UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 August 2, 2024,
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, 2024
INDEX
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Page |
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3 |
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Item 1 |
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3 |
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Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 |
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4 |
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5 |
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6 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 |
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8 |
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Item 2 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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18 |
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Item 3 |
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26 |
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Item 4 |
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26 |
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27 |
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Item 1 |
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27 |
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Item 1A |
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27 |
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Item 2 |
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27 |
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Item 3 |
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27 |
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Item 4 |
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27 |
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Item 5 |
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27 |
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Item 6 |
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28 |
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29 |
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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)
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June 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable—net |
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Contract revenues in excess of billings |
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Inventories |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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PROPERTY AND EQUIPMENT—Net |
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OPERATING LEASE ASSETS |
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GOODWILL |
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INVENTORIES—Noncurrent |
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OTHER |
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TOTAL |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Operating lease liabilities |
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Billings in excess of contract revenues |
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Total current liabilities |
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LONG-TERM DEBT |
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OPERATING LEASE LIABILITIES—Noncurrent |
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DEFERRED INCOME TAXES |
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OTHER |
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Total liabilities |
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EQUITY: |
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Common stock—$. |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total equity |
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TOTAL |
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$ |
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$ |
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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)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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$ |
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$ |
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$ |
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$ |
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Gross profit |
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General and administrative expenses |
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Other gains |
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( |
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( |
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( |
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Operating income |
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Interest expense—net |
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( |
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( |
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( |
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Other income |
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Income (loss) before income taxes |
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( |
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Income tax provision |
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( |
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( |
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( |
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( |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
( |
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Basic earnings (loss) per share |
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$ |
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$ |
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$ |
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$ |
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Basic weighted average shares |
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Diluted earnings (loss) per share |
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$ |
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$ |
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$ |
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$ |
( |
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Diluted weighted average shares |
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See notes to unaudited condensed consolidated financial statements.
4
Great Lakes Dredge & Dock Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in thousands)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
( |
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Net change in cash flow derivative hedges—net of tax (1) |
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( |
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Comprehensive income (loss) |
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$ |
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$ |
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$ |
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$ |
( |
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See notes to unaudited condensed consolidated financial statements.
5
Great Lakes Dredge & Dock Corporation and Subsidiaries
Condensed Consolidated Statements of Equity
(Unaudited)
(in thousands)
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Accumulated |
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Shares of |
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Additional |
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Other |
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Common |
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Common |
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Paid-In |
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Retained |
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Comprehensive |
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Stock |
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Stock |
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Capital |
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Earnings |
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Loss |
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Total |
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BALANCE—January 1, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Share-based compensation |
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— |
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— |
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Vesting of restricted stock units and impact of shares withheld for taxes |
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— |
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( |
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— |
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— |
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( |
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Exercise of options and purchases from employee stock plans |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Other comprehensive income—net of tax |
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— |
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— |
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— |
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— |
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BALANCE—June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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BALANCE—January 1, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Share-based compensation |
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— |
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— |
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Vesting of restricted stock units and impact of shares withheld for taxes |
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— |
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( |
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— |
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— |
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( |
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Exercise of options and purchases from employee stock plans |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive loss —net of tax |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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BALANCE—June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Accumulated |
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Shares of |
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Additional |
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Other |
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Common |
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Common |
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Paid-In |
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Retained |
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Comprehensive |
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Stock |
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Stock |
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Capital |
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Earnings |
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Loss |
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Total |
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BALANCE—March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Share-based compensation |
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— |
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— |
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Vesting of restricted stock units and impact of shares withheld for taxes |
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— |
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( |
) |
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— |
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— |
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( |
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Exercise of options and purchases from employee stock plans |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Other comprehensive income—net of tax |
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— |
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— |
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— |
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— |
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BALANCE—June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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BALANCE—March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Share-based compensation |
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— |
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— |
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Vesting of restricted stock units and impact of shares withheld for taxes |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Net income |
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- |
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— |
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— |
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— |
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Other comprehensive income—net of tax |
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- |
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— |
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— |
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— |
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BALANCE—June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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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)
|
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Six Months Ended |
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June 30, |
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2024 |
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2023 |
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OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
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$ |
( |
) |
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Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: |
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Depreciation and amortization |
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Deferred income taxes |
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Gain on sale of assets |
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( |
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( |
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Amortization of capitalized contract costs |
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Amortization of deferred financing fees |
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Share-based compensation expense |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
) |
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Contract revenues in excess of billings |
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( |
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Inventories |
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( |
) |
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Prepaid expenses and other current assets |
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( |
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Accounts payable and accrued expenses |
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( |
) |
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( |
) |
Billings in excess of contract revenues |
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( |
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Other noncurrent assets and liabilities |
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( |
) |
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Cash provided by operating activities |
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INVESTING ACTIVITIES: |
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Purchases of property and equipment |
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( |
) |
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( |
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Proceeds from dispositions of property and equipment |
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Cash used in investing activities |
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( |
) |
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( |
) |
FINANCING ACTIVITIES: |
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Deferred financing fees |
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( |
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— |
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Taxes paid on settlement of vested share awards |
|
|
( |
) |
|
|
( |
) |
Exercise of options and purchases from employee stock plans |
|
|
|
|
|
|
||
Borrowing under revolving loans |
|
|
|
|
|
|
||
Borrowing under Second Lien Credit Agreement |
|
|
|
|
|
— |
|
|
Repayments of revolving loans |
|
|
( |
) |
|
|
( |
) |
Payments on finance lease obligations |
|
|
( |
) |
|
|
— |
|
Cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental Cash Flow Information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Non-cash Investing and Financing Activities |
|
|
|
|
|
|
||
Property and equipment purchased but not yet paid |
|
$ |
|
|
$ |
|
||
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)
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, 2023. 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, 2024 and December 31, 2023, and its results of operations for the three and six months ended June 30, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023 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
The condensed consolidated statements of operations and comprehensive income (loss) for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year.
Recently Issued Accounting Pronouncements—In December 2023, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Income Taxes (Topic 740)” (“ASU 2023-09”). The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. One of the amendments in ASU 2023-09 includes disclosure of, on an annual basis, a tabular rate reconciliation of (i) the reported income tax expense (or benefit) from continuing operations, to (ii) the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal income tax rate of the jurisdiction of domicile using specific categories, including separate disclosure for any reconciling items within certain categories that are equal to or greater than a specified quantitative threshold of
On January 1, 2024, we adopted FASB ASU 2023-07, “Segment Reporting (Topic 280)” (“ASU 2023-07”). The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. ASU 2023-07 requires a public entity to report a measure of segment profit or loss that the chief operating decision maker (CODM) uses to assess segment performance and make decisions about allocating resources. ASU 2023-07 also requires other specified segment items and amounts, such as depreciation, amortization, and depletion expense, to be disclosed under certain circumstances. The amendments in ASU 2023-07 also do not
8
change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, adopted retrospectively. The adoption of ASU 2023-07 did not have a material effect on the Company’s consolidated financial statements or disclosures.
Reclassifications—Certain reclassifications have been made to prior period condensed consolidated statements of cash flows to conform to current period presentation. These reclassifications have
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) 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 (loss) per share are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding — basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of stock options and restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding — diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per share — basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Earnings (loss) per share — diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
For the six months ended June 30, 2023,
For the three and six months ended June 30, 2024, respectively, there were
Accrued expenses at June 30, 2024 and December 31, 2023 were as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Insurance |
|
$ |
|
|
$ |
|
||
Payroll and employee benefits |
|
|
|
|
|
|
||
Finance lease liabilities |
|
|
|
|
|
|
||
Interest |
|
|
|
|
|
|
||
Income and other taxes |
|
|
|
|
|
|
||
Contract reserves |
|
|
|
|
|
|
||
Fuel hedge contracts |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
9
Second lien credit agreement
On April 24, 2024, the Company, Great Lakes Dredge & Dock Company, LLC, NASDI Holdings, LLC, Great Lakes Environmental & Infrastructure Solutions, LLC, Great Lakes U.S. Fleet Management, LLC, and Drews Services LLC (collectively, the “Credit Parties”) entered into a $
The Second Lien Credit Agreement provides for (i) a senior secured second-lien term loan facility in an aggregate principal amount of $
The Second Lien Credit Agreement contains customary representations, mandatory prepayments and affirmative and negative covenants, including a minimum liquidity covenant that requires the Credit Parties to maintain consolidated liquidity of (a) $
The Second Lien Credit Agreement also contains customary events of default (including non-payment of principal or interest on any material debt and breaches of covenants) as well as events of default relating to certain actions by the Company’s surety bonding providers. The obligations of the Credit Parties under the Second Lien Credit Agreement are unconditionally guaranteed, on a joint and several basis, by each borrower (other than the Company) and subsidiary guarantor under the ABL Credit Agreement (as defined below), each existing or future issuer or guarantor under the indenture governing the Company’s
The loans under the Second Lien Credit Agreement funded on the Closing Date were used to repay amounts outstanding under the ABL Credit Agreement, to pay fees and expenses associated with the transactions and for general corporate purposes, including to fund upcoming new build payments. The delayed draw portion of the term loans, if funded, will be used to fund future new build payments, ongoing working capital and for other general corporate purposes. The Second Lien Credit Agreement matures on the earlier of
The obligations under the Second Lien Credit Agreement are secured on a second-priority basis by substantially all of the assets of the Credit Parties. The outstanding obligations thereunder shall be secured by a valid second priority perfected lien on substantially all of the U.S. flagged and located vessels of the Credit Parties and a valid perfected lien on all domestic accounts receivable and substantially all other assets of the Credit Parties, subject to the permitted liens and interests of other parties (including the Company’s surety bonding providers). Pursuant to the terms of that certain Intercreditor Agreement dated as of April 24, 2024, (as amended, restated, supplemented, or otherwise modified from time to time, the “Intercreditor Agreement”), by and between PNC Bank, National Association, as first lien agent, and GCS, as second lien agent, the obligations under the Second Lien Credit Agreement are subordinated to the first-priority liens securing the obligations under the ABL Credit Agreement.
Interest on the term loan facility under the Second Lien Credit Agreement is equal to either a base rate option (“Base Rate Loan”) or a Secured Overnight Financing Rate (“SOFR”) option (“Term SOFR Loan”) at the Company’s election. In the case of a Base Rate Loan, interest on the unpaid principal amount shall equal (i) the greatest of (a) the “Prime Rate” in the United States as quoted from time to time by The Wall Street Journal or the highest per annum rate of interest published by the Federal Reserve Board, (b) the federal funds effective rate (but not less than zero) plus
10
Reference Rate on the day that is two business days prior to the first day of such applicable interest period, plus
The Company had $
Credit agreement
On April 24, 2024, the Credit Parties, PNC Bank, National Association (“PNC”), as agent for the lenders, and certain financial institutions party thereto entered into an amendment to the ABL Credit Agreement described below (the “ABL Amendment”). The ABL Amendment (w) eliminates the Company’s ability to increase the commitments under the senior secured revolving credit facility (x) modifies the pricing of loans and undrawn commitments as summarized below, (y) adds a minimum liquidity covenant, for so long as the Second Lien Credit Agreement has not been prepaid and terminated, that requires the Credit Parties to maintain consolidated liquidity of (a) $
The ABL Amendment modifies the Applicable Margin for Advances as follows: (i) following the ABL Amendment closing date through and including the date immediately prior to the date on which the Borrowing Base Certificate is required to be delivered for most recently completed fiscal quarter (commencing with the fiscal quarter ending on September 30, 2024) (the “Adjustment Date”), (a) the Applicable Margin for Domestic Rate Loans Advances is
On July 29, 2022, the Credit Parties entered into a second amended and restated revolving credit and security agreement (as amended, supplemented or otherwise modified from time to time, the “ABL Credit Agreement”) with certain financial institutions from time to time party thereto as lenders, PNC Bank, National Association, as Agent (the “Agent”), PNC Capital Markets, CIBC Bank USA, Bank of America, N.A. and Truist Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners, CIBC Bank USA and Truist Bank as Co-Syndication Agents, Bank of America, N.A., as Documentation Agent and PNC Bank National Association, as Green Loan Coordinator. The ABL Credit Agreement amends and restates the prior ABL Credit Agreement dated as of May 3, 2019 by and among the financial institutions from time to time party thereto as lenders, the Agent and the Credit Parties party thereto such that the terms and conditions of the prior credit agreement have been subsumed and replaced in their entirety by the terms and conditions of the ABL Credit Agreement, including the amount available under the revolving credit facility. The terms of the ABL Credit Agreement are summarized below.
The ABL Credit Agreement provides for a senior secured revolving credit facility in an aggregate principal amount of up to $
The ABL Credit Agreement contains a green loan option where the Company can borrow at the lower interest rates described below so long as such funds are used to fund capital investments related to renewable energy and clean transportation projects and are consistent with green loan principles. The green loan option is subject to a $
The ABL Credit Agreement contains customary representations and affirmative and negative covenants, including a springing financial covenant that requires the Credit Parties to maintain a fixed charge coverage ratio (ratio of earnings before income taxes, depreciation and amortization, net interest expenses, non-cash charges and losses and certain other non-recurring charges, minus capital expenditures, income and franchise taxes, to net cash interest expense plus scheduled cash principal payments with respect to debt plus restricted payments paid in cash) of not less than
11
The obligations under the ABL Credit Agreement are secured by substantially all of the assets of the Credit Parties. The outstanding obligations thereunder shall be secured by a valid first priority perfected lien on substantially all of the U.S. flagged and located vessels of the Credit Parties and a valid perfected lien on all domestic accounts receivable and substantially all other assets of the Credit Parties, subject to the permitted liens and interests of other parties (including the Company’s surety bonding providers).
The Company had
Capitalized terms used but not defined herein in Note 4, Long-term debt, shall have the meanings ascribed to such terms in the Second Lien Credit Agreement and the ABL Amendment, as applicable.
Senior Notes and subsidiary guarantors
In May 2021, the Company sold $
The Company’s obligations under these 2029 Notes are guaranteed by each of the Company’s existing and future
The weighted average interest rates on the Company’s outstanding borrowings were
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 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.
12
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 or foreign currency risk. The Company does not hold or issue derivatives for speculative or trading purposes.
|
|
|
|
Fair Value at |
|
|||||||||||||
|
|
Fair Value Hierarchy Levels |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
||||
Derivatives designated as cash flow hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fuel hedge contracts |
|
2 |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Foreign currency exchange hedge contracts |
|
2 |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Total derivatives |
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
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 goal is to hedge approximately
As of June 30, 2024, the Company was party to various swap arrangements to hedge the price of a portion of its diesel fuel purchase requirements for work in its backlog to be performed through December 2025. As of June 30, 2024, there were
At June 30, 2024 and December 31, 2023, the fair value liabilities of the fuel hedge contracts were estimated to be $
Foreign currency exchange hedge contracts
The Company is exposed to certain market risks, including foreign currency exchange rate risks related to the purchase of new vessel build materials in Europe. The Company sometimes enters into foreign currency exchange forward contracts to hedge the risk that fluctuations in the Euro in relation to the US Dollar could have an adverse impact on cash flows associated with its equipment builds.
As of June 30, 2024, the Company was party to various foreign exchange forward contract arrangements to hedge the purchase of materials through November 2024. As of June 30, 2024, there were
As of June 30, 2024 . the fair value liability of foreign currency exchange hedge contracts was $
13
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 |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fuel Hedge Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of derivative losses to earnings—net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Change in fair value of derivatives—net of tax |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net change in cash flow derivative fuel hedges—net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign Currency Exchange Hedge Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of derivative losses (gains) to earnings—net of tax |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Change in fair value of derivatives—net of tax |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net change in cash flow derivative foreign currency hedges—net of tax |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Total net change in cash flow derivative hedges - net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Adjustments reclassified from accumulated balances of other comprehensive income (loss) to earnings are as follows:
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
Statement of Operations Location |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fuel hedge contracts |
|
Costs of contract revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign currency exchange hedge contracts |
|
Other expense (income) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
|
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 values of the ABL Amendment and Second Lien Credit Agreement approximate fair value at June 30, 2024. In May 2021, the Company sold $
14
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
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
During the six months ended June 30, 2024, the Company granted
At June 30, 2024, the Company had $
Revenue by category
The following series of tables presents the Company's revenue disaggregated by several categories.
Domestically, the 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, are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
Revenues |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capital—U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Coastal protection |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maintenance |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rivers & lakes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company’s contract revenues by type of customer, for the periods indicated, are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
Revenues |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal government |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
State and local government |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Private |
|
|
|
|
|
- |
|
|
|
|
|
|
— |
|
||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
Accounts receivable at June 30, 2024 and December 31, 2023 are as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Completed contracts |
|
$ |
|
|
$ |
|
||
Contracts in progress |
|
|
|
|
|
|
||
Retainage |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Total accounts receivable—net |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The components of contracts in progress at June 30, 2024 and December 31, 2023 are as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Costs and earnings in excess of billings: |
|
|
|
|
|
|
||
Costs and earnings for contracts in progress |
|
$ |
|
|
$ |
|
||
Amounts billed |
|
|
( |
) |
|
|
( |
) |
Costs and earnings in excess of billings for contracts in progress |
|
|
|
|
|
|
||
Costs and earnings in excess of billings for completed contracts |
|
|
|
|
|
|
||
Total contract revenues in excess of billings |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Current portion of contract revenues in excess of billings |
|
$ |
|
|
$ |
|
||
Long-term contract revenues in excess of billings |
|
|
— |
|
|
|
— |
|
Total contract revenues in excess of billings |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Billings in excess of costs and earnings: |
|
|
|
|
|
|
||
Amounts billed |
|
$ |
( |
) |
|
$ |
( |
) |
Costs and earnings for contracts in progress |
|
|
|
|
|
|
||
Total billings in excess of contract revenues |
|
$ |
( |
) |
|
$ |
( |
) |
At June 30, 2024 and December 31, 2023, costs to fulfill a contract with a customer recognized as an asset were $
Commercial commitments
Performance and bid bonds are customarily required for dredging and marine construction projects. The Company has bonding agreements with Argonaut Insurance Company, ACE Holdings, Liberty Mutual Insurance Company, Philadelphia Indemnity Insurance Company, Ascot Insurance Companies and AXIS Insurance Company under which the Company can obtain performance, bid and payment bonds. The Company also has outstanding bonds with Travelers Casualty and Surety Company of America, Berkley Insurance Company and Zurich American Insurance Company. Bid bonds are generally obtained for a percentage of bid value and amounts outstanding typically range from $
Certain foreign projects performed by the Company have warranty periods, typically spanning between to
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
16
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 its proceedings, individually or in the aggregate, would be expected to have a material effect on results of operations, cash flows or financial condition.
Lease obligations
The Company leases certain operating equipment and office facilities under long-term operating and financing 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 ABL Amendment, 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 ABL Amendment. 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.
17
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, 2023 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
Great Lakes is the largest provider of dredging services in the United States which is complemented with a long history of performing significant international projects. The Company is also fully engaged in expanding its core business into the rapidly developing offshore wind energy industry. The Company operates in one operating segment, which is also the Company’s one reportable segment and reporting unit.
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, the 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.
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 33% over the three-year period ended December 31, 2023, including 36%, 56%, 23% and 22% of the domestic capital, coastal protection, maintenance and rivers & lakes sectors, respectively, exclusive of liquefied natural gas (“LNG”) projects.
The Company’s largest domestic 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 six months of 2024, 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 69% of dredging revenues, which is below the average of the three-year period ended December 31, 2023 of 74%. The decrease in the federal government revenue percentage is a result of additional revenues from state and local governments and private customers in the first half of 2024.
The Company’s vessels are subject to periodic regulatory 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”) and that recommended repairs have been satisfactorily completed. Regulatory dry dock frequency is a statutory requirement mandated by the U.S. Coast Guard and the ABS. The Company’s vessels undergo regulatory dry-docks every two to three years or every five years, depending on the vessel type and may also go into dry dock on an as-needed basis for upgrades, maintenance and repairs. During the second quarter of 2024, the Company commenced and completed regulatory dry dock inspections on two dredges, and completed the regulatory dry dock inspection that commenced during the first quarter of 2024. Two of these dredges are expected to return to work in the third quarter of
18
2024. By comparison, the Company experienced regulatory dry dock inspections on two dredges in the second quarter of 2023. The Company does not have any regulatory dry dock inspections planned for the remainder of 2024.
As of the end of the second quarter of 2024, the Company had one dredge cold stacked. The cold stacked equipment can be easily reactivated when market conditions are favorable for the Company. During the second quarter of 2024, the Company began the reactivation of one of the previously cold stacked vessels in anticipation of commencing a contract in late 2024 or 2025.
The Company plans to participate in the offshore wind market, and in November 2021, the Company entered into a $197 million contract with Philly Shipyard to build the first U.S. flagged Jones Act compliant, inclined fall-pipe vessel for subsea rock installation for wind turbine foundations, the Acadia, which is expected to be delivered and operational in the second half of 2025. This vessel represents a significant critical advancement in building the U.S. logistics infrastructure to support the future of the new U.S. offshore wind industry. Offshore wind has been recognized around the world as a reliable source of renewable energy. The Company continues to pursue and tender bids, both domestically and internationally, for multiple offshore wind projects for the Acadia, to protect and stabilize offshore wind structures, cables and pipelines.
The offshore wind market reached historic milestones in the first quarter of 2024, with two commercial-scale offshore wind farms becoming operational and supplying power to the grid in New York and Massachusetts. New Jersey also awarded 3.7 gigawatts (“GW”) of Power Purchase Agreements in January 2024, and the results of the tri-state (Massachusetts, Rhode Island, and Connecticut) solicitation for 6 GW of offshore wind, are expected in the third quarter of 2024. In February 2024, the Vineyard Wind project, located about 14 miles off Martha’s Vineyard, completed installation of five turbines and is supplying power to the New England grid, while continuing to install additional turbines. In March 2024, the South Fork Wind project was completed, with all 12 offshore wind turbines constructed and the wind farm successfully delivering power to Long Island and the Rockaways. In June 2024, Equinor and Ørsted signed final power deals with New York State Energy Research & Development Authority for the Empire Wind and Sunrise Wind projects. Notably, the Company has been awarded rock installation contracts for both projects, and expects to be using the Acadia to protect and stabilize foundations and cables for these projects with combined capacity of 1.7 GW. On July 17, 2024, construction began on the Sunrise Wind project which is expected to provide power to approximately 600,000 New York homes. On July 2, 2024, the U.S. Department of the Interior (“DOI”) approved the Atlantic Shores South offshore wind energy project off the New Jersey Coast, which is expected to power close to one million homes with clean renewable energy. This brings total DOI approvals to more than 13 GW of clean energy from offshore wind energy projects. Also in July 2024, the Bureau of Ocean Energy Management approved the construction and operation of two offshore wind energy facilities, New England Wind 1 and New England Wind 2, that could power close to a million homes. In addition to the U.S. offshore wind market, there are several other market opportunities that the Acadia is well suited for, such as rock placement in the international offshore wind market, rock protection over pipelines in the oil and gas and carbon capture markets and telecommunications and power cable protection. As such, we continue to pursue and bid on a number of other offshore wind farm and cable and pipeline protection projects for the Acadia, both domestically and internationally, with work planned for 2026 and beyond.
19
Results of operations
The following tables set forth the components of net income (loss) and Adjusted EBITDA, as defined below, as a percentage of contract revenues for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
||||
Contract revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
|
% |
|
100.0 |
|
% |
Costs of contract revenues |
|
|
(82.5 |
) |
|
|
(86.5 |
) |
|
|
(79.5 |
) |
|
|
(89.7 |
) |
|
Gross profit |
|
|
17.5 |
|
|
|
13.5 |
|
|
|
20.5 |
|
|
|
10.3 |
|
|
General and administrative expenses |
|
|
9.5 |
|
|
|
10.9 |
|
|
|
8.8 |
|
|
|
9.5 |
|
|
Other gains |
|
|
(0.5 |
) |
|
|
(0.2 |
) |
|
|
(0.8 |
) |
|
|
(0.1 |
) |
|
Operating income |
|
|
8.5 |
|
|
|
2.8 |
|
|
|
12.5 |
|
|
|
0.9 |
|
|
Interest expense—net |
|
|
(2.5 |
) |
|
|
(2.4 |
) |
|
|
(2.2 |
) |
|
|
(2.3 |
) |
|
Other income |
|
|
0.1 |
|
|
|
1.5 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
Income (loss) before income taxes |
|
|
6.1 |
|
|
|
1.9 |
|
|
|
10.4 |
|
|
|
(0.6 |
) |
|
Income tax provision |
|
|
(1.7 |
) |
|
|
(0.6 |
) |
|
|
(2.7 |
) |
|
|
- |
|
|
Net income (loss) |
|
|
4.4 |
|
|
|
1.3 |
|
|
|
7.7 |
|
|
|
(0.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
|
15.2 |
% |
|
|
12.5 |
% |
|
|
18.6 |
|
% |
|
9.2 |
|
% |
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 (loss):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
7,673 |
|
|
$ |
1,733 |
|
|
$ |
28,697 |
|
|
$ |
(1,498 |
) |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense—net |
|
|
4,198 |
|
|
|
3,175 |
|
|
|
8,089 |
|
|
|
6,560 |
|
Income tax provision |
|
|
2,842 |
|
|
|
796 |
|
|
|
9,831 |
|
|
|
5 |
|
Depreciation and amortization |
|
|
11,108 |
|
|
|
10,937 |
|
|
|
22,128 |
|
|
|
21,787 |
|
Adjusted EBITDA |
|
$ |
25,821 |
|
|
$ |
16,641 |
|
|
$ |
68,745 |
|
|
$ |
26,854 |
|
20
The Company’s contract revenues by type of work, for the periods indicated, were as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||||||||||
Revenues (in thousands) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
||||||
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital—U.S. |
|
$ |
70,747 |
|
|
$ |
38,157 |
|
|
|
85.4 |
% |
|
$ |
140,647 |
|
|
$ |
70,632 |
|
|
|
99.1 |
% |
Coastal protection |
|
|
70,195 |
|
|
|
56,490 |
|
|
|
24.3 |
% |
|
|
134,121 |
|
|
|
107,795 |
|
|
|
24.4 |
% |
Maintenance |
|
|
28,464 |
|
|
|
35,809 |
|
|
|
(20.5 |
)% |
|
|
92,875 |
|
|
|
107,737 |
|
|
|
(13.8 |
)% |
Rivers & lakes |
|
|
680 |
|
|
|
2,211 |
|
|
|
(69.2 |
)% |
|
|
1,103 |
|
|
|
4,547 |
|
|
|
(75.7 |
)% |
Total revenues |
|
$ |
170,086 |
|
|
$ |
132,667 |
|
|
|
28.2 |
% |
|
$ |
368,746 |
|
|
$ |
290,711 |
|
|
|
26.8 |
% |
Total revenue was $170.1 million for the three months ended June 30, 2024, up $37.4 million, or 28%, from $132.7 million for the same period in the prior year. For the six months ended June 30, 2024, total revenue was $368.7 million, up $78.0 million, or 27%, from $290.7 million for the same period in the prior year. For the three and six months ended June 30, 2024, the Company experienced a significant increase in domestic capital and coastal protection revenues, due in part to the delivery of the Galveston Island, the Company’s newest hopper dredge which began operations in February 2024, as compared to the same periods in the prior year. These increases were partially offset by decreases in maintenance and rivers & lakes revenues during the current year periods.
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, 2024, domestic capital dredging revenue was $70.7 million, up $32.5 million, or 85%, compared to $38.2 million for the same period in 2023. The increase in capital dredging revenues for the three months ended June 30, 2024 was mostly due to a higher amount of revenue earned on projects in Texas in the second quarter of 2024 when compared to the same period in the prior year. This increase was partially offset by lower revenue earned on projects in Virginia in the current quarter. For the six months ended June 30, 2024, domestic capital dredging revenue was $140.6 million, up $70.0 million, or 99%, compared to $70.6 million for the same period in the prior year. The increase in capital dredging revenues for the six months ended June 30, 2024 was mostly due to a higher amount of revenue earned on projects in Texas in the current year when compared to the prior year period.
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, 2024 was $70.2 million, an increase of $13.7 million, or 24%, compared to $56.5 million in the prior year period. The increase in coastal protection revenue for the three months ended June 30, 2024 was attributable to an increase in the amount of revenue earned on projects in Florida and New Jersey in the current year when compared to the prior year period. This increase was partially offset by lower revenue earned on projects in New York in the current quarter. Coastal protection revenue for the six months ended June 30, 2024 was $134.1 million, an increase of $26.3 million, or 24%, compared to $107.8 million in the prior year period. The increase in coastal protection revenue for the six months ended June 30, 2024 was attributable to an increase in revenue earned on projects in Florida and Alabama in the current year when compared to the prior year period. This increase was partially offset by lower revenue earned on projects in New York in the current year to date period.
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 second quarter of 2024 was $28.5 million, down $7.3 million, or 21%, from $35.8 million in the same period of 2023. The decrease in maintenance revenues for the three months ended June 30, 2024 was mostly attributable to a decrease in revenue earned on projects in North Carolina, Alabama and Texas when compared with prior year quarter. This decrease was slightly offset by an increase in revenue earned on projects in Louisiana, Mississippi and Puerto Rico in the current year quarter. Maintenance revenue for the six months ended June 30, 2024 was $92.9 million, down $14.8 million, or 14%, from $107.7 million in the prior year period. The decrease in maintenance revenues for the six months ended June 30, 2024 was primarily attributable to a decrease in revenue earned on projects in North Carolina, South Carolina, Alabama and Texas when compared with prior year quarter. This decrease was slightly offset by an increase in revenue earned on projects in Louisiana, Mississippi and Puerto Rico in the same period in the prior 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 three months ended June 30, 2024, rivers & lakes revenue was $0.7 million, a decrease of $1.5 million, or 69%, from $2.2 million during the same period of 2023. During the six months ended June 30, 2024, rivers & lakes revenue was $1.1 million, a decrease of $3.4 million, or 76%, from $4.5
21
million in the prior year period. The decrease in river & lakes revenue for the three and six months ended June 30, 2024 was mostly attributable to a decrease in revenue earned on projects in Tennessee and Arkansas as compared to same periods of 2023.
Consolidated gross profit for the three months ended June 30, 2024 was $29.8 million, up $11.9 million, or 66%, compared to $17.9 million in same period of 2023. Gross profit margin for the three months ended June 30, 2024 increased to 17.5% from 13.5% in the same period in the prior year. Consolidated gross profit for the six months ended June 30, 2024 was $75.4 million, up $45.4 million, or 151%, compared to $30.0 million in the same period in the prior year. Gross profit margin for the six months ended June 30, 2024 increased to 20.5% from 10.3% in the same period in the prior year. The higher gross profit and profit margins experienced for the three and six months ended June 30, 2024 were driven by increased revenues as well as improved utilization and project performance in the current year quarter. Additionally, the project mix during the current year periods include a larger proportion of higher margin capital and coastal protection projects than the same periods in the prior year.
During the three and six months ended June 30, 2024, general and administrative expenses were $16.2 million and $32.3 million, respectively, compared to the same periods in the prior year in which the three and six month periods totaled $14.5 million and $27.5 million, respectively. For the three and six months ended June 30, 2024, general and administrative expenses include higher stock compensation and employee benefit expenses, partially offset by lower severance and office expenses.
Operating income for the second quarter of 2024 was $14.6 million, up $10.9 million from $3.7 million in the same period of the prior year. Operating income for the six months ended June 30, 2024 was $46.1 million, up $43.3 million from $2.8 million in the same period of the prior year. The increase in operating income for the three and six months ended June 30, 2024 was a result of higher gross profit, as well as gains on the sale of assets in the current year periods when compared to the same periods in the prior year, partially offset by higher general and administrative expenses in the current year periods when compared to the same periods in the prior year.
For the three months ended June 30, 2024, net interest expense was $4.2 million, $1.0 million higher compared to $3.2 million for the same period in the prior year. Net interest expense for the six months ended June 30, 2024 was $8.1 million, $1.5 million higher compared to $6.6 million for the same period in the prior year. The increase in net interest expense for the three and six months ended June 30, 2024 was primarily due to higher borrowings and the execution of the Second Lien Credit Agreement during the second quarter.
Income tax provision for the three months ended June 30, 2024 was $2.8 million compared to $0.8 million for the same period in the prior year. For the six months ended June 30, 2024, the income tax provision was $9.8 million compared to a negligible income tax provision in the prior year period. The effective tax rate for the six months ended June 30, 2024 was 25.5%, while the effective tax rate for the same period of 2023 was nearly zero. The lower effective tax rate incurred in 2023 was primarily due to near break-even net loss offset by lower deductions for stock compensation in that period.
Net income for the three months ended June 30, 2024 was $7.7 million, up $6.0 million from $1.7 million in the same period in the prior year. Diluted earnings per share was $0.11 per share for the three months ended June 30, 2024, compared to $0.03 per share for the three months ended June 30, 2023. Net income for the six months ended June 30, 2024 was $28.7 million, an increase of $30.2 million, or 2,013%, from a net loss of $1.5 million for the same period in the prior year. Diluted earnings per share were $0.42 for the six months ended June 30, 2024, compared to a diluted loss per share of $0.02 for the six months ended June 30, 2023. The increase in net income for the three and six months ended June 30, 2024 was primarily driven by the substantial improvement to gross profit and the gain on sale of assets. This increase was slightly offset by an increases in general and administrative expenses and the income tax provision.
Adjusted EBITDA (as defined on page 20) for the three months ended June 30, 2024 was $25.8 million, up $9.2 million, from $16.6 million in the same quarter in the prior year. The increase in Adjusted EBITDA during the second quarter of 2024 was driven by the increase in gross profit, excluding depreciation partially offset by an increase in general and administrative expense. For the six months ended June 30, 2024 Adjusted EBITDA was $68.7 million, up $41.8 million, from $26.9 million during the same period in the prior year. The increase in Adjusted EBITDA during the first half of 2024 was driven by the increase in gross profit, excluding depreciation, as well as an increased income tax provision in the current period, partially offset by an increase in general and administrative expense.
22
Bidding activity and backlog
The following table sets forth, by type of work, the Company’s backlog as of the dates indicated:
|
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June 30, |
|
|
December 31, |
|
|
June 30, |
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Backlog (in thousands) |
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2024 |
|
|
2023 |
|
|
2023 |
|
|||
Dredging: |
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|
|
|
|
|
|
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|
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Capital—U.S. |
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$ |
683,131 |
|
|
$ |
741,839 |
|
|
$ |
243,646 |
|
Coastal protection |
|
|
38,205 |
|
|
|
138,394 |
|
|
|
34,835 |
|
Maintenance |
|
|
82,070 |
|
|
|
152,104 |
|
|
|
147,143 |
|
Rivers & lakes |
|
|
4,468 |
|
|
|
6,765 |
|
|
|
8,931 |
|
Total backlog |
|
$ |
807,874 |
|
|
$ |
1,039,102 |
|
|
$ |
434,555 |
|
Total dredging backlog does not include $273.1 million of domestic low bids pending formal award and additional phases (“options”) pending on projects currently in dredging backlog at June 30, 2024. Additionally, it does not include $44.6 million of performance obligations or $12.7 million of options pending award related to offshore wind contracts. The Company expects to perform on its offshore wind contracts using the Acadia, which is expected to be delivered and operational in the second half of 2025.
The Company’s contract backlog represents our 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. Additionally, 21% of our June 30, 2024 dredging backlog relates to federal government contracts, which can be canceled at any time without penalty to the government, subject to our contractual right to recover our actual committed costs and profit on work performed up to the date of cancellation. Our backlog may fluctuate significantly from quarter to quarter based upon the type and size of the projects we are awarded from the bid market. A quarterly increase or decrease of our backlog does not necessarily result in an improvement or a deterioration of our business. Our backlog includes only those projects for which we have obtained a signed contract with the customer.
The 2024 Energy and Water Appropriations Bill, which passed in the first quarter, provided a record $8.7 billion in total funding to the Corps for fiscal year 2024. This funding included $5.6 billion for the Corps’ Operations and Maintenance work, $2.8 billion for the Harbor Maintenance Trust Fund to maintain and modernize our nation’s waterways, $2.2 billion for flood and storm damage reduction, and $18 million for Beneficial Use of Dredged Material. In 2023, the Disaster Relief Supplemental Appropriations Act was also approved which included $1.48 billion for the Corps to make necessary repairs to infrastructure impacted by hurricanes and other natural disasters, and to initiate beach renourishment projects that will increase coastal resiliency. We expect this increased budget and additional funding will continue to support a strong bid market so far in 2024, with a robust beach renourishment market and capital projects for additional phases of the Mobile and Sabine-Neches deepening projects.
The 2025 Corps’ budget is expected to be another record appropriation. On June 28, 2024, the U.S. House of Representatives (the “House”) Energy and Water Appropriations Subcommittee passed their 2025 Appropriations Bill providing the Corps with a budget of $9.96 billion, which is $2.7 billion above the President’s Budget request. The bill includes $5.7 billion for Operations and Maintenance projects, of which $3.1 billion is from the Harbor Maintenance Trust Fund. On August 1, 2024, the Senate Appropriation Committee approved its draft of the 2025 Energy and Water spending bill which provides $10.3 billion in total funding for the Corps.
The Water Resources Development Act (“WRDA”) is on a two-year renewal cycle and includes legislation that authorizes the financing of Corps’ projects for studies, flood and hurricane protection, dredging, ecosystem restoration and other construction projects aimed at improving rivers and harbors in the United States. WRDA 2022 featured authorization for the New York and New Jersey shipping channels to be deepened to 55 feet, estimated at $6 billion, as well as the Coastal Texas Protection and Restoration Program, estimated at $34.4 billion. The Coastal Texas Protection and Restoration Program includes dune and marsh restoration to safeguard the Texas Gulf Coast from hurricane surges. WRDA 2024 appears to have strong bipartisan support and has already been approved by the U.S. Senate Environment and Public Works Committee and the House Transportation and Infrastructure Committee. The House and Senate approved their versions of WRDA 2024 on July 22, 2024 and August 1, 2024, respectively. The two bodies will now conference to resolve any differences. This moves WRDA 2024 one step closer to full Congressional approval.
23
The domestic dredging bid market for the quarter ended June 30, 2024 was $561.8 million, a $45.5 million decrease compared to the same period in the prior year. Total domestic dredging bid market for the current year period included awards for seven domestic capital projects, seven coastal protection projects, nine maintenance projects, and two river maintenance projects. The total domestic dredging bid market through June 30, 2024 was $873.7 million, of which the Company won 9.4%, which is below the Company’s average of 33% for the three-year period ended December 31, 2023. 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.
The Company’s contracted dredging backlog was $807.9 million at June 30, 2024 compared to $1,039.1 million of dredging backlog at December 31, 2023. Total dredging backlog does not include $273.1 million of domestic low bids pending formal award and options pending on projects currently in dredging backlog at June 30, 2024. Additionally, it does not include $44.6 million of performance obligations or $12.7 million of options pending award related to offshore wind contracts. Subsequent to June 30, 2024, the Company was low bidder on additional projects totaling approximately $181.6 million. At December 31, 2023, the total dredging backlog does not include $44.6 million of performance obligations related to offshore wind contracts or $179.4 million of domestic low bids pending formal award and options pending on projects in dredging backlog as of that date. Included in the June 30, 2024 backlog are two LNG projects, including the Rio Grande LNG project, which is the largest project undertaken in the Company's history, and the Port Arthur LNG Phase 1 project for Marine Dredging and Disposal. Subcontractor work has begun on both of these LNG projects and dredging work is anticipated to start in the third quarter of 2024.
Domestic capital dredging backlog at June 30, 2024 was $683.1 million, a decrease of $58.7 million from December 31, 2023. During the six months ended June 30, 2024, the Company was awarded one domestic capital dredging contract in Florida for $59.8 million. During the six months ended June 30, 2024, the Company continued to earn revenue on deepening projects in Virginia and Texas. Government funded projects coming into the pipeline include Sabine-Neches and Mobile. 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. 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.
Coastal protection dredging backlog at June 30, 2024 was $38.2 million, a decrease of $100.2 million from December 31, 2023. During the six months ended June 30, 2024, the Company was awarded one coastal protection project in New Jersey for $13.2 million. During the six months ended June 30, 2024, the Company continued to earn revenue on coastal protection projects in New York, New Jersey, Alabama and Florida, which were in dredging backlog at December 31, 2023. 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.
Maintenance dredging backlog at June 30, 2024 was $82.1 million, a decrease of $70.0 million from December 31, 2023. In the six months ended June 30, 2024, the Company was awarded one maintenance project for a total of $9.3 million in Florida. During the six months ended June 30, 2024, the Company continued to earn revenue on projects in Louisiana, Texas, Mississippi, Puerto Rico and Florida that were in dredging backlog at December 31, 2023.
Rivers & lakes backlog at June 30, 2024 was $4.5 million, a decrease of $2.3 million compared to rivers & lakes backlog at December 31, 2023. For the six months ended June 30, 2024, the Company continued to earn revenue on a project Arkansas which was in dredging backlog at December 31, 2023.
Liquidity and capital resources
The Company continues to actively manage its liquidity. The Company’s principal sources of liquidity are net cash flows provided by operating activities, proceeds from previous issuances of long-term debt, and draws on our revolver. 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 operating activities for the six months ended June 30, 2024 and 2023 was $56.8 million and $34.1 million, 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 increase in cash provided by operating activities during the six months ended June 30, 2024, relates primarily to significantly higher current period earnings in the current year, partially offset by the increases in contract revenues in excess of billings, decreases in billings in excess of contract revenues and changes in working capital compared to the same period in the prior year.
The Company’s cash flows used in investing activities for the six months ended June 30, 2024 and 2023 were $55.2 million and $53.6 million, respectively. Investing activities primarily relate to investments in our new build program, normal course upgrades and capital maintenance of the Company’s dredging fleet. During the six months ended June 30, 2024, the Company invested $4.0 million in the
24
Galveston Island, $15.5 million in the Amelia Island and $36.6 million in the Acadia, as well as maintenance capital expenditures. These investments were partially offset by the disposition of certain equipment for approximately $9.0 million during the current year.
The Company’s cash flows (used in) provided by financing activities for the six months ended June 30, 2024 and 2023 totaled a use of $2.2 million and proceeds of $55.0 million, respectively. The increase in net cash flows used in financing activities is primarily due to net repayments on the Company’s revolving debt facility during the six months ended June 30, 2024 of $90.0 million, compared to net borrowings of $55.0 million on the Company’s revolving debt facility during the six months ended June 30, 2023. On April 24, 2024, the Credit Parties entered into a $150.0 million second lien credit agreement (as amended, supplemented or otherwise modified from time to time, the “Second Lien Credit Agreement”) with Guggenheim Corporate Funding, LLC, on behalf of one or more clients, as the lender, and Guggenheim Credit Services, LLC as Administrative Agent, Collateral Agent and Lead Arranger. The Company borrowed $100.0 under the Second Lien Credit Agreement on the closing date and has the option to borrow an additional $50.0 million for a period of 12 months following the closing date of the initial loan. The net proceeds from the Second Lien Credit Agreement were used to repay amounts outstanding under the ABL Credit Agreement, to pay fees and expenses associated with the Second Lien Credit Agreement and ABL Amendment and for general corporate purposes, including to fund upcoming new build payments. Additionally, the deferred financing fees associated with the Second Lien Credit Agreement of approximately $11.3 million increased the net cash flows used in financing activities during the six months ended June 30, 2024.
The Company expects to spend between approximately $130 million and $150 million on capital expenditures in 2024 which is comprised of vessels in our new build program and maintenance capital expenditures. The Company anticipates that remaining new build program payments will be made with cash on hand, future cash flows generated from operations, revolver availability, proceeds from the Second Lien Credit Agreement and potential new sources of financing.
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 ABL Amendment, Second Lien Credit Agreement and 2029 Notes. 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 availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long- or short-term financial prospects if the level of our business activity decreased due to a market downturn. If internal sources of liquidity prove to be insufficient, we may not be able to successfully obtain additional financing on favorable terms, or at all. During the second quarter of 2024, Moody’s Investor Services changed our outlook from negative to stable and reaffirmed our corporate credit rating at B2, and S&P Global Ratings changed our outlook from negative to stable and reaffirmed our corporate credit rating at CCC+. These credit ratings are below investment grade and could raise our cost of financing. As a consequence, we may not be able to issue additional debt in amounts and/or with terms that we consider to be reasonable. One or more of these occurrences could limit our ability to pursue other business opportunities.
The Company believes its cash and cash equivalents, its anticipated cash flows from operations and availability under its revolving credit facility and the option to borrow additional funds under the Second Lien Credit Agreement 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 ABL Amendment, Second Lien 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 Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. 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, 2023.
25
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The market risk of the Company’s financial instruments as of June 30, 2024 has not materially changed since December 31, 2023. The market risk profile of the Company on December 31, 2023 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, 2023.
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, 2024. 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, 2024 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, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
PART II — Other Information
Item 1. Legal Proceedings.
See Note 8, Commitments and contingencies, in the Notes to Condensed Consolidated Financial Statements.
Item 1A. Risk Factors.
There have been no material changes during the six months ended June 30, 2024 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, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Securities Trading Plans of Executive Officers and Directors
Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables pre-arranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Securities Trading and Disclosure of Confidential Information policy permits our officers and directors to enter into trading plans designed to comply with Rule 10b5-1.
On
During the quarterly period ended June 30, 2024, none of our other officers (as defined in Rule 16a-1(f) under the Exchange Act) or directors
27
Item 6. Exhibits
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101 |
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Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language ("Inline XBRL") * |
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104 |
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Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) * |
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* Filed herewith
** Furnished herewith
*** Previously filed
28
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.
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Great Lakes Dredge & Dock Corporation |
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(registrant) |
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By: |
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/s/ Scott Kornblau |
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Scott Kornblau |
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Senior Vice President and Chief Financial Officer |
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(Principal Financial Officer and Duly Authorized Officer) |
Date: August 6, 2024
29
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GREAT LAKES DREDGE & DOCK CORPORATION
a Delaware corporation
Great Lakes Dredge & Dock Corporation (the “Corporation”), a corporation organized and existing under the DGCL (as defined below), does hereby certify as follows:
NAME
The name of the Corporation is Great Lakes Dredge & Dock Corporation.
REGISTERED OFFICE AND AGENT
The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the city of Wilmington, county of New Castle. The name and address of the registered agent is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
PURPOSE
The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (the “DGCL”).
CAPITAL STOCK
170,000,000 shares, par value $0.0001 per share, shall be shares of common stock (the “Common Stock”); and
1,000,000 shares, par value $0.0001 per share, shall be shares of initially undesignated preferred stock (the “Preferred Stock”).
2
“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such first Person as of the date on which, or at any time during the period for which, the determination of affiliation is being made. For the purpose of this definition, “control” means (i) the ownership or control of 50% or more of the equity interest in any Person, or (ii) the ability to direct or cause the direction of the management or affairs of a Person, whether through the direct or indirect ownership of voting interests, by contract or otherwise.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that person or a combination thereof. For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries, and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Corporation.
RESTRICTIONS ON TRANSFER AND OWNERSHIP
3
4
5
Full voting rights shall be restored to any shares of a class or series of capital stock of the Corporation that were previously deemed to be Excess Shares, and any dividends or distributions with respect thereto that have been previously paid into an escrow account shall be due and paid solely to the holders of record of such shares, promptly after such time as, and to the extent that, such shares have ceased to be Excess Shares (including as a result of the sale of such shares to a U.S. Citizen prior to the issuance of a Redemption Notice pursuant to Section 6(c)(iii) of this Article Five); provided that such shares have not been already redeemed by the Corporation at its option pursuant to this Section 6.
6
7
8
9
10
A Person shall be deemed to be the “beneficial owner” of, or to “beneficially own”, or to have “beneficial ownership” of, shares or interests in an entity to the extent such Person would be deemed to be the “beneficial owner” thereof pursuant to Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act, as such rule may be amended or supplemented from time to time, and any successor rule to such rule, and such terms shall apply to and include the holder of record of any such shares or interests.
“Coastwise Laws” shall mean the United States cabotage laws set forth in Title 46, United States Code, Chapter 551, including but not limited to the Jones Act, the Dredge Act, the Towing Vessel Act, and the Passenger Vessel Services Act.
“Code” shall mean the Internal Revenue Code of 1986, as amended, any successor statutes thereto, and the regulations promulgated thereunder, in each case as amended or supplemented from time to time.
“Disqualified Person” shall have the meaning ascribed to such term in Section 5(a) of this Article Five.
“Disqualified Recipient” shall have the meaning ascribed to such term in Section 5(a) of this Article Five.
“Excess Shares” shall have the meaning ascribed to such term in Section 4 of this Article Five.
“Excess Share Date” shall have the meaning ascribed to such term in Section 4 of this Article Five.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended or supplemented from time to time.
“Fair Market Value” of one share of a particular class or series of the capital stock of the Corporation as of any date shall mean the average of the daily Market Price (as defined herein) of one share of such capital stock for the 20 consecutive Trading Days (as defined herein) immediately preceding such date, or, if such capital stock is not listed or admitted for unlisted trading privileges on any National Securities Exchange, the fair value of a share of such class or series of capital stock on such date as determined in good faith by the Board.
“Maritime Laws” shall mean collectively those United States laws governing the ownership, documentation, and operation of United States documented vessels with coastwise trade endorsements, including the Coastwise Laws, Title 46 United States Code Chapter 121, and Title 46 United States Code Section 50501, and any successor statutes thereto, and the regulations promulgated thereunder, in each case as amended or supplemented from time to time.
The “Market Price” of a share of a class or series of capital stock of the Corporation for a particular day shall mean: (A) the last reported sales price, regular way, on such day, or, in case no sale takes place on such day, the average of the reported closing bid and asked prices, regular way, on such day, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted for unlisted trading privileges on the principal
11
National Securities Exchange on which such class or series of capital stock is then listed or admitted for unlisted trading privileges; or (B) if such class or series of capital stock is not then listed or admitted for unlisted trading privileges on any National Securities Exchange, the last quoted price on such day, or, if not so quoted, the average of the closing bid and asked prices on such day in the over-the-counter market, as reported by The Nasdaq Stock Market or such other system then in use; or (C) if on any such day such class or series of capital stock is not quoted by any such organization, the average of the bid and asked prices on such day as furnished by a professional market maker making a market in such capital stock selected by the Corporation; or (D) if on any such day no market maker is making a market in such capital stock, the fair value of a share of such class or series of capital stock on such day as determined in good faith by the Board (or a duly authorized committee thereof).
“National Securities Exchange” shall mean an exchange registered with the Securities and Exchange Commission under Section 6(a) of the Exchange Act, as such section may be amended or supplemented from time to time, and any successor to such statute, or The Nasdaq Stock Market or any successor thereto.
“Non-U.S. Citizen” shall mean any Person other than a U.S. Citizen.
“Permitted Percentage” shall mean, with respect to any class or series of capital stock of the Corporation, the lesser of (i) 22.5% of the shares of such class or series of capital stock of the Corporation from time to time issued and outstanding, and (ii) 90% of the maximum percentage of the issued and outstanding shares of such class or series of capital stock of the Corporation permitted to be beneficially owned, individually or in the aggregate, by Non-U.S. Citizens under the Maritime Laws so that the Corporation does not cease to be qualified under the Maritime Laws to own and operate vessels that may engage in dredging in the navigable waters of the United States and to transport dredged material between points in the United States.
“Proposed Transfer” shall have the meaning ascribed to such term in Section 5(a) of this Article Five.
“Proposed Transferee” shall have the meaning ascribed to such term in Section 5(a) of this Article Five.
“Redemption Date” shall have the meaning ascribed to such term in Section 6(c)(iii) of this Article Five.
“Redemption Notes” shall mean interest-bearing promissory notes of the Corporation with a maturity of not more than 10 years from the date of issue and bearing interest at a fixed rate equal to the yield on the U.S. Treasury Note having a maturity comparable to the term of such promissory notes as published in The Wall Street Journal or comparable publication at the time of the issuance of the promissory notes.
“Redemption Notice” shall have the meaning ascribed to such term in Section 6(c)(iii) of this Article Five.
“Redemption Price” shall have the meaning ascribed to such term in Section 6(c)(i) of this Article Five.
12
“Restricted Person” shall have the meaning ascribed to such term in Section 5(a) of this Article Five.
“Status Change” shall have the meaning ascribed to such term in Section 5(a) of this Article Five.
“Trading Day” shall mean a day on which the principal National Securities Exchange on which shares of any class or series of the capital stock of the Corporation are listed is open for the transaction of business or, if such capital stock is not listed or admitted for unlisted trading privileges on any National Securities Exchange, a day on which banking institutions in New York City generally are open.
“U.S. Citizen” shall mean a citizen of the United States within the meaning of the Maritime Laws (as defined herein) for purposes of owning or operating vessels in the United States coastwise trade.
BOARD OF DIRECTORS
13
14
RESERVED
LIMITATION OF LIABILITY
To the fullest extent permitted by the DGCL, or any other applicable law, as it now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader exculpation rights than permitted prior thereto), no director or officer of the Corporation shall be liable to the Corporation or its stockholders for monetary damages arising from a breach of fiduciary duty owed to the Corporation or its stockholders. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such repeal or modification. For purposes of this Article Eight, “officer” shall have the meaning provided in Section 102(b)(7) of the DGCL, as it presently exists or may hereafter be amended from time to time.
INDEMNIFICATION
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ACTION BY WRITTEN CONSENT;
SPECIAL MEETINGS OF STOCKHOLDERS
The stockholders of the Corporation may not take any action by written consent in lieu of a meeting, and must take any actions at a duly called annual or special meeting of stockholders and the power of stockholders to consent in writing without a meeting is specifically denied. Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by the affirmative vote of directors holding a majority of the voting power of all directors then in office. Notwithstanding the foregoing, the provisions of the first sentence of this Article Ten shall not apply at any time when the Corporation’s Common Stock is not registered under Section 12 of the Securities Exchange Act of 1934, as amended.
RESERVED
SECTION 203
The Corporation expressly elects to be governed by Section 203 of the DGCL.
AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation or otherwise, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock required by law, this Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation or
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otherwise, the affirmative vote of the holders of (i) at least 66-2/3% of the voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt any provision inconsistent with, to amend or repeal any provision of, or to adopt a bylaw inconsistent with Article Seven, Article Eight, Article Nine, Article Ten, Article Eleven or this Article Thirteen of this Amended and Restated Certificate of Incorporation or (ii) at least a majority of the voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt any provision inconsistent with, to amend or repeal any provision of, or to adopt a bylaw inconsistent with any other provision of this Amended and Restated Certificate of Incorporation.
* * * * * *
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IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 9th day of May, 2024.
By: /s/Vivienne R. Schiffer
Name: Vivienne R. Schiffer Title: Senior Vice President, Chief Legal
Officer, Chief Compliance Officer
and Corporate Secretary
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Exhibit 31.1
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Lasse J. Petterson, certify that:
Date: August 6, 2024
/s/ LASSE J. PETTERSON |
Lasse J. Petterson |
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Scott Kornblau, certify that:
Date: August 6, 2024
/s/ SCOTT KORNBLAU |
Scott Kornblau |
Senior Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Great Lakes Dredge & Dock Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lasse J. Petterson, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Great Lakes Dredge & Dock Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
/s/ LASSE J. PETTERSON |
Lasse J. Petterson |
President and Chief Executive Officer |
|
Date: August 6, 2024 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Great Lakes Dredge & Dock Corporation and will be retained by Great Lakes Dredge & Dock Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Great Lakes Dredge & Dock Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Kornblau, Senior Vice President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by Great Lakes Dredge & Dock Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
/s/ SCOTT KORNBLAU |
Scott Kornblau |
Senior Vice President and Chief Financial Officer |
|
Date: August 6, 2024 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Great Lakes Dredge & Dock Corporation and will be retained by Great Lakes Dredge & Dock Corporation and furnished to the Securities and Exchange Commission or its staff upon request.