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

FORM 10-K/AAMENDMENT NO. 1

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005
	or
o	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:  333-64687

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

Delaware	13-3634726
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2122 York Road, Oak Brook, IL	60523
(Address of principal executive offices)	(Zip Code)

(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   x    No   o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes   x    No   o

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  x   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.  Yes   x    No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):  Large Accelerated Filer              Accelerated Filer                      Non-Accelerated Filer      x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   o    No   x

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

As of March 27, 2006, there were outstanding 1,000 shares of Common Stock and zero shares of Preferred Stock.

DOCUMENTS INCORPORATED BY REFERENCE
None

EXPLANATORY NOTE

The Amendment No. 1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Form 10-K”) is being filed solely for the purpose of including in Items 8 and 15 the financial statements of Amboy Aggregates (a Joint Venture).  The Registrant accounts for its investment in Amboy Aggregates under the equity method.  The Registrant inadvertently failed to include the financial statements of Amboy Aggregates required by Rule 3-09 of Regulation S-X in the Form 10-K. In addition, exhibits 10.4 and 10.5 were added to the exhibit listing because they were inadvertently omitted from the Form 10-K.

Item 8.          Financial Statements and Supplementary Data

The consolidated financial statements (including financial statement schedules listed under Item 15 of this Report) of Great Lakes Dredge & Dock Corporation called for by this Item, together with the Report of Independent Registered Public Accounting Firm dated March 22, 2006, are set forth on pages 9 to 37 inclusive, of this Report, and are hereby incorporated by reference into this Item.  The financial statements of Amboy Aggregates (A Joint Venture) called for by this Item, together with the Report of Independent Registered Public Accounts dated January 16, 2006, are set forth on pages 39 to 48 inclusive of this Report, and are hereby incorporated by reference into this Item.  Financial statement schedules not included in this Report have been omitted because they are not applicable or because the information called for is shown in the consolidated financial statements or notes thereto.

2

Item  15. — Exhibits, Financial Statements Schedules

(a)           Documents filed as part of this report

1.   Consolidated Financial Statements

The consolidated financial statements listed below are set forth on pages 9 to 37 inclusive, of this Report and are incorporated by reference in Item 8 of this Report.

	Page
Great Lakes Dredge & Dock Corporation:
Report of Independent Registered Public Accounting Firm	8
Consolidated Balance Sheets as of December 31, 2005 and 2004	9
Consolidated Statements of Operations for the years ended December 31, 2005, 2004, and 2003	10
Consolidated Statement of Stockholder’s Equity for the years ended December 31, 2005, 2004, and 2003	11
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003	12
Notes to Consolidated Financial Statements	13-37
Amboy Aggregates (A Joint Venture)
Report of Independent Public Accountants	39
Balance Sheets as of December 31, 2005 and 2004	40
Statements of Income and Partners’ Capital for the Years Ended December 31, 2005, 2004 and 2003	41
Statement of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003	42
Notes to Financial Statements	43

2.     Financial Statement Schedules

All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.

3.     Exhibits

The exhibits required to be filed by Item 601 of Regulation S-K are listed in the “Exhibit Index” which is attached hereto and incorporated by reference herein.

3

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	GREAT LAKES DREDGE & DOCK CORPORATION
By:	/s/ Douglas B. Mackie
	Douglas B. Mackie
	President, Chief Executive Officer and Director
	Date: September 14, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capabilities and on the dates indicated.

Signature		Date	Title
/s/ Douglas B. Mackie	September 14, 2006		President, Chief Executive
Douglas B. Mackie			Officer and Director
/s/ Deborah A. Wensel	September 14, 2006		Senior Vice President,
Deborah A. Wensel			Chief Financial Officer
			and Treasurer
/s/ Samuel M. Mencoff	September 14, 2006		Director
Samuel M. Mencoff
/s/ Thomas S. Souleles	September 14, 2006		Director
Thomas S. Souleles
/s/ Douglas C. Grissom	September 14, 2006		Director
Douglas C. Grissom

4

EXHIBIT INDEX

Number	Document Description
2.1	Amended and Restated Agreement and Plan of Merger dated as of December 22, 2003, among Great Lakes Dredge & Dock Corporation, GLDD Acquisitions Corp., GLDD Merger Sub, Inc. and Vectura Holding Company LLC. (1)
3.1	Restated Certificate of Incorporation of the Company. (2)
3.2	Bylaws of the Company. (2)
4.1	Indenture, dated as of December 22, 2003, by and among GLDD Merger Sub, Inc. and BNY Midwest Trust Company, as trustee. (1)
4.2	Supplemental Indenture, dated as of December 22, 2003, by and among Great Lakes Dredge & Dock Corporation, the guarantors party thereto and BNY Midwest Trust Company, as trustee. (1)
4.3	Amendment to Indenture, dated as of January 30, 2004, by and among Great Lakes Dredge & Dock Corporation, and BNY Midwest Trust Company, as trustee. (4)
4.4	Supplemental Indenture, dated as of February 27, 2004, by and among Great Lakes Dredge & Dock Corporation, the guarantors party thereto and BNY Midwest Trust Company, as trustee. (4)
4.5	Second Supplemental Indenture, dated as of July 12, 2004, by and among Great Lakes Dredge & Dock Corporation, and BNY Midwest Trust Company, as trustee. (9)
4.6	Third Supplemental Indenture, dated as of December 2, 2005, by and among Great Lakes Dredge & Dock Corporation, and BNY Midwest Trust Company, as trustee. (10)
4.7	Form of 73¤4% Senior Subordinated Note due 2013. (7)
4.8	Form of Guarantee to be issued by the Guarantors of the securities to be issued in this Exchange Offer subject to this Registration Statement. (7)
10.1	Credit Agreement, dated as of December 22, 2003, among GLDD Acquisitions Corp., Great Lakes Dredge & Dock Corporation, the other loan parties from time to time party thereto, the financial institutions from time to time party thereto, Lehman Brother, Inc. and Credit Suisse First Boston, acting through its Cayman Islands Branch, as Joint Advisors, Joint Lead Arrangers and Joint Book Runners, and Bank of America, N.A., as an issuer of the Letters of Credit, and as representative for the lenders. (1)
10.2	Credit Agreement, dated as of December 17, 2003, by and between Great Lakes Dredge & Dock Company and General Electric Capital Corporation. (1)
10.3	Amendment No. 1 to Credit Agreement, dated as of September 30, 2004, by and among Great Lakes Dredge & Dock Corporation, GLDD Acquisitions Corp., the other loan parties from time to time party thereto, the financial institutions from time to time party thereto, and Bank of America, N.A., as issuer of the Letters of Credit and as representative of the Lenders. (3)
10.4	Amendment No. 2 to Credit Agreement, dated as of June 13, 2005, by and among Great Lakes Dredge & Dock Corporation, GLDD Acquisitions Corp., the other loan parties from time to time party thereto, the financial institutions from time to time party thereto, and Bank of America, N.A., as issuer of the Letters of Credit and as representative of the Lenders. (13)
10.5	Amendment No. 3 to Credit Agreement, dated as of November 14, 2005, by and among Great Lakes Dredge & Dock Corporation, GLDD Acquisitions Corp., the other loan parties from time to time party thereto, the financial institutions from time to time party thereto, and Bank of America, N.A., as issuer of the Letters of Credit and as representative of the Lenders. (15)
10.6	Amendment No. 4 to Credit Agreement, dated as of March 22, 2006, by and among Great Lakes Dredge & Dock Corporation, GLDD Acquisitions Corp., the other loan parties from time to time party thereto, the financial institutions from time to time party thereto, and Bank of America, N.A., as issuer of the Letters of Credit and as representative of the Lenders. (18)

5

10.7	First Amendment to Credit Agreement and Guaranty, dated as of September 30, 2004, by and among Great Lakes Dredge & Dock Company, Great Lakes Dredge & Dock Corporation and General Electric Capital Corporation. (3)
10.8	Second Amendment to Credit Agreement dated as of July 6, 2005, by and among Great Lakes Dredge & Dock Company, as Borrower, Great Lakes Dredge and Dock Corporation, as Guarantor, and General Electric Capital Corporation, as Lender. (11)
10.9	Third Amendment to Credit Agreement dated as of August 1, 2005, by and among Great Lakes Dredge & Dock Company, as Borrower, Great Lakes Dredge & Dock Corporation as Guarantor and General Electric Capital Corporation, as Lender. (12)
10.10	Management Equity Agreement, dated as of December 22, 2003, among GLDD Acquisitions Corp., Madison Dearborn Partners IV, L.P. and the management investors from time to time party thereto. (1)
10.11	Subscription Agreement, dated as of December 22, 2003, among GLDD Acquisitions Corp., Madison Dearborn Partners IV, L.P. and the other investors from time to time party thereto. (1)
10.12	Registration Rights Agreement, dated as of December 22, 2003, among GLDD Acquisitions Corp., Madison Dearborn Partners IV, L.P. and the other investors from time to time party thereto. (1)
10.13	Third Amended and Restated Underwriting and Continuing Indemnity Agreement, dated as of December 22, 2003, among Great Lakes Dredge & Dock Corporation, certain of its subsidiaries, Travelers Casualty and Surety Company and Travelers Casualty and Surety Company of America. (1)
10.14	First Amendment to Third Amended and Restated Underwriting and Continuing Indemnity Agreement, dated as of September 30, 2004, by and among Great Lakes Dredge & Dock Corporation, certain of its subsidiaries, Travelers Casualty and Surety Company and Travelers Casualty and Surety Company of America. (3)
10.15	Second Amendment to Third Amended and Restated Underwriting and Continuing Indemnity Agreement, dated as of November 14, 2005, by and among the Great Lakes Dredge & Dock Corporation, the subsidiaries of Great Lakes Dredge & Dock Company, Travelers Casualty and Surety Company, United Pacific Insurance Company, Reliance National Insurance Company, Reliance Surety Company and Travelers Casualty and Surety Company of America. (15)
10.16	Waiver letter from Travelers Casualty and Surety Company and Travelers Casualty and Surety Company of America, dated April 21, 2005. (14)
10.17	Waiver letter from Travelers Casualty and Surety Company and Travelers Casualty and Surety Company of America, dated June 13, 2005. (13)
10.18	Employment Agreement between the Company and Douglas B. Mackie. † (5)
10.19	Employment Agreement between the Company and Richard Lowry. † (6)
10.20	Summary of Oral Employment Agreements with Named Executive Officers. † (17)
10.21	Annual Cash Bonus Plan. † (8)
10.22	401(k) Savings Plan † (8)
10.23	401(k) Lost Benefit Plan † (8)
12.1	Ratio of Earnings to Fixed Charges. (18)
14.1	Code of Business Conduct and Ethics. (16)
21.1	Subsidiaries of the Registrant. (18)
31.1	Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2	Certification Pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

6

(1)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on January 6, 2004.
(2)	Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Commission on March 29, 2004.
(3)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on October 5, 2004.
(4)	Incorporated by reference Form S-4 Registration Statement of the Company (File No. 333-64687) filed with the Commission on March 31, 2004.
(5)	Incorporated by reference Form S-4 Registration Statement of the Company (File No. 333-64687) filed with the Commission on September 29, 1998.
(6)	Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement of the Company (File No. 333-64687) filed with the Commission on December 14, 1998.
(7)	Included as part of Exhibit 4.1 to this Annual Report on Form 10-K.
(8)	Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2005.
(9)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 12, 2005.
(10)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 8, 2005.
(11)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on July 8, 2005.
(12)	Incorporated by reference to the Company’s Current Report on Form 10-Q filed with the Commission on August 10, 2005.
(13)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on June 14, 2005.
(14)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 26, 2005.
(15)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on November 17, 2005.
(16)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on October 24, 2005.
(17)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 13, 2006.
(18)	Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Commission on March 28, 2006.

*Filed herewith.

†Compensatory plan or arrangement.

Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act

The Company has not sent any annual report covering the Company’s fiscal year ended December 31, 2005 or proxy statement, form of proxy or other proxy soliciting material to its security holders.  No such report or proxy material is expected to be furnished to security holders subsequent to the filing of this Annual Report on Form 10-K.

7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of
Great Lakes Dredge & Dock Corporation
Oak Brook, Illinois

We have audited the accompanying consolidated balance sheets of Great Lakes Dredge & Dock Corporation and Subsidiaries (the “Company”) as of December 31, 2005 and 2004 (successor), and the related consolidated statements of operations, stockholder’s equity, and cash flows for the years then ended.  Additionally, we have audited the consolidated statement of operations, stockholder’s equity, and cash flows for the year ended December 31, 2003 (predecessor).  Our responsibility is to express an opinion on these financial statements based on our audits.  We did not audit the financial statement of Amboy Aggregates (Amboy) joint venture for the year ended December 31, 2003, the Company’s investment in which is accounted for using the equity method.  The Company’s equity of $1.0 million in Amboy’s net income for the year ended December 31, 2003, are included in the accompanying financial statements.  The financial statements of Amboy were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such joint venture, is based solely on the report of such other auditors for the year ended December 31, 2003.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, the capital stock of the Company was acquired by GLDD Acquisitions Corp. in a business combination accounted for as a purchase.  The financial statements reflect the revaluation of the net assets of the Company at the date of acquisition.  Therefore, the amounts reported on the successor basis are not comparable to the amounts shown on the predecessor basis.

/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
March 22, 2006

8

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2005 and 2004
(in thousands, except share and per share amounts)

ASSETS	2005			2004
Current assets:
Cash and equivalents	$	601		$	1,962
Accounts receivable, net	85,114			65,762
Contract revenues in excess of billings	14,352			12,439
Inventories	17,084			16,497
Prepaid expenses	4,700			4,274
Other current assets	12,413			11,380
Total current assets	134,264			112,314
Property and equipment, net	240,849			256,594
Goodwill	98,747			103,563
Other intangible assets, net	1,579			3,267
Inventories	11,206			11,278
Investments in joint ventures	8,605			7,965
Other	11,987			13,654
Total assets	$	507,237		$	508,635
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	50,836		$	46,770
Accrued expenses	24,264			17,676
Billings in excess of contract revenues	8,108			6,706
Current maturities of long-term debt	1,950			1,950
Total current liabilities	85,158			73,102
Long-term debt	248,850			252,300
Deferred income taxes	88,154			90,429
Other	4,473			5,314
Total liabilities	426,635			421,145
Minority interests	1,850			1,599
Stockholder’s equity:
Common stock, $.01 par value; 1,000 shares issued and outstanding	—			—
Additional paid-in capital	97,000			97,000
Accumulated deficit	(18,039		)	(11,087		)
Accumulated other comprehensive loss	(209		)	(22		)
Total stockholder’s equity	78,752			85,891
Total liabilities and stockholder’s equity	$	507,237		$	508,635

See notes to consolidated financial statements.

9

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2005, 2004 and 2003
(in thousands)

							Predecessor
	Successor Basis						Basis
	2005			2004			2003
Contract revenues	$	423,399		$	350,862		$	398,800
Costs of contract revenues	372,046			314,940			328,196
Gross profit	51,353			35,922			70,604
General and administrative expenses	29,322			25,473			27,867
Amortization of intangible assets	786			4,174			—
Impairment of intangibles	5,718			—			—
Subpoena-related expenses	2,865			2,317			—
Demolition litigation expense	—			1,275			—
Sale-related expenses	—			273			10,635
Operating income	12,662			2,410			32,102
Other income (expense):
Interest expense, net	(23,055		)	(20,334		)	(20,717		)
Sale-related financing costs	—			—			(13,113		)
Equity in earnings of joint ventures	2,328			2,339			1,422
Minority interests	(251		)	132			28
Loss before income taxes	(8,316		)	(15,453		)	(278		)
Income tax benefit (provision)	1,364			4,366			(1,318		)
Net loss	$	(6,952	)	$	(11,087	)	$	(1,596	)

See notes to consolidated financial statements.

10

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY

Years ended December 31, 2005, 2004 and 2003

(in thousands, except share amounts)

																	Accumulated						Note
	# of Shares										Additional						Other						Receivable
	Preferred		Common		Preferred			Common			Paid-in			Accumulated			Comprehensive			Treasury			From
	Stock		Stock		Stock			Stock			Capital			Deficit			Income (Loss)			Stock			Stockholder			Total
Predecessor Basis
Balance at January 1, 2003	45,000		5,000,000		$	1		$	50		$	50,457		$	(62,787	)	$	103		$	(162	)	$	(68	)	$	(12,406	)
Reverse stock split (1 for 100)			(5,000,000	)																						—
			50,000
Repayment on note receivable from stockholder																							68			68
Comprehensive income (loss):
Net loss														(1,596		)										(1,596		)
Reclassification of derivative gains to earnings (netof tax of $625)																	(970		)							(970		)
Change in fair value of derivatives (net of tax of $759)																	1,176									1,176
Total comprehensive loss																										(1,390		)
Effect of Transaction on Predecessor Basis	(45,000	)	(50,000	)	(1		)	(50		)	(50,457		)	64,383			(309		)	162			—			13,728
Balance at December 31, 2003	—		—		—			—			—			—			—			—			—			—
Successor Basis
Issuance of new shares to GLDD Acquisitions Corp.	—		1,000		$	—		$	—		$	97,000		$	—		$	—		$	—		$	—		$	97,000
Balance at December 31, 2003	—		1,000		—			—			97,000			—			—			—			—			97,000
Comprehensive income (loss):
Net loss														(11,087		)										(11,087		)
Reclassification of derivative gains to earnings (net of tax of $1,062)																	(1,654		)							(1,654		)
Change in fair value of derivatives (net of tax of $1,048)																	1,632									1,632
Total comprehensive loss	—		—		—			—			—			—			—			—			—			(11,109		)
Balance at December 31, 2004	—		1,000		$	—		$	—		$	97,000		$	(11,087	)	$	(22	)	$	—		$	—		$	85,891
Comprehensive income (loss):
Net loss														(6,952		)										(6,952		)
Reclassification of derivative gains to earnings (net of tax of $1,192)																	(1,838		)							(1,838		)
Change in fair value of derivatives (net of tax of $1,071)																	1,651									1,651
Total comprehensive loss	—		—		—			—			—			—			—			—			—			(7,139		)
Balance at December 31, 2005	—		1,000		$	—		$	—		$	97,000		$	(18,039	)	$	(209	)	$	—		$	—		$	78,752

See notes to consolidated financial statements.

11

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Periods ended December 31, 2005, 2004 and 2003

(in thousands)

	Successor Basis									Predecessor Basis
							December 31,			Jan 1 - Dec 31,
	2005			2004			2003			2003
OPERATING ACTIVITIES
Net loss	$	(6,952	)	$	(11,087	)	$	—		$	(1,596	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization	24,686			26,853			—			16,294
Loss (earnings) of joint ventures	(2,328		)	(2,339		)	—			(1,422		)
Distribution from equity joint ventures	1,625			1,925
Minority interests	251			(132		)	—			(28		)
Deferred income taxes	(1,695		)	(6,388		)	—			3,906
Gain on dispositions of property and equipment	(342		)	(394		)	—			(2,506		)
Impairment of goodwill and intangible assets	5,718			—
Other, net	1,667			1,729			—			5,660
Changes in assets and liabilities:
Accounts receivable	(19,352		)	(893		)	—			(12,744		)
Contract revenues in excess of billings	(1,913		)	(1,203		)	—			1,816
Inventories	(515		)	(3,204		)	—			(1,461		)
Prepaid expenses and other current assets	(1,919		)	4,252			—			(771		)
Accounts payable and accrued expenses	10,133			12,495			(6,458		)	17,252
Billings in excess of contract revenues	1,401			(2,102		)	—			(2,107		)
Other non-current assets and liabilities	(185		)	(2,063		)	—			3,877
Net cash flows from operating activities	10,280			17,449			(6,458		)	26,170
INVESTING ACTIVITIES
Purchases of property and equipment	(12,645		)	(23,085		)	—			(37,650		)
Dispositions of property and equipment	5,468			10,261			—			5,840
Cash released from (funded to) equipment escrow	—			876			—			(2,451		)
Acquisition of Predecessor common and preferred shares	—			527			(129,142		)	—
Payment of sale-related expenses	—			—			(19,994		)	—
Disposition of interest in Riovia investment	—			—			—			1,200
Equity investment in land	—			—			—			(1,047		)
Purchase portion of minority interests’ share in NASDI	—			—			—			(75		)
Net cash flows from investing activities	(7,177		)	(11,421		)	(149,136		)	(34,183		)
FINANCING ACTIVITIES
Repayments of long-term debt	(5,450		)	(4,450		)	(1,762		)	(9,238		)
Borrowings under (repayments of) revolving loans, net	2,000			—			(5,000		)	1,000
Repayment of NASDI stockholder notes	—			—			(3,000		)	—
Proceeds from issuance of new long-term debt	—			—			60,300			23,400
Proceeds from issuance of 7¾% senior subordinated notes	—			—			175,000			—
Redemption of 11¼% senior subordinated notes	—			—			(155,000		)	—
Proceeds from issuance of Successor common shares	—			—			94,309			—
Financing fees	—			(1,149		)	(14,050		)	(388		)
Repayment of capital lease debt	(1,014		)	(1,242		)	—			(713		)
Other	—			—			—			68
Net cash flows from financing activities	(4,464		)	(6,841		)	150,797			14,129
Net change in cash and equivalents	(1,361		)	(813		)	(4,797		)	6,116
Cash and equivalents at beginning of period	1,962			2,775			7,572			1,456
Cash and equivalents at end of period	$	601		$	1,962		$	2,775		$	7,572
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	21,230		$	17,483		$	6,458		$	19,286
Cash paid (refunded) for taxes	$	234		$	(5,013	)	$	—		$	6,286

See notes to consolidated financial statements.

12

GREAT LAKES DREDGE & DOCK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (in thousands, except share and per share amounts)

1.Nature of business and summary of significant accounting policies

Organization and recapitalization

Great Lakes Dredge & Dock Corporation and its subsidiaries (the Company or Great Lakes) are in the business of marine construction, primarily dredging, and commercial and industrial demolition services. The Company’s primary dredging customers are domestic and foreign government agencies, and its primary demolition customers are general contractors, corporations that commission projects, non-profit institutions such as universities and hospitals, and local government and municipal agencies.

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 Holding Company LLC (Vectura), for approximately $362 million, including fees and expenses, in a transaction accounted for as a purchase (the Transaction). The acquisition was effected by a new company established for this purpose, GLDD Acquisitions Corp., which now owns 100% of the equity securities of Great Lakes Dredge & Dock Corporation.  Certain members of Great Lakes’ management own approximately 15% of the outstanding common stock of GLDD Acquisitions Corp. and MDP and certain of its co-investors own the remaining 85%.  See Note 2 for a description of the Transaction.

Principles of consolidation and basis of presentation

The consolidated financial statements include the accounts of Great Lakes Dredge & Dock Corporation and its majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated.  The equity method of accounting is used for investments in unconsolidated investees in which the Company has significant influence.   Other investments, if any, are carried at cost.

The acquisition of the Company by MDP 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.  For presentation herein, the financial statements up to the date of the sale are denoted as Predecessor Basis, while the financial statements prepared subsequent to the Transaction are denoted as Successor Basis.  The sale was accounted for as if it had occurred on December 31, 2003.  Management determined that results of operations were not significant and no material transactions occurred during the period from December 23 to December 31, 2003.

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Use of estimates

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

Revenue and cost recognition on contracts

Substantially all of the Company’s contracts for dredging services are fixed-price contracts, which provide for remeasurement based on actual quantities dredged.  The majority of the Company’s demolition contracts are also fixed-price contracts, with others managed as time-and-materials or rental projects.  In accordance with the American Institute of Certified Public Accountants’ Statement of Position 81-1, “Accounting for the Performance of Construction-Type and Certain Production-Type Contracts,” contract revenues are recognized under the percentage-of-completion method, based on the Company’s engineering estimates of the physical percentage completed for dredging projects and using a cost-to-cost approach for demolition projects.  For dredging projects, costs of contract revenues are adjusted to reflect the gross profit percentage expected to be achieved upon ultimate completion of each dredging project.  For demolition contracts, contract revenues are adjusted to reflect the estimated gross profit percentage.  Provisions for estimated losses on contracts in progress are made in the period in which such losses are determined. Claims for additional compensation due the Company are not recognized in contract revenues until such claims are settled.  Billings on contracts are generally submitted after verification with the customers of physical progress and may not match the timing of revenue recognition.  The difference between amounts billed and recognized as revenue is reflected in the balance sheet as either contract revenues in excess of billings or billings in excess of contract revenues.  Modifications may be negotiated when a change from the original contract specifications is encountered, necessitating a change in project scope or performance methodology and/or material disposal.  Thus, the resulting modification is considered a change in the scope of the original project to which it relates. Significant expenditures incurred incidental to major contracts are deferred and recognized as contract costs based on contract performance over the duration of the related project.  These expenditures are reported as prepaid expenses.

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Classification of current assets and liabilities

The Company includes in current assets and liabilities amounts realizable and payable in the normal course of contract completion unless completion of such contracts extends significantly beyond one year.

Cash equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Inventories

Inventories consist mainly of pipe, purchased spare parts, and supplies used in the Company’s dredging operations.  Inventories are stated at the lower of cost or market, using an average cost methodology.

Property and equipment

Capital additions, improvements and major renewals are classified as property and equipment and are carried at cost.  Maintenance and repairs are charged to earnings as incurred.  Depreciation is provided over the estimated useful lives of property and equipment using the straight-line method.  The estimated useful lives by class of assets are 10 years for buildings and improvements, 5 to 10 years for furniture and fixtures, 3 to 10 years for vehicles, dozers and other light operating equipment and systems, and 10 to 30 years for heavy operating equipment, such as barges and dredges.  Leasehold improvements are amortized over the shorter of their remaining useful lives or the remaining lives of the leases.

Goodwill and other intangibles

Goodwill represents the excess of the purchase price of net tangible and intangible assets acquired in business combinations over their estimated fair value.  Other intangibles mainly represent developed technology and databases, customer relationships, and customer contracts acquired in business combinations.  Goodwill resulting from the Transaction is tested annually for impairment in the third quarter of each year, or more frequently should circumstances dictate.

The other intangible assets identified with respect to the Transaction are being amortized over a 7 to 10 year period, except for the intangible assets related to customer contracts, which are being amortized over approximately 13 to 15 months, consistent with the average remaining duration of the underlying contracts.

Long-lived assets

Long-lived assets are comprised of property and equipment and intangible assets subject to amortization.  Pursuant to the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived

15

Assets,” long-lived assets to be held and used are reviewed for possible impairment whenever events indicate that the carrying amount of such assets may not be recoverable by comparing the undiscounted cash flows associated with the assets to their carrying amounts.  If such a review indicates an impairment, the carrying amount would be reduced to fair value.  If long-lived assets are to be disposed, depreciation is discontinued, if applicable, and the assets are reclassified as held for sale at the lower of their carrying amounts or fair values less costs to sell.

Asset Retirement Obligations

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement
Obligations” (FIN 47) which is effective for fiscal years ending after December 15, 2005 and is an interpretation of FASB Statement No. 143, “Accounting for Asset Retirement Obligations”. FIN 47 requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the fair value of the liability can be reasonably estimated. Interpretation No. 47 further clarifies what the term “conditional asset retirement obligation” means with respect to recording the asset retirement obligation discussed in SFAS No. 143. The adoption of FIN 47 did not have a material impact on the Company’s consolidated financial position, annual results of operations or cash flows.

Self-insurance reserves

The Company self-insures costs associated with workers’ compensation claims, hull and equipment liability and general business liabilities, up to certain limits.  Insurance reserves are established for estimates of the loss that the Company will ultimately incur on reported claims, as well as estimates of claims that have been incurred but not yet reported.  In determining its estimates, the Company incorporates historical loss experience and judgments about the present and expected levels of cost per claim.  Trends in actual experience are a significant factor in determination of such reserves.

Income taxes

The Company records income taxes based upon SFAS No. 109, “Accounting for Income Taxes,” which requires the use of the liability method of accounting for deferred income taxes.  The provision for income taxes includes federal, foreign and state income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities.

Fair value of financial instruments

The carrying value of financial instruments included in current assets and current liabilities approximates fair values due to the short-term maturities of these instruments.  The carrying value of long-term bank debt is a reasonable estimate of its fair value as interest rates are variable, based on the prevailing market rates.   At December 31, 2005 and 2004, the Company had long-term subordinated notes outstanding with a recorded

16

book value of $175,000.  The fair value of these notes was $157,500 and $157,938 at December 31, 2005 and 2004, respectively, based on quoted market prices.

Minority interest

The Company owns 85% of the capital stock of NASDI, a demolition service provider located in the Boston, Massachusetts area.  The remaining 15% of the capital stock is owned by a senior manager of NASDI.  Minority interest at December 31, 2005 and 2004 reflects the remaining NASDI management stockholder’s 15% non-voting interest in NASDI.

Capital stock

As a result of the sale of the Company (see Note 2), the Company currently has only one class of common stock with a par value of $.01 per share.  500,000 shares are authorized and 1,000 shares are issued and outstanding at December 31, 2005 and 2004.

Reclassifications

In the 2004 consolidated statement of cash flows, $1,925 of distributions from equity joint ventures was reclassified from net cash flows from investing activities to net cash flows from operating activities and $1,242 of capital lease repayments was reclassified from operating activities to net cash flows from financing activities to conform to the 2005 presentation. Also, in the 2003 consolidated statement of cash flows, $2,451 of cash funded to an equipment escrow account was reclassified from net cash flows from operating activities to net cash flows from financing activities and $713 of capital lease repayments was reclassified from operating activities to net cash flows from financing activities to conform to the 2004 and 2005 presentations, respectively.

2.Sale transaction

On December 22, 2003, MDP acquired control of the Company for an initial purchase price of $362,111, including fees and expenses.   The acquisition was financed by new equity contributions of $97,000; term loan and revolver borrowings under a new senior credit facility of approximately $60,300 and $2,000, respectively; the issuance of $175,000 of 7.75% Senior Subordinated Notes due 2013; the rollover of term loan borrowings under a new equipment financing facility of $23,400; the rollover of approximately $1,558 million of capital leases; and cash on hand of $2,853.  As mentioned previously, the sale was accounted for as if it had occurred on December 31, 2003, as management determined that results of operations were not significant and no material transactions occurred during the period from December 23 to December 31, 2003.   The purchase price was subject to certain working capital and debt adjustments to be finalized approximately three months

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subsequent to the Transaction, as defined per the merger agreement.  The adjustments were finalized in April of 2004, resulting in a decrease to the initial purchase price of $527.

Following is a summary of the fair values of the assets acquired and liabilities assumed as of the date of the acquisition (as revised by the results of third party appraisals and the purchase price adjustment):

Current assets	$	116,584
Property and equipment	263,746
Other intangible assets	7,441
Goodwill	103,563
Other assets	31,391
Total assets acquired	522,725
Current liabilities	56,043
Other liabilities	105,098
Total liabilities assumed	161,141
Total purchase price	$	361,584

The purchase price was allocated to the acquired assets and liabilities based on their fair values at December 31, 2003, as determined by management’s estimates and third-party appraisals, where practicable.   At December 31, 2005, after reviewing for any impairment, goodwill of $79,097 and $19,650 has been assigned to the dredging and demolition reporting units, respectively.   See Notes 5 and 8 regarding the current year impairment of demolition unit goodwill and intangibles.

In connection with the sale, the Company incurred transaction expenses of approximately $23,748, which were reflected in the Company’s 2003 Predecessor Basis statement of operations.  These transaction expenses include sale-related operating expenses of $10,635 for advisory fees and discretionary bonuses paid to management and sale-related financing costs of $13,113 related to the early extinguishment of the Company’s 11¼% senior subordinated notes and write-off of deferred financing costs related to the Company’s prior debt structure. In addition, the Company incurred other acquisition-related costs of approximately $2,691, which were capitalized as direct costs of the Transaction.

3.Accounts receivable

Accounts receivable are as follows:

	2005			2004
Completed contracts	$	33,818		$	13,971
Contracts in progress	41,885			43,088
Retainage	10,016			9,211
	85,719			66,270
Allowance for doubtful accounts	(605		)	(508		)
	$	85,114		$	65,762

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4.Contracts in progress

The components of contracts in progress are as follows:

	2005			2004
Costs and earnings in excess of billings:
Costs and earnings for contracts in progress	$	196,846		$	232,994
Amounts billed	(185,635		)	(221,243		)
Costs and earnings in excess of billings for contracts in progress	11,211			11,751
Costs and earnings in excess of billings for completed contracts	3,141			688
	$	14,352		$	12,439
Prepaid contract costs (included in prepaid expenses)	$	1,541		$	718
Billings in excess of costs and earnings:
Amounts billed	$	(113,243	)	$	(196,639	)
Costs and earnings for contracts in progress	105,135			189,933
	$	(8,108	)	$	(6,706	)

5.Goodwill

In the third quarter of 2005, the Company performed its annual assessment for the impairment of goodwill.  At the time of the Company’s sale transaction in December 2003, a portion of the total goodwill had been allocated to the demolition segment.  Although NASDI achieved its 2005 forecast and is projected to be cash flow positive going forward, Company management does not believe that it will achieve the future returns contemplated in the 2003 forecasts prepared when the goodwill was allocated.  These downward revised projections for the demolition business are attributable to higher anticipated incentive pay to retain a key member of the demolition business’ management.  Based on these revised projections the Company determined there was an impairment of the goodwill related to its demolition reporting unit. Therefore, the Company recorded a non-cash write-down of $4,816 to reflect management’s best estimate, using a discounted cash flow model, of the impairment to goodwill.

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6.Property and equipment

Property and equipment are as follows:

	2005			2004
Land	$	2,870		$	2,870
Buildings and improvements	270			125
Furniture and fixtures	1,154			1,129
Operating equipment	282,700			275,102
	286,994			279,226
Accumulated depreciation	(46,145		)	(22,632		)
	$	240,849		$	256,594

7.Investments in joint ventures

The Company has a 50% ownership interest in Amboy Aggregates (Amboy), whose primary business is the dredge mining and sale of fine aggregate.  The Company accounts for its investment in Amboy using the equity method. The following table includes Amboy’s summarized financial information for the periods presented.

	2005			2004			2003
Current assets	$	7,943		$	7,727		$	6,414
Non-current assets	8,942			8,420			9,367
Total assets	16,885			16,147			15,781
Current liabilities	(1,676		)	(2,160		)	(2,625		)
Non-current liabilities	—			—			(147		)
Equity	$	15,209		$	13,987		$	13,009
Revenue	$	28,363		$	26,773		$	19,316
Costs and expenses	(23,765		)	(22,095		)	(17,412		)
Net income (loss)	$	4,598		$	4,678		$	1,904

Amboy has a loan with a bank, which contains certain restrictive covenants, including limitations on the amount of distributions to its joint venture partners.  It is the intent of the joint venture partners to periodically distribute Amboy’s earnings, to the extent allowed by Amboy’s bank agreement.  The term portion of Amboy’s loan matured in October 2003, and the $2,000 revolving credit facility was set to expire in August 2005.  The revolving credit facility was amended to extend the expiration to August 2007 and increase the facility to $3,000.  The Company no longer guarantees any of the outstanding borrowings and accrued interest under the facility.

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In 2003, the Company and its Amboy joint venture partner each purchased a 50% interest in land, which is adjacent to the Amboy property and may be used in connection with the Amboy operations.  The Company’s share of the purchase price totaled $1,047 and is reflected in investments in joint ventures.  Income from that land was $29 for the year ended December 31, 2005.

For the years ended December 31, 2005 and 2004, the Company received distributions from Amboy and the adjacent land venture totaling $1,625 and $1,925.

The Company’s 2003 equity from earnings of joint ventures in the statement of income includes a gain of $470 resulting from the Company’s sale of its 20% investment in Riovia S.A., a venture whose sole business was the performance of a dredging contract in Argentina and Uruguay.

8.Intangible Assets

At December 31, 2005, the net book value of intangible assets identified with respect to the Transaction is as follows:

	Estimated			Accumulated
	Life	Cost		Amortization		Net
Customer contract backlog	13 to 15 months	$	4,237	$	4,148	$	89
Demolition customer relationships	7 years	1,093		529		564
Software and databases	7 to 10 years	1,209		283		926
		$	6,539	$	4,960	$	1,579

In the third quarter of 2005, the Company wrote-down the intangible asset related to demolition customer relationships by $902.  This impairment on intangibles was analyzed in conjunction with the goodwill impairment as discussed in Note 5.  When the original customer relationship intangible was established in 2003, it required estimation of future annual revenues attributable to certain key customers.  Over the past two years, the demolition revenues were generated by a greater variety of customers, rather than being as concentrated as anticipated with these key customers.  Therefore, the future revenue expectations related to these particular customers were revised, resulting in this non-cash impairment write-down based on a discounted cash-flow analysis.

Amortization expense related to these intangible assets is estimated to be $311 in 2006 and $263 annually in 2007 through 2010.

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9.Impairment of land disposal rights

The Company owned rights to dispose a certain quantity of dredged material in upland disposal sites in New Jersey.  During 2003, the site owner informed Company management that it did not intend to make future disposal sites available for the Company to utilize its disposal rights.  Therefore, management determined that recovery of the land rights at their recorded amount was unlikely and recorded an impairment loss of $2,276.

10.Other non-current assets

At December 31, 2005 and 2004, other non-current assets includes $1,575 of cash held in a new escrow account as security for the Company’s lease rental obligations under one of its long-term equipment operating leases.  This cash will be released once the Company achieves certain financial thresholds, or upon conclusion of the lease.

11.Accrued expenses

Accrued expenses are as follows:

	2005		2004
Payroll and employee benefits	$	8,927	$	4,700
Insurance	6,387		5,022
U.S. income and other taxes	3,170		2,564
Interest rate swap liability	1,598		662
Interest	1,115		799
Equipment leases	933		719
Demolition litigation expense	—		1,275
Other	2,134		1,935
	$	24,264	$	17,676

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12.Long-term debt

Long-term debt is as follows:

	2005			2004
Senior bank debt:
Equipment term loan	$	19,500		$	21,450
Term loan B	54,300			57,800
Revolving loan	2,000			—
7 ¾% senior subordinated notes	175,000			175,000
	250,800			254,250
Current maturities of long-term debt	(1,950		)	(1,950		)
	$	248,850		$	252,300

In December 2003, the Company entered into a long-term loan with an equipment financing company (Equipment Term Loan) to refinance borrowings incurred under its former revolving credit facility to acquire certain equipment that was previously under an operating lease.  Principal payments under the Equipment Term Loan total $1,950 annually for each of the next nine years and are paid in quarterly installments.  Interest is paid quarterly at a variable LIBOR-based rate.   The Equipment Term Loan agreement also contains provisions that require the Company to maintain certain financial ratios.   Borrowings under the Equipment Term Loan are secured by first lien mortgages on certain operating equipment with a net book value of $20,348 at December 31, 2005.

In connection with the sale, in December 2003, the Company also entered into a new bank credit agreement (Credit Agreement) with a group of banks, consisting of a Tranche B Term Loan facility, which matures in 2010, and a $60,000 aggregate revolving credit facility which may be used for borrowings or for letters of credit, which expires in 2008.  The terms of the Credit Agreement provide for interest rate spreads based on the Company’s debt level compared to earnings, as defined, and allow for various interest rate options for loan amounts and periods that are selected at the discretion of the Company.  Borrowings under the Credit Agreement are secured by first lien mortgages on certain operating equipment of the Company with a net book value of $80,309 at December 31, 2005 and are guaranteed by all domestic subsidiaries of the Company.   The Credit Agreement also contains provisions requiring the Company to maintain certain financial ratios and restricting the Company’s ability to pay dividends, incur indebtedness, create liens, and take certain other actions.

Effective September 30, 2004, the Company amended its Credit Agreement and Equipment Term Loan (collectively, Senior Credit  Facilities) to allow additional flexibility in its leverage and interest coverage ratios, including replacement of the total leverage ratio with a required minimum EBITDA, as defined in the aforementioned agreements, through 2005.  In exchange, the Company’s capital spending limits were reduced

23

and the Company’s borrowing availability under its revolving credit facility was reduced to $45,000 (with a sub-limit of $35,000 for letters of credit and $15,000 for revolver borrowings), until such time that the Company achieves certain defined financial measures.  At December 31, 2005, the Company had $20,147 in undrawn letters of credit relating to foreign contract performance guarantees and insurance payment liabilities and $2,000 borrowed under the revolver.  Therefore, at December 31, 2005, the Company had availability of $22,853 (with a sub-limit of $14,853 for the letters of credit and $13,000 for revolver borrowings).  At December 31, 2005, the Company was in compliance with its various covenants under its revised Senior Credit Facilities.

Effective February 1, 2006, the Company’s borrowing availability reverted back to the full $60,000 allowed under the original terms of its Credit Agreement with its senior lenders, based on the attainment of the certain defined financial measures in accordance with the terms of the September 2004 amendment to such credit agreement.  Additionally, on March 22, 2006 the Company amended its Credit Agreement to increase its sub-limit for letters of credit to $45 million from $35 million.

The Company is required to pay all unpaid principal amounts of its term loan B facility in full at maturity.   Annual prepayments of principal may be required to the extent the Company reduces collateral and voluntary prepayments are allowed.   In 2005 and 2004, the Company made voluntary prepayments of $3,500 and $2,500, respectively.

At December 31, 2005 and 2004, the Company’s weighted average borrowing rate under its Senior Credit Facilities was 7.9% and 6.4%, respectively.  Amortization of financing fees related to the Senior Credit Facilities added 1.0% to the 2005 weighted average borrowing rate.  The Company also pays an annual commitment fee of up to 0.750% on the average daily unused capacity available under the revolving credit facility.

On December 22, 2003, the Company issued $175,000 of 7¾% senior subordinated notes (Notes) which will mature on December 15, 2013. The Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future senior debt, including borrowings under the Senior Credit Facilities. The Company’s obligations under the Notes are guaranteed on a senior subordinated basis by all of the Company’s domestic subsidiaries.

The Company used the proceeds from its new debt, along with equity contribution from its new owners, to provide consideration to its former owners, as well as repay its former debt, including its 11¼% senior subordinated notes due August 15, 2008.  In connection with the extinguishment of these notes in December of 2003, the Company paid tender and call premiums totaling $9,359, which are reflected as sale-related financing costs in the 2003 consolidated statement of operations. Additionally, in connection with the

24

extinguishment of its old debt structure, the Company wrote off deferred financing costs totaling $3,754, which is also reflected as sale-related financing costs in the 2003 consolidated statement of operations.

Financing fees and amendment fees related to the Senior Credit Facilities and the Notes are deferred and amortized over the respective terms of the borrowings.

The schedule of principal payments required under the Company’s long-term debt at December 31, 2005 is as follows:

2006	$	1,950
2007	1,950
2008	3,950
2009	1,950
2010	1,950
Thereafter	239,050
	250,800
Less current portion	(1,950		)
	$	248,850

The Company sometimes enters into capital lease arrangements to finance the acquisition of dozers, excavators and automobiles.  The current portion of capital lease obligations, in the amounts of $933 and $719, is included in accrued expenses at December 31, 2005 and 2004, respectively.  The long-term portion of these leases is included in other long-term liabilities and totaled $992 and $1,140, respectively.   The terms of these leases extend through 2008.  The net book value of these assets was $2,598 and $1,676 at December 31, 2005 and 2004, respectively.

13.Risk management activities

The Company uses derivative instruments to manage commodity price, interest rate, and foreign currency exchange risks.  Such instruments are not used for trading purposes.  As of December 31, 2005, the Company is party to various swap arrangements to hedge the price of a portion of its diesel fuel purchase requirements for work in its backlog to be performed through May 2006.  As of December 31, 2005, there were 2.5 million gallons remaining on these contracts.  Under these agreements, the Company will pay fixed prices ranging from $1.48 to $1.99 per gallon.  At December 31, 2005 and 2004, the fair value of these contracts was estimated to be a liability of $344 and $36, respectively, based on quoted market prices.  The fair value at December 31, 2005 and 2004 is recorded in accrued liabilities on the balance sheet.

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The Company has designated its fuel hedge arrangements as cash flow hedges, resulting in the following activity in accumulated other comprehensive (loss), net of income taxes:

	2005			2004
Accumulated other comprehensive income as of January 1	$	(22	)	$	—
Net gains reclassified into costs of contract revenues from accumulated other comprehensive income, net of tax	(1,838		)	(1,654		)
Change in fair value of derivatives, net of tax	1,651			1,632
Accumulated other comprehensive loss as of December 31	$	(209	)	$	(22	)

Ineffectiveness related to these fuel hedge arrangements was determined to be immaterial.  The remaining gains or losses included in accumulated other comprehensive loss at December 31, 2005 will be reclassified into earnings over the next five months, corresponding to the period during which the hedged fuel is expected to be utilized.

In February 2004, the Company entered into an interest rate swap arrangement to swap a notional amount of $50,000 from a fixed rate of 7.75% to a floating LIBOR-based rate in order to manage the interest rate paid with respect to the Company’s 7¾% senior subordinated notes.  The fair value of the swap at December 31, 2005 was a liability of $1,598 and is recorded in accrued expenses.  The swap is not accounted for as a hedge; therefore, the changes in fair value are recorded as adjustments to interest expense in each reporting period.  In 2005 the Company made settlement payments under the swap totaling $245, which are recorded as interest expense and in 2004, the Company received settlement payments under the swap totaling $526, which are recorded as a reduction to interest expense.

The Company had no foreign currency hedge contracts outstanding at December 31, 2005 or 2004.

14. Income taxes

The provision (benefit) for income taxes is as follows:

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							Predecessor
	Successor Basis						Basis
	2005			2004			2003
Federal:
Current	$	(24	)	—			$	(3,521	)
Deferred	(1,420		)	(5,823		)	3,553
State:
Current	614			456			561
Deferred	(275		)	(365		)	353
Foreign:
Current	(259		)	1,366			372
	$	(1,364	)	$	(4,366	)	$	1,318

The Company’s income tax provision (benefit) reconciles to the provision at the statutory U.S. federal income tax rate as follows:

							Predecessor
	Successor Basis						Basis
	2005			2004			2003
Tax (benefit) provision at statutory U.S. federal income tax rate	(2,742		)	(5,298		)	(67		)
Write-off of goodwill	1,637			—			—
Foreign taxes deducted, net of federal income tax benefit	(226		)	901			246
State income tax, net of federal income tax benefit	130			(64		)	723
Other	(163		)	95			416
Income tax (benefit) provision	$	(1,364	)	$	(4,366	)	$	1,318

During the third quarter of 2005, the Company performed its annual assessment for the impairment of goodwill related to its demolition business.  Based upon the results of this assessment the Company recorded a non-cash write-down of $4,816 which impacted the federal tax provision for the year ended December 31, 2005, as noted above.

For the year ended December 31, 2005, the Company’s income tax provision includes foreign income tax expense of $159 and interest expense of $96 resulting from the settlement of a foreign tax obligation related to the 1999 taxable year.

At December 31, 2005 and 2004, the Company had net operating loss carryforwards for federal income tax purposes of approximately $4,854 and $15,049, respectively, which will expire in 2024.   At December 31, 2005 and 2004 the Company had net operating loss carryforwards for state income tax purposes totaling $6,948 and $11,307 respectively, which will expire between 2010 and 2024.

The Company has recorded reserves for contingent income tax liabilities with respect to loss contingencies that are deemed probable of occurrence.  Such amounts total $3,120 and are included in income taxes payable at

27

December 31, 2005.  These loss contingencies relate primarily to the classification of transaction expenses incurred in connection with the Company’s sale in December 2003, the taxation of foreign earnings, and state income tax issues.

The Company’s deferred tax assets (liabilities) are as follows:

	Successor Basis
	2005			2004
Net deferred tax assets:
Accrued liabilities	$	5,321		$	6,046
Net operating loss carry-forward benefit	2,188			5,729
	7,509			11,775
Net deferred tax liabilities:
Depreciation and amortization	(90,432		)	(96,410		)
Other	(278		)	(381		)
	(90,710		)	(96,791		)
Total net deferred tax liabilities	$	(83,201	)	$	(85,016	)
As reported in the balance sheet:
Net current deferred tax assets (included in other current assets)	$	4,953		$	5,413
Net non-current deferred tax liabilities	(88,154		)	(90,429		)
Total net deferred tax liabilities	$	(83,201	)	$	(85,016	)

15. Lease commitments

The Company leases certain operating equipment and office facilities under long-term operating leases expiring at various dates through 2020.  The equipment leases contain renewal or purchase options that specify prices at the then fair market 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 Credit Agreement, and one lease arrangement requires that the Company maintain certain financial ratios comparable to those required by its Senior Credit Facilities.  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.

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Future minimum operating lease payments for the years ending December 31 are as follows:

2006	$ 14,172
2007	13,464
2008	12,794
2009	11,527
2010	8,201
Thereafter	53,981
Total minimum lease payments	$114,139

Total rent expense under long-term operating lease arrangements for the years ended December 31, 2005, 2004 and 2003 was $16,344, $15,109 and $17,397, respectively.  This excludes expenses for equipment and facilities rented on a short-term, as-needed basis.

16. Retirement plans

The Company sponsors two 401(k) savings plans, one covering substantially all non-union salaried employees (Salaried Plan) and the second covering its non-union hourly employees (Hourly Plan).  Under both plans, individual employees may contribute a percentage of compensation and the Company will match a portion of the employees’ contributions. Additionally, the Salaried Plan includes a profit-sharing component, permitting the Company to make discretionary employer contributions to all eligible employees of the Salaried Plan.  The Company’s expense for matching and discretionary contributions for 2005, 2004 and 2003 was $2,944, $1,975 and $2,879, respectively.  On January 1, 2003, the Company adopted a third 401(k) savings plan specifically for employees that are members of the Company’s tugboat union.   Participation in and contributions to this plan are not significant.

The Company also contributes to various multi-employer pension plans pursuant to collective bargaining agreements.  In the event of a plan’s termination or Company withdrawal from a plan, the Company may be liable for a portion of the plan’s unfunded vested benefits.  As of December 31, 2005, unfunded amounts, if any, are not significant.  Total contributions to multi-employer pension plans for the years ended December 31, 2005, 2004 and 2003 were $5,218, $4,410 and $5,000, respectively.

17. Segment information

The Company and its subsidiaries currently operate in two reportable segments:  dredging and demolition.   The Company’s financial reporting systems present various data for management to run the business, including profit and loss statements prepared according to the segments presented. Segment information for 2005, 2004 and 2003 is provided as follows:

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								Predecessor
	Successor Basis							Basis
						December 31,		Jan 1 - Dec 31,
	2005			2004		2003		2003
Dredging
Contract revenues	$	374,262		$	313,807			$	360,830
Operating income	15,176			1,484				29,655
Depreciation and amortization	23,187			24,923				15,261
Total assets	469,914			466,794		$	474,803
Property and equipment, net	236,468			252,508		259,956
Goodwill	79,097			79,570		80,475
Investment in equity method investee	8,605			7,965		7,551
Capital expenditures	10,935			21,535				35,796
Demolition
Contract revenues	$	49,137		$	37,055			$	37,970
Operating income	(2,514		)	926				2,447
Depreciation and amortization	1,499			1,930				1,033
Total assets	37,323			41,841		$	48,141
Property and equipment, net	4,381			4,086		4,176
Goodwill	19,650			23,993		23,442
Investment in equity method investee	—			—
Capital expenditures	1,710			1,550				1,854
Total
Contract revenues	$	423,399		$	350,862			$	398,800
Operating income	12,662			2,410				32,102
Depreciation and amortization	24,686			26,853				16,294
Total assets	507,237			508,635		$	522,944
Property and equipment, net	240,849			256,594		264,132
Goodwill	98,747			103,563		103,917
Investment in equity method investee	8,605			7,965		7,551
Capital expenditures	12,645			23,085				37,650

30

The Company aggregates the revenue related to its dredging projects into the following types of work:

	Successor Basis				Predecessor Basis
	2005		2004		2003
Capital dredging - U.S.	161,125		$	141,674	$	203,699
Capital dredging - foreign	47,402		62,862		60,922
Beach nourishment dredging	92,746		51,289		47,858
Maintenance dredging	72,989		57,982		48,351
Total	$	374,262	$	313,807	$	360,830

The Company derived revenues and gross profit from foreign projet operations for the years ended December 31 as follows:

	Successor Basis						Predecessor Basis
	2005			2004			2003
Contract revenues	$	47,402		$	62,862		$	60,922
Costs of contract revenues	(43,066		)	(54,462		)	(56,930		)
Gross profit	$	4,336		$	8,400		$	3,992

The majority of the Company’s long-lived assets are marine vessels and related equipment.  At any point in time, the Company may employ certain assets outside of the U.S., as needed, to perform work on the Company’s foreign projects.  As of December 31, 2005 long-lived assets with a net book value of $48,878 were employed outside of the U.S.

Certain foreign projects performed by the Company have warranty periods, typically spanning no more than three to five years beyond project completion, whereby the Company retains responsibility to maintain the project site to certain specifications during the warranty period.  Generally, any potential liability of the Company is mitigated by insurance, shared responsibilities with consortium partners, and/or recourse to owner-provided specifications.   The Company does not anticipate having to perform under its warranty provisions; therefore, no liability has been reflected at December 31, 2005 or 2004 related to its potential warranty obligations.

18.Concentrations of risk

The Company’s primary dredging customer is the U.S. Army Corps of Engineers (the Corps), which has responsibility for federally funded projects related to navigation and flood control.  In 2005, 2004 and 2003, 70.2%, 67.2% and 65.3%, respectively, of contract revenues were earned from dredging contracts with federal government agencies, including the Corps as well as other federal entities such as the U.S. Coast Guard and U.S. Navy.  At December 31, 2005 and 2004, approximately 62.7% and 68.2%, respectively, of accounts

31

 receivable, including contract revenues in excess of billings, were due on dredging contracts with federal government agencies.   The Company depends on its ability to continue to obtain federal government dredging contracts, and indirectly, on the amount of federal funding for new and current government dredging projects.  Therefore, the Company’s dredging operations can be influenced by the level and timing of federal funding.

19.Commitments and contingencies

Performance and bid bonds are customarily required for dredging and marine construction projects, as well as some demolition projects.  The Company obtains its performance and bid bonds through a bonding agreement with a surety company that has been granted a security interest in a substantial portion of the Company’s operating equipment with a net book value of $83.5 million at December 31, 2005.  The bonding agreement contains provisions requiring the Company to maintain certain financial ratios and restricting the Company’s ability to pay dividends, incur indebtedness, create liens, and take certain other actions.  The bonding agreement was amended effective September 30, 2004 to revise the minimum net worth requirements.  At December 31, 2005, the Company was in compliance with its various covenants under the bonding agreement, as revised.  Bid bonds are generally obtained for a percentage of bid value and amounts outstanding typically range from $5 to $10 million.  At December 31, 2005, the Company had outstanding performance bonds valued at approximately $330 million; however, the revenue value remaining in backlog related to these projects totaled approximately $155 million.

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.

In the normal course of business, the Company is a defendant in various legal proceedings.  Except as described below, the Company is not currently a party to any material legal proceedings or environmental claims.

On February 10, 2004, the Company was served with a subpoena to produce documents in connection with a federal grand jury convened in the United States District Court for the District of South Carolina.  The Company believes the grand jury has been convened to investigate the United States dredging industry in connection with work performed for the U.S. Army Corp of Engineers. The Company continues to comply with the Justice department’s requests and Company management believes that it has provided substantially all of the documents that have been requested to this point.  In addition to the documents requested, seven employees or former employees of the Company have now been interviewed or have testified before the grand jury.

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In 1999, the Boston Housing Authority (“BHA”), for whom the Company’s demolition business, NASDI, had worked, asserted that NASDI and its subcontractors were responsible for improperly disposing of some contaminated materials. At the time the Company acquired NASDI in 2001, it was believed that NASDI had sufficient recourse in the matter and that any potential liability would be minimal.  However, since 2001, certain of the insurance carriers that would be responsible for this matter have gone bankrupt.  Negotiations between the parties have continued to progress, and in the third quarter of 2004, the case went before a judge in the Massachusetts court system who advised NASDI and the subcontractors to accept a settlement with the BHA.  Therefore, in the third quarter of 2004, the Company recorded a $1.3 million charge for NASDI’s share of this potential settlement liability.  This final settlement was paid in the fourth quarter of 2005.   Company management believes there is no further liability to the Company related to this matter.

On January 19, 2005, the Company, along with its joint-venture partners on the Port of Los Angeles Deepening Project, received a request for information from the United States Environmental Protection Agency (“EPA”) pursuant to section 308(a) of the Clean Water Act.  The EPA is investigating alleged dredging of unauthorized material and unauthorized discharge of that material at various locations in federally regulated waters of the U.S. relating to this project.   The Company performed this project under a contract with the Los Angeles district of the Corps and believes it was in compliance with the contract specifications.  The Company has complied with the request for information and has received no further response from the EPA.  It is management’s understanding that the Corps is currently addressing this matter with the EPA in Washington, as this is a national policy issue.  Therefore, the Company believes the EPA request it has received will not result in any further action against the Company.

On August 15, 2003 a claim was brought in the Landesgericht (District Court) of Berlin, Germany against Great Lakes by Hafemeister Erd-und Tiefbau GmbH, a German construction Company.  On June 8, 2004 Great Lakes was served with notice of this claim, alleging that in 2000 the Company along with a Dutch company wrongfully withdrew from a consortium prior to the submission of a tender for a project to be performed in Germany.  The claimant is seeking damages from its inability to bid on or perform the works in the amount of approximately €21,000.  Great Lakes filed a petition with the German courts to seek dismissal of the claim for lack of factual and legal merit.  A hearing occurred in December 2005 and the claim was dismissed.   Although the claimant has the right to appeal the dismissal, Company management believes there will be no liability to the Company related to this matter.

20.Subsidiary guarantors

The payment obligations of the Company under its 7¾% senior subordinated notes are guaranteed by all of the Company’s domestic subsidiaries (Subsidiary Guarantors).  Such guarantees are full, unconditional and joint and several.  Separate financial statements of the Subsidiary Guarantors are not presented because the Company’s management has determined that they would not be material to investors. The following

33

supplemental financial information sets forth, on a combined basis, the balance sheets, statements of operations and statements of cash flows for the Subsidiary Guarantors, the Company’s non-guarantor subsidiary and for the Great Lakes Dredge & Dock Corporation (GLD Corporation).

Condensed Consolidating Balance sheet at December 31, 2005

ASSETS	Guarantor Subsidiaries		Other Subsidiaries		GLD Corporation		Eliminations			Consolidated Totals
Current assets:
Cash and equivalents	$	596	$	5	$	—	$	—		$	601
Accounts receivable, net	85,114		—		—		—			85,114
Receivables from affiliates	9,202		2,876		4,542		(16,620		)	—
Contract revenues in excess of billings	14,352		—		—		—			14,352
Inventories	17,084		—		—		—			17,084
Prepaid expenses and other current assets	10,742		—		6,371		—			17,113
Total current assets	137,090		2,881		10,913		(16,620		)	134,264
Property and equipment, net	228,393		—		12,456		—			240,849
Goodwill.	98,747		—		—		—			98,747
Other intangible assets, net	1,579		—		—		—			1,579
Investments in subsidiaries	2,881		—		355,388		(358,269		)	—
Notes receivable from affiliates	—		—		22,702		(22,702		)	—
Inventories	11,206		—		—		—			11,206
Investments in joint ventures	8,605		—		—		—			8,605
Other assets	2,010		—		9,977		—			11,987
	$	490,511	$	2,881	$	411,436	$	(397,591	)	$	507,237
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	50,836	$	—	$	—	$	—		$	50,836
Payables to affiliates	7,754		—		8,866		(16,620		)	—
Accrued expenses	19,460		—		4,804		—			24,264
Billings in excess of contract revenues	8,108		—		—		—			8,108
Current maturities of long-term debt	1,950		—		—		—			1,950
Total current liabilities	88,108		—		13,670		(16,620		)	85,158
Long-term debt	17,550		—		231,300		—			248,850
Notes payable to affiliates	22,702		—		—		(22,702		)	—
Deferred income taxes	1,199		—		86,955		—			88,154
Other	3,923		—		550		—			4,473
Total liabilities	133,482		—		332,475		(39,322		)	426,635
Minority interests	—		—		—		1,850			1,850
Stockholder’s equity	357,029		2,881		78,961		(360,119		)	78,752
	$	490,511	$	2,881	$	411,436	$	(397,591	)	$	507,237

34

Condensed Consolidating Balance Sheet at December 31, 2004

	Guarantor		Other			GLD		Consolidated
ASSETS	Subsidiaries		Subsidiary			Corporation		Eliminations			Totals
Current assets:
Cash and equivalents	$	1,957	$	5		$	—	$	—		$	1,962
Accounts receivable, net	65,762		—			—		—			65,762
Receivables from affiliates	8,422		2,906			4,540		(15,868		)	—
Contract revenues in excess of billings	12,439		—			—		—			12,439
Inventories	16,497		—			—		—			16,497
Prepaid expenses and other current assets	13,780		—			1,874		—			15,654
Total current assets	118,857		2,911			6,414		(15,868		)	112,314
Property and equipment, net	242,672		—			13,922		—			256,594
Goodwill.	103,563		—			—		—			103,563
Other intangible assets, net	3,267		—			—		—			3,267
Investments in subsidiaries	2,924		—			281,813		(284,737		)	—
Notes receivable from affiliates	—		—			22,702		(22,702		)	—
Inventories	11,278		—			—		—			11,278
Investments in joint ventures	7,965		—			—		—			7,965
Other assets	2,073		—			11,581		—			13,654
	$	492,599	$	2,911		$	336,432	$	(323,307	)	$	508,635
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	46,770	$	—		$	—	$	—		$	46,770
Payables to affiliates	4,143		—			7,185		(11,328		)	—
Accrued expenses	13,238		—			4,438		—			17,676
Billings in excess of contract revenues	6,706		—			—		—			6,706
Current maturities of long-term debt	6,490		—			—		(4,540		)	1,950
Total current liabilities	77,347		—			11,623		(15,868		)	73,102
Long-term debt	19,500		—			232,800		—			252,300
Notes payable to affiliates	22,702		—			—		(22,702		)	—
Deferred income taxes	85,311		(13		)	5,131		—			90,429
Other	4,630		—			684		—			5,314
Total liabilities	209,490		(13		)	250,238		(38,570		)	421,145
Minority interests	—		—			—		1,599			1,599
Stockholder’s equity	283,109		2,924			86,194		(286,336		)	85,891
	$	492,599	$	2,911		$	336,432	$	(323,307	)	$	508,635

35

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2005

Successor Basis
	Guarantor			Other			GLD			Consolidated
	Subsidiaries			Subsidiary			Corporation			Eliminations			Totals
Contract revenues	$	423,399		$	—		$	—		$	—		$	423,399
Costs of contract revenues	(372,528		)	—			482			—			(372,046		)
Gross profit	50,871			—			482			—			51,353
General and administrative expenses	(29,235		)	(65		)	(22		)	—			(29,322		)
Subpoena-related expenses.	(2,865		)	—			—			—			(2,865		)
Amortization of intangible assets	(786		)	—			—			—			(786		)
Impairment of intangible assets	(5,718		)	—			—			—			(5,718		)
Operating income (loss)	12,267			(65		)	460			—			12,662
Interest expense, net	(4,015		)	—			(19,040		)	—			(23,055		)
Equity in earnings (loss) of subsidiaries	(43		)	—			55,561			(55,518		)	—
Equity in earnings of joint venture	2,328			—			—			—			2,328
Minority interests	—			—			—			(251		)	(251		)
Income (loss) before income taxes	10,537			(65		)	36,981			(55,769		)	(8,316		)
Provision for income taxes	44,358			22			(48,573		)	5,557			1,364
Net income (loss)	$	54,895		$	(43	)	$	(11,592	)	$	(50,212	)	$	(6,952	)

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2004

Successor Basis
	Guarantor			Other			GLD			Consolidated
	Subsidiaries			Subsidiary			Corporation			Eliminations			Totals
Contract revenues	$	350,862		$	—		$	—		$	—		$	350,862
Costs of contract revenues	(315,675		)	(13		)	748			—			(314,940		)
Gross profit (loss)	35,187			(13		)	748			—			35,922
General and administrative expenses	(25,208		)	(64		)	(201		)	—			(25,473		)
Amortization of intangible assets	(4,174		)	—			—			—			(4,174		)
Subpoena-related expenses	(2,317		)	—			—			—			(2,317		)
Demolition litigation expense.	(1,275		)	—			—			—			(1,275		)
Sale-related expenses	(138		)	—			(135		)	—			(273		)
Operating income (loss)	2,075			(77		)	412			—			2,410
Interest expense, net	(4,116		)	—			(16,218		)	—			(20,334		)
Equity in loss of subsidiaries	(52		)	—			(486		)	538			—
Equity in earnings of joint venture	2,339			—			—			—			2,339
Minority interests	—			—			—			132			132
Income (loss) before income taxes	246			(77		)	(16,292		)	670			(15,453		)
Provision for income taxes	(864		)	25			5,486			(281		)	4,366
Net loss	$	(618	)	$	(52	)	$	(10,806	)	$	389		$	(11,087	)

Condensed Consolidating Statement of Operations for the Year Ended December 31, 2003

Predecessor Basis
	Guarantor			Other			GLD			Consolidated
	Subsidiaries			Subsidiary			Corporation			Eliminations			Totals
Contract revenues	$	401,300		$	—		$	—		$	(2,500	)	$	398,800
Costs of contract revenues	(329,391		)	(48		)	(1,148		)	2,391			(328,196		)
Gross profit (loss)	71,909			(48		)	(1,148		)	(109		)	70,604
General and administrative expenses	(27,692		)	(57		)	(118		)	—			(27,867		)
Sale-related expenses	(5,996		)	—			(4,639		)	—			(10,635		)
Operating income (loss)	38,221			(105		)	(5,905		)	(109		)	32,102
Interest expense, net	(2,530		)	—			(18,187		)	—			(20,717		)
Sale-related financing costs	—			—			(13,113		)	—			(13,113		)
Equity in (loss) earnings of subsidiaries	(58		)	—			21,290			(21,232		)	—
Equity in earnings of joint ventures	1,422			—			—			—			1,422
Minority interests	—			—			—			28			28
Income (loss) before income taxes	37,055			(105		)	(15,915		)	(21,313		)	(278		)
Provision for income taxes	(15,674		)	37			6,684			7,635			(1,318		)
Net income (loss)	$	21,381		$	(68	)	$	(9,231	)	$	(13,678	)	$	(1,596	)

36

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2005

	Successor Basis
	Guarantor			Other			GLD			Consolidated
	Subsidiaries			Subsidiary			Corporation			Eliminations		Totals
Operating Activities
Net cash flows from operating activities	$	80,636		$	(30	)	$	(70,326	)	$	—	$	10,280
Investing Activities
Purchases of property and equipment	(12,645		)	—			—			—		(12,645		)
Dispositions of property and equipment.	5,468			—			—			—		5,468
Cash released from (funded to) equipment escrow	—			—			—			—		—
Acquisition of Predecessor common and preferred shares	—			—			—			—		—
Net cash flows from investing activities	(7,177		)	—			—			—		(7,177		)
Financing Activities
Repayments of long-term debt	(1,950		)	—			(1,500		)	—		(3,450		)
Net change in accounts with affiliates	(27,196		)	30			27,166			—		—
Repayment of capital lease debt	(1,014		)	—			—			—		(1,014		)
Net cash flows from financing activities	(30,160		)	30			25,666			—		(4,464		)
Net change in cash and equivalents	43,299			—			—			—		(1,361		)
Cash and equivalents at beginning of year	1,957			5			—			—		1,962
Cash and equivalents at end of year	$	45,256		$	5		$	—		$	—	$	601

Condensed Consolidating Statement of Cash Flows for the Year Ended December 31, 2004

	Successor Basis
	Guarantor			Other			GLD			Consolidated
	Subsidiaries			Subsidiary			Corporation			Eliminations		Totals
Operating Activities
Net cash flows from operating activities	$	22,679		$	(64	)	$	(5,166	)	$	—	$	17,449
Investing Activities
Purchases of property and equipment	(23,085		)	—			—			—		(23,085		)
Dispositions of property and equipment	10,236			25			—			—		10,261
Cash released from (funded to) equipment escrow	876			—			—			—		876
Distributions from equity joint ventures	—			—			—			—		—
Acquisition of Predecessor common and preferred shares	527			527			—			—		—
Net cash flows from investing activities	(11,446		)	25			—			—		(11,421		)
Financing Activities
Repayments of long-term debt	(1,950		)	—			(2,500		)	—		(4,450		)
Net change in accounts with affiliates	(8,631		)	35			8,596			—		—
Financing fees	(219		)	—			(930		)	—		(1,149		)
Repayment of capital lease debt	(1,242		)	—			—			—		(1,242		)
Net cash flows from financing activities	(12,042		)	35			5,166			—		(6,841		)
Net change in cash and equivalents	(809		)	(4		)	—			—		(813		)
Cash and equivalents at beginning of year	2,766			9			—			—		2,775
Cash and equivalents at end of year	$	1,957		$	5		$	—		$	—	$	1,962

37

AMBOY AGGREGATES (A JOINT VENTURE)

REPORT ON FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

AND REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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Report of Independent Public Accountants

To the Partners

Amboy Aggregates

We have audited the accompanying balance sheets of Amboy Aggregates (A Joint Venture) as of December 31, 2005 and 2004, and the related statements of income and partners’ capital and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Amboy Aggregates (A Joint Venture) as of December 31, 2005 and 2004, and its results of operations and cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/ J.H. COHN LLP

Roseland, New Jersey

January 16, 2006

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AMBOY AGGREGATES (A JOINT VENTURE)

BALANCE SHEETS

DECEMBER 31, 2005 AND 2004

	2005		2004
ASSETS
Current assets:
Cash and cash equivalents	$	291,195	$	941,523
Accounts and note receivable, net of allowance for doubtful accounts of $288,269	4,819,547		4,988,324
Inventory	2,375,557		1,474,925
Prepaid expenses and other current assets	162,789		217,762
Due from general partners			10,331
Due from affiliates	112,379
Total current assets	7,761,467		7,632,865
Property, plant and equipment, net of accumulated depreciation	5,195,665		5,291,008
Investment in joint venture	3,451,615		2,900,017
Permits, net of accumulated amortization of $73,798 and $38,841	294,674		228,586
Totals	$	16,703,421	$	16,052,476
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	1,220,111	$	1,065,532
Accrued expenses and other current liabilities	271,483		911,967
Due general partners	3,096
Due affiliates			89,154
Total current liabilities	1,494,690		2,066,653
Commitments and contingencies
Partners’ capital	15,208,731		13,985,823
Totals	$	16,703,421	$	16,052,476

See Notes to Financial Statements.

40

AMBOY AGGREGATES (A JOINT VENTURE)

STATEMENTS OF INCOME AND PARTNERS’ CAPITAL

YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

	2005			2004			2003
Revenue:
Net sales	$	28,362,519		$	29,823,487		$	23,956,595
Interest	6,153						58
Totals	28,368,672			29,823,487			23,956,653
Costs and expenses:
Cost of sales	22,753,086			24,056,131			21,314,868
Selling	218,351			202,722			277,414
General and administrative	1,836,329			1,562,289			1,202,526
Interest	14,596			31,307			72,460
Totals	24,822,362			25,852,449			22,867,268
Income from operations	3,546,310			3,971,038			1,089,385
Equity in income of joint venture	1,051,598			706,039			814,507
Net income	4,597,908			4,677,077			1,903,892
Partners’ capital, beginning of year	13,985,823			13,008,746			11,104,854
Distributions	(3,375,000		)	(3,700,000		)
Partners’ capital, end of year	$	15,208,731		$	13,985,823		$	13,008,746

See Notes to Financial Statements.

41

AMBOY AGGREGATES (A JOINT VENTURE)

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003

	2005			2004			2003
Operating activities:
Net income	$	4,597,908		$	4,677,077		$	1,903,892
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,303,561			1,243,757			1,382,336
Amortization of deferred charges and permits	34,957			22,326			25,086
Provision for doubtful accounts							120,000
Equity in income of joint venture, net of dividends received of $500,000 and $1,060,000 in 2005 and 2004	(551,598)			353,961			(814,507		)
Changes in operating assets and liabilities:
Accounts receivable	168,777			(1,239,836		)	(960,794		)
Inventory	(900,632		)	694,375			141,362
Prepaid expenses and other current assets	54,973			(24,696		)	(23,273		)
Due from general partners and affiliates	(188,106		)	(151,589		)	126,460
Accounts payable	154,579			(63,971		)	167,263
Accrued expenses and other liabilities	(640,484		)	400,048			71,972
Net cash provided by operating activities	4,033,935			5,911,452			2,139,797
Investing activities:
Capital expenditures	(1,208,218		)	(573,413		)	(345,097		)
Increase in permits	(101,045		)	(99,900		)	(8,664		)
Net cash used in investing activities	(1,309,263)			(673,313)			(353,761)
Financing activities:
Payments of long-term debt							(1,592,517		)
Repayments of note payable—bank				(900,000		)	(100,000		)
Distributions	(3,375,000		)	(3,700,000		)
Net cash used in financing activities	(3,375,000		)	(4,600,000		)	(1,692,517		)
Net increase (decrease) in cash and cash equivalents	(650,328		)	638,139			93,519
Cash and cash equivalents, beginning of year	941,523			303,384			209,865
Cash and cash equivalents, end of year	$	291,195		$	941,523		$	303,384
Supplemental disclosure of cash flow data:
Interest paid	$	14,596		$	31,307		$	72,460
Supplemental disclosure of noncash investing and financing activities:
Equipment purchased with liability to affiliates							$	120,000

See Notes to Financial Statements.

42

AMBOY AGGREGATES (A JOINT VENTURE)

NOTES TO FINANCIAL STATEMENTS

Note 1—Organization and business:

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

The Partnership operates principally in one business segment which is to dredge, process, transport and sell fine aggregate in the New York Metropolitan area.

Note 2—Summary of significant accounting policies:

Use of estimates:

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

Cash equivalents:

The Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Concentrations of credit risk:

Financial instruments which potentially subject the Partnership to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Partnership maintains its cash and cash equivalents with high credit quality financial institutions. At times, the Partnership’s cash and cash equivalents exceed the current insured amount under the Federal Deposit Insurance Corporation of $100,000. At December 31, 2005, the Partnership had cash and cash equivalents with one bank that exceeded Federally insured limits in the amount of approximately $587,000.

The Partnership generally extends credit to its customers, a significant portion of which are in the construction industry. During 2005, 2004 and 2003, approximately 70%, 79% and 85%, respectively, of the Partnership’s net sales were derived from nonrelated major customers who accounted for approximately $4,011,000 and $3,793,000 of the accounts receivable balance at December 31, 2005 and 2004, respectively.

The Partnership closely monitors the extension of credit to its customers while maintaining allowances for potential credit losses. On a periodic basis, the Partnership 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. Management does not believe that significant credit risk exists at December 31, 2005.

Inventory:

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

Property, plant and equipment:

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.

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Investment in joint venture:

The investment is recorded on the equity method.

Permits:

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

Revenue recognition:

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 collectibility assured which is usually upon shipment of the product.

Amounts billed related to shipping and handling are included in revenue.

Shipping costs:

Shipping and handling costs, which are included in cost of sales, amounted to $3,553,179, $3,756,740 and $5,455,341 in 2005, 2004 and 2003, respectively.

Income taxes:

Income or loss of the Partnership 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 financial statements.

Note 3—Inventory:

Inventory consists of the following:

	2005		2004
Raw materials	$	780,860	$	833,300
Finished goods	1,493,317		544,885
Supplies	101,380		96,740
Totals
	$	2,375,557	$	1,474,925

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Note 4—Property, plant and equipment:

Property, plant and equipment consists of the following:

	Range of
	Estimated
	Useful
	Lives
	(Years)	2005		2004
Land		$	677,408	$	677,408
Plant and equipment	3 to 15	8,992,476		8,195,020
Delivery equipment (Scows)	10 to 20	8,582,676		8,323,441
Dredging system	15 to 20	14,542,109		14,453,763
Office equipment and trailers	10	244,601		244,601
Automobiles and trucks	3 to 5	201,943		306,035
		33,241,213		32,200,268
Less accumulated depreciation		28,045,548		26,909,260
Totals		$	5,195,665	$	5,291,008

Note 5—Investment in joint venture:

The Partnership has a 50% interest in a joint venture whose principal business activity is to process and sell fine aggregate and stone to additional markets in the New York Metropolitan area.

In 2005 and 2004, the joint venture distributed $500,000 and $1,000,000, respectively, to the other 50% member of the joint venture.

Summarized financial information of the joint venture as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005 is as follows:

	2005		2004
Balance sheet data:
Assets:
Current assets	$	8,391,997	$	6,265,184
Property, plant and equipment	900,127		790,092
Other	50,000		25,027
Total assets	$	9,342,124	$	7,080,303

45

	2005		2004		2003
Balance sheet data (concluded):
Liabilities and members’ equity:
Liabilities:
Current liabilities	$	2,438,895	$	1,190,494
Other			89,775
Total liabilities	2,438,895		1,280,269
Members’ equity	6,903,229		5,800,034
Total liabilities and members’ equity	$	9,342,124	$	7,080,303
Income statement data:
Net sales	$	26,451,926	$	18,881,345	$	16,909,173
Costs and expenses	24,348,731		17,469,267		15,280,158
Net income	$	2,103,195	$	1,412,078	$	1,629,015

Note 6—Accrued expenses and other current liabilities:

Accrued expenses and other current liabilities consist of the following:

	2005		2004
Compensation	$	271,483	$	855,433
Union health and welfare			56,534
Totals	$	271,483	$	911,967

Note 7—Credit facility:

The Partnership has available a $3,000,000 revolving credit facility, borrowings under which are secured by the Partnership’s accounts receivable and inventory and bear interest at either the bank’s base rate or the 60/90 day LIBOR plus 130 basis points and which expires on August 31, 2007. There is a stand-by fee of 1 / 2 % per year on the unused portion of the revolving credit facility. The Partnership had no outstanding borrowings under the revolving credit facility at December 31, 2005 and 2004.

Note 8—Retirement plans:

Pension plan:

Employees covered by a union agreement are included in a multi-employer pension plan to which the Partnership makes contributions in accordance with the contractual union agreement. The Partnership made contributions of $397,064, $326,821 and $268,665 during the years ended December 31, 2005, 2004 and 2003, respectively. Plan benefit and net asset data for the multi-employer pension plan for union employees are not available.

46

401(k) plan:

The Partnership maintains a retirement plan qualifying under Section 401(k) of the Internal Revenue Code which allows eligible employees to defer a portion of their income through contributions to the plan. Under the provisions of the plan, the Partnership makes contributions for the benefit of the employees, subject to certain limitations. The Partnership’s contributions for the years ended December 31, 2005, 2004 and 2003 were $87,888, $83,231, $76,255, respectively.

Note 9—Commitments and contingencies:

License agreement:

The Partnership has a license agreement with the State of New Jersey which enables the Partnership to dredge in the Ambrose Channel for commercial sand. Under this agreement, the State of New Jersey receives a royalty fee based on the amount of material dredged of $.47 per cubic yard. Royalties charged to operations during the years ended December 31, 2005, 2004 and 2003 amounted to $748,405, $1,012,891 and $832,420, respectively.

Operating leases:

The Partnership leases property and equipment under operating leases which expire on various dates through July 2011. The equipment leases provide for purchase options at the end of the fifth and tenth year. Rent expense approximated $436,000, $461,000 and $404,000 in 2005, 2004 and 2003, respectively. Future minimum lease payments under the operating leases in each of the five years subsequent to December 31, 2005 and thereafter are as follows:

Year Ending December 31,	Amount
2006	$455,608
2007	462,499
2008	319,562
2009	283,951
2010	149,711
Thereafter	29,249
Total	$	1,700,580

Litigation:

In 2005, the City of South Amboy adopted a resolution declaring the Partnership’s property in need of redevelopment. The determination is currently on appeal before the courts and the ultimate outcome is not determinable.

Additionally, in the ordinary course of business, the Partnership 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 Partnership.

47

Note 10—Related party transactions:

During 2005, 2004 and 2003, the Partnership had sales to the joint venture and the other 50% member of the joint venture aggregating approximately $1,230,000, $720,000 and $732,000, respectively. In addition, during 2005, 2004 and 2003, the Partnership purchased merchandise from the joint venture aggregating approximately $2,858,000, $1,737,000 and $1,981,000, respectively. Also during 2003, the Partnership purchased equipment from the joint venture totaling $120,000. Amounts due to/from affiliates at December 31, 2005 and 2004 arose from these transactions.

During 2005, the Partnership purchased merchandise from one of its members for approximately $42,000. Amounts due general partners arose from these transactions.

During 2004 and 2003, the Partnership had sales to one of its members of $49,000 and $204,000, respectively. Amounts due from general partners arose from these transactions.

During 2005, 2004 and 2003, the Partnership paid rent to an entity whose members are partners of the Partnership totaling $180,000, $180,000 and $150,000, respectively. The lease, which requires monthly payments of $15,000, expires in February 2008.

48