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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 March 31, 2020

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.)

 

 

 

2122 York Road, Oak Brook, IL

 

60523

(Address of principal executive offices)

 

(Zip Code)

(630) 574-3000

(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 April 28, 2020, 64,795,114 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 March 31, 2020

INDEX

 

 

 

 

 

Page

 

 

 

 

 

 

 

Part I Financial Information (Unaudited)

 

3

 

 

 

 

 

Item 1

 

Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2020 and December 31, 2019

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2020 and 2019

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2020 and 2019

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2020 and 2019

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

 

Item 2

 

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

 

17

 

 

 

 

 

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

24

 

 

 

 

 

Item 4

 

Controls and Procedures

 

24

 

 

 

 

 

 

 

Part II Other Information

 

25

 

 

 

 

 

Item 1

 

Legal Proceedings

 

25

 

 

 

 

 

Item 1A

 

Risk Factors

 

25

 

 

 

 

 

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

25

 

 

 

 

 

Item 3

 

Defaults Upon Senior Securities

 

25

 

 

 

 

 

Item 4

 

Mine Safety Disclosures

 

25

 

 

 

 

 

Item 5

 

Other Information

 

25

 

 

 

 

 

Item 6

 

Exhibits

 

26

 

 

 

 

 

 

 

Signature

 

27

 

 

 

 

 

 

 

 

2


 

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)  

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

207,474

 

 

$

186,995

 

Accounts receivable—net

 

 

44,014

 

 

 

19,785

 

Contract revenues in excess of billings

 

 

37,080

 

 

 

22,560

 

Inventories

 

 

29,440

 

 

 

30,189

 

Prepaid expenses and other current assets

 

 

32,300

 

 

 

41,183

 

Total current assets

 

 

350,308

 

 

 

300,712

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT—Net

 

 

371,884

 

 

 

374,596

 

OPERATING LEASE ASSETS

 

 

81,319

 

 

 

72,612

 

GOODWILL

 

 

76,576

 

 

 

76,576

 

INVENTORIES—Noncurrent

 

 

64,090

 

 

 

61,126

 

ASSETS HELD FOR SALE— Noncurrent

 

 

3,970

 

 

 

3,970

 

OTHER

 

 

7,732

 

 

 

7,960

 

TOTAL

 

$

955,879

 

 

$

897,552

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

79,917

 

 

$

76,091

 

Accrued expenses

 

 

53,898

 

 

 

51,225

 

Operating lease liabilities

 

 

20,965

 

 

 

21,351

 

Billings in excess of contract revenues

 

 

61,327

 

 

 

55,266

 

Total current liabilities

 

 

216,107

 

 

 

203,933

 

 

 

 

 

 

 

 

 

 

LONG-TERM DEBT

 

 

323,066

 

 

 

322,843

 

OPERATING LEASE LIABILITIES—Noncurrent

 

 

60,641

 

 

 

51,131

 

DEFERRED INCOME TAXES

 

 

44,633

 

 

 

35,740

 

OTHER

 

 

4,803

 

 

 

4,506

 

Total liabilities

 

 

649,250

 

 

 

618,153

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 8)

 

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

Common stock—$.0001 par value; 90,000 authorized, 64,795 and 64,283 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively.

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

302,558

 

 

 

302,189

 

Retained earnings (accumulated deficit)

 

 

10,896

 

 

 

(23,091

)

Accumulated other comprehensive income (loss)

 

 

(6,831

)

 

 

295

 

Total equity

 

 

306,629

 

 

 

279,399

 

TOTAL

 

$

955,879

 

 

$

897,552

 

 

See notes to unaudited condensed consolidated financial statements.

3


 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

Contract revenues

 

$

217,695

 

 

$

192,637

 

Costs of contract revenues

 

 

149,221

 

 

 

142,760

 

Gross profit

 

 

68,474

 

 

 

49,877

 

General and administrative expenses

 

 

15,571

 

 

 

14,825

 

(Gain) loss on sale of assets—net

 

 

(145

)

 

 

279

 

Operating income

 

 

53,048

 

 

 

34,773

 

Interest expense—net

 

 

(6,630

)

 

 

(7,551

)

Other income (expense)

 

 

(1,121

)

 

 

172

 

Income from continuing operations before income taxes

 

 

45,297

 

 

 

27,394

 

Income tax provision

 

 

(11,310

)

 

 

(6,846

)

Income from continuing operations

 

 

33,987

 

 

 

20,548

 

Loss from discontinued operations, net of income taxes

 

 

 

 

 

(3,380

)

Net income

 

$

33,987

 

 

$

17,168

 

 

 

 

 

 

 

 

 

 

Basic earnings per share attributable to continuing operations

 

$

0.53

 

 

$

0.33

 

Basic loss per share attributable to discontinued operations, net of tax

 

 

 

 

 

(0.05

)

Basic earnings per share

 

$

0.53

 

 

$

0.28

 

Basic weighted average shares

 

 

64,455

 

 

 

62,882

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to continuing operations

 

$

0.52

 

 

$

0.32

 

Diluted loss per share attributable to discontinued operations, net of tax

 

 

 

 

 

(0.05

)

Diluted earnings per share

 

$

0.52

 

 

$

0.27

 

Diluted weighted average shares

 

 

65,717

 

 

 

64,569

 

 

See notes to unaudited condensed consolidated financial statements.

 

 

4


 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

Net income

 

$

33,987

 

 

$

17,168

 

Net unrealized (gain) loss on derivatives—net of tax (1)

 

 

(7,126

)

 

 

2,740

 

Comprehensive income

 

$

26,861

 

 

$

19,908

 

 

(1)

Net of income tax (provision) benefit of $(2,417) and $971 for the three months ended March 31, 2020 and 2019 respectively.

See notes to unaudited condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

5


 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Condensed Consolidated Statements of Equity

(Unaudited)

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

Accumulated

 

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

Shares of

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Other

 

 

 

 

 

 

 

Common

 

 

Common

 

 

Treasury

 

 

Treasury

 

 

Paid-In

 

 

(Accumulated

 

 

Comprehensive

 

 

 

 

 

 

 

Stock

 

 

Stock

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE—January 1, 2020

 

 

64,283

 

 

$

6

 

 

 

 

 

$

 

 

$

302,189

 

 

$

(23,091

)

 

$

295

 

 

$

279,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

39

 

 

 

 

 

 

 

 

 

 

 

 

1,675

 

 

 

 

 

 

 

 

 

1,675

 

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

 

 

388

 

 

 

 

 

 

 

 

 

 

 

 

(1,928

)

 

 

 

 

 

 

 

 

(1,928

)

Exercise of options and purchases from employee stock plans

 

 

85

 

 

 

 

 

 

 

 

 

 

 

 

622

 

 

 

 

 

 

 

 

 

622

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,987

 

 

 

 

 

 

33,987

 

Other comprehensive loss—net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,126

)

 

 

(7,126

)

BALANCE—March 31, 2020

 

 

64,795

 

 

$

6

 

 

 

 

 

$

 

 

$

302,558

 

 

$

10,896

 

 

$

(6,831

)

 

$

306,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE—January 1, 2019

 

 

62,830

 

 

$

6

 

 

 

(278

)

 

$

(1,433

)

 

$

295,135

 

 

$

(74,971

)

 

$

(3,809

)

 

$

214,928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of recent accounting pronouncements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,802

 

 

 

 

 

 

2,802

 

Share-based compensation

 

 

31

 

 

 

 

 

 

 

 

 

 

 

 

2,201

 

 

 

 

 

 

 

 

 

2,201

 

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

 

 

453

 

 

 

 

 

 

 

 

 

 

 

 

(2,188

)

 

 

 

 

 

 

 

 

(2,188

)

Exercise of options and purchases from employee stock plans

 

 

286

 

 

 

 

 

 

 

 

 

 

 

 

1,626

 

 

 

 

 

 

 

 

 

1,626

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,168

 

 

 

 

 

 

17,168

 

Other comprehensive income—net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,740

 

 

 

2,740

 

BALANCE—March 31, 2019

 

 

63,600

 

 

$

6

 

 

 

(278

)

 

$

(1,433

)

 

$

296,774

 

 

$

(55,001

)

 

$

(1,069

)

 

$

239,277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

6


 

Great Lakes Dredge & Dock Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

33,987

 

 

$

17,168

 

Loss from discontinued operations, net of income taxes

 

 

 

 

 

(3,380

)

Income from continuing operations

 

$

33,987

 

 

$

20,548

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

9,451

 

 

 

8,905

 

Deferred income taxes

 

 

11,310

 

 

 

7,074

 

(Gain) loss on sale of assets

 

 

(145

)

 

 

279

 

Amortization of deferred financing fees

 

 

403

 

 

 

868

 

Share-based compensation expense

 

 

1,675

 

 

 

2,000

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(24,229

)

 

 

30,285

 

Contract revenues in excess of billings

 

 

(14,520

)

 

 

1,538

 

Inventories

 

 

(2,215

)

 

 

280

 

Prepaid expenses and other current assets

 

 

8,036

 

 

 

(1,678

)

Accounts payable and accrued expenses

 

 

(523

)

 

 

(935

)

Billings in excess of contract revenues

 

 

6,062

 

 

 

36,062

 

Other noncurrent assets and liabilities

 

 

779

 

 

 

566

 

Net cash flows provided by operating activities from continuing operations

 

 

30,071

 

 

 

105,792

 

Net cash flows provided by operating activities of discontinued operations

 

 

 

 

 

2,668

 

Cash provided by operating activities

 

 

30,071

 

 

 

108,460

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(8,733

)

 

 

(7,704

)

Proceeds from dispositions of property and equipment

 

 

447

 

 

 

147

 

Net cash flows used in investing activities of continuing operations

 

 

(8,286

)

 

 

(7,557

)

Net cash flows used in investing activities of discontinued operations

 

 

 

 

 

(60

)

Cash used in investing activities

 

 

(8,286

)

 

 

(7,617

)

7


 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Taxes paid on settlement of vested share awards

 

 

(1,928

)

 

 

(2,188

)

Exercise of options and purchases from employee stock plans

 

 

622

 

 

 

1,626

 

Repayments of revolving loans

 

 

 

 

 

(11,500

)

Net cash flows used in financing activities of continuing operations

 

 

(1,306

)

 

 

(12,062

)

Net cash flows used in financing activities of discontinued operations

 

 

 

 

 

(253

)

Cash used in financing activities

 

 

(1,306

)

 

 

(12,315

)

Net increase in cash, cash equivalents and restricted cash

 

 

20,479

 

 

 

88,528

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

186,995

 

 

 

34,458

 

Cash, cash equivalents and restricted cash at end of period

 

$

207,474

 

 

$

122,986

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid (received) for interest

 

$

(277

)

 

$

229

 

Cash paid (refunded) for income taxes

 

$

137

 

 

$

(10

)

 

 

 

 

 

 

 

 

 

Non-cash Investing and Financing Activities

 

 

 

 

 

 

 

 

Property and equipment purchased but not yet paid

 

$

4,801

 

 

$

6,239

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

8


 

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, 2019. 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 March 31, 2020 and December 31, 2019, and its results of operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019 have been included.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the coronavirus (COVID-19) pandemic which, among other things, includes various tax provisions relating to refundable payroll tax credits, deferment of the employer side of certain payroll taxes and social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company is still assessing the financial impact of these tax-related changes.

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 one 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, 2019 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 2020 should no prior triggering events occur.

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.

9


 

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

 

 

 

Three Months Ended

 

(shares in thousands)

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

33,987

 

 

$

20,548

 

Loss from discontinued operations, net of income taxes

 

 

 

 

 

(3,380

)

Net income

 

 

33,987

 

 

 

17,168

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding — basic

 

 

64,455

 

 

 

62,882

 

Effect of stock options and restricted stock units

 

 

1,262

 

 

 

1,687

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding — diluted

 

 

65,717

 

 

 

64,569

 

 

 

 

 

 

 

 

 

 

Earnings per share from continuing operations — basic

 

$

0.53

 

 

$

0.33

 

Earnings per share from continuing operations — diluted

 

$

0.52

 

 

$

0.32

 

 

For the three months ended March 31, 2019, 66 stock options (“NQSOs”) and restricted stock units (“RSUs”) were excluded from the calculation of diluted earnings per share based on the application of the treasury stock method, as such NQSOs and RSUs were determined to be anti-dilutive.

 

3.

Accrued expenses

Accrued expenses at March 31, 2020 and December 31, 2019 were as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

Insurance

 

$

13,445

 

 

$

15,702

 

Interest

 

 

9,788

 

 

 

3,284

 

Fuel hedge contracts

 

 

8,695

 

 

 

 

Contract reserves