Great Lakes Dredge & Dock Corp (GLDD) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q4 2008 Great Lakes Dredge and Dock Corporation Earnings Conference Call. My name is Antoine, and I will be you operator for today. (Operator Instructions) I would now like to turn the call over to Deb Wensel, Chief Financial Officer. Please proceed, ma'am.

Thank you, this is Deb Wensel, and I welcome you to our quarterly conference call. I will begin our discussion by presenting the financial highlights for the quarter and year ended December 31, 2008. Then Doug Mackie, Chief Executive Officer of Great Lakes, will share his market overview, which will provide a 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.

I hope all of you had a chance to review our press release issued this morning, which includes financial highlights for the quarter and year ended December 31, 2008.

Total revenue for the quarter ended December 31, 2008 was $163 million, up 4% from fourth quarter 2007 revenue of $156.9 million. Foreign operations generated $53.4 million and domestic capital operations contributed a solid $39.8 million in revenue during the quarter.

Work continued on several capital projects in the ports of New York, New Jersey and Boston and along the Columbia River in Oregon. Gross profit was $18.1 million for the fourth quarter 2008 versus $22.7 million a year earlier resulting in a decrease in gross margin to 11.1% from 14.5%.

During the quarter, the Company was again negatively impacted by weather related downtime both domestically and in the Middle East. Fourth quarter gross profit was also negatively impacted by the assessment of a $2.2 million retroactive insurance premium by West of England, the protection and indemnity club, which provides injury insurance coverage for the company's maritime workforce.

G&A expenses were down by more than 12% in the 2008 fourth quarter due to the declines in incentive pay and profit sharing expense versus a year ago. Nevertheless operating income dropped by 30% to $7.6 million from $10.8 million in last year's fourth quarter.

Net interest expense is up $0.9 million for the period due to a reduction in interest income of $0.5 million and a reduction in the gain on the Company's interest rate slots.

The company also recognized a $0.6 million decrease in earnings from a 50% owned joint venture, Amboy Aggregates. Amboy's operations have been negatively impacted by the slow down in housing and road construction. These factors collectively resulted in pre tax earnings of $3.1 million, down from $7.8 million last year.

Net income for the 2008 fourth quarter was $1.8 million or $0.03 per diluted share versus $3.8 million or $0.06 per diluted share a year ago.

EBITDA of $16.1 million for the 2008 quarter compared with $17.4 million in the previous year. Revenue for the 2008 fiscal year of $586.9 million was up 14% from $515.8 million for the previous year, driven by foreign and domestic capital and maintenance operations.

Demolition activity was particularly robust in the first half of the year. Although gross profit was up for the year, gross margin of 11.8% decreased from 13.2% a year earlier, due to the negative impacts of unfavorable weather, the temporary loss of the Dredge New York and a $2.2 million insurance premium and margin compression in the demolition segment.

Despite the increase in gross profit, higher general administrative expenses in 2008, primarily from payroll and healthcare costs, resulted in operating income for 2008 of $26.1 million versus $29 million from the previous year.

Further pressuring earnings was a $2 million reduction in Amboy's earnings that more than offset a $0.5 million decrease in interest expense. These factors resulted in pre tax earnings for the year of $8.8 million compared with $13.5 million a year ago -- or a year earlier.

Net income for the year ended December 31, 2008 was $5 million or $0.09 per diluted share, down from $7.1 million or $0.14 per diluted share the year before. The diluted weighted average number of shares outstanding for the year ended December 31, 2008 increased to 58.5 million from 52.2 million last year as a result of the Company's issuance of 18.4 million shares of stock upon exercise of warrants in mid 2007.

Year-to-date 2008 EBITDA was $55.9 million, down from -- down $1.6 million from 2007. At this point I'd like to turn the call over the Doug Mackie, our CEO, who will give you an overview of what's going on in the dredging market.

Thank you, Deb. It was another active domestic dredging bid market in the fourth quarter, generating $190 million of work, with projects contributing from all sectors: capital, beach and maintenance.

The beach bid market for the fourth quarter of $55 million was the largest quarter for beach work since the third quarter of 2007. The full year 2008 domestic bid market was $783 million, almost a 30% increase from the 2007 bid market of $603 million.

Maintenance work was the primary source of this increase. The $351 million of awards nearly double the 2007 market of $188 million. The Company won contracts totaling $300 million or 38% of the total bid domestic market on a par with its five-year average of 40%, and only $21 million less than in 2007, during which it achieved an especially high 53% win percentage.

We were also pleased to see a return of the beach bid market after a weak first nine months in 2008. Looking forward we see more than $100 million of beach work scheduled to be bid during the next 12 months, as many beaches along the East and Gulf Coast are at critical stages.

In early 2008 we had talked about the number of projects growing by year end because of this deferral of work beginning in the third quarter of 2007, due predominantly to permitting issues, while we feel there will continue to be some funding and permitting issues, we see a better outlook for beach work than at this time last year.

Continuing resolutions passed on October 1, 2008 expires on March 6; however, there is an omnibus bill in Congress to pass a budget for the remainder of the government's fiscal year. This is good news for the Corp because when they are working under a continuing resolution, the approval process to fund projects is typically longer. When the Corp is working under an approved budget, they have a set amount of funds to work with and they do not have to get approval to bid individual projects.

Late November there was a $750 million supplemental appropriation passed related to repairing Gulf Coast storm damage. Unfortunately the Corp has had difficulty getting access to these funds and to date very little has been spent.

We are still waiting for the Mobile and Galveston Districts to put out several large projects. It is our understanding that the Galveston District has a backlog of over 30 projects ready to go.

Last week the President signed the American Recovery and Reinvestment Act, a $787 billion stimulus plan. The focus of this plan is clearly on near term spending that can create jobs and expedite a recovery. An emphasis on infrastructure spending has resulted in approximately $111 billion being designated for this work. Funds of approximately $1 billion appear to be included for port maintenance and shoreline protection; a good portion of which we expect to be spent on dredging. The Corp will publish in the near term a list of priority projects for which it plans to request funds. It is expected that it will take another three months to six months to put this work out to bid.

While the stimulus package should create a needed uptick in the funds spent on maintenance dredging, the long term solution still remains the Harbor Maintenance Trust Fund Initiative. Maintenance dredging in our nation's ports has been under funded for several years, leaving many of them at considerably less than their authorized depths. This has had a negative impact on US commerce by virtue of increasing costs on imports and exports.

Through the efforts of RAMP, or Realize America's Maritime Promise, Congress has increasingly recognized the need to maintain our ports to enable more efficient movement of shipping traffic, thereby reducing costs and promoting economic growth. The success of RAMP's initiative is critical. Having 100% of the Harbor Maintenance Trust Funds go for their intended purpose, will insure our harbors are continually maintained at the stated depth. In addition to the attention that has been directed toward the stimulus plan, there is continued momentum for support of the Harbor Maintenance Trust Fund legislation. We are hopeful that this legislation could be passed as early as this summer. For addition information concerning this effort, you can go to www.ramphmtf.org.

Near term domestic capital projects include another section of the New York Harbor, a project in Tampa, work for the Navy in Norfolk and other deepening work along the East Coast.

In addition there have been a couple of programs put in place to support ongoing funding for shore protection and barrier island restoration. First, is the Coastal Impact Assistance Program, a federal plan to provide monies from offshore oil drilling to six coastal states. The second longer term plan is the Offshore Continental Shelf Program, which apportions money from offshore oil drilling leases back to the impacted states. While none of these dollars have been spent yet, we are seeing efforts by Louisiana and industry coalitions, including the oil and gas industry to push for these expenditures to be made, and expect that several coastal restoration projects in Louisiana should be coming out soon. In total we see capital projects which in the aggregate could provide more than $200 million of opportunities over the next 12 months.

The $5.25 billion expansion plan for the Panama Canal, that is slated for completion in 2014, continues to move forward. Earlier this month, the Panama Canal Authority, announced that it is prepared to award the largest contract under the expansion program, which is for the design and construction of the new set of locks on both the Pacific and Atlantic entrances of the canal. Only one contract has been awarded for dredging work to date, but we anticipate there will be several more projects that will come out in the next couple of years, which will provide good opportunities for employing our equipment. Even more importantly, the Panama Canal expansion program will make maintaining and deepening our Eastern Coast ports even more critical. Deeper draft vessels are too large to navigate in our ports, goods destined for the US will bear high transportation costs.

In summary, the domestic market has seen some improvement during 2008, particularly in maintenance and then in the fourth quarter, beach work. However, during the year overall funding constraints were evident.

Looking forward, we anticipate an increase in work coming out to bid from the Supplemental Storm appropriations and the stimulus plan. There is a clear focus on infrastructure spending by the new administration, and with the Democratic majority in Congress, there is reason to anticipate that the annual appropriation process will get back on track.

For the long term, the growth in foreign commerce, which is expected to accelerate with the expansion of the Panama Canal, should apply real pressure on this country to bring our ports to competitive standards. And there is a heightened expectation that the Harbor Maintenance Trust Fund will be used for the intended purpose of funding maintenance dredging to keep our ports competitive. For these reasons we feel positive about the domestic dredging market going forward.

Overall, 2008 was a very strong year for foreign operations. However, the decline in oil prices and contraction in the region's real estate market in recent months has begun to slow the robust economic growth in the Middle East.

During the last few weeks, the Company has been asked to enter into discussion to restructure up to 50% of the remaining retracted backlog for the Diyaar projects to an options status, allowing the customer flexibility on timing of execution. Therefore the Company is working with the customer to come to a mutually beneficial agreement. The customer has been very public about their intent to complete the project and therefore, we currently feel positive that any option work will be awarded to us over time.

At this point we are hopeful of being able to maintain good utilization of our overseas vessels and Diyaar and other shorter term projects. However, it is unclear when the additional work we have been negotiating will be awarded. Given the uncertain timing of projects in this region, we will continue to review the opportunity to reposition vessels to the US in light of developments here in conjunction with the stimulus plan and other anticipated funding legislation.

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

Thank you, Doug. I'll start by giving revenue details for the quarter. For the quarter ended December 31, 2008, we had $40 million of domestic capital, $53 million of foreign capital, $29 million of beach, $28 million of maintenance and $13 million of demolition for total quarter revenue of $163 million. The comparable numbers for the third quarter of 2008 were $37 million of domestic capital, $51 million of foreign capital, $7 million of beach, $29 million of maintenance and $19 million for demolition, for total quarter revenue of $143 million. And finally the comparable numbers for the fourth quarter of 2007 were $44 million domestic capital, $45 million foreign capital, $20 million beach, $20 million maintenance and $28 million demolition for total quarter revenue of $157 million.

Capital revenues for the fourth quarter totaled $93 million and were up from $89 million a year ago. The majority of the recent quarter's capital revenues were generated by our Dredge New York and Clamshell Dredges continuing work on deepening projects in the New York, New Jersey and Boston Harbors; continuing work on the Columbia River deepening project on the West Coast with our hopper dredge, Terrapin Island; work our Louisiana Coastal restoration projects, with our hydraulic dredge, Alaska; and finally we employed our five hopper dredges and our three large hydraulic dredges throughout the quarter on a variety of projects in Bahrain. The Company also began work on a cruise terminal in Honduras with the Clamshell Dredge 53.

Beach revenue of $29 million in the fourth quarter compared with $19 million a year earlier as the Company worked on projects in South Carolina, Georgia and New York. However, total 2008 beach revenue was down compared with 2007 as a result of permitting delays and getting work out to bid earlier in the year.

Maintenance revenue in the fourth quarter was $28 million, up from $20 million a year ago as previously mentioned; the maintenance markets continued to be strong throughout this year, totaling $350 million in 2008, nearly double the 2007 market of $188 million. The number of maintenance projects contributed to this quarter's revenue, including dredging in the New York and New Jersey harbors, Maryland, the Gulf, the Mississippi River and along the West coast.

With the award of just over $300 million of domestic projects this year, contracted backlog of December 31, 2008 totaled $418 million compared with $322 million at December 31, 2007. However, as Doug indicated, there are ongoing discussions with our customer regarding the Diyaar contract that may shift a portion of the Diyaar backlog to options pending status. Additionally the December 31, 2008 dredging backlog does not reflect approximately $107 million of domestic projects -- domestic low bids pending awards and additional phases pending on projects currently in backlog.

Revenue for the Company's demolition business, NASDI LLC, was $12.9 million, down from $28.1 million last year. Beginning in the third quarter of 2007, NASDI generated record revenues for four consecutive quarters due to a series of larger projects. However, as expected, the revenue is now moderating to levels experienced prior to the third quarter 2007.

Demolition services backlog in December 31, 2008 was $24 million compared to $39 million at the end of the fourth quarter 2007. Due to the completion of the large projects just mentioned, backlog has returned to levels existing prior to the 2007 second quarter.

Recently NASDI has taken on several projects in the New York market, and is looking to expand its presence there in 2009. Our backlog by judging work types and segment at December 31, 2008 was $176 million of domestic capital, $196 million of foreign capital, $19 million of beach, $27 million in maintenance, for a total dredging backlog of $418 million. NASDI's $24 million, gives us total company backlog of $442 million.

The comparable numbers for the end of the third quarter were $186 million of domestic capital, $212 million of foreign capital, $24 million beach, $31 million maintenance, for a total dredging backlog of $453 million. Adding NASDI's $19 million of backlog gave us a total company backlog of $472 million.

And finally the comparative numbers for the end of the fourth quarter 2007 were $175 million of domestic capital, $107 million of foreign capital, $31 million of beach, $9 million of maintenance, for a total dredging backlog of $322 million. Demolition backlog was $39 million, for a total company backlog of $361 million.

Capital expenditures for the fourth quarter totaled $11.6 million. This included spending of $2.9 million on the dredges Ohio and Noon Island, related to upgrades and placing these vessels into service. $1.1 million was spent this quarter on final construction of the power barge that will enhance the utilization and operating efficiency of our dredge Florida. Work on this completed in October was refinanced through a sale-lease stacked transaction. An additional $1.6 million was spent on the expansion and renovation of the Company's corporate offices in Oak Brook, Illinois. Substantially all the costs of the build out and furnishings are being funded by the landlord as an incentive for signing a long term lease renewal.

The remaining $6 million included work on a variety of dredges as well as the purchase of smaller auxiliary equipment for dredging operation. Fourth quarter 2008 maintenance spending, which is equipment related costs or expense in the year incurred, was $11.8 million up from the 2007 fourth quarter. However, maintenance expenses for the 2008 year were down nearly $2 million compared with 2007.

As of December 31, 2008, senior and subordinated stacks, net of $10.5 million in cash and cash equivalent, was $206 million, including $41.5 million of borrowings under the revolving credit facility. During the quarter the Company completed its daily stack of the power barge noted above for $16.7 million.

At the end of the fourth quarter 2008, outstanding performance letters of credit totaled $34.6 million, including $18 million outstanding on the Company's revolving credit facility. The Company's $155 million facility matures in June 2012 and includes an $85 million sub-limit for the issuance of letters of credit.

At the end of September, Lehman Brothers, a 6.5% participant in our credit facility stopped funding its share or our revolver borrowing. However, since we have sufficient capacity -- or significant capacity on the revolver, this has not impacted our ability to fund working capital needs. Availability of December 31, 2008 was $88.2 million excluding $7.3 million attributable to Lehman's. Leading positions in our credit are held by Bank of America, Charter One, GE Capital Corporation and Wells Fargo Bank.

At quarter end our total leverage was 3.65 times and interest coverage was 3.71 times. In terms of working capital requirements during 2008, we increased our investment type inventory for both our international and domestic operations.

In addition as foreign operations grew last year, we increased our spare parts inventory, receivables and retainage needed to support our overseas work. This is partially offset by one domestic project in which we have been receiving advanced payments.

Despite all the challenges that we faced throughout the year, including the negative weather impact, the reduction on demolition margins later in the year, and the year-end insurance premium call, 2008 results were in line with our expectations.

As we have indicated there's an exceptional amount of economic uncertainty looking out into 2009. A strong backlog domestically and the possibility of additional opportunities from the recently passed stimulus plan and 2009's federal budget bodes well for our domestic operations this year.

On the international side of the business, there are significant unknowns. We have all but one vessel available to work there throughout 2009, but the situation remains fluid. The pace of current projects and the prospects of the future may be further affected by the current economic turmoil.

Therefore at this time we are not providing specific EBITDA guidance for 2009. We do believe 2009 should be better than 2008 and that there is potential upside from the stimulus plan and the 2009 budget. However, as the year progresses and the impact of the variables I mentioned becomes clearer, it may allow us to provide more clarity on EBITDA results for 2009.

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, to GAAP measure in the financial section of our companies website at gldd.com.

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

(Operator Instructions) Your first comes from the line of Andy Kaplowitz with Barclays Capital. Please proceed with your question.

Good morning, guys. Can you hear me okay?

Yes, Andy, we can.

So I know you're not giving EBITDA guidance, but when we look into 2009, can you talk about cash flow generation in 2009 to the best of your ability? What are we spending money on? What should we look for in terms of cash generation in '09?

Well, again, that's what we do give guidance on normally is our EBITDA, which is really the cash flow measure. I guess the only other item to think about there that --

Is CapEx.

Is the cap spending. And we've talked before that with our current equipment we need to spend something around $22 million annually on the equipment. Now that being said, there's some allowance there for a change in utilization, that number can go down or up if necessary. But I think that's really the only other number that we sort of talk about. And I think we'll sort of gauge that number depending on what we see going forward for 2009.

Okay thanks. And, Doug, have you seen -- you've kind of alluded to it, but it doesn't seem like you've seen much impact on the business in the US from the slowing economy. But what do you see out there in the US? Has the business been affected in ways that -- like as how's the state and local business? How are the pieces of the business that you would expect to be sensitive to the economy?

Well, it's clear that over the last 12 months that, domestically, the federal government has provided most of the revenue for our domestic businesses. We have a very good domestic backlog, it's a strong backlog domestically, but we need to see some of the stimulus money come out to really get upside.

We are seeing good utilization for our equipment through the first six months. There might -- there's a few holes out there in the third and fourth quarter. But we're pretty optimistic about being able to fill that in if we could get any type of funding coming out of either the program for the restoration of the Gulf, which was supposedly started last November, and of course the new stimulus plan. So we're hopeful for upside.

When do you make the decision -- I know it's a hard question, but when do you make the decision to take some dredges back from the Middle East? Is there anything that we can look for to get a view on when utilization would start to suffer in the Middle East and you'd have to bring some dredges back?

We're fairly occupied for the first part of the year and we don't feel any risks there, so we have time. What we're looking at is -- we're obviously going through some negotiations and we're assessing our opportunities that we have bids pending. And that's one side. And it could be -- if we believe that we can get a better return, I mean that's what we always look at, if we could get a better return bringing one or two dredges back to the United States, we will not hesitate.

We still have enough capacity in the US for what we see right at the moment that there is a surge of stimulus money and there's a weakness in the Middle East. We'll make that move. We're already at -- just like in the military, we have plans based on what we see and what results we have in our negotiations.

Doug, I would imagine that since you're working on some of these big projects in the US and the Middle East, you haven't seen much pricing competition yet. But can you give us sort of the landscape as to -- and I also would imagine given your market trend in the US that you're okay going forward -- but maybe just the landscape on what's going on in the US and the Middle East as you view your competitors.

Well, I think overall for the last quarter we've seen margins continue to stay good. And it usually is a pretty good market fourth quarter and first quarter because of the -- as you know those are our strongest quarters because that's when the government seems to put out all the work or as a result of all the windows that close during the summer.

So we haven't seen, we've still seen good margins overall. We've -- as far as in the foreign market, there is pressure, downward pressure on pricing for jobs. There are several large competitors in the Middle East who have had to slow down jobs and some larger jobs that we haven't been bidding have been delayed or canceled.

So we're -- there's -- we're seeing overall pressure in the Middle East, but we are now looking out towards other areas outside the United States for some of our equipment.

I don't know if you can answer this question, Doug, is there anyway to quantify that pressure in terms of margins? Is it 10% or 20% or is it like 30% or more?

Right now, we haven't really -- we haven't submitted a new bid. We still have several bids pending. And we haven't really -- we haven't gotten to the point of them -- of the owners putting pressure on us. I wouldn't be surprised if they were, but right now they're more looking at the designs of the projects and whether or not projects that are in the pipeline will be smaller or be in a base and an option mode.

So we're -- it's slowed down on the awards, but there's still some being awarded in the Middle East, several that have been awarded in the Middle East in the last couple of months and there's some in the pipeline.

Great. One more quick clarification, if I could. Deb, is there a way to tell us how much the repairs on the New York were approximately in the quarter and or the weather impact on the quarter? How that impacted margins?

No, we don't specifically identify those. I mean obviously we look out to the particular jobs that that impacted, but what we usually try to highlight to you are those larger items that impact the quarter. But again a lot of it's the full mix of what's going on. So just to give those numbers doesn't necessarily give you the whole picture either.

I understand. Thank you.

Your next question comes from the line of Richard Paget with Morgan Joseph. Please proceed with your questions.

Good morning, everyone.

Hi, Richard.

Good morning.

Just getting back to the Middle East, I think in the press release you said you have about $140 million left on the Diyaar project. So does that -- can we just extrapolate that you have about a quarter, maybe a quarter or two left of work on existing terms and then that 50%, the re-bid, would be work for the second half?

Well this is -- we're still in negotiations. This is what the owner would like to happen, but we're looking at trying to get a benefit out of this in some way. But that's what the owner is suggesting. But if we do -- if it turns out to be 50%, you're right, we would probably only have about 25% of the job left in the base work and then we'd have to look to the option work.

And then what's your sense of some of your domestic competitors, like Weeks, for example, that have sent some of their vessels over into foreign markets over the past couple of years. That if the Middle Eastern market in particular continues to be a bit challenging, they might send boats back to the US.

To my knowledge Weeks and Manson has no vessels outside of the United States. They have no operations outside of the United States.

Okay so you wouldn't expect any real new capacity coming into the market?

No, I wouldn't expect that at all.

Okay. And then just getting back to the domestic market, you guys -- it seems like you've been more positive on potential catalysts than in a long time. And just looking at the Army Corp's budget, it looks like they could see 30% to 40% upside in their budget just from the stimulus package if you look at some of the line items that's getting directed towards them.

Is that the sense of magnitude we could expect from the stimulus package for the market that would trickle down to dredging?

Well that's -- trying to guess what the Corp of Engineers would do is -- as -- well let's put it this way, we failed miserably ever trying to predict what the Corp is going to do.

A little bit different, we understand is that sometime in the next 30 to 60 days, they will give us a list of projects that are -- that will be coming out with timing and priority. We're hopeful that the 30% to 40% could come to us. But until we see it, we are waiting and ready to go. They say it could be two to three quarters before the funds come out.

That would be very good if it really happened. There's still some -- we are seeing the districts are -- will start to put out meetings, Galveston has put out a meeting concerning potential stimulus work and Gulf Coast -- the Gulf Coast reconstruction.

Now West Coast -- most of the Corp districts now are having meetings and they are giving us outlines of what they think they'll put out. So we'll have a lot more news over the next two months about what we'll get.

Okay and then the insurance charge of $2.2 million, is that in the gross margin line, or is that part of SG&A?

It's in the gross margin line.

Alright, thanks. I'll get back in queue.

(Operators Instructions) Your next question comes from the line of Jack Kasprzack with BB&T Capital Markets. Please proceed with your question.

Thanks, good morning.

Hi.

I wanted to ask about the Corp as well and the stimulus plan. It's my understanding that the money is going to be made available almost right away, and -- so why wouldn't the impact be more clear and immediate for -- or benefit, clear and immediate for 2008 -- I'm sorry for 2009 than what you guys seem to be indicating?

Is it just a product of being burned on trying to predict the Corp in the past or is it really that uncertain?

It's based on what we're hearing from our representatives in Washington, that it will be one to two quarters before the money comes out for whatever reason. That's the only information we have. The Corp pretty much says the same thing though. They -- at the one meeting we went to, they weren't really sure either. But our representatives in Washington who follow this situation still believe it will be third or fourth quarter funding at best.

And the $1 billion that you guys mentioned in the press release, I think the Corp got in the stimulus package, $4.6 billion, if there's not a list of projects out yet, where does the $1 billion estimate come from?

Well, that does come from the Corp of Engineers.

Okay, well that --

Some of it is administrative, some of the stimulus money is for the locks and dams and interior work that they do along the waterways of the United States.

Okay, great. And how -- is there a figure about what it costs to move a dredge back and forth from the Middle East that you can give us? Sort of a typical estimate you might use for moving a dredge?

Well, it all depends on the type of dredge. I mean it can be as little as $1 million or $1.5 million to $2 million, $4 million to $5 million. It all depends on how much -- the type of vessel you bring back, how much pipe you bring back and intend to plant, which we will have to assess once -- when we're looking at jobs in the US, it'll be very dependent on which vessels we bring back and how much of our inventory we bring back.

Given the -- if the stimulus money does kick in in the second half of '09 and some of the other opportunities on the domestic market that seem to be out there, would you expect to see a domestic bid market in '09 that grows at a similar rate that it grew in '08; that 30% or so or would that be too optimistic?

Well it may be a little optimistic if they start funding in the fourth quarter.

Right.

'10 you might be able to see that growth.

So we're still in -- it does seem like on the domestic side we're still in a period of time where we can see very robust growth similar to what we saw sort of accelerate in the back half of '08?

Yes, and they are -- also you have to put in the Harbor Maintenance Trust Fund, which we're very positive with and that is -- I mean it was $1.4 billion last year, I think the revenue this year might be a $1 billion or $1.1 billion, it's down. But even $1 billion coming in with no strings is very important to our industry not only for '09, '10 and '11, but going forward.

Great. Thanks for the color.

Your next question is a follow-up question from the line of Richard Paget with Morgan Joseph. Please proceed with your question.

I was wondering since we've been in somewhat of a deflationary environment, any cost, whether it's fuel or the cost of some of your piping, will you benefit on your margins or anything like that? Or is that just kind of strictly pass through?

Well, eventually it will. A lot of our inventory, well fuel obviously, but fuel, since we hedge it -- if fuel comes down, all our competitors will get the same benefit. It's just a pass through. As far as inventory pipe, obviously we bought a lot of it over the last four or five years at higher prices with steel. Now that it's come down as we -- when we have to buy more pipe, and obviously more inventory, it'll certainly be at a lower cost. It'll average out over time.

Okay, thanks. That's it.

There are no further questions at this time. I would now like to turn the call back over to management.

Well thank you for joining our fourth quarter update and we'll look forward to talking to you after the first quarter of 2009. Good-bye.

Thank you for you participation in today's conference. This concludes the presentation. You may now disconnect.