  Net of income tax (provision) of $(773) and $(1,255) for the six months ended June 30, 2021 and 2020 respectively.

See notes to unaudited condensed consolidated financial statements.

 


 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Condensed Consolidated Statements of Equity

(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Total

 

BALANCE—January 1, 2022

 

 

65,746

 

 

$

6

 

 

$

308,482

 

 

$

90,369

 

 

$

140

 

 

$

398,997

 

Share-based compensation

 

 

9

 

 

 

 

 

552

 

 

 

 

 

 

 

552

 

Vesting of restricted stock units and impact of shares withheld for taxes

 

 

212

 

 

 

 

 

(1,827

)

 

 

 

 

 

 

(1,827

)

Exercise of options and purchases from employee stock plans

 

 

79

 

 

 

 

 

390

 

 

 

 

 

 

 

390

 

Net income

 

 

 

 

 

 

 

 

11,057

 

 

 

 

 

11,057

 

Other comprehensive loss—net of tax

 

 

 

 

 

 

 

 

 

 

6,235

 

 

 

6,235

 

BALANCE—March 31, 2022

 

 

66,046

 

 

$

6

 

 

$

307,597

 

 

$

101,426

 

 

$

6,375

 

 

$

415,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Other

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-In

 

 

(Accumulated

 

 

Comprehensive

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Total

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income

 

 

Total

 

BALANCE—January 1, 2021

 

 

65,023

 

 

$

6

 

 

$

304,757

 

 

$

40,937

 

 

$

968

 

 

$

346,668

 

 

 

65,023

 

 

$

6

 

 

$

304,757

 

 

$

40,937

 

 

$

968

 

 

$

346,668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

73

 

 

 

-

 

 

 

2,564

 

 

 

-

 

 

 

-

 

 

 

2,564

 

 

 

63

 

 

 

 

 

1,766

 

 

 

 

 

 

 

1,766

 

Vesting of restricted stock units and impact of shares withheld for taxes

 

 

410

 

 

 

-

 

 

 

(3,784

)

 

 

-

 

 

 

-

 

 

 

(3,784

)

 

 

410

 

 

 

 

 

(3,784

)

 

 

 

 

 

 

(3,784

)

Exercise of options and purchases from employee stock plans

 

 

148

 

 

 

-

 

 

 

1,440

 

 

 

-

 

 

 

-

 

 

 

1,440

 

 

 

124

 

 

 

 

 

1,260

 

 

 

 

 

 

 

1,260

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,919

 

 

 

-

 

 

 

10,919

 

 

 

 

 

 

 

 

 

8,814

 

 

 

 

 

8,814

 

Other comprehensive income—net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,290

 

 

 

2,290

 

 

 

 

 

 

 

 

 

 

 

1,886

 

 

 

1,886

 

BALANCE—June 30, 2021

 

 

65,654

 

 

$

6

 

 

$

304,977

 

 

$

51,856

 

 

$

3,258

 

 

$

360,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE—January 1, 2020

 

 

64,283

 

 

$

6

 

 

$

302,189

 

 

$

(23,091

)

 

$

295

 

 

$

279,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

61

 

 

 

-

 

 

 

3,130

 

 

 

-

 

 

 

-

 

 

 

3,130

 

Vesting of restricted stock units and impact of shares withheld for taxes

 

 

412

 

 

 

-

 

 

 

(2,106

)

 

 

-

 

 

 

-

 

 

 

(2,106

)

Exercise of options and purchases from employee stock plans

 

 

191

 

 

 

-

 

 

 

1,318

 

 

 

-

 

 

 

-

 

 

 

1,318

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

42,947

 

 

 

-

 

 

 

42,947

 

Other comprehensive loss—net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,686

)

 

 

(3,686

)

BALANCE—June 30, 2020

 

 

64,947

 

 

$

6

 

 

$

304,531

 

 

$

19,856

 

 

$

(3,391

)

 

$

321,002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE—March 31, 2021

 

 

65,620

 

 

$

6

 

 

$

303,999

 

 

$

49,751

 

 

$

2,854

 

 

$

356,610

 

 

 

65,620

 

 

$

6

 

 

$

303,999

 

 

$

49,751

 

 

$

2,854

 

 

$

356,610

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

12

 

 

 

-

 

 

 

798

 

 

 

-

 

 

 

-

 

 

 

798

 

Vesting of restricted stock units and impact of shares withheld for taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of options and purchases from employee stock plans

 

 

22

 

 

 

-

 

 

 

180

 

 

 

-

 

 

 

-

 

 

 

180

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,105

 

 

 

-

 

 

 

2,105

 

Other comprehensive income—net of tax

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

404

 

 

 

404

 

BALANCE—June 30, 2021

 

 

65,654

 

 

$

6

 

 

$

304,977

 

 

$

51,856

 

 

$

3,258

 

 

$

360,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE—March 31, 2020

 

 

64,795

 

 

$

6

 

 

$

302,558

 

 

$

10,896

 

 

$

(6,831

)

 

$

306,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

22

 

 

 

-

 

 

 

1,455

 

 

 

-

 

 

 

-

 

 

 

1,455

 

Vesting of restricted stock units and impact of shares withheld for taxes

 

 

24

 

 

 

-

 

 

 

(178

)

 

 

-

 

 

 

-

 

 

 

(178

)

Exercise of options and purchases from employee stock plans

 

 

106

 

 

 

-

 

 

 

696

 

 

 

-

 

 

 

-

 

 

 

696

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,960

 

 

 

-

 

 

 

8,960

 

Other comprehensive income—net of tax

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,440

 

 

 

3,440

 

BALANCE—June 30, 2020

 

 

64,947

 

 

$

6

 

 

$

304,531

 

 

$

19,856

 

 

$

(3,391

)

 

$

321,002

 

 

See notes to unaudited condensed consolidated financial statements.

 


 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

Six Months Ended

 

 

Three Months Ended

 

 

June 30,

 

 

March 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

10,919

 

 

$

42,947

 

 

$

11,057

 

 

$

8,814

 

Adjustments to reconcile net income to net cash flows provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

20,681

 

 

 

18,707

 

 

 

11,316

 

 

 

10,053

 

Deferred income taxes

 

 

2,218

 

 

 

14,441

 

 

 

3,285

 

 

 

1,389

 

Gain on sale of assets

 

 

(32

)

 

 

(184

)

(Gain) loss on sale of assets

 

 

(321

)

 

 

106

 

Amortization of deferred financing fees

 

 

1,715

 

 

 

805

 

 

 

317

 

 

 

403

 

Share-based compensation expense

 

 

2,564

 

 

 

3,130

 

 

 

552

 

 

 

1,766

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,249

 

 

 

(14,109

)

 

 

45,791

 

 

 

(26,742

)

Contract revenues in excess of billings

 

 

(2,450

)

 

 

2,123

 

 

 

(34,691

)

 

 

3,188

 

Inventories

 

 

(1,233

)

 

 

(4,733

)

 

 

(5,703

)

 

 

(3,379

)

Prepaid expenses and other current assets

 

 

4,131

 

 

 

10,733

 

 

 

(6,612

)

 

 

(832

)

Accounts payable and accrued expenses

 

 

(2,668

)

 

 

(8,229

)

 

 

12,247

 

 

 

(10,303

)

Billings in excess of contract revenues

 

 

(3,775

)

 

 

(179

)

 

 

(11,126

)

 

 

6,055

 

Other noncurrent assets and liabilities

 

 

282

 

 

 

2,008

 

 

 

205

 

 

 

242

 

Cash provided by operating activities

 

 

35,601

 

 

 

67,460

 

 

 

 

 

 

 

 

 

Cash (used in) provided by operating activities

 

 

26,317

 

 

 

(9,240

)

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(64,828

)

 

 

(21,076

)

 

 

(28,866

)

 

 

(27,038

)

Proceeds from dispositions of property and equipment

 

 

223

 

 

 

936

 

 

 

1,110

 

 

 

Cash used in investing activities

 

 

(64,605

)

 

 

(20,140

)

 

 

(27,756

)

 

 

(27,038

)

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred financing fees

 

 

(4,395

)

 

 

-

 

Taxes paid on settlement of vested share awards

 

 

(3,784

)

 

 

(2,106

)

 

 

(1,827

)

 

 

(3,784

)

Exercise of options and purchases from employee stock plans

 

 

1,440

 

 

 

1,318

 

 

 

390

 

 

 

1,260

 

Cash used in financing activities

 

 

(6,739

)

 

 

(788

)

 

 

(1,437

)

 

 

(2,524

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(35,743

)

 

 

46,532

 

 

 

(2,876

)

 

 

(38,802

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

216,510

 

 

 

186,995

 

 

 

147,459

 

 

 

216,510

 

Cash, cash equivalents and restricted cash at end of period

 

$

144,583

 

 

$

177,708

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

142,583

 

 

$

177,708

 

Restricted cash included in other long-term assets

 

 

2,000

 

 

 

 

Cash, cash equivalents and restricted cash at end of period

 

$

180,767

 

 

$

233,527

 

 

$

144,583

 

 

$

177,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

13,984

 

 

$

12,548

 

 

$

100

 

 

$

106

 

Cash paid for income taxes

 

$

332

 

 

$

175

 

 

$

58

 

 

$

58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash Investing and Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment purchased but not yet paid

 

$

11,139

 

 

$

4,608

 

 

$

10,319

 

 

$

5,855

 

 

See notes to unaudited condensed consolidated financial statements.

 


 

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(dollar amounts in thousands, except per share amounts or as otherwise noted)

 

1.

Basis of presentation

The unaudited condensed consolidated financial statements and notes herein should be read in conjunction with the audited consolidated financial statements of Great Lakes Dredge & Dock Corporation and Subsidiaries (the “Company” or “Great Lakes”) and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021. The condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations, although management believes that the disclosures are adequate and make the information presented not misleading. In the opinion of management, all adjustments, which are of a normal and recurring nature (except as otherwise noted), that are necessary to present fairly the Company’s financial position as of June 30, 2021March 31, 2022 and December 31, 2020,2021, and its results of operations for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 and cash flows for the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 have been included.

The components of costs of contract revenues include labor, equipment (including depreciation, maintenance, insurance and long-term rentals), subcontracts, fuel, supplies, short-term rentals and project overhead. Hourly labor is generally hired on a project-by-project basis. Costs of contract revenues vary significantly depending on the type and location of work performed and assets utilized.

The Company has 1 operating segment which is also the Company’s reportable segment and reporting unit of which the Company tests goodwill for impairment. The Company performed its most recent annual test of impairment as of July 1, 20202021 with no indication of impairment as of the test date. The Company will perform its next scheduled annual test of goodwill in the third quarter of 2021.

On August 4, 2020, the Company announced that its board of directors approved a share repurchase program, authorizing, but not obligating, the repurchase of up to an aggregate amount of $75.0 million of its common stock from time to time through July 31, 2021.2022.  

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

2.

Earnings per share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.

The computations for basic and diluted earnings per share are as follows: 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

(shares in thousands)

 

June 30,

 

 

June 30,

 

`

 

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

2,105

 

 

$

8,960

 

 

$

10,919

 

 

$

42,947

 

 

$

11,057

 

 

$

8,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding — basic

 

 

65,646

 

 

 

64,864

 

 

 

65,458

 

 

 

64,659

 

 

 

65,847

 

 

 

65,269

 

Effect of stock options and restricted stock units

 

 

491

 

 

 

894

 

 

 

729

 

 

 

1,143

 

 

 

589

 

 

 

890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding — diluted

 

 

66,137

 

 

 

65,758

 

 

 

66,187

 

 

 

65,802

 

 

 

66,436

 

 

 

66,159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share — basic

 

$

0.03

 

 

$

0.14

 

 

$

0.17

 

 

$

0.66

 

 

$

0.17

 

 

$

0.14

 

Earnings per share — diluted

 

$

0.03

 

 

$

0.14

 

 

$

0.16

 

 

$

0.65

 

 

$

0.17

 

 

$

0.13

 

 


 

3.

Accrued expenses

Accrued expenses at June 30, 2021March 31, 2022 and December 31, 20202021 were as follows:

 

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance

 

$

17,365

 

 

$

14,754

 

 

$

13,355

 

 

$

12,821

 

Payroll and employee benefits

 

 

7,744

 

 

 

21,675

 

 

 

6,525

 

 

 

13,533

 

Interest

 

 

5,726

 

 

 

1,460

 

Other

 

 

5,220

 

 

 

6,427

 

Income and other taxes

 

 

1,995

 

 

 

2,164

 

 

 

2,903

 

 

 

2,941

 

Interest

 

 

1,728

 

 

 

3,285

 

Contract reserves

 

 

750

 

 

 

2,491

 

 

 

220

 

 

 

444

 

Other

 

 

7,648

 

 

 

8,530

 

Total accrued expenses

 

$

37,230

 

 

$

52,899

 

 

$

33,949

 

 

$

37,626

 

 

4.

Long-term debt

 

Credit agreement

As of June 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had 0 borrowings outstanding under our $200,000 amended and restated revolving credit and security agreement (as amended, the “Amended Credit Agreement”). There were $35,909$21,527 and $36,407$25,127 of letters of credit outstanding and $163,764$178,146 and $163,231$174,546 of availability under the Amended Credit Agreement as of June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. The availability under the Amended Credit Agreement is suppressed by $327 as of June 30, 2021March 31, 2022 and December 31, 2020,2021, as a result of certain limitations set forth in the Amended Credit Agreement.

 

Senior Notes and subsidiary guarantors

In May 2021, the Company sold $325 million$325,000 of unsecured 5.25% Senior Notes (the “2029 Notes”) pursuant to a private offering.  The 2029 Notes were priced to investors at par and will mature on June 1, 2029.  The Company used the net proceeds from the offering, together with cash on hand, to redeem all $325 million$325,000 aggregate principal amount of its outstanding 8.000% Senior Notes due 2022 (the “8% Notes”).   Approximately $1.0 million of deferred financing fees related to the 8% Notes were extinguished and are presented within net interest expense in the Statement of Operations.

The Company’s obligations under these 2029 Notes are guaranteed by each of the Company’s existing and future 100% owned domestic subsidiaries that are co-borrowers or guarantors under itsthe Amended Credit Agreement. Such guarantees are full, unconditional and joint and several. The parent company issuer has no independent assets or operations and all non-guarantor subsidiaries have been determined to be minor.

5.

Fair value measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy has been established by GAAP that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The accounting guidance describes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.


The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. At times, the Company holds certain derivative contracts that it uses to manage commodity price risk. The Company does not hold or issue derivatives for speculative or trading purposes. The fair values of these financial instruments are summarized as follows:

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

Description

 

At June 30, 2021

 

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

 

 

Significant Other Observable Inputs (Level 2)

 

 

Significant Unobservable Inputs (Level 3)

 

 

At March 31, 2022

 

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

 

 

Significant Other Observable Inputs (Level 2)

 

 

Significant Unobservable Inputs (Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel hedge contracts

 

$

4,802

 

 

$

-

 

 

$

4,802

 

 

$

-

 

 

$

8,971

 

 

$

-

 

 

$

8,971

 

 

$

-

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

Description

 

At December 31, 2020

 

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

 

 

Significant Other Observable Inputs (Level 2)

 

 

Significant Unobservable Inputs (Level 3)

 

 

At December 31, 2021

 

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

 

 

Significant Other Observable Inputs (Level 2)

 

 

Significant Unobservable Inputs (Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel hedge contracts

 

$

1,739

 

 

$

-

 

 

$

1,739

 

 

$

-

 

 

$

630

 

 

$

-

 

 

$

630

 

 

$

-

 

 

Fuel hedge contracts

The Company is exposed to certain market risks, primarily commodity price risk as it relates to diesel fuel purchase requirements, which occur in the normal course of business. The Company enters into heating oil commodity swap contracts to hedge the risk that fluctuations in diesel fuel prices could have an adverse impact on cash flows associated with its domestic dredging contracts. The Company’s typical goal is to hedge approximately 80% of the eligible fuel requirements for work in domestic backlog.

As of June 30, 2021,March 31, 2022, the Company was party to various swap arrangements to hedge a portion of the price of its diesel fuel purchase requirements for work in its backlog to be performed through June 2022.March 2023. As of June 30, 2021,March 31, 2022, there were 8.77.1 million gallons remaining on these contracts which represent approximately 80% of the Company’srepresenting forecasted domestic fuel purchases through June 2022.March 2023. Under these swap agreements, the Company will pay fixed prices ranging from $1.22$1.64 to $1.90$3.50 per gallon.

At June 30, 2021March 31, 2022 and December 31, 20202021, the fair value asset of the fuel hedge contracts were estimated to be $4,802$8,971 and $1,739,$630, respectively, and are recorded in prepaid expenses and other current assets. For fuel hedge contracts considered to be highly effective, the lossesgains reclassified to earnings from changes in fair value of derivatives, net of cash settlements and taxes, for the sixthree months ended June 30, 2021March 31, 2022 were $3,404.$2,481. The remaining gains and losses included in accumulated other comprehensive loss at June 30, 2021March 31, 2022 will be reclassified into earnings over the next twelve months, corresponding to the period during which the hedged fuel is expected to be utilized. Changes in the fair value of fuel hedge contracts not considered highly effective are recorded as cost of contract revenues in the Statement of Operations. The fair values of fuel hedges are corroborated using inputs that are readily observable in public markets; therefore, the Company determines fair value of these fuel hedges using Level 2 inputs.

The Company is exposed to counterparty credit risk associated with non-performance of its various derivative instruments. The Company’s risk would be limited to any unrealized gains on current positions. To help mitigate this risk, the Company transacts only with counterparties that are rated as investment grade or higher. In addition, all counterparties are monitored on a continuous basis.

The fair value of the fuel hedge contracts outstanding as of June 30, 2021March 31, 2022 and December 31, 20202021 is as follows:

 

 

 

 

Fair Value at

 

 

 

 

Fair Value at

 

 

 

 

June 30,

 

 

December 31,

 

 

 

 

March 31,

 

 

December 31,

 

 

Balance Sheet Location

 

2021

 

 

2020

 

 

Balance Sheet Location

 

2022

 

 

2021

 

Asset derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel hedge contracts

 

Prepaid expenses and other current assets

 

$

4,802

 

 

$

1,739

 

 

Prepaid expenses and other current assets

 

$

8,971

 

 

$

630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Accumulated other comprehensive income (loss)

Changes in the components of the accumulated balances of other comprehensive income (loss) are as follows:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of derivative (gains) losses to earnings—net of tax

 

 

(1,878

)

 

 

2,490

 

 

 

(3,404

)

 

 

3,828

 

Reclassification of derivative gains to earnings—net of tax

 

 

(2,481

)

 

 

(1,526

)

Change in fair value of derivatives—net of tax

 

 

2,282

 

 

 

950

 

 

 

5,694

 

 

 

(7,514

)

 

 

8,716

 

 

 

3,412

 

Net change in cash flow derivative hedges—net of tax

 

$

404

 

 

$

3,440

 

 

$

2,290

 

 

$

(3,686

)

 

$

6,235

 

 

$

1,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments reclassified from accumulated balances of other comprehensive income (loss) to earnings are as follows:

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

Three Months Ended

 

 

 

 

June 30,

 

 

June 30,

 

 

 

 

March 31,

 

 

Statement of Operations Location

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

Statement of Operations Location

 

2022

 

 

2021

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel hedge contracts

 

Costs of contract revenues

 

$

(2,513

)

 

$

3,340

 

 

 

(4,554

)

 

 

5,132

 

 

Costs of contract revenues

 

$

(3,319

)

 

$

(2,041

)

 

Income tax (provision) benefit

 

 

(635

)

 

 

850

 

 

 

(1,150

)

 

 

1,304

 

 

Income tax provision

 

 

(838

)

 

 

(515

)

 

 

 

$

(1,878

)

 

$

2,490

 

 

$

(3,404

)

 

$

3,828

 

 

 

 

$

(2,481

)

 

$

(1,526

)

 

Other financial instruments

The carrying value of financial instruments included in current assets and current liabilities approximates fair value due to the short-term maturities of these instruments. Based on timing of the cash flows and comparison to current market interest rates, the carrying value of our revolving credit agreement approximates fair value. In May 2021, the Company issuedsold $325,000 of 5.25% Seniorthe 2029 Notes, which were outstanding at June 30, 2021March 31, 2022 (see Note 4, Long-term debt). The 2029 Notes are senior unsecured obligations of the Company and its subsidiaries that guarantee the 2029 Notes. The fair value of the senior notes2029 Notes was $334,783$310,375 at June 30, 2021,March 31, 2022, which is a Level 1 fair value measurement as the senior notes’ value was obtained using quoted prices in active markets. It is impracticable to determine the fair value of outstanding letters of credit or performance, bid and payment bonds due to uncertainties as to the amount and timing of future obligations, if any.

6.

Share-based compensation

On May 5, 2021, the Company’s stockholders approved the Great Lakes Dredge & Dock Corporation 2021 Long-Term Incentive Plan (the “Incentive Plan”), which previously had been approved by the Company’s board of directors subject to stockholder approval. The Incentive Plan replaces the 2017 Long-Term Incentive Plan (the “Prior Plan”) and is largely based on the Prior Plan, but with updates to the available shares and other administrative changes.  The Incentive Plan permits the granting of stock options, stock appreciation rights, restricted stock and restricted stock units to the Company’s employees and directors for up to 1.5 million shares of common stock, plus the number of shares that remained available for future grant under the Prior Plan as of the effectiveness of the Incentive Plan.

The Prior Plan permitted the granting of stock options, stock appreciation rights, restricted stock and restricted stock units to the Company’s employees and directors for up to 3.3 million shares of common stock, plus an additional 1.7 million shares underlying equity awards issued under the 2007 Long-Term Incentive Plan.

During the sixthree months ended June 30, 2021,March 31, 2022, the Company granted 307 thousand8,000 restricted stock units to certain employees. In addition, all non-employee directors on the Company’s board of directors are paid a portion of their board-related compensation in stock grants or restricted stock units. Compensation cost charged to expense related to share-based compensation arrangements was $798$552 and $1,455$1,766 for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively.  Compensation cost charged to expense related to share-based compensation arrangements was $2,564 and $3,130 for the six months ended June 30, 2021 and 2020, respectively.


7.

Revenue

At June 30, 2021,March 31, 2022, the Company had $454,402$473,471 of remaining performance obligations, which the Company refers to as total backlog. Approximately 93%79% of the Company’s backlog willis expected to be completed in 20212022 with the remaining balance expected to be completed in 2022.2023.



Revenue by category

The following series of tables presents our revenue disaggregated by several categories.

Domestically, ourthe Company’s work generally is performed in coastal waterways and deep-water ports. The U.S. dredging market consists of four primary types of work: capital, coastal protection, maintenance and rivers & lakes. Foreign projects typically involve capital work.

The Company’s contract revenues by type of work, for the periods indicated, were as follows:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

Revenues

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Dredging:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital—U.S.

 

$

79,399

 

 

$

63,440

 

 

$

157,005

 

 

$

146,989

 

 

$

101,010

 

 

$

77,606

 

Capital—foreign

 

 

1,613

 

 

 

3,981

 

 

 

6,322

 

 

 

10,843

 

 

 

-

 

 

 

4,709

 

Coastal protection

 

 

46,631

 

 

 

56,038

 

 

 

93,262

 

 

 

135,888

 

 

 

71,917

 

 

 

46,631

 

Maintenance

 

 

37,278

 

 

 

41,968

 

 

 

82,579

 

 

 

84,353

 

 

 

19,812

 

 

 

45,301

 

Rivers & lakes

 

 

4,993

 

 

 

2,493

 

 

 

8,379

 

 

 

7,542

 

 

 

1,610

 

 

 

3,386

 

Total revenues

 

$

169,914

 

 

$

167,920

 

 

$

347,547

 

 

$

385,615

 

 

$

194,349

 

 

$

177,633

 

 

The Company’s contract revenues by type of customer, for the periods indicated, were as follows:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

Revenues

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Dredging:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal government

 

$

127,331

 

 

$

133,496

 

 

$

258,063

 

 

$

299,263

 

 

$

167,574

 

 

$

130,732

 

State and local government

 

 

37,069

 

 

 

29,693

 

 

 

71,844

 

 

 

72,025

 

 

 

24,601

 

 

 

34,775

 

Private

 

 

3,901

 

 

 

750

 

 

 

11,318

 

 

 

3,484

 

 

 

2,174

 

 

 

7,417

 

Foreign

 

 

1,613

 

 

 

3,981

 

 

 

6,322

 

 

 

10,843

 

 

 

-

 

 

 

4,709

 

Total revenues

 

$

169,914

 

 

$

167,920

 

 

$

347,547

 

 

$

385,615

 

 

$

194,349

 

 

$

177,633

 

 

Accounts receivable at June 30, 2021March 31, 2022 and December 31, 20202021 are as follows:

 

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Completed contracts

 

$

12,526

 

 

$

12,347

 

 

$

6,348

 

 

$

10,612

 

Contracts in progress

 

 

15,393

 

 

 

21,239

 

 

 

23,639

 

 

 

65,415

 

Retainage

 

 

8,386

 

 

 

5,968

 

 

 

7,739

 

 

 

7,490

 

 

 

36,305

 

 

 

39,554

 

 

 

37,726

 

 

 

83,517

 

Allowance for doubtful accounts

 

 

(564

)

 

 

(564

)

 

 

(564

)

 

 

(564

)

 

 

 

 

 

 

 

 

Total accounts receivable—net

 

$

35,741

 

 

$

38,990

 

 

$

37,162

 

 

$

82,953

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

The components of contracts in progress at June 30, 2021March 31, 2022 and December 31, 20202021 are as follows:

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Costs and earnings in excess of billings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and earnings for contracts in progress

 

$

317,984

 

 

$

199,964

 

 

$

369,584

 

 

$

270,998

 

Amounts billed

 

 

(291,493

)

 

 

(168,569

)

 

 

(323,841

)

 

 

(240,941

)

Costs and earnings in excess of billings for contracts in progress

 

 

26,491

 

 

 

31,395

 

 

 

45,743

 

 

 

30,057

 

Costs and earnings in excess of billings for completed contracts

 

 

10,177

 

 

 

2,823

 

 

 

29,898

 

 

 

10,894

 

Total contract revenues in excess of billings

 

$

36,668

 

 

$

34,218

 

 

$

75,641

 

 

$

40,951

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of contract revenues in excess of billings

 

$

34,556

 

 

$

32,106

 

 

$

74,535

 

 

$

39,844

 

Long-term contract revenues in excess of billings

 

 

2,112

 

 

 

2,112

 

 

 

1,106

 

 

 

1,107

 

Total contract revenues in excess of billings

 

$

36,668

 

 

$

34,218

 

 

$

75,641

 

 

$

40,951

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Billings in excess of costs and earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts billed

 

$

(382,785

)

 

$

(550,468

)

 

$

(141,076

)

 

$

(224,381

)

Costs and earnings for contracts in progress

 

 

353,952

 

 

 

517,860

 

 

 

137,389

 

 

 

209,567

 

Total billings in excess of contract revenues

 

$

(28,833

)

 

$

(32,608

)

 

$

(3,687

)

 

$

(14,814

)

In the first quarter of 2022, a revision to the estimated gross profit percentage of a project was recognized due to a positive settlement of a claim from the recently completed project resulting in a cumulative net impact on the project margin, which increased gross profit by $11,724.

 

At June 30, 2021March 31, 2022 and December 31, 2020,2021, costs to fulfill a contract with a customer recognized as an asset were $6,887$5,656 and $10,501,$5,652, respectively, and are recorded in other current assets and other noncurrent assets. These costs relate to pre-contract and pre-construction activities. During the three and six months ended June 30,March 31, 2022 and 2021, and 2020, the Company amortized $5,909$2,402 and $3,612, and 11,756 and 8,804$5,847, respectively, of pre-construction costs.

8.

Commitments and contingencies

Commercial commitments

Performance and bid bonds are customarily required for dredging and marine construction projects. The Company has bonding agreements with Argonaut Insurance Company, Berkley Insurance Company, Chubb Surety and Liberty Mutual Insurance Company, under which the Company can obtain performance, bid and payment bonds. The Company also has outstanding bonds with Travelers Casualty, Surety Company of America and Zurich American Insurance Company. Bid bonds are generally obtained for a percentage of bid value and amounts outstanding typically range from $1,000 to $10,000. At June 30, 2021,March 31, 2022, the Company had outstanding performance bonds with a notional amount of approximately $1,143,833.$1,178,796. The revenue value remaining in backlog totaled approximately $454,402.$473,471.

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

Legal proceedings and other contingencies

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

Various legal actions, claims, assessments and other contingencies arising in the ordinary course of business are pending against the Company and certain of its subsidiaries. The Company will defend itself vigorously on all matters. These matters are subject to many uncertainties, and it is possible that some of these matters could ultimately be decided, resolved, or settled adversely to the Company. Although the Company is subject to various claims and legal actions that arise in the ordinary course of business, except as described below, the Company is not currently a party to any material legal proceedings or environmental claims. The Company records an


accrual when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe any of these proceedings, individually or in the aggregate, would be expected to have a material effect on results of operations, cash flows or financial condition.


On April 23, 2014, the Company completed the sale of NASDI, LLC (“NASDI”) and Yankee Environmental Services, LLC (“Yankee”), which together comprised the Company’s historical demolition business, to a privately ownedprivately-owned demolition company. On January 14, 2015, the Company and its subsidiary, NASDI Holdings, LLC, brought an action in the Delaware Court of Chancery to enforce the terms of the Company's agreement to sell NASDI and Yankee. Under the terms of the agreement, the Company received cash of $5,309 and retained the right to receive additional proceeds based upon future collections of outstanding accounts receivable and work in process existing at the date of close. The Company seeks specific performance of the buyer’s obligation to collect and to remit the additional proceeds, and other related relief. Defendants have filed counterclaims alleging that the Company misrepresented the quality of its contracts and receivables prior to the sale. The Company denies defendants’ allegations. In addition, the Company has been granted a judgment in the amount of $21,934 based upon the buyer’s default of its obligations to indemnify the Company for losses resulting from failure to perform in accordance with terms of surety performance bond. The defendants filed a notice of appeal from that judgement. The Company continues to aggressively pursue collection from the buyer on outstanding amounts owed under the sale and the indemnification. An estimate of a range of potential gains or losses relating to these matters cannot reasonably be made.

On April 22, 2021, the U.S. Attorney’s Office for the Eastern District of Louisiana filed a bill of information against the Company charging the Company with a negligent discharge violation of the Clean Water Act arising from a September 2016 oil spill. The spill occurred during the Company’s Cheniere Ronquille project and resulted in the discharge of around one hundred sixty barrels of crude oil in Bay Long, Louisiana. The Company has cooperated with the U.S. Attorney’s Office and other relevant agencies in their investigation of the oil spill and on June 15, 2021, the Company pleaded guilty to the misdemeanor violation alleged in the bill of information and agreed to pay a fine of $1,000. AsIn the first quarter of 2022, the Company entered into a result,settlement of a civil suit arising from the government may initiate suspension or debarment proceedings against us,same matter which might prohibit us from bidding for, entering into or completing certain government projects.was primarily covered by its insurance policies.  The Company also remains subject to potential liability for restitution in connection with this criminal matter, and has deposited the potential liability for the criminal matter of $2,000 into the registry of the court.  That amount is presented as restricted cash in other noncurrent assets. On April 18, 2022, the government filed a motion seeking restitution for an amount less than what was deposited into the registry of the court.  The related hearing was held in federal court on April 26, 2022, and the sentencing hearing is scheduled for June 14, 2022.  If it is determined that the Company owes additional restitution, the Company believes that the amount could range between $0 and the $2,000 previously deposited.  As a result of the pending civil suit arisingconviction, the government will initiate statutory debarment proceedings against the Company, which might prohibit the Company from the same matter.bidding for, entering into or completing certain government projects. Although the Company does not know whether debarment proceedings will be initiated or result in prohibitions, or the impact of any such resulting prohibitions, the Company does not expect any such proceedings or prohibitions to cause a material disruption to its business, financial condition or results of operations.

On September 27, 2019, the EPA Region 4 filed an administrative complaint against the Company relating to a project the Company performed at PortMiami from 2013-2015 alleging violations of Section 103 of the Marine Protection, Research, and Sanctuaries Act (“MPRSA”) and failure to report violations of the MPRSA. In July 2021, the parties executed a consent agreement wherein the Company agreed to pay $500 as a civil penalty.

Lease obligations

The Company leases certain operating equipment and office facilities under long-term operating leases expiring at various dates through 2030. The equipment leases contain renewal or purchase options that specify prices at the then fair value upon the expiration of the lease terms. The leases also contain default provisions that are triggered by an acceleration of debt maturity under the terms of the Company’s Amended Credit Agreement, or, in certain instances, cross default to other equipment leases and certain lease arrangements require that the Company maintain certain financial ratios comparable to those required by its Amended Credit Agreement. Additionally, the leases typically contain provisions whereby the Company indemnifies the lessors for the tax treatment attributable to such leases based on the tax rules in place at lease inception. The tax indemnifications do not have a contractual dollar limit. To date, no lessors have asserted any claims against the Company under these tax indemnification provisions.

 


 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary note regarding forward-looking statements

Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933 (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by the Securities and Exchange Commission (“SEC”), all as may be amended from time to time. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Great Lakes Dredge & Dock Corporation and its subsidiaries (“Great Lakes” or the “Company”), or industry results, to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements that are not historical fact are forward-looking statements. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “may,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions.

These cautionary statements are being made pursuant to the Securities Act, the Exchange Act and the PSLRA with the intention of obtaining the benefits of the “safe harbor” provisions of such laws. Great Lakes cautions investors that any forward-looking statements made by Great Lakes are not guarantees or indicative of future performance. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements with respect to Great Lakes, include, but are not limited to, risks and uncertainties that are described in Item 1A. “Risk Factors” of Great Lakes’ Annual Report on Form 10-K for the year ended December 31, 2020, in Item 1A. “Risk Factors” of Great Lakes’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 in Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q and in other securities filings by Great Lakes with the SEC.

Although Great Lakes believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any forward-looking statements. Great Lakes’ future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date hereof and Great Lakes does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.

 

General

The Company is the largest provider of dredging services in the United States. In addition, the Company is fully engaged in expanding its core business into the rapidly developing offshore wind energy industry.  The Company has a long history of performing significant international projects. The mobility of the Company’s fleet enables the Company to move equipment in response to changes in demand for dredging services.

In the fourth quarter of 2020, the Company announced the relocation of its headquarters from Oak Brook, Illinois to Houston, Texas. The Company’s new corporate office in Houston opened in the first quarter of 2021. This relocation places the Company closer to key regional customers and new markets, especially along the Gulf Coast and the Mississippi River.

Dredging generally involves the enhancement or preservation of the navigability of waterways or the protection of shorelines through the removal or replenishment of soil, sand or rock. Domestically, our work generally is performed in coastal waterways and deep waterdeep-water ports. The U.S. dredging market consists of four primary types of work: capital, coastal protection, maintenance and rivers & lakes. The Company’s bid market is defined as the aggregate dollar value of domestic dredging projects on which the Company bid or could have bid if not for capacity constraints or other considerations (“bid market”). The Company experienced an average combined bid market share in the U.S. of 37%35% over the prior three years, including 49%, 55%54%, 19%17% and 34%23% of the domestic capital, coastal protection, maintenance and rivers & lakes sectors, respectively.

The Company’s largest domestic dredging customer is the U.S. Army Corps of Engineers (the “Corps”), which has responsibility for federally funded projects related to navigation and flood control of U.S. waterways. In the first sixthree months of 2021,2022, the Company’s dredging revenues earned from contracts with federal government agencies, including the Corps as well as other federal entities such as the U.S. Coast Guard and the U.S. Navy were approximately 74%86% of dredging revenues, slightly belowabove the Company’s prior three yearthree-year average of 79%80%.

In December 2019, a novel strain ofThe coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. COVID-19(“COVID-19”) pandemic has since spread worldwide and to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic and on March 13, 2020 the United States declared a national emergency in response to the coronavirus outbreak. This outbreak has severely impacted global economic activity and many countries, and states inincluding the United States and its governmental entities and private businesses, have reacted by instituting quarantines, mandating school and business closures and limiting travel at various times throughout the pandemic.


On March 28, 2020, dredging was specifically listed in the U.S. Department of Homeland Security’s “Advisory Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response” which federally designates the Company as an essential business or “critical infrastructure” company that can maintain operations during the ongoing pandemic. As mentioned above, the Company’s largest domestic dredging customer is the Corps; the Corps oversees the majority of these critical infrastructure projects and, in this capacity, has continued to follow their bid schedule and prioritize all types of dredging including port maintenance


and expansion and coastal protection projects that are necessary to avoid potential storm damage during hurricane season. Despite the uncertainty surrounding COVID-19, to date, the Corps is continuing to advertise new projects. During the first half of 2021 the Company began to experience increased project costs and delays related to COVID-19; currently, all affected projects are back in operation.

Our Executive Leadership team has established a COVID-19 Command Team that meets twiceonce each week to update contingency plans, as necessary, and address the challenges related to maintaining operations in this evolving economic environment. The Company’s primary focus has been the health and safety of its employees. The Company has implemented new paid leave policies and additional sanitary and safety measures to mitigate the risk of infection to employees.

On vessels and job sites, the Company has instituted fewer employee shift changes and increased sanitary and social distancing measures. InThe Company is now 100% fully vaccinated against COVID-19, with few accommodations.  Direct COVID-19 related costs were approximately $1,000 for the first halfquarter of 2021,2022 compared to approximately $4,300 in the Company began to experience more significant operational interruptions and direct costs related to the third wavefirst quarter of the COVID-19 pandemic. Several vessel crews were infected despite extensive testing and isolation protocols. Vessels were required to go to shore for crew changes and the vessels had to be disinfected before returning to work. This impacted the vessels’ scheduling and availability which led to project delays. Currently, those projects and vessels that were impacted are completed and back in operation, respectively. The Company has initiated an extensive vaccination effort of our crews and staff and the Company currently has 71% of its staff either fully vaccinated or partially vaccinated.2021.  

Since March 2020,In mid-2021, the Company’s corporate employees have effectively transitioned tobegan transitioning from a remote working environment and have discontinued non-essential travel to follow recommended physical and social distancing guidelines in order to reduce the risk of infection. Beginning in the current quarter, the Company’s Houston employees began transitioning back to working in person at the Houston corporate headquarters.with a hybrid working environment. The Company is following the protocols published by the U.S. Centers for Disease Control and Prevention, the World Health Organization and state and local governments. As the Company’s employees, customers and communities are facing significant challenges, the Company cannot predict how COVID-19 will evolve or the impact it, or actions taken to contain it, will have on future results. Due to the uncertainty that surrounds this virus, the Company will be continually evaluating safety and operational contingency plans and the potential future impact that this evolving environment has on the Company’s business, financial condition and results of operations.

The Company plans to participate in the offshore wind market and in MarchNovember 2021, the Company awardedentered into a $197 million contract for the design and development ofwith Philly Shipyard Inc. to build the first U.S. flagged Jones Act compliant, inclined fall-pipe vessel for subsea rock installation for wind turbine foundations.foundations with expected delivery of the vessel in the second half of 2024. This vessel would representrepresents a significant and critical advancement in building the U.S. logistics infrastructure to support the future of the new U.S. offshore wind industry. Once the contract is fully executed, the Company expects delivery of the vessel in early 2024.  As of the current quarter, theThe Company has begun soliciting bidsbidding on select projects in the offshore wind market.market and was recently awarded its first contract.

The current administrationPresidential Administration has pushed to accelerate renewable energy developments and has set a target to install 30GW of offshore wind energy generation capacity by 2030 on the U.S. east coast.  Additionally, inEast Coast. In March 2021, the White House announced new initiatives that will advance the administration’s goals to expand the nation’s offshore wind energy capacity in the coming decade by opening new areas of development, improving environmental permitting and increasing public financing for projects.  

projects  In Julyaddition, in January 2022, the administration announced plans to auction more than 480,000 acres in the New York Bight for six new offshore wind energy leases, the administration’s first wind sale and the largest lease area ever offered, with potential build-out capacity of up to 7GW. Additionally, in 2021, the Corps’U.S. Senate passed the $1.2 trillion infrastructure bill where the Corps will be granted $11.6 billion in funding to improve the nation’s resilience to the effects of climate change.

On March 15, 2022 the Omnibus Appropriations Bill was signed into law, which included funding for the Corps totaling $8.3 billion for fiscal year 2022.  This is an increase of $548 million above the fiscal year 2021 amount and an increase of $1.6 billion above the President’s original budget was approved by the House of Representatives at a record high proposed budget level of $8.66 billion.  In this bill,request.  Appropriations included $4.6 billion for operation and maintenance, including $2.5 billion from the Harbor Maintenance Trust Fund (“HMTF”) in accordance with the Coronavirus Aid, Relief and Economic Security Act (the “HMTF”“CARES Act”) would receive $2.05 billion. This record funding is in addition toand $35.0 million for flood control and coastal emergencies which includes $19.8 million for the annual cap being lifted from the HMTF in 2020 and the 2020construction of shore protection projects.

The Water Resource Development Act bill (the “WRDA”).  WRDA, which authorizes new projects and makes policy changes that will make natural infrastructure and beneficial use of dredged material more common, and was included in the Consolidated Appropriations Act 2021 signed into law on December 27, 2020. This continues the trend of WRDA legislation in each session of Congress since 2014. The legislation provides access to the $9.3 billion in unspent HMTF tax collections, establishes a funds distribution process for HMTF funding and approves projects to proceed to construction.

The Company has one operating segment which is also the Company’s one reportable segment and reporting unit.

The Company’s vessels are subject to periodic dry dock inspections to verify that the vessels have been maintained in accordance with the rules of the U.S. Coast Guard and the American Bureau of Shipping (“ABS”ABS���) and that recommended repairs have been satisfactorily completed. Dry dock frequency is a statutory requirement mandated by the U.S. Coast Guard and the ABS. The Company’s vessels dry-dock every two to three years or every five years, depending on the vessel type and also on an as-needed basis for occasional unscheduled repairs. The Company experienced two dry dock inspections in the first quarter of 2022. One vessel remained in dry dock at quarter end with the expectation of returning to work in the second quarter.

 


 

Results of operations

The following tables set forth the components of net income and Adjusted EBITDA, as defined below, as a percentage of contract revenues for the three and six months ended June 30, 2021March 31, 2022 and 2020:2021:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

Three Months Ended

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

March 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

 

Contract revenues

 

 

100.0

%

 

 

100.0

%

 

 

100.0

 

%

 

100.0

 

%

 

 

100.0

 

%

 

100.0

 

%

Costs of contract revenues

 

 

(86.5

)

 

 

(80.3

)

 

 

(83.9

)

 

 

(73.7

)

 

 

 

(83.0

)

 

 

(81.4

)

 

Gross profit

 

 

13.5

 

 

 

19.7

 

 

 

16.1

 

 

 

26.3

 

 

 

 

17.0

 

 

 

18.6

 

 

General and administrative expenses

 

 

8.4

 

 

 

8.8

 

 

 

8.8

 

 

 

7.9

 

 

 

 

7.5

 

 

 

9.2

 

 

Gain on sale of assets—net

 

 

(0.1

)

 

 

-

 

 

 

-

 

 

 

-

 

 

(Gain) loss on sale of assets—net

 

 

(0.2

)

 

 

0.1

 

 

Operating income

 

 

5.2

 

 

 

10.9

 

 

 

7.3

 

 

 

18.4

 

 

 

 

9.7

 

 

 

9.3

 

 

Interest expense—net

 

 

(3.9

)

 

 

(4.0

)

 

 

(3.8

)

 

 

(3.5

)

 

 

 

(2.1

)

 

 

(3.7

)

 

Other income (expense)

 

 

0.4

 

 

 

0.3

 

 

 

0.3

 

 

 

(0.1

)

 

 

 

(0.2

)

 

 

0.1

 

 

Income before income taxes

 

 

1.7

 

 

 

7.2

 

 

 

3.8

 

 

 

14.8

 

 

 

 

7.4

 

 

 

5.7

 

 

Income tax provision

 

 

(0.5

)

 

 

(1.9

)

 

 

(0.6

)

 

 

(3.7

)

 

 

 

(1.7

)

 

 

(0.8

)

 

Net income

 

 

1.2

 

 

 

5.3

 

 

 

3.2

 

%

 

11.1

 

%

 

 

5.7

 

%

 

4.9

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

11.9

%

 

 

16.7

%

 

 

13.5

 

%

 

23.2

 

%

 

 

15.3

 

%

 

15.1

 

%

 

Adjusted EBITDA, as provided herein, represents net income (loss) from continuing operations, adjusted for net interest expense, income taxes, depreciation and amortization expense, debt extinguishment, accelerated maintenance expense for new international deployments, goodwill or asset impairments and gains on bargain purchase acquisitions. Adjusted EBITDA is not a measure derived in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company presents Adjusted EBITDA as an additional measure by which to evaluate the Company’s operating trends. The Company believes that Adjusted EBITDA is a measure frequently used to evaluate performance of companies with substantial leverage and that the Company’s primary stakeholders (i.e., its stockholders, bondholders and banks) use Adjusted EBITDA to evaluate the Company’s period to period performance. Additionally, management believes that Adjusted EBITDA provides a transparent measure of the Company’s recurring operating performance and allows management and investors to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance. For this reason, the Company uses a measure based upon Adjusted EBITDA to assess performance for purposes of determining compensation under the Company’s incentive plan. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, amounts determined in accordance with GAAP including: (a) operating income as an indicator of operating performance; or (b) cash flows from operations as a measure of liquidity. As such, the Company’s use of Adjusted EBITDA, instead of a GAAP measure, has limitations as an analytical tool, including the inability to determine profitability or liquidity due to the exclusion of accelerated maintenance expense for new international deployments, goodwill or asset impairments, gains on bargain purchase acquisitions, interest and income tax expense and the associated significant cash requirements and the exclusion of depreciation and amortization, which represent significant and unavoidable operating costs given the level of indebtedness and capital expenditures needed to maintain the Company’s business. For these reasons, the Company uses operating income to measure the Company’s operating performance and uses Adjusted EBITDA only as a supplement. The following is a reconciliation of Adjusted EBITDA to net income:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

2,105

 

 

$

8,960

 

 

$

10,919

 

 

$

42,947

 

 

$

11,057

 

 

$

8,814

 

Adjusted for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense—net

 

 

6,657

 

 

 

6,725

 

 

 

13,243

 

 

 

13,355

 

 

 

4,025

 

 

 

6,586

 

Income tax provision

 

 

829

 

 

 

3,131

 

 

 

2,218

 

 

 

14,441

 

 

 

3,285

 

 

 

1,389

 

Depreciation and amortization

 

 

10,628

 

 

 

9,256

 

 

 

20,681

 

 

 

18,707

 

 

 

11,316

 

 

 

10,053

 

Adjusted EBITDA

 

$

20,219

 

 

$

28,072

 

 

$

47,061

 

 

$

89,450

 

 

$

29,683

 

 

$

26,842

 

 


 

The Company’s contract revenues by type of work, for the periods indicated, were as follows:

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

 

Revenues (in thousands)

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

 

Dredging:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital—U.S.

 

$

79,399

 

 

$

63,440

 

 

 

25.2

%

 

$

157,005

 

 

$

146,989

 

 

 

6.8

%

 

$

101,010

 

 

$

77,606

 

 

 

30.2

%

 

Capital—foreign

 

 

1,613

 

 

 

3,981

 

 

 

(59.5

)%

 

 

6,322

 

 

 

10,843

 

 

 

(41.7

)%

 

 

-

 

 

 

4,709

 

 

 

(100.0

)%

 

Coastal protection

 

 

46,631

 

 

 

56,038

 

 

 

(16.8

)%

 

 

93,262

 

 

 

135,888

 

 

 

(31.4

)%

 

 

71,917

 

 

 

46,631

 

 

 

54.2

%

 

Maintenance

 

 

37,278

 

 

 

41,968

 

 

 

(11.2

)%

 

 

82,579

 

 

 

84,353

 

 

 

(2.1

)%

 

 

19,812

 

 

 

45,301

 

 

 

(56.3

)%

 

Rivers & lakes

 

 

4,993

 

 

 

2,493

 

 

 

100.3

%

 

 

8,379

 

 

 

7,542

 

 

 

11.1

%

 

 

1,610

 

 

 

3,386

 

 

 

(52.5

)%

 

Total revenues

 

$

169,914

 

 

$

167,920

 

 

 

1.2

%

 

$

347,547

 

 

$

385,615

 

 

 

(9.9

)%

 

$

194,349

 

 

$

177,633

 

 

 

9.4

%

 

 

Total revenue was $169.9$194.3 million for the three months ended June 30, 2021,March 31, 2022, up $2.0$16.7 million, or 1.2%9.4%, from $167.9$177.6 million for the same period in the prior year. For the three months ended June 30, 2021,March 31, 2022, the Company experienced an increase in domestic capital and rivers & lakes revenuescoastal protection revenue as compared to the same period in the prior year. This increase was partially offset by a decrease incoastal protection, maintenance, rivers & lakes and foreign capital revenue during the current periodfirst quarter of 2022 as compared to the same period in the prior year. For the six months ended June 30, 2021, total revenue was $347.5 million, down from revenue of $385.6 million for the same period in the prior year, representing a decrease of $38.1 million or 9.9%. For the six months ended June 30, 2021, the Company experienced a decrease in coastal protection, maintenance and foreign capital revenue as compared to the same period in the prior year. This decrease was slightly offset by an increase in domestic capital and rivers & lakes revenues during the current period as compared to the same period in the prior year.

Capital dredging consists primarily of port expansion projects, which involve the deepening of channels and berthing basins to allow access by larger, deeper draft ships and the provision of land fill used to expand port facilities. In addition to port work, capital projects also include coastal restoration and land reclamations, trench digging for pipelines, tunnels and cables, and other dredging related to the construction of breakwaters, jetties, canals and other marine structures. For the three months ended June 30, 2021,March 31, 2022, domestic capital dredging revenue was $79.4$101.0 million, up $16.0$23.4 million, or 25.2%30.2%, compared to $63.4$77.6 million for the same period in 2020.2021. The increase in capital dredging revenues for the three months ended June 30, 2021March 31, 2022 was mostly due to a greater amount of revenue earned on projects in Texas, Massachusetts, Florida, Louisiana, Alabama, New Hampshire and Alabama,Maine in the current yearfirst quarter of 2022 when compared to the prior year quarter. This increase was partially offset by less revenue earned on projects in Florida and Louisiana in the current quarter. For the six months ended June 30, 2021, domestic capital revenue was $157.0 million compared to $147.0 million for the same period in 2020, representing an increase of $10.0 million, or 6.8%. The increase in capital dredging revenues for the six months ended June 30, 2021 was mostly due to a greater amount of revenue earned on projects in Massachusetts, and South Carolina, in the prior year period when compared to the current year. This increase was partially offset by less revenue earned on projects in Texas, Delaware,South Carolina and FloridaMississippi in the currentprior year.

Foreign capital projects typically involve land reclamations, channel deepening and port infrastructure development. In the secondfirst quarter of 2021,2022, there was no foreign capital revenue was $1.6 million, down $2.4 million, or 59.5%, as compared to $4.0$4.7 million in the same quarter in the prior year. Foreign capital revenue for the first half of 2021 was $6.3 million which is $4.5 million, or 41.7%, lower than revenue of $10.8 million for the same period of the prior year. The Company continued to earn revenue in 2021 from a project in Bahrain that is essentially completed as of the current quarter.

Coastal protection projects involve moving sand from the ocean floor to shoreline locations where erosion threatens shoreline assets. Coastal protection revenue for the quarter ended June 30, 2021March 31, 2022 was $46.6$71.9 million, a decreasean increase of $9.4$25.3 million, or 16.8%54.3%, compared to $56.0$46.6 million in the prior year period. The decreaseincrease in coastal protection revenues for the three months ended June 30, 2021March 31, 2022 was mostly attributable to a lower amount of revenue earned on projects in Virginia, New Jersey, Florida and South Carolina in the prior year period when compared to the current year. This decrease was slightly offset by revenue earned on two projects in North Carolina in the current year quarter. Coastal protection revenue for the six months ended June 30, 2021 was $93.3 million, representing a decrease of $42.6 million or 31.4%, from $135.9 million for the same period in 2020. The decrease in coastal protection revenues for the six months ended June 30, 2021 was mostly due to a greater amount of revenue earned on projects in Virginia,North Carolina, New Jersey Florida, South Carolina, and Georgia,New York in the priorcurrent year period when compared to the currentprior year. This decreaseincrease was partiallyslightly offset by more revenue earned on projects in North CarolinaFlorida, Louisiana and LouisianaVirginia in the currentprior year.

Maintenance dredging consists of the re-dredging of previously deepened waterways and harbors to remove silt, sand and other accumulated sediments. Due to natural sedimentation, most channels generally require maintenance dredging every one to three years, thus creating a recurring source of dredging work that is typically non-deferrable if optimal navigability is to be maintained. In addition, severe weather such as hurricanes, flooding and droughts can also cause the accumulation of sediments and drive the need for maintenance dredging. Maintenance revenue for the secondfirst quarter of 20212022 was $37.3$19.8 million, down $4.7$25.5 million, or 11.2%56.3%, from


$42.0 $45.3 million in the second quartersame period of 2020.2021. The decrease in maintenance revenues for the three months ended June 30, 2021March 31, 2022 was mostly attributable to a greater amount ofdecrease in revenue earned on projects in Maryland, North Carolina, Louisiana, Texas, Florida, Maryland, New York and Virginia inNew Jersey from the prior year quarter, when compared to the current year quarter. This decrease was partially offset by higher revenue earned on projects in Florida, Georgia and Louisiana in the current year quarter. Maintenance revenue for the six months ended June 30, 2021 was $82.6 million, a decrease of $1.8 million, or 2.1%, compared to $84.4 million for the comparable period in prior year. The decrease in maintenance revenues for the six months ended June 30, 2021 was mostly due to a greater amount of revenue earned on projects in Maryland and Virginia in the prior year period when compared to the current year. This decrease was partially offset by morean increase in revenue earned on projectsa project in Florida, Georgia and LouisianaNorth Carolina in the current year.

Rivers & lakes dredging and related operations typically consist of lake and river dredging, inland levee and construction dredging, environmental restoration and habitat improvement and other marine construction projects. During the secondfirst quarter of 2021,2022, rivers & lakes revenue was $5.0$1.6 million, an increasea decrease of $2.5$1.8 million, or 100.3%52.9%, from $2.5$3.4 million during the same period of 2020.2021. The increasedecrease in river and lakes revenue for the three monththree-months ended June 30, 2021March 31, 2022 was mostly attributable to a decrease in revenue earned on projects in Texas, Kansas and Mississippi from the prior year. This decrease was partially offset by a greater amount of revenue earned on projectsa project in Mississippi and TexasTennessee in the current year quarter. Rivers & lakes revenue for the six months ended June 30, 2021 was $8.4 million, up $0.9 million, or 12.0%, from $7.5 million for the same period in the prior year. The increase in rivers & lakes revenues for the six months ended June 30, 2021 was mostly due to a greater amount of revenue earned on projects in Mississippi in the current year period, when compared to the prior year. This increase was partially offset by more revenue earned in the San Jacinto project in Texas in the prior year.

Consolidated gross profit for the quarterquarters ended June 30,March 31, 2022 and March 31, 2021 was $22.9 million, down $10.1 million, or 31% compared to $33.0 million in the same quarter of 2020.relatively flat at $33.1 million. Gross profit margin for the three months ended June 30, 2021March 31, 2022 was 13.5%17.0% compared to 19.7%18.6% in the second quartersame period of 2020. The lower gross profit experienced for2021.


During the three months ended June 30, 2021 was driven by $3.0March 31, 2022, general and administrative expenses were $14.6 million, of direct costs related to the third wave of COVID-19 in addition to COVID-19 indirect costs and a decrease in profitability of the Company’s domestic capital and coastal protection dredging projects in the quarter when$1.7 million compared to the same period in the prior year, offset slightly by higher gross profit in the maintenance, rivers & lakes and foreign capital dredging projects in the current quarter. Consolidated gross profit for the six months ended June 30, 2021 was $56.0 million, down $45.5 million, or 45%, compared to $101.5 million in the same period of the prior year. Gross profit margin for the six months ended June 30, 2021 was down to 16.1% from 26.3% in the same period in prior year. which totaled $16.3 million. The lower gross profit experienced for the six months ended June 30, 2021 was driven by $7.3 million of direct costs related to the third wave of COVID-19 in addition to COVID-19 indirect costs and a decrease in profitability of the Company’s domestic capital, coastal protection and rivers & lakes dredging projects in the quarter when compared to the same period in the prior year, offset slightly by higher gross profit in the maintenance, and foreign capital dredging projects in the current year.

During the three and six months ended June 30, 2021, general and administrative expenses were $14.2for the quarter was primarily due to $1.1 million in lower share-based compensation expense and $30.5$0.8 million respectively, compared to the same periodsin lower relocation expense in the priorcurrent year in which the three and six months totaled $14.8 million and $30.4 million, respectively. For the three and six months ended June 30, 2021, general and administrative expenses include higher technical and consulting expenses related to our engagement with Boston Consulting Group (“BCG”) to assist with evaluating the offshore wind market strategy as well as reviewing other long-term growth strategies for GLDD and higher relocation expense related to the headquarter move to Texas. These increases were offset by lower incentive payCompany’s regional office and lower travel expenses.headquarters.

Operating income for the secondfirst quarter of 20212022 was $8.8$18.8 million, down $9.5up $2.2 million compared to operating income of $18.3$16.6 million for the same quarter in 2020. Operating income for the six months ended June 30, 2021 was $25.5 million, down $45.8 million from operating income of $71.3 million in the same period of prior year period.2021. The decreaseincrease in operating income for the three and six months ended June 30, 2021first quarter of 2022 was partially as a result of lower gross profitgeneral and administrative expense in the current year when compared to the same period in the prior year.

For the three months ended June 30, 2021,March 31, 2022, net interest expense was $6.7$4.0 million, relatively flat$2.6 million lower compared with $6.7to $6.6 million for the prior year quarter. Net interest expense the six months ended June 30, 2021 was $13.2 million, compared with $13.4 for the same period in the prior year.  The decrease in net interest expense for the three and six months ended June 30, 2021 includes a $1.0 million write-off to extinguishment of subsidiary debt relatedwas primarily due to the deferred financing feesrefinancing of the redeemed 8.000% Senior Notes due 2022 (the “8% Notes”). This expense was offset by thesenior notes in May 2021 at a lower interest expense from our newly issued $325 million of unsecured 5.25% Senior Notes (the “2029 Notes”).rate.

Income tax provision for the three months ended June 30, 2021March 31, 2022 was $0.8$3.3 million compared to an income tax provision of $3.1$1.4 million for the same period in the prior year. For the six months ended June 30, 2021 and 2020, the Company had an income tax provision of $2.2 million and $14.4 million, respectively. The effective tax rate for the sixthree months ended June 30, 2021March 31, 2022 was 16.9%22.9%, down 8.3%up 9.3% from the effective tax rate of 25.2%13.6% for the same period of 2020.2021. The decreaseincrease in the effective tax rate was primarily due to a one-time benefit associated with a stock compensation tax deduction in the currentfirst quarter of the prior year.


Net income for the quarter ended June 30, 2021March 31, 2022 was $2.1$11.1 million, down $6.9up $2.3 million, or 77%26%, from $9.0$8.8 million in the same quarter in the prior year. Diluted earnings per share was $0.03$0.17 for the three months ended June 30, 2021,March 31, 2022, compared to $0.14$0.13 for the three months ended June 30, 2020.March 31, 2021. The decreaseincrease in net income for the three months ended June 30,March 31, 2021 was primarily due to the decrease in gross profitgeneral and administrative expense and net interest expense in the current year quarter.Netquarter, partially offset by the higher income for tax provision in the six months ended June 30, 2021 was $10.9 million, down $32.0 million, or 75%, from $42.9 million forcurrent quarter compared to the same periodquarter in the prior year. Diluted earnings per share attributable to continuing operations were $0.16 and $0.65 for the six months ended June 30, 2021 and 2020, respectively. The decrease in net income for the six months ended June 30, 2021 was driven by the decrease to gross profit mostly. This increase was slightly offset by a $1.5 million increase in other income and a $12.2 million decrease in income tax provision during the current year when compared to the same period in the prior year.

Adjusted EBITDA (as defined on page 19)17) for the quarter ended June 30, 2021March 31, 2022 was $20.2$29.7 million, down $7.9up $2.9 million, or 28%11%, from $28.1$26.8 million in the same quarter in the prior year quarter.year. The decreaseincrease in Adjusted EBITDA during the secondfirst quarter of 20212022 was driven by the decreaseincrease in gross profit, excluding depreciation. Fordepreciation and the six months ended June 30, 2021, Adjusted EBITDA was $47.1 million, down $42.4 million, or 47%, from $89.5 million during the same perioddecrease in the prior year.general and administrative expense.

 

Bidding activity and backlog

The following table sets forth, by type of work, the Company’s backlog as of the dates indicated:

 

 

June 30,

 

 

December 31,

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

Backlog (in thousands)

 

2021

 

 

2020

 

 

2020

 

 

2022

 

 

2021

 

 

2021

 

Dredging:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital - U.S.

 

$

320,820

 

 

$

320,920

 

 

$

345,901

 

 

$

320,352

 

 

$

398,748

 

 

$

310,163

 

Capital - foreign

 

 

269

 

 

 

6,865

 

 

 

19,717

 

 

 

 

 

 

-

 

 

 

2,077

 

Coastal protection

 

 

51,204

 

 

 

97,986

 

 

 

21,967

 

 

 

120,457

 

 

 

99,048

 

 

 

82,589

 

Maintenance

 

 

67,440

 

 

 

125,090

 

 

 

25,782

 

 

 

31,451

 

 

 

50,966

 

 

 

84,820

 

Rivers & lakes

 

 

14,669

 

 

 

8,515

 

 

 

10,036

 

 

 

1,211

 

 

 

2,826

 

 

 

6,334

 

Total backlog

 

$

454,402

 

 

$

559,376

 

 

$

423,403

 

 

$

473,471

 

 

$

551,588

 

 

$

485,983

 

 

The Company’s contract backlog represents its estimate of the revenues that will be realized under the portion of the contracts remaining to be performed. These estimates are based primarily upon the time and costs required to mobilize the necessary assets to and from the project site, the amount and type of material to be dredged and the expected production capabilities of the equipment performing the work. However, these estimates are necessarily subject to variances based upon actual circumstances. Because of these factors, as well as factors affecting the time required to complete each job, backlog is not always indicative of future revenues or profitability. Also, 72%53% of the Company’s June 30, 2021March 31, 2022 dredging backlog relates to federal government contracts, which can be canceled at any time without penalty to the government, subject to the Company’s contractual right to recover the Company’s actual committed costs and profit on work performed up to the date of cancellation. The Company’s backlog may fluctuate significantly from quarter to quarter based upon the type and size of the projects the Company is awarded from the bid market. The Company’s backlog includes only those projects for which the Company has obtained a signed contract with the customer. A quarterly increase or decrease of the Company’s backlog does not necessarily result in an improvement or a deterioration of the Company’s business.


The domestic dredging bid market for the quarter ended June 30, 2021March 31, 2022 was $532.4$198.2 million, a $103.8$16.7 million increasedecrease compared to the same period in the prior year. Total domestic dredging bid market for the current year period included awards for the third phase of the Mobile Harbor Deepening project, the Golden Triangle Marsh Project, one maintenancecostal storm risk management project in the gulf region, one rivers & lakes projectNew York and three costal protection projects in Tennessee, one coastal protection project and one maintenance project in Florida.North Carolina. For the contracts awarded in the current year, the Company won, 65.9%89.9%, or $148.1 million, of domestic capital projects, and 36.3%, or $44.1$99.0 million, of the coastal protection projects, through June 30, 2021.March 31, 2022. The Company won 34.5%49.9% of the overall domestic bid market for the sixthree months ended June 30, 2021,March 31, 2022, which is slightly lowerhigher than the Company’s prior three yearthree-year average of 36.6%35.0%.Variability in contract wins from quarter to quarter is not unusual and one quarter’s win rate is generally not indicative of the win rate the Company is likely to achieve for a full year. After the end of the quarter, we were awarded the Cape May Beach Renourishment Project for $12.1 million and we were low bidder on the Corpus Christi Phase III Deepening Project for $151.9 million and the Thimble Shoal deepening and renourishment project for $39.5 million.year.

The Company’s contracted dredging backlog was $454.4$473.5 million at June 30, 2021March 31, 2022 compared to $559.4$551.6 million of backlog at December 31, 2020.2021. These amounts do not reflect approximately $508.6$505.3 million of domestic low bids pending formal award and additional phases (“options”) pending on projects currently in backlog at June 30, 2021.March 31, 2022. At December 31, 20202021 the amount of domestic low bids and options pending award was $472.3$567.3 million.

Domestic capital dredging backlog at June 30, 2021March 31, 2022 was $78.4 million lower than at the same level compared to December 31, 2020. In2021. During the sixthree months ended June 30, 2021, the Company was awarded the third phase of the Boston Harbor deepening project. During the six months ended June 30, 2021,March 31, 2022, the Company continued to earn revenue on deepening projects in Charleston, Jacksonville,Texas, Alabama, Florida, South Carolina, Massachusetts and the gulf region, aNew Hampshire and Maine, multiple coastal restoration projectprojects in Louisiana, and a liquefied natural gas project in Louisiana. Government funded projects coming into the pipeline include the Norfolk Harbor deepening, Freeport Reaches, as well as additional phases of theMobile deepening and Corpus Christi deepenings, as well as new deepenings for ports in Alabama and the Everglades in Florida.Christi. These deepenings continue the trend of ensuring all East Coast and Gulf of Mexico ports will be able to accommodate the deeper draft vessels currently used on several trade routes. In addition, multiple project phases for port deepenings in Norfolk and the Houston ship channel are expected to continue for the next several years. The nation’s governors continue to show commitment to their respective ports through engagement and funding. Finally, Congress has also shown a commitment to ports and waterways, providing record annual budgets for the Corps for port deepening and channel maintenance. In addition to this port work, a greater amount of coastal restoration and rehabilitation projects are being funded in the Gulf Coast region as the states utilize available monies for ecosystem priorities, a portion of which is allocated to dredging.


ForeignThere was no foreign capital dredging backlog at June 30, 2021 was $6.6 million lower than atMarch 31, 2022 and December 31, 2020. During the six months ended June 30, 2021 the Company continued to earn revenue on a projectand there are no future foreign projects in the Middle East which was in backlog at December 31, 2020.pipeline.  

Coastal protection dredging backlog decreased $46.8increased $21.4 million from December 31, 2020.2021. In the sixthree months ended June 30, 2021,March 31, 2022, the Company was awarded twothree coastal protection projects of $28.5 and $15.6totaling $57.8 million in Florida.North Carolina and one costal protection project of $37.2 million in New York. During the sixthree months ended June 30, 2021,March 31, 2022, the Company continued to earn revenue on coastal protection projects in New Jersey, New York, North Carolina and Florida which were in backlog at December 31, 2020.2021. Coastal protection and storm impacts continue to provide the major impetus for coastal project investment at federal and state levels. Strong hurricane and storm seasons have resulted in an increase in beach erosion and other damage which adds to the recurring nature of our business and the need for more frequent coastal protection and port maintenance projects. As a result of the extreme storm systems in prior years involving Hurricanes Harvey, Irma, and Maria, the U.S. Congress passed supplemental appropriations for disaster relief and recovery which includes $17.4 billion for the Corps to fund projects that will reduce the risk of future damage from flood and storm events. The Corps is beginning to provide visibility on its plans for this money, and it is expected that approximately $1.8 billion will be allocated to dredging-related work. Most of this work is anticipated to be coastal protection related, but some funding may be provided for channel maintenance. During 2019, an additional $3.3 billion of supplemental appropriations was approved for disaster relief funding as a result of Hurricane Florence and Hurricane Michael.Michael.

Maintenance dredging backlog decreased $57.6$19.5 million from December 31, 2020. In2021. During the sixthree months ended June 30, 2021, the Company was awarded one maintenance project of $38.3 in the Gulf region and another one of $3.3 million Florida. During the six months ended June 30, 2021,March 31, 2022, the Company continued to earn revenue on two projects in Louisiana and projects in Georgia and North Carolina and Florida whichthat were in backlog at December 31, 2020.2021. Past WRDA bills called for full use of the HMTF for its intended purpose of maintaining future access to the waterways and ports that support our nation’s economy. On March 27, 2020, the U.S. government enacted the CARES Act which includes a provision that lifts caps on the HMTF, thereby allowing full access to future annual revenues. Through the increased appropriation of HMTF monies, the Company anticipates increased funding for harbor maintenance projects to be let for bid.

Rivers & lakes backlog at June 30, 2021March 31, 2022 was up $6.2down $1.6 million compared to backlog at December 31, 2020. In2021. For the sixthree months ended June 30, 2021, the Company was awarded one rivers & lakes project in Tennessee. For the six months ended June 30, 2021,March 31, 2022, the Company continued to earn revenue on projects in TexasTennessee and Mississippi which was in backlog at December 31, 2020.2021.

 

Liquidity and capital resources

The Company’s principal sources of liquidity are net cash flows provided by operating activities and proceeds from previous issuances of long-term debt. The Company’s principal uses of cash are to meet debt service requirements, finance capital expenditures, provide working capital and other general corporate purposes.


The Company’s cash provided by or used in operating activities for the sixthree months ended June 30,March 31, 2022 and 2021 was the source of $26.3 million and 2020 was a use of $35.6 million and a source of $67.5$9.2 million in cash, respectively. Normal increases or decreases in the level of working capital relative to the level of operational activity impact cash flow from operating activities. The decreaseincrease in cash provided by operating activities during the sixthree months ended June 30, 2021March 31, 2022 compared to the same period in the prior year was driven by lowerdue to an increase in net income in current year, offset partially by lower investmentas well as a decrease in working capital due to a decrease in accounts receivable during the current year when compared to the same period in the prior year.

The Company’s cash flows used in investing activities for the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 totaled $64.6$27.8 million and $20.1$27.0 million, respectively. Investing activities primarily relate to normal course upgrades and capital maintenance of the Company’s dredging fleet. The Company announcedis currently building a Shipyard Contract for 6,500 cubic yard Trailing Suction Hopper Dredgetrailing suction hopper dredge with expected delivery in June 2020 and, later, in December 2020the first quarter of 2023.  In November 2021, the Company announced the design and development ofentered into a $197 million contract with Philly Shipyard Inc. to build the first U.S. flagged Jones Act compliant, inclined fall-pipe vessel for subsea rock installation for wind turbine foundations to support the new U.S. offshore wind industry. Duringindustry with expected delivery in the six months ended June 30,second half of 2024.  In July 2021, the Company has invested $14.0 million towards these new vessels. In addition, the Company spent $16.4 million in the period ended June 30, 2021announced a contract to acquire two dredges that had previously been leased and $6.9 million to acquire


build two multifunctional all-purpose vessels (“multicats”).   TheDuring the three months ended March 31, 2022, the Company did not receive any proceeds from dispositions of propertyinvested $8.0 million in a new hopper dredge, $6.2 million in multicats and equipment in the current year period compared to $0.4scows and $0.5 million in the prior year period.rock installation vessel.

The Company’s cash flows used in financing activities for the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 totaled $6.7$1.4 million and $0.8$2.5 million, respectively. The increasedecrease in cash used in financing activities relates to $4.4 million of deferred financing fees paid related to the newly issued $325 million of the 2029 Notes and changes in the taxes paid on settlement of vested shares awards offset slightly by increaseand a decrease in cash from the Company’s employee stock purchase plan. Of the previously announced $75.0 million share repurchase program, the Company repurchased $3.9 million of common stock in the third quarter of 2020 and none during the period ended June 30, 2021.

The Company maintains a favorable cash on hand position and revolver availability and as a result is well positioned for changes in the current economic environment. In the current year,To date, the Company began to experience more considerablehas had various operational interruptions and direct costs related to the third waveor financial impacts as a result of the coronavirus (COVID-19) pandemic. The impacted projects are now back in operation but the Companyongoing COVID-19 pandemic and will continue to assess the potential economic impact that the virus and pandemicactions taken to contain it could have on the Company’s operations and liquidity.

Senior notes

 

In May 2021, the Company sold $325 million of 2029unsecured 5.25% Senior Notes (the “2029 Notes”) pursuant to a private offering.  The 2029 Notes were priced to investors at par and will mature on June 1, 2029.  The Company used the net proceeds from the offering, together with cash on hand, to redeem allthe $325 million aggregate principal amount of its outstanding 8% Notes.8.000% Senior Notes due 2022.

The 2029 Notes are senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by the guarantors and any other subsidiary guarantors that from time to time become parties to the indenture. The terms of the indenture, among other things, limit the ability of the Company and its restricted subsidiaries to (i) pay dividends, or make certain other restricted payments or investments; (ii) incur additional indebtedness and issue disqualified stock; (iii) create liens on their assets; (iv) transfer and sell assets; (v) enter into certain business combinations with third parties or enter into certain other transactions with affiliates; (vi) create restrictions on dividends or other payments by the Company’s restricted subsidiaries; and (vii) create guarantees of indebtedness by restricted subsidiaries. These covenants are subject to a number of important limitations and exceptions that are described in the indenture.

 

Commitments, contingencies and liquidity matters

Refer to Note 4, Long-term debt, in the Notes to Condensed Consolidated Financial Statements for discussion of the Company’s Amended Credit Agreement. Additionally, refer to Note 8, Commitments and contingencies, in the Notes to Condensed Consolidated Financial Statements for discussion of the Company’s surety agreements.

 

The Company intends to upgrade its existing domestic fleet by acquiring or building new vessels, equipment and technology to increase productivity and efficiency and further enhance safety. Existing cash on hand, future net cash flows, debt financing and new leases are all available funding resources from which the Company will evaluate its options when considering these upgrades.

The Company believes its cash and cash equivalents, its anticipated cash flows from operations and availability under its revolving credit facility will be sufficient to fund the Company’s operations, capital expenditures and the scheduled debt service requirements for the next twelve months. Beyond the next twelve months, the Company’s ability to fund its working capital needs, planned capital expenditures, scheduled debt payments and dividends, if any, and to comply with all the financial covenants under the Amended Credit Agreement and bonding agreements, depends on its future operating performance and cash flows, which in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond the Company’s control.

Critical accounting policies and estimates

In preparing its consolidated financial statements, the Company follows GAAP, which is described in Note 1, Basis of presentation, to the Company’s December 31, 20202021 Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K. The application of these principles requires significant judgments or an estimation process that can affect the results of operations, financial position and cash flows of the Company, as well as the related footnote disclosures. The Company continually reviews its


accounting policies and financial information disclosures. Except as noted in Note 1, Basis of presentation, of the Company’s financial statements, there have been no material changes in the Company’s critical accounting policies or estimates since December 31, 2020.2021.

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

The market risk of the Company’s financial instruments as of June 30, 2021March 31, 2022 has not materially changed since December 31, 2020.2021. The market risk profile of the Company on December 31, 20202021 is disclosed in Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.

 


Item 4.

Controls and Procedures.

a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures, as required by Rule 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of June 30, 2021.March 31, 2022. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act a) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure and b) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2021March 31, 2022 in providing such a reasonable assurance.

b) Changes in internal control over financial reporting.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II — Other Information

Item 1.

See Note 8, Commitments and contingencies, in the Notes to Condensed Consolidated Financial Statements.

Item 1A.

Risk Factors.

There have been no material changes except for the following, during the sixthree months ended June 30, 2021March 31, 2022 to the risk factors previously disclosed in Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as supplemented by the risk factor previously disclosed in Item 1A.  “Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.

The Company could face liabilities and/or damage to our reputation as a result of certain legal and regulatory proceedings, including a recent legal proceeding in Louisiana.

The Company operates in a highly regulated environment with constantly evolving legal and regulatory frameworks. From time to time, the Company is subject to legal and regulatory proceedings in the ordinary course of its business. These include proceedings relating to aspects of its businesses that are specific to the Company and proceedings that are typical in the businesses in which it operates.

In particular, on April 22, 2021, the U.S. Attorney’s Office for the Eastern District of Louisiana filed a bill of information against the Company charging the Company with a negligent discharge violation of the Clean Water Act arising from a September 2016 oil spill. The spill occurred during the Company’s Cheniere Ronquille project and resulted in the discharge of around 160 barrels of crude oil in Bay Long, Louisiana. The Company has cooperated with the U.S. Attorney’s Office and other relevant agencies in their investigation of the oil spill and has agreed to plead guilty to the misdemeanor violation alleged in the bill of information. As a result, the government may initiate suspension or debarment proceedings against us, which might prohibit us from bidding for, entering into or completing certain government projects. These suspension or debarment actions may be limited in time and scope, but the Company cannot guarantee that any such action will not have a material adverse effect on its business, results of operations, cash flows or financial condition. In addition, this matter may lead to negative publicity and press speculation about the Company, whether valid or not, which may harm our reputation and be damaging to our business, results of operations, cash flows or financial condition.

The Company is currently a defendant in a number of other litigation matters, including those described in Note 8, Commitments and contingencies, in the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. In certain of these matters, the plaintiffs are seeking large and/or indeterminate amounts of damages. These matters are also subject to many uncertainties, and it is possible that some of these matters could ultimately be decided, resolved or settled adversely to the Company. An adverse outcome in a legal or regulatory matter could, depending on the facts, have an adverse effect on the Company’s business, results of operations, cash flows or financial condition.

Furthermore, whether the ultimate outcomes are favorable or unfavorable, these matters can also have significant adverse reputational impacts, including negative publicity and press speculation about the Company, whether valid or not, which may be damaging to the Company’s business, results of operations, cash flows or financial condition.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information regarding repurchases of the Company’s common stock by the Company during the quarter ended June 30, 2021:None.

Period

 

Total Number of Shares Purchased

 

 

Average Price Paid per Share

 

 

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

 

 

Maximum Aggregate Dollar Value That May Yet Be Purchased Under the Plans or Programs (1)

 

April 1, 2021 – April 30, 2021

 

 

0

 

 

$

-

 

 

 

0

 

 

$

71,127,473

 

May  1, 2021 - May 31, 2021

 

 

0

 

 

$

-

 

 

 

0

 

 

$

71,127,473

 

June 1 2021 - June 30, 2021

 

 

0

 

 

$

-

 

 

 

0

 

 

$

71,127,473

 

Total

 

 

0

 

 

$

-

 

 

 

0

 

 

$

71,127,473

 

(1)Item 3.

On August 4, 2020, the Company announced a share repurchase program approved by its board of directors, authorizing, but not obligating, the repurchase of up to an aggregate amount of $75,000,000 of its common stock from time to time through July 31, 2021.Defaults Upon Senior Securities.


Item 3.Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information

 

None.



 

Item 6.

Exhibits

 

Number

 

Document Description

 

 

 

4.131.1

Indenture, dated May 25, 2021, among Great Lakes Dredge & Dock Corporation, as Issuer, the guarantors party thereto, and Wells Fargo Bank, National Association, as Trustee, relating to the 2029 Notes (incorporated by reference to Great Lakes Dredge & Dock Corporation’s Current Report on Form 8-K filed with the Commission on May 25, 2021 (Commission file no. 001-33225))

4.2

Form of 2029 Notes (included in Exhibit 4.1) (incorporated by reference to Great Lakes Dredge & Dock Corporation’s Current Report on Form 8-K filed with the Commission on May 25, 2021 (Commission file no. 001-33225))

10.1

Great Lakes Dredge & Dock Corporation 2021 Long-Term Incentive Plan (incorporated by reference to Great Lakes Dredge & Dock Corporation’s Current Report on Form 8-K filed with the Commission on May 7, 2021 (Commission file no. 001-33225)) †

10.2

Purchase Agreement, dated May 12, 2021, by and among Great Lakes Dredge & Dock Corporation, certain subsidiary guarantors named therein and BofA Securities, Inc., as representative of the initial purchasers named therein. (incorporated by reference to Great Lakes Dredge & Dock Corporation’s Current Report on Form 8-K filed with the Commission on May 18, 2021 (Commission file no. 001-33225)) †

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. **

 

 

 

101

 

Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language ("Inline XBRL") *

 

 

 

104

 

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) *

 

*

Filed herewith

**

Furnished herewith

Compensatory plan or arrangement

 


 

SIGNATURE

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

 

 

Great Lakes Dredge & Dock Corporation

 

(registrant)

 

 

 

 

By:

 

/s/  SMark W. Marinkocott Kornblau

 

 

 

Mark W. MarinkoScott Kornblau

 

 

 

Senior Vice President, and Chief Financial Officer and Treasurer

 

 

 

(Principal Financial and Accounting Officer and Duly Authorized Officer)

 

Date:  AugustMay 3, 20212022

 

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