Great Lakes Dredge & Dock Corp (GLDD) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the fourth-quarter 2011 Great Lakes Dredge & Dock Corporation earnings conference call. My name is Giovaughn and I will be your coordinator for today.

At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's conference, Ms. Katie Hayes, Treasurer and Director of Investor Relations. Please proceed.

Morning. This is Katie Hayes, Treasurer and Director of Investor Relations, and I welcome you to our quarterly conference call.

Bruce Biemeck, our President and Chief Financial Officer, will begin our discussion representing the financial highlights for the 2011 fourth quarter and year to date. 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 factors inherent in our business are set forth in our filings with the SEC including on our 2010 Form 10-K and subsequent filings.

During this hall we also refer to certain non-GAAP financial measures including adjusted EBITDA, which are explained in the net income to adjusted EBITDA reconciliation attached to our earnings release.

I will now the turn the call over to Bruce.

Thank you, Katie. We issued our press release this morning and I assume you have had a chance to look at it. I am going to make some comments on our highlights first from the total year 2011. First of all, 2011 was another successful year with $93.7 million of EBITDA, second only to $103 million in 2010.

In our last call we are reaffirmed our guidance of $85 million to $90 million of EBITDA, excluding gains from asset sales. Our asset gains of $8.6 million during the quarter exceeded our expectation and the resulting year's results places us within the guidance given.

Some of the highlights in the year. We executed significant turnaround in the demolition business during the year, posting record revenue for the year in that segment. We increased our domestic dredging backlog versus the year-end 2010 as a result of improved annual win rate of 43% of our bid market, which is above our traditional average of 40%.

International opportunities improved, highlighted by a fourth-quarter win on the East Hidd dredging project, a $34 million land reclamation project in Bahrain, and bidding opportunities have been steadily increasing in this region. We experienced strong execution on projects in our Rivers & Lakes division as we achieved our forecasted expectations for 2011 and continued growth in backlog. This has continued into the new year with over $40 million of backlog and low bids pending an award as of the end of last week.

In keeping with our strategy of rationalizing underutilized assets, in 2011 we sold two foreign flag vessels and a piece of property in Texas for gains of over $11 million. The land was an unutilized property acquired in the 1990s as part of an equipment purchase and the dredges were underperforming assets with increasing maintenance requirements and a limited market, such that margins on this equipment have not materialized in recent years. As previously reported in detail, 2011 earnings per share were impacted by the issuance of new senior notes which resulted in $6.2 million of additional expense for 2011.

During the quarter some of the highlights to point out are the Dredging segment was affected by weather again in the fourth quarter as it was in the third, and as a result, it affected our fourth-quarter dredging revenue and margin. The Demolition segment experienced a very strong fourth quarter, posting record operating income for the quarter.

Rivers & Lakes had a strong quarter concluding a strong second half after experiencing extreme weather conditions during the first two quarters. So we got off to a slow start in 2011 in Rivers & Lakes, but the second half was very good.

Domestic Dredging was affected by weather, as I mentioned, but also repair issues, many of which could have been better managed. Management has addressed these issues and believes 2012's results will reflect this.

Keep in mind when looking at our fourth quarter that in 2010 the fourth quarter was positively impacted by the work that we did in the Gulf on construction of the berms. Again, in the quarter we sold the dredge [or rather] the island located in Bahrain and the piece of property in Texas which I had mentioned for gains of $8.6 million.

In the 2011 bid market, the domestic dredging bid market for the year ended December 31 totaled $1.041 billion compared to $875 million in the prior year. The Company won 43% of the overall domestic bid market, which is above its prior three-year average of 39%. For the full year of 2011 Great Lakes won 62%, or $188 million, of the beach nourishment projects awarded; 33%, which is $118 million, of the capital projects awarded; 36%, equaling $109 million, of the maintenance projects awarded; and 36%, or $20 million, of the rivers and lakes projects awarded.

Great Lakes strong win rate in the fourth quarter along with the addition of the East Hidd land reclamation project in Bahrain resulted in dredging backlog and pending awards of $355 million at December 31, which compares favorably to $317 million at December 31, 2010. The Company's contracted dredging backlog was $319 million at December 31. That is without pending awards which compared to $283 million at December 31, 2010.

In addition, since December 31, 2011, we have won seven projects totaling $264 million, including the previously announced $180 million project in Australia.

Demolition segment backlog was $51 million at December 31, 2011, which compares to $81 million at December 31, 2010. Among several other projects, however, the demolition segment has a $22 million remediation project in New Jersey which is pending award at year-end. In our demolition business we experienced further improvement in the fourth quarter in all areas of work which include bridge demolition and Yankee Environmental.

Just a few comments on the Demolition division, which was a bit of a roller coaster during the year. As you may recall, we made some changes in the early part of the year installing new management in the second and third quarters. We improved bidding, estimating, and the control environment immediately.

We had significant losses in the first half which were completely offset by positive results in the second half. Of note, we have had a number of successes on projects, bid, won, and performed during 2011 and we see a very strong market ahead.

Capital expenditures for the year totaled $25 million, which ties to our most recent forecast. We took advantage of the 100% bonus depreciation allowed by the IRS in 2011, which accelerated some spending, and we also spent about $5 million on items that we had normally rented and determined it was more cost effective to purchase.

As we noted on our last call, we have also throughout the year performed analysis rationalizing existing equipment and have reduced some of our equipment. Not major pieces of equipment, but equipment that we think is surplus or not performing with adequate returns. This is an ongoing program designed primarily to identify underperforming assets and eliminate the ongoing expenditures associated with maintaining these assets.

We are also continuing our cost improvement programs associated with spending and procurement related to fuel, parts, and pipe inventory and other cost line items. These are not areas of neglect, but rather areas where upgraded systems and methods can be beneficial.

Turning to the balance sheet, our cash balance at December 31 was $113.3 million. As previously discussed, we refinanced the notes in the first quarter replacing $175 million of 7.75% with $250 million at 7 3/8%, which are eight-year notes. Our revolving credit facility matures in June of 2012 and we had no borrowings against that facility at year end.

We remain in the process of negotiating a new revolving credit facility and we anticipate having that finalized shortly. Our ratios remain strong with total leverage ratio net of cash at 1.6 at year-end and interest coverage of 4.8 times.

Those are some summary comments related to operations and liquidity, and I would like to now turn the call over to Jon who is going to discuss some of the initiatives I referred to, as well as strategic planning and growth considerations for moving forward. Thank you.

Thanks, Bruce. First of all, I would like to thank everybody at Great Lakes for all the hard work they did during the year.

I think it has been a very good year for Bruce and I in our first full year at the helm. What I would like to first do is talk about what I think are some of the highlights from 2011 and then give you a view on where we think the market is going in 2012 and beyond.

We did a lot of things to follow our goals and strategies we talked about throughout the year. First off, and probably the biggest highlight we have to talk about, is our Demolition business. It was a total restart, as many of you gleaned from our discussions, and we couldn't be prouder of where we positioned it.

We told you that when you would either figure it out or get rid of it. We figured it out. We have positioned it very well. We have aligned it with our business and we couldn't be prouder of how it executed in the fourth quarter and the opportunities we see going forward.

Some of the highlights from that are, one, focusing and developing a bridge demolition business which deals with assets and opportunities on the water, a very specialized type of demolition that plays well with our other assets and our knowledge. We focused in on some brownfield opportunities. We think that is a real opportunity, especially with some of the other work that we have done throughout the year, and we see that as a continual growing opportunity.

We focused our efforts on more programmatic opportunities, things that could provide multiple larger projects, including things like the utilities. And there will be a significant amount of work in the utilities and I will talk about that a little bit when we get into the 2012 outlook and beyond. Also, programs like the Army RAC program and other programs that are what I would call much more programmatic.

We have also looked at rationalize some of the smaller business we are doing outside and in the Boston markets. Finally, we have really focused on opportunities where we can combine dredging skills with demolition skills. We actively have three projects either in execution or in backlog that are actually joint projects that our Demolition business is doing with our Dredging operations.

So all-in-all, very happy about that. Where we put that business, where we positioned it, and we do expect that business to grow and we see the opportunities there.

Secondly, we did an acquisition and, as Bruce said, because of weather and some initial things it was slow in the integration. But we executed to our plan in 2011 that we budgeted as part of the acquisition and we have integrated that business into Great Lakes, and we again see that business as a growing sector and fitting in very well with us.

Thirdly, in 2011 we structured a TerraSea joint venture we talked about to go after the environmental services side of the business. We see that as a real opportunity for both our rivers and our lakes and our smaller equipment. In addition, we see that as a real opportunity to mesh with our demolition business.

It was really in the planning phases and the putting together phases in 2011, but we have some tremendous opportunities on the bidding side that we are looking at now. And we will hope to be able to announce some nice, solid wins in the first and second quarter of this year.

And, finally, we talked some about our international operations throughout the year and how we have to identify opportunities where we can get risk adjusted returns for going overseas. We spent some good amount of time as a management team evaluating that and we really see some very good opportunities internationally. We have focused our efforts, again, in the Middle East where Bruce talked about the Hidd reclamation, and we see the market growing there.

Also, obviously the win in Australia. We see Australia as a growing business and as we move some equipment there for the next three years we expect probably to have an office there and work through there as we go forward. We see a significant amount of opportunities on the natural resource side in Australia.

We have one of our business development teams out in India right now on a two-week mission with the US Department of Commerce exploring their ports and opportunities there. We also have spent some time and hired a professional to help us get into Latin America, Brazil, Colombia, and Central America, and we believe that will also be fruitful for us.

So we accomplished a lot of our goals in 2011 from the standpoint of identifying areas to grow and build some growth into the organization. Bruce talked about some of our other opportunities and things in 2011 that we looked at such as cost containment, rationalization of equipment. And you saw that with the sale of the Victorian, the Northerly, and an excess piece of land.

Finally, I think we announced at the beginning of the year we have restructured some of our compensation programs to better align our management's focus on the fact that we have to get a return on assets for our shareholders and just not an EBITDA [goal]. We think that is an important step in re-educating our people that we have to provide returns on assets and it's important for our shareholders.

Now let's talk a little bit about where we see the market in 2012. Because of the big Wheatstone win, let's talk a little bit about international.

Obviously the Wheatstone project we announced, $180 million, we think that has opportunities for us to increase and we also see tremendous opportunities for additional projects in Australia once we get down there. Many of you spent some time and have looked at the natural gas programs and natural resource programs in Australia on the West Coast, and we expect that there will be a significant amount of work there.

Our plans are to mobilize into Brazil one of our clamshell packages. We talked about hiring a vice president to focus on South and Central America. We think there is a nice market there for some of our clamshells and some of the work we can do. We think there is river work in Colombia.

And so we are going to get in to Latin and Central America. We have made the investment to hire a senior professional. He will be going down there probably in the second to third quarter once we sign up our first major project that we believe we will have soon. We expect that to be another market that fits well for our equipment.

The Middle East, just so you know, we have seen continued growth in the bidding opportunities. East Hidd is one of several projects we are proposing on now and we see that market picking up again. So our Middle East we expect to improve in the coming year from a revenue side.

And we have talked about India. India, I think, long term is going to be a tremendous growth market. We talked about the fact that we have identified someone to do some work with together there and we are investing some resources. So we see that market as an interesting market and a market that should be good for our equipment in the long term.

Secondly, let's talk a little bit about coastal restoration. We announced that we won Pelican Island and we are doing that now. We were low bid on a second major coastal restoration project, Scofield. We expect that to be awarded in the next couple of weeks and we expect to see a significant amount of money coming in for coastal restoration.

As we have discussed in the past, we think the Scofield project is very exciting because it involves a long pipeline and we think there are numerous opportunities that will come off of that project.

Additionally, I think many of you may have seen that there was legislation passed in the House, the coastal restoration, RESTORE Act. I can't tell you if it will be passed in the Senate, but the legislation basically said that 80% of the fines will go to Gulf Coast restoration.

We have also heard some noises of a BP NRDA settlement, where those funds will be, but we are very comfortable that there will be money in the Gulf Coast region for restoration and we expect to see numerous projects coming out over the next 12 to 24 months. So we have talked about that market and that market is coming to us now.

Thirdly, I would like to talk a little about the River & Lake market. We talked about, and Bruce has mentioned, that with our backlog and low bids pending that business has its largest backlog in the history of its business. We see opportunities along the Mississippi River; we see lake opportunities there; we see opportunities with our TerraSea joint venture. So we have significant hopes that that business will continue to grow significantly for us in the next year or two.

We have also identified that there are opportunities potentially to work with state and local governments in potentially helping them finance smaller projects. We have had discussions with a significant amount of regional bankers. We actually came out with a small program where we would take responsibility for executing a project and then helping them on the financing side and actually then been placing the debt for them.

So it's something we started right at the end of the year, beginning of this year. It's garnering some interest in the marketplace and we believe that it will help jumpstart some potential projects that are out there in backlog for communities that just aren't finding a simple way to finance them.

The fourth thing I would like to touch on a little bit is in the deepenings. You have clearly seen a lot of talk -- you can't open a newspaper in any of the Gulf or East Coast communities that have ports and not talk about deepenings. There is some legislation that passed in December which allows for increased local contributions to the partnering with the Corps for funding federal projects and expediting them. And that is how the Miami project that should come out for bid this summer is getting done, with a larger local cost sharing with the federal government.

To get on the soapbox for a bit, you see billions of dollars of money being spent around these ports in preparation for the deepening and the federal money just needs to come in to help support the deepening. With the Panama Canal being still on plan for completion in 2014 you will start seeing those dominoes coming in.

As for Miami, we feel we are best-positioned to get that business. If anybody is paying attention in Miami, right now -- it's not out to bid yet because there is some environmental groups who are concerned with what that will do. One of the big proposals, obviously, out there in initial discussing there is a significant amount of blasting to execute on that project.

We believe we are the only dredging company that can dredge the Miami Harbor with minimal blasting and so we think that should be very attractive to both the federal government, the local government, and the environmentalists. And in an RFP scenario we think that will competitively put us in a much better position.

Finally, on the Dredging side let's talk a minute about the efforts in Washington. The Harbor Maintenance Trust Fund has had a significant amount of discussion in Washington. We have been discussed in the transportation bill. But everybody's best efforts and expectations are that nothing happens in Washington -- and there may not be a transportation bill -- but I would not say that our efforts have gone without value.

The president's budget for 2013 has $180 million increase in the navigation budget, which is really dredging, and the rest of the Army Corps budget is either flat or potentially down a little bit. Additionally, there has been a disaster recovery fund set up in Congress in December to do Mississippi River projects that both help our core Dredging business and our River & Lake business, and money has been funded into there where in the past it had to come through supplemental budget for the Corps.

So the discussions in Washington and the work we have been doing will increase the overall market for dredging. We haven't given up on getting the Harbor Maintenance Trust Fund through; we have a tremendous coalition. I will tell you that the effort and the amounts of voice we have garnered in Washington is outsized for a small dredging industry, and so we are seeing benefits from our significant amount of time and efforts in Washington.

So we do believe that there are tremendous market opportunities in almost all phases of our dredging opportunity -- Domestic, Rivers & Lakes, and International. And based on his market outlook, our equipment department is deep in the planning phase for equipment additions which will allow us to take advantage of these opportunities. We are working hard to determine what is the right investments we should make, but I would not be surprised to see us make investments this year in equipment.

Lastly, from a market outlook I would like to talk about the Demolition business. As Bruce said and as I said earlier, repositioned business with tremendous opportunities. We are seeing bridge demolition business have to come out.

We executed on a project and we are still doing it on Memorial Bridge in Portsmouth, New Hampshire. If anybody wants to go to YouTube and see it, it was a tremendous engineering feat for us to take the full center span down and actually lowered it onto five barges at once. We are taking it now to decommission and recycle the metals.

We see and have won a couple of small utility projects, and we are in deep discussions for significant other utility projects. We think that in conjunction with our TerraSea we believe brownfield reclamations are starting to pick up again. And as Bruce mentioned, we have a $22 million low bid pending for a project in New Jersey which is a brownfield that we feel very, very good about.

All-in-all we think our demolition business is on a growth phase and we like the market and we like where we are going and taking it. So we are very comfortable with the market outlook. We think there is clearly avenues for growth and we are still looking on the acquisition side.

And with that I am glad for Bruce and I to take any questions anybody might have.

(Operator Instructions) Trey Grooms, Stephens.

Good morning, guys. First question, so you mentioned on disaster recovery fund that money has been funded there for Mississippi. Any idea on the timing of when we could see something roll out there?

You are going to see projects coming out I think we actually had a small River & Lake project on a task order, and we expect to see some more task orders. We also see -- as the US fleet the hoppers are pretty full, so we are talking with the powers that be about turning some of that work into cut ahead work. But we expect to continue to see some of that work coming out but some of it actually has.

Okay. So you could continue to see that kind of pickup in 2012?

Yes, I believe we will continue to see -- yes, we will continue to see those opportunities throughout the year.

Okay. All right, perfect. Then also, I believe on prior calls you had talked about the possibility of bringing on an additional ship or vessel or increasing capacity at some point in the future, and I think you had mentioned that you might be making a decision on that possibly in the first quarter. Can you give us an update on that?

Well, as we said previously, we are pretty far along in the design and measuring the market. And would certainly like to see a couple of more events take place, such as the Harbor Maintenance Trust Fund. That would make us feel a lot more comfortable, but we do think that that is a matter of time.

We are proceeding with our design plans and I think toward the end of the first quarter, end of the second quarter we may be at the decision point.

Okay. But nothing definitive at this point yet?

Nothing definitive because we have put a lot of upfront work into this. Designing, reviewing, analyzing, making sure that our calculations are right for productivity and so on. And so we just don't want to jump the gun before we feel very comfortable that our assumptions are in line.

Okay, that makes sense.

To follow along with that Trey, I would say that there is nothing in our decision making process that has changed and we are on a path -- we are on the same path we were on last time, so really nothing has changed.

Okay. I guess can you talk a little bit about -- so the big win in Australia, I mean that is a great win for you guys. It seems that, at least from what we know, historical international margins have been lower than the kind of overall industry, or excuse me, overall company margins. So with all the mobilization that is associated with that job can you just kind of give us an idea of how this particular job compares to kind of historical international work?

Well, it reflects a change in our strategy to go -- to focus on projects that aren't the smaller, lower margin projects that we have had in the past. We believe that larger projects, partnerships as we have formed here are important in going forward with our strategy of improving our international business. And this is an example of that.

Additionally, Trey; one, the cost of move, which will be expensive, is covered in the bid. It is a private-pay client not a government. And as Bruce said, it's a partnership, if you will, with DI and it's a significant long-term project.

We tend to do better on those type of projects than we do smaller ones, because I think our engineering skills and our partner's engineering skills allow you to engineer more profit into these projects. So we expect this to be a good project for us.

Yes, a partnership with DI but with significant ultimate customers where there is more market ahead.

All right, that is great. My last question is on the demolition business. You guys have done a great job kind of turning that business around.

Can you give us an idea just -- I don't know how much detail you can give us, but as much as possible on kind of where you see that business, at least from a margin standpoint, kind of long-term. How it kind of compares to the overall business that would be helpful. Thank you.

I will say a few things first and then let Jon come in. As Jon said, we tried to redirect the business through our new management to focus on more sophisticated projects. More sophisticated projects are going to result in different margins than we have seen in the past, that is higher margins than we have seen in the past.

We had a very well laid out strategy of what markets we want to look at. We had a strategy of getting our demolition business' feet wet, that is in the water, and they are now looking at projects, both on land and in the water, which we think is significant. They are working with our dredging division on certain projects and we think that the direction they have taken is right where we wanted to head.

Again, in answer to your question, we see improved margins ahead.

Trey, I think we may have talked about this before. When we really dug into our demolition business we saw that, again, we made money on bigger projects, more sophisticated projects, projects that involve more engineering and skill, and the 80/20 rule. We had a lot of smaller projects that we did to fill but really were making low margins on.

So as we redirected that business and as we talk about getting into programmatic things like Army Corps RAC programs, going after utilities at value. Value, safety, value; engineering skills. And you are dealing with more sophisticated people, you tend to deal with higher margin projects and you keep out -- and you keep away from some of the people that just drive down the market price. Because whether it's bonding requirements for taking down a bridge or it's level of sophistication and safety, if you are dealing with a utility, or things like that, that we believe we are going to be able to push the margins up in that business as we go along.

So we feel good that not only are revenues going to continue to grow in that business, but we also believe margins should expand also.

All right. Thanks a lot, guys. Good luck.

Andy Kaplowitz, Barclays.

Morning, guys. [Mark Mahalo] on for Andy. Thanks for taking my questions.

So I had a quick question. Jon, you touched on it a little bit, but can you kind of provide a little bit more of your 2012 outlook versus 2011 just in terms of whether it be your backlog, revenue, EBITDA outlook, or if you want to talk a little bit more about your Domestic Dredging bid market or kind of the win rate you expect in 2012? You had a very solid, what, 43%. Do you still expect that in 2012?

As you know, we obviously don't give you guidance until the second half of the year but you know our backlog is up. We see no reason why our win percentage should not trend the way it has historically trended. And we believe, certainly on the Demolition side, we are moving in a way that we won't have a first half of the year that we had last year where we are playing a lot of catch up and we are rolling off of a lot of poorly bid jobs where we had to take some reserves and completing things with zero margins.

Though we don't give guidance, I think you can probably tell from our voice that we are very optimistic about where 2012 should be.

Right. I think you touched on it just now with your answer as well to the previous question. In terms of your Demolition segment, I am guessing you are saying that you expect a more consistent earnings stream in 2012 versus 2011 and do not expect the kind of, I guess, the roller coaster that you had in 2011?

I mean, you know, between all of us now we can obviously say that that was a complete restructuring.

Right.

2011 we totally recognized the problems in the first half of the year and we acted quickly. We had seven projects I guess we bid that ultimately were lost projects that had zero margins; we had to take hits on them.

There is still a little bit of run over in our backlog on that, but not much. The new backlog that we are booking is backlog at good margin and we have the proper controls in place and the people in place to make that happen. We probably got rid of, Bruce, was it 25%, 30% of our management there?

Yes.

We did a complete overhaul there, so we feel comfortable that it's going to be a more steady operation.

Okay, great. Then just finally we have been hearing just from I would guess a few riots that are occurring in Bahrain to mark the one-year anniversary of the uprising there. You also recently announced your project in Bahrain.

Is there any difficulty right now in terms of that project ramping up or it's just kind of steady as she goes?

No, that project is working right now and understand the nature of the project. How they deal with some of the situations in Bahrain and results of the Arab Spring is they announced that they were going to build 50,000 homes for the Shiite majority, even though it's a Sunni ruling class. So the East Hidd project is actually the first big project.

So we are building the island and are going to build 3,000 homes and a full community there. So that was announced in the fall. It's fast tracked; we started pumping sand, I guess, after mobilizing. Right after the first of the year, Bruce?

Yes.

And we told them we would be done in a year. I think we are ahead of schedule and we will be done before the end of the year. And there will be more things along those lines.

So, yes, the things that are going on now we dealt with them last year. I think they are nowhere near as profound and as concerned that we have right now, and I think we are keeping an eye on it. But we are working, we are away from the Pearl Roundabout and we are in a rather secure area right now.

Okay, great. Thanks very much for the color, guys.

Philip Volpicelli, Deutsche Bank.

Good morning, Jon and Bruce. My question is with regards to the backlog, the $264 million of additional backlog you booked since the end of the quarters. So $34 million of that is East Hidd, $180 million of that is the Australia project, and then there is another $50 million. Can you break down that $50 million?

Yes, the answer is East Hidd was booked before the end of the year.

Oh, okay.

$46 million.

Yes, $46 million is the low bid on Scofield Island which is a reclamation project. And that will probably start, Bruce, in the third quarter, full quarter, is that right?

Yes.

There is a lot of mobilization there so a significant amounts of pipe laying and equipment utilization. There are a reasonable amount of River & Lake projects that came on and --

Huge project in San Diego.

Yes, there is a San Diego beach project which is just under $20 million also. So, yes, it's a nice mix of business for us. So go on --

That is great. Then in terms of the surplus assets that you sold. Are there more surplus assets that we should expect to be sold in 2012?

Nothing is imminent, but as I said, it's a program that we began to measure the cost of keeping and maintaining equipment versus historical utilization and the market. And so we have our eyeballs on a few things, but nothing imminent and nothing significant as we had in 2011 at least at this point.

Okay, great. Then in terms of the demolition, the seven jobs that you both mentioned that are at a loss. I think both of you danced around how much is left in the backlog there. Could you maybe put a dollar amount on that or an expectation on how much pain or operating loss it's going to cost?

Well, there are no more operating losses. We lost the reserves those jobs, which means we took the hit for the entire job. And so as we go forward we recognize revenue and zero margin. So it's not losses we are recognizing; it's just revenue without any margin.

I think we are down to two projects, two significant projects. Significant historically, nothing significant really going into 2012. I think the backlog might be --

(inaudible - microphone inaccessible)

How much? Apparently about $4 million that we have in backlog right now. However, on those projects there is some additional work which we are not bidding at a loss or taking at a loss, so there may be upside to those very projects.

That is great. And then my last question I know you don't give guidance for EBITDA until the second half of the year, but could you provide CapEx guidance for the year assuming, kind of excluding whether or not you build a new dredge?

Yes. It depends, of course, on whether the -- and I don't know the update on the tax benefit. I don't think it -- I don't think it has passed yet, but if it should pass we would again try to accelerate some of our future needs. But barring that, I would say that we are -- I think we saved $15 million to $25 million normally and I think that is about where we target right now.

All right. Thanks, guys.

(Operator Instructions) John Rogers, D.A. Davidson.

Good morning. I guess, first of all, it looks like with your bookings first quarter -- at the end of the first quarter, depending on revenue, you are going to be close to record backlog there. I guess I am wondering how to think about that in terms of utilization rates, because some of this work extends out longer than you normally have.

But as it stands right now, your utilization rates I assume are going to be pretty high. Can you compare those to 2011?

Well, we have sort of been careful about talking about utilization and capacity because of different configurations of equipment and support equipment. In fact, the only place where we have really detailed it is in the Rivers & Lakes division where we can -- where we have a better fix on what those dredges are capable of doing given the market.

As we said when we acquired that division, it's basically a $40 million a year -- it has been a $40 million revenue per year business and we think that with existing equipment we could perhaps do twice that amount. In fact, in the third quarter we had $15 million of revenue and said, well, if you annualize that you could get to $60 million. And so that is a small component of it.

There is some backlog we have that carries into future years. In fact, the Australia project really doesn't get going until the fourth quarter of 2012. But we have a significant amount of backlog and we would like to think that the market will continue to provide opportunities. And as it does, we would like to think that we can get greater utilization out of our equipment.

Because I am assuming that that is important as just your bid margins, I mean in terms of getting your overall margins up.

Well, it is because there are fixed costs to cover, that is right. And so we carefully take a look at that by piece of equipment. As we win jobs we plot it into a schedule to indicate what our utilization for that piece of equipment.

There are some variables, such as option work, for federal projects. Option work means that the customer, at their option, can add some work to it so it requires some strategy just thinking about what else to bid if that option should be exercised. But as it is we have a pretty full booking for our hopper dredges at this point and have some additional capacity for our cutter dredges, our hydraulic dredges, and also our clamshell equipment.

Okay. Bruce, in terms of depreciation for 2012, can you tell us what that looks like? Because it bounces around still a fair amount quarter to quarter (multiple speakers)

It has bounced around this year because, as we said in the last call, we had a number of capital leases, in effect capital leases in our demo division that had originally been acquired and treated as expense. And so we capitalized some of those items. So that is why there was some bounciness to it. It's usually flatter than that.

I don't know, Katie, if you have a forecast for depreciation or a budget number, but --.

For depreciation for next year, I think this year we were at about -- depreciation and amortization was about $40 million. I would say probably $38 million to $40 million next year because you are going to roll off some of that amortization from 2011.

Okay. Then just one last housekeeping. In terms of a tax rate, it dropped down in the quarter. I assumed that has to do with the sales of the equipment. Should we be thinking about a more normalized tax rate next year or for 2012?

(multiple speakers) because our mix of business in the state. The big factor in our tax rate is state rate, which varies quite a bit between New York and Louisiana. So at any time our tax rate is the federal rate plus the combination of state rates for where we are working.

Okay, okay. But there is -- but even with more work I guess more out into 2013 internationally I mean will your tax rate then come down?

Well, interesting question. Part of our strategy now is determining as we look forward to growth in our international business just what our structure is going to be. I don't think Jon and I can answer that yet, but our policy in the past has been to perform work and repatriate those earnings. And they fall right into the tax bucket.

But there are alternatives and it depends on how we can strategize for the future and what needs we see ahead internationally.

Okay. Thanks a lot. Appreciate the help.

At this time I am showing no further questions in the queue. I would like to turn it over to our speakers for any closing remarks.

Thanks very much for joining us today. We look forward to talking to you after our first quarter.

Thanks, everyone.

Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.