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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, 2021

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 April 29, 2021, 65,642,039 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, 2021

INDEX

 

 

 

 

 

Page

 

 

 

 

 

 

 

Part I Financial Information (Unaudited)

 

3

 

 

 

 

 

Item 1

 

Financial Statements

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020

 

3

 

 

 

 

 

 

 

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

 

4

 

 

 

 

 

 

 

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

 

5

 

 

 

 

 

 

 

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

 

6

 

 

 

 

 

 

 

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

 

14

 

 

 

 

 

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

 

21

 

 

 

 

 

Item 4

 

Controls and Procedures

 

21

 

 

 

 

 

 

 

Part II Other Information

 

23

 

 

 

 

 

Item 1

 

Legal Proceedings

 

23

 

 

 

 

 

Item 1A

 

Risk Factors

 

23

 

 

 

 

 

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

24

 

 

 

 

 

Item 3

 

Defaults Upon Senior Securities

 

24

 

 

 

 

 

Item 4

 

Mine Safety Disclosures

 

24

 

 

 

 

 

Item 5

 

Other Information

 

24

 

 

 

 

 

Item 6

 

Exhibits

 

25

 

 

 

 

 

 

 

Signature

 

26

 

 

 

 

 

 

 

 

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,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

177,708

 

 

$

216,510

 

Accounts receivable—net

 

 

65,732

 

 

 

38,990

 

Contract revenues in excess of billings

 

 

28,918

 

 

 

32,106

 

Inventories

 

 

33,756

 

 

 

34,689

 

Prepaid expenses and other current assets

 

 

43,563

 

 

 

40,398

 

Total current assets

 

 

349,677

 

 

 

362,693

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT—Net

 

 

400,723

 

 

 

383,042

 

OPERATING LEASE ASSETS

 

 

57,687

 

 

 

65,188

 

GOODWILL

 

 

76,576

 

 

 

76,576

 

INVENTORIES—Noncurrent

 

 

62,725

 

 

 

58,413

 

OTHER

 

 

12,594

 

 

 

12,112

 

TOTAL

 

$

959,982

 

 

$

958,024

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

70,756

 

 

$

71,308

 

Accrued expenses

 

 

44,017

 

 

 

52,899

 

Operating lease liabilities

 

 

15,861

 

 

 

19,472

 

Billings in excess of contract revenues

 

 

38,663

 

 

 

32,608

 

Total current liabilities

 

 

169,297

 

 

 

176,287

 

 

 

 

 

 

 

 

 

 

LONG-TERM DEBT

 

 

323,958

 

 

 

323,735

 

OPERATING LEASE LIABILITIES—Noncurrent

 

 

42,058

 

 

 

45,879

 

DEFERRED INCOME TAXES

 

 

58,492

 

 

 

56,466

 

OTHER

 

 

9,567

 

 

 

8,989

 

Total liabilities

 

 

603,372

 

 

 

611,356

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 8)

 

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

Common stock—$.0001 par value; 90,000 authorized, 65,620 and 65,023 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively.

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

303,999

 

 

 

304,757

 

Retained earnings

 

 

49,751

 

 

 

40,937

 

Accumulated other comprehensive income

 

 

2,854

 

 

 

968

 

Total equity

 

 

356,610

 

 

 

346,668

 

TOTAL

 

$

959,982

 

 

$

958,024

 

 

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,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Contract revenues

 

$

177,633

 

 

$

217,695

 

Costs of contract revenues

 

 

144,557

 

 

 

149,221

 

Gross profit

 

 

33,076

 

 

 

68,474

 

General and administrative expenses

 

 

16,322

 

 

 

15,571

 

(Gain) loss on sale of assets—net

 

 

106

 

 

 

(145

)

Operating income

 

 

16,648

 

 

 

53,048

 

Interest expense—net

 

 

(6,586

)

 

 

(6,630

)

Other income (expense)

 

 

141

 

 

 

(1,121

)

Income before income taxes

 

 

10,203

 

 

 

45,297

 

Income tax provision

 

 

(1,389

)

 

 

(11,310

)

Net income

 

$

8,814

 

 

$

33,987

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.14

 

 

$

0.53

 

Basic weighted average shares

 

 

65,269

 

 

 

64,455

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.13

 

 

$

0.52

 

Diluted weighted average shares

 

 

66,159

 

 

 

65,717

 

 

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,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Net income

 

$

8,814

 

 

$

33,987

 

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

 

 

1,886

 

 

 

(7,126

)

Comprehensive income

 

$

10,700

 

 

$

26,861

 

 

(1)

Net of income tax (provision) benefit of $637 and $(2,417) for the three months ended March 31, 2021 and 2020 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

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Other

 

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-In

 

 

(Accumulated

 

 

Comprehensive

 

 

 

 

 

 

 

Stock

 

 

Stock

 

 

Capital

 

 

Deficit)

 

 

Income (Loss)

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE—January 1, 2021

 

 

65,023

 

 

$

6

 

 

$

304,757

 

 

$

40,937

 

 

$

968

 

 

$

346,668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

63

 

 

 

 

 

 

1,766

 

 

 

 

 

 

 

 

 

1,766

 

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

 

 

410

 

 

 

 

 

 

(3,784

)

 

 

 

 

 

 

 

 

(3,784

)

Exercise of options and purchases from employee stock plans

 

 

124

 

 

 

 

 

 

1,260

 

 

 

 

 

 

 

 

 

1,260

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,814

 

 

 

 

 

 

8,814

 

Other comprehensive loss—net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,886

 

 

 

1,886

 

BALANCE—March 31, 2021

 

 

65,620

 

 

$

6

 

 

$

303,999

 

 

$

49,751

 

 

$

2,854

 

 

$

356,610

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 income—net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,126

)

 

 

(7,126

)

BALANCE—March 31, 2020

 

 

64,795

 

 

$

6

 

 

$

302,558

 

 

$

10,896

 

 

$

(6,831

)

 

$

306,629

 

 

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,

 

 

 

2021

 

 

2020

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

8,814

 

 

$

33,987

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

10,053

 

 

 

9,451

 

Deferred income taxes

 

 

1,389

 

 

 

11,310

 

(Gain) loss on sale of assets

 

 

106

 

 

 

(145

)

Amortization of deferred financing fees

 

 

403

 

 

 

403

 

Share-based compensation expense

 

 

1,766

 

 

 

1,675

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(26,742

)

 

 

(24,229

)

Contract revenues in excess of billings

 

 

3,188

 

 

 

(14,520

)

Inventories

 

 

(3,379

)

 

 

(2,215

)

Prepaid expenses and other current assets

 

 

(832

)

 

 

8,036

 

Accounts payable and accrued expenses

 

 

(10,303

)

 

 

(523

)

Billings in excess of contract revenues

 

 

6,055

 

 

 

6,062

 

Other noncurrent assets and liabilities

 

 

242

 

 

 

779

 

Cash (used in) provided by operating activities

 

 

(9,240

)

 

 

30,071

 

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(27,038

)

 

 

(8,733

)

Proceeds from dispositions of property and equipment

 

 

 

 

 

447

 

Cash used in investing activities

 

 

(27,038

)

 

 

(8,286

)

 

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Taxes paid on settlement of vested share awards

 

 

(3,784

)

 

 

(1,928

)

Exercise of options and purchases from employee stock plans

 

 

1,260

 

 

 

622

 

Cash used in financing activities

 

 

(2,524

)

 

 

(1,306

)

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

 

 

(38,802

)

 

 

20,479

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

216,510

 

 

 

186,995

 

Cash, cash equivalents and restricted cash at end of period

 

$

177,708

 

 

$

207,474

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

106

 

 

$

(277

)

Cash paid for income taxes

 

$

58

 

 

$

137

 

 

 

 

 

 

 

 

 

 

Non-cash Investing and Financing Activities

 

 

 

 

 

 

 

 

Property and equipment purchased but not yet paid

 

$

5,855

 

 

$

4,801

 

 

See notes to unaudited condensed consolidated financial statements.

 

7


 

 

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. 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, 2021 and December 31, 2020, and its results of operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended March 31, 2021 and 2020 have been included.

In 2020, the Company announced the relocation of its headquarters from Illinois to Houston, Texas, the new Houston office lease began in January 2021.

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, 2020 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.

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

 

(shares in thousands)

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Net income

 

$

8,814

 

 

$

33,987

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding — basic

 

 

65,269

 

 

 

64,455

 

Effect of stock options and restricted stock units

 

 

890

 

 

 

1,262

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding — diluted

 

 

66,159

 

 

 

65,717

 

 

 

 

 

 

 

 

 

 

Earnings per share — basic

 

$

0.14

 

 

$

0.53

 

Earnings per share — diluted

 

$

0.13

 

 

$

0.52

 

 

8


 

 

3.

Accrued expenses

Accrued expenses at March 31, 2021 and December 31, 2020 were as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Insurance

 

$

14,854

 

 

$

14,754

 

Interest

 

 

9,785

 

 

 

3,285

 

Payroll and employee benefits

 

 

6,603

 

 

 

21,675

 

Income and other taxes

 

 

2,361

 

 

 

2,164

 

Contract reserves

 

 

1,037

 

 

 

2,491

 

Other

 

 

9,377

 

 

 

8,530

 

Total accrued expenses

 

$

44,017

 

 

$

52,899

 

 

4.

Long-term debt

 

Credit agreement

As of March 31, 2021 and December 31, 2020, the Company had no borrowings outstanding under our $200,000 amended and restated revolving credit and security agreement (as amended, the “Amended Credit Agreement”). There were $35,907 and $36,407 of letters of credit outstanding and $163,731 and $163,231 of availability under the Amended Credit Agreement as of March 31, 2021 and December 31, 2020, respectively. The availability under the Amended Credit Agreement is suppressed by $362 as of March 31, 2021 and December 31, 2020, as a result of certain limitations set forth in the Amended Credit Agreement.

 

Senior Notes and subsidiary guarantors

In May 2017, the Company issued $325,000 of 8.000% senior notes (“8% Senior Notes”) due May 15, 2022 with interest paid semi-annually. The 8% Senior Notes can be refinanced at par in May 2021 and the Company’s management is monitoring and assessing the debt markets to determine if the current market is favorable to refinance the 8% Senior Notes in May 2021.

The Company’s obligations under these 8% Senior Notes are guaranteed by certain of the Company’s 100% owned domestic subsidiaries. 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.

9


 

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

 

Description

 

At March 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

 

$

4,262

 

 

$

 

 

$

4,262

 

 

$

 

 

 

 

 

 

 

 

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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel hedge contracts

 

$

1,739

 

 

$

 

 

$

1,739

 

 

$

 

 

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 fuel requirements for work in domestic backlog.

As of March 31, 2021, the Company was party to various swap arrangements to hedge the price of its diesel fuel purchase requirements for work in its backlog to be performed through March 2022. As of March 31, 2021, there were 10.0 million gallons remaining on these contracts which represent approximately 80% of the Company’s forecasted domestic fuel purchases through March 2022. Under these swap agreements, the Company will pay fixed prices ranging from $1.12 to $1.90 per gallon.

At March 31, 2021 and December 31, 2020 the fair value asset of the fuel hedge contracts were estimated to be $4,262 and $1,739, respectively, and are recorded in prepaid expenses and other current assets. For fuel hedge contracts considered to be highly effective, the losses reclassified to earnings from changes in fair value of derivatives, net of cash settlements and taxes, for the three months ended March 31, 2021 were $1,526. The remaining gains and losses included in accumulated other comprehensive loss at March 31, 2021 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 March 31, 2021 and December 31, 2020 is as follows:

 

 

 

 

 

Fair Value at

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

Balance Sheet Location

 

2021

 

 

2020

 

Asset derivatives:

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

Fuel hedge contracts

 

Prepaid expenses and other current assets

 

$

4,262

 

 

$

1,739

 

 

 

 

 

 

 

 

 

 

 

 

 

10


 

 

Accumulated other comprehensive income (loss)

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Derivatives:

 

 

 

 

 

 

 

 

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

 

 

(1,526

)

 

 

1,338

 

Change in fair value of derivatives—net of tax

 

 

3,412

 

 

 

(8,464

)

Net change in cash flow derivative hedges—net of tax

 

$

1,886

 

 

$

(7,126

)

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

 

Statement of Operations Location

 

2021

 

 

2020

 

Derivatives:

 

 

 

 

 

 

 

 

 

 

Fuel hedge contracts

 

Costs of contract revenues

 

$

(2,041

)

 

$

1,792

 

 

 

Income tax (provision) benefit

 

 

(515

)

 

 

454

 

 

 

 

 

$

(1,526

)

 

$

1,338

 

 

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 2017, the Company issued a total of $325,000 of 8% Senior Notes, which were outstanding at March 31, 2021 (see Note 4, Long-term debt). The 8% Senior Notes are senior unsecured obligations of the Company and its subsidiaries that guarantee the 8% Senior Notes. The fair value of the senior notes was $327,844 at March 31, 2021, which is a Level 1 fair value measurement as the senior notes’ value was obtained using quoted prices in active markets. The 8% Senior Notes can be refinanced at par in May 2021 and the Company’s management is monitoring and assessing the debt markets to determine if the current market is favorable to refinance the 8% Senior Notes in May 2021. 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 11, 2017, the Company’s stockholders approved the Great Lakes Dredge & Dock Corporation 2017 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 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 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 three months ended March 31, 2021, the Company granted 307 thousand 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 $1,766 and $1,675 for the three months ended March 31, 2021 and 2020, respectively.

7.

Revenue

At March 31, 2021, the Company had $485,983 of remaining performance obligations, which the Company refers to as total backlog. Approximately 93% of the Company’s backlog will be completed in 2021 with the remaining balance expected to be completed in 2022.


11


 

 

Revenue by category

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

Domestically, our 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: