Great Lakes Dredge & Dock Corp (GLDD) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Third Quarter 2010 Great Lakes Dredge and Dock Corporation Earnings Conference Call. My name is Chantelle and I will be your facilitator for today's call. (Operator Instructions.) I would now like to turn the presentation over to your host for today's call, Ms. Katie Hayes, Manager of Investor Relations. Please proceed, Ms. Hayes.

Good morning. This is Katie Hayes, Manager of Investor Relations for Great Lakes, and I welcome you to our quarterly conference call. Bruce Biemeck, our President and Chief Financial Officer, will begin our discussion by presenting the financial highlights for the 2010 third quarter and year-to-date through September 30, 2010. Then Jon Berger, 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. I will now turn the call over to Bruce.

Thank you, and good morning. I hope you've all had a chance to review our press release this morning. It includes the financial highlights for the periods presented, and if you did you'll see that we had a quarter that we're very pleased with. Our business continued to operate at elevated levels during the three months ended September 30, and there's a few things to note as we look at these and talk about them. We had strong domestic performance, you can see from higher revenues in both dredging and demolition. The revenues in the quarter reached 173 million, which is an increase of 24% from the third quarter of '09. The strong domestic dredging performance during the quarter included a continuation of the Louisiana berm work. And we'll talk about that a little more later in the call.

We did experience moderate declines in domestic beach and maintenance, which we believe is attributable to timing of projects rather than any kind of change in the market. Foreign revenue also declined as the Middle East market has leveled off, as we--as has been previously discussed for a number of market and economic reasons.

The gross margin for the Company improved to 18.9 during the quarter from 12.2 for the same 2009 period. We experienced a higher utilization level as we had a number of projects going and also a number of our vessels were employed on the berm work that--in Louisiana. Operating income gained significantly, 16.1 versus 5.1 in the same 2009 quarter. G&A was up quite a bit - 4.8 million in the third quarter, and is a result of the expense for severance and our recent reorganization.

The strong performance that I've just gone through produced EBITDA of 24.1 million versus 12.9 million in the third quarter of '09 and includes the increase in G&A. So all in all, a very strong third quarter, a very strong quarter for the Company.

As we look into the bid market, as we've seen and where we--what we expect in the near future, the domestic dredging market in the third quarter, there was 356 million, bringing the year-to-date to 658 million, which is lower than the 845 million in '09. But in '09, there was the inclusion of stimulus projects. The years--the domestic market for the year also does not include the berm work due to the nature of the project authorization procedure, which I think most of you are familiar with. It's not a lump sum that is bid--that is put out to bid, and then bid on. It's a continuing authorization of work as the overall authorization for the projects occurs.

And again, worth noting in '09 was the abundance of stimulus projects. Year-to-date at 9-30 this year 2010, the Company has won 90% of its--of beach project, 22% of maintenance, 16% of capital, 23% of overall market, which is below our average, as you know, which does not include the berm work which I just discussed and for which we have recognized 65 million of revenue for the first three quarters of this year. We will continue to work on this project into the fourth quarter and there have been additional amounts authorized, so we're uncertain as to how far this can--will or can go into 2010--11, but we know that we are--we continue to be employed in the fourth quarter of 2010.

For the domestic dredging market overall, there have been $58 million in projects bid since October 1, which we have won 46 million or 79%, so we're starting out the quarter with a good bidding record. In the foreign market, since quarter end, in fact just this week, we have been awarded the final phase of DR, the large reclamation project in Bahrain that we've talked about, that has a value of $46 million. In terms of demolition during the third quarter and into October, we have bid on civil projects, most notably a $30 million bridge demolition project in Louisiana related to the--to Katrina, the Katrina damage to the bridge since subsequent to that there has been a new one built and now this has to be removed. And we were the low bidder at a bid of around $30 million.

Dredging backlog at September 30, 221 versus 365 at the end of 2009. As if always the case, and I've talked about it a little bit already, there are always low bid projects not included in backlog awaiting formal contracts, as well as options on existing contracts and foreign projects in the negotiating stage. The--I think that this quarter is probably a little more complicated than most quarters because there are significant elements of all of the low bids pending and low bid pending because not yet awarded, and low bids which have been recent. In any case, as I said, at 9-30, we have 221 of backlog versus 365. But when I take this 221 and add our low bids through 9-30 that have not yet been contracted, I add the DR option, which I just talked about which has been awarded after 9-30, and our October low bids for which we had a pretty good record, all of a sudden I can get up to a number of about 370 million, and that does not, again, include the berm because we don't include that as backlog. It's authorized in pieces. So we don't have a chunk to put in there as we would other projects. So I'd say we can look at this and feel like pretty comfortable for this 370-plus berm.

And if we look at the same period--if we look at the 12-31-09 period on the same basis, that is taking the actual backlog and adding those projects, the low bids not yet contracted, and the October--and I mean, the other low bids subsequent to the end of the quarter, we get to 4-20. So we can see that there's a closer relationship to the numbers at the end of September and at the end of December than it might appear. And also, we have taken our NASDI backlog from 16 at year-end to 55, and then again, if we look at the low bids in the months following the quarter, we can add 32 to the year-end number and 30 to the October number, so we're looking at 48 versus 85. And so, if we add all the dredging and all the demolition work together, we have very comparable total backlog - 468 at the end of the--at the end of '09 and 455 at the end of September 30. So I hope that helps to understand how we feel comfortable when we talk about a backlog of--a dredging backlog at a lower level. We look at our components that we've been able to add since, and we look at the market as we're going forward and we think overall things look pretty good.

We do expect a strong bid market in the next six months and we believe we'll maintain our traditional market share. As I said, in addition, we continue to perform berm work and are hopeful that this will carry into 2011.

The only other thing about backlog I might add is with respect to demolition, it has been--the Company has attempted to expand its markets geographically and that has been successful. We have taken on more work in New York and kind of learning our way as we go. And recently, we bid this job in Louisiana and won it and have spent sufficient time analyzing the bid to feel very comfortable that we can perform the work and make a good margin on it.

Just to turn to [equipment] spending for a minute, we've been busy this year. We've had many dredges that have worked and so, our capital spending is really down. We have--in the quarter we spent 4.3 million, which brings the year-to-date total to 12.5 million, and as I say, part of that was because projects were deferred as dredges were employed for longer periods than expected. So some of these projects certainly will be deferred and take place in future periods. So full year capital spending is expected to be 19 million, which compares to our budget of 25 million. We also--in addition to that we had the completion of the Dredge Ohio, which is a U.S. flag vessel which is targeted for overseas, specifically Middle East operations. And we are completing the work on that dredge this year. It will be approximately an additional 14 million to get the dredge ready to perform at the high level some of our other hydraulic dredges do, and that is favorable to plan. The dredge will initially--the dredge will be finished by the end of this year and ready to work. And we'll initially perform some work in the--on the DR option I just mentioned.

Although we've had to defer a few projects, our equipment's in good shape and as is our organization. We're committed to serving the market at the--as the market leader and are preparing for any changes in business levels, so we can continue our position of leadership and assure that we maximize operating returns.

Just a few things on debt and liquidity, and then I'll let Jon Berger say a few things. We obviously have continued to enjoy strong cash flow during the year and throughout the third quarter. We've had a reduction in working capital, particularly in the area of foreign operation. And all this resulted in cash and equivalents of 79 million at September 30. We still have the 175 million of senior debt outstanding and--on the revolving credit facility, which we've really only been using for letters of credit, we have $130 million of borrowings available at September 30. As far as ratios, total leverage ratio netting domestic cash and equivalents, 1.1 times. Interest coverage, 7.1 times. Continue to--all our covenants and financial ratios continue to improve and show financial strength for the Company.

We have as a major project ahead--and I have talked about and planned for an analysis--our capital structure, which we have to face as we look at the maturity date on the senior subordinated debt and on the bank facility and so we are considering those maturities and our growth plans which we've talked about previously and Jon will discuss a little more.

So with that, I'm going to ask Jon to discuss some of the things that I--that he will discuss.

Thanks, Bruce. First off, I want to take a moment to thank the whole Great Lakes team for the performance in what appears to be another record year. It's always important to acknowledge excellent performance and really we have had that during the first nine months of this year. It goes without saying we are extremely pleased with the continued strong performance demonstrated in the third quarter, and barring any unusual weather patterns, the strong performance will continue in the fourth quarter, but as a seasonally adjusted slowing based on weather and projects.

With that, however we remain very positive on the full year, and as you saw this morning, we've raised EBITDA guidance from the $95 to the $100 million range. To be sure the work to meet the EBITDA levels is on the books right now, and if we get cooperation with the weather I'm confident that our team can execute at the higher end of that range.

We have a number of projects in process as we move forward with an eye towards implementing efficiency and growth initiatives. We have discussed them since being appointed in early September, and as you know, it's still very--in the early stages. In future calls, we will keep you updated on our progress. But right now, let me give you some thoughts on the current market as we go forward.

First and foremost, the ultimate passing of the Harbor Maintenance Trust Fund is key. Whether it gets passed in this lame duck session or in '11, as we discussed, it would give us upwards of $500 million of more into the drudging maintenance market. We've enlisted the support of all of our board members together with a major presence in Washington with our trade association, the DCA, and we've formed a very strong coalition of interested parties from other industries to really try to push the Harbor Maintenance Fund.

Today is election day and it sounds like we may have some major changes, but the bill remains supported by strong bipartisan, both sides of the aisle. However, we all know and you all know in Washington the only certainty is uncertainty, so we just keep our fingers crossed. Funding, if passed, would probably only start hitting the market in the fourth quarter of '11, but roll in in 2012 strongly.

Let's take a quick look at 2011 and beyond. 2011, as Bruce said, is shaping up to be a solid market even without the benefit of stimulus and without a significant amount of berm work. It's no secret we need to work hard to increase our foreign dredging revenue, which the DR extension is a good part of that, and also our demolition backlog is very heartening for us.

More mid-term, the deepening of the Panama Canal has created a sense of urgency for capital deepening, which hopefully will benefit 2011, the latter part, and moving forward. It is clear to me that we need to foster discussions that ports and waterways are as important a part of infrastructure as roads and bridges. And as a community, I think we need to do a better job of that.

The coastal restoration work in the Gulf is gaining much momentum and it's expected to start bidding and we expect to see some projects starting off in '11 there. The beach projects, as many of you know, may have been deferred and now it looks like we'll have a strong beach market over the next 12 months and we hope to see over $200 million of awards being issued. The Middle East market has been somewhat flat and trending downward for the last couple years, and so we're embarking on a full review of that specific market and how we adapt to that market.

On the other side, we've been seeing some opportunities in Brazil. As we mentioned, we have a dredge down there now and we hope to be able to employ other pieces of equipment in that market and we see some opportunities for our specific equipment.

Our demolition expansion has resulted in higher revenue projections and backlog, and as we get over the learning curve in some of our new markets, we expect the earnings to come flowing through on that side, too. Our recent [significant] win in Louisiana supports our thesis that we can grow beyond our core markets in demolition. As we've discussed, our team is going through a very extensive strategic planning exercise and fusing us with some strategic thinking, and we expect to see some very interesting results coming out of that, both for internal and external operation improvements and external and internal growth. We do believe the Company is equipped with the proper management equipment and a capital structure now to pursue these opportunities when they come forward.

Those are our prepared remarks and now we're open for some question and answers.

(Operator Instructions.) And your first question comes from the line of Trey Grooms of Stephens. Please proceed.

Good morning, guys.

Hey, Trey.

The first question, could you give us a little bit more color on the DR option that you were talking about, just to make sure that I have the numbers right that you kind of went through briefly? But could you just kind of give us a little more color on that?

Well, the color would be that the option is the same option that has been discussed for the last couple of years and--as the final add on to the project, and it's value is $46 million. And our understanding is that it can start fairly soon.

Yes, that's--the timing, it could start fairly soon. How long do you think it would last to kind of go through that project? How long would it last?

Yes. It's over a number of years, so it's a small contribution. I think two to three years.

Okay.

But we will be able to put the retrofitted Ohio on there and, for lack of a better term, shake out the bugs and get the Ohio working.

About 100 days of work.

About 100 days for Ohio, so we're very excited about that, because any time you do a major renovation of a vessel you want to get it to work and shake out any of the learning curves. So we're excited that that should have about 100 days on it.

Okay. And in your prepared remarks, I guess you discussed that in 2011 you thought that the Middle East would see some improvement. Is this primarily it or is there other kind of core demand improvement going on there?

No, there's--there are a number of projects that are coming up for bid. Probably the one that we're most focused on right now is the one in Qatar where we've worked before. But there is a list of additional projects that we think are projects that would work for us, for our equipment, for our organization.

Okay, that's helpful. And then, just on--looking at the demand domestically for dredging, you touched on a couple of things that might--the coastal restoration, for example. I mean, is that--are these things that you think can start to ramp up pretty quickly in 2011? Is this more of a kind of mid-year type thing? I understand that you guys are expecting another strong year in 2011. I'm just trying to really kind of gauge the timing.

I mean, the basic bid market looks like it will be a stronger market if you take out certain of the extra items, the stimulus, and the berm work. Harbor Maintenance Trust Fund, if it were to be passed, would probably only give us some support in the fourth quarter of next year. The berm work--excuse me, the coastal restoration work, if it starts bidding out next year, probably second half of the year you'd see potentially some flow. The muscle along deepening of ports, I think that's probably a little bit more mid-term. You may get something this year, but--'11, but '12 through '15 is when you'll start--my guess is start feeling some of that. And as Bruce said, there is some berm money left that we're told will be played into. Some of that will go into the fourth quarter, but I think you'll probably see some of that in the first quarter next year, too.

Okay. And then, just shifting gears to demolition, can you talk a little bit about what's driving that strength?

Geographic expansion I would say is the key. We continue to have a great reputation in Massachusetts and when projects do come along, we're highly sought out--we're a sought after contractor to do that. But we've spent effort bidding on and learning the market in New York and in other areas. And when the bridge came up that resulted from the Katrina damage we saw that as an opportunity, a bridge that made sense for us and for our equipment. And we took a hard look at it. And so, that's a part of it, too. So our team at NASDI is looking at selective projects up and down the coast and inland. They have recently been thinking about a project that came up in Colorado which seems a reach, but it's a project that might be well suited for our talent, and so we'll be looking at that. So I think the guys at NASDI are fired up and ready and aggressive. They're willing to think about projects in a number of places.

And, Bruce, there's two other points that I think I'd like to put out there. One, internally, we're really trying to mesh the skill sets NASDI has with some of our internal skill sets here on--.

--Yes--.

--In (inaudible) on the dredging side. So I think there's some synergies we can gain from there and maybe give them a little bit more bulk. And secondly, it's clear to us, certain of the competitors in the demolition business have run into some economic issues and have had a tough time with their bonding. So our financial strength in that market has opened up some opportunities also for us.

Yes, that's right.

Because competitors are having a hard time.

Okay, that's all helpful. And then, just my last question is on Harbor Maintenance Trust Fund. I know you talked about it a little bit there. But just you guys are a lot closer to it than most of us out here. So just kind of what's your gut feel on kind of the timing of this thing? Do you think it's likely that we could get something done in the lame duck or do you think it's--is that a long shot or just your thoughts there?

It's third and long. We don't have Brett Favre quarterbacking for us this year. We've probably got someone a little--maybe a little more like a Peyton Manning. But it's going to be tough. You know the mood in Washington. Spending money is difficult. The one thing I will say is between the DCA and our team, there is a tremendously more coherent coalition going after it. So if we don't get it this year, we have good hopes that it will get passed at some point. But we've long since left the area of prognosticating on what happens in Washington. I'll leave that up to CNN and Fox News and everyone else.

Okay. I don't blame you there. Well, congratulations, guys, on a great quarter. Keep up the good work.

Thank you.

Your next question comes from the line of [Grau Shu] of Barclays Capital. Please proceed.

Hi. Good morning, guys. Congrats on the great quarter.

Thank you.

Thank you.

First, just a follow up on the DR contract. Is the $46 million it or can you get more on the DR contract afterwards or in between? Because I think the $46 million is an option, but is there any more scope that can come from the project?

Well, not from that particular project, but certainly there is more--there are more projects possible in that area.

Yes. I mean, clearly--.

--The Bahrain area?

Yes, the Middle East, obviously, slowed down tremendously and we're starting to see a lot of things put on--put back on the burner that was taken off the burner. But that specific project was a add-on to a project we had been working for a couple years and it's just kind of in the final phase that was finally awarded.

Okay. And maybe more importantly, do you think that the DR project release is an indication that the activity is making--picking up a little bit in the Middle East? I mean, did that pick up--how does that compare versus your expectations last quarter or early in the year?

Well, by itself, it's not an indication because there was an expiration date on exercising the option. So that's--that is not an indication, but there are other indications, such as the project in Canada that I discussed that is moving along and feels very real for bidding in a short period of time. So we are seeing some pickup in activity.

Okay. So I mean, if you hit on all cylinders next year, both in the Middle East and other areas, like Brazil, do you think it's possible you can sort of get back to maybe north of $100 million a year of foreign work, or is that a bit of a stretch in 2011?

Are you asking about foreign work, our revenue level?

Yes, foreign dredging. I'm sorry. You asked a question?

We've been above 100 for the last few years.

Right.

I think your question might be do we think we'll get back up to the levels we saw two years, three years ago. And I think it will be difficult to get up to the levels when we were just pounding it in the Middle East. But--

--It's difficult focusing on a single market.

Right.

And I think the key to what we're trying to do is we're trying to look at South America, we're trying to look at the Middle East--.

--Yes--.

--Looking in a number of places. So we're not going to just depend on a single market [that fits].

Right. I mean, I said, the other areas like Brazil as well. So if you're looking at the South American market as well, I mean, based on the bids that you see that could come next year, I mean, is it possible that you can give back to that kind of level that you saw in the last couple of years for 2011, or is that a stretch?

I think if you combine all those markets, it's certainly possible. There are--as we've--as you've heard in previous calls, there are a number of projects in Brazil that have--that are scheduled to come up for bid. And we think that we are capable from an equipment and operating standpoint to perform well on those.

Okay. And so, what is your longer term goal for NASDI as a percentage of the business? I mean, this seems like an area that if you get large enough , you can maybe add some stable revenue stream to the overall business. I mean, how fast can that ramp? I mean, I know you've made some headway into New York and as you had suggested, you won a contract in Louisiana. But how fast can that

It's a good question. We're going through, again, our strategic planning exercise and I think if we can incorporate NASDI in with us and work together and integrate better, I think we can grow it. But we're still going through that process. I think you'll find that the Louisiana project will be a good indication of how we find the market and our ability to take that into different locations. So I think you're just going to have to give us probably three or six months to get a little bit more color on that.

Okay. Just one more. Can you talk about the operational improvements a little bit more? How significantly can that contribute to G&A next year? I mean, are we talking a couple hundred basis points or is it lower?

We are still going through the strategic planning exercise. We think there's some room for improvement on the operating side, but I think it's probably too early for us to quantify it for you here.

Okay. Thanks, guys.

Yes.

Congratulations.

Thank you.

Thank you.

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

Hi. Can you--this--can you give us any idea of the AR balance with these sales? It seems like your working capital didn't go up that much more than cash, but can you tell me what the AR balance was, the accounts receivable?

Yes. Just hold on a second. Let me pull it up.

AR was about 125 million.

Okay. And then, drilling down a little bit more on the demolition, it seems like your backlog jumped up a couple of quarters ago there, but the revenues didn't really hit until this quarter. And is there anything we can infer from the backlog about what revenues will look like over the next two or three quarters? Do you pick up the backlog pretty quickly and run through it pretty quickly, or is there any guidance you can give us there on what revenues could pick up?

Well, I would say that it varies. I mean, we are--we--our backlog does not include the bridge demo in Louisiana because it was--we were a little better in October. But we're rolling in--we'll be rolling into the backlog soon. However, that job won't start for a few months. And that's an example of a job that starts pretty slowly. Others get going right away, particularly if they're in Massachusetts. So the answer to the question would be based partially on the location of the job and also on other factors. But normally, those projects get started fairly quickly. By the time that they're bid out, the projects are ready to go.

Okay. And then, on the U.S. capital revenues, I mean, I don't think you've ever had a quarter that big. Is that true in that segment?

I can't say for sure that that's the highest that we've ever had. But certainly, that was driven by the work in the--behind the berms.

Yes.

And I mean, it seems to me that you almost couldn't really sustain that level of revenues, and you mentioned the fact you were having--you're expecting a little bit of a slower fourth quarter because you're going to have stuff out on maintenance and repositioning. But I mean, if you're running at full utilization, how much--is there any way for you to give us an indication of how much revenue you can generate in the U.S. capital segment with the current fleet you have deployed in the U.S. market?

Well, I guess you asked a couple things there. One is, the fourth quarter is almost always a slower quarter, so things are bound to slow down in the fourth quarter. The weather is different. We just can't operate the way we can in second and third quarter. And in the fourth quarter, particularly this year, there will be some work performed on some of the vessels to shore it up to take on 2011. As far as your broader question to--which kind of goes to capacity, it's very difficult to answer that. As you know, we've been very careful about that because it depends on too many variables, what kind of work. Berm work is different than a deepening. Deepening work in Baltimore is different than deepening work in New York. It's very difficult to get your arms around that.

And we do have flexibility with some of our U.S. flag vessels that are out in the U.S. If the U.S. market stays very strong and picks up in the various sectors, we would clearly look at repositioning one or two of those vessels.

Okay. And then, I guess finally, to the cash on your balance sheet. You said you're looking at your capital structure going forward. Would you consider doing a dividend increase? It seem like you've got plenty of net income to support it.

I mean, we're starting the strategic planning process, as we talked about, which I think the capital structure will play in. And we're looking at the debt markets in the near term, whether we should be refinancing or not. So everything is on the table. Obviously, we'd have to go and get some covenant relief to increase our dividend. But it's safe to say that we're open to exploring all opportunities that we think have shareholder value.

It's hard for Jon and I to speak for the board, but I guess our preference would be to take the capital and invest it in something we think can grow.

Very good. Thank you. That's all I have.

Okay, thank you.

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

Good morning, everyone.

Good morning.

Good morning, Richard.

I wonder if we could get back to the Harbor Maintenance Trust Fund. I know you guys said you didn't want to prognosticate on what's going to happen with Washington, but given that we're going to know the election results tomorrow, what are the I guess more favorable scenarios whether the House goes to the Democrats--or goes to the Republicans or the Democrats keep it? And then, particularly in the Oberstar race. If he gets voted out, will he be more inclined to try and either get WRDA and push through for his legacy in the lame duck, or would he pluck it off of Ward and try and pass it through in another bill?

Richard, we talk to many lobbyists. We've talked to many Congressmen, a few Senators. Depending on who you talk to, you get all of the above. I think the question we have to be ready to do, and we are, is no matter what ends up happening today we have to try to use all the leverage we can in association with, obviously, the DCA and our coalition to react to whatever happens today. So I think we've got in our mind courses of action to take, if Oberstar doesn't remain Chairman, if Oberstar doesn't remain in the House. We have other plans depending on if the House goes Republican. We've walked through every option and, trust me, everyone we talk to lays out seven different options for every scenario. So all we can do is react as best we can to what happens today.

Okay. And then, getting back to NASDI, you're expanding into different geographies. Does that start to change the risk profile of some of your projects, just given that local regulations could be a little bit different sourcing materials and/or labor? Does that become a riskier endeavor for you as you guys go into new markets?

Well, clearly, risk gets added on if you're further from home, you're further from your comfort zone, but not--we don't think significantly so. In order to bid in most places, we have to be licensed, which means somebody has to be very familiar with--at last one person has to be very familiar with the local regulations. And that has been the case. So from that standpoint, we're really not uncomfortable. But it is further from home and you're right, sources for needs are new. So there is an element of that, but nothing that I would even consider significant.

Yes. And the other part that I'll point out, when we talk about integrating NASDI with the dredging business and some of the things we have here in Oakbrook, is some of those project management skills, when NASDI continues to grow one of the things you always look at is who are the project managers, maintaining costs, keeping your eye on the ball, which we all know at the end of the day is you've got to be watching things like that every week. We can lend some support there and we have those skill sets. We're very strong project managers. And our ability in working with NASDI on those things I think will mitigate a lot of those potential risks.

Okay. And then, finally, just getting to the berm work, I think you've said that you guys have done about 65 million in revenues. Do you have a sense of how much is left on that total 360? And then, second part of the question would be, given that you guys are putting the berms in place there and assuming they're successful, will that maybe help jumpstart the coastal restoration projects since vessels are already down there and people are seeing the potential benefits of putting those berms in place?

Well, last question first, we hope so. We hope that will accelerate it. In terms of what we see for the berm work, yes, we're around 65. It's very hard for us to measure what that means in terms of how much has been authorized. We don't know for example how much is going to non-pure dredging, that is consultants, general contractor and so on. So that's why this has been a little difficult for us to talk about in terms of our bid market and our backlog, because it's--we get spurts of authorization. And we have authorization to continue through this quarter and we are hopeful that that will continue into 2011, but we just don't have the information to answer that question as well as you'd like it answered.

But it is true, Bruce, that 240 has been, for lack of a better term, allocated, and then the other 120 has gone to the state--of that initial 360. So the state's still figuring out with their advisors how they're going to apply that and we hope to be part of that.

Yes.

I think we've played very well down there. We've gotten from the general contractors--I think at the end of the day, we've probably shown as good or better than any other dredging company down there. So I feel comfortable that as the work continues, we'll get our fair share.

Yes, that's right. It's just--we recently came across a question about, well, if you've done 65 and there's been 240, that's not your market share. Well, no, it's not because the 240 just isn't a relevant number.

Right.

We don't know how much of that is specifically for pure dredging activities and how much of it has really been committed once it's been authorized. So what we do know is that we've done 65 million. We're continuing into the fourth quarter and we are ready to keep going if asked to do so.

All right, thanks. I'll get back in queue.

Thank you.

Your next question comes from the line of [Tristin Richardson] of D.A. Davidson. Please proceed.

Tristin Richardson. Good morning, guys. This is Tristin in for John Rogers.

Hey, Tristin.

Just to follow up on the berm construction just very briefly. You guys have said 65 million year-to-date. And have you guys indicated what it was for the third quarter?

60 million. I think we did say that. Yes.

Yes. I mean, there was--.

--Most of it was the third quarter.

Yes, very little truly hit the second quarter.

Got you. Okay, thank you. And then, I know this will be in the Q, but would you guys mind breaking out the segment earnings, the operating income?

Unfortunately, I don't have that right in front of me.

Okay. And then, just looking at the SG&A line, it up ticked quite a bit, year-over-year ahead of the earnings growth and sequentially. I was just curious if you could provide some color on what was driving that increase.

Well, that's the reorganization expense, the severance and other reorganization expenses. So it's--we've had considerable expenses here.

Okay.

It was 4.4 million in this quarter alone.

Got you. Okay. Thank you guys very much. That's all I had.

Okay. Thank you.

Thanks.

Your next question comes from the line of Kevin Bairnes of SCF Marine. Please proceed.

Hello?

Kevin?

Mr. Bairnes, please check your phone for the mute feature, sir. I believe he has the line on hold. Your next question comes from the lien of A.J. Strasser of Cooper Creek Partners. Please proceed.

Hey, Jon, Bruce, Katie. Congratulations, great quarter.

Thank you.

Thank you.

Thank you.

So I had a question on the gross margins. They've been pretty solid in the last few quarters in the 20% range, I guess as a function of good utilization. If 2011 is solid, what do you think the gross margins can be? And I know it's hard to predict. But is it possible to replicate these margins going forward? Are there things you can do to try to keep utilization strong?

Well, utilization is one of the keys. But maybe a bigger key is that our dredging team has been able to perform on projects as they bid them and as they expect it in. And so, they have done really a great job in the quarter and in the year making sure those projects get performed as efficiently and profitably as possible. But the other part of it certainly is utilization. As utilization rises, it benefits us. And we--can we at this point discuss whether our utilization could be as high next year? We--it could be. It depends on some of these things that Jon talked about - the coastal restoration, continuation of berm work, those kinds of things. But hard to say at this point or suggest that that utilization can continue throughout '11.

Great. And then, I had another question on the EBITDA. So it was even--I guess it was even better than 24 million, if you add back the 4.4 million in reorg items. Really, a great job there. Going forward, you can just--as we look into Q4, are there any assumptions in your guidance in terms of the continuation of those reorg items? And then, I have one more question on the Panama Canal.

The reorg is substantially complete. There are--there's a small amount that will occur in the fourth and first half of '11, but it is--it's less than $250,000 over those three quarters.

Okay, thank you. And then, just lastly, and just to the extent that you can talk about this, now, obviously, as we get closer to the actual work of port expansion, how big of an opportunity can the U.S. port expansion as a result of the Panama Canal expansion be? I think we have kind of heard that New York port expansion was over 1.5 billion and that was just one port. As you guys kind of look at the opportunity here, obviously, there are several ports to be done. Could you just give us a sense of what kind of potential over the next four or five years is as a result of this?

I mean, it's real big numbers and it's the type of work that we do real, real well. Our equipment is very suited for deepening work, the more difficult type of work. And you'd have to go port by port, but it's a significant number. And there's a lot of ports out that are buying ports and obviously the ones that get deepened first will be better. So I think you need to stay tuned as we do on a very close basis with each of the bigger ports on the east coast.

Yes, there's a footrace in a sense. So when Jon was asked whether--how soon that could come, it depends on how aggressive a couple of the ports might be. The more aggressive they want to be, the better--the sooner they're going to be ready and the better equipment they're going to have from us to work on their port.

How many ports are we talking about?

I would say--fair to say six ports are kind of competing with each other to be ready.

Great. All right, thanks, again, and really great quarter. Congratulations and good story.

Thank you.

Yes. Thanks for taking my question.

Absolutely.

Your final question comes from the line of Jack Kasprzak of BB&T. Please proceed.

Oh, thanks. Good morning. I was going to ask about the berm work. Obviously, you mentioned in the press release it helped utilization overall. But hearkening back to the Q2 call, I think the comment at that point was that it was lower margin because it was day work, because the margin turned out to be better than you guys thought it was going to be, noticing that the third quarter gross margin was very similar to the second quarter, so you obviously didn't give up too much, or was there something else going on there?

Well, there are a few things that I should mention to answer that. One is, again, utilization helped, but I think that the third quarter was not such a great quarter just because of berm work. Again, we had a number of other projects during the quarter that were performed very well by our dredging guys, and so we complemented the quarter certainly with the berm work. But it was just an effort on the part of the dredging group to perform a number of projects, to perform on a number of projects while also performing this berm work. The berm work was--it was not bid on a lump sum. It is a daily rate and it carries a lower margin, but the combination of the other projects we worked on and the higher utilization all contributed to the success of the quarter.

Okay, great. That's all I had. Thanks very much.

Thanks, Jack.

Okay. If there are no other questions, we want to thank everybody for joining us this morning and we look forward to speaking to you all as a group after the year-end. Thanks, everyone. Bye.

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