Great Lakes Dredge & Dock Corp (GLDD) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2009 Great Lakes Dredge & Dock Corporation Earnings call. My name is Robin and I will be your coordinator for today. (Operator Instructions) I would now like to turn the presentation over to your host for today, Ms. Deb Wensel, Chief Financial Officer. Please proceed.

Thank you. This is Deb Wensel and I welcome you to our quarterly conference call. I will begin our discussions by presenting the financial highlights for the quarter ended March 31, 2009, 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 that all of you have had the chance to review our press release issued this morning which includes financial highlights for the quarter ended March 31, 2009. We achieved record revenue for the quarter ended March 31, 2009 of $179.2 million which was up 32% from $135.7 million for the first quarter of 2008. Dredging revenue of $166.3 million increased 66% compared with the 2008 first quarter and fleet utilization was improved across all the dredging sectors. In addition, during last year's first quarter utilization was negatively impacted by the temporary loss of the Dredge New York and mobilization of several vessels to the Middle East.

Gross profit increased to $27 million for the first quarter of 2009 from $12 million a year earlier. Gross profit margin reached 15.1% versus 8.8% last year due to increased fleet utilization and operating efficiencies on certain domestic projects which more than offset a margin reduction recorded on our Diyar contract in the Middle East.

During the quarter we agreed in concept to allow the customer to break up the remaining contracted backlog into two pieces. Approximately $57 million of our backlog on that project which was higher margin work became an option that may or may not be awarded in the future. As a result of the contraction of the project our margin on the base work is reduced and therefore negatively impacted our first quarter.

Gross profit in the demolition segment was down due to the decrease in activity and a reduction in the price of scrap. In addition, a reduction margin was taken on a demolition contract related to a large development project in downtown Boston that has been delayed due to the economic downturn.

General and administrative expenses were on par with the prior year as the Company has worked to control costs throughout the organization. Consequently, operating income reached $16.4 million, up from $1.8 million in last year's first quarter.

First quarter pre-tax earnings were $11.6 million compared with a loss of $1.7 million last year. Net income attributable to Great Lakes Dredge & Dock Corporation for the 2009 first quarter was $7.3 million or $0.13 per diluted share versus a net loss of $1.2 million or negative $0.02 per diluted share a year ago.

EBITDA was $28.4 million for the 2009 quarter compared with $9.4 million in the previous year, again driven by strong operations in the current quarter versus last year's first quarter which was impacted by much lower utilization.

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.

Thanks, Deb. It was another active domestic dredging bid market in the first quarter generating $182 million of work with projects primarily from the capital and maintenance sectors.

The Company won 51% of the projects put out for bid including 44% of the maintenance work and 62% of the capital projects.

In February the President signed the American Recovery and Reinvestment Act authorizing a $787 billion economic in his plan. Last week the Army Corp of Engineers published a list of projects that it intends to complete using stimulus plan funds. Based on our review of the planned expenditures it appears that between $350 and $400 million will be allocated to dredging projects. Primarily maintenance work, but also includes some capital work and should be put out to bid and awarded in the next 18 months. We can see some of this work coming out quickly as add-ons to current projects and expect new projects may begin as early as the third quarter.

While the stimulus package should create a needed upswing in the funds spent on maintenance dredging, long-term solutions still remains in the Harbor Maintenance Trust Fund Initiative. There continues to be positive support for the Harbor Maintenance Trust Fund legislation. It currently appears that a new water bill, The Water Research and Development Act, will be reintroduced by the end of 2009 and the Harbor Maintenance Trust Fund legislation will be included within the water amendment. We are hopeful for the passage of the bill in the first half of 2010.

We need to deepen US ports and not just maintain them. It's expected to become more important over the next several years as deeper draft cargo vessels are being built and the Panama Canal Expansion moves forward.

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

In addition, the programs we spoke of in the last call are still on track to add dollars to the dredging market in the next few years. The Coastal Impact Assistance Program is a Federal plan to [divide] monies from offshore oil drilling in the Gulf to six coastal states.

The other longer term plan is the Offshore Continental Shelf Program which appropriates money from offshore oil drilling leases back to the impacted states. While none of these dollars has 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. In total we see capital projects which, in the aggregate, could provide more than $200 million of opportunities over the next 12 months.

We believe the state and local authorities may be struggling with budget shortfalls due to the current economic recession and, as a result, state funding of beach nourishment work is down, again, this year. Nevertheless, we see a number of beach projects that are scheduled to be bid toward the end of the next 12 months as we believe many beaches along the East and Gulf Coast are at critical stages.

And finally, the $5.25 billion expansion plan for the Panama Canal which is slated for completion in 2014 continues to move forward. The Panama Canal Authority held a site visit and pre-bid conference at the end of April for the Atlantic Entrance Channel Dredging Project which is scheduled to be bid in July of this year.

This project could be a good opportunity to occupy certain vessels in our fleet. Even more importantly, the Panama Canal Expansion Program will make maintaining and deepening our East and Gulf Coast ports even more critical. Deeper draft vessels are too large to navigate in our ports. (Technical Difficulties ) for the US will bear higher transportation costs.

In summary, the domestic market remains steady during the first quarter 2009 with the exception of beach work which appears to continue to be constrained by funding issues.

Looking forward we anticipate an increase in work coming out to bid from the stimulus plan and there is real optimism that the Harbor Maintenance Trust Fund Initiative will be successful early next year to provide ongoing funding to maintain our course at the stated depths.

Over the long-term, the growth in foreign commerce which is expected to accelerate with the expansion of the Panama Canal should apply real pressure to bring US ports to competitive standards. For these reasons we remain quite positive about the domestic dredging market outlook.

Throughout 2008 our foreign operations ramped up steadily and in the first quarter of 2009 continued this momentum. However, beginning in the fourth quarter of 2008 with the decline in oil prices and contraction in the region's real estate market, the economic boom in the Middle East stalled. We have felt the impact of the downturn and the results of our negotiations with our Diyar contract.

While we maintained good utilization of our fleet overseas in the first quarter, this will slow as we move into the second half of the year with less Diyar work in backlog and other projects in backlog are completed. It is also unclear whether 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 other international opportunities or back to the United States in light of the developments here related to the stimulus plan and other anticipated funding legislation.

At this time I'd like to ask Deb to walk through a more detailed analysis of our first quarter performance.

I will start with a general overview of contracts contributing to the quarter's performance. Revenue during the quarter included $54 million of domestic capital, $44 million of foreign capital, $22 million of beach work, $46 million of maintenance, $13 million of demolition for a total first quarter revenue of $179 million. This compares to the fourth quarter of 2008 where 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 a total of fourth quarter revenue of $163 million.

The numbers for the first quarter of 2008 were $31 million of domestic capital, $33 million of foreign capital, $18 million of beach, $18 million of maintenance and $36 million of demolition for total first quarter 2008 revenue of $136 million.

Capital revenues for the first quarter totaled $98 million, up $34 million from a year ago - $23 million from domestic operations and $11 million from foreign operations.

The majority of the recent quarter's capital revenues were generated by our Dredge New York which was fully utilized during the quarter, working with three of our Clamshell Dredges on deepening projects in the New York and New Jersey Harbors, our Hopper Dredge Terrapin Island continued working on the Columbia River deepening project on the West Coast, our Hydraulic Dredge Alaska was working on a Louisiana Coastal restoration project and finally [employed] most of our fleets stationed in the Middle East on a variety of projects in Bahrain including Diyar. The Company also concluded work on a cruise terminal in Honduras with the Clamshell Dredge 53 and started work as a sub on a project in the Panama Canal.

Beach revenue was $22 million in the first quarter compared with $18 million a year earlier as the Company worked on projects in New York and New Jersey. First quarters typically have higher beach revenues due to the open environmental window at this time. However, the last two years have been impacted by permitting and funding issues.

Maintenance revenue in the first quarter was $46 million, up from $18 million a year ago. The maintenance market was strong throughout 2008 due largely to spring flooding along the Mississippi and hurricanes in the Gulf with bids nearly doubling the 2007 maintenance bid market.

2009 has started out strong, as well. A number of maintenance projects contributed to this quarter's revenue including dredging in Maryland, North Carolina, Texas and Georgia.

Margins in the dredging sector improved overall as most of the fleet was working a good portion of the quarter and several domestic projects experienced significant operating efficiencies. In addition the Company did not experience an increase in G&A expense with the increase in dredging activity.

Contracted dredging backlog at March 31, 2009 totaled $344 million compared with $418 million at December 31, 2008. The decrease is a result of their restructuring of the Diyar contract previously mentioned. Approximately half the remaining backlog, or $57 million, was reclassified as an option pending award by the customer.

Additionally, the March 31, 2009 dredging backlog does not reflect approximately $63 million of domestic low bids pending award, and additional phases pending on projects currently in backlog.

Revenue for the coming demolition business was $13 million for the quarter, down from $36 million last year. Beginning in the third quarter of 2007 demolition generated record revenues for four consecutive quarters due to a series of larger projects. However, this revenue has now moderated to levels experienced prior to the third quarter of 2007. The margins in the demolition sector have been negatively impacted in the first quarter by a decrease in activity. The loss recorded -- and the loss recorded on a large project in Boston that is stalled due to the economic downturn.

This January the demolition business acquired a 65% interest in an asbestos abatement company, Yankee Environmental Services, Inc. The $1.2 million transaction was completed in asset purchase. Yankee provides environmental remediation services including asbestos abatement and removal of other hazardous materials for private and government entities including schools, universities, hospitals and other businesses throughout the New England area and has been a subcontractor on many NASDI projects requiring such services. This acquisition enables us to broaden our service offerings to include abatement capabilities which will make NASDI more competitive.

Demolition services backlog including Yankee [end] March 31, 2009 with $24 million on par with backlog at the end of 2008. Recently the demolition business has taken on several projects in the New York market and is looking to expand its presence there in 2009.

Our backlog by dredging type and segment at March 31, 2009 was $185 million of domestic capital, $121 million of foreign capital, $10 million (sic - see press release) of beach work, $36 million of maintenance for a total of dredging backlog of $344 million, adding demolition backlog of $24 million for total Company backlog of $368 million.

This compares to year-end backlog at the end of 2008 of $176 million domestic capital, $196 million of foreign capital, $19 million of beach work, $27 million of maintenance for a total dredging backlog of $418 million and adding, again, $24 million for demolition, for a total Company backlog of $442 million.

Capital expenditures for the first quarter totaled $4.7 million which included $1.5 million spent by NASDI on equipment to expand its footprint beyond Massachusetts, primarily into New York.

As of March 31, 2009 senior and subordinated debt net of $6.3 million in cardholders and cash equivalents was $229.4 million including $60.7 million of borrowings under the revolving credit facility. The revolver balance is up from year-end due to the increase in quarterly activity and continued slower payment terms on foreign receivables.

The Company's $155 million facility matures in June 2012 and includes an $85 million sublimit for the issuance of letters of credit. Availability at March 31, 2009 was $59.5 million (sic - see press release) excluding $7.3 million attributable to a defaulting lender. Lien positions in our credit facility are held by Bank of America, Charter One, GE Capital Corporation and Wells Fargo Bank. At quarter end our total leverage was 3.06 times and interest coverage was 12.9 times.

First quarter 2009 was a record quarter for the Company. We were able to achieve these results with our sizeable backlog at year end and a strong win percentage in the domestic bid market in the first quarter coupled with favorable weather conditions and minimal mobilization in mechanical downtime that resulted in high utilization of our fleet.

Looking out to the rest of this year, there are still several unknowns. The strong backlog domestically and the possibility of additional opportunities from the recently passed stimulus plan on top of the 2009 Federal budget should bode well for our domestic operations this year.

On the international side of the business, of a fleet currently positioned in the Middle East all but one of our vessels are now fully operational and available to work throughout 2009. The situation remains fluid. And while that fleet has been busy to date, the pace of current projects and prospects for future work may be further impacted the current economic uncertainty. Therefore, we may need to look at opportunities outside of the Middle East to employ some of this equipment.

Therefore, we again will not provide specific EBITDA guidance for 2009. However, as the year progresses and the impact of the variables I mentioned becomes clear, it will allow us to provide more clarity on full year EBITDA expectations 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 a GAAP measure in the financial section of our Company's website at gldd.com.

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

(Operator Instructions) Richard Paget, Morgan Joseph.

Just getting back to the guidance or lack thereof, I know in the past you had said you expect 2009 to at least meet 2008 levels and given that the first quarter you basically, you know, almost hit half of what you did all last year, I mean, at the very minimum we still expect that. Correct?

Yes. That's correct. It was a good quarter but we certainly felt comfortable before and do now that we would do better than we did last year.

And is the big variable what's going to happen with the international boats? And then if you do, when you do, end up redeploying them that will be the kind of big uncertainty on what the costs are going to be surrounding their transport?

I think those are some of the issues. Whether or not they will stay in the Middle East and have work there, whether we can find other opportunities, whether there would be mobilization and the time that it would take to mobilize. But I think, on the other side, we also talk about the uncertainty. We just don't know yet how good things might be here domestically, as well. So it's kind of the mixture of those two unknowns that make it difficult to say where we'll end up.

And then domestically now that you've combed through the Army Corp's list, I remember there had been some estimates that that dredge number could be a billion. I've heard some higher. It's come down on the lower end of expectations. Did anything change or people just getting overly enthusiastic with the influx of money?

Well as we always, when we talk about the Corp, I think we try not to be too enthusiastic. We had seen the billion dollar number but I think we always said a portion of which would be dredging. So I think this is sort of within our expectations. We had originally said somewhere between 4 and 6 so it's not far off from that, I think.

Now in terms of the stimulus money, are you seeing any other types of potential dredge market? I mean, for instance up in Wisconsin there's a Fox River remediation where they are cleaning up some PCBs and I know there's a dredge portion of that. Are you seeing any other projects in that type of range? Because I think it's like a $600 million program.

Yes, the Fox River, we've dabbled in that years ago but it's really not work for a large dredging company. It's like the clean-up for GE where it's very small quantities are being remediated at a time.

What we're seeing mostly is, as the Corp stated, was going to be mostly maintenance work. We were a little bit surprised that they put in a lot of -- they put in some construction work which is a good surprise. They put some money in for construction.

So in some ways it might have been a little bit disappointed but in other ways they did put in some work that we can readily win and some of the work they are already adding on to projects we are already working on and they will increase the amount on these projects.

I think, Richard, (inaudible) anything outside of the stimulus.

Outside the stimulus plan? I mean, we have the 2009 budget which it is going to be -- the stimulus plan will be incremental to that so that's a very solid and good reason and bodes well for the domestic market.

And then typically if you look at the seasonality of your business margins in the first quarter are some of the lower ones, is this first quarter - I don't necessarily want to call it an aberration but - can we possibly see margins increase sequentially?

Well, I think that if you talk about first quarter being lower margins, I mean, if you look at last year they were low because utilization was so low. We had various issues - the Dredge New York out, mobilization of some dredges. We have sort of the pricing that we've built in -- build into our contracts and we look at that over time and we've been saying with a better market you can get better margins. But what also happens is you start to get incremental margin once your utilization is higher and so that's kind of what happened here in the first quarter is while we had good margins on projects we also had this overriding utilization issue.

If utilization comes down that impacts the margins overall as well so the real story for the first quarter was the big utilization.

Thanks. I'll get back in queue.

Andrew Kaplowitz, Barclays.

This is actually Jiong Shao in place of Andy Kaplowitz. Good morning, Doug. Good morning, Deb. The question of Diyar project in Bahrain, were there any positive gains from contract renegotiations with the customers? In other words, did they pay you any penalties to move part of the backlog into the options status? And when will you finish the current $57 million in backlog? And when will the customer make a decision on the other $57 million?

No. I mean, really it was a concession that we gave to our customer. They asked for it. We decided -- they are a big customer of ours, they are on other projects that we are currently looking at and are currently working on so while we ended up taking a hit on the project we felt that that was the prudent thing to do at this point in time.

As far as the remaining work, it's not necessarily clear. We're sort of working with them as to what sort of time table that will be so that's not yet certain. And, I believe they will have 18 month -- a period over which they can award that option or not.

When will you finish the current $57 million?

It's not necessarily clear. We've been working continuously through the first quarter but we think that will probably slow down.

So what other projects are you currently working on in the Middle East besides Diyar and do you see any prospective large projects to be bidding on in 2009/2010?

We do have a couple of other projects that we did work on in the first quarter. They are continuing here in the second quarter. And we do have additional work that we're negotiating and looking at but it's just not certain how and when we might be able to sign those up.

Yes. In Diyar right now we obviously -- I mean, in Bahrain right now, we have the Diyar project and we have two other projects of medium size and some smaller projects and we're -- and there are projects we are negotiating and bidding for in that area and we will -- we still have a presence in the Middle East but I don't think it will be as large as it has been in the past year but there are still opportunities not only in Bahrain but throughout the region that we will be bidding on.

What was the fleet utilization rate in the first quarter in domestic and foreign and how does it compare to 4Q?

Well, again, that's a question everyone always wants to know. We don't have a good metric to say. It was highly utilized during the first quarter.

But it's not theoretical [max] utilization? Was it?

No. Not every vessel was working everyday. It was a very high utilization but it's possible that we could have done more.

Fair enough. And on the $350 million to $400 million in dredging contracts funded under the stimulus plan, is there any reason to think that you can't achieve the same win rate as you have on a normal biddable market?

Well, I think it would be somewhat lower simply because there is a portion of the work that is set aside for small business association which takes a chunk of that. We are still analyzing this list and don't have all the information on the list but it will -- and since it's dominated with maintenance work, generally we take a smaller percentage of the work in maintenance than we do in capital and beach.

However, the fact that we have this add-on of the stimulus bill, it will occupy our competitors and there is capital work and beach work out there and work out in Louisiana. So we may see better utilizations simply because our competitors will be fully occupied.

Got you. And finally on the beach prospects in 2009, are you including any delayed projects from 2008?

Well, we think there's beaches delayed from 2007 as a matter of fact.

Okay. I remember you mentioning last year that there were some delayed projects that could be awarded in 2008 but it wasn't. So those projects are still alive in 2009?

That's correct. They are. And we're seeing in the budget, the Federal budget, there are several beach projects but most of them will be bid probably in the third quarter and fourth quarter to work off into 2010.

Thank you. Congratulations on the quarter.

Jack Kasprzak, BB&T Capital Markets.

I was going to ask about the margin impact in the first quarter of having the New York Dredge back on line, the Dredge New York back on line.

Well, again, the dredge -- the New York is working on -- I mentioned there's three projects in the New York area that we have in backlog right now and it works in conjunction with some of our other clamshell fleet so the dredging market is big for us and it's important when that dredge is working and the jobs that it works on. Although all three were bid at various different times so the first job a little bit lower margins and then second and third job margins coming back up. That's an important dredge for us to have working.

But there's no way to pinpoint the impact of -- I guess to say it differently, what was the negative impact in the first quarter last year?

Again, we don't typically talk about what any one particular dredge is contributing at any point in time. Obviously, there's a lot of competitive information. Right now with regard to the New York we have a claim against the ship owners that ran into the vessel in that. So we typically don't give out that sort of information. And, again, we've talked about it, any particular dredge can have sort of a wide range of results.

How about for the second quarter of this year will you have a positive -- potential positive comparison from having that dredge back on line versus last year -- versus second quarter last year?

Yes. I think that's fair. That vessel will be working the second quarter of this year and it was not working last year.

And how about an estimate for D&A for the year if you could give us that?

I think our G&A this year --

I'm sorry, D&A. It's depreciation.

Oh, I think we ran at about $30 million.

30? I shouldn't have interrupted you, Deb, if you wanted to give G&A as well.

Yes.

I should know better.

I can usually talk -- we saw in the first quarter we sort of held even with the prior year, a little bit of inflation increase there, but we don't have -- the thing is we have a G&A in place that's capable of doing a wide range in utilization here. So we don't expect that G&A number to change significantly.

Great. Thanks. And earlier this morning a competing company mentioned on their conference call that there's a meeting being held by the Army Corp on May 20th to talk about how they are going to, I guess, roll out stimulus-related projects. I guess if you could comment on that in terms of, is there such a meeting? I assume there is and is this work going to be competitively bid or is it a situation where there's so much of it they are going to try and parcel out in a more efficient manner to get it out quickly? If you could give us your views on that.

Well, the meeting on the 20th is an annual meeting that they hold every year. And, obviously, a lot of the focus will be the stimulus work. That will dominate, I'm sure, the program.

And as far as the bidding it will be slightly different. It will all be competitively bid but they -- they may give you a menu of jobs to bid within a certain area rather than a single job at a time. And they don't have to award all of the menu but in order to get all of these jobs out they are looking at a different bidding process.

We've seen it before and it's been used infrequently in the past. Now they might put out a few jobs at the same time and you may or may not get all three or four of the other projects that are bid in that grouping.

The Army Corp has to put the money -- the stimulus money out by September of '10 but there seems to be some talk that they want it obligated faster, perhaps by the end of the year. Have you heard of that same discussion?

Yes. We have.

Great. Thanks very much.

(Operator Instructions) John Parker, Jefferies.

Can you give me a little more color on your foreign backlog? Is only 57 of it in Bahrain? And it seems like you picked up some more business and perhaps this Panama work and Honduras work, but can you breakdown the foreign backlog between Bahrain and the rest of the world?

That $57 million is just the Diyar contract, so that's what's remaining on that particular contract. There is more work in Bahrain. The Honduras job we've completed so there wouldn't be backlog on that one and the Panama, Doug, I don't know how much -- it's not a big project.

It's not a big job but it's a rental job which we're working for one of our competitors but we still have significant backlog in the Middle East other than the Diyar jobs.

So if I look at your $120 million you say the bulk of that is in the Middle East?

That's correct.

Right.

And I tried to approximate, based on your disclosures, a percentage of your fleet that is deployed in the Middle East in terms of capacity. Do you have a number that you guys use for saying what percentage of your capacity is supplied in the Middle East at this time?

No. We don't. We've only given the number of vessels because there are some hopper dredges and there are some hydraulic dredges. There's no mechanical dredges there. But again, different vessels have different sort of capacities than that and we don't have a way that we look at that. I mean, the first quarter revenue was 40%, 35% foreign? 27%.

I think we've said our capacity is somewhere around -- 35% last year and now 27% this quarter. Of course, it depends on how utilization that we have here domestically (inaudible) that percentage.

Yes. If you look at -- the work in the Middle East is at lower rates than it is domestically so you can't really translate weighing domestic and foreign because the fuel is so much cheaper over there and the labor is so much cheaper over there. And that's why if you are looking at the numbers of vessels in the Middle East versus -- and you look at the revenue in the Middle East versus the revenue in domestic you would see that the domestic work bears higher revenues. And the mix of the dredges and the type of work which makes it difficult to, for our competitors and our analysts, to figure it out but --

And then it seems like a very strong beach quarter and that was coming off a pretty small backlog at the end of the year. And, again, you are faced with a very small beach backlog and you're not into the summer slowdown season yet. Do you see any sales coming in in the second quarter and keeping the same level of beach or is the beach just going to be tough of the foreseeable future?

The first quarter of this year and last year on beach work were comparable and what we would consider down from what we had seen prior to that because, again, the environmental windows are open and that's when we would typically see more so last year we thought there were spending issues. This year - or permitting issues, I'm sorry - this year we're kind of assuming it's more of a funding issue.

Again, it looks like there's some work that should come out at the end of the year again. Typically we don't see any of that work in the summer. So that's a little bit difficult to tell here.

You don't see anything adding to that $1.5 million backlog you have there in the short-term?

Well, some of our competitors and Great Lakes has won bids but it hasn't hit backlog yet from beach. So there's some and there's some coming up but we're looking at most of it be bidding in the third and into the fourth quarter. There will be a few small jobs this quarter but the bulk of the dredging beach work will come out later in the year.

And then, finally, it seems like your gross margins has already been remarked upon were obviously very strong and it's obviously due to [titleization] and smaller, less mechanical problems but is there any particular area of your business, the way you break it down, that had higher than normal gross margins and is that sustainable?

I mean, if I look at my modeling and I try and calculate your gross margins based on the revenue level I come up with much lower ones than you ended up having. So is there any particular area -- one segment that had higher than usual gross margins?

Well, again, I think there is the sort of overall effect of utilization across all of the dredges. Whether they were working in maintenance or capital, it didn't really -- it doesn't really matter at that point once you have high utilization.

I mean, as you look forward if we can't maintain that level of utilization that will have some impact on the margins going forward.

Yes. It would be difficult to sustain this for four quarters, obviously, for two reasons. There won't be -- the market will not allow us because there will be breaks in bidding, especially in the summer period and, also, it is -- we had decent weather and good weather in other areas and we expect, again, we expect in the summer that we'll get difficult weather through the hurricane season which obviously helps us in the long run but hurts us while we are working. So there's always a little bit of risk during the hurricane season.

And the EBITDA guidance, I think you said you're not going to give us any guidance at this point. But the last guidance you gave for this year was somewhere in the mid-50s. Is that correct?

Well, we're not really giving guidance but we did indicate that we felt that we could do better than last year and I believe last year was (inaudible).

That's all for me. Thank you very much for your help.

A follow-up question from Richard Paget, Morgan Joseph.

Just getting back to the Middle East, I know things have slowed down and as you said the real estate market is tough over there, but as oil has crept back up above $50 per barrel, have you started to see your clients over there becoming more comfortable with moving ahead on potential projects at all?

I don't think so. It's been a short amount of time here that the pricing has been coming up so just as it kind of takes a bit of time for everyone to take in the downturn if it is, in fact, an upturn, I think it will take them a bit to recognize that and maybe change their plans. So it's difficult to tell but we don't see anything (inaudible) at this point yet.

And then do these customers kind of have like a benchmark of where they start getting active again? I mean, I know in the Oil and Gas Industry some people can talk about where the cut-off is but for some of your customers, have you heard it's $50, $75, $60?

We've heard in the newspapers and magazines and everything else and analysts. However, I think they will be measured as the price of oils go up. I think one of the biggest areas of issue is Dubai which they have gone too far, too fast. But other areas in the Middle East have been not at that pace so maybe if the oil comes up I think they will come out in a measured way. But it's not like they are -- they are still bidding work and negotiating work but it's nowhere near the pace it was two years ago.

Thanks.

At this time I would now like to turn the presentation over back to Deb Wensel for closing remarks.

Thank you. Thank you for joining us first quarter update and we look forward to talking to you after the second quarter of 2009.

Ladies and gentlemen, this concludes your presentation. You may now disconnect. Good day.