Great Lakes Dredge & Dock Corp (GLDD) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Great Lakes Drudge and Dock Corporation Earnings Conference Call. My name is Regina and I will be your operator for today. (Operator Instructions.) As a reminder, today's conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Katie Hayes, Director of Investor Relations. You may proceed, ma'am.

Good morning. This is Katie Hayes, head 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 for the quarter and six months ended June 30, 2010. Then Doug Mackie, our Chief Executive Officer, will share his market overview. Following their comments, there will be an opportunity for questions.

During this call, we will be making certain forward-looking statements to help you understand our business. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in the filings with the SEC, including our 2009 Form 10-K and subsequent filings.

During this call, we will refer to certain non-GAAP financial measures, including EBITDA, which are explained in the net income to EBITDA reconciliation attached to our earnings release and posted in our Investor Relations section of the Company's website, along with certain other operating data. I will now turn the call over to Deb Wensel.

Thank you, Katie. I hope that all of you have had a chance to review our press release this morning, which includes financial highlights for the period. We had a very successful second quarter with strong domestic performance driving high revenue and strong margins which produced EBITDA of nearly 29 million, matching our robust performance for the first quarter of this year. Total revenue for the quarter ended June 30, 2010 was 180.1 million, an increase of 26% from 142.5 million during the second quarter of 2009. The higher revenue was due to significant increases in both domestic capital and beach revenue, more than offsetting a moderate decline in domestic maintenance work and a sharp reduction in slime drudging projects. Demolition revenue in the quarter was 14.5 million, comparable with a year ago. Gross profit for the second quarter of 2010 increased by 21% to 34.6 million from 28.6 million, due to strong revenue growth. However, gross profit margin decreased to 19.2% versus 20%, due in part to reduced activity in the Middle East that resulted in certain vessels being idle.

Operating income increased by more than 20% to 20.2 million versus 16.8 million for the second quarter of 2009, despite the negative impact of 2.7 million of severance expense. Interest expense was reduced by 1.7 million, due primarily to gaining some of the Company's interest rate swaps, adding to net income attributable to Great Lakes Drudge and Dock Corporation, which was up by more than 45% to 10.8 million, or $0.18 per diluted share, versus 7.4 million, or $0.13 per diluted share, a year ago.

The domestic bid market for the second quarter of 2010 was disappointing, as only 91 million of work was awarded, resulting in a year to date total bid market of 303 million. Last year's robust 521 million market for the same period included a high level of maintenance work that was supported by stimulus funding. To date this year, Great Lakes has won all beach projects awarded, totaling 23.6 million, as well as 34%, or 53 million of the maintenance projects. For the second quarter, the Company won 48% of the overall domestic bid market versus a 16% win rate in this year's first quarter. This performance underscores the variability which can occur in the quarter to quarter bid results. Despite this variability, the Company's contract win rate for the last three years has averaged 46%.

In addition, the Company undertook a significant amount of work related to the construction of berms off the coast of Louisiana. BP has established a $360 million escrow account to fund the construction of these berms. The berm construction project is being managed by Shaw Environmental and Infrastructure, Inc. Great Lakes and other domestic dredging companies are working on this project under contract with Shaw. Due to the nonpublic nature of the contracting process, none of the Louisiana berm work is included in the bid market data presented.

Given the Company's strong operating performance in the first six months, a significant amount of backlog was worked off during the period. And while the Company did pick up work related to the berm construction, this did not offset the impact of the reduced domestic bid market as well as the lack of new foreign projects. Therefore, the Company's overall dredging backlog decreased 249 million as of June 30, 2010, compared with 365 million at the beginning of this year.

In addition, during July, the Company signed a contract for approximately 5.5 million of work in the Port of Natal, Brazil and we were also low bidder on a $10 million project in Puerto Rico and a $15 million capital project in Florida. Since this work was signed or bid after quarter end, it is not included in backlog at June 30.

In the demolition business we have seen encouraging signs during the first half. Demolition service's backlog at June 30, 2010 was 57.6 million, more than double the 23.7 million level of June 30, 2009. This increase reflects the success the demolition business has had in expanding into new markets, specifically New York. While revenues did not increase during the first half of the year, we do expect to see revenue gains in the second half as (inaudible) begins to execute on this new backlog.

Capital expenditures for the quarter totaled approximately 4.9 million, bringing the year to date spend to 8.2 million. Despite this lower than average level, we continue to expect full year capital spending to reach 25 million. Today, we have also spent 2.1 million to redesign our Dredge Ohio into a world class hydraulic cutter section drudge similar in size and capability to our Dredge Texas. The total cost of this project is expected to be approximately 18 million and will be substantially completed by year end.

Continued strong cash flow from operations resulted in cash and cash equivalents of 52.8 million as of June 30, 2010. Outstanding at quarter end was (inaudible) of 7.75 senior subordinated debt, and performance letters of credit of 32.3 million, including 16.6 million of letters of credit issued under the Company's revolving credit facility. During the quarter, the Company amended its revolving credit facility to remove a defaulting lender, effectively reducing the facility from 155 million to 145 million. The revolving credit facility, which matures in June 2012, had 128.4 million of borrowings available at June 30.

At quarter end, our total leverage ratio, calculated according to the terms of our credit facility which nets domestic cash and cash equivalents, was 1.4—I'm sorry, 1.5 times and our interest coverage was 6.2 times. For the first half of 2010, we continue to reduce our investment in working capital as our operations have shifted to more domestic projects and payments have been made on a [prime] account receivable that had been outstanding throughout 2009. Looking to the end of the year, we would expect some increase in working capital as we ramp up for working in Brazil.

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

Thanks, Deb. As we have previously mentioned, Great Lakes has committed its expertise and a portion of its fleet, crews and personnel to building sand berms off the Louisiana coast in response to the deepwater horizon oil spill in the Gulf of Mexico. We currently have six dredges, three hoppers, and three hydraulics, and several other pieces of ancillary equipment, working on this project. Our backlog includes approximately 60 days of work for this equipment and it is unknown at this point whether the work will be extended. We also note that three of our competitors are participating in this effort as well with eight other dredgers and other equipment currently working on the project.

Although last quarter we were encouraged that the President had introduced his 2011 Federal Budget, it now appears that a budget will not be passed before the fiscal year begins on October 1, 2010, requiring the government to operate a--under a continuing resolution. While this is not an ideal situation for the Corp, it has been the norm in recent years and we're confident that they will continue the good work in the second half of the year and into 2011. However, as in prior years, we have limited ability to see what projects are on the horizon.

We continue to be optimistic about the passage of the Harbor Maintenance Trust Fund Bill. It will be a real positive for the industry because it will assure that these funds are spent as intended, primarily from maintenance dredging, which has not been the case over the last several years. The Harbor Maintenance Trust Fund legislation was included in a new WRDA bill, the Water Research and Development Act, which was introduced in the House last week and is currently on track for introduction in the Senate as well. If success--the WRDA doesn't look promising, the sponsors have indicated the Harbor Maintenance Trust Fund legislation will be presented on its own. Either way, we continue to be hopeful for passage this fall.

Additional funding provided by its passage would not be accessible in 2011 absent an additional—absent an addition to the 2011 budget stipulating the inclusion of Harbor Maintenance Trust Fund or a passage of a supplementary appropriations bill. Otherwise, it won't be until the 2012 budget or the fourth quarter of next year that we'll see the full impact from Harbor Maintenance Trust Fund. Nevertheless, the increase focused on infrastructure and port work is a positive sign that Congress and the Administration recognize the importance of funding these types of projects.

With regard to capital work, as we have previously mentioned, the expansion of the Panama Canal continues to heighten the need for the U.S. to deepen its East and Gulf Coast ports. Recently, we have seen increased discussion of expansion plans for several ports in addition to the $350 million deepening project in the Delaware River, the first phase of which was bid last year, and the $600 million deepening project that is planned for Jacksonville, Florida. Projects in Boston and Miami look likely, although they may not impact the bid market until 2012. In the shorter term, another section of the New York Harbor was bid in July and it was won by a joint venture of our competitors.

However, other domestic capital projects we see on the horizon include work for the Navy in Norfolk and Florida, deepening in Savannah, and a couple of other deepening contracts along the Gulf Coast. These capital projects could add more than $100 million to the domestic bid market over the next 12 months.

Due to the oil spill in the Gulf, it is likely that any coastal restoration projects that were expected to be bid in the second half of the year will be delayed until 2011. However the current situation in the Gulf has heightened the need for barrier islands and coastal restoration throughout the entire Gulf Coast region. President Obama has appointed Navy Secretary Ray Mabus to develop a long term restoration plan for the Gulf area. We are hopeful that renewed focus on coastal restoration and the need for barrier islands will improve funding prospects and help ensure that projects come out to bid in a more consistent manner during the next year and beyond.

The Beach bid [embargo] came back in 2009 after experiencing funding and permitting delays in the prior two years. We currently believe that there will be similar opportunities for beach work in the second half of 2010. There are several beaches--beach projects we see on the horizon that are both federally and locally funded. Currently, we expect over $100 million in beach projects to be bid in the next 12 months.

Our curtain backlog in the Middle East will occupy our large hydraulic dredge and a few smaller dredges into the third quarter of 2010. We continue to expect increased activity levels to return to the region during 2011, which should provide opportunities for improved utilization of our equipment we have in the region. We are hopeful that the upgraded Ohio will be employed on a project has soon as its reconfiguration is complete.

In addition, we are excited about the--about entering the Brazil market. During July, we mobilized our hopper dredge, Reem Island, to Brazil to work on a deepening project in the Port of Natal. It is scheduled to reach Brazil in August and begin work in September. While we currently have the one project signed, we are negotiating other potential work in Brazil that will not only occupy the Reem, but also could require the Noon Island to be redeployed there as well.

Before moving ahead to discuss the outlook, I do want to say how pleased Great Lakes is to welcome Carl Albert to our Board of Directors. Carl's admission increases our Board to eight members, seven of whom are independent, and myself, who represent Great Lakes senior management. As you can see from the biographical information contained in the earnings release, he has been successful in leadership roles in manufacturing and service industries, as well as a private investor. The breadth of knowledge Carl brings will be a valuable addition to that currently represented on the Board.

Outlook. In regard to our full look 2010 performance, we are now providing EBITDA guidance in the range of $83 million to $88 million. As we have seen in previous years, our quarters can be rather uneven. While we believe the underlying need for dredging service remains strong and is not at issue, the availability of funding projects, the timing of bidding this work, and therefore hinders our visibility into the market.

The first half of 2010 was very strong with over $28 million of EBITDA in each quarter. However, we began the second half with a lower backlog than at the beginning of 2010 and a lack of clarity with regard to near term bid opportunities. In addition, while further work off the coast of Louisiana will be a positive in terms of equipment employment, because this work was negotiated based on the daily rental rates, the expected margins are lower than we have expected on recent capital in beach work. So even though the next six months could be possibly impacted by the demand for beach and maintenance work picking up and the demolition business continuing to gain momentum, we think it is appropriate and prudent to moderate expectations for the second half versus the first half results.

Katie?

This concludes our prepared remarks. I would like to now open the call for your questions.

(Operator Instructions.) And your first question today comes from the line of Richard Paget with Morgan Joseph.

Good morning, everyone.

Good morning.

Good morning.

Just, Doug, I wanted to get back to guidance a little bit and there was some seasonality and you cited some issues. But I mean, is the lower end kind of the really like base level? I mean, I know last year the second half was kind of tough. Some of it was redeployment costs. Fourth quarter had dismal weather. I mean, are you really assuming a very--I don't want to say worst case scenario, but a very extremely conservative, because it just seems the trail off is considerable.

Well, it's--as you said, you had--we had a tough third quarter with not much utilization and a miserable fourth quarter. And we are--I'm not going to say we're extremely conservative. I think we're right down the middle. And if the work comes out, the levels could go higher. But right now, we feel comfortable with the forecast we put together.

Okay. Getting to the domestic bid market, I mean, that's one of the lowest in a while. And I know you talked about some of the stimulus funding wasn't there. But I mean, what do you attribute the lower level to [in the quarter]? Was it distracted with the work in the Gulf? I mean, was there other things that we might see a catch up in the second half and then the second quarter was somewhat of an anomaly?

So we were somewhat disappointed with the bid market, though $300 million versus 500 million. As you know, in 2009, the stimulus funding came in buckets of jobs. And as we see the second half of the year, there's been some better projects and additional projects going forward through August, through the end of the year. July was a very good year for bidding—a good month for bidding. So we're hopeful that with the--between the Corp putting out the work and the--and the work in the Gulf for the berms continuing, assuming it continues, it should be a better second half.

Okay. And with the berm work, I wondered if you could kind of help us quantify it. I mean, I know you said 60 days, but how much is currently in backlog? And that 60 days of work, I mean, is that kind of--does that use all of the $360 million budget, or do you think potentially there would still be some more money to do some additional berm work?

Well, we intentionally didn't give a dollar amount of that 60 days, because of course, as we said, it's--the process here is not a--.

--It wasn't in open bidding.

--Wasn't an open bid process. And so--and again, too, it's a rental rate, so if we were to give you the amount of backlog and the number of days, that sort of signals what our rates are to our competitors and we don't want to do that. But I think the 60 days includes the six--six of our vessels going forward. That would not use up the 360 million that BP has put into escrow at this point in time.

Okay. And then, you talked about the margins being a bit less. I mean, are we--I mean, what kind of magnitude are we looking at? Is it a couple hundred basis points? Is that the way to look at it?

Yes. I mean, as we talk about the range of margins between maintenance and capital, and again talking in a relative range of contract margins, our maintenance are down between 15 and 20, and capital can be 25 to 30, again, on average. And while this is capital work, because it's rental rate work it's much closer to our maintenance margin than the capital and the beach work, which is what we had here in the second quarter.

All right. Thanks. I'll get back in queue.

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

Good morning. This is actually [Will Greene] on for Trey.

Hi, Will.

Hi. So it's obviously great news to see that you guys are making your way to Brazil, finding a home for those dredges internationally. I wonder if you could talk about maybe any mobilization costs you guys may see for the Reem Island as it makes its way over there.

For the hopper dredges, it's--the mobilization is nowhere near the cost that it is to send a flotilla of cutter head dredges over there. So it's really not that onerous at all. It sails on its own bottom, doesn't need any additional equipment when it gets there. So it's really--in this case it's not a big part of the overall cost.

Okay. And then, when can we expect to hear something on whether or not the--was it the Noon Island that would be following it?

Yes.

When could we expect to hear something about? Are we in final stages of bidding there? What's kind of the timeframe?

Well, I think we're--it will probably be a month at least before we assign a contract on that. It is a very complex program that goes on in Brazil, but we feel confident that we'll get work for the Noon Island prior--I'd say prior to the end of the year, if not in the fourth quarter.

Okay. And then, just I guess staying on kind of the international--the foreign dredging side, I mean, there's been a significant falloff in revenue and obviously I think that's easily explainable with kind of what's gone on in the Middle East, the DR project and everything there. But looking forward, with these--with the possibility of this new project with the Reem coming on, and then maybe the Noon in DC, do you see revenues for foreign picking up? I guess maybe sequentially in the third quarter and kind of increasing from here? Do you think we've seen the worst in terms of run rate for that foreign aspect of the business?

Well, I think we're--for the rest of this year, I think it will be pretty flat for the international work. We see better prospects especially in the Middle East for our cutter head dredges next year and other work in the Middle East region. But unless something unusual happens, we would think this would be a flat second half for the international group.

Okay. So you think we've pretty much hit kind of a baseline type--okay. And then, I guess just finally jumping back to the berm stuff, there's--it's obviously--seems like a big--really big opportunity for you guys down in the Gulf. And you touched on kind of where the Corp is and everything. And I would assume that the guidance you guys are giving kind of includes some aspect of both--what is going on outside of that berm work domestically. Can you just talk about maybe what else is out there in terms of domestic demand? I mean is it--I know you've touched on it a little bit, but I mean, besides the Gulf of Mexico work, I mean, what are some of the major things that are going--that are actually going on out there right now?

Well, there's certainly--we think there's beach work lining up. There's already been two or three beaches--beach projects bid already. A lot of them can't start until next September or October. And we're looking at we think a very busy beach market this year. And again, there's--we're looking at more than $100 million of capital work. And in the Gulf of Mexico, as we said, it--other than berm work there may not be much other work other than the normal maintenance that's required in the Gulf of Mexico. Certainly, with the unusual weathers we have had during this summer and we've got--we have hurricane issues coming up and northeasters coming up, so I think we'll still see an active Gulf Coast market going forward.

Okay. I appreciate the color and great quarter.

Thanks.

Thank you.

Your next question comes from the line of Andrew Kaplowitz with Barclays Capital.

Good morning, everyone.

Good morning.

Good morning.

I was wondering if you guys could compare for us utilization of the global fleet in Q2 versus 3Q or maybe just start with the U.S. Like are a lot of vessels that you have sort of coming off work in Q2 versus 3Q and really the second half of the year? Is that why we're a little more cautious on the second half of the year?

I think at this point, we still have some backlog coming into the third quarter. And then, of course, we have utilization in the--off the Louisiana coast (inaudible). So I think there's good utilization domestically for equipment. As we said, internationally, probably no pick up there, so we're looking at similar levels to the second quarter from that. And one of the bigger differences being that the margins on what we kind of expect the work in third quarter to be compared to the second quarter.

But for the change in the earnings in the second half of the year versus the first half of the year that you're implying, are there big dry dockings that you're expecting, or are you implying that 4Q--given the 4Q you had last year in terms of bad weather, are you kind of sort of saying, hey, 4Q could be bad weather again, let's give this guidance the way it is? Or just trying to figure out what sort of interruptions in your business you're sort of implying in your guidance.

I think that will include some normal shipyard time, so that is included in there. I think, too, as we look at the fourth quarter of last year, we were expecting a pretty high level fourth quarter last year. We had a lot of work going on and that got hit by the weather issues. So really with our fourth quarter here, I think we don't think because of our backlog level and what we haven't seen in the big market yet, that yes we would have a lower utilization in the fourth quarter of this year, not necessarily expecting any issues to [emerge] as we had in the fourth quarter of last year.

Okay. And then, you mentioned that competitor one or joint venture, the New York bid, that was in July. You guys have generally been--done very well in New York and your dredges are well suited for New York. So do you think that they just got more aggressive with pricing or is there anything--is it just anomalous, you'll guys will continue to win a lot of New York work or what can we think there?

Well, the two northeast competitors, the joint venture competitors, who have been working in the New York Harbor for a number of years and they've bid and won this type of work in the past. We very much would've liked to won that project. We are backlogged for New York--for the first quarter and we're looking for opportunities for the Drudge both domestically and internationally, if there isn't work in the New York Harbor. I can't guess what--we don't even know who the participants are in the joint venture at that—at this time, so it's hard for us to figure out exactly who the players are. And I guess as you know we lost it by 0.005%. And we didn't think we were over aggressive, and maybe they have a better toy than we do now. I don't know. We'll have to see what happens.

That's helpful, Doug. And you took some severance costs in the quarter. Can you sort of elaborate on where you took them and maybe if you can give us why you took them? Your business seems quite good here.

Well, early in the second quarter we had put out a press release that there was reorganization and we had an individual that stepped up to head of our dredging operations, which sort of eliminated our COO position. So it's just severance costs related to our COO leaving. And that was announced--.

--I see--.

--Early in the quarter.

Yes.

I see. And Doug, just a thought, you talked about maintenance sort of picking up. The backlog in maintenance is lower than it's been in a while. Is part of it just maybe we have a little less activity in terms of weather related issues that require maintenance or has the Corp just kind of refocused on Louisiana or something like that? I mean, is this just sort of lumpiness in maintenance and it should come back, or is there anything to worry about there?

Well, I mean, it's been very busy in the Mississippi River region. It's been very busy from January through May, in fact through even June and July in the Gulf area. So--and I think with the potential for storms and possible hurricanes, I think as is being predicted by the forecasters that we should see some maintenance work coming out. And there are normal maintenance projects coming out that are scheduled in the next two months to bid.

Thank you, guys.

Your next question comes from the line of John Rogers with D.A. Davidson.

Hi. Good morning.

Good morning.

Good morning.

First of all, just on the pending awards, what did you say--did--what was the number at the end of the quarter?

I don't think we gave the total pending.

Oh, okay.

Yes.

We typically do. What I do is mention a few bids that came--.

--After--.

--Out after. So they wouldn't even be in what would typically call our pending number.

Okay.

We identified that we had picked up the project in Brazil and we're low on another project in Puerto Rico. And then, there was a Federal capital job in Florida that we're a low bidder on. So just to show that there's a little activity in the month, and as Doug indicated there was some bidding that was going on.

Okay. And sorry, but I mean, I guess it will be in the Q. But do you have that pending award number, since we're on it?

Let me just try to look up--.

--If not, then that's okay.

Yes. We can certainly provide that.

Yes.

Okay. And then, the other thing is, Doug, you mentioned the variances in your bids versus competition. And just looking at some of the bids that have come out lately, what's your sense of pricing in the market? I mean, it seems as if a lot of these dredge bids are coming in above engineer's estimates. Is that just because they're using old cost numbers? Any comments or thoughts there?

Well, I don't--I haven't--of the major bids we've--lately, we've been well under the government estimates.

Okay.

I mean, the government estimate in New York was $146 million and the winning bid was 108 million.

Right.

And in a job in Florida, which was just bid by the Port Authority at Manatee--I guess the Tampa Port Authority, they bid the job twice, put it out twice. And it was a--it was maybe 10% below their budget, which is different from what the Corp's budget is. It's not 100% and add 25% onto it. It was--so I think it's--I think the bids have been in a good area. I mean, there's been some that have been very cheap and some have been I think in a good range. Just not enough of it coming out.

Okay. And based on what you see for the second half of the year, I mean, you made the reference to your EBIDA guidance. But does the bid market itself--I mean, are you assuming that it stays at this level, declines, or improves? Because it's pretty--I mean, I realize what's happening to your revenue and earnings, but the market itself is certainly on a year over year basis looks like it's down quite a bit. Is this the new level or is it--?

It is. Yes, year over year, it is down significantly.

Yes.

But we're looking at--we see that as scheduled to bid.

Yes.

Doesn't always mean it's going to go on time. And if you add in what's going on with the berm work, I--as I said before, I would think that the second half should be much better than the first half of this year.

Okay. And are there--and last, are there any specific proposals for work beyond the $360 million job for barrier islands, or just talk at this point?

Yes. We didn't--to my knowledge we don't think there is any talk going on right now.

Okay. So what you referred to as--I thought was potential for additional work down there is still a number of years out. Would that be fair?

Yes. If they're going to--yes I think that would not be--I don't think that would be funded by BP. But I think--.

--No, no. Right.

There's people talking about building--getting a barrier island project going on for a number of years to restore the coasts that have been ravaged throughout Louisiana and Texas and Alabama and into Florida. There's some talk of that.

Okay. But nothing specific there yet?

No. I mean, just the clarify, I mean, obviously, the berm work is something specific that's happened in--.

--Right--.

--This point in time because of the oil spill. But I think the work that Doug was talking about going forward is Louisiana coastal restoration work. And that's something that's been in the works here for a while and we think maybe it's being highlighted more now because of what's happened there. The appointment of--.

--Navy Secretary Mabus--.

Mabus to this--to put together a plan for that. So that's what we're looking at additional work coming out in the Gulf area, but more with barrier island restoration and not berm construction.

Okay. Oh, and, Deb, just on the balance sheet, your cash came up in the quarter. Will that--what's your debt repayment schedule or plans there?

At this point, we don't have any other debt that's prepayable. We only have the 175 million, 7.75 notes outstanding. And--.

--Okay--.

--So we don't have anything to pay down.

Okay. And remind me, when can you start paying that off?

Well, we can't pay it off now. It has a premium.

Right.

About two points--.

--Five-eighths.

2.25?

Point, yes.

It drops down to about 1.5% at the end of this year as your premium.

Okay, great. Thank you.

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

Hi. I'm wondering if you expect any slowdown in the beach business for the third quarter. I know--I remember last year you had a pretty strong quarter on the beach. Do you have any work that you can do this third quarter?

There is one job that we—we're allowed to start in September. But other than that, most of the work that will come--or allowed to start work is end of September or October.

Okay. And then, in the Brazil redeployment, did you have to re-flag or re-crew any of those dredges or the one dredge, I should say?

No.

And are you starting a sales office in Brazil, or is this just something you're sourcing from the United States?

Right now we're--we have contracted some people down in Brazil right now. But we're--most of the work is--most of the estimating work is coming out of Oak Brook.

Okay. And then, you talked in your press release about you think the Panama Canal offers some opportunity for port deepening projects, I assume on the Atlantic side. And also, I just wonder if there's any more color you could give on that, but also any potential bids you'll be putting in for the actual work itself.

To--are you talking about work that we're going to bid in the Panama Canal or--?

--Yes, for the actual widening project. I mean, I know you've talked about in the past that you thought there was an opportunity there. In the recent press release you also indicated that you thought because of the Canal, there'll be some good port deepening opportunities. And I guess any color on both of those potential businesses--sources of business would be helpful?

Well, as it turns out we have not been very successful at acquiring projects in the Panama Canal area. The international bidders are extremely aggressive on this work and unless the international competitors are going to raise their bids, I don't think we will. Most of the dredging companies, whether it's U.S. or other European dredgers, will not be getting the work in the Panama Canal. The work that has been bid has been extremely inexpensive. As far as work related to the Panama Canal, we're looking at, again, a Miami deepening and probably not until 2012, which will be a nice job there. Jacksonville is trying to put together a program. Also, even Boston is starting to want us to put together a program. And there's some jobs still needed in Wilmington and in Gulfport. But we're not seeing--we're seeing about the same level of deepening projects in 2010 as we've had in 2009. You can't see it increasing really from the last four--three or four years.

Okay. And then, finally, I guess the last question or touch on this a little. But you do--are developing a lot of cash and there's--I guess you could start calling the debt. Are there any other thoughts you have about how you could use that cash?

Well, again, absent an opportunity to look at acquiring (inaudible), which we are not aware of, typically we do pay down debt. So we'll have to look at what we might be able to do along those terms here. But at this point in time, we don't have to do anything. There's no pending maturities with either our credit facility or with the subordinated debt. But we will certainly take a look at where we are because we have generated sufficient or very high cash levels. And I think we have some additional cap spending that will happen in the second part of this year that maybe will bring down those balances, but we still will be at a pretty significant cash balance by the end of the year.

Any thought of increasing the dividend?

These are all things that certainly are on the table for us to think about as we move forward in the next six months here.

Okay. Thank you very much for your help.

Your next question comes from the line of Jack Kasprzak with BB&T Capital Markets.

Thanks. Good morning. Can you hear me?

Yes, we can.

Good morning.

Oh, thanks. Sorry. The lackluster bid market in the second quarter that you guys have described, is that directly related to the oil spill do you think?

No. No, it's not at all. The Corp might have hesitated for a while. But they--the Corp backed off from that oil spill work early on, so I don't think it had anything to do with the berm building. I think it's just that there was a lack of projects coming out relative to last year.

But I guess the budget--wasn't the budget fairly--I guess we had stimulus last year, so that provided a difficult comparison. And so, there's just less money from--that the Corp had to put to work? Is that simply the case you think?

Yes, I think it is. And hopefully, the second half will be stronger. We think it should be stronger because it really was very, as you say, lackluster. And a much smaller market than we anticipated.

If the second half is stronger, i.e., more bids are available, is there enough time to win some of that work, to get to work on it and maybe have a second half of the year that looks at least a little bit more like the first half versus what you've guided to?

Well, I mean, it--a couple questions there. One is, can we do the work? Can we bid it--get it authorized and perform it? I mean, there's a lot of maintenance work that you could do that quickly and that wouldn't--you could get billing in 30 or 35 days. So that's a possibility. But we have--right now, we have decent backlog for the third quarter. I mean, better than average. But it's--a lot of this equipment is at lower margins, so that may bring down the third quarter somewhat. We'll have to see what's going to happen with our 30--our 60-day rentals that we have going with Shaw.

Doug, given that it sounds like--correct me if I'm wrong--again, with regard to the guidance and what it implies for the second half, obviously a lot of questions on that issue. But it sounds like it's not a utilization issue, it's a margin issue. I mean, six dredges working on the berms out of 16 in the U.S., it seems like you guys will be pretty well utilized during the second half of the year. I mean, I guess the question is, if the pricing or margin on that berm work is so inferior, why take the work in the first place?

Well, because then our vessels would be tied up.

So it was really the only option for some of those vessels, at least in the near term?

Yes. Not for all of them, but some of them. Some of them we had to defer and we'll get back to them. But--.

--There is some work that those dredges will be going back to in the fourth quarter. But it's good near term work and when the bid market is lower it's been prudent to take it on. So I think as we look at third quarter, just to summarize, we do think there is good utilization, as you said. And then, the margins, not that they're bad margins, they're just not the high margins of beach and capital work that we were able to do earlier in the year. And then, as we look at fourth quarter, maybe not the high level of utilization, but more typical work in the fourth quarter.

Got it. Thanks very much.

(Operator Instructions.) Your next question comes from the line of Hans Jayfer; Cooper Gray Partners.

Hey, Doug, how are you?

Good, how are you?

Good. Could you just--how much of the berm--how much of your portion of the berm work is in your second half guidance? And also, is it in your currently stated backlog that you guys are giving right now? And I have a follow up question after that.

Well, it is in our backlog. And I'm not sure I understood the first part of the question.

I'm just trying to figure out how much of your second half EBITDA guidance is assuming work from the Gulf of Mexico from the Shaw Group.

Well, all that we have in backlog at the end of the second quarter we expect to complete the second half of this year. So that is in our guidance.

Right. But I'm saying, if you could just help us kind of figure out how much of the sort of implied $30 million of EBITDA that you guys are assuming for the second half, how much of that is normal--kind of normal GLDD work versus how much of that is--are you expecting to come from the berm work that you're doing for the Shaw Group?

That's a fairly detailed question. And I think, too, the question was asked, well, how much work is it, and that's maybe another way to ask your same question. And again, there's reluctance on our end to talk about that and sort of signal to our competitors, who are doing some of this work as well, as to what sort of rates that we're getting.

And would you be able to give us any type of sort of run rate--any type of kind of EBITDA kind of Q3 quarter to date, just to give us a sense of where things are as they stand, how you guys are doing?

I'm not sure what you're--through the end of July?

Yes, just kind of quarter--where we stand today versus since the end of last quarter, what kind of your monthly EBITDA run rate is.

I mean, again, we're early on in August here, so we don't have our July results nor typically do we get that granular with the information that we provide.

Okay.

Ladies and gentlemen, this concludes the question and answer portion of the call. I'd like to turn the call back over to Management for closing remarks.

Thank you. Thank you for joining our second quarter update. We continue to be excited about the dredging opportunities we see on the horizon. Great Lakes has the largest and most diverse fleet in the U.S. and a significant international presence. This positions us well to take on a range of domestic projects we see in the near and long term, especially complex capital projects and offshore beach projects, as well as the anticipated resurgence of international opportunities. We look forward to talking with you in November about our 2010 third quarter. Thank you for participating.

Ladies and gentlemen, thank you so much for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a wonderful day.