Great Lakes Dredge & Dock Corp (GLDD) 2009 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the 3rd Quarter 2009 Great Lakes Dredge and Dock Corporation Earnings Conference Call. My name is Shemisa (ph), and I will be your coordinator for today.

At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference. If at any time during the call you require assistance, please press *0, and the coordinator will be happy to assist you.

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. Katie Hayes, Director of Investor Relations. Please proceed.

This is Katie Hayes, Director of Investor Relations for Great Lakes, and I welcome you to our quarterly conference call. Deb Wensel, our Chief Financial Officer, will begin our discussion by presenting the financial highlights of the quarter and nine months ended September 30th 2009.

Then Doug Mackie, Chief Executive Officer of Great Lakes, will share his market overview. Following their 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 undo 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 further updates.

I'll now turn the call over to Deb Wensel.

Thank you, Katie.

I hope that all of you had a chance to review our press release this morning, which includes financial highlights for the period.

As expected, in the third quarter of this year, revenue and margin levels moderated from the more robust levels we achieved during the first two quarters. This occurred partly because of and in response to the growth in the 2009 domestic bid market, and the slowdown in infrastructure spending in the Middle East. We mobilized two of our large hydraulic dredges, Texas and the California, back to the US during the quarter.

Revenue for the quarter ended September 30, 2009 of $140 million decreased slightly from 142.8 million for the same period through 2008. However, the 2009 third quarter included a strong performance by domestic dredging operations; more than offsetting a significant decline in foreign work. Demolition revenues continued to be off from the prior year.

While gross profit margin of 12.2% in the third quarter of 2009 was comparable to the third quarter of 2008, it was down from the first two quarters of 2009. That was due to lower fleet utilization as a result of mobilizing the two vessels from the Middle East, and three other dredges undergoing required dry-dock service. All of these vessels were actively utilized during the first six months of the year.

In addition, costs for the mobilization of the dredge California will not be fully covered by revenues from the two projects for which the dredge was initially mobilized. As a result, approximately $3 million of additional expense was recognized in the third quarter, lowering gross profit margin by 2%.

Nevertheless, the Company decided it was important to reposition this large hydraulic dredge, given the very positive dynamics in the US market.

Net income was $1.7 million, or 0.03 per diluted share, versus 1.4 million, or 0.02 per diluted share a year ago.

Revenues for the 9-month period ended September 30th 2009 increased by nearly 9%, to $461.7 million, compared with 423.9 million for the same 2008 period. Primarily as a result of greater dredging utilization in the first half of 2009.

This increased utilization and higher contract margins on domestic projects during the same six-month period positively impacted gross profit margins, which grew to 15.7%, from 12.1% a year earlier.

Operating income more than doubled, reaching $38.3 million versus 18.5 million a year ago, due to the increase in revenue in gross profit margin.

Year-to-date 2009 EBITDA was $64 million; a 50% increase from 39.8 million for the same period in 2008. And income for the year-to-date was $16.4 million, or 0.28 per diluted share, versus 3.2 million or 0.05 per diluted share a year earlier.

With another impressive domestic bid-market quarter, primarily fueled by beach and maintenance work, Great Lakes continued to maintain a solid backlog. Contracted dredging backlog as of September 30, 2009 was $401 million, compared with 396 million at September 30, 2009.

The 2008 backlog number has been adjusted for the portion of the DR contract that became an option-pending award in the first quarter of 2009. While total backlog has remind constant since that time, domestic backlog has grown 40%. Primarily driven by maintenance and beach work, which offset a reduction in foreign backlog.

Demolition services backlog at September 30, 2009, was $19 million; on par with September 30, 2008. Recently our Boston-based demolition business has taken on several projects in the New York market, where it's been trying to gain a foothold; as well as several local bridge demolition projects.

The bridge and highway market appears to be seeing some improvement, as so much money is being spent in this area.

Capital expenditures for the third quarter totaled $8.2 million. This is up from previous quarters due to the required dry-dockings that were performed during the quarter. This brings our year-to-date spend to just over $18.2 million.

Some of the dry-dockings that were performed were more expensive than originally expected. And in addition, a dry-docking that was planned for 2010 is being performed in the fourth quarter, to accommodate project scheduling for next year.

Accordingly, we anticipate the total year capital spend for 2009 to approximate $26 million.

In early August, the Company completed a secondary offering of approximately 12.5 million shares of our common stock, owned primarily by Madison Dearborn Capital Partners. All proceeds of this offering were received by the selling shareholders, and not by the Company.

This transaction has increased the trading liquidity for the Company's common stock, and has expanded its shareholder base.

During the quarter, we paid down $11.5 million in revolver debt, bringing our revolver borrowings to $30 million. As of September 30th 2009, senior and subordinated debt, net of $11.9 million in cash and cash equivalents, was 193.1 million; including the borrowings under the revolving credit facility.

At quarter-end, outstanding performance letters of credit totaled $21.3 million, including 13 million outstanding on the Company's revolving credit facility.

The Company's $155 million revolving credit facility matures in June 2012, and includes an 85 million sub limit for the issuance of letters of credit. At September 30, 2009, the Company had $104 million of borrowings available under this facility, after giving effect to 8 million of unavailable commitment due to a defaulting lender.

Leading positions in our credit facility are held by Bank of America, RBS, GE Capital Corporation and Wells Fargo Bank.

At quarter-end, our total leverage was 2.4-times, and interest coverage was 5.4-times. During the quarter, we saw a reduction in working capital investment from the prior quarter, primarily due to a decrease in foreign receivables and work in progress.

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.

As Deb mentioned, we saw another active domestic bid market during the third quarter. Funding from the American Recovery and Investment Act continued to stimulate bidding.

In addition, a number of beach projects which did not receive stimulus funding were bid during the quarter, after a relatively slow first half of 2009.

The beach projects accounted for 32% of the third-quarter domestic bid market of $325 million. The year-to-date 2009 domestic bid market reached $845 million; exceeding the size of any full-year bid market since 2002.

As the domestic bid market has improved, we have captured a 50% share, which is higher than our prior 3-year average of 42%.

With respect to the stimulus fund, it has been challenging to track how much stimulus money any given project has received. We continue to believe that in total, approximately $350 million will be spent on dredging projects under this stimulus plan.

The Corp has until October 2010 to commit the remainder of the fund.

The Corp of Engineers Fiscal Year 2010 budget was signed by President Obama last week. Operating under an approved budget, as opposed to a continuing resolution, helped the Corp fund and bid work much more efficiently.

In regards to other pending legislation, the outlook remains positive for passing a bill which ensures that 100% of the Harbor-Maintenance Trust Fund is used for its intended purpose; primarily, maintenance dredging.

It's increasingly acknowledged how critical it is that our ports and waterways be maintained at their stated depth. Much of the maintenance work coming out now is due to a lack of focus on this area over the last several years.

A new water bill -- the Water Resources Development Act -- still appears to be on track to be introduced in late 2009. And the Harbor Maintenance Trust Fund legislation will be included within the Water Bill.

We are hopeful for passage of the bill in the first half of 2010.

The Panama Canal expansion continues to move forward. While we did not win the most recent dredging project, the deepening of the canal remains critical to our business. As the deeper draft cargo ships are being built that can take advantage of the canal expansion, the need to deepen US ports will become more critical.

This is evidenced by the $350 million depending project in the Delaware River, of which the first phase was bid earlier this year. And the $600 million deepening project that is planned in Jacksonville, Florida. Both are being planned in anticipation of the need to accommodate these deeper-draft vessels.

In the shorter-term, we see domestic capital projects on the horizon. Such as deepening another section of the New York Harbor, work for the Navy in Norfolk, and other deepening work along the East and Gulf Coasts.

These capital projects could add more than $200 million to the domestic bid market in the next 12 months.

With regard to additional funding sources, the Supplemental Appropriations Act of 2009 that was signed into law in June appropriates $400 million for Barrier Island and Ecosystem Restoration to rebuild shorelines impacted by historical levels of storm damage along the Mississippi Gulf Coast.

The Corp is in the planning stages for this restoration, and has indicated that it will start bidding projects in the fourth quarter of 2010.

We also see that the Coastal Impact Assistance Program is still on track to add dollars to the dredging market in other areas along the Gulf Coast during the next few years. This program has obtained funding and is currently formalizing a procurement process to bid projects in 2010.

Each work was actively bid in the third quarter, with more than $100 million of projects awarded. While State and Local authorities may still struggle to get beach projects funded, third quarter was a positive sign that work which needs to get done will continue to come up.

In addition, there appears to be a change in the sentiment by the Administration toward increasing budget appropriations of beach projects that should allow for future improvement and funding for this market.

As Deb said, our operations have slowed down in the Middle East. We are continuing to perform on the DR Project. However, a good portion of the remaining work has been delayed indefinitely.

Our current backlog will keep a portion of our Middle East pretty busy until the second quarter of 2010, and we see several potential dredging projects on the horizon. But at this point, the timeframe for when these projects might move forward is unknown.

We feel Bahrain still holds good potential for our fleet located there. However, we probably will not see major opportunities until dredging customers in the region feel more confident in continuing their expansion plans.

Last quarter we reported we had signed a contract for work in Brazil. However, this project has been canceled but may rebid in the future. There still appears to be potential in the Brazilian market, and we are working on bidding other projects with some of the equipment located in the Middle East.

We have been very fortunate in recent years to have grown our dredging fleet and enhanced our operating flexibility, which enables us to respond to wherever in the world we see the most advantageous dredging opportunities.

We are now focusing on growing demand for the dredging in the domestic market. With our dredges in place to take advantage of these domestic opportunities, we are positioned not only to close the 2009 fiscal year with a strong performance, but to carry the momentum forward into 2010.

Having said that, we are reaffirming our 2009 total-year EBITDA guidance of $80 to 85 million.

This concludes our prepared remarks. But I would also like to note that we will provide a summary of our operating and backlog information provided herein, as well as the reconciliation of our EBITDA -- which is a non-GAAP measure of that income GAAP measure -- in the financial section of our Company's website, at GLDD.com

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

Thank you.

Ladies and gentlemen, if you wish to ask a question, please press *1 on your touchtone telephone. If your question has been answered or you wish to withdraw your question, press *2. Press *1 to begin.

Your first question comes from the line of Andy Kaplowitz of Barclay's Capital. Please proceed.

Good morning, everyone.

Doug, you mentioned the Middle East and that it could be a while before things start picking up there. But last quarter, you had mentioned that you were bidding 8 to 9 projects. Are those still out there to be bid? Or are those getting pushed to the right, also? Or what's going on with those?

Well, we have put in several proposals in the Middle East. And we are looking during 2010, in the Middle East. We're still looking at 8 or 9 more projects.

It's just become very slow; very methodical. I think they are just measuring what's going to happen with the price of oil. But they're still out there; the ones that we've been talking about.

Gotcha. And then Doug, if you step back and characterize the international markets, we saw what you bid on the Panama piece versus the competitor who won.

And so I'm just trying to figure out how competitive is pricing. Is that just an anomalous example of what happened in Panama? If you look globally, are things pretty weak outside of the US?

Well, in addition to Great Lakes, two of our other European competitors were aghast at the prices. This is very difficult work, and we think they're going to have to move material a long way for about $4 or 5 a cubic meter -- which is, I think, off anybody's radar.

We really don't understand except for maybe just the Jan de Nul who took the job is busy building new vessels. So maybe that's a little pressure on them to really cut it right down to the bone. We didn't even look. Once we saw the results, we didn't even take a second thought. It's out of this universe.

Gotcha. But Doug, you still see opportunities outside of that? I mean the Brazil project notwithstanding -- there are opportunities internationally here?

Yes. There are. We're very busy in the Middle East. And we've put in several bids, actually, they're bids and proposals, in South America. Several going in into Brazil.

Great. And one more, if I could.

In the US market, the maintenance backlog continues to build. Partly funded, obviously, by stimulus. But can that continue to build? I mean that market just seems like it continues to strengthen, based on what's going on. You're actually winning more than I thought you'd win in that market.

Can you just kind of characterize that market over the next couple quarters?

Well, we still have a very good backlog in maintenance work. And there continues to be tremendous flooding through the Midwest -- the Mississippi -- down in the gulf area. Whether or not it's stimulus money or it's just needed maintenance money, we still see it coming up.

We've had a record number of rental projects on the Mississippi River this year. So whether it's stimulus or whether it's just the need, I think we should have a strong first and second quarter, for sure.

Great.

And we do have, now, as I said; we have a budget. For the first time in six years, maybe.

Better late than never. Thank you, guys.

Sure.

Your next question comes from the line of John Rogers of DA Davidson. Please proceed.

Hi. Good morning.

Good morning.

A couple of things, just to clarify.

The California, which was going to work on the Brazilian project, does that now come to the US?

No. That was not the California. It was going to be hopper-dredged. The [Rima June] was going to go to Brazil. The California was always going to come to the gulf.

Okay. And I'm sorry -- the one that was going to Brazil -- where does that end up now?

Well, it's still working in the Middle East.

Okay. So no additional capacity into the US.

Right. No.

Okay.

And then in terms of bookings in the fourth quarter, you mentioned the $83 million where you were low bid on. It looks like there's been some other work in October where you were also low bid on? Are we going to be a billion-dollar-plus market this year?

I would say yes. I think it's almost certain that it'll be a billion-dollar market. Based on what's been awarded in October and what we see in November. I think it's going to be over a billion.

Okay.

And what happens then with pricing? Is that getting better? You mentioned that -- I mean, we haven't seen a market this size in a number of years. But if you go back into the early 2000s when you were generating 18-19% margins, is that possible again?

Again, there's a lot that has to happen in 2010. We got a strong first and second quarter. But clearly, pricing has been better. There've been fewer competitors, and pricing has been good probably for all our competitors, also.

We're still looking at a very good market. We don't know how much stimulus money is out there, because they don't tell us.

Yes.

I guess we'll find out sometime this year. But there's some of that. And I think we have a very strong budget. And what's really fortunate is now that we have the Administration getting back into beach renourishment.

They've found out that the beneficial use of it is great and is probably a better return on their investment than deepening harbors. Because the beaches are now, and they need to get the beaches renourished. Because many of them are in a critical stage. I think the Administration has realized that.

Okay.

And I might just add to the pricing -- and I think Doug's right with the domestic market. We're seeing improved pricing. But we are -- again, as we talk about the different types, maintenance work versus capital work -- maintenance work tends to be slower than capital work.

And if you wanted to go back to the period of 2002, we had a lot of capital work.

Yes.

Going forward, we have to recognize we still have a significant presence overseas. And the expectation would be those margins tend to be a little bit lower.

So on a company overall, yes, I think we've seen some improvement. I think we'll continue to see some improvement. But whether we get to the margins that we had when we had all domestic capital work, that may not be the case.

Okay. Thanks.

And in terms of your equipment that was in dry-dock or being upgraded during the quarter, can you give us a sense of what portion of your capacity was out of commission?

Well, again, it's always difficult to say. But we had two big hydraulics and a big clamshell dredge that were out for a good portion of the quarter, undergoing their regular required maintenance.

So it was I think a fairly significant impact to the quarter.

I think probably our four biggest cutterhead dredges -- which are the biggest producers -- were either in shipyard or sailing across the Atlantic. So that would tell you that it was significant.

Okay. And, oh, last thing, I guess. Deb, in terms of depreciation this year, I think previously you'd said about $29 or 30 million. Is that still a good number?

I think it's a little north of that. I think it's 32.

32? Okay. Great. Thank you very much.

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

Your next question comes from the line of John Parker of Jefferies. Please proceed.

Can you tell me, you said you're relocating the dredge California. What is the other dredge that you're relocating?

We relocated the dredge Texas. And the Texas arrived the end of September and started working here at the end of the quarter.

So Texas is already working in the US, I assume. Right?

In the US. Yes. Jacksonville and the (INAUDIBLE)

And what is the schedule for the California's arrival?

The California has arrived, and will start working --

In the next few days.

Shortly. Yes.

Okay. And then how did the beach get so busy in the traditional summer off-season? And then I think you also said that it was not a function of the federal money coming in. Is it just that there was such a backlog of stuff that needed to be done that it all hit? Usually you have a seasonal slowdown in the summer quarter.

We do. It was a little bigger than what we would typically see in the third quarter. But of course, a lot of bidding in the quarter for beach work, which will be performed here in the fourth and first quarters. That's what's more typical.

Okay. And then it seems like your depreciation's jumping around a lot. And you gave guidance for the full year, but I'm wondering why your depreciation went up in the third quarter when you had a few dredges out of service due to repositioning and also due to dry-dock.

It seems like it should've been lower than the second quarter. Can you give any more color on that?

Well again, we look at overall activity; which may not track utilization of the equipment, but more so revenue of equipment. So while there wasn't utilization, there was revenue on mobilization and things like that.

Yes. The depreciation number -- we really try to look at where we sit for the full year. I think if you look at the 32, that's a good number. It does move around a bit between quarters, and that's just based on some sort of accounting projections that we have. That doesn't necessarily give you utilization, if that's what you're trying to look at.

Okay. It just seemed to go the opposite way I would've expected. But that's all I have for now. Thank you very much for your help.

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

Good morning. Guess I got cut off before.

Sorry about that.

Wonder if you could talk a little bit about NASDI and I think you mentioned in the press release, given the volumes, there was a little bit of margin impact. Is there any way to quantify that? And did that have to do with you guys doing more bidding in the quarter? And do you --

It sounds like your outlook for that business is a little bit better, given what you said before.

Well, I think their year this year has been pretty flat. They took some hits on projects they were carrying forward. They've been sort of maintaining a backlog level, with moving into New York to pick up some of the bridge work.

But I think it's still a bit of a tough go. And it's really the construction market. And the construction market in Boston and the New York area.

I think we see some signs of some funding. I think we talked a little bit about the bridge side, so that's where they were concentrating a bit. But again, until we see an uptick in construction, I don't think that the demolition will improve significantly.

Now I think as the economy improves, they'll improve along with it. But right now, they're fairly flat. I guess they're just hopeful that maybe mid next year or so they start to see some increase there.

I don't know if Doug -- if you have any comments.

No.

Okay. Then getting back to WIRDA (ph). Talking to some people in the industry, they're not necessarily all that confident that it's going to get pushed through in the beginning of next year, just given the general length it takes the federal government to get things done.

We've had the healthcare bill taking up a lot of resources, so to speak. What are you guys hearing about that actually moving forward? And is there the possibility that if that does look like that could get delayed longer, that you could use some other mechanism to get Harbor Trust Maintenance Fund fully allocated?

Yes. Well, we've been following it closely. And some of what we've found out is that we feel on the House side, for whatever reason -- and again, this is from our lobbyists -- on the House side, they feel that the House will push it through fast.

But there is some concern that the Senate has, as you said, this healthcare and everything else out there. It will tend to be more methodical.

However, they still feel very good that it'll be passed this year. They were hopeful for the first quarter and now I think they still feel it should be by midyear. But you're right, there is some of that going on that they just might not get to the bill.

But they have passed the Corp budget, which was on, and it was off. It was on. And then they decided they needed the infrastructure. So the House side, especially, is pushing the Harbor Maintenance Trust Fund issue.

And again, it's never certain. But we still feel very good about it.

So is there the possibility to lift that out of attaching it to WIRDA (ph)? And if the Corp said, "We need this now," that it could be attached to something else and get it through sooner?

Well, they still think the WIRDA (ph) the best. But again, it'd be up to obviously the sponsors of the bill to work that out.

Certainly our industry, as well as the shipping industry and the port industry, is focusing on this a lot. And the three groups of us will be pushing to get it through no matter what legislation it's attached to. We've talked about that, also.

Okay. And then just given the way the economy's been tracking, can you give us a sense of how that's impacted the Harbor Trust Maintenance Fund itself, and what kind of dollars are still coming in? Just to get a sense of what the potential impact would be as it stands now, if it does go through.

Well, we get it. We get the information a year after they do the assessment. But actually, when we ran it in 2008, it went up to about 1.6 or 1.7 billion. Just because of the first half of the year.

And again, I don't know where or how they're counting their dollars, but there is a lag. We assume that '09 would be down, and they're talking about being down 10 to 15%. But that's just their guess.

Yes, but it's still positive. It's still well over a billion.

And then just to put that in perspective, can you estimate how much of that money was allocated toward Harbor Maintenance? Or is that -- ?

I don't really know that I could estimate that. All the maintenance work -- O&M work -- eats up about $700 to 750 million a year for the Corp. But estimating how it's going to run out, I really can't tell you. Because they don't really provide us with the numbers to estimate it.

Okay. But I mean clearly, if that gets passed through, it's going to be significantly more available toward dredging than it had?

Oh, yes. And again, it'll probably -- let's say we get it. Just say it's mid-year it passes. I don't think we're going to see, and it's 1.4 billion -- I don't think they'll be able to spend the entire 600 or 700 additional money.

I think maybe the first year, it'll add 200 or 300 million, and then it'll build. Especially if we have the economies improving and getting imports and exports running at a faster speed again.

But I would think the full force that we're hoping would be 2012, when we get the full impact of it. That's Fiscal 2012 -- which would be October of 2011.

Okay. Thanks. I'll give it back to you.

Your next question comes from the line of Trey Grooms of Stephens. Please proceed.

Good morning. This is actually Will Green on the line for Trey.

Hi, Will.

I wanted to touch on the dry-docking. I know you guys kind of mentioned that it did impact. Is there any way you can quantify about how much that may hit the margin? Or what that may have cost in terms of utilization? Loss of utilization?

For dry-docking? In this quarter, it's not only dry-docking, but it was the cost of demobilization.

These are normal dry-dockings that we have.

Yes. And you know, part of what the expenditures that we do in dry-docking, which I talked a bit about, are also capital.

Yes.

Because in these dry-dockings, we can put a lot of steel back on the vessels. We can redo some engines and things.

So I'm not sure that the maintenance had a big impact on the quarter. It would seem to be more capital for these particular items.

I think we're tracking pretty much along our maintenance budget for this year. So I don't know if that answers the question.

Well, we've been -- we obviously had a high first quarter. We had a very good second quarter. And we did actually talk about there was going to be a weaker third quarter. And again, if we'd had the four dredges working in the United States since we had all the backlog, I think you could estimate as much as we could. Because we'd've been almost fully occupied. And we certainly would've been far north of $13 million EBITDA.

Okay. That's helpful.

And then in terms of you talked a little bit about the domestic bid market and how pricing -- you're starting to see some improvement, there.

I wonder if you could add some color on how many bidders you're seeing at the table. How that compares to what you saw last quarter or a year ago. Any added color there would be helpful.

Well, we're looking at really, in our market, obviously Great Lakes and Weeks has dominated most of the market. But Manson has had good results, as well as Orion. After you go below that, there are some smaller ones.

We could see as many in the market as 7 or 8 bidders. But we rarely see more than 4 bidders on any one single project. And most of the time, 3 or less. So with a market like this, people get occupied.

How does that compare to late '08? I know that things were kind of starting to pick up.

Late '08 was when it picked up. It was a strong quarter, given the fact that you have the holidays.

I think that we were seeing a 5, counting the fourth quarter, we'll have five really solid quarters of bidding.

So right now, we're looking at rarely more than 3 or 4 bidders at the table. I wonder if you could just -- how did that look before all this end-market spending started to ramp and the maintenance work started to really get going?

Were you seeing closer to 6, 7, 8? On an average job, what did it look like?

Not for a grade like the work we do.

I don't remember ever seeing 7 bidders. I can't even remember seeing 6 bidders in the last 2 or 3 years.

I think we might've seen 5 or 4 back in 2008 and 2007. It's just the fact that so many of our competitors are regional; especially the West Coast. So the West Coast and Gulf Coast -- a lot of them doing go up in union territory. And they don't have the ability to work on the East Coast.

So there is a cap on how many bidders we can have. But in a tough market, all you need is two bidders and you could be miserable.

But with a good market, you find fewer bidders .

Well having said that, if you continue to see this improvement, it sounds like the end-markets are extremely strong, still. Do you envision a situation going forward where you may be seeing 2, on average? Or 3 at the bid table? Or do you think that stays pretty steady next year?

I think the norm for us is 2 or 3 and sometimes 4. That's the norm for us. But we bid virtually every job that we can reach with our equipment. Just to get to the table.

So it's a process that I think all bidders do in both dredging and E&Cs. They do that in order to keep busy and get more information about the market. You have to bid for these projects, even if you feel like you have a lower chance to win.

Okay. That's very helpful.

And then I guess I have one more on kind of G&A expenses. Last year we saw it tick down sequentially from third quarter to fourth quarter. Do you guys expect that happens again this year? Or how should we be thinking about that?

I'm not sure. We can have certain expenses in any particular quarter that could bump up.

For instance, this quarter we had the secondary offering happen. So we had some additional expense related to that.

So of course we won't see that in the fourth quarter this year. But other than that, I don't think there's anything significantly different.

All right. Well, great. I appreciate it.

You have a follow-up question from the line of John Rogers of DA Davidson. Please proceed.

Hi. Thanks.

I just wanted to follow up on the $3 million of additional expenses recognized in the quarter.

Which relocation was that associated with?

That is the dredge California. Yes.

Typically, mobilization expense is charged to the project that the dredge is going to.

Right.

Both the Texas and the California mobilized. Their expense is then incorporated into our project estimate.

For the Texas, the project absorbed the cost. And of course, you re-estimate, given that dredge. And then we did the same for the California.

But what happens is, with the project, and actually in this case, there's two, the allocation of the cost to get the contracts in this quarter. Even though understanding the dredge hasn't even started those contracts. So a percent of complete accounting requires us to take that margin hit on those jobs immediately, because that's our accounting convention.

So it's rather an interesting issue. We took a $3 million expense on those projects in the quarter, and those projects have not started, yet.

Okay. So you start off the project in the hole, so to speak?

No. Actually, no. We start off the project at zero, because we've taken the in-the-hole off.

Yes. So in a sense, then, is the project more profitable for the next quarter or the duration than it would be otherwise?

Yes. Absolutely. Because you've already taken the $3 million hit. So, yes.

All the revenue going forward now will be basically what we call a zero margin.

Okay. And the project -- how long are these projects? I mean will they be completed in the fourth quarter?

One will be completed in the fourth quarter. The second one will go into the first quarter and will be completed in the first quarter.

Okay. So rather than being spread out over that period, a lot of it will show up. It'll reverse itself, to some extent in the fourth quarter and in the first part of the first.

So in the sense that yes, you don't have those expenses going along during that period. We really have basically taken all the expense out. And then the project now, of course, there's no positive margin on those at that point.

Right.

So that will have an impact on the overall contract margins for the fourth quarter. But again, it's covering all variable costs and all its fixed costs.

Right. Okay. All right. Thanks.

Thanks. I appreciate it.

There are no further questions in the queue. I would like to turn the call back over to Ms. Katie Hayes. Please proceed.

Thank you for joining our third-quarter update. We look forward to talking with you next year about our 2009 fourth quarter.

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