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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number:
333-64687

Great Lakes Dredge & Dock Corporation
(Exact name of registrant as specified in its charter)

(630) 574-3000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:    NONE

Securities registered pursuant to Section 12(g) of the Act:    NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes    o    No    ý

All of the Company's common stock is held by a holding company.

As of March 22, 2004, there were outstanding 1,000 shares of Common Stock and zero shares of Preferred Stock.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

        This Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, including but not limited to the Management's Discussion and Analysis of Financial Condition and Results of Operations, contains or may contain forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Readers are cautioned not to place undue reliance on such statements because they are subject to numerous uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking statements include information concerning the Company's possible or assumed future results of operations. When used in this Report, the words "anticipate," "believe," "estimate," "except," "future," "intend," "plan," "should" and similar expressions or the negative thereof or other comparable terminology or discussions of strategy, plans, or intentions, identify such forward-looking statements. These statements are based on assumptions that have been made in light of the Company's experience in the industry as well as its perceptions of historical trends, current conditions, expected future developments and other factors that the Company believes are appropriate under the circumstances. These statements are not guarantees of performance or results. Although the Company believes that these forward-looking statements are based on reasonable assumptions, many factors could affect the Company's actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. Some of these factors include:

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A loss of government dredging contracts could have a negative impact on the Company's business, financial condition and results of operation.



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The Company's inability to obtain bonding for future projects would limit the amount of dredging contracts that the Company could perform.



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Significant operating risks and hazards (including environmental hazards, industrial accidents, encountering unusual or unexpected geological formations, cave-ins below water levels, disruption of transportation services and flooding) could result in damage or destruction to persons or property, which could result in losses or liabilities to the Company.



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Although the Company insures against the risk of loss in its business, actual liabilities may exceed the Company's insurance coverage.



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The Company's growth may be hindered if it is unable to retain key executives and other personnel.



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The Company is exposed to political, economic and other risks related to its international operations.



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The Company's operations may be adversely affected by weather conditions and natural disasters.



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The amount of the Company's estimated backlog is subject to change and not necessarily indicative of future sales.



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Because of the fixed-price nature of most of its contracts, the Company is subject to risks of losses from underestimating costs, operational difficulties and other changes that may occur over the contract period.



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The Company's dredging operations may fluctuate due to seasonality and other factors that may adversely affect its cash flow.



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The Company's business could suffer in the event of a work stoppage by its unionized labor force.



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Environmental matters could force the Company to incur significant capital and operational costs.



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If the Company's demolition business is unable to compete effectively, its demolition revenues may decline and it may be unable to sustain its gross profit margins in its demolition business.



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The loss of key customers and large contracts in its demolition activities could have a material impact on the Company's business, financial condition and results of operations.



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The Company depends on subcontractors in its demolition business, and an inability to find quality subcontractors could cause disruptions in its demolition business.

        Other factors and assumptions not identified above are also relevant to the forward-looking statements, and if they prove incorrect, could also cause actual results to differ materially from those projected. The forward-looking statements made in this Report or incorporated by reference into this Report relate only to events as of the date on which the statements are made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

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Part I

Item 1.—Business

Organization

        Great Lakes Dredge & Dock Corporation (the "Company" or "Great Lakes") is the largest provider of dredging services in the United States. The Company was founded in 1890 as Lydon & Drews Partnership and contracted its first project in Chicago, Illinois. The Company changed its name to Great Lakes Dredge & Dock Company in 1905 and was involved in a number of marine construction and landfill projects along the Chicago lakefront and in the surrounding Great Lakes' region. The Company was listed on the NYSE in 1971, and in 1985, purchased through a friendly stock offer by ITEL. Throughout this period, the Company expanded geographically, providing marine construction and dredging services throughout the U.S. and in certain international markets. In 1991, the Company was purchased by an affiliate of Blackstone Capital Partners, who owned the Company until 1998, at which time it was sold to Vectura Holding Company LLC ("Vectura"), a portfolio company of Citigroup Venture Capital, Ltd.

        On December 22, 2003, Madison Dearborn Capital Partners IV, L.P. ("MDP"), an affiliate of Chicago-based private equity investment firm Madison Dearborn Partners, LLC, acquired control of Great Lakes from its former owner, Vectura, for approximately $362.1 million, including fees and expenses, in a transaction accounted for as a purchase. The acquisition was effected by a new company established for this purpose, GLDD Acquisitions Corp., which acquired 100% of the equity securities of the Company. Certain members of GLDD's management own approximately 15% of outstanding common stock of GLDD Acquisitions Corp. and MDP and certain of its co-investors own the remaining 85%. The acquisition was financed by new equity contributions of $97.0 million; term loan and revolver borrowings under a new senior credit facility of $60.3 million and $2.0 million, respectively; the issuance of $175.0 million of 7³/4% senior subordinated notes due 2013; the rollover of term loan borrowings under a new equipment financing facility of $23.4 million; the rollover of approximately $1.6 million of capital leases; and cash on hand of $2.8 million.

        On April 24, 2001, the Company purchased 80% of the capital stock of North American Site Developers, Inc. ("NASDI"), a demolition services provider located in the Boston, Massachusetts area. The purchase consideration for the acquisition included $35.0 million in cash payable to the stockholders of NASDI and two senior subordinated notes totaling $3.0 million payable to the NASDI management stockholders. In 2003, the Company increased its ownership in NASDI to 85%. One NASDI management stockholder retains a 15% non-voting interest in NASDI. With the acquisition of NASDI, the Company now operates in two reportable segments: dredging and demolition. Financial information about the Company's segments is provided in Note 16, "Segment information" in the Notes to the Consolidated Financial Statements.

Dredging Operations

        Dredging generally involves the enhancement or preservation of navigability of waterways or the protection of shorelines through the removal or replenishment of soil, sand or rock. The U.S. dredging market consists of three primary types of work: capital, beach nourishment and maintenance. The Company's bid market is defined as the population of projects on which it bid or could have bid if not for capacity constraints ("bid market"). The Company achieved a combined U.S. market share of the projects within its bid market of 31%, 49% and 39% in 2003, 2002 and 2001, respectively. In addition, the Company is the only U.S. dredging service provider with significant international operations, which averaged 15% of its dredging contract revenues over the last three years. The Company's fleet of 24 dredges, 27 material transportation barges, two drillboats, and numerous other specialized support vessels is the largest and most diverse fleet in the U.S. The Company believes its fleet would cost in excess of $1.0 billion to build in the current market.

        Domestic Dredging Operations. Over its 113-year life, the Company has grown to be the leader in each of its primary dredging activities in the U.S., including:

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Capital (approximately 57% of 2003 dredging revenues). Capital dredging projects are primarily port expansion projects, which involve the deepening of channels to allow access by larger, deeper draft ships and the providing of land fill for building additional port facilities. Capital projects also include other land reclamations, trench digging for pipes, tunnels and cables, and other dredging related to the construction of breakwaters, jetties, canals and other marine structures. Although capital revenue can be impacted by budgetary constraints and economic conditions, these projects typically generate an immediate economic

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benefit to the ports and surrounding communities. The Company's bid market share of total U.S. capital projects averaged 46% over the past three years

The U.S. capital market includes "Deep Port" projects authorized under the 1986 Water Resource Development Act ("WRDA") as amended and supplemented, most recently in December 2000. Without significant deepening efforts, many major U.S. ports risk losing their competitive position as a result of being unable to accommodate larger cargo vessels. The WRDA legislation provides authorization for the deepening of certain major domestic ports. In 1997, the U.S. Army Corps of Engineers (the "Corps") announced Deep Port work, authorized by WRDA, to be completed through 2005, with an aggregate value in excess of $2.0 billion, and supplemental authorizations have increased this amount to approximately $4.0 billion, with work to be completed through 2010. Currently, over $2.5 billion of these authorized Deep Port projects have yet to be let for bid. Deep Port work has comprised a substantial portion of recent bid markets, averaging 36% of the bid market over the last three years. The Company's bid market share of Deep Port projects averaged 45% over the last three years.

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Beach Nourishment (approximately 13% of 2003 dredging revenues). Beach nourishment projects generally involve moving sand from the ocean floor to shoreline locations when erosion has progressed to a stage that threatens substantial shoreline assets. Beach nourishment is often viewed as a better response to erosion than trapping sand through the use of sea walls and jetties, or relocating buildings and other assets from the shoreline. Beach nourishment also facilitates shoreline real estate development and recreational activities. Generally, beach nourishment projects take place during the fall and winter months to minimize interference with bird and marine life migration and breeding patterns and coastal recreation activities. The Company's bid market share of U.S. beach nourishment projects averaged 61% over the last three years.



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Maintenance (approximately 13% of 2003 dredging revenues). Maintenance dredging consists of the redredging of previously deepened waterways and harbors to remove silt, sand and other accumulated sediments. Due to natural sedimentation, active 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. The Company's bid market share of U.S. maintenance projects averaged 27% over the last three years.

        Foreign Dredging Operations (approximately 17% of 2003 dredging revenues). Foreign capital projects typically relate to channel deepening and port infrastructure development. Beginning in the early 1990s, consolidation among foreign competitors, along with an increase in foreign governments' investments in infrastructure, created new overseas dredging opportunities for the Company. Since this time, the Company has targeted opportunities which are well suited to its equipment and where competition from its European competitors is reduced. While the Company has only a minor share of the international dredging market, it has maintained its presence in the foreign markets to enable it to diversify, particularly at times when there is anticipation of a decrease in the domestic market. Over the last ten years, the Company has worked in Europe, the Middle East, Africa, India, Mexico and South America. In recent years, the Middle East region has presented the most attractive prospects, and the Company currently has dredging assets positioned in the Middle East, Africa, and Central America. Revenues from foreign capital projects averaged 15% of the Company's dredging revenues over the last three years.

        The Company believes that it benefits from a number of favorable trends in the U.S. dredging market:

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Deep Port capital projects. Historically, the average controlling depth of the 10 largest U.S. ports, as measured by annual container volume, has been approximately 10 feet less than the average controlling depth of the ten largest non-U.S. ports worldwide. Without significant deepening efforts, most major U.S. ports risk being unable to accommodate larger cargo vessels, which renders them less competitive with deeper ports. The Corps has the primary responsibility for maintaining and improving the nation's waterways, ports and shorelines. Funding for announced projects has increased significantly in recent years due to increased federal funding, authorized through the WRDA legislation, and increased cost sharing of capital projects by local governments. However, contrary to this trend, 2003 experienced a reduction in bidding of Deep Port work due to several factors that are further discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Outlook and Backlog." Despite the reduction in 2003 Deep Port bidding, the Company continues to believe that Deep Port work will provide significant opportunities for the domestic dredging industry.

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Increasing need for beach nourishment. Beach erosion is a continuous problem and there is a growing awareness among state and local governments as to the importance of beachfront assets to the multi-billion dollar tourism industry. To date, a significant amount of funding has been allocated to restore and preserve eroding beachfront. Beach projects are generally funded by both federal and state and local monies; therefore, a downturn in the economy can impact the amount of available funding, particularly from state and local sources. The 2003 beach bid market, however, remained strong with bid revenues of approximately $96 million, and recent bid schedules provided by project owners indicate that a number of significant projects valued in excess of $150 million should be forthcoming in 2004.



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Additional significant long-term opportunities. Other capital projects, although not part of the Deep Port program, make consistent contributions to our revenues. A number of these capital projects have been identified, including work in Texas City and Bayport, Texas, and Long Beach, California, which will require similar technical expertise and equipment capabilities. Additionally, there are significant capital dredging opportunities related to projects to contain the erosion of wetlands and coastal marshes (particularly in Louisiana), provide land reclamation for the San Francisco airport expansion and clean-up contaminated inland waterways such as the Hudson River in New York and the Fox River in Wisconsin. These long-term projects have the potential to add substantial revenue to the dredging market, beginning as soon as 2005 and continuing for approximately eight to 10 years thereafter.

Demolition Operations

        NASDI, founded in 1976, is a major U.S. provider of commercial and industrial demolition services. NASDI's core business is exterior and interior demolition, generally performed in the New England area. Exterior demolition involves the complete dismantling and demolition of structures and foundations. Interior demolition involves removing specific structures within a building. Other business activities include site development and asbestos and other hazardous material removal. NASDI generally contracts hazardous material removal to insured subcontractors and does not take possession of hazardous materials, which remain the property of the site owner. NASDI is one of a few providers in New England with the required licenses, operating expertise, equipment fleet and access to bonding to execute larger, complex industrial demolition projects. In recent years, NASDI has successfully performed three demolition projects involving the dismantling and disposal of aging power generation plants. NASDI continues to pursue additional opportunities in the developing market for the demolition of aging industrial facilities, often to allow for the construction of new and more efficient replacements on the same site.

Competitive Strengths

        The Company possesses a number of competitive strengths that have allowed it to develop and maintain its leading position within the dredging industry.

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Favorable competitive dynamic. The Company benefits from significant advantages relative to both existing and potential competitors, including (i) the requirements of the Dredging Act of 1906 and the Jones Act of 1920, which effectively prohibit foreign dredges and, to a certain extent, foreign-owned dredging companies from competing in the U.S (see "Business—Government Regulations"); (ii) the relatively long lead time and high capital cost associated with the construction of a new dredge, which the Company estimates to be two years and between $20 to $60 million, depending on the type of dredge; and (iii) the Company's reputation for quality and customer service built up over its 113-year operating history, during which time it has never failed to complete a project.



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Largest and most diverse dredging fleet. The Company operates the largest and most diverse dredging fleet in the U.S., with over 200 pieces of equipment, including the largest hopper fleet and the largest hydraulic dredges in the U.S. The size, versatility and technical capabilities of the fleet improves the Company's competitiveness by affording the Company the flexibility to select the most efficient equipment for a particular job and enabling the Company to perform multiple projects at the same time. To maintain the value and effectiveness of its fleet, the Company emphasizes preventative maintenance to minimize downtime, increase profitability, extend vessel life and reduce replacement capital expenditure requirements.



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Specialized capability in capital projects. The Company has also been a leader in U.S. capital dredging, which generally requires specialized engineering expertise, specific combinations of equipment and experience in executing complex projects. The Company believes its extensive experience performing complex projects significantly enhances its ability to bid for and complete these contracts profitably. Additionally, the

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Company believes it has a significant advantage over its competitors in projects bid as "requests for proposal". For further information regarding the request for proposal process, see "Bidding Process" below.

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Proprietary and proven project costing methodologies. Over the course of its 113-year operating history, the Company has developed an extensive proprietary database of publicly-available dredging records from its own and its competitors' activities and past bidding results. The Company believes that its extensive proprietary database combined with its accumulated estimating and bidding expertise is a significant competitive advantage in bidding for new dredging contracts. The Company's expertise in accurately estimating project costs has contributed to its strong and consistent profitability.



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Diversified revenue base. The Company benefits from a dredging revenue base that is broadly diversified across the three dredging sectors, which have different demand drivers. Capital projects primarily consist of port expansion work, which is driven by growth in U.S. trade and commerce. Beach nourishment and maintenance projects are more heavily influenced by weather, natural sedimentation and erosion. Revenue within each of the Company's dredging sectors comes from a portfolio of separate contracts, which helps to mitigate project-specific risk. For the year ended December 31, 2003, the Company's revenues were derived from over 50 separate dredging contracts, and no contract represented more than 15% of its revenues. The Company's foreign dredging operations and demolition operations further diversify its revenue and customer base.



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Proven, experienced management team. The Company's top 13 senior managers have an average of 20 years of experience in the dredging industry. The Company believes that this experience provides it with a significant advantage over its competitors. Certain members of management own 15% of the Company's issued and outstanding common stock.

Business Strategy

        The Company intends to continue to grow contract revenues and cash flows and strengthen its competitive position worldwide by using the following strategies:

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Continuing to maintain preeminence in domestic markets. The Company expects to maintain its domestic leadership position by leveraging (i) the size, diversity and technical capabilities of its fleet, (ii) its industry-leading operating experience, (iii) its engineering expertise, and (iv) its efficient and safe project management practices.



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Capitalizing on market opportunities. Using its strong technical capabilities and operating experience, the Company believes that it will be able to capitalize on the over $2.5 billion of authorized Deep Port projects that have yet to be let for bid, beach nourishment opportunities of approximately $100 million per year and an annual maintenance market of approximately $200 million. Additionally, the Company has identified other long range capital projects, such as the Louisiana coastal restoration project among others, that have the potential to add substantial revenues to the industry over the next eight to 10 years. Numerous foreign projects provide attractive opportunities to employ its foreign-based assets.



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Enhancing its operating capabilities. During the last few years, the Company has acquired or constructed several key pieces of equipment. This new equipment has enhanced its dredging capabilities by providing additional tools for capital projects and strengthening its ability to perform maintenance and beach nourishment projects. For example, in 2000 the Company made improvements to its dredge "Texas," to increase its cutting power, making it the most powerful hydraulic cutter dredge in the U.S., capable of handling rock work required in many of the port deepening projects.



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Continuing its presence in foreign markets. Foreign governments' port infrastructure investments continue to present new overseas dredging opportunities for Great Lakes. The Company intends to continue to selectively pursue international opportunities that offer it the potential to increase the utilization of its asset base.



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Pursuing growth opportunities in the commercial and industrial demolition market. The Company believes that its experience in bidding for and completing large projects and its significant infrastructure will be particularly valuable in helping NASDI to bid for and win large demolition projects. NASDI's experience, strong reputation, quality equipment and key client relationships in the demolition market, combined with the Company's core competencies, offer it the opportunity to increase the volume and profitability of its demolition work.

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Customers

        Dredging. The dredging industry's customers include federal, state, and local governments, foreign governments, and both domestic and foreign private concerns such as utilities and oil companies. Most dredging projects are competitively bid, with the award going to the lowest qualified bidder. There are generally few economical substitutes that customers can use for dredging services. The Corps is the largest dredging customer in the U.S. and has responsibility for federally funded projects related to navigation and flood control. In addition, the U.S. Coast Guard and the U.S. Navy are responsible for awarding federal contracts with respect to their own facilities. In 2003, approximately 72% of the Company's dredging revenues were earned from contracts with federal government agencies or companies operating under contracts with federal government agencies.

        Foreign governments are the primary dredging customers in international markets, generally for capital projects relating to infrastructure development. Approximately 17% of the Company's 2003 dredging revenues were earned from contracts with foreign governments or companies operating under contracts with foreign governments.

        Demolition. NASDI's customers include general contractors who subcontract demolition services, corporations that commission projects, non-profit institutions such as universities and hospitals, and local government and municipal agencies. NASDI benefits from key relationships with certain customers in the general contracting and public infrastructure industries. NASDI negotiates the majority of its demolition contracts as fixed price ("lump sum") contracts with other projects negotiated on a time-and-materials ("T&M") basis. NASDI frequently receives revenues from change orders on existing contracts. The majority of the demolition services are currently concentrated in New England. In 2003, approximately 51% of NASDI's annual revenues were earned from contracts with three private customers.

Bidding Process

        Dredging. Most of the Company's dredging contracts are obtained through competitive bidding on terms specified by the party inviting the bid. The nature of the specified services dictates the types of equipment, material and labor involved, all of which affect the cost of performing the contract and the price that dredging service providers will bid.

        For contracts under its jurisdiction, the Corps typically prepares a cost estimate based on the specifications of the project. To be successful, a bidder must be determined by the Corps to be a responsible bidder (i.e., a bidder that generally has the necessary equipment and experience to successfully complete the project) and submit the lowest responsive bid that does not exceed 125% of an estimate determined by the Corps to be fair and reasonable. Contracts for projects that are not administered by the Corps are generally awarded to the lowest qualified bidder, provided the bid is no greater than the amount of funds that are available for the project.

        Substantially all of the Company's dredging contracts are competitively bid. However, some government contracts are awarded by a sole source procurement process through negotiation between the contractor and the government, while other projects have been recently bid by the Corps through a "request for proposal" (RFP) process. The RFP process allows the project award to be based on the technical capability of the contractor's equipment and methodology, as well as price, and has, therefore, been advantageous for the Company since it has the technical engineering expertise and equipment versatility to comply with the project specifications.

        Great Lakes has operated for over 113 years and maintains an extensive historical database of dredging production records from its own and its competitors' activities and past bidding results. Prior production records help the Company predict sediment composition and optimum equipment requirements. Management believes that its extensive database and its accumulated estimating and bidding expertise allow the Company to be more accurate than its competitors in predicting dredging cost prior to bidding for contracts.

        Demolition. NASDI has established a network of local contacts with developers and prime contractors that act as referral sources and frequently enable NASDI to procure demolition jobs on a sole-source basis. When NASDI bids on a project, it evaluates the contract specifications and develops a cost estimate to which it adds profit for the final bid price. While there are numerous competitors in the demolition services market, NASDI is one of the few firms in its region of operation with the capability to execute large projects, which often limits its competition. For these reasons, if it is not the lowest bidder on a contract, NASDI may still be awarded a project based on its qualifications.

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Bonding and Foreign Project Guarantees

        Dredging. For most domestic projects and some foreign projects, dredging service providers are required to obtain three types of bonds, which are typically provided by large insurance companies. A bid bond is required to serve as a guarantee that if a service provider's bid is chosen, the service provider will sign the contract. The amount of the bond is typically 20% of the service provider's bid, up to a maximum bond of $3.0 million. After a contract is signed, the bid bond is replaced by a performance bond, the purpose of which is to guarantee that the job will be completed. A performance bond typically covers 100% of the contract value with no maximum bond amounts. If the service provider fails to complete a job, the bonding company assumes such obligation and pays to complete the job, generally by using the equipment of the defaulting company. A company's ability to obtain performance bonds with respect to a particular contract depends upon the size of the contract, as well as the size of the service provider and its financial position. A payment bond is also required to protect the service provider's suppliers and subcontractors in the event that the service provider cannot make timely payments. Payment bonds are generally written at 100% of the contract value.

        Great Lakes' projects are currently bonded by Travelers Casualty and Surety and Travelers Casualty and Surety Company of America (collectively, "Travelers"). The Company has never experienced difficulty in obtaining bonding for any of its projects. If the Company were to default on a project, the bonding company would complete the defaulted contract and would be entitled to be paid the contract price directly by the customer. Additionally, the bonding company would be entitled to be paid by the Company for any costs incurred in excess of the contract price. Travelers has been granted a security interest in a substantial portion of our operating equipment as collateral for its surety.

        For most foreign dredging projects, letters of credit or bank guarantees issued by foreign banks, which are secured by letters of credit issued under the Company's credit agreement with its senior secured lenders (the "Credit Agreement"), are required as security for the bid, performance and, if applicable, advance payment. Foreign bid guarantees are usually 2% to 5% of the service provider's bid. Foreign performance and advance payment guarantees are each typically 5% to 10% of the contract value.

        Demolition. NASDI's contracts are primarily with private, non-government customers; thus, it often is not required to secure bonding. When NASDI does have bonding requirements, the bonds are also provided by Travelers.

Competitive Environment

        Dredging. The U.S. dredging industry is highly fragmented but has experienced significant consolidation in recent years. Approximately 180 entities in the U.S. presently operate more than 600 dredges, most of which are smaller and service the inland, as opposed to coastal, waterways and therefore, do not generally compete with Great Lakes. Competition in the Company's market is determined primarily on the basis of price, and competition is often limited by the size of the job, equipment requirements, bonding requirements, certification requirements, or government regulations. Great Lakes and four other key competitors perform the majority of the work within the Company's domestic dredging bid market, with smaller dredging companies obtaining a 16% share, on average, over the last three years. Since the Deep Port projects are typically of significant value and there is a large volume of projects remaining in the program, some of these smaller dredging companies have made equipment investments, rationalized by the opportunities in the Deep Port market and encouraged by the Corps in an effort to increase competition. While these smaller competitors have won some major Deep Port projects, they have generally not performed well on these projects so it is unclear whether they will pose the same degree of competition in the future.

        Demolition. The U.S. demolition and related services industry is highly fragmented and is comprised mostly of small regional companies, many of which are not able to perform some of the large, complex infrastructure projects on which NASDI excels. Unlike many of its competitors, NASDI is able to perform both the small and large projects and competes in the demolition and related services industry primarily on the basis of its experience, reputation, equipment, key client relationships and price.

Equipment

        Dredging. Great Lakes' fleet of dredges, material barges and other specialized equipment is the largest and most diverse in the U.S. There are three principal types of dredging equipment: hopper dredges, hydraulic dredges and mechanical dredges.

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Hopper Dredges. Hopper dredges are typically self-propelled and have the general appearance of an ocean-going vessel. The dredge has hollow hulls into which material is suctioned hydraulically through drag-arms and deposited. Once the hollow hulls or "hoppers" are filled, the dredge will sail to the designated disposal site and either (i) bottom dump the material or (ii) pump the material from the hoppers through a pipeline to the designated site. Hopper dredges can operate in rough waters, are less likely than other types of dredges to interfere with ship traffic and can move quickly from one project to another. Great Lakes operates the largest hopper fleet in the U.S., affording it flexibility to quickly respond to time-sensitive projects.



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Hydraulic Dredges. Hydraulic dredges remove material using a revolving cutterhead which cuts and churns the sediment on the ocean floor and hydraulically pumps the material by pipe to the disposal location. These dredges are very powerful and can dredge some types of rock. Certain materials can be directly pumped as far as seven miles with the aid of a booster pump. Hydraulic dredges work with an assortment of support equipment, which help with the positioning and movement of the dredge, handling of the pipelines, and the placement of the dredged material. Great Lakes operates the only two large electric hydraulic dredges in the U.S., which makes the Company particularly competitive in markets with stringent emissions standards, such as California.



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Mechanical Dredges. There are two basic types of mechanical dredges operating in the U.S.: clamshell and backhoe. In all cases, the dredge uses a bucket to excavate material from the ocean floor. The dredged material is placed by the bucket into material barges or "scows" for transport to the designated disposal area. The scows are emptied by bottom-dumping, direct pump-out or removal by a crane with a bucket. Mechanical dredges are capable of removing hardpacked sediments and debris and can work in tight areas such as along docks or terminals. Clamshell dredges with specialized buckets are ideally suited to handle material requiring controlled disposal. The Company has the largest fleet of material barges in the industry, which provides cost advantages when dredged material is required to be disposed far offshore or when material requires controlled disposal.

        Great Lakes' domestic dredging fleet is typically positioned on the East and Gulf Coasts with a smaller number of vessels on the West Coast and on inland rivers. The mobility of the Company's fleet enables it to move equipment in response to changes in demand. Great Lakes' fleet includes assets currently positioned internationally in the Middle East, Africa and Central America.

        The Company is continually assessing its need to upgrade and expand its dredging fleet to take advantage of improving technology and to address the changing needs of the dredging market. As mentioned previously, the Company has recently made some significant additions to its dredging capacity which it believes will enhance its ability to compete for and execute future Deep Port projects and strengthen its ability to perform beach and maintenance projects.

        The Company is committed to preventive maintenance, which it believes is reflected in the long lives of most if its equipment and its low level of unscheduled downtime on jobs. The Company spent $27.9 million on maintenance in 2003, in addition to $37.7 million on capital expenditures (which included approximately $15.0 million used to buy out certain dredging equipment previously under operating lease, $3.6 million related to a barge being constructed as part of a like-kind exchange, and a $0.8 million deposit on construction of two new rock barges).

        Demolition.    NASDI owns and operates specialized demolition equipment, including a fleet of excavators equipped with shears, pulverizers, processors, grapples, and hydraulic hammers that provide high-capacity processing of construction and demolition debris for recycling and reclamation. NASDI also owns and maintains a large number of skid-steer loaders, heavy-duty large-capacity loaders, cranes, recycling crushers, off-highway hauling units and a fleet of tractor-trailers for transporting equipment and materials to and from job sites. NASDI rents additional equipment on a project-by-project basis, which allows NASDI flexibility to adjust costs to the level of project activity.

Equipment Certification

        Certification of equipment by the U.S. Coast Guard and establishment of the permissible loading capacity by the America Bureau of Shipping ("A.B.S.") are important factors in Great Lakes' dredging business. Many projects, such as beach nourishment projects with offshore sand, dredging projects in exposed entrance channels, and dredging projects with offshore disposal areas, are restricted by federal regulations to be performed only by

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dredges or scows that have U.S. Coast Guard certification and a load line established by the A.B.S. The certifications indicate that the dredge is structurally capable of operating in open waters. The Company has more certified vessels than any domestic competitor and makes substantial investments to maintain these certifications.

Seasonality

        Prior to the last several years, the Company had historically realized lower contract revenues and earnings in the first and fourth quarters of each year. This trend was due to a number of factors including variation in weather conditions and government funding cycles, which affected the timing and execution of projects. In recent years, seasonality has not had a significant impact on the Company's dredging operations, with the increased volume of Deep Port work in the market and the impact of environmental windows, which require that certain work be performed in winter months to protect wildlife habitats. The Company has been able to respond to these market factors since it has the flexibility to move its equipment around as weather conditions and environmental restrictions dictate. However, in the future, seasonality may become more of a factor if the project mix changes and the Company is not able to be as flexible in utilizing its equipment. The Company's demolition operations are not significantly impacted by seasonality.

Backlog

        The Company's contract backlog represents management's estimate of the revenues which will be realized under the portion of the contracts remaining to be performed. Such estimates are subject to fluctuations based upon the amount of material actually dredged or scope of demolition services to be provided as well as factors affecting the time required to complete the job. In addition, because a substantial portion of the Company's backlog relates to government contracts, the Company's backlog can be canceled at any time without penalty; however, the Company can generally recover actual committed costs and profit on work performed up to the date of cancellation. Consequently, backlog is not necessarily indicative of future results. The Company's backlog includes only those projects for which the customer has provided an executed contract. The components of the Company's backlog are addressed in more detail in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Employees

        Dredging. At December 31, 2003, the Company employed approximately 300 full-time salaried personnel, with additional hourly personnel, most of whom are unionized and hired on a project-by-project basis. During 2003, the Company employed an average of approximately 500 hourly personnel to meet project requirements. Crews are generally available for hire on relatively short notice.

        The Company is a party to numerous collective bargaining agreements that govern its relationships with its unionized hourly personnel. However, five primary agreements apply to approximately 90% of such employees. The Company has not experienced any major labor disputes in the past five years and believes it has good relationships with its significant unions; however, there can be no assurances that the Company will not experience labor strikes or disturbances in the future.

        Demolition. At December 31, 2003, NASDI employed approximately 20 full-time salaried administrative employees, in addition to approximately 120 unionized employees who are party to four union agreements. The unionized employees are hired on a project-by-project basis and are generally available for hire on relatively short notice.

Joint Ventures

Amboy Aggregates

        The Company and a New Jersey aggregates company each own 50% of Amboy Aggregates ("Amboy"). Amboy was formed in December 1984 to mine sand from the entrance channel to the New York Harbor and to provide sand and aggregate for use in road and building construction. Great Lakes' dredging expertise and its partner's knowledge of the aggregate market formed the basis for the joint venture. The Company's investment in Amboy is accounted for using the equity method.

        Amboy is the only East Coast aggregate producer to mine sand from the ocean floor. Amboy has a specially designed dredge for sand mining, de-watering and dry delivery. No other vessel of this type operates in the U.S.

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Amboy's ocean-based supply of sand provides a long-term competitive advantage in the Northeast as land-based sand deposits are depleted or rendered less cost competitive by escalating land values.

        Mining operations are performed pursuant to permits granted to Amboy by the federal government and the states of New York and New Jersey. After much delay, in 2002, Amboy was successful in obtaining approval for a new permit allowing it to mine deeper in its sand borrow areas. This new sand source is expected to be of better quality, thereby requiring less blending with other materials, which should enable Amboy to reduce the cost of its final product and improve margins. See also "Management's Discussion and Analysis—Off-Balance Sheet Commitments and Contingencies."

Government Regulations

        The Company is subject to government regulations pursuant to the Foreign Dredging Act of 1906, as amended (the "Dredging Act") and Section 27 of the Merchant Marine Act of 1920, as amended (the "Jones Act"), which prohibit foreign-built, chartered or operated vessels (absent special legislative action) from competing in the U.S. dredging market and from owning more than 25% of a U.S. dredging company. The owners and charterers of dredges operating in the navigable waters of the United States must meet the coastwise trade requirements of the Jones Act and the Shipping Act of 1916, as amended. Such dredges must be registered under U.S. law and have coastwise endorsements pursuant to the Vessel Documentation Act. These acts prohibit dredges owned, chartered or controlled by entities that are less than 75% owned and controlled by U.S. citizens from transporting dredged material between points in the United States.

        In 1992, Congress amended the Dredging Act to bring it into conformity with the U.S. citizenship requirements of the rest of the nation's cabotage laws. In so doing, Congress included grandfather clauses to protect certain existing dredge operators affected by the change in law. The language of the grandfather clauses exempted the dredge STUYVESANT from the 75% ownership and control requirement. The STUYVESANT is chartered to Stuyvesant Dredging Company, Inc., a foreign corporation and wholly-owned by Royal Boskalis Westminster, NV, a Dutch company, the largest dredging service provider in the world. In early 1999, Stuyvesant Dredging exploited a loophole in the STUYVESANT grandfather clause, thus allowing it to expand its control of additional dredging vessels. As of December 31, 2003, Stuyvesant Dredging controlled 21 dredging vessels operating in the United States, including seven dredges and 14 ancillary vessels. A coalition of U.S.-citizen dredging companies, labor unions, U.S. maritime operating companies and U.S. shipbuilders have joined together in an attempt to close the STUYVESANT grandfather clause loophole. Although the attention of Congress has recently been diverted to other matters, the coalition continues to actively pursue this issue. However, one of the industry's domestic dredging companies recently protested a bid award by the Corps in favor of Bean Stuyvesant, LLC, a company 50% owned by Stuyvesant Dredging. The basis for the protest was that the Corps could not award the bid to Bean Stuyvesant, which was proposed in the bid as the charterer of the dredge in question, because Bean Stuyvesant was neither a U.S. citizen for the purpose of operating vessels in the coastwise trade nor eligible for inclusion within the Dredging Act's grandfather provision. The U.S. Court of Federal Claims agreed and issued an injunction in favor of the domestic dredging company. Bean Stuyvesant is appealing this decision, and it is expected there will be a hearing on the appeal in the second quarter of 2004. The Company remains hopeful that this decision could lead to more equitable treatment amongst the participants within the U.S. dredging industry.

Environmental Matters

        The Company's operations and facilities are subject to various environmental laws and regulations related to, among other things: dredging operations; the disposal of dredged material; protection of wetlands; storm water and waste water discharges; demolition activities; asbestos removal; transportation and disposal of other hazardous substances and materials; and air emissions. The Company is also subject to laws designed to protect certain marine species and habitats. Compliance with these statutes and regulations can delay appropriation with respect to, and performance of, particular projects and increase related expenses.

        The Company's projects may involve demolition, excavation, transportation, management and disposal of hazardous waste and other hazardous substances and materials. Various laws strictly regulate the removal, treatment and transportation of hazardous water and other hazardous substances and materials and impose liability for human health effects and environmental contamination caused by these materials. The Company's demolition business, for example, requires it to transport and dispose of hazardous substances and materials, such as asbestos. The Company takes steps to limit its potential liability by hiring qualified asbestos abatement

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subcontractors to remove such materials from its projects, and some project contracts require the client to retain liability for hazardous waste generation.

        Services rendered in connection with hazardous substance and material removal and site development may involve professional judgments by licensed experts about the nature of soil conditions and other physical conditions, including the extent to which hazardous substances and materials are present, and about the probable effect of procedures to mitigate problems or otherwise affect those conditions. If the judgments and the recommendations based upon those judgments are incorrect, the Company may be liable for resulting damages that its clients incur, which may be material.

        Based on the Company's experience, its management believes that the future cost of compliance with existing environmental laws and regulations (and liability for known environmental conditions) will not have a material adverse effect on its business, financial condition or results of operations. However, the Company cannot predict what environmental legislation or regulations will be enacted in the future; how existing or future laws or regulations will be enforced, administered or interpreted; or the amount of future expenditures that may be required to comply with these environmental or health and safety laws or regulations or to respond to future cleanup matters or other environmental claims.

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Item 2.—Properties

        Dredging.    Great Lakes' dredging fleet is the largest in the U.S. and one of the largest fleets in the world. The fleet consists of over 200 pieces of equipment, including the largest hopper fleet and most of the large hydraulic dredges in the U.S.

        The following table provides a listing of the Company's current fleet of equipment, including equipment under long-term operating leases.

        A significant portion of the Company's operating equipment is subject to liens by the Company's senior lenders and bonding company. See Note 6, "Property and Equipment," and Note 11, "Long-term Debt," in the Notes to the Consolidated Financial Statements.

        The Company leases approximately 40,000 square feet of office facilities in Oak Brook, Illinois, which serves as its principal administrative facility. The primary lease for this property will expire in the year 2008. The Company also leases waterfront properties in Baltimore, Maryland, and Green Cove Springs, Florida. These locations serve as mooring sites for idle equipment and inventory storage.

        Demolition.    NASDI rents its primary office facility in Allston, Massachusetts, and a garage and maintenance facility in Everett, Massachusetts. NASDI maintains a fleet of operating equipment including excavators, loaders, trucks, and similar equipment, sufficient to meet its project requirements. Certain pieces of equipment are obtained under capital lease arrangements.

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Item 3.—Legal Proceedings

        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 or its former subsidiary, NATCO Limited Partnership, are named as defendants in approximately 260 lawsuits, the majority of which were filed between 1989 and 2000, and seven of which were filed in the last three years. In these lawsuits, the plaintiffs allege personal injury, primarily fibrosis or asbestosis, from exposure to asbestos on our vessels. The vast majority of these lawsuits have been filed in the Northern District of Ohio and a few in the Eastern District of Michigan. These cases have been transferred to the asbestos multi-district litigation pending in the Eastern District of Pennsylvania. The Company cannot determine its potential liability in these cases because the claims generally do not specify the amount of damages sought. No discovery has been sought by plaintiffs in any of these cases, and none of these cases has been litigated to date as to the Company. Management does not believe that these cases will have a material adverse impact on the business.

        A joint venture in which the Company holds an approximately 36% interest is subject to a counterclaim filed by the Red Sea Ports Authority relating to a contract performed in Egypt between 1999 and 2001. The joint venture instituted arbitration proceedings against the Red Sea Ports Authority for monetary claims arising out of the contract and sought approximately $40 million in damages. The Red Sea Ports Authority counterclaimed for $74 million in damages, alleging environmental damage from the project, including damage to coastline, fisheries and coral reefs, and misuse of the designated disposal site. In July 2003, an arbitration hearing was held in Egypt regarding the joint venture's claim and the Red Sea Ports Authority's counterclaim. The Company expects a decision to be rendered in the second quarter of 2004. Management believes that the allegations in the counterclaim are baseless and do not believe that it will have a material adverse impact on the Company's business.

Item 4.—Submission of Matters to a Vote of Security Holders

        On November 6, 2003, the Company's stockholders, pursuant to a unanimous written consent, approved the merger agreement pursuant to which Great Lakes was merged with and into GLDD Merger Sub, Inc., a Delaware corporation newly formed by GLDD Acquisitions Corp. for purposes of completing the acquisition of the Company.

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Part II

Item 5.—Market for the Registrant's Common Equity and Related Stockholder Matters

        There is no established public offering market for the outstanding common equity of the Company. At December 31, 2003, GLDD Acquisitions Corp. owned 100% of the outstanding common equity of the Company. Madison Dearborn Capital Partners IV, L.P. and its co-investors owns approximately 85% and certain members of the Company's management own in aggregate approximately 15% of the outstanding common equity of GLDD Acquisitions Corp.

        The ability of the Company to pay dividends is restricted by certain covenants contained in the Company's senior credit facility, as well as certain restrictions contained in the Company's indenture relating to its subordinated debt.

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Item 6.—Selected Financial Data

        The following table sets forth certain financial data regarding the Company and should be read in conjunction with the consolidated financial statements and notes thereto (see Item 15, "Financial Statements" and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations"). The income statement and balance sheet data presented below have been derived from the Company's consolidated financial statements. The acquisition of the Company by MDP in December 2003 was accounted for as a purchase in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," resulting in a new basis of accounting subsequent to the transaction. Therefore, for presentation herein and throughout the remainder of this Report, financial information relating to the Company prior to the sale transaction is denoted as Predecessor Basis, while financial information relating to the Company subsequent to the transaction is denoted as Successor Basis.

(1)

Includes the results of NASDI since its acquisition in April, 2001.

(2)

EBITDA in 2003 includes the impact of sale-related expenses totaling $10.6 million, related to the sale of the Company in 2003.

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(3)

Capital expenditures in 2003 includes approximately $15.0 million used to buy out certain dredging equipment previously under operating lease, $3.6 million related to a barge being constructed as part of a like-kind exchange, and a $0.8 million deposit on construction of two new rock barges).

        "EBITDA," as provided herein, represents earnings from continuing operations before net interest expense (including sale-related financing costs), income taxes, and depreciation and amortization expense. 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. The Company presents EBITDA as additional information because it is among the bases upon which the Company assesses its financial performance, and certain covenants in its borrowing arrangements are tied to similar measures. The Company believes EBITDA is a useful measure for the users of its financial statements because it provides information that can be used to evaluate the effectiveness of the Company's business from an operational perspective, exclusive of costs to finance its activities, income taxes, depreciation of operating assets and amortization of intangible assets, none of which is directly relevant to the efficiency of its operations. EBITDA is not calculated identically by all companies; therefore, the Company's presentation of EBITDA may not be comparable to similarly titled measures of other companies. The following table reconciles net income to EBITDA for the periods indicated: