Great Lakes Dredge & Dock Corp (GLDD) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2009 Great Lakes Dredge & Dock Corporation earnings conference call. My name is Michella and I will be your coordinator for today. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Ms. Deborah Wensel, Chief Financial Officer. Please proceed.

Thank you. Good morning. This is Deb Wensel, Chief Financial Officer of Great Lakes, and I welcome you to our quarterly conference call.

I will begin our discussion by presenting the financial highlights for the quarter and six months ended June 30, 2009. Then Doug Mackie, Chief Executive Officer of Great Lakes, will share his market overview, which will provide a useful context with 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 a chance to review our press release issued this morning, which includes financial highlights for the quarter and six months ended June 30, 2009. Our total revenue for the quarter ended June 30, 2009, was $142.5 million, on par with revenue of $145.3 million for the second quarter of 2008.

However, our dredging revenue of $128.5 million increased 16% compared with the 2008 second quarter, virtually offsetting a reduction in demolition revenue to $13.9 million from $34.8 million a year ago.

Gross profit increased to $28.6 million for the second quarter of 2009, from $21.6 million a year earlier, and gross profit margin reached 20% versus 14.9% last year, due to more favorable dredge fleet utilization.

The demolition unit gross profit was negatively impacted by reduced activity levels that resulted in less revenue to cover their fixed costs.

Revenues for the six-month period ended June 30, 2009, grew by more than 14%, to $321.7 million, compared with $281 million for the same 2008 period, again, as a result of the increase in dredging operations more than offsetting a decrease in the demolition sector.

Accordingly, gross profit margin increased to 17.3% from 11.9% a year earlier, due to higher dredge utilization and operating efficiencies experienced in the first half of this year.

By comparison, 2008 was negatively impacted by the mobilization of Dredge Texas to the Middle East and repairs that were being made to the Dredge New York.

The Company performed a record level of dredging during the first quarter of 2009. Even though revenues in the second quarter did not reach that level, gross profit margins strengthened substantially.

Although level of fleet utilization had a significant impact on the quarter's results, the mix of specific projects on which our dredges perform impacts revenue as well as margins. Therefore, while the fleet utilization rate or the number of days our dredges worked was similar between the first two quarters of 2009, the mix of jobs was different, resulting in a disparity of revenue and gross profit margin between the quarters.

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, Deborah. [Spudding] the American Recovery and Reinvestment Act helped stimulate good volume in the second quarter.

Due in part to the availability of these funds, we saw projects that were already scheduled to bid broaden in scope, as well as new projects coming out for bid. The domestic bid market, including capital, beach, and maintenance work, totaled $339 million, of which maintenance projects accounted for 65%.

At this time, information related to how much of the second quarter bid market came from stimulus dollars is not readily available.

Second-quarter activity brought the year-to-date domestic bid market to $521 million, compared with the full-year 2008 bid market of $783 million. The Company won 50% of the year-to-date domestic bid market, including 44% of the maintenance work bid and 75% of the capital work, which included new work bid and options awarded on projects in the Company's backlog.

The Company won a large deepening project in Jacksonville, Florida, in the quarter, along with several maintenance projects in the Gulf.

We expect work funded under the stimulus plan to continue to be let for bid over the next 10 to 12 months. We continue to believe that approximately $350 million to $400 million will be spent on dredging projects under the stimulus plan.

It's increasingly acknowledged how critical it is that we regularly maintain our ports and waterways. Much of the maintenance work coming out now is due to a lack of focus on maintenance projects over the last several years. The critical need for these maintenance projects to be completed is helping garner support for the Harbor Maintenance Trust Fund initiative.

It currently appears that a new water bill, Water Resources Development Act, will be introduced by the end of 2009, and the Harbor Maintenance Trust Fund legislation will be included within that -- this word of amendment. We are hopeful for passage of the bill in the first half of 2010.

Additionally, there is good news from Washington DC that the Corps of Engineers' budget should be passed prior to October 1. The Senate and House have already passed their versions of the bill. The budget is now in conference, where it is expected to pass through and move on to the President for signature.

We continue to contend that the need to deepen U.S. ports will become more important over the next several years as deeper draft cargo ships are being built and the Panama Canal expansion moves forward.

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

In addition, the programs we spoke of on the last call, the Coastal Impact Assistance Program and offshore continental shelf programs, are still on track to add dollars to the dredging market in the next few years.

While none of these funds have been spent yet, we are seeing efforts by the state of Louisiana and industry coalitions, including those from 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 year or two.

The very exciting new development was the passage of the Supplemental Appropriations Act of 2009, which was signed in law in June. This legislation appropriates $400 million for barrier island restoration, an ecosystem restoration to restore shorelines impacted by historical levels of storm damage along the Mississippi Gulf Coast. The Corps is in the planning stages to accomplish this restoration and will likely start bidding projects in the third or fourth quarter of 2010.

State and local authorities are struggling with budget shortfalls due to the current economic recession and, as a result, state funding of beach nourishment jobs has been down, again through the first half of this year.

Nevertheless, we see a substantial number of beach projects scheduled to be bid this year, as many beaches along the East and Gulf Coast are in critical need of renourishment. In fact, in July, $68 million of beach work was awarded or bid.

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 is scheduled to bid the Atlantic entrance-channel dredging project in the third quarter, which could be a good opportunity for 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 essential.

As we have noted in the last two quarters, with the decline in oil prices and contraction in the region's real estate market, the economic boom in the Middle East has stalled, which has impacted the scope of our DR contract. As we have previously noted, part of the contracted backlog became an option that the customer may or may not award.

In addition, the renegotiated contract provides longer payment terms that will result in higher receivable balances for a period of time.

With the reduced activity we are now experiencing the Middle East, we have looked to other opportunities for the vessels located in the region. In July, we signed a contract for a project in Brazil for which one of our large hopper dredges will be repositioned in the third quarter.

We will continue to look, if necessary, for other opportunities internationally to utilize the dredges remaining in the Middle East.

In summary, the domestic dredging market was both -- boosted in the second quarter by the Corps of Engineers working to did a backlog of shovel-ready maintenance projects that are being funded partially by the stimulus plan, and we anticipate this increased activity to continue into next year. While beach work in 2009 had a [false] start, we saw it pick up in July and currently expect several good opportunities to be bid through year end.

In addition, there is real optimism that the Harbor Maintenance Trust Fund initiative will be successful early next year and will provide ongoing funding to maintain our ports at their stated depth.

In looking out further, we feel dredging demand will be fueled by the growth in foreign commerce and the expansion of the Panama Canal, which should apply considerable pressure to bring U.S. ports to competitive standards.

Also, additional demand will come from the 2009 supplemental appropriations for the Mississippi Gulf Coast restoration, the Coastal Impact Assistance Program, and the offshore continental shelf program.

This potential we see in the domestic dredging market has prompted us to reposition two of our large hydraulic cutter-suction dredges, the Texas and the California, from the Middle East back to the United States. The Texas will be arriving later this month and begin work in September on a deepening project in Jacksonville. The California should begin work in the fourth quarter.

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

I'll start with a general overview of contracts contributing to the quarter's performance. Our revenue during the second quarter of 2009 included $38 million of domestic capital work, $45 million of foreign capital work, $2 million of beach, $43 million of maintenance, and $14 million of demolition revenue, for a total quarter revenue of $142 million.

The comparative numbers for the first quarter of 2009 include $54 million of domestic capital, $44 million of foreign capital, $22 million of beach, $46 million of maintenance work, and $13 million of demolition, for total quarterly revenue of $179 million.

For the second quarter of 2008, we had $45 million of domestic capital, $35 million of foreign capital, $9 million of beach, $21 million of maintenance, and $35 million of demolition, for a total revenue [up] for the quarter of $145 million.

Capital revenues for the second quarter totaled $83 million, on par with $80 million a year ago. The majority of the recent quarter's capital revenues were generated by the Dredge New York and two of our clamshell dredges working on deepening projects in the New York and New Jersey harbors; our hydraulic dredge Florida, working on a deepening project in Tampa, Florida; clamshell dredge 53 being employed as a sub on a project in the Panama Canal; and finally, most of our fleet stationed in the Middle East being utilized on a variety of projects in Bahrain, including the DR contract.

Beach revenue was $2 million in the second quarter, compared with $9 million a year earlier. As Doug mentioned, beach work has been curtailed as beach communities struggle with funding issues.

Maintenance revenue in the second quarter was $43 million, up from $21 million a year ago. The maintenance market, which was strong throughout 2008, has nearly matched the full 2008 market in just the first six months of 2009. This is largely the result of a backlog of maintenance projects getting put out to bid.

A number of maintenance projects contributed to this quarter's revenue, including dredging in Maryland, Mississippi, and North Carolina.

Margins in the dredging sector improved over the prior year on first quarter with a higher level and more favorable mix of work performed. In addition, the Company held at G&A expense constant, despite the increase in dredging activity.

Contracted dredging backlog as of June 30, 2009, was $390 million, compared with $344 million at March 31, 2009. The June 30, 2009, dredging backlog does not reflect approximately $142 million of domestic low bids pending awards and additional phases pending on projects currently in backlog, as well as the amount that remains on an option on the DR contract.

The March 31, 2009, dredging backlog did not include approximately $63 million of domestic low bids pending awards and options on projects in backlog at that time.

Revenue for the Company's demolition business was $14 million for the quarter, down from $35 million last year. Activity in the demolition segment has been negatively affected by the economic downturn and the resulting slowdown in the construction market. Margins have been negatively impacted by the decreased activity, as well as contract losses related to a large development project in downtown Boston that has been delayed due to the economic downturn.

Demolition services backlog at June 30, 2009, was $24 million, on par with backlog last quarter. Recently, the demolition business has taken on several projects in the New York market and is looking to expand its presence there in 2009.

In addition, NASD has taken on several bridge demolition projects. This appears to be the first market to see some improvement as stimulus money is being spent on bridge and road construction.

Our backlog by dredging work type and segment at June 30, 2009, was $216 million of domestic capital, $79 million of foreign capital, $12 million of beach, $83 million of maintenance, for a total dredging backlog of $390 million, adding demolition backlog of $24 million, for a total Company backlog of $414 million.

Same numbers comparatively for the first quarter of 2009 was $185 million of domestic capital, $121 million of foreign capital, $2 million of beach, $36 million of maintenance, for a total dredging backlog of $344 million. Again, NASD had $24 million of backlog, and total Company backlog at the end of the first quarter of $368 million.

Capital expenditures for the second quarter totaled $4.7 million, which related to budgeted upgrades for the fleet and attendant plans. Our year-to-date spend is just over $10 million. We expect our required capital spending to approximate $23 million for the full year.

As of June 30, 2009, senior and subordinated debt, net of $9.6 million in cash and cash equivalents, was $206.9 million, including $41.5 million of borrowings under the revolving credit facility. At quarter end, outstanding performance letters of credit totaled $29 million, including $13.3 million outstanding on the $155 million Company's revolving credit facility. This facility matures in June 2012 and includes an $85 million supplement for the issuance of letters of credit.

On June 30, 2009, the Company had $92.9 million of borrowings available under this facility, after giving effect to $7.3 million of unavailable commitment due to a defaulting lender. Bidding positions in our credit facility are held by Bank of America, Charter One, GE Capital Corp., and Wells Fargo Bank.

At quarter end, our total leverage was 2.52 times and interest coverage was 5.4 times.

During the first and second quarters, we continued to see some increase in working capital requirements, due primarily to the growth in receivables from increased activity levels, new requirements on the DR project, and a slowdown in collection of demolition receivables. Our debt levels, however, remain constant, as this increasing working capital has been funded by free cash flow.

During the first half of this year, the Company experienced a high level of utilization in most of the dredging sectors and an improvement in domestic margins. We were able to achieve these results due to our sizable backlog, a strong win percentage in the domestic bid market, favorable weather conditions, and minimal mobilization and mechanical downtime.

Looking out to the rest of this year, we know we will be impacted by the slowdown in the Middle East and the mobilization of our two large hydraulic dredges to the United States and one hopper dredge to Brazil.

We are maintaining a strong backlog domestically with expectations for good bid opportunities supplemented by stimulus funding in the second half of the year. Having achieved a record first-half performance and given our current sizable domestic backlog and expectations for a favorable domestic market, we anticipate 2009 EBITDA will range between $80 million and $85 million.

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.

(Operator Instructions). Richard Paget, Morgan Joseph & Co. Inc..

I just want to be clear on your expectations for the bid market over the next couple of quarters. Just given the pace, especially in the second quarter, I know you guys had talked about incremental dredge work from the stimulus package being in a range, but I mean, it seems like, with how it's going now, I just want to make sure that this isn't all front-end loaded, that they did the kind of easy pent-up demand in the maintenance side, and we could see a falloff going forward.

It sounds like you've listed a lot of incremental work coming out right now. Do you think this pace continues or do you think it slows down a little bit?

This is Doug Mackie. Richard, we really don't know the amount of the stimulus money that is in each of these jobs. It's unfortunate, but the government only has that information. I think we will get it fairly soon.

But you've got to remember, the stimulus money really didn't come out until mid-May. So a lot of the projects that we bid were projects that had some stimulus money in it, but several of -- most of the projects were already in the queue for the second quarter. So I would think we still have a good 10 to 12 months of steady work coming out on the stimulus plan.

Okay, so you see the possibility of a billion-dollar bid market for 2009.

It looks like it's on track for that, yes. Based on the July bids.

And then, getting back to gross margins, they were the highest that I've seen since following you guys. And I know, Deb, you talked about good utilization, the lack of any significant mechanical or weather issues. I mean, were there any one-time incentive awards or anything that would've popped those up a bit? And is this all just good execution and utilization, or have we started to see some pricing come into the market, given all the activity?

I think, in certain projects, that we've seen some pricing come in and we may have some more effect on that the rest of this year, into next year.

But again, when we get to certain levels of utilization and certain types of utilization for our vessels, you know this is what we can talk about, what we could do. So I don't think there's any anomalies in here, untypical type of projects. Other than maybe a little bit less mechanical and weather downtime than we've certainly have seen over the last year or two.

But other than that, there's not something unusual going on there, some other kind of project that gave us a big boost.

Okay, so if this market continues, and I guess backlog suggests that we could see high teen to 20-plus gross margins again, but obviously absent of any bad weather, any other rogue orange juice anchors.

Exactly. Right, our gross profit over the first portion there was about 17%. You know, maybe not at that level, but certainly in the mid teens. I don't think we'll go back to the lower level.

And then, just finally, could you remind us of some kind of a ballpark cost of redeploying the Texas and California and the hopper dredge to Brazil? And I don't know whether you can just break it down of what the actual costs are of moving them. And then, maybe give us somewhat of what lost opportunity costs would be, relative to what they had been doing?

This is Doug. There is different scenarios here. In some cases, we could offset some of the mobilization in the bids we are bidding in the domestic market.

In some cases, we'll be able to partially offset the costs coming back from the Middle East. In the -- or with the hopper dredge, I think it's -- we have that covered. The mobilization is covered in that hopper dredge, because it's a single vessel going over.

But -- so the prices for -- can range for -- anywhere from an additional $2 million to $5 million to $6 million to incremental mobilization coming back from the United States. So we have covered some of the expenses, but some of the third and fourth quarter will be affected by mobilization charges that we can't put in the contract.

I think, Doug's point, too, so you look at -- you were asking about gross margins over the next couple of quarters. Obviously, those mobilization costs being in the contract will impact those margins on those particular contracts, and as Doug said, there may be some that just -- flows through innocent cover.

So that is one reason, too, that we will see something a little bit different in the second half of the year.

But, again, what's coming up going forward, obviously, is the reason for bringing those dredges back, and the opportunity for them to work here in the domestic markets through the end of this year and into next year will be positive.

Andy Kaplowitz, Barclays Capital.

Nice quarter. Doug, can you talk about the international markets in a little more detail?

Obviously, we've all seen what happened with oil prices and the markets. Oil has picked up a bit lately. I think the Middle East has picked up a bit lately, and so the question I have for you is can you sort of give us a -- I don't know, a picture of your international opportunities, both in the Middle East and internationally, how you are thinking about positioning these dredges, and maybe the size of the Brazil contract, if you could?

Yes. Well, as far as -- starting in the Middle East, we still have several projects ongoing in the Middle East, which will go into the first quarter. A lot of work will go into the first quarter, and possibly into the second quarter.

And we are looking at and bidding in the Middle East, over the next probably four months, more than eight or nine projects that we feel we have decent chances of being successful. A lot of this work is still very suitable for us and have good reputations still throughout the Middle East.

As you can see, we've already taken on some work in Brazil. It's a smaller project. It's a rental project in the country. But it covers our mobilization. And, if you -- several months of occupancy, which will get us on the ground there for several other opportunities in Brazil.

And we're also looking at work throughout India, even on the Pacific coast, the --and then -- or Southeast Asia, and so we are looking throughout the world, as we've done in the past. The market is -- the world market is a little stagnant, but it's still a $5 billion or $6 billion market, easily, out there.

So, we are -- we've done this in the past. Moved dredges around. We'll be looking to South America, Africa, and any other place our dredges are suitable. So we are -- I mean, and we have taken two of our biggest dredges back to the United States and one large hopper dredge, which takes a lot of pressure off trying to -- to getting the occupancy for these dredges.

Let me ask the question this way. Excluding the fleet that's gone to the U.S. and to Brazil, excluding the Panama Canal opportunity, how confident are you that you can utilize your existing fleet internationally at the same rate that you've utilized it in the first half of the year?

I'm pretty confident that we will not utilize the equipment at the high occupancy we have first half of the year. There will -- there is slowing down in the bidding. I think the negotiations are taking longer, but we still feel we will have a significant presence in the Middle East going forward. Because we still -- there is good opportunities and a lot of infrastructure work yet to be done there.

If I could shift gears back to the U.S., you've obviously taken a high share of projects over the last couple of quarters. You've mentioned in the past because one of your biggest competitors left the New York area, that was a big reason why your shares picked up, but 75% of the capital markets and then 44% of maintenance. What are your competitors doing right now? Are they getting filled up with the maintenance work? And so, in general, there's just so much work out there that you take a really big share of capital and maintenance? What are your competitors doing right now?

Nobody is sitting still right now, I can tell you that. Most of our competitors are -- if not fully occupied, they are mostly occupied. So the domestic dredging market is a good place to be right at this time.

Got you. And Deb, you mentioned the mix of jobs helps your gross margin, right? But -- so when I look at the revenue mix in the U.S., I actually -- I mean, I see a big jump in maintenance in the quarter versus -- actually, I see maintenance relatively flat and I see capital U.S. down a little bit, sequentially.

And so, it's hard to see the mix change, you know, from our seat. Is it just that certain projects have better pricing than other projects?

It's not necessarily the mix between capital, beach, and maintenance. It's a particular project mix that we have going on. So it's the particular capital project in the second quarter versus the first quarter.

It's the particular maintenance projects that we are doing in the second quarter versus the first quarter.

Right, and I thought you might say that. Is there any way for us to sort of see that, like if you win something in New York, is it going to be better than something in Jacksonville, or is it just -- is that too hard to do?

That's too hard to do because, again, as every job is being bid, there is a different competitive dynamic at that point in time. And especially there is a different dynamic, certainly, between capital and maintenance work.

And this is what we always struggle with to try and help you understand is the utilization rate. Right? Because [in fact], we could have a really high utilization, but if it's not the best of jobs, then you may have a lot of revenue but not quite as much margin.

Conversely, if we have some good utilization but we have some higher-margin work -- you know, so that's why we've always struggled with this, in just getting some flat utilization, because that doesn't tell the whole story.

I mean, that's just something we've always been struggling with, to try and help in understanding. And we can't necessarily predict it either. We look to the market to see what's coming out. We try and bid those best projects for the best equipment, and then we work that plan.

Deb, do you expect this particular mix in the U.S. to last for the rest of this year?

I think that Richard was trying to ask that -- or that same issue. Are we in that margin, and I think that we will have better gross margins, one, because we have a little better market here.

As Doug said, with more of the competition being fuller and having more backlog, that will have an overall effect on any of the projects that we're bidding. So we think, going forward here, that we will see some better margins.

Now, we have a mix of activity in this next quarter because we have some mobilizations and those sort of expenses coming through, and I think we talked about that. But, at any point in time, we will have big margins and then some other margins as well.

But I think, on average, we are saying here we think that we can sustain higher margins than we have in the past, not as high as we did in the first half of the year.

Trey Grooms, Stephens Inc.

This is actually [Will Green], on for Trey. I wanted to touch on kind of the -- I guess what everyone is touching is kind of the mix, but it sounds like the domestic market is really being helped by this abundance of maintenance work that's starting to flow through.

But when you look at backlog, at capital, your domestic capital backlog also ticked up in the quarter. Is that a case of you are just now starting to see kind of the bigger capital projects being bid? What's the current environment? Is the mix still being kind of dominated by those maintenance projects, or do you expect to see more capital work as the year progresses?

I think the capital work will be probably on par with last year's -- actually, the last two or three years, so I don't think -- it's been pretty steady.

Most of that is coming from New York Harbor projects, which will go on for several more years. But we have seen some Navy work coming out and we've seen this Jacksonville deepening project coming out. So there may be some thought of -- for optimism that we'll see some more capital work.

Certainly, during the rest of this year I think we will be dominated still with a lot of maintenance work, because the stimulus plan is 99% maintenance work. We are -- I mean, there's a good surprise because we were a little bit worried about the beach work, but all of the sudden in July, we had a nice slug of work in July, and we see very good work for the rest of the year.

So I would think that the beach market will be a bigger -- will have a bigger focus in the last five months of this year.

So you could potentially see beach work, I guess, once you come into the seasonally stronger fourth-quarter for beach work, you could actually see that higher than 2008? Do you see that kind of impact?

Yes, definitely.

And then, I guess touch again on the maintenance side. You know, this is the second quarter in a row where you've kind of had mid $40 million revenue on maintenance dredging. Do you expect that to be kind of a good run rate going forward for you guys for the rest of the year or do you see that kind of picking up as we go forward?

It should stay at some of the same rate because we -- like I said, we've only had a month and a half in the stimulus plan so far, because the money really didn't come out until mid-May and it was going to be at least -- around a 12-month program.

In addition, we had a lot of beach work -- I'm sorry, maintenance work throughout last year and this year, and that was the result of all the storms we've had and all the flooding we've had. I mean, it's been -- we've had almost a record number of dredges in the Mississippi River. And there's still a lot of rain runoff throughout that basin.

So it's partially due to the stimulus and partially due to just the weather that it, I think, is going to continue at a strong pace.

That's very helpful. And then, I just wanted to also touch on demolition. You talked about maybe seeing a pickup there, after seeing two or three quarters of kind of some weakness, and I know that was somewhat unexpected, but do you see that kind of picking up in the second half? To maybe getting to, I don't know, a quarterly run rate of maybe $20 million, or is that just signs of stabilization is kind of what you are hinting at?

I think June was a better quarter for them. Better work, better margins. However, they still have a few problem projects as a result of some developers following the projects or even abandoning the projects.

But we -- you know, I think it'll be a tough quarter and probably a -- hopefully a breakeven year for NASD.

We'll have to -- we're working through this, but the good news is that they have made an entry into the New York market and they've got decent backlog in New York, along with their Boston and New England work, so we'll have to see how this New York work pans out. But it appears that they're getting good projects and we'll know a lot more by the fourth quarter.

And the other area, too, they're moving into is the bridge demolition, which could be promising as well because we think we see stimulus funds starting to flow into there. So, they are doing the right things to capture where the money is. So right now, the construction market is just difficult.

So still a difficult market, but seeing some early signs of promise, I guess, in some new markets, it sounds like.

I think that's fair.

That's all I had and, I guess, great quarter, guys.

John Parker, Jeffries & Company.

Could you just clarify -- on your press release and in your prepared comments, you said there was $142 million not included in backlog. Does that include both domestic bids pending award, and also the foreign component that's been made into an option?

No. The $142 million is all domestic. We didn't give the foreign number. We are very sensitive to that number right now because we are still in negotiations with the customer. But that $142 million is all domestic.

Okay, that's fine. I just wanted to clarify that because it was a little unclear. And then, I'm sorry -- I missed your availability under the revolver when you mentioned it earlier. What is that?

The availability -- was $92.9 million. Almost $93 million is available.

Then, the depreciation and amortization went way down, which I assume was related to a sale leaseback. But can you walk us through how you got to such a lower D&A number?

Again, our depreciation varies between quarter. We have an annual depreciation number, but it varies -- it's dependent sort of on the revenue level of our activity level during the quarter.

So again, I think we've been asked before what sort of run rate we have, and I believe I said $30 million to $32 million of depreciation, and that's what it will be for the full year.

Okay, and if you could please repeat the CapEx number for the quarter? I miss that as well. I apologize.

That's okay. CapEx for the quarter was, I believe, $4.7 million, which brought us to just about $10 million -- or just over $10 million for the first half of the year.

Got it. And then, on the margins, I guess this has really been asked a lot, but it strikes me that you have -- some capacity was taken out of the market just in advance of a growth in the bid market, and it seems with the amount of maintenance work you are doing that traditionally has been lower margin work, but perhaps the margins are starting to pick up there.

Maybe you don't want to talk about it too much, but are you seeing better margins on the maintenance-type work? And also, is there any risk that more people will start coming into this market with new dredges or bringing dredges from overseas?

I'll answer the last question first. We don't believe any of our U.S. operators have any dredges outside the United States. So they couldn't bring them back. Because they're not [jones at].

So, as far as we know, we are the only operator, U.S. operator, who could bring dredges back into this market.

As far as new builds of dredges, all we've -- what we've mostly seen are just the smaller dredges, 22-inch, 20-inch dredges, cutter-head dredges, which really -- don't really participate that much in our market, generally. None of the smaller dredgers have hopper dredges in -- or very large mechanical dredges.

But we mostly are seeing some smallish cutter-head dredges being built. That really doesn't affect our market.

Okay, and then, finally, on Brazil, it seems like that's a brand-new market for you. Can you give us any color on how you were able to suddenly find a new market opened up and what types of leads you might be able to source from other regions? I guess you mentioned Southeast Asia. But how do you find jobs like that where you traditionally haven't operated before?

We have operated in South America and in Brazil in the past. We've done some maintenance work several years ago there.

We've -- we have -- we have consultants around the world, in Argentina, throughout South America. We have them in the Far East, and we also have two individuals who are salaried employees of ours who spend a lot of time throughout the world, focusing a lot -- mostly in the Middle East, India, Africa, and then in the Caribbean, South America, and Central America.

We -- it's very infrequent when Great Lakes gets an opportunity in Southeast Asia. It's -- we've bid several jobs there, but have never been successful. But we still take out plans and specs, and often bid these jobs. So we're not shy about going anywhere, based on the experience of our management who has spent 25 to 30 years traveling around the globe.

John Rogers, D.A. Davidson & Co..

This is Tristan Richardson for John Rogers. Of the eight or nine projects that you said you were tracking in the Middle East, could you give us a sense of, maybe, the size and the timing on some of that work?

Yes, it's -- I mean, it is -- we are bidding the work, have been bidding the work since probably June, even earlier than that, probably from February of 2009. We've been negotiating two or three jobs, which is moving but at a snail's pace.

And we'll be looking at jobs in the Middle East bidding out -- you know, we can see out to 2011 into 2012, the long range. The projects are -- in size, if we -- generally, on the low end, $15 million, on the high end, maybe $120 million is what we're looking at right now.

Richard Paget, Morgan Joseph & Co. Inc..

One quick housekeeping with tax rate. Should we stick around 40% or is it a little bit lower now?

I think we are at 40% through -- I [don't] think last year we were about 43%. We are about 40% now and I think that's probably the right rate to use.

Just real quick, on the bill, have you gotten any pushback, given some possible budget constraints that -- with part of the Harbor Trust Maintenance Fund going into the general funds, has anyone said, well, maybe we should keep the flexibility and maybe take this out of the water? Have you seen any of that at all?

We've not seen any of that. If anything, it's getting stronger and stronger.

This concludes today's question-and-answer session. I will now turn the call back over to Deborah Wensel. Please proceed.

Thank you for joining our second quarter update and we will look forward to talking to you after our third quarter of 2009.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a good day.