gldd-ex992_1068.htm

As of December 31, 2015 and 2014 and for the Periods from January 1, 2015 to June 30, 2015 and from July 1, 2015 to December 31, 2015 and for the Years Ended December 31, 2014 and 2013 (unaudited)

We have audited the accompanying consolidated financial statements of Amboy Aggregates Joint Venture and Subsidiaries, which comprise the consolidated statement of net assets in liquidation as of December 31, 2015, and the related consolidated statement of changes in net assets in liquidation for the period from July 1, 2015 to December 31, 2015, and the consolidated statements of operations and partners' capital and cash flows for the period from January 1, 2015 to June 30, 2015, and the related notes to the consolidated financial statements.

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Amboy Aggregates Joint Venture and Subsidiaries as of December 31, 2015, and the changes in its net assets in liquidation for the period from July 1, 2015 to December 31, 2015 and the results of their operations and their cash flows for the period from January 1, 2015 to June 30, 2015 in accordance with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the partners of Amboy Aggregates approved a plan of liquidation on July 1, 2015, and the Company determined liquidation is imminent. As a result, the Company changed its basis of accounting for periods subsequent to June 30, 2015 from the going concern basis to the liquidation basis. Our opinion is not modified with respect to this matter.

We have audited the accompanying consolidated financial statements of Amboy Aggregates Joint Venture and Subsidiaries (the “Companies”), which comprise the consolidated balance sheet as of December 31, 2014, and the related consolidated statements of income and partners' capital and cash flows for the year then ended, and the related notes to the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Amboy Aggregates Joint Venture and Subsidiaries as of December 31, 2014, and the results of their consolidated operations and their consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

The consolidated financial statements as of December 31, 2013 and for the years ending December 31, 2013 and 2012 were not subjected to audit, review, or compilation procedures and, accordingly, we do not express an opinion, a conclusion, nor provide any other assurance on such statements.

	2014
ASSETS
CURRENT ASSETS:
Cash	$	9,889,342
Accounts receivable, net of allowance for doubtful accounts of $225,000		1,339,848
Inventory		1,065,718
Prepaid expenses and other current assets		217,834
Due from affiliates		185,876
Total current assets		12,698,618
Restricted cash		3,500,000
Property, plant and equipment, net of accumulated depreciation		1,192,696
Permits, net of accumulated amortization of $10,582		59,965
TOTAL	$	17,451,279

LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable	$	33,223
Accrued expenses		8,743,912
Current portion of long-term debt		5,505,986
Total current liabilities		14,283,121
Other liabilities		12,079
Total liabilities		14,295,200

COMMITMENTS AND CONTINGENCIES

PARTNERS' CAPITAL		3,156,079
TOTAL	$	17,451,279

CONSOLIDATED STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL (GOING CONCERN BASIS)

							(Unaudited)
	2015			2014			2013
Net sales	$	139,307		$	13,783,784		$	24,399,235
Costs and expenses:
Cost of sales		624,789			13,902,423			20,256,560
Selling		—			167,967			375,735
General and administrative		1,452,565			1,888,751			949,602
Totals		2,077,354			15,959,141			21,581,897
Other income—Gain on disposition of property and equipment		849,905			15,156,406			—
Income (loss) from operations		(1,088,142	)		12,981,049			2,817,338
Interest expense		(480,416	)		(1,085,886	)		(488,377	)
Interest income		—			—			7
Other expense		(1,109,043	)		—			—
Income (loss) from continuing operations		(2,677,601	)		11,895,163			2,328,968
Discontinued operations:
Income from discontinued operations		—			510,484			1,669,207
Loss on sale of discontinued operations		—			(2,309,230	)		—
Totals		—			(1,798,746	)		1,669,207
Net income (loss)		(2,677,601	)		10,096,417			3,998,175
Distributions		—			23,210,070			—
Partners' capital, beginning of the period		3,156,079			16,269,732			12,271,557
Partners' capital, end of the period	$	478,478		$	3,156,079		$	16,269,732

							2013
	2015			2014			(Unaudited)
OPERATING ACTIVITIES:
Net income (loss)	$	(2,677,601	)	$	10,096,417		$	3,998,175
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization		37,532			561,179			1,321,392
Bad debt (recovery of)		28,035			(71,311	)		152,020
Amortization of permits		59,965			7,055			53,504
Gain on disposition of property and equipment		(849,905	)		(15,156,406	)		—
Accrued interest and yield maintenance fee		—			917,990			—
Loss on sale of discontinued operations		—			2,309,230			—
Changes in operating assets and liabilities:
Accounts and notes receivable		975,920			3,289,001			(2,287,707	)
Inventory		58,145			1,015,875			(162,688	)
Prepaid expenses and other current assets		217,834			(87,185	)		9,462
Due to (from) general partners, affiliates and member		158,861			(310,184	)		(68,997	)
Accounts payable		19,860			(269,711	)		(324,152	)
Accrued expenses		(427,407	)		(19,095	)		294,830
Other liabilities		(12,079	)		(79,083	)		(70,927	)
Net cash provided by (used in) operating activities		(2,410,840	)		2,203,772			2,914,912

INVESTING ACTIVITIES:
Capital expenditures		—			(500,777	)		(174,321	)
Proceeds from disposition of property and equipment		2,014,049			33,032,006			—
Proceeds from sale of discontinued operations		—			11,649,926			—
Increase in permits		—			—			(70,546	)
Other receivable—agreement of sale		—			—			250,651
Deposit		—			—			2,000,000
Due from insurance claim		—			89,141			1,008,276
Net cash provided by investing activities		2,014,049			44,270,296			3,014,060

FINANCING ACTIVITIES:
Repayments of long-term debt		(5,505,986	)		(1,204,354	)		(1,073,925	)
Distributions		—			(23,210,070	)		—
Payment to affiliate from disposition of property and equipment		—			(16,095,018	)		—
Repayment of line of credit		—			(675,000	)		(775,000	)
Net cash used in financing activities		(5,505,986	)		(41,184,442	)		(1,848,925	)

Cash included in current assets—discontinued operations		—			—			(2,094,116	)
Net increase (decrease) in cash		(5,902,777	)		5,289,626			1,985,931
Cash, beginning of period		9,889,342			4,599,716			2,613,785
Cash, end of period	$	3,986,565		$	9,889,342		$	4,599,716

Supplemental disclosure of cash flow data:
Interest paid	$	480,416		$	473,471		$	544,754
Supplemental schedule of noncash investing and financing activities:
Restricted cash in escrow from sale of discontinued operations				$	3,500,000
Liability associated with the restoration of NYS&S piers				$	8,327,230
Inventory sold included in gain on disposition of property and equipment				$	769,789

As of December 31, 2015 and 2014 and for the Periods from January 1, 2015 to June 30, 2015

and from July 1, 2015 to December 31, 2015 and for the Years Ended December 31, 2014 and 2013 (unaudited)

Amboy Aggregates (“Amboy” or the “Company”) was established on January 1, 1989 as an equal Joint Venture between Great Lakes Dredge & Dock Company, LLC (“Great Lakes”) and Ralph Clayton and Sons Materials, L.P.

Amboy operates principally in one business segment which is to dredge, process, transport and sell fine aggregate in the New York Metropolitan area. Additionally, the liability of the members is limited to the members’ total equity.

The consolidated financial statements include the accounts of Amboy and its majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains its cash with high credit quality financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Company ("FDIC") up to $250,000. As of December 31, 2015, the Company's cash balance exceeded the current FDIC insured amount by approximately $7,020,000.

Prior to the winddown of the Company (see below), credit was extended to its customers, a significant portion of which are in the construction industry. During 2014 and 2013, approximately 62% and 32%, respectively, of the Company's net sales were derived from nonrelated major customers. During 2014 and 2013, three and four customers accounted for 66% and 64% of the Company's gross accounts receivable, respectively.

The Company closely monitors the extension of credit to its customers while maintaining allowances for potential credit losses. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions and does not have a policy for requiring collateral.

The Company's direct labor is supplied primarily by unions, which have collective bargaining agreements. For the years ended December 31, 2014 and 2013, 58% and 77%, respectively, of the Company's labor force is subject to collective bargaining agreements, which expires on January 31, 2016.

Inventory is stated at the lower of cost, determined using the first-in, first-out (FIFO) method, or market.

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets.

As of December 31, 2015 and 2014 and for the Periods from January 1, 2015 to June 30, 2015

and from July 1, 2015 to December 31, 2015 and for the Years Ended December 31, 2014 and 2013 (unaudited)

The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. If facts and circumstances indicate that the Company's long-lived assets might be impaired, the estimated future undiscounted cash flows associated with the long-lived asset would be compared to its carrying amounts to determine if a write-down to fair value is necessary. If a write-down is required, the amount is determined by estimation of the present value of net discounted cash flows.

Costs incurred in connection with obtaining permits to dredge the Company's products are amortized on the straight-line basis over the term of the related permits.

Sales are recognized when revenue is realized or becomes realizable and has been earned. In general, revenue is recognized when the earnings process is complete and collectability is reasonably assured which is usually upon shipment of the product. Amounts billed related to shipping and handling are included in revenue.

Income or loss of the Company is includible in the income tax returns of the partners in proportion to their respective interests. Accordingly, there is no provision for income taxes in the accompanying consolidated financial statements.

The Company has no unrecognized tax benefits at December 31, 2015. The Company's Federal and state income tax returns prior to fiscal year 2012 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

The Company recognizes interest and penalties associated with income tax matters as part of the income tax provision, if applicable, and includes accrued interest and penalties with the related tax liability in the accompanying consolidated balance sheets.

Based on discussions with the Company’s partners, it was determined that liquidation of Amboy was imminent as of July 1, 2015. The Company’s partners were in discussions to abandon and write-off inventory in addition to relinquishing the license agreement with the State of New Jersey which enables the Company to conduct operations. Therefore, effective July 1, 2015, the Company applied the liquidation basis of accounting on a prospective basis. The liquidation basis of accounting requires the Company to estimate amounts of cash or other consideration it expects to collect and to accrue all costs associated with implementing and completing the plan of liquidation and requires management to make estimates that affect the amounts reported in the consolidated financial statements and related notes. To the extent there are any changes in the Company’s July 1, 2015 initial estimates, there will be changes reflected in the Statement of Changes in Net Assets in Liquidation.

Before the Company can fully liquidate its Net Assets in Liquidation, Amboy must complete the restoration of two piers which were damaged as a result of operations. The Company currently estimates that repairs to the piers will be complete in 2017. Accordingly, Amboy has made appropriate expense accruals for such time period in the calculation of Net Assets in Liquidation. However, the projected remaining wind down period could be either shortened or lengthened by other intervening matters not currently known to management. If the timing of any of these steps

As of December 31, 2015 and 2014 and for the Periods from January 1, 2015 to June 30, 2015

and from July 1, 2015 to December 31, 2015 and for the Years Ended December 31, 2014 and 2013 (unaudited)

changes, the future accrued costs may change. Results could differ from these estimates and may affect the net assets in liquidation and actual cash flows.

The consolidated financial statements for the period from January 1, 2015 to June 30, 2015, were prepared on the going concern basis of accounting, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Prior period financial results have not been restated under the liquidation basis of accounting.

The Company has evaluated subsequent events through February 29, 2016, which is the date the financial statements were available to be issued.

The following is a reconciliation of partners’ capital under the going concern basis of accounting to net assets in liquidation under the liquidation basis of accounting as of July 1, 2015.

In applying the liquidation basis of accounting, the Company recognized a net decrease of $194,476 in its estimated value of net assets in liquidation. This estimated value of net assets in liquidation includes projections of costs and expenses to be incurred during the time it takes to complete the plan of liquidation. There is an inherent uncertainty with these projections, and they could change materially based on the timing of the completion of all of the steps necessary for the liquidation.

On October 21, 2014, the Company sold 100% of its interest in New York Sand & Stone, LLC (“NYS&S”). The purchase price was approximately $15,181,000, resulting in a loss on sale of discontinued operations of approximately $2,309,000 reported in the consolidated statement of operations and partners' capital for the year ended December 31, 2014.

In connection with the sale, proceeds received during 2014 amounted to approximately $11,650,000. The remaining unpaid balance of the purchase price is held in escrow, to be released to the Company upon certain events. This escrow amount is recorded as restricted cash in the consolidated balance sheet as of December 31, 2014 and will be used towards the restoration of two piers located at the NYS&S site.

As of December 31, 2015 and 2014 and for the Periods from January 1, 2015 to June 30, 2015

and from July 1, 2015 to December 31, 2015 and for the Years Ended December 31, 2014 and 2013 (unaudited)

The following amounts are related to NYS&S and have been segregated from continuing operations and reported as discontinued operations in the consolidated statements of operations and partners' capital for the years ended December 31, 2014 and 2013.

On the application of liquidation basis, inventory was adjusted to its net realizable value, less cost to sell.

Amboy and Lower Main Street Development, LLC (“Lower Main”) an entity whose related members are partners of the Company, entered into an amended and restated agreement on December 13, 2013 to sell substantially all of the real estate on which Amboy conducts its operations for $33,000,000. On December 31, 2013, pursuant to the terms of the amended and restated agreement, the buyer made a first payment of $2,000,000 which was to be applied to the purchase price at the closing.

On December 31, 2014, the Company sold substantially all of the land, resulting in a gain of approximately $15,100,000, included in gain on disposition of property and equipment in the consolidated statement of operations and partners' capital for the year ended December 31, 2014.

As of December 31, 2015 and 2014 and for the Periods from January 1, 2015 to June 30, 2015

and from July 1, 2015 to December 31, 2015 and for the Years Ended December 31, 2014 and 2013 (unaudited)

With the exception of a single vessel, all equipment was sold for proceeds of $2,014,049 for the period ended June 30, 2015. On the application of liquidation basis, the remaining vessel was adjusted to its net realizable value, less cost to sell.

Depreciation and amortization expense was $37,532, $321,403 and $517,028 (unaudited) for the period from January 1, 2015 to June 30, 2015 and the years ended December 31, 2014 and 2013, respectively.

The Company had a promissory note payable (the "Note") with a former member of NYS&S with remaining outstanding principal of $4,587,996. The note, which was secured by interest in NYS&S, contained a covenant prohibiting the sale of the collateral. At December 31, 2014, the Company was in breach of the covenant as a result of the sale of NYS&S. Under the terms of the agreement, violation of the covenant enabled acceleration of the amounts due, which included, in addition to the principal and accrued interest, a yield maintenance fee. At December 31, 2014, the entire amount of the note, $4,587,996, was included in current liabilities. In addition, the Company accrued approximately $917,900 representing accrued interest and yield maintenance fee, which was included in the current portion of long-term debt in the consolidated balance sheet as of December 31, 2014. The Note was paid in 2015.

Employees covered by a union agreement were included in multi-employer pension and annuity plans to which the Company made contributions in accordance with the contractual union agreement. The Company ceased contributions to the Operating Engineers Local No. 825 Pension Plan effective February 19, 2011 and any future contributions were paid to the annuity fund. As a result of withdrawing from the pension fund, the Company was obligated to pay $328,628, plus interest of $47,445, of which $65,236, including interest of $3,419, was paid during 2015, $77,687, including interest of $5,834, was paid during 2014 and $58,262 (unaudited), including interest of $7,245 (unaudited), was paid during 2013. At December 31, 2014, other liabilities and accrued expenses included $12,079 and $76,547, respectively, related to this withdrawal obligation.

The Company maintained a retirement plan qualifying under Section 401(k) of the Internal Revenue Code which allowed eligible employees to defer a portion of their income through contributions to the plan. Under the provisions of the plan, the Company made contributions for the benefit of the employees, subject to certain limitations. The Company's contributions for the period from January 1, 2015 to June 30, 2015 and the years ended December 31, 2014 and 2013 were $21,857, $63,029 and $86,136 (unaudited), respectively. The Company terminated this retirement plan effective April 30, 2015.

The Company had a license agreement through August 5, 2016 with the State of New Jersey which enabled the Company to dredge in the Ambrose Channel for commercial sand. Under this agreement, the State of New Jersey received a royalty fee based on the amount of material dredged that, effective August 1, 2009, ranged between $.35 and $.70 per cubic yard. Royalties charged to operations during the years ended December 31, 2014 and 2013 amounted to $84,186 and $424,309 (unaudited), respectively. Effective August 14, 2015, the Company relinquished the license agreement to Great Lakes.

As of December 31, 2015 and 2014 and for the Periods from January 1, 2015 to June 30, 2015

and from July 1, 2015 to December 31, 2015 and for the Years Ended December 31, 2014 and 2013 (unaudited)

In the ordinary course of business the Company is a party in various legal proceedings. In the opinion of management, resolution of these claims is not expected to have a material adverse impact on the financial position or results of operations of the Company.

The Company sells inventory to affiliates. Sales to affiliates during the years ended December 31, 2014 and 2013 were $102,000 and $222,000 (unaudited), respectively. Due from affiliates at December 31, 2014 consist of the following:

During 2014 and 2013, Amboy accrued rent totaling $180,000 to Lower Main, whose related members are partners of the Company. The lease, which required monthly payments of $15,000, was on a month-to-month basis through the end of 2014 when the land was sold (see Note 6). During 2015, Lower Main transferred cash of $36,947 in partial satisfaction of the outstanding receivable to the Company and liquidated.

		Page

Independent Auditor's Reports		2-3

Consolidated Statement of Net Assets in Liquidation (Liquidation Basis)		4

Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation Basis)		5

Consolidated Balance Sheet (Going Concern Basis)		6

Consolidated Statements of Operations and Partners' Capital (Going Concern Basis)		7

Consolidated Statements of Cash Flows (Going Concern Basis)		8

Notes to Consolidated Financial Statements		9-14

	2015
ASSETS
Cash	$	3,855,682
Accounts receivable		383,826
Restricted cash		3,414,330
Property, plant and equipment		200,000
TOTAL		7,853,838

LIABILITIES
Contract obligation to restore piers (Note 4)		7,461,146
Accrued liquidation costs		145,690
TOTAL		7,606,836

NET ASSETS IN LIQUIDATION	$	247,002

	2015
Net assets in liquidation as of July 1, 2015	$	284,002
Changes in net assets in liquidation
Changes in accrued liquidation costs		(37,000	)
Net assets in liquidation as of December 31, 2015	$	247,002

Partners' capital as of June 30, 2015	$	478,478

Increase due to estimated accounts receivable settlement		275,000
Increase due to estimated net realizable value of equipment		200,000
Decrease due to estimated net realizable value of inventory		(1,007,573	)
Increase due to contract obligation to restore pier		785,178
Liability for accrued estimated disposal costs of liquidation		(447,081	)
Adjustments to reflect the change to the liquidation basis of accounting		(194,476	)
Estimated value of net assets in liquidation as of July 1, 2015	$	284,002

	December 31, 2014
Finished goods	$	873,610
Supplies		192,108
Total	$	1,065,718

	Period from
	January 1, 2014
	to October 21, 2014			2013 (unaudited)
Net sales	$	17,931,132		$	25,574,434

Income from discontinued operations	$	510,484		$	1,669,207
Loss on sale of discontinued operations		(2,309,230	)		—
Totals	$	(1,798,746	)	$	1,669,207

	Range of Estimated Useful Lives (Years)	December 31, 2014
Land		$	72,070
Plant and equipment	3 to 15		10,663,910
Delivery equipment (Scows)	10 to 20		8,853,867
Dredging system	15 to 20		14,784,282
Office equipment and trailers	10		248,876
Automobiles and trucks	3 to 5		322,234
			34,945,239
Less accumulated depreciation			33,752,543
Total		$	1,192,696

	December 31, 2014
Great Lakes Dredge & Dock Corporation	$	120,894
Lower Main		64,982
	$	185,876