Great Lakes Dredge & Dock Corp (GLDD) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Great Lakes Dredge & Dock Company Q2 2005 update call, moderated today by Ms. Deborah Wensel. At this time, participants are in listen-only mode. After the presentation, a question-and-answer session will be conducted, and instructions to participate will be given at that time. Please be aware that today's call is being recorded. A replay of this conference will be available until August 9th by dialing 1-800-753-5575. (OPERATOR INSTRUCTIONS).

I would now like to introduce you to your moderator, Ms. Wensel. Ma'am, you may begin.

Thank you. This is Deb Wensel, Chief Financial Officer of Great Lakes, and I welcome you to our quarterly update call. A quick administrative matter -- the number that was just given to you for the call is different than was given in the press release, but is the correct number to dial in and hear a recording of this call. And again, that number is 1-800-753-5575.

The purpose of this conference call is to provide you with a summary of Great Lakes' second-quarter 2005 financial results, operating and bidding activities, market outlook, debt and liquidity levels and other relevant information. Following the presentation, as we said, you will have an opportunity to ask any questions.

Before I begin, however, I will remind you that certain matters discussed may be considered forward-looking statements, and participants in this call are cautioned not to place undue reliance on such forward-looking statements. Furthermore, any forward-looking statements speak only as of the date hereof, and Great Lakes assumes no obligation to provide any future updates.

Our revenue for the second quarter of 2005 was 93.4 million, which compares to the second-quarter 2004 level of 72.1 million and the first-quarter 2005 level of 99.9 million. Although this represents a slight decline from our first quarter, the Company continued to experience good utilization of its dredging fleet through the second quarter, and was significantly higher relative to the reduced level of utilization experienced in the second quarter of 2004.

This decline in utilization in the second quarter of 2004 was due to the Army Corps of Engineers funding constraints, which led to a slowdown in the bidding activity through the first half of 2004 and the postponement of certain work in the Company's backlog at that time. However, it appears that the funding issues at the Corps are being moderated; therefore, the Company's utilization has improved and we have been able to perform on projects that had previously been postponed or have since been added to backlog. Accordingly, the Company's gross profit margin for the quarter ended June 30, 2005, improved to 12.2% compared to 8.1% for the same quarter of 2004, primarily as a result of the higher utilization relative to the fixed costs, as well as improved margins inherent in the dredging projects performed during the 2005 period.

For the second quarter of 2005, as a result of the improved utilization and margins, our EBITDA increased to 10.2 million compared to 5.6 million for the second quarter of 2004 and 5.2 million for the first quarter of this year. This was in line with our expectations, as our backlog has strengthened and we anticipate performing on more projects with improving margins.

The quarter's EBITDA reflects an additional 0.9 million of legal expenses related to the federal subpoena the Company received in February of 2004. At this time, there is nothing new to communicate with respect to this matter. As mentioned previously, we have provided the documents that have been requested by the Justice Department to this point, and seven of the company employees or former employees have now been interviewed or testified before the Grand Jury. Assuming that this matter remains unresolved, we are likely to continue incurring some legal costs, but we are expecting that the amounts will be declining.

Revenues and EBITDA for the six months ended June 30, 2005 were 193.3 million and 15.4 million, respectively, which compared to 176.0 million and 20.4 million for the same 2004 period. The increase in the 2005 year-to-date revenues was attributable primarily to the higher second-quarter utilizations relative to the 2004, since utilization had dropped off significantly in the 2004 quarter, as previously mentioned. However, EBITDA for the six months ended June 30, 2005 is lower than the comparable 2004 period, primarily since the first quarter of 2005 included a number of projects at lower than typical margins, due to the competitive conditions when they were bid.

Now I will give a general overview of contracts contributing to the quarter's operations, within the context of the dredging markets we serve and our demolition segment. Revenue during the quarter included 41 million of capital, 22 million of beach work, 18 million of maintenance, 12 million of demolition, for a total revenue of 93 million. The comparable numbers for the first quarter of this year were 36 million of capital, 22 million of beach, 30 million of maintenance and 12 million of demolition, for a total of 100 million in revenue. And I will also give you the numbers for the second quarter of 2004. There was 40 million of capital, 12 million of beach, 10 million of maintenance and 10 million of demolition, for a total company revenue of 72 million.

Our capital dredging revenue for the quarter totaled 41 million, and was substantially generated by the following work. We commenced our project on Miami Harbour with our Drillboat Apache. Our hydraulic dredge Texas will begin working on this project in July. We commenced the first phase of the Columbia River deepening project in Oregon with our hopper dredge Sugar Island, continued work on our Arthur Kill II New York and Oakland, California deepening projects. Work started up again on the Wilmington, North Carolina project, which had been previously postponed due to funding issues. Approximately 7 million of pass-through work was performed by our subcontractor on the Port Jersey Channel deepening. The hydraulic dredge Carolina and another smaller hydraulic dredge continued working on the Durrat land development project in Bahrain. And finally, the completion of a small project in Barcelona, Spain by our foreign-based hopper dredge.

The majority of our backlog continues to be represented by both domestic and foreign capital dredging work, and we expect to be working on a number of these projects over the remainder of the year, including deepening projects at Arthur Kill, Wilmington and Miami domestically and other capital projects at Ocean Cay, Bahamas, and Bahrain abroad. Additionally, we are hopeful that we may begin the second phase of the port deepening project in Brunswick, Georgia in the fourth quarter of this year, whereas previously this work was not expected to commence until the fall of 2006.

Our beach revenue in the second quarter totaled 22 million, which is in line with our first quarter level, as well. We have seen our beach revenues increase over the first half of this year, which is to be expected, given that beach work has comprised 40% of the domestic bid market in recent quarters. During the quarter, the Company substantially completed renourishment of the Rehoboth and Dewey beaches in Delaware, which were in backlog at year end, and worked on four beach projects in Florida, which were added to backlog in the first and second quarters of this year. Of these, the two smaller projects were concluded during the quarter, but work on the larger Broward and St. John's County beaches will continue into the fourth quarter.

Maintenance revenue in the second quarter totaled 18 million, which is on par with recent quarters, which had generally been higher than in previous years, since we have taken on more maintenance work to fill in while the capital work has declined. This quarter's revenues were substantially generated by the harbor maintenance project in Tampa, Florida, as well as two rental projects along the Mississippi River, all of which were completed in the quarter.

As I have mentioned previously, the scope on the Tampa project has been expanded from the original contract by a number of modifications directed by the Corps. As a result, we continue to have a large amount of working capital investment related to this project, since we cannot collect on the remaining amounts of this modification work until the Corps completes their customary audit of our cost proposals. We anticipate that their audit should be complete in the third quarter, and that we should then collect on our remaining receivables for this project. At the end of June, we received 4.6 million, which leaves approximately 6.5 million on this project to be collected upon completion of the Corps' audit process.

In our demolition segment, NASDI had another strong quarter, generating approximately 12 million in demolition revenue. The activity in the demolition sector has accelerated in recent months, and NASDI has continued to add a good volume of work with improving margins to its backlog.

Looking at our debt and liquidity situation, capital expenditures for the second quarter totaled 5 million, bringing our year-to-date total to 8.1 million. The quarter's outlays included approximately 550,000 related to the final construction of the second of two rock barges. Like the first of these barges, which was completed in 2004, this one was sold and leased back under an operating lease which was concluded in June. Our full-year 2005 capital budget is 13 million, most of which relates to efficiency enhancements to our existing equipment.

Over the last couple of years, our capital spending has included a significant amount to replace and enhance our dredge scow capacity. We have recently commissioned four new large-capacity scows, including these two rock barges just mentioned, which will replace some of our older, smaller scows and provide more efficient tools to address upland disposal requirements and increased dumpsite towing distances. We have also made significant enhancements to a number of our other scows in our fleet to increase our material capacity.

Our 2005 second-quarter cash interest expense increased to 5.1 million compared to 4.2 million of cash interest in the second quarter of 2004, as a result of higher underlying interest rates and larger spreads on the Company's variable-rate debt, coupled with more average outstanding borrowings on the Company's revolver facility. The 2005 second-quarter total interest reflects a non-cash benefit of 1 million, due to the valuation of the Company's fixed to floating interest rate swap, which was put in place in February of 2004. This compares to a non-cash interest expense of 2.4 million for the 2004 quarter on the same swap.

The Company incurred a net loss of 0.5 million for the second quarter of 2005, which compares to a net loss of 5.4 million for the comparable 2004 quarter. As a result of this quarter's loss, the Company's net worth stayed below the minimum level required in our underwriting and indemnity agreements with our surety company. Therefore, we again discussed this matter with our surety company, and they have provided an additional waiver of this requirement for the quarter ended June 30, 2005. We were otherwise in compliance with all debt covenants at June 30, 2005. At quarter end, our interest coverage was 1.61, and senior leverage was 2.79. Our total leverage ratio was waived through 2005 and replaced with a minimum EBITDA measure with which we were also in compliance at June 30, 2005.

In early June, we had become concerned as to whether we would have sufficient working capital to fund certain schedule commitments coming due in the second half of the month. Revenues and earnings had been picking up, but at that time we had a number of unique project-related working capital investments, such as that related to the modification work on the Tampa project previously mentioned, and it appeared that we were unlikely to collect currently on certain receivables. Therefore, we approached our senior lenders and, effective June 13th, amended our credit agreements to provide us with additional liquidity to address near-term working capital needs. The amendment increased the Company's revolver borrowing availability by 5 million, with an offsetting decrease to the Company's letter of credit capacity in the same amount. The additional revolver borrowing capacity is available until the earlier of October 31, 2005, or such time that we collect on the Tampa contract receivable. At that time, the revolver borrowing availability and letter of credit capacities will revert back to the pre-amendment terms.

We also amended our senior leverage ratio for the quarter ended June 30, 2005 to 3.3 to 1 to allow us to utilize the additional borrowing capacity. As it turned out, we were able to accelerate collections of certain receivables by the end of the month, so that at June 30th our revolver borrowings totaled only 5 million, which was lower than had been anticipated. So we have not yet needed to make use of the additional capacity made available by the amendment.

At June 30, 2005, we had outstanding performance letters of credit totaling 13.7 million. Therefore, under the revised terms of our credit agreement, we had remaining LC capacity or availability of 16.3 million, which should be sufficient to accommodate the letters of credit necessary for the additional foreign work we still anticipate taking on. As mentioned, at June 30, 2005, we had 5 million drawn under the revolver facility, so our borrowing availability under the revised terms of our credit agreements was 15 million, which we believe is sufficient for all of the Company's current operating cash needs.

Looking at some other matters, in past discussions we mentioned that Great Lakes had received a request for information from the United States Environmental Protection Agency pursuant to 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 US, relating to the Port of Los Angeles deepening project, which was being performed by the Company and a joint venture partner. The Company was performing this project under a contract with the Los Angeles District of the Corps. We believe we performed in compliance with the contract specifications, and to date have received no further response from the EPA to the information we have provided. This has become an industrywide issue, and we understand that the Corps is working with the EPA to devise a solution to this matter.

As I mentioned in our last call, our contract with our tugboat operators in New York expired in February of this year. The next round of negotiations are actually set for tomorrow, and we hope to come to agreement after this or maybe one additional round of negotiations. We are currently working in New York, and the expiration of this agreement has not affected our operations there.

With respect to the employee embezzlement matter I mentioned in the prior call, we have completed our internal investigation with respect to other matters handled by this employee, and are satisfied that all improprieties have been identified. In June, we collected the full insurance proceeds relating to this matter, and the State's Attorney's Office intends to prosecute a criminal case against the former employee.

I thought I'd also take a moment to discuss our fuel hedging program, since I have received some questions in the past, given the recent increase in fuel pricing. Diesel fuel does represent a significant operating expense for the Company, representing approximately 6 to 7% of costs of contract revenues in any given year. We do make use of fuel commodity forward contracts to reduce the impacts of changing fuel pricing on the Company's domestic operations. Our projects are typically bid with fuel being estimated at current prices. On a (indiscernible) basis we analyze our monthly estimated domestic fuel consumption and put in place fuel forward contracts, with the goal of hedging approximately 80% of our estimated usage at any point in time.

Given that there is not typically a long timeframe between the time the domestic work is bid and then awarded and put into backlog, we believe this procedure has adequately enabled us to manage our fuel pricing risk. On the occasion when domestic products have remained outstanding for an unusual amount of time, such as with our Brunswick project, we have generally been able to negotiate revised fuel pricing to mitigate our exposure.

Turning to the bidding market, the second-quarter 2005 domestic dredging bid market, representing work awarded during the period, totaled 154 million, bringing the year-to-date bid market to 369 million, which is on par with the average annual bid market over the last three years of approximately 690 million.

Over one-third of this quarter's work related to seven beach nourishment projects, which was consistent with the first quarter and was expected, given the severe hurricane season experienced in 2004 and the need to the replenish numerous beaches across the Florida coastlines. Great Lakes has won two of these projects, including a $15 million project in St. John's County, Florida, and the remainder were won by competitors.

The quarter's activity also included the first phase of the Columbia River deepening project, which was won by Great Lakes for approximately 11 million. This project was originally bid with a larger scope and then canceled when the bids were in excess of the Corps' allowable estimate. We were low bidder under the original scope and again under the final awarded contract. This project incurred numerous environmental delays, so we are pleased to see that those hurdles have been addressed and that this work is moving forward.

Despite the volume of work that has now come up for bid in the first and second quarters, much of the beach and maintenance work was again won by competitors at relatively low pricing. As a result, we won only 21% of the quarter's awards, as we have continued to bid these opportunities with more reasonable margins. While the pricing was very cheap for the work let for bid in the first quarter and continuing into the second quarter, we have noticed that work bid towards the end of the second quarter and into the first bids of July has been better pricing. Thus, it appears that the competitors may be bidding more rationally, and we have won a couple of recent beach jobs with some good margins. We also see a number of domestic cancel (ph) opportunities coming up, for which we think our equipment is well-suited.

Looking at backlog, despite the continued competitive bidding environment, we have still been able to maintain a solid dredging backlog, and have been able to improve our contract margins. Our dredging backlog at June 30, 2005 increased to 294 million compared to 241 million at March 31, 2005 and 129 million at June 30, 2004. The June 30 backlog includes approximately 83 million for the two-year Durrat land reclamation project in Bahrain, since the full scope of this project was awarded in the second quarter. However, our recorded backlog does not include 22 million of low bids pending award and other options pending on projects currently in backlog.

Our backlog by segment at June 30, 2005 and some recent comparative periods -- we had 142 million of domestic capital, 116 million of foreign capital, 31 million of beach, 6 million of maintenance, for a total dredging backlog of 295 million, adding demolition backlog of 17 million for total company backlog of 312 million. The comparable numbers for the end of the first quarter of 2005 were 154 million of domestic capital, 38 million of foreign capital, 37 million of beach, 13 million of maintenance, for a total dredging backlog of 242, adding 15 million of demolition backlog for a total company backlog of 257. And then, at the end of the second quarter of 2004, we had 95 million of domestic capital, 19 million of foreign capital, 4 of beach, 11 for maintenance, for a total dredging backlog of 129 million, adding 13 million of demolition for a total company backlog of 142.

The demolition services backlog improved to 16.6 million compared to 15.5 million at March 31, 2005 and 12.6 million at June 30, 2004. Activity in the demolition sector has picked up, and NASDI added two more demolition projects valued in excess of 1 million to backlog during the quarter, along with a number of its usual small to mid-size projects.

Turning to dredging in the Deep Port area, as I indicated before, the Water Resources Development Act or WRDA legislation forms the basis for authorizing the Corps' civil works projects. No act was passed in 2004, but a 2005 version of the WRDA has already been introduced and passed a House vote in July. This version includes authorization of additional federal cost-sharing to 53 feet for ongoing port deepening projects, which could encourage some ports to pursue additional deepening project, as they would get more federal funding. The bill has been introduced in the Senate, and its passage is still possible in the current year, but it is likely to receive lower priority than other measures currently before the Senate such as Social Security, the highway transportation and, certainly, the Supreme Court nomination.

As I mentioned earlier, Great Lakes won the first phase of the Columbia River deepening project in Oregon, and we expect to complete this project in the third quarter of this year. A number of other Deep Port projects valued in excess of 100 million are still scheduled to bid over the remainder of 2005. This includes the next phase of the Columbia River deepening, the initial phase of the Port Jersey 50-foot deepening project, a project to deepen the entrance to the Ambrose Channel in New York to 53 feet, the next two phases of the Oakland, California 50-foot deepening projects and potentially two port expansion projects in the Tampa area.

The Corps' fiscal year 2006 budget has now passed both the House and Senate. The bill originally passed the House at a reduced level from the fiscal year 2005 but was marked up by the Senate and now stands at 5.3 billion, which is an increase over the prior-year appropriations. Although dredging only makes up a portion of the Corps' total appropriations, feedback from the industry associations has been positive, as the bill currently drafted provides funds for various new studies which provide the basis for future new construction. Additionally, the bill provides sustained levels of funding for construction projects for ports, navigation channels and beach and environmental restoration, and reaffirms congressional support for federal funding of the beach nourishment program.

We also continue to monitor a number of opportunities for dredging services related to the development of LNG terminals, particularly along the Gulf Coast of Texas. We have already submitted proposals for over 50 million in dredging services solicited by private customers, typically large energy companies. One of our competitors has recently awarded one of these projects valued at approximately 15 million, and we believe that we are well-positioned to win at least one of the next projects in the coming months. As we have said in the past, with the higher prices of domestically produced natural gas and the increased cost competitiveness of importing LNG, we expect to see more of this work materialize in the near future.

In the beach market, as we anticipated, we have seen a large volume of new beach work through the first half of 2005. Much of the work in Florida is being funded by the emergency supplemental bill passed towards the end of 2004 to pay for damage from the 2004 hurricane. Those funds have now been committed, but bidding schedules continue to indicate an additional 100 million of beach work to be bid through the remainder of 2005. This includes the first phase of the Louisiana Coastal Restoration Project, which has been discussed for some time now but is actually set to bid in late July. Great Lakes was low bidder on two large beach projects that bid in July, and when we are awarded this work we will begin a portion of it in the fourth quarter.

Given the status of the Corps' 2006 budget, we are hopeful that this beach work will continue to bid at a similar pace, since it appears that the federal portion of the funding is being appropriated. Many of the counties and localities have secured their portion of the funding and are eager to see these projects through.

The maintenance bid market totaled approximately 100 million through the first six months of 2005, which puts it on track to achieve levels consistent with annual historical averages of approximately 200 million. We still anticipate that one of our competitors, Manson Dredging, will be commissioning their new hopper dredge by the beginning of 2006. This dredge is over two times the size of our most recently constructed hopper dredge, the Liberty Island, and is well-suited for the maintenance rental market along the Mississippi River outlets. This dredge could potentially impact the hopper bid market as soon as the end of the third quarter this year.

As mentioned earlier, we were awarded the full scope of work related to the Durrat development project in Bahrain, and this is reflected in our June 30 backlog. We began the initial phase of this project in the fourth quarter of 2004. The project will provide work for two years for two large hydraulic dredges and one small hydraulic dredge. The contract is being performed in a joint venture with the same Bahraini contractor that we partnered with for the Hidd contract, and this company is performing the civil works.

Also, as I mentioned in the first quarter, we are a minority partner in a consortium that has won a large land reclamation project to expand the airport into Doha, Qatar, although due to scheduling conflicts, little of our equipment is planned for the execution of this project. We continue to follow a number of large land reclamation projects in the Middle East, particularly in Qatar, Oman and Bahrain, countries that generally welcome relationships with US contractors. Given the volume of work being generated in the region, there appear to be opportunities for better margins than typically achieved on foreign work. We often partner with other foreign construction or dredging firms to bid on this work, and these projects often take us a significant amount of time and effort to negotiate the final terms and scope. Given the current fleet of equipment we have committed to the region, we're hopeful to take on some additional work to occupy our equipment upon completion of the Durrat project.

As you know, at the end of the first quarter, we had reached the lowest level of earnings that we had experienced in recent years on a 12-month trailing basis. As we had forecasted, we did see utilization and earnings improve through the second quarter, and we were able to achieve our financial targets. While the bidding activity has been robust through the first half of the year, pricing has remained competitive. But, given our current backlog, we have been able to maintain a rational bidding strategy, and have taken on new work with improving margins compared to those on certain projects won in 2004, when we, along with others in the industry, had excess capacity. We continue to maintain a solid level of backlog with our recent foreign and domestic awards. We are in the midst of performing the deepening projects in Arthur Kill, New York; Miami Harbour, Florida; Wilmington, North Carolina; and Columbia River, Oregon, all of which are progressing well.

Despite this, it does, however, appear that the Corps districts are still being constrained with respect to funding new or even continuing projects, and it is unclear to us where they stand in their internal reorganization efforts and what demands on their funds and resources may still be coming from the reconstruction efforts in Iraq. However, presuming that the bidding activity continues at a similar pace through the second half of 2005, we believe will be able to take on additional backlog at better margins levels than we have experienced recently.

Coupled with work to be performed from our current backlog, we continue to believe that our 2005 EBITDA budget, in the range of 38 to 42 million, is achievable. At this level of EBITDA, we still expect to generate sufficient cash flow to meet our current annual debt service requirements of approximately 20 million and to fund our necessary capital expenditures.

This concludes the formal portion of the update, but I would also like to note that we will provide a summary of the operating and backlog information provided herein, as well as a reconciliation of our EBITDA, which is a non-GAAP measure, to net income, a GAAP measure, in the financial section of our company's web site at gldd.com.

I would now like to open up the call for questions.

(OPERATOR INSTRUCTIONS). Sarah Thompson, Lehman Brothers.

A couple of questions. One of the things that you had cited as being kind of a higher expense in the first quarter was the maintenance that you had spent in the first quarter. Can you just give us what that number was for the second quarter?

Second-quarter maintenance was 8 million.

8 million. Okay, so still at a pretty high level?

It is at a high level, but we also expect that with the equipment going back to work during the second half of the year, that we have spent more in the first half of the year then we will spend in the second half of the year.

And then, can you give us -- because I know they are not always the same number -- what your LTM bank EBITDA is?

You know, I don't have that in front of me. There is a calculation. The basic difference is the federal subpoena expense, which for this quarter was 0.9.

And then, on the covenants with the surety provider, can you just talk about -- I know you said you got a waiver for June. Are you guys thinking about permanently changing that, or are you just going to ask for a waiver every quarter? Do you think you will be back in compliance? Can you just give us a little color?

Yes. We are not too far off of compliance; we are just underneath. And we're going to leave it at that level and just continue to talk with the surety. That is how they would like to go forward with it. So, with projections, if we make what we're talking about, we should probably be back in compliance, if not by the third quarter, certainly by the fourth quarter.

Patricia O'Connor (ph), Franklin (ph).

Two questions -- have you thought of or looked at selling NASDI at all, if you run into liquidity issues?

Well, actually NASDI has been a real plus for us this year. They have been doing well and they have been providing cash to the operations. So no, not really; I think they are additive. And I don't think there's really any positive that would come out of selling NASDI.

But it could be a source of liquidity if --?

Potentially, yes.

Then, have you seen any small operators dropping off because they just can't handle this low pricing and this environment?

Well, there's a lot of small dredging operators, and we don't really pay a great deal of attention to them. I am sure there has been a number of them affected. In our particular market, it's a smaller group of competitors, and I think they have all experienced the same difficulties that we have over the last year or so, but have not seen any change within those companies at this point in time.

But I guess of someone did decide to close down, you would see their assets come on the market (multiple speakers)?

Yes, I would presume so, yes.

Larry Taylor, Credit Suisse First Boston.

Several of my questions have been answered, but I wonder if you can give us any sense, Deb, whether industry has been spending less in CapEx over the last couple of years through these difficult times than we have seen historically, or are we still seeing -- obviously, there's one large hopper dredge, but are we seeing any reduction anywhere? Or are people just still spending and adding to their equipment pools?

Well, other than this large hopper dredge, there hasn't been any new dredges added to the market. It's hard for us to know if they are spending much on ancillary equipment in that. Of course, none of our competitors are public companies. So I'm not sure, but it certainly could be an area that they could cut back on temporarily.

And if we can get you to perhaps elaborate a little bit on the relative size of some of the major awards or potential projects that are out there for bid, in terms of the three or four largest that are likely to come to the market and bid over the next six months to a year. Can you give us some indication of the size?

Well, the thing in the -- we really don't know, particularly in the maintenance market, but generally that has been running around 200 million. And we are halfway there at midyear, so it seems like there should be a similar level. In the beach, we have identified numerous projects, and as I said here it adds up to somewhere in excess of 100 million. But that takes into quite a number of different beach projects. And then, as far as on the capital side, I has indicated a number of projects. I think we had an approximation of that. I can't find it in my notes.

I am trying to get a sense of the relative size. So, for example, you had talked about some land reclamation projects -- some stuff in Bahrain, also, for example, on the foreign side. Just order of magnitude, the relative size, you said the LNG stuff in aggregate could be 50. But some of these other projects -- are we talking about lumps that size, or are they five to ten?

Yes, there is a fairly large range. The work that we looked at overseas is approaching 100 million. The LNG projects, the one that has already been awarded was somewhere in the range of 15 million. Any of these port deepening projects -- some of it depends on the scope. Well, all of it depends on the scope of the particular portion of the work that they are putting out. So it's a pretty broad range, and they can be pretty large amounts. And we have seen bids in the New York area between 50 and 70 million on the last few projects. So the capital projects can range in size, I would say, somewhere in the bottom end of 15 to 20 million and then, on the upper end, not likely more than about 90 or 100 million. That's probably high.

I guess what I'm trying to get a sense of is where there any sort of elephants out there? Are there two or three that are sort of 100 million that, in terms of watching, you would say, okay, this is a huge win or a big mess, for example?

No. I don't think so. I think the projects that I named in the New York area -- those tend to be the larger projects, could be 50, somewhere in that -- and this is me talking. And of course, again, it all depends upon the scope and size of the project. But they are sizable, and I think they are very real, if that helps any.

Chris Tam (ph), Goldman Sachs.

I just had a quick question about the percentage of your revenues coming from private versus government entities. What percentage of that do you see right now being private? Which way do you see that trending? Are you guys making an active effort to go further toward a more private contract in the future? A little bit of color on that, please?

No, I think the major buyer of dredging services is clearly the Army Corps of Engineers. It's their responsibility to maintain the navigability of waterways and these big port developments. They do the beach work and they do the maintenance work. So I think they will always be a substantial part of the market. But what is interesting is when private companies do come into the market for a reason, like they have with these LNG terminals. And certainly if that comes out, we aggressively pursued doing that work, because it is only additive to the market. And certainly, right now, there's capacity in the industry. But again, our focus is pretty specifically the Army Corps of Engineers and their work. But we do keep our eyes on any other areas where there may be private or local funding.

And I guess kind of what I am getting at with that question is, we have seen the problems that can kind of arise when they have a lack of funding or lack of ability to pay you guys on time. Is there any kind of way that you guys can think about mitigating that risk, in terms of having such a big exposure to kind of the win of their funding?

Well, again, dredging is sort of a unique task, you know. And right now in the United States we have not said, look at imports or shippers or whatever; it's your responsibility. The federal government has taken responsibility for our ports and our beaches. And I don't think that there will be a change to that. I mean, over time, certainly, there's a lot more funding that is coming from local, private individuals. But again, just given the nature of dredging, and that everybody who uses a channel benefits from it, I don't know how it would shift anything much away from federal government responsibility.

(OPERATOR INSTRUCTIONS). Brooks Moore, FBR.

You may have already gone over this, but can you give us the dollar value of the contracts that were awarded from the Corps in 2Q?

In the second quarter?

Yes.

Well, yes. In the second quarter of 2005, the bid market totaled 154 million. Now, I don't know if you were trying to focus on Corps versus other. That I don't have. The 154 would include whatever jobs were.

You say the 154 includes Corps and other, state and private, et cetera?

Yes. It includes --

That's the total bid market?

Yes. You know, I talked about the one LNG project that was --

Right.

So that would be included in that number.

And my question is, what is the dollar value of contracts that were awarded to Great Lakes out of that 154?

21%. Yes, 32.4 million.

I get -- okay. And then, going back to the prior question about the split between Corps and private, looking at your existing backlog, can you give us a percentage of how much of that is Corps versus a combination of your Bahrain project and other foreign government and private projects?

No, I'm sorry. We do keep track of revenues, whether they are private or foreign. But I don't have a backlog number that we break out between government and private.

But, net of the $83 million in Bahrain, it would be safe to say that the balance of that backlog is primarily Corps?

Yes, of the -- well, let's see. From backlog I said there was 142 million of capital domestic. Yes, a good portion, a very significant portion of that would be with the Army Corps.

Swaraj Chowdhury, Dalton Investments.

I have two questions. The first question is your bidding market share is definitely lower than what was average for the three years. Are you bidding only for the profitable projects, or why is this decline?

I think, over this past couple of quarters, yes, that we felt that we have a sufficient amount of backlog that it just really doesn't make sense to beat up your equipment for no margin. And so we have been selective in the margins that we have been bidding.

The other question is, compared to first quarter, did you see the bidding margins really improving? And do you see that happening going forward?

Very recently, we think that bid margins have improved. And we don't see any reason why they shouldn't continue at a more reasonable level; but, again, that's up to the sort of dynamics of every project, when it is bid and who is available and how aggressively they feel they need to bid.

What is the length of this contract? And you have visibility up to how many quarters? Do you have visibility of your earnings and your revenues?

Well, we have visibility for a portion of every quarter's earnings level, out to however long our projects are. And they tended to be -- they can be out to a year to a year and a half. The capital projects are the longer-term; and, like I said, they can be anywhere from six months to a year and a half. Maintenance jobs may only be three, four, five months long, and therefore they don't sit in backlog very long. So that's a sort of renewable; you pick up work, and you work it off (ph) in a very short timeframe.

So we have a certain amount of visibility of a portion of every quarter's earnings at any point in time, but we have to have expectations that there will be maintenance and beach work that come out and bid, and we will perform in those subsequent quarters that we don't yet know or have in backlog.

The total amount of projects that you are working on right now -- what percentage of that would be really short-term, let's say within six months?

You know, that's a difficult question to answer. As I said, again, at any point in time -- you look at the capital works, 142 million of domestic and 116, I think I said, of foreign. We know the foreign is going to take about two years. The domestic will be somewhere between probably six months and a year and a half, at most. And then the rest of it, which is a smaller portion, will probably run off here in the next three to five months.

Ted Bedwell (ph), Loomis Sayles.

Just a cash flow question on the second quarter. What would the proceeds from the sale-leaseback be in the second quarter?

It's approximately 4.4 million.

And then, there was another 4 million or so from the receivable collection?

On Tampa, right.

On Tampa, okay. So the 13 million capital spending forecast -- is that net of sale-leaseback proceeds for the year?

Yes, based on current spending.

I thought that was 13. Okay. Then, one other question on Bahrain -- you said the margins, I think, were better than the foreign typical margin. Would you be able to characterize the Bahrain margins relative to the domestic margins?

Well, you know, again, our margins have kind of been floating around.

Yes. Well, the current quarter at 10% EBITDA -- is that kind of the area we're talking about?

Well, (multiple speakers) EBITDA, again. I've had a discussion the last couple of quarters about looking at different margins, one being the contract margin, versus looking at like an operating or gross margin. When you look domestically versus foreign, over the time period, domestic margins are probably 50% to 100% higher than foreign margins, depending on the type of work. So maybe it's coming up to maybe being only 25% differential.

Brooks Moore, FBR.

Can you help us understand what the implications are if the WDRA is not passed in the Senate this year and how this relates to the Corps' appropriation?

Yes. Well, in actuality, a WRDA bill has not passed since December of 2000. It used to pass fairly regularly every two years. So for our industry and for our work, a lot of work has already been authorized. So if they were to do all of the work that was authorized, it would still be quite a bit of dredging for the next several years. But I think it is important for future years out -- five years, seven years out -- that a WRDA bill here gets passed in the next year or two.

And in terms of the Corps' appropriation, I'm sorry -- how does the WDRA relate to that, or are they two different --

They are two different things, yes. One is just an overall sort of federal authorization that there may be some other policies and sort of procedures that go along in WRDA. But the appropriations is basically what is allowed to be spent for the next year.

And the Corps is currently working under a continuing resolution? Is that correct?

Yes. Not for '05. They have a budget for '05; they are working under that budget. Presumably, they will pass the budget here in time for the new year, which starts October 1st. If not, as has happened in the past, they can go under a continuing resolution. It causes a little bit of -- it's kind of hard on our end to understand; they certainly continue to fund all the projects that have been started. But it's not clear -- although we have seen projects start during a continuing resolution. So we are not sure exactly how that situation affects the spending in our industry. But I think right now you can see that there's a budget bill out there. And I don't think there's any reason to think that won't pass.

We will know more about that October-ish?

Exactly.

Andrew Munz (ph), Banc of America Securities.

You had said that, industrywide, there is a great deal of excess capacity, still. How does yours rate with respect to some of your competitors? And has there been a deliberate attempt -- given what you perceive, perhaps, to be a short-term weak bidding market -- to keep some capacity for when it does improve?

Well, I think when I was talking about having excess capacity, I was referring, actually, to last year, when everyone had excess capacity. With the bidding market that's come out now here in the first and second quarters, I would not say that there's a lot of excess capacity. There's certainly additional capacity, but that at any point is not unusual in our industry (technical difficulty) the bid market for the first and second quarter. Work came out, and a pretty good-sized market. So that's our evidence that it seems to be that things are working through the process and they are coming out for bid.

On the other side, though, it's just more sort of individual Corps districts and sort of thing that we are hearing from some of the associations that there's still issues out there. We (technical difficulty) some of our projects. I think at the first-quarter call, I had talked about getting some letters from -- on particular jobs (ph) that we were working, where they say, well, we may not have funding. They had funding.

So I guess what it is is it still seems to be a little bit (technical difficulty). Certainly, the bid market is coming back up. But we are still hearing some behind-the-scenes information from the Corps that doesn't necessarily point (technical difficulty). And that's sort of what we're trying to project. It's not clear, but certainly we have had evidence that the bid market, at least, is going in the right direction.

Now, as far as the appropriations bills, have you looked at them in any detail to see the consequences for the dredging market? I know you had said that you'd had some good feedback from the industry, but have you done any work on looking at it in detail?

We do. We have someone that takes a look at it. But it's not always clear. You have to sort of infer what some projects that are included or may not be included you would have to really do a lot of investigating with the different Corps districts and the port authorities and that to really understand what has been appropriated. But certainly, from a general sense, when you take a look at the bill, there certainly seems to be moneys there to spend on a sort of normal appropriations level for our industry.

Derrick Lewing (ph), Nomura.

I just had a question on the Bahrain project, and you said that you had added 83 million to the backlog this quarter. Should we expect that to be worked down evenly over the next seven or eight quarters? And what kind of margins does that work have?

Well, again, I think someone had previously asked a little bit about that. You know, again, it's not quite the same margins as we have had historically domestically, but it is an improvement on the foreign side. And again, nothing is even. But a good approximation would probably say to divide it by eight.

(OPERATOR INSTRUCTIONS). Chris Tam, Goldman Sachs.

I just kind of had a follow-up question, just one that you had talked about a little bit earlier. You kind of mentioned that a $100 million quarter is pretty busy for you guys. Is that still kind of accurate? I know that has kind of been pretty accurate historically. Are you guys kind of looking at higher barriers now, or is that still kind of the case?

You mean can we do more than that?

Yes. Is that like -- are you guys looking to, or can you --?

Well, again, we talked a little bit about the relationship of revenues and cash flow or earnings levels. It's not an absolute that more revenue means more earnings. It depends upon the kind of work. If we take on more work that includes subcontractors, or in a case of a job like Port Jersey, were we have subcontracted out most of that job, you can have a pretty high revenue level and yet you are not utilizing your equipment. So the issue is it's really utilization and what jobs that those dredges are being utilized.

So we clearly could go over 100 million and have less earnings. We can go under 100 million and have more earnings. So maybe the question is more -- that you're looking at is can we take on more utilization (multiple speakers) do more? And yes, we can. We have dredges available, more on the hopper side of things, which is where we really had the low level of utilization last year. But with this beach work here, it's filling in. So we are getting back to a point where it's more normal, it's more up to what is typical for us to have additional capacity, and not what I would call maybe excess capacity.

And so, in terms of bidding on some of the higher-margin stuff, as you have alluded to, do you think that the competitors -- your competitors that have kind of been bidding on the lower-margin stuff -- are they getting -- I mean, just because it's not as high of a margin for you guys, are they getting margins that they are comfortable with? Or are they bidding on this just for the sake of getting revenue?

Well, that's a good question. None of our competitors are public, so we don't know the answer to that. They continue to stay in business; they continue to perform the work. So I can surmise that they are at a margin that is acceptable. But given our understanding of their equipment and that we can see the production and that, we would think that it's not a big amount of earnings. Again, everyone in the industry has to weigh the difference between more utilization versus better margins, and that is that you bid (ph) everything.

Linda Newman (ph), Post Advisory Group.

I have a question about the Manson dredge that is coming on, I think you said, early '06. Can you give us a little more detail on -- is 60 to 80 million in maintenance revenue sort of the normal range for you? And over how many dredges does that usually -- how much does this Manson dredge, which is twice as your largest, represent? And what do you think the implication is for how much of a potential loss of business that could represent?

And then, the other question is I just noticed that you said that now seven employees have been interviewed by the Grand Jury. And I just wanted to check -- last time, that was five. Is there increased activity in regard to that this quarter, or has it sort of been a few employees a quarter?

There really hasn't been any additional activity. It's the seven individuals that had been either interviewed or have testified at this point. But that's just what has happened.

As far as the Manson dredge, the dredge seems to be -- or from what we understand, the dredge seems to be most suited for the Mississippi maintenance work, which is a piece of the maintenance market. It varies from year to year, that portion of the maintenance market, because it all depends on the amount of flow that comes through the Mississippi River. And that depends upon precipitation in the Midwest. So far, we have not had a lot of precipitation here, so it may signal -- but you don't know until we get to the winter months.

It's hard to say how much they will take of the market, because you don't know exactly what the market will be and whether their dredge is more efficient than those markets or not. We really won't be able to tell much until we see it come out and see how they are bidding and what their appetite is. But clearly, it's another piece of equipment. It's additional capacity, and it will have some impact. But I don't know that there's a way to estimate that at this point.

Any sense of, if you had to sort of say, of the total capacity of the fleet and the size of this versus the fleet, how much extra capacity is, in terms of ability to -- in terms of tons, or whatever they can remove?

No. We don't really have any statistics in our industry about -- we certainly know the hopper dredges that are out there and what their capacities are. But each job is unique. It depends upon the material. So if it's a 5,000-cubic-yard hopper dredge, you maybe only can fill it halfway full, because it's a certain kind of material, or maybe overflow it because it's another kind. So there isn't, probably, a good statistic that really is meaningful, when you just add up all the hopper capacities of this equipment. I'm not sure it would tell you anything about how it will reflect in the market.

And then, it sounds like you have additional capacity in hoppers. Would you say that is true of your competitors, as well?

We have more hoppers than any of our competitors. And that is helpful to us, because we can respond more quickly to jobs. We are usually the last person standing in a bid situation, and that has been very favorable for us. So I would say generally, on average, that we have a lower utilization rate of our hoppers than they do. But we have found that it is still advantageous to have the additional capacity, to be able to be more efficient in certain jobs or be able to respond more quickly and that. So generally speaking, we have always had probably a lower utilization rate than our competitors.

Ms. Wensel, there are no further questions at this time. Please continue.

I would like to thank you for joining our second-quarter update, and I expect to conduct the next call for our third-quarter results the week of October 24th. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference call. Please remember that a replay of this conference will be available until August 9th by dialing 1-800-753-5575. At this time, you may all disconnect.