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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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:
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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.
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☒ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☐ |
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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
As of July 29, 2022,
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, 2022
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, 2022 and December 31, 2021 |
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3 |
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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, 2022 and 2021 |
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7 |
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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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17 |
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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
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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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2022 |
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2021 |
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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 and 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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COMMITMENTS AND CONTINGENCIES (Note 8) |
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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 income |
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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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2022 |
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2021 |
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2022 |
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2021 |
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Contract revenues |
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$ |
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$ |
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$ |
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$ |
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Costs of contract revenues |
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Gross profit |
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General and administrative expenses |
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(Gain) loss on sale of assets—net |
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( |
) |
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( |
) |
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( |
) |
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Operating income (loss) |
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( |
) |
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Interest expense—net |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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Other income (expense) |
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( |
) |
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( |
) |
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Income (loss) before income taxes |
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( |
) |
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Income tax (provision) benefit |
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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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||||||||||
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2022 |
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2021 |
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2022 |
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2021 |
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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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|
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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(1) |
|
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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|||
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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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|||||
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Stock |
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Stock |
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Capital |
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Earnings |
|
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Income |
|
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Total |
|
||||||
|
BALANCE—January 1, 2022 |
|
|
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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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Share-based compensation |
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— |
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— |
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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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|||
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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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||||
|
BALANCE—June 30, 2022 |
|
|
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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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|
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|
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|
BALANCE—January 1, 2021 |
|
|
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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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— |
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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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( |
) |
|||
|
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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|
|
|
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|||
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Net income |
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— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
||||
|
Other comprehensive income—net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
|
BALANCE—June 30, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
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|
|
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Shares of |
|
|
|
|
|
|
Additional |
|
|
|
|
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Other |
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|||
|
|
|
Common |
|
|
Common |
|
|
Paid-In |
|
|
Retained |
|
|
Comprehensive |
|
|
|
|
|
|||||
|
|
|
Stock |
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Total |
|
||||||
|
BALANCE—March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
- |
|
|
Share-based compensation |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|||
|
Exercise of options and purchases from employee stock plans |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|||
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
— |
|
|
|
( |
) |
||||
|
Other comprehensive loss—net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
||||
|
BALANCE—June 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE—March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|||
|
Exercise of options and purchases from employee stock plans |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
|||
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
||||
|
Other comprehensive income—net of tax |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
||||
|
BALANCE—June 30, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
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)
|
|
|
Six Months Ended |
|
|||||
|
|
|
June 30, |
|
|||||
|
|
|
2022 |
|
|
2021 |
|
||
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
Adjustments to reconcile net income to net cash flows provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
|
|
|
Gain on sale of assets |
|
|
( |
) |
|
|
( |
) |
|
Amortization of deferred financing fees |
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
|
|
|
Contract revenues in excess of billings |
|
|
( |
) |
|
|
( |
) |
|
Inventories |
|
|
( |
) |
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
|
( |
) |
|
Billings in excess of contract revenues |
|
|
( |
) |
|
|
( |
) |
|
Other noncurrent assets and liabilities |
|
|
|
|
|
|
|
|
|
Cash provided by operating activities |
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from dispositions of property and equipment |
|
|
|
|
|
|
|
|
|
Cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Deferred financing fees |
|
|
— |
|
|
|
( |
) |
|
Taxes paid on settlement of vested share awards |
|
|
( |
) |
|
|
( |
) |
|
Exercise of options and purchases from employee stock plans |
|
|
|
|
|
|
|
|
|
Cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
|
Net decrease 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 |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash included in other long-term assets |
|
|
|
|
|
|
— |
|
|
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)
|
1. |
Basis of presentation |
The unaudited condensed consolidated financial statements and notes herein should be read in conjunction with the audited consolidated financial statements of Great Lakes Dredge & Dock Corporation and Subsidiaries (the “Company” or “Great Lakes”) and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations, although management believes that the disclosures are adequate and make the information presented not misleading. In the opinion of management, all adjustments, which are of a normal and recurring nature (except as otherwise noted), that are necessary to present fairly the Company’s financial position as of June 30, 2022 and December 31, 2021, and its results of operations for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021 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 results of operations and comprehensive income for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year.
|
2. |
Earnings per share |
Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
The computations for basic and diluted earnings per share are as follows:
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 three months ended June 30, 2022,
8
|
3. |
Accrued expenses |
Accrued expenses at June 30, 2022 and December 31, 2021 were as follows:
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2022 |
|
|
2021 |
|
||
|
|
|
|
|
|
|
|
|
|
|
Insurance |
|
$ |
|
|
|
$ |
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Payroll and employee benefits |
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
Income and other taxes |
|
|
|
|
|
|
|
|
|
Contract reserves |
|
|
— |
|
|
|
|
|
|
Total accrued expenses |
|
$ |
|
|
|
$ |
|
|
|
4. |
Long-term debt |
Credit agreement
As of June 30, 2022 and December 31, 2021, the Company had
On July 29, 2022, 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 with the Company, 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 “New Amended 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 New Amended Credit Agreement amends and restates the prior Amended 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 Amended Credit Agreement have been subsumed and replaced in their entirety by the terms and conditions of the New Amended Credit Agreement, including the amount available under the revolving credit facility. The terms of the New Amended Credit Agreement are summarized below.
The New Amended Credit Agreement provides for a senior secured revolving credit facility in an aggregate principal amount of up to $
The New Amended 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 New Amended 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 more than
9
The obligations under the New Amended 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).
Interest on the senior secured revolving credit facility of the New Amended Credit Agreement is equal to either a Domestic Rate option or Secured Overnight Financing Rate (“SOFR”) option, at the Company’s election. As of July 29, 2022, (a) the Domestic Rate option is the highest of (1) the base commercial lending rate of PNC Bank, National Association, as publicly announced, (2) the sum of the overnight bank funding rate plus
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
|
5. |
Fair value measurements |
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy has been established by GAAP that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The accounting guidance describes three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company 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.
10
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 and foreign currency exchange rate risk. The Company does not hold or issue derivatives for speculative or trading purposes.
|
|
|
|
|
Fair Value at |
|
|||||||||||||||||||
|
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hierarchy |
|
June 30, 2022 |
|
|
|
|
December 31, 2021 |
|
||||||||||||||
|
|
|
Levels |
|
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, including commodity price risk as it relates to diesel fuel purchase requirements, which occur in the normal course of business. The Company enters into heating oil commodity swap contracts to hedge the risk that fluctuations in diesel fuel prices could have an adverse impact on cash flows associated with its domestic dredging contracts. The Company’s typical goal is to hedge approximately
As of June 30, 2022, the Company was party to various swap arrangements to hedge a portion of the price of its diesel fuel purchase requirements for work in its backlog to be performed through June 2023. As of June 30, 2022, there were
At June 30, 2022 and December 31, 2021, the fair value asset 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 enters into foreign currency exchange forward contracts to hedge the risk that fluctuations in the Euro in relation to the Dollar could have an adverse impact on cash flows associated with its equipment builds.
As of June 30, 2022, the Company was party to various foreign exchange forward contract arrangements to hedge the purchase of materials through November 2024. As of June 30, 2022, there were
As of June 30, 2022, the fair value asset of the foreign currency exchange hedge contracts was estimated to be $
11
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, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel Hedge Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of derivative gains 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel Hedge Contracts |
|
Costs of contract revenues |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Income tax provision |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other financial instruments
The carrying value of financial instruments included in current assets and current liabilities approximates fair value due to the short-term maturities of these instruments. Based on timing of the cash flows and comparison to current market interest rates, the carrying value of our revolving credit agreement approximates fair value. In May 2021, the Company sold $
12
|
6. |
Share-based compensation |
On May 5, 2021, the Company’s stockholders approved the Great Lakes Dredge & Dock Corporation 2021 Long-Term Incentive Plan (the “Incentive Plan”), which previously had been approved by the Company’s board of directors subject to stockholder approval. The Incentive Plan replaces the 2017 Long-Term Incentive Plan (the “Prior Plan”) and is largely based on the Prior Plan, but with updates to the available shares and other administrative changes. The Incentive Plan permits the granting of stock options, stock appreciation rights, restricted stock and restricted stock units to the Company’s employees and directors for up to
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, 2022, the Company granted
|
7. |
Revenue |
At June 30, 2022, the Company had $
Revenue by category
The following series of tables presents our 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 |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital—U.S. |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Capital—foreign |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
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 |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal government |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
State and local government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
13
Accounts receivable at June 30, 2022 and December 31, 2021 are as follows:
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2022 |
|
|
2021 |
|
||
|
Completed contracts |
|
$ |
|
|
|
$ |
|
|
|
Contracts in progress |
|
|
|
|
|
|
|
|
|
Retainage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
Total accounts receivable—net |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
The components of contracts in progress at June 30, 2022 and December 31, 2021 are as follows:
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2022 |
|
|
2021 |
|
||
|
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 |
|
$ |
( |
) |
|
$ |
( |
) |
In the three and six months ending June 30, 2022, a revision to the estimated gross profit percentage of a project was recognized due to a positive settlement of a claim from the recently completed project resulting in a cumulative net impact on the project margin, which increased gross profit by $
At June 30, 2022 and December 31, 2021, costs to fulfill a contract with a customer recognized as an asset were $
|
8. |
Commitments and contingencies |
Commercial commitments
Performance and bid bonds are customarily required for dredging and marine construction projects. The Company has bonding agreements with Argonaut Insurance Company, Berkley Insurance Company, Chubb Surety and Liberty Mutual Insurance Company, under which the Company can obtain performance, bid and payment bonds. The Company also has outstanding bonds with Travelers Casualty, Surety Company of America and Zurich American Insurance Company. Bid bonds are generally obtained for a percentage of bid value and amounts outstanding typically range from $
14
Certain foreign projects performed by the Company have warranty periods, typically spanning no more than
Legal proceedings and other contingencies
As is customary with negotiated contracts and modifications or claims to competitively bid contracts with the federal government, the government has the right to audit the books and records of the Company to ensure compliance with such contracts, modifications, or claims, and the applicable federal laws. The government has the ability to seek a price adjustment based on the results of such audit. Any such audits have not had, and are not expected to have, a material impact on the financial position, operations, or cash flows of the Company.
Various legal actions, claims, assessments and other contingencies arising in the ordinary course of business are pending against the Company and certain of its subsidiaries. The Company will defend itself vigorously on all matters. These matters are subject to many uncertainties, and it is possible that some of these matters could ultimately be decided, resolved, or settled adversely to the Company. Although the Company is subject to various claims and legal actions that arise in the ordinary course of business, except as described below, the Company is not currently a party to any material legal proceedings or environmental claims. The Company records an accrual when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe any of these proceedings, individually or in the aggregate, would be expected to have a material effect on results of operations, cash flows or financial condition.
On April 23, 2014, the Company completed the sale of NASDI, LLC (“NASDI”) and Yankee Environmental Services, LLC (“Yankee”), which together comprised the Company’s historical demolition business, to a privately-owned demolition company. Under the terms of the agreement, the Company received cash of $
On April 22, 2021, the U.S. Attorney’s Office for the Eastern District of Louisiana filed a bill of information against the Company charging the Company with a negligent discharge violation of the Clean Water Act (the “CWA”) arising from a September 2016 oil spill. The spill occurred during the Company’s Cheniere Ronquille project and resulted in the discharge of around one hundred sixty barrels of crude oil in Bay Long, Louisiana. The Company cooperated with the U.S. Attorney’s Office and other relevant agencies in their investigation of the oil spill and on June 15, 2021, the Company pleaded guilty to the misdemeanor violation alleged in the bill of information and agreed to pay a fine of $
15
Lease obligations
The Company leases certain operating equipment and office facilities under long-term operating leases expiring at various dates through 2030. The equipment leases contain renewal or purchase options that specify prices at the then fair value upon the expiration of the lease terms. The leases also contain default provisions that are triggered by an acceleration of debt maturity under the terms of the Company’s New Amended Credit Agreement, or, in certain instances, cross default to other equipment leases and certain lease arrangements require that the Company maintain certain financial ratios comparable to those required by its New Amended Credit Agreement. Additionally, the leases typically contain provisions whereby the Company indemnifies the lessors for the tax treatment attributable to such leases based on the tax rules in place at lease inception. The tax indemnifications do not have a contractual dollar limit. To date, no lessors have asserted any claims against the Company under these tax indemnification provisions.
16
|
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, 2021 and in other securities filings by Great Lakes with the SEC.
Although Great Lakes believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ materially from a projection or assumption in any forward-looking statements. Great Lakes’ future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made only as of the date hereof and Great Lakes does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law.
General
The Company is the largest provider of dredging services in the United States. In addition, the Company is fully engaged in expanding its core business into the rapidly developing offshore wind energy industry. The Company has a long history of performing significant international projects. The mobility of the Company’s fleet enables the Company to move equipment in response to changes in demand for dredging services.
Dredging generally involves the enhancement or preservation of the navigability of waterways or the protection of shorelines through the removal or replenishment of soil, sand or rock. Domestically, our work generally is performed in coastal waterways and deep-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 35% over the prior three years, including 49%, 54%, 17% and 23% of the domestic capital, coastal protection, maintenance and rivers & lakes sectors, respectively.
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 2022, the Company’s dredging revenues earned from contracts with federal government agencies, including the Corps as well as other federal entities such as the U.S. Coast Guard and the U.S. Navy were approximately 76% of dredging revenues, below the Company’s prior three-year average of 80%.
The coronavirus (“COVID-19”) pandemic has impacted global economic activity and many countries, including the United States and its governmental entities and private businesses, have reacted by instituting quarantines, mandating school and business closures and limiting travel at various times throughout the pandemic.
On March 28, 2020, dredging was specifically listed in the U.S. Department of Homeland Security’s “Advisory Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response” which federally designates the Company as an essential business or “critical infrastructure” company that can maintain operations during the ongoing pandemic. As mentioned above, the Company’s largest domestic dredging customer is the Corps; the Corps oversees the majority of these critical infrastructure projects and, in this capacity, has continued to follow their bid schedule and prioritize all types of dredging including port maintenance
17
and expansion and coastal protection projects that are necessary to avoid potential storm damage during hurricane season. Despite the uncertainty surrounding COVID-19, to date, the Corps is continuing to advertise new projects.
Our Executive Leadership team has established a COVID-19 Command Team that meets as necessary to update contingency plans and address the challenges related to maintaining operations in this evolving economic environment. The Company’s primary focus has been the health and safety of its employees. The Company has implemented paid leave policies and additional sanitary and safety measures to mitigate the risk of infection to employees. On vessels and job sites, the Company has instituted fewer employee shift changes and increased sanitary measures. The Company is now 100% fully vaccinated against COVID-19, with few accommodations. Direct COVID-19 related costs were approximately $0.1 million for the second quarter of 2022 compared to approximately $3.0 million in the second quarter of 2021.
In mid-2022, the Company’s corporate employees began transitioning from a hybrid working environment to mostly working in person. The Company is following the protocols published by the U.S. Centers for Disease Control and Prevention, the World Health Organization and state and local governments. As the Company’s employees, customers and communities are facing significant challenges, the Company cannot predict how COVID-19 will evolve or the impact it, or actions taken to contain it, will have on future results. Due to the uncertainty that surrounds this virus, the Company will be continually evaluating safety and operational contingency plans and the potential future impact that this evolving environment has on the Company’s business, financial condition and results of operations.
The Company plans to participate in the offshore wind market and in November 2021, the Company entered into a $197 million contract with Philly Shipyard Inc. to build the first U.S. flagged Jones Act compliant, inclined fall-pipe vessel for subsea rock installation for wind turbine foundations with expected delivery of the vessel in the second half of 2024. This vessel represents a significant and critical advancement in building the U.S. logistics infrastructure to support the future of the new U.S. offshore wind industry. The Company has begun bidding on select projects in the offshore wind market and on July 14, 2022, the Company, in consortium with Van Oord, entered into its first contract with Empire Offshore Wind, a joint venture between Equinor and BP, to perform subsea rock installation work for the Empire I and Empire II offshore wind farms in New York. These wind farms are expected to provide over 2 Gigawatts (“GW”) of renewable energy to the state of New York; enough renewable energy to power more than one million households in New York.
The current Presidential Administration has pushed to accelerate renewable energy developments and has set a target to install 30GW of offshore wind energy generation capacity by 2030 on the U.S. East Coast. In March 2021, the White House announced new initiatives that will advance the administration’s goals to expand the nation’s offshore wind energy capacity in the coming decade by opening new areas of development, improving environmental permitting and increasing public financing for projects In addition, in February 2022, the Bureau of Ocean Energy Management (the “BOEM”) auctioned more than 480,000 acres in the New York Bight area for six new offshore wind energy leases, which brought in $4.4 billion resulting in the most significant wind lease sale in the United States to date. Additionally, in 2021, the U.S. Senate passed the $1.2 trillion infrastructure bill where the Corps will be granted $11.6 billion in funding to improve the nation’s resilience to the effects of climate change.
On March 15, 2022 the Omnibus Appropriations Bill was signed into law, which included funding for the Corps totaling $8.3 billion for fiscal year 2022. This is an increase of $548 million above the fiscal year 2021 amount and an increase of $1.6 billion above the President’s original budget request. Appropriations included $4.6 billion for operation and maintenance, including $2.5 billion from the Harbor Maintenance Trust Fund (“HMTF”) in accordance with the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and $35.0 million for flood control and coastal emergencies which includes $19.8 million for the construction of shore protection projects.
The Water Resource Development Act bill (the “WRDA”), which authorizes new projects and makes policy changes that will make natural infrastructure and beneficial use of dredged material more common, was included in the Consolidated Appropriations Act 2021 signed into law on December 27, 2020. This continues the trend of WRDA legislation in each session of Congress since 2014. The legislation provides access to the $9.3 billion in unspent HMTF tax collections, establishes a funds distribution process for HMTF funding and approves projects to proceed to construction. In July 2022, the Senate passed their version of the Water Resources Development Act 2022 (“the WRDA 2022”) which includes legislation that authorizes about $25 billion to help finance 20 new or modified Corps projects for flood and hurricane protection, dredging, ecosystem restoration and other construction projects. Since the House also passed their version recently, the legislation is expected to be conferenced and signed into law by the President in short order. If this timeline is adhered to, it will be the earliest passage of this legislation in recent history. In addition, in July 2022, both the Senate and House passed their respective fiscal year 2023 Corps budget proposals. The Senate’s proposal was $8.7 billion in funding and House’s proposal was $8.9 billion. Prior to sending to the President for his signature, the House and Senate will meet to agree on a final amount, which will likely be another record budget for the Corps.
The Company has one operating segment, which is also the Company’s one reportable segment and reporting unit.
18
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. The Company experienced regulatory dry dock inspections on two dredges in the second quarter of 2022. An additional dredge was in dry dock for emissions testing. One vessel remained in regulatory dry dock at quarter end with the expectation of completing its dry dock in the third quarter.
Results of operations
The following tables set forth the components of net income and Adjusted EBITDA, as defined below, as a percentage of contract revenues for the three and six months ended June 30, 2022 and 2021:
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
||||
|
Contract revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
|
% |
|
100.0 |
|
% |
|
Costs of contract revenues |
|
|
(93.0 |
) |
|
|
(86.5 |
) |
|
|
(87.3 |
) |
|
|
(83.9 |
) |
|
|
Gross profit |
|
|
7.0 |
|
|
|
13.5 |
|
|
|
12.7 |
|
|
|
16.1 |
|
|
|
General and administrative expenses |
|
|
7.2 |
|
|
|
8.4 |
|
|
|
7.4 |
|
|
|
8.8 |
|
|
|
(Gain) loss on sale of assets—net |
|
|
— |
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
— |
|
|
|
Operating income (loss) |
|
|
(0.2 |
) |
|
|
5.2 |
|
|
|
5.4 |
|
|
|
7.3 |
|
|
|
Interest expense—net |
|
|
(2.3 |
) |
|
|
(3.9 |
) |
|
|
(2.2 |
) |
|
|
(3.8 |
) |
|
|
Other income (expense) |
|
|
(0.7 |
) |
|
|
0.4 |
|
|
|
(0.4 |
) |
|
|
0.3 |
|
|
|
Income (loss) before income taxes |
|
|
(3.2 |
) |
|
|
1.7 |
|
|
|
2.8 |
|
|
|
3.8 |
|
|
|
Income tax (provision) benefit |
|
|
0.6 |
|
|
|
(0.5 |
) |
|
|
(0.7 |
) |
|
|
(0.6 |
) |
|
|
Net income (loss) |
|
|
(2.6 |
) |
|
|
1.2 |
|
|
|
2.1 |
|
% |
|
3.2 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
6.8 |
% |
|
|
11.9 |
% |
|
|
11.6 |
|
% |
|
13.5 |
|
% |
19
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 (loss) 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, |
|
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(4,033 |
) |
|
$ |
2,105 |
|
|
$ |
7,024 |
|
|
$ |
10,919 |
|
|
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense—net |
|
|
3,424 |
|
|
|
6,657 |
|
|
|
7,449 |
|
|
|
13,243 |
|
|
Income tax provision (benefit) |
|
|
(853 |
) |
|
|
829 |
|
|
|
2,432 |
|
|
|
2,218 |
|
|
Depreciation and amortization |
|
|
11,614 |
|
|
|
10,628 |
|
|
|
22,930 |
|
|
|
20,681 |
|
|
Adjusted EBITDA |
|
$ |
10,152 |
|
|
$ |
20,219 |
|
|
$ |
39,835 |
|
|
$ |
47,061 |
|
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) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
2022 |
|
|
2021 |
|
|
Change |
|
||||||
|
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital—U.S. |
|
$ |
89,693 |
|
|
$ |
79,399 |
|
|
|
13.0 |
% |
|
$ |
190,704 |
|
|
$ |
157,005 |
|
|
|
21.5 |
% |
|
Capital—foreign |
|
|
— |
|
|
|
1,613 |
|
|
|
(100.0 |
)% |
|
|
— |
|
|
|
6,322 |
|
|
|
(100.0 |
)% |
|
Coastal protection |
|
|
45,119 |
|
|
|
46,631 |
|
|
|
(3.2 |
)% |
|
|
117,036 |
|
|
|
93,262 |
|
|
|
25.5 |
% |
|
Maintenance |
|
|
12,648 |
|
|
|
37,278 |
|
|
|
(66.1 |
)% |
|
|
32,460 |
|
|
|
82,579 |
|
|
|
(60.7 |
)% |
|
Rivers & lakes |
|
|
1,968 |
|
|
|
4,993 |
|
|
|
(60.6 |
)% |
|
|
3,577 |
|
|
|
8,379 |
|
|
|
(57.3 |
)% |
|
Total revenues |
|
$ |
149,428 |
|
|
$ |
169,914 |
|
|
|
(12.1 |
)% |
|
$ |
343,777 |
|
|
$ |
347,547 |
|
|
|
(1.1 |
)% |
Total revenue was $149.4 million for the three months ended June 30, 2022, down $20.5 million, or 12.1%, from $169.9 million for the same period in the prior year. For the three months ended June 30, 2022, the Company experienced a decrease in maintenance, rivers & lakes, coastal protection and foreign capital revenue as compared to the same period in the prior year. This decrease was partially offset by an increase in domestic capital revenue during the second quarter of 2022 as compared to the same period in the prior year. For the six months ended June 30, 2022, total revenue was $343.8 million, down from revenue of $347.5 million for the same period in the prior year, representing a decrease of $3.7 million or 1.1%. For the six months ended June 30, 2022, the Company experienced a decrease in maintenance, rivers & lakes and foreign capital revenue as compared to the same period in the prior year. This decrease was slightly offset by an increase in domestic capital and coastal protection revenues during the current period as compared to the same period in the prior year.
20
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, 2022, domestic capital dredging revenue was $89.7 million, up $10.3 million, or 13.0%, compared to $79.4 million for the same period in 2021. The increase in capital dredging revenues for the three months ended June 30, 2022 was mostly due to a greater amount of revenue earned on projects in Virginia, Texas, Louisiana, Maine and Alabama in the second quarter of 2022 when compared to the same period in the prior year. This increase was partially offset by revenue earned on projects in South Carolina and Massachusetts in the prior year. For the six months ended June 30, 2022, domestic capital revenue was $190.7 million compared to $157.0 million for the same period in 2021, representing an increase of $33.7 million, or 21.5%. The increase in capital dredging revenues for the six months ended June 30, 2022 was mostly due to a greater amount of revenue earned on projects in Texas, Maine, Virginia, Alabama, Louisiana, Massachusetts and Florida in the current year period when compared to the prior year. This increase was partially offset by revenue earned on projects in South Carolina and Mississippi in the prior year.
Foreign capital projects typically involve land reclamations, channel deepening and port infrastructure development. In the three and six months ended June 30, 2022, there was no foreign capital revenue compared to $1.6 million and $6.3 million in the three and six months ended June 30, 2021.
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, 2022 was $45.1 million, a decrease of $1.5 million, or 3.2%, compared to $46.6 million in the prior year period. The decrease in coastal protection revenues for the three months ended June 30, 2022 was mostly attributable to a lower amount of revenue earned on projects in North Carolina and Florida in the current year period when compared to the prior year. This decrease was slightly offset by revenue earned on projects in New York and New Jersey in the current year. Coastal protection revenue for the six months ended June 30, 2022 was $117.0 million, representing an increase of $23.7 million or 25.5%, from $93.3 million for the same period in 2021. The increase in coastal protection revenues for the six months ended June 30, 2022 was mostly due to a greater amount of revenue earned on projects in North Carolina, New York and New Jersey in the current year period when compared to the prior year. This increase was partially offset by less revenue earned on projects in Florida and Louisiana in the current year.
Maintenance dredging consists of the re-dredging of previously deepened waterways and harbors to remove silt, sand and other accumulated sediments. Due to natural sedimentation, most channels generally require maintenance dredging every one to three years, thus creating a recurring source of dredging work that is typically non-deferrable if optimal navigability is to be maintained. In addition, severe weather such as hurricanes, flooding and droughts can also cause the accumulation of sediments and drive the need for maintenance dredging. Maintenance revenue for the second quarter of 2022 was $12.6 million, down $24.7 million, or 66.1%, from $37.3 million in the same period of 2021. The decrease in maintenance revenues for the three months ended June 30, 2022 was mostly attributable to a decrease in revenue earned on projects in Louisiana and Florida, from the prior year. This decrease was partially offset by an increase in revenue earned on projects in North Carolina in the current year. Maintenance revenue for the six months ended June 30, 2022 was $32.5 million, a decrease of $50.1 million, or 60.7%, compared to $82.6 million for the comparable period in the prior year. The decrease in maintenance revenues for the six months ended June 30, 2022 was mostly due to a lower amount of revenue earned on projects in Louisiana, Florida and Texas in the current year period when compared to the prior year. This decrease was partially offset by more revenue earned on projects in North Carolina in the current year.
Rivers & lakes dredging and related operations typically consist of lake and river dredging, inland levee and construction dredging, environmental restoration and habitat improvement and other marine construction projects. During the second quarter of 2022, rivers & lakes revenue was $2.0 million, a decrease of $3.0 million, or 60.6%, from $5.0 million during the same period of 2021. The decrease in river and lakes revenue for the three months ended June 30, 2022 was mostly attributable to a decrease in revenue earned on projects in Mississippi and Texas in the current year. This decrease was partially offset by an increase in revenue earned on a project in Tennessee in the current year. Rivers & lakes revenue for the six months ended June 30, 2022 was $3.6 million, down $4.8 million, or 57.1%, from $8.4 million for the same period in the prior year. The decrease in rivers & lakes revenues for the six months ended June 30, 2022 was mostly due to a lower amount of revenue earned on projects in Mississippi, Texas and Kansas in the current year period, when compared to the prior year. This decrease was partially offset by an increase in revenue earned on a project in Tennessee in the current year.
21
Consolidated gross profit for the quarter ended June 30, 2022 was $10.5 million, down $12.4 million, or 54%, compared to $22.9 million in same period of 2021. The lower gross profit experienced for the three months ended June 30, 2022, was driven by a decrease in profitability of the Company’s maintenance, rivers & lakes and costal protection dredging projects in the quarter when compared to the same period in the prior year, offset slightly by higher gross profit in domestic capital dredging projects in the current quarter. Consolidated gross profit for the six months ended June 30, 2022 was $43.5 million, down $12.5 million, or 22.3%, compared to $56.0 million in the same period of the prior year. Gross profit margin for the six months ended June 30, 2022 was down to 12.7% from 16.1% in the same period in the prior year. The lower gross profit experienced for the six months ended June 30, 2022 was driven by supply chain delays and high inflation which led to a decrease in the profitability of the Company’s maintenance, rivers & lakes and costal protection dredging projects. This decrease was offset slightly by higher gross profit in domestic capital and foreign capital dredging projects in the current year period. Supply chain delays impacted drydockings and caused dredges to be delayed when mobilizing to their projects and rapidly increasing inflation impacted the cost of labor, operating supplies and drydockings, all of which negatively impacted gross margin.
During the three and six months ended June 30, 2022, general and administrative expenses were $10.8 million and $25.4 million, respectively, compared to the same periods in the prior year in which the three and six months totaled $14.2 million and $30.5 million, respectively. For the three and six months ended June 30, 2022, general and administrative expenses include lower incentive pay and profit sharing in addition to lower relocation expenses related to the headquarters move to Texas.
Operating loss for the second quarter of 2022 was $0.3 million, down $9.1 million compared to operating income of $8.8 million for the same quarter in 2021. Operating income for the six months ended June 30, 2022 was $18.4 million, down $7.1 million from operating income of $25.5 million in the same period of the prior year. The decrease in operating income for the three and six months ended June 30, 2022 was a result of lower gross profit in the current year when compared to the same period in the prior year. This decrease was partially offset by lower general and administrative expenses in the current year when compared to the same period in the prior year.
For the three months ended June 30, 2022, net interest expense was $3.4 million, $3.3 million lower compared to $6.7 million for the same period in the prior year. Net interest expense for the six months ended June 30, 2022 was $7.4 million, $5.8 million lower compared with $13.2 million for the same period in the prior year. The decrease in net interest expense was primarily due to the refinancing of the senior notes in May 2021 at a lower interest rate and an increase in capitalized interest due to the extensive new build program.
Income tax benefit for the three months ended June 30, 2022 was $0.9 million compared to an income tax provision of $0.8 million for the same period in the prior year. For the six months ended June 30, 2022 and 2021, the Company had an income tax provision of $2.4 million and $2.2 million, respectively. The effective tax rate for the six months ended June 30, 2022 was 25.7%, up 8.8% from the effective tax rate of 16.9% for the same period of 2021. The increase in the effective tax rate was primarily due to a one-time benefit associated with a stock compensation tax deduction in the first quarter of the prior year.
Net loss for the quarter ended June 30, 2022 was $4.0 million, down $6.1 million from net income of $2.1 million in the same quarter in the prior year. Diluted earnings (loss) per share was $(0.06) for the three months ended June 30, 2022, compared to $0.03 for the three months ended June 30, 2021. The decrease in net income for the three months ended June 30, 2022 was primarily due to the decrease in gross profit in the current year quarter, partially offset by a decrease in general and administrative expense and net interest expense in the current year quarter. Net income for the six months ended June 30, 2022 was $7.0 million, down $3.9 million, down 36%, from $10.9 million for the same period in the prior year. Diluted earnings per share were $0.11 and $0.16 for the six months ended June 30, 2022 and 2021, respectively. The decrease in net income for the six months ended June 30, 2022 was driven by the decrease to gross profit. This decrease was slightly offset by a decrease in general and administrative and net interest expense during the current year when compared to the same period in the prior year.
Adjusted EBITDA (as defined on page 20) for the quarter ended June 30, 2022 was $10.2 million, down $10.0 million, from $20.2 million in the same quarter in the prior year. The decrease in Adjusted EBITDA during the second quarter of 2022 was driven by the decrease in gross profit, excluding depreciation partially offset by a decrease in general and administrative expense. For the six months ended June 30, 2022 Adjusted EBITDA was $39.8 million, down $7.3 million, or 16%, from $47.1 million during the same period in the prior year. The decrease in Adjusted EBITDA during the first six months of 2022 was driven primarily by the decrease in gross profit, excluding depreciation and other income.
22
Bidding activity and backlog
The following table sets forth, by type of work, the Company’s backlog as of the dates indicated:
|
|
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|||
|
Backlog (in thousands) |
|
2022 |
|
|
2021 |
|
|
2021 |
|
|||
|
Dredging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital - U.S. |
|
$ |
246,042 |
|
|
$ |
398,748 |
|
|
$ |
320,820 |
|
|
Capital - foreign |
|
|
— |
|
|
|
— |
|
|
|
269 |
|
|
Coastal protection |
|
|
76,978 |
|
|
|
99,048 |
|
|
|
51,204 |
|
|
Maintenance |
|
|
43,561 |
|
|
|
50,966 |
|
|
|
67,440 |
|
|
Rivers & lakes |
|
|
7,220 |
|
|
|
2,826 |
|
|
|
14,669 |
|
|
Total backlog |
|
$ |
373,801 |
|
|
$ |
551,588 |
|
|
$ |
454,402 |
|
The Company’s contract backlog represents its estimate of the revenues that will be realized under the portion of the contracts remaining to be performed. These estimates are based primarily upon the time and costs required to mobilize the necessary assets to and from the project site, the amount and type of material to be dredged and the expected production capabilities of the equipment performing the work. However, these estimates are necessarily subject to variances based upon actual circumstances. Because of these factors, as well as factors affecting the time required to complete each job, backlog is not always indicative of future revenues or profitability. Also, 53% of the Company’s June 30, 2022 dredging backlog relates to federal government contracts, which can be canceled at any time without penalty to the government, subject to the Company’s contractual right to recover the Company’s actual committed costs and profit on work performed up to the date of cancellation. The Company’s backlog may fluctuate significantly from quarter to quarter based upon the type and size of the projects the Company is awarded from the bid market. The Company’s backlog includes only those projects for which the Company has obtained a signed contract with the customer. A quarterly increase or decrease of the Company’s backlog does not necessarily result in an improvement or a deterioration of the Company’s business.
The domestic dredging bid market for the quarter ended June 30, 2022 was $938.1 million, a $405.7 million increase compared to the same period in the prior year. Total domestic dredging bid market for the current year period included awards for three coastal protection projects in North Carolina, Charleston Maintenance project in South Carolina, an access channel dredging project in New Jersey, coastal storm risk management project and channel maintenance project in New York. The Company won 11.1% of the overall domestic bid market for the six months ended June 30, 2022, which is lower than the Company’s prior three-year average of 35.0%, primarily due to an atypical bid market with projects out to bid that the Company would not typically bid on. 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 $373.8 million at June 30, 2022 compared to $551.6 million of backlog at December 31, 2021. These amounts do not reflect approximately $540.9 million of domestic low bids pending formal award and additional phases (“options”) pending on projects currently in backlog at June 30, 2022. At December 31, 2021, the amount of domestic low bids and options pending award was $567.3 million.
Domestic capital dredging backlog at June 30, 2022 decreased by $152.7 million from December 31, 2021. In the three months ended June 30, 2022, the Company was awarded one domestic capital dredging project in New Jersey totaling $7.0 million. During the six months ended June 30, 2022, the Company continued to earn revenue on deepening projects in Louisiana, Texas, Alabama, Florida, South Carolina, Virginia, Massachusetts, New Hampshire and Maine, multiple coastal restoration projects in Louisiana, and a liquefied natural gas project in Louisiana. Government funded projects coming into the pipeline include the Freeport Reaches, AOC deepening, Port of Houston, Corpus Christi and additional phases of Mobile deepening. These projects continue the trend of ensuring all East Coast and Gulf of Mexico ports will be able to accommodate the deeper draft vessels currently used on several trade routes. In addition to the government funded deepening projects, the Company also has a port deepening project in Texas. 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.
There was no foreign capital dredging backlog at June 30, 2022 and December 31, 2021 and there are no future foreign projects in the pipeline.
Coastal protection dredging backlog at June 30, 2022 decreased $22.1 million from December 31, 2021. In the six months ended June 30, 2022, the Company was awarded $95.0 million of coastal protection projects, including three projects in North Carolina and one in New York. During the six months ended June 30, 2022, the Company continued to earn revenue on coastal protection projects in New
23
Jersey, New York, North Carolina and Florida which were in backlog at December 31, 2021. Coastal protection and storm impacts continue to provide the major impetus for coastal project investment at federal and state levels. Strong hurricane and storm seasons have resulted in an increase in beach erosion and other damage which adds to the recurring nature of our business and the need for more frequent coastal protection and port maintenance projects. As a result of the extreme storm systems in prior years involving Hurricanes Harvey, Irma, and Maria, Congress passed supplemental appropriations for disaster relief and recovery which includes $17.4 billion for the Corps to fund projects that will reduce the risk of future damage from flood and storm events. The Corps is beginning to provide visibility on its plans for this money, and it is expected that approximately $1.8 billion will be allocated to dredging-related work. Most of this work is anticipated to be coastal protection related, but some funding may be provided for channel maintenance.
Maintenance dredging backlog at June 30, 2022 decreased $7.4 million from December 31, 2021. In the three months ended June 30, 2022, the Company was awarded one maintenance project in New York totaling $2.7 million and one maintenance project in South Carolina totaling $17.6 million. During the six months ended June 30, 2022, the Company continued to earn revenue on projects in Louisiana, Mississippi and North Carolina that were in backlog at December 31, 2021. Past WRDA bills called for full use of the HMTF for its intended purpose of maintaining future access to the waterways and ports that support our nation’s economy. On March 27, 2020, the U.S. government enacted the CARES Act which includes a provision that lifts caps on the HMTF, thereby allowing full access to future annual revenues. Through the increased appropriation of HMTF monies, the Company anticipates increased funding for harbor maintenance projects to be let for bid.
Rivers & lakes backlog at June 30, 2022 increased $4.4 million compared to backlog at December 31, 2021. For the six months ended June 30, 2022, the Company continued to earn revenue on projects in Tennessee and Mississippi which were in backlog at December 31, 2021.
Liquidity and capital resources
The Company’s principal sources of liquidity are net cash flows provided by operating activities and proceeds from previous issuances of long-term debt. The Company’s principal uses of cash are to meet debt service requirements, finance capital expenditures, provide working capital and other general corporate purposes.
The Company’s cash provided by operating activities for the six months ended June 30, 2022 and 2021 was the source of $0.8 million and $35.6 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 decrease in cash provided by operating activities during the six months ended June 30, 2022, compared to the same period in the prior year, was due to a decrease in net income as well as an increase in working capital due to an increase in contract revenues in excess of billings during the current year when compared to the same period in the prior year.
The Company’s cash flows used in investing activities for the six months ended June 30, 2022 and 2021 were $69.6 million and $64.6 million, respectively. Investing activities primarily relate to normal course upgrades and capital maintenance of the Company’s dredging fleet. The Company is currently building a 6,500 cubic yard trailing suction hopper dredge with expected delivery in the first quarter of 2023, additionally, in June 2022 the Company exercised the contract option with the same builder to build a second 6,500 cubic yard trailing suction hopper dredge with expected delivery in the first quarter of 2025. In November 2021, the Company entered into a $197 million contract with Philly Shipyard Inc. to build the first U.S. flagged Jones Act compliant, inclined fall-pipe vessel for subsea rock installation for wind turbine foundations to support the new U.S. offshore wind industry with expected delivery in the second half of 2024. In July 2021, the Company announced a contract to build two multifunctional all-purpose vessels (“multicats”). During the six months ended June 30, 2022, the Company invested $16.0 million in the new hopper dredge, $18.2 million in multicats and scows and $2.7 million in the rock installation vessel. The Company anticipates that remaining new build program payments will be made with cash on hand, future cash flows generated from operations and revolver availability.
The Company’s cash flows used in financing activities for the six months ended June 30, 2022 and 2021 totaled $1.2 million and $6.7 million, respectively. The decrease in cash used in financing activities relates to greater new debt financing fees in the prior year period in addition to changes in the taxes paid on settlement of vested shares awards and a decrease in the exercise of options and purchases from the Company’s employee stock purchase plan.
The Company maintains a favorable cash on hand position and revolver availability and, as a result, is well positioned for changes in the current economic environment.
24
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 New Amended Credit Agreement and Senior 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 Company intends to upgrade its existing domestic fleet by acquiring or building new vessels, equipment and technology to increase productivity and efficiency and further enhance safety. Existing cash on hand, future net cash flows, debt financing and new leases are all available funding resources from which the Company will evaluate its options when considering these upgrades.
The Company believes its cash and cash equivalents, its anticipated cash flows from operations and availability under its revolving credit facility will be sufficient to fund the Company’s operations, capital expenditures and the scheduled debt service requirements for the next twelve months. Beyond the next twelve months, the Company’s ability to fund its working capital needs, planned capital expenditures, scheduled debt payments and dividends, if any, and to comply with all the financial covenants under the New Amended Credit Agreement and bonding agreements, depends on its future operating performance and cash flows, which in turn are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond the Company’s control.
Critical accounting policies and estimates
In preparing its consolidated financial statements, the Company follows GAAP, which is described in Note 1, Basis of presentation, to the Company’s December 31, 2021 Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K. The application of these principles requires significant judgments or an estimation process that can affect the results of operations, financial position and cash flows of the Company, as well as the related footnote disclosures. The Company continually reviews its accounting policies and financial information disclosures. Except as noted in Note 1, Basis of presentation, of the Company’s financial statements, there have been no material changes in the Company’s critical accounting policies or estimates since December 31, 2021.
25
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Item 3. |
Quantitative and Qualitative Disclosures about Market Risk. |
The market risk of the Company’s financial instruments as of June 30, 2022 has not materially changed since December 31, 2021. The market risk profile of the Company on December 31, 2021 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, 2021.
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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, 2022. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act a) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure and b) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2022 in providing such a reasonable assurance.
b) Changes in internal control over financial reporting.
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
PART II — Other Information
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Item 1. |
Legal Proceedings. |
See Note 8, Commitments and contingencies, in the Notes to Condensed Consolidated Financial Statements.
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Item 1A. |
Risk Factors. |
There have been no material changes during the six months ended June 30, 2022 to the risk factors previously disclosed in Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
None.
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Item 3. |
Defaults Upon Senior Securities. |
None.
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Item 4. |
Mine Safety Disclosures. |
Not applicable.
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Item 5. |
Other Information |
None.
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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 |
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** |
Furnished herewith |
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, Chief Financial Officer and Treasurer |
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(Principal Financial Officer and Duly Authorized Officer) |
Date: August 2, 2022
29