Great Lakes Dredge & Dock Corp (GLDD) 2007 Q3 法說會逐字稿

Good day, everyone, and welcome to the Great Lakes Dredge and Dock third quarter update conference call. Just as a reminder, today's call is being recorded.

At this time, I'd like to turn the conference over to Ms. Deb Wensel, Chief Financial Officer of Great Lakes. Please go ahead, ma'am.

Thank you. I'd like to welcome you to our quarterly conference call. I will begin our discussion by presenting the financial highlights for the third quarter of 2007, then Doug Mackie, Chief Executive Officer of Great Lakes will share his market overview, which will provide useful context within which to view my more detailed discussion of operating results. Following our comments, there will be an opportunity for questions.

Before I begin, however, I need to 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.

The revenue for the quarter ended September 30, 2007, was $116.5 million, up by more than 40% from the third quarter of 2006 revenue of $81.7 million. In the 2007 quarter foreign activity was particularly strong, accounting for 45% of our dredging revenue. The company's domestic operations, not unlike last year, were impacted by dry dockings and start-up delays of work in backlog, primarily on the New York, New Jersey projects due to funding and environment permitting issues faced by the Army Corps of Engineers.

In contrast, the company's demolition unit, North American Site Developers, or NASDI, produced an 86% increase in revenue, or $10.5 million quarter-over-quarter. This is a result of two large projects NASDI won last quarter that will provide additional work through the first quarter of 2008.

The gross profit margin for the third quarter of 11.5% was similar to the previous year's third quarter. Operating income in the third quarter increased by more than 23% to $3.7 million, from $3 million a year ago, despite a significant increase in general and administrative expenses. Items responsible for this increase include costs related to the secondary offering, legal expenses related to transactions during the quarter, and expenses associated with being a publicly traded company.

EBITDA of $11.7 million for the 2007 quarter was up by over 18% from $9.9 million in the previous year. Interest expense of $3.4 million for the third quarter of 2007, a reduction of $1.7 million from the year-ago quarter, as lower debt levels resulted in a decrease of $1.3 million, and the company recorded a $0.4 million favorable non-cash adjustment versus the 2006 quarter, to the market value of the company's interest rate swap.

Net income was $0.6 million in the third quarter of 2007, representing a favorable swing of $1.6 million, from the $1 million net loss in last year's third quarter. In 2006, the net loss available to common stockholders, after accruing $2.1 million of preferred stock dividends, was 3.1.

Prior to the Aldabra transaction completed in December of 2006, GLDD Acquisitions Corp had shares of preferred stock outstanding on which dividends were accrued semiannually. In connection with the merger, these shares were exchanged for common stock of the company. Therefore, there are no preferred dividends in 2007.

Revenues for the nine-month period ended September 30, 2007, increased by almost 18%, to $358.9 million, compared with $304.2 million for the same 2006 period. Gross profit margin in the period of 12.6% was relatively unchanged from the prior year. Operating income increased more than 6%, to $18.2 million, from $17.1 million, despite costs related to the general and administrative expenses noted for this quarter, and bad debt expense and costs to reduce the company's personal injury lawsuits in Texas discussed last quarter.

EBITDA increased to $40 million, from $37 million. Net income increased by $2.8 million, to $3.3 million for the 2007 nine-month period, versus a year ago, due, in large part, to the $3.1 million reduction in interest expense.

In 2006, the net loss available to common stock holders after accruing $6.2 million of preferred stock dividends, with $5.7 million.

At this point, I'd like to turn the call over to Doug Mackie, our CEO, who will give you an overview of what's going on in the dredging market.

Thank you, Deb. The company experienced good utilization of its dredging fleet, from both domestic and international work, during the first nine months of 2007, and contract margins continue to be solid. The third quarter domestic bid market produced approximately $190 million of contract awards, which is up from the first two quarters of 2007, but less than we would have liked to have seen, as the Corps is still challenged in getting products out to bid due to its ongoing funding issues. And while the third quarter bid market was larger than the last two quarters, the year-to-date market is only $441 million.

Looking to current projects that are now expected to bid in the fourth quarter, it is unlikely the full-year bid market will match last year's $714 million. However, early in the fourth quarter, the company was awarded the first phase of the Port Jersey Channel Project, which we mentioned in earlier calls. The first phase is worth $61 million in revenue with a remaining $24 million expected to be awarded in the first half of 2008.

So although the full-year bid market will likely be smaller than last year's, when we include the Port Jersey Channel Project, we have matched the amount of work we took on for the 2006 year. And this includes four large capital projects, two in New Jersey and one each in Boston and Oregon that will provide continuous work for certain dredges over the next eight to 12 months.

There is very positive news regarding the passage of the new WRDA Authorization Bill. The Water Resources Development Act, or WRDA, is the primary vehicle for authorizing capital projects to deepen the nation's ports. The current WRDA Bill, passed by both the House and the Senate, was reconciled in committee and sent to the President, who vetoed the bill on November 2nd. It appears that Congress has the votes and the desire to override the President, as the sessions to override the veto are scheduled for today and tomorrow.

An important positive for the industry in the current WRDA Bill, is the authorization of three additional harbor depending projects totaling $350 million. Even more significant is the authorization of $3.7 billion for priority projects under the Louisiana Coastal Restoration Plan. A good portion of this authorization is -- it's expected to be for dredging projects. While passage of this bill will not alleviate current funding issues for the Corps' dredging work, it would provide support for the continuing deep port projects in the future.

With the bidding of the Port Jersey and Newark Bay work already in this year, the next bids for capital work from the Corps look to be later in 2008. At that time, we expect to see bid opportunities, including a port expansion project in Jacksonville Harbor, Florida, the start of another depending project in Wilmington, North Carolina, as well as work in the Port of Savannah, the Channels of Pascagoula and Pensacola, and several smaller projects, that, in aggregate, are expected to total over $180 million.

On the private capital front, in the fourth quarter, we will complete our $26 million port expansion project in Freeport, the Bahamas, and our $10 million LNG project at Sabine Pass, Texas, which we picked up in the third quarter.

There are still some smaller and two larger LNG related port expansion projects that should provide a sizeable amount of capital work, and, in the near term, compensate, to some extent, for the lower level of capital work put out by the Corps.

With respect to the beach nourishment market, we saw, in the first nine months of 2007, a mix of both federally and privately funded contracts that produced a $140 million bid market, which is higher than last year's total beach bid market of $126 million. The positive, here again, is the amount of funding that is committed from the state and local municipalities, which represents 35% of the beach market to date.

However, looking forward, we have seen a number of both federally and privately funded projects fall off of the near-term schedule. This may impact revenue for beach work for us in the first quarter of 2008, whereas, in the last two years, beach work has been a big revenue producer in the first quarter. We still expect over $200 million of beach projects to be bid over the next 12 to 15 months, with a significant portion of funding from non-federal sources.

And we have been -- as we have been reporting all through 2007, we believe that the international dredging work will continue to be a significant source of revenue. The international work we currently have in backlog is significant to occupy the equipment we presently have in Bahrain into 2009. Taking into account the option pending on the DR project and other contracts we are close to signing, we will be able to engage the current equipment and employ additional equipment over the following two to three years.

We believe the Middle East region to be one of the most robust markets for dredging services, including a significant amount of work suitable for our fleet, to be bid over the next two to five years. Based on these dynamics in the Middle East market, in mid-October, we came to an agreement to purchase two hopper dredges, which have been operating in Brazil, for $25 million. These vessels will require some additional outfitting, and one dredge may require upgrades to install (inaudible) capabilities. Total additional spending on these dredges, including mobilization cost, expected to be $9 million.

Depending on the schedule to compete the -- complete these requirements, one or both of the dredges could begin to work in the Middle East on the projects currently in backlog, as early as the second quarter of the next year. These dredges, after the necessary upgrades, are anticipated to generate between $6.5 and $8 million of cash flow, depending on the type of work they are performing.

As you know, earlier this year, we purchased two dredges previously operated by competitors in the domestic market. One is working on the west coast and the second is undergoing modifications to produce a world-class hydraulic cutter-head dredge. The purchase of these two dredges should enhance the company's competitive position with regard to domestic dredging opportunities, while not increasing overall market to capacity.

In addition to these new equipment purchases, we are spending approximately $10 million to construct an auxiliary vessel to support our electric cutter-head dredge Florida. We expect this to yield significant operating efficiencies and enhance the versatility of the Florida, increasing its deployment opportunities and utilization rate in the US.

Overall, we expect the domestic acquisitions and the construction of an auxiliary vessel, coupled with consolidating domestic capacity, to contribute to our revenue growth and overall profitability. Depending on general market conditions, once these vessels are fully deployed, we anticipate that they can generate approximately $9 million, which is $13 million of EBITDA in a year.

2007 has turned out to be a big year for vessel additions by the company. We are pleased with the opportunities and expect these vessels will provide the increased flexibility, efficiency, and capacity to fuel growth in our revenues and profitability in the long-term.

While there continues to be some short-term uncertainty with regard to the Corps funding issues, the capabilities which our fleet now provides, positions us to take advantage currently of the strong market in the Middle East, as well as the expected return of more capital work in domestic markets in the future, that will be critical to keep US ports competitive with those in foreign markets.

Now let me ask Deb to walk you through a more detailed analysis of our second quarter performance.

All right. I'll start with a general overview of contracts contributing to the quarter's performance within the context of the dredging markets we serve in our demolition segment.

Revenue during the quarter included $39 million of domestic capital, $42 million of foreign capital, $3 million of beach work, $9 million of maintenance, and $23 million of demolition, for a total of $116 million of revenue. The comparative amounts for the third quarter of 2006, were $28 million of domestic capital, $23 million of foreign capital, $4 million of beach, $15 million of maintenance, and $12 million of demolition, for a total of $82 million in revenue.

The majority of our $81 million of capital revenues this quarter were generated by our hydraulic dredges Florida and Illinois, furnishing work on our deepening project in Brunswick, Georgia. We had continuing work on Golden Pass LNG project with our hydraulic dredge Alaska. Also continuing work by the dredge Texas on our contract for port expansion work in Freeport, the Bahamas. And finally, two of our projects in Bahrain, DR and the Bahrain Investment work, accounted for $28 million of revenue in the third quarter, produced by four hopper dredges and two hydraulic dredges working for most of the quarter.

Beach revenue was $3 million in the third quarter, compared to $4 million in the third quarter of 2006. These levels are becoming typical in the third quarter, as more and more beaches are subject to environmental windows, which only allow beach work in the October/November to about April/May time frame.

Maintenance revenue in the third quarter was $9 million. While in line with 2006 levels, it did represent a drop from last quarter's $13 million. In the first half of this year, we have seen even higher than typical revenues, as our equipment was working on three sizeable maintenance projects, which have since been completed. The majority of the third quarter maintenance revenues generated -- I'm sorry -- related to dredging in Kings Bay, Georgia, and the Columbia River in Oregon.

NASDI had a strong quarter, generating approximately $23 million in demolition revenue. Over the last two years, NASDI's been consistently producing $11 to $13 of revenue per quarter. So this is a significant increase. The change is due primarily to two large contracts NASDI won in the second quarter for demolition and site work. A good portion of the projects include subcontract work, so the margins are not as high as NASDI typically generates. Nevertheless, the work is expected to lead to additional direct demolition activity for NASDI, yielding more typical margin. These projects should provide a higher level of revenue for NASDI through the first quarter of 2008.

Looking at the third quarter bid market, Doug indicated that the 2007 domestic dredging bid market, representing work awarded during the period, totaled $189.1 million, of which Great Lakes won a sizeable share. This quarter saw higher percentage of capital work than previous quarters, and Great Lakes won all of the capital work put out to bid. They also won a sizeable beach project for over $20 million.

As in the last quarter, Great Lakes was low bidder on the $85 million capital project in Port Jersey Channel. Subsequent to the third quarter end, the company was awarded $61 million of that project, with work to commence before the end of 2007. The company's still waiting for the Corps to award remaining options relating to its Newark Bay, New Jersey capital project for $36 million, and this Port Jersey Channel job for $24 million. The company anticipates these actions will be awarded in the first half of 2008.

When the contract is awarded it will be included in both the bid market and backlog numbers. The work from these New Jersey projects will provide solid utilization for our mechanical backhoe dredge New York and two clamshell dredges through mid-2009.

This year-to-date market, domestic market, totaled $441 million, of which Great Lakes won 44%. As Doug discussed, it's unlikely the fourth quarter will provide enough work to match last year's bid market of $714 million. However, since the company won a significant portion of the third quarter market and with the award of the $61 million from Port Jersey after quarter end, we have taken on the same amount of work domestically in 2007, to date, as we did for the full year 2006.

With a significant amount of the work awarded to Great Lakes this quarter, dredging backlog as of September 30, 2007 of $290.9 million, increased by $51.3 million compared with June 30, 2007 backlog of $239.6 million. However, current backlog is down from September 30, 2006 level of $350.3 million. The September 30, 2007 dredging backlog does not reflect approximately $319 million of low bids pending award and additional phases or options pending on projects currently in backlog. That represents an $89 million increase in low bids and options pending from $230 million at this time last year. Both amounts include the $150 million contract option expected to be awarded for the second phase of the DR Land Reclamation project in Bahrain. The balance of the 2007 low bids and pending awards is all domestic work.

Demolition services backlog was $37.4 million, compared with $41.5 million of June 30, 2007, and $20.1 million at September 30, 2006. Although down slightly from last quarter, there is still a significant amount of backlog for the demolition unit and includes two large projects, as mentioned, that are contributing to the increase in NASDI's revenues for the third quarter. NASDI's been able to generate consistent backlog and is expected to maintain this trend, as there continues to be good demand for demolition services in the Boston area.

Our backlog by dredging work type and segment at September 30, 2007, was $103 million of domestic capital work, $128 million of foreign capital, $44 million of beach, $16 million of maintenance, for a total dredging backlog of $291 million, adding NASDI's $37 million, for a total company backlog of $328 million. The comparative numbers we saw at the end of the second quarter of 2007, was $66 million of domestic capital, $161 million of foreign capital, $9 million of beach, $4 million of maintenance, for a total dredging backlog of $240 million, and demolition backlog added $41 million. And also then, for the third quarter end 2006, we had $98 million of domestic capital, $162 million of foreign capital, $43 million of beach work, $47 million of maintenance work, for a total backlog of $350 million, and NASDI added another $20 million in backlog at that time.

Turning to equipment spending. Capital expenditures for the third quarter totaled $5.7 million. This quarter spending included $1.3 million in modifications for the new dredge Terrapin Island and $1.4 for the new internal piping system for the hopper dredge Liberty Island. An additional $1.1 million was spent this quarter on construction of the barge that Doug discussed, which will enhance the utilization and operating efficiency of the dredge Florida. This brings the year-to-date spend on this vessel to $5.1 million. It is expected that the total spend on this construction will be $10 million, and should be complete early in 2008.

As in the last quarter, in the first half of the year, the company purchased the dredge Ohio and attendant plant for $13.6 million, and bought out operating leases for the dredges Texas and Pontchartrain and two scouts for a total of $14.4 million. Also, in June, the company purchased the Terrapin Island dredge for $25.5 million, and in the third quarter, this purchase was refinanced through a long-term operating lease. Year-to-date, our capital spending for items exclusive of the dredge acquisition and the building of the auxiliary vessel for the Florida, as noted, was $17.2 million. Based on commitments through the end of the year, we have increased our estimate for 2007 capital expenditures to $21.5 million.

Third quarter 2007 maintenance spending, which is equipment (inaudible) cost or expensed in the year incurred, was $13.9 million, up from the first two quarters in prior year, as several vessels were in dry dock this quarter. As work slowed in the third quarter domestically, we took the opportunity to do some required dry dockings early, so we would not have to interrupt work in progress. As we have previously noted, we have found that preventative, rather than reactive maintenance, has been a very effective strategy in maximizing utilization.

Looking at debts and liquidity. As previously announced, Great Lakes merged with Aldabra Acquisition Corporation, publicly traded blank check company, on December 26th, 2006, and is now traded on the NASDAQ under the symbol GLDD. This merger has allowed the company to de-lever, which facilitated our recent acquisition opportunities. By virtue of the funds received in connection with the merger, the company paid in full its senior bank debt term debt of just over $50 million by year-end 2006. The company's $175 million of 7-3/4 senior subordinated note due 2013, remain outstanding.

In the third quarter, all the company's outstanding warrants were either exercised or redeemed. In total, $91.8 million was received by the company as a result of the warrants exercised in 2007, including $60.2 million received in the third quarter. In addition, the company completed a secondary offering in early August, of 13,340,000 shares of its common stock, including the exercise of over allotments by certain selling shareholders. All proceeds of the secondary were received by the selling shareholders and not by the company. The combination of the two actions have enhanced the company's capital structure and provided increased trading liquidity for the company's common stock.

On June 12th, 2007, Great Lakes entered into a five-year, $155 million senior revolver -- revolving credit facility to refinance equipment term debt and borrowings under its existing senior credit facility. As of September 30th 2007, total debt was $189.5 million, including $14.5 million of borrowings under the revolver facility related to working capital needs. At the end of the quarter, outstanding performance, letters of credit totaled $45.2 million, and total cash and equivalents were $29.7 million. The significant increase in cash is a result of the warrant exercise proceeds that were received in the quarter and subsequently invested. At quarter end, our total leverage was 3.18 times, and interest coverage was 2.85 times.

For the past two quarters, I've mentioned the need to increase our investment and working capital by approximately $7 million for pipe inventory necessary to support operations both domestically and internationally. This has been accomplished over the past three quarters. During this quarter, we have seen an additional increase in working capital, due partially to normal differences in timing of operational cash flows and additional investments required with the shift to increase dredging activities overseas. Also, the demolition segment has increased working capital with a higher level of activity. Therefore, while we expect a decrease from the end of the third quarter levels, we are expecting to carry a greater investment in working capitals going forward.

And finally, a quick update on the company's claims related to our hourly workforce residing in Texas. During the quarter, no new claims were filed against the company, and several outstanding claims were settled. Therefore, there was no impact on earnings, as there had been over the last 18 months. We feel this is due, in part, to the efforts of the Maritime Jobs for Texas, a coalition of Maritime employers that were working to reform Texas Venue Law with regard to the type of personal injury suits the dredging industry has faced recently.

On May 24th, 2007, the Texas Legislature passed a bill which removed, in part, certain venue rules favorable to would-be plaintiffs. These legislative reforms were intended to reduce the number of meritless personal injury suits filed against the industry in Texas.

At this point, the company still has a significant backlog of claims to date, for it has -- for which it has recorded reserves. As of the end of the quarter, our reserves represent our best estimate of the outcome of the claims currently outstanding.

Our outlook; operations for the first nine months of 2007 were solid, although slightly below our expectations. Our backlog strengthened at the end of the third quarter, as we won a sizeable portion of a higher bid market domestically. As a result, we should see a strong fourth quarter to complete 2007. Therefore, looking forward, we feel we can adjust our guidance for the company's EBITDA from $54 to $57 million, for full-year 2007. This guidance does include utilization of the Terrapin Island, which is working on the west coast, but no contribution from the Ohio or the construction of the new vessel we discussed. Those vessels, along with the two Brazilian dredges we will purchase in the fourth quarter, will impact 2008, and beyond, depending on the timing of modification and deployment opportunities.

This concludes our prepared remarks. But I would also 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 website at gldd.com.

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

Thank you. (OPERATOR INSTRUCTIONS) And our first question will come from Andy Kaplowitz with Lehman Brothers.

Good morning. You obviously had a good quarter in terms of getting your share of new awards. So I guess my question, Doug, is that because of purchasing the new dredges? I know that the Terrapin Island is working now. Can we expect a higher share going forward of wins for you guys?

Well, we, based on just the elimination of a major competitor, I would think, going forward, that we would have a bigger share, and especially since that competitor did focus on the capital market. So I think logically, and, to date, we've seen a higher percentage of the capital work, which is the best work in the domestic market.

Of course. But there's a big difference between sort of 40% share and 100% share. I guess what I'm trying to figure out is, can you do a lot higher than your historic proportion of 35, 40% share? It seems like you can, going forward.

Well, being within about a 10% or 12% share of the market, historically, and we were around a 35 to 40, so we would -- we would hope to take a significant percentage of that 12%. That's our -- that's our hope and our plan.

Okay. Great. On the margin, gross margins tend to jump around a little bit. I guess I understand that. Is there anything in the quarter to focus on versus last quarter that resulted in lower growth margins?

Well, we did have some expenses due to the secondary, and, honestly, during the year expenses. And we also had a -- for the third quarter, we did have one difficult project on the east coast that hurt the margin somewhat. But that project will be completed in the next week.

Okay. And is there any way for you to quantify either the impact of the transaction expension -- expenses on SG&A or the one project on gross margin?

We would -- we don't have that at hand, but I'm sure we could talk to that later.

Gotcha. Thank you. One more question before I get back in queue. The WRDA Bill, obviously, it looks like it could go forward here. And I know it's a nice callous for you guys. But I guess the question is timing. This is the authorization, but not the appropriation. So how long do you think, Doug, it would take to see some of those new deepening projects that you mentioned or any of the coastal restoration dredging?

Well, generally what we find after a large authorization bill, we don't usually see it for six to nine months, actually projects being bid after that. And again, we are in a situation where we're in a continuing resolution. Sometimes the continuing resolutions are very good and sometimes they're weak. But I'm looking forward to a -- hopefully I'm looking forward to a year next year in 2008, where we generally find that the House and the Senate will spend money.

Okay. Great. Thank you.

And our next question will come from Richard Paget with Morgan Joseph.

Good morning, everyone.

Good morning.

Just to follow up on Andy's question about you guys getting better market share and some of the competition being out of the bid process. I mean, does that suggest that the backlog that you guys are winning are at better margins?

Well, with -- and again, it's been -- it's -- there's been two or three nice capital projects and big beach projects, which the margins are somewhat better. But that's a small -- a small part of the whole year going forward. So it is an indication that margins are better, but if -- unless the -- unless we get a better domestic market, that will not -- that will not continue. Right now it is sufficient enough to have better margins. But we just have to see what's going to happen with this continuing resolution.

Okay. And I know you mentioned that '07 is not really going to match '06. But if you compare third quarter this year with last year, I mean last year had a pretty big bid market. I mean, how would you say fourth quarter this year is stacking up with fourth quarter last year?

Well, the third quarter was a little bit less than last year's.

Oh, yes.

Right.

It was a big quarter --

Versus '06.

Right. Fourth quarter usually has always been weaker than the third quarter. Right now --

I can't remember -- to be honest, I don't remember what the fourth quarter --

Yes. We'd have to get back to you on that, Richard. We don't have the fourth quarter of last year.

Yes. I've only got year-to-date here.

We only have year-to-date, year-to-date.

Okay. And then how would you characterize kind of the storm season this year, which would either mean beach nourishment work needed to be up or down? I mean, was it -- I mean, it seemed, at least kind of hurricane-wise that it obviously didn't match '05.

Well, actually, if you would get on the website, you would probably see that this was probably one of the worst seasons for beach erosion. The reason we've seen two -- over the last six weeks, we've had two major storms where they're not hurricanes, but they are tropical storms or -- and they worked their way up the east coast. And they're -- if you look at the reports on the website, you'll see that all -- from Florida all the way up the east coast, beach erosion has been very bad. So now, will that -- it generally takes for them, if the beaches already don't have permits or -- permits in place, which a lot of them do, it may be a six to nine month lag. But it was a season that did a lot of destruction of the beaches this year on the east coast.

Okay. Thanks. I'll get back in queue.

(OPERATOR INSTRUCTIONS) And our next question will come from John Parker with Jefferies.

Good morning. You referred to your website having information about the storms. Is that your website or you're just referring to weather websites in general?

Weather websites in general. Or go to -- if you go to any of the coastal communities --

Got it. Got it. Okay. Deb, can you just quantify the deferred financing fees for me during the quarter? I know you have a new revolver now, so things have changed a little bit.

Those came in during the second quarter.

Yes. There was a big number in the second quarter. Was there any --

No, it came in the third quarter most, related to the secondary offering expenses, not related to financing activities.

No, no, no. But I meant -- I'm sorry. I meant the amortization of deferred fees. I'm just trying to get your cash interest number.

Oh. The third quarter.

If you don't have it now, you can --

No. Yeah --

-- do it later.

-- that's something that I can get for you.

Okay. The $61 million project that was recently announced is that a maintenance project or a capital project?

It's a capital project. And the 61 is a portion of it. We expect another $24 million of that job to be awarded early next year.

Okay. And are you seeing any other opportunities overseas outside of your Bahrain stronghold or is that primarily where you're focused at this point?

No, there's a lot of work going on in Bahrain, and so we've been focusing there. We were involved in a very large bid in [Al Budaiya]. We were not successful on that one. So there -- there are some in the surrounding region as well. But there's just a very plentiful amount of work coming out in Bahrain.

Okay. That's all I have for now. Thank you very much.

(OPERATOR INSTRUCTIONS) And we do have a follow-up question from Andy Kaplowitz.

Guys, I just want to clarify something. It seems like -- I'm trying to get a read as to how you think the market -- what you think the market is like right now. Do you think it's sort of the same as it was maybe three months ago, six months ago, or is it getting better or worse? I'm talking about the US capital market.

The US capital market is probably similar from last year. The difference is, as far as capital market, we are -- we are down from last year, 2006. But the -- so but there is better opportunities from us because of the exit of the major competitor. But it is down. We -- there was some capital work in the fourth quarter bid. I don't know if it'll be awarded. But we -- we'll still be down $30 or $40 million in capital versus last year, which is not huge, but it is -- it does come in waves. I mean, hopefully, we'll see a better 2008 capital market.

Is that your best guess? Do you think we will see a better 2008 capital market?

You know what, it's going to be mostly dependent on the private. I think there's a couple decent large LNG projects that can be bid next year, as well as a deepening expansion of a couple channels and ports in Texas. I think those will make the difference. There is -- there is somewhere in the neighborhood of $150 to $180 million of core work coming out. But I think what would make it a better market is if these private jobs come through as scheduled.

Doug, maybe if you could talk about the LNG projects that are potentially out there. Are they proceeding? Are you still thinking maybe early '08, you could be in the running for them?

Yes, they -- I mean, there's -- there are four separate ones, two large and two small. They're -- they are scheduled in some late first quarter and into the second quarter, significant projects. So we're hopeful that they will -- they will make up more than the difference in the capital from the lack of work coming out of the Corps.

Understand. Thank you.

And our next question will come from Seth Weber with Banc of America.

Hi. Good morning. Sorry if I missed this. But given, I guess given what's going on in the domestic market and the acquisition that you just made, would you say that your fleet is kind of at adequate size at this point, or would you expect to continue to kind of pick up vessels if they became available, kinds of ones and twos here?

I think we would -- I mean, we have an adequate fleet. We're always interested in additional plan, especially domestic. If opportunities come up, we will -- we will address them and look at them very hard. As far as the foreign fleet, right now, I think -- I think our view now would be that we have sufficient fleet of hopper dredges right now for what we need overseas. And if we -- if we see any weakness in the US market over the next 18 months, we'll just take -- do some plan on the United States, in -- if we have good opportunities in the Middle East.

Okay. Have you noticed any changes in the competitive environment overseas? Have any of the bigger players started trying to infringe on what you guys are doing there?

Not at all. We've, overall, pricing has gone up a little bit somewhat, and we think that'll continue.

Okay. Thanks very much, guys.

(OPERATOR INSTRUCTIONS) And at this time, there appears to be no further questions in the queue.

Okay. Well, thank you for joining our third quarter update. And we'll look forward to talking to you next year. Thank you.

That does conclude our teleconference for today. We'd like to thank everyone for your participation. And have a wonderful day.