Orion Group Holdings Inc (ORN) 2009 Q1 法說會逐字稿

Good day and welcome to the Orion Marine Group first quarter 2009 earnings conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Chris DeAlmeida. Please go ahead.

Good morning and welcome to the Orion Marine Group first quarter 2009 earnings conference call. Joining me today are Mike Pearson, Orion Marine Group's President and Chief Executive Officer; Mark Stauffer, our Executive Vice President and Chief Financial Officer; and Cabell Acree, our Vice President and General Counsel.

Regarding the format of the call, we've allocated about 15 minutes for prepared remarks, in which Mike and Mark will highlight our results for the quarter and outlook for 2009, and then we will open up the call for questions.

During the course of this conference call, we will make projections and other forward-looking statements, among other things, our end-markets, revenues, gross profit, gross margin, EBITDA, EBITDA margin, backlog, projects and negotiation and pending awards, as well as our estimates and assumptions regarding our future growth, EBITDA, EBITDA margins, gross margins, administrative expenses and capital expenditures.

These statements are predictions that are subject to risks and uncertainties, including those described in our 10-K for 2008, that may cause actual results to differ materially. Moreover, past performance is not necessarily an indicator of future results. By providing this information, we undertake no obligation to update or revise any projections or forward-looking statements, whether as a result of new developments or otherwise.

Also, please note that EBITDA and EBITDA margin are non-GAAP financial measures under rules of the Securities and Exchange Commission, including Regulation G. Please refer to the reconciliation accompanying this earnings call available on our website at www.OrionMarineGroup.com for comments on the use of non-GAAP financial measures, as well as applicable reconciliation to the most comparable GAAP measures.

Also, please refer to our earnings release issued this morning, May 7th, 2009, and our quarterly and annual filings with the SEC, which are available on our website, for additional discussions of risk factors that could cause actual results to differ materially from our current expectations.

Before I turn the call over to Mike, I'd like to take the opportunity to extend a personal invitation to our annual shareholders' meeting, which will be held next Thursday, May 14th, 2009 at 11 a.m. Eastern in New York at the Hilton New York, 1335 Avenue of the Americas.

With that, I will turn the call over to Mike. Mike?

Thank you, Chris. Good morning and thanks for joining us. We once again delivered solid results this quarter, with revenue and EBITDA margin that exceeded our first quarter goal.

Revenues for the first quarter of 2009 increased $17.5 million, or 33%, as compared to the first quarter of 2008, which exceeds our first quarter revenue growth goal of 28% to 32%. First quarter EBITDA was $12.1 million, which resulted in an EBITDA margin of 17.2%, which also exceeded our first quarter goal range of 14% to 16%.

We had a very good quarter as we continue to see good demand for our turnkey services, with increased activity on the federal side and continued good bid opportunities for the future.

More specifically, we continue to see good demand as port expansion plans continue, the cruise industry continue to look at adding new destinations, bridge construction remained a focal point, and we saw increased bid activity from the Army Corps of Engineers.

Now, turning to our end markets and outlook for the remainder of the year, as stated before, continued port expansion, the need for US infrastructure improvements and coastal and wetland restoration projects, and also the expansion in the cruise industry should continue to provide us with good bid opportunities.

As a reminder, we remain in uncertain economic times and, therefore, we must continue to be vigilant about the state of our end markets. As we previously stated, it's not unreasonable to think that some of our end markets could see some deterioration or bidding delays as a result of the uncertainty in the economy. However, the other end markets may outperform due to increased spending on infrastructure projects, as well as hurricane protection and restoration projects.

Now, while we've not seen any significant pull-backs or delays to date, we will remain vigilant as the economy continues to be under pressure and some of our end markets may be impacted. However, we still believe the impacts of the economic downturn may be mitigated by the need to rehabilitate America's crumbling infrastructure and to provide needed improvements for the future.

Now, just to highlight some of the major growth drivers that we continue to see for 2009, we believe the Gulf Coast and Southeast Atlantic ports will continue with expansion plans, despite some decrease in global shipping traffic. We believe funding for these projects has and will remain in tact for most of the planned port expansions.

Additionally, the stimulus package provides additional funds for ports in our market areas. For example, recently the Port of Houston and the Port of Galveston recently announced $140 million in collected stimulus monies to construct, operate and maintain area channels.

Additionally, bridge rehabilitation and replacement continues to be a focal point. We continue to see additional bridge opportunities and believe these projects will be a priority of states who have funding coming in, in part from the annual spending of the current Safety Loop program and throughout the -- and through the stimulus package.

Now, with regard to the Army Corps of Engineers, we believe we're going to continue to see increased opportunities. The Corps is well positioned with significant funding levels as a result of their normal budget funds, additional supplemental emergency hurricane-related funding and additional funding from the stimulus package.

As you know, the Corps recently released their project list associated with the American Recovery and Reinvestment Act, or commonly referred to as the stimulus package. We're still examining the Corps' ARRA project list, and we believe there's substantial bid opportunities as a result of this project list that are not included in the bid market opportunities that we're currently tracking.

With regard to timing, the Corps is required to commit all the funds prior to September 30th, 2010. However, the Corps has indicated that their intent is to obligate the majority of these projects before year end. As we've said before, we believe while the stimulus could have a positive impact on our backlog and potentially offer revenue opportunities during 2009, we believe the bulk of revenue impact will actually be in 2010 and 2011.

Finally, I want to touch on the cruise industry. As you know, there remains several large ships under construction or being delivered that are expected to come online over the next couple of years.

The current marine facilities that will dock some of these ships are inadequate and require substantial upgrades. And we believe we'll continue to see either mooring upgrades to existing facilities, or new cruise ship pier construction opportunities as a result.

So, to sum it up, we continue to see strength in most of our end markets and good prospects, both near term and long term, and we remain cautiously optimistic about our year.

As we look ahead, we see good opportunities for growth and opportunities to continue our expansion plans. Still, we want to grow the business profitably, so we're going to be prudent in our bidding and execution and vigilant in monitor the economic developments, which are difficult to predict with regard to any positive or negative impacts in our business.

And with that, I'll turn the call over to Mark Stauffer, our CFO, to discuss the financial results in more detail. Mark?

Thanks, Mike. And again, thanks for joining us.

Net income for the first quarter of 2009 was $4.3 million, or $0.20 per diluted share, which compares with $2.8 million, or $0.13 per diluted share in the prior-year period.

First quarter 2009 contract revenues increased 33% year-over-year to $70 million, of which 48% was generated from federal, state and local government agencies, and 52% from private industry. This compares to 58% from federal, state and local government agencies and 42% form private industry in the first quarter of 2008.

I would like to remind investors there can be fluctuations in quarter-to-quarter results due to the timing and mix of projects. For this reason, we suggest investors focus on the long-term and annual results rather than quarter-to-quarter fluctuations.

SG&A expenses for the first quarter of 2009 were $7.2 million, which represents an increase of $1.4 million year-over-year, primarily due to amortization and overhead costs related to the acquisition in February of 2008.

Looking at backlog, we ended the quarter with $134.1 million of backlog as of March 31st, 2009. Again, I want to remind investors that backlog can fluctuate from period to period due to timing and execution of contracts. Additionally, we have several projects that we are apparent low bidder on, or that are in negotiation, that are not reflected in the backlog as of the end of the quarter.

Our backlog consists of projects under contract that have either not started or are in progress and not yet complete. And we cannot guarantee that revenue projected in our backlog will be realized or, if realized, will result in earnings.

In addition to our current backlog, we are tracking potential bid opportunities of $4 billion to $4.5 billion, of which approximately $1.2 billion could liquidate in 2009. This does not include the Corps of Engineers bid opportunities related to the stimulus package which Mike mentioned earlier.

Given the current backlog, contracts we have recently signed and the revenue opportunities we see for 2009, we expect second quarter 2009 revenue will grow 8% to 12% year-over-year. Additionally, we have set our second quarter EBITDA margin goal at 15% to 17%.

For the full-year of 2009, we remain comfortable with our previously stated full-year 2009 year-over-year revenue growth goal of 12% to 16%, and our full-year 2009 EBITDA margin goal of 14% to 18%.

Turning to the balance sheet, we believe it is important to have a strong, stable balance sheet with good free cash flow generation, low leverage and a solid cash position.

For the quarter, net cash flow from operating activities was $18.9 million, which is an increase of $10.1 million as compared to the first quarter of 2008. We believe a good positive cash flow from operations is one of the foundations at our Company that is viewed favorably by our bonding company, and is a safeguard during economically volatile times like these. At this time we do not anticipate the need to utilize our revolving line of credit.

Additionally, we once again ended the quarter with a solid cash position. As of March 31st, 2009 we had cash on hand and availability under our revolving line of credit of approximately $49.2 million. In addition, we had another $15 million of liquidity available to the Company at the discretion of our lenders.

Finally, our debt position remains low. As of the end of the quarter, our leverage was less than 1 times EBITDA, which we believe is conservative and is well below our comfort level of 2.5 to 3 times EBITDA.

In closing, we once again delivered good results while maintaining our solid financial position during the quarter. Our strong balance sheet should help us in this current economic environment. While we will monitor our markets during these volatility times, we continue to see good bid opportunities and continue to execute new contracts. Additionally, we remain comfortable with our full-year outlook given our current backlog level and revenue opportunities for the year.

With that, I'll turn the call back to Chris to begin the Q&A portion of the call.

Thank you, Mark and Mike. We would now like to open up the call to questions. Kristin, would you please review the procedures for placing a question?

Certainly. (OPERATOR INSTRUCTIONS.) And we'll take our first question from Fred Buonocore with CJS Securities.

Yes, good morning. Very nice quarter.

Good morning.

Thanks. Good morning.

Just on the backlog, you're realizing that it can be lumpy. Can you give a little more color? Were there -- was there a large project or two that was completed in the quarter and then went out of backlog? Or I mean, did you see any sort of slowdown in new orders or new awards that you could attribute to anything specific, or this is kind of just the normal lumpiness?

And then you mentioned that there are some projects that you're apparent low bidder on that haven't gotten in there yet. Are those Corps-related dredging projects or a mix? So, if you could give a little more color on that, that would be great.

Alright. It would be a mix. But as we've said, our backlog can fluctuate from period to period, just due to timing and execution of the contracts. And we've got a number of contracts out there that -- we don't announce contracts until we get the actual contracts signed. So, there is sometimes a timing issue in that regard, but we're comfortable with our goals.

And do you think that your backlog can get back up to the levels where it had been in the Q4 and Q3 '08 timeframe?

Well again, I think, Fred, that it's all a matter of timing of the execution of contracts. And as we've said in the prepared remarks, we are [apparently a little better] and have things under negotiation. As Mike said, we don't announce the contracts under $10 million.

So, I think that we're comfortable with the backlog and with the opportunities we see for bid opportunities and revenue opportunities for the reminder of the year. And we think it's just sort of the normal lumpiness of backlog. And it's primarily attributable just to the timing and execution of contracts.

That's great. And then, just understanding the Corps projects, I did look at that list as it relates to the stimulus package. Do you have a sense for -- in trying to parse out Corps dredging projects, some that would be part of the $740 million in emergency funding for the hurricanes from the last year, and other regular O&M budget funding and then stimulus funding. Are the projects on that list kind of separate from those other buckets, or do we find projects from those other buckets showing up on that list? I'm just trying to get a sense for how much is incremental and --.

Yes. There's got to be some projects from all three sources there; base, stimulus and supplemental, but it's kind of hard to tell at this point. I mean, we're just impressed with the size of the list of projects that has come out and the extent of work that's going to be funded in the next couple of years, just with this first stimulus injection of $4.6 billion.

We participate in the O&M side, which is about half that money. And that's on top of a base civil works budget that's $5 billion. So, it's essentially like a 50% increase of what you would normally see coming out of the Corps.

So, it's going to take us some time go through this project list. The Corps is going to have a national meeting on the dredging side, I think 20th of May, and we'll get better clarity on how they're going to parcel these projects out. And so, it'll take us some time to come through that, but it's very difficult to say how much is actually stimulus. How much is actually WRDA. It's a little bit of everything.

And another thing I would add to that is the stimulus is not in the tracking number that we talked about this morning. With respect to the comment you made about the supplemental funding related to the hurricane activity, as we've said on previous calls, that's a little muddier. That probably has started filtering into the projects we track. It's a little difficult, because I don't think those projects are necessarily tagged, whether they would have been ordinarily done under the base budget or not. So, I think that's a little bit muddier. But the stimulus project list, we expect -- that is not in the current tracking system and we expect that to change as we move through the next several months, as Mike talked about.

I mean, there's nearly 1,200 projects listed. It's just a huge list. And we're just happy with that we see areas that we can participate, both in construction and dredging, and we're glad to see the Coast Guard get some money. There are some projects right here in our own backyard, in Houston for example, and Galveston, that the Coast Guard's going to get funded to take care of some navigation hazards, bridge widths that need to be widen and a railroad crossing that's been a real navigation hazard for the shipping industry for years. They're finally going to take care of some of these issues. So, all of that just bodes well for our industry.

That's great. Thank you very much.

You bet.

We'll take our next question from Trey Grooms with Stephens.

Good morning. This is Will Green on for Trey.

Good morning.

I also had a question on the stimulus. In terms of the Corps of Engineers projects that did get listed, I don't know if you mentioned it already, but do you have a sense for how much of that work is going to be in the Gulf and other areas where you operate in?

Well, I think we're going through the list, as Mike said, right now. We think it's a substantial amount. There's a substantial amount in our market areas that we're participating in now. So, we view it as a very positive thing. And I think as we go through the next several months, we expect to see that firm up in our bid tracking system, as Mike said. The Corps' intention that they've announced is that they'd like to get the bulk of these projects committed before year end.

Okay. Great. And then you obviously mentioned that bidding activity for the Corps is picking up. Could you talk about maybe the competition you're seeing at the bid table right now and how it's compared to maybe last year, or just over the last several months? How it's differed?

Yes. It's been kind of spotty. I think on the lower end contracts, the smaller contracts, it's -- there's certainly been some pressure on margins there with the anxiety about the economy. That hasn't been the case in some of the bigger projects that we've looked at where there's less competition.

But I think now that the highway funding is getting kicked off, that stimulus program, that's a pretty big safety loop program that's kicking in. I think they got in their stimulus bill $27.5 billion, and about third of that is within the states that we operating in, the eight state regions that we covers.

So, I think that may help to abate some of the pressure we've seen with people that aren't necessarily full-time marine contractors trying to just find work. So, that appears to be starting to kick in now. And as the year progresses, maybe that'll relive some of the pressure. But it's certainly a lot of anxiety out there right now with construction companies.

And with respect to the dredging work specifically in the Corps, I think that, as we talk about before, the fact that the Corps has adequate funding from all these various sources, we think it's a positive impact and good for the industry. And we think that that will take some of the uncertainty out of the equation with respect to competitors. And I think we've sort of seen some of that occur as we moved into 2009 as a result of the adequate funding that the Corps has.

Right. It makes sense. And then I had one other question. You guys are obviously building a good amount of cash. I just wondered kind of what the priorities would be for that and kind of what you're seeing on the M&A front? Is there any way you could talk about pipeline or valuations you're seeing out there?

Well, I think with the kind of economy that we're faced with right now, having a strong balance sheet is essential. And just in the event there's any further setbacks with the economy, we want to be in a strong position and be poised to take advantage of that situation as the year progresses. And that's kind of where we are at right now.

Alright. Thanks, guys. Great quarter.

Thanks.

Thank you.

We'll go next to Alex Rygiel with FBR Capital Markets.

Good morning, Mike and Mark. Nice quarter.

Hey, Alex. Thanks.

Two questions. First, over the past two months since your last call, do you think your visibility has changed at all from 2009 and/or 2010 for the good or the bad?

Well, there's certainly a lot more opportunities out there than we expected and I'm pretty upbeat about the outlook. As we said, we -- last year when we were talking about this stimulus, when the election was going on, we didn't really believe it would have that much of an impact to this year just because of that the time it takes to process that volume of work. And I feel like that is the case, that we're going to see surge towards the end of the year; certainly, the back half of this year will get impacted.

But we just see more long-term opportunities than we've had in the past. And near term, we've got to get the program up and running. I mean, when you look at the Corps' package, here the first half of the year is going to be pretty well gone before they really start parceling this out. So, I think we were prudent in being cautious on our expectations. But, it all stacks up pretty good.

And Alex, I will comment, too, is that the volume of projects we're tracking in our tracking system is definitely up as we've moved into 2009. It's up since the end of the Q4.

And that's not because you're just getting smarter at what you're tracking, right?

We think we're smart about what we track all the time. But I think, no. I think it's because of a variety of things that we've talked about with respect to Corps funding, excluding stimulus, but Corps funding and other projects we're tracking, that the opportunities are definitely up since last call.

And I feel like I'm softly hearing that we could maybe see a mix shift towards more dredging over the next 6 to 12 months. Do you think that'll play out?

I think there's going to be a lot of dredging work come out. I think we get an opportunity to improve our utilization on our dredging fleet if the Corps continues to go at the pace they have.

We've had a good bidding activity in the first quarter of this year and it looks like that's continuing on in the second quarter. And if you remember a year ago, we weren't doing much work in the second quarter. And the Corps basically shut down there for a while. Well, that problem's been solved. We're very busy and, yes, I do think our dredging fleet should benefit from this.

Yes. And I think definitely as a result, I mean, I think we've said -- we've talked about before we look at all of our opportunities that are in front of us at any one time and -- to decide which projects we're going to take a priority for us to go after. But I do think it's fair to say that we will probably -- it would be fair to think that our volume of federal work is going to increase as we move through the year.

Yes. Just one of the things that the Corps indicated to us is that, of the operating and maintenance activities that they're going to carryout this year, about 60% of their projects are going to be associated with cutterhead pipeline dredges, which we have in our fleet. And only 25% is going to be hopper dredging and 15% is going to be mechanical dredging. So, just analyzing just the dredging component, that should be very good for us.

That's great. And lastly, you're starting to build some nice cash on the balance sheet. At what point in time do you think we should expect some deployment of that cash, either for asset purchases or acquisitions?

Well, we've definitely got our CapEx program in place for the year. We had previously announced $16 million to $18 million of CapEx for the year. I think when we talked about that before, we also communicated that we would adjust our thinking on that as we progressed in the year and saw what opportunities were in front of us. But I think definitely we continue to look at opportunities, both for expansion in our geographic areas, either via just asset acquisition, or we want to remain opportunistic on the acquisition front as well.

Great. Thank you very much.

You bet.

We'll go next to Jack Kasprzak with B&B -- I'm sorry, BB&T Capital Markets.

Thanks. Good morning, everyone.

Good morning.

Can you give us some guidance on SG&A expense for the full year? It was $7.2 million in the quarter, of course, but I know you have some amortization expense coming off I think in August. Any guidance you could give there would be helpful.

We do have that coming off in August. If you think about that, that was about $6.8 million, $6.9 million that was amortizing over 18 month starting in March of '08. So, that will roll off in August, if you kind of do the math there. So, if you sort of think about where we've been -- and I think other -- barring that, it should remain fairly in the range it is with that piece coming off in August.

That implies that, by the fourth quarter, it'll be a lower run rate than what we saw in the first or second quarter.

Yes, it should be.

Okay. Do you guys think that opportunities, project opportunities or bidding opportunities were delayed or pushed out during the first quarter while the stimulus bill was being debated and proposed? The logic being that maybe agencies were on hold to see how much money was being -- was going to be allocated through the stimulus plan. Did you see or sense any impact like that?

Not significantly. I mean, the bid activity was much higher the first part of this year than it was the first part of last year. But there were certainly a lot of projects that the Corps had teed up to submit. I think they had a shopping list of about $13 billion of unfunded projects and they got approved $4.6 billion, which tells me that they've got a number of projects that they'll want to continue to put forward in '10 and '11.

And it's really hard to answer that question. I really couldn't see it on the dredging side. But certainly, with the highway side, yes. People were running out of money. I mean, there were definitely some issues with safety loop getting an injection that was badly needed. So, I guess the DOT side slowed down significantly, not so much on the Corps.

Okay. Well, you mention in your comments, Mike, you had several or some projects that you think you'd been awarded or you were low bid but hadn't been awarded and so they're not in the backlog. Can you guys quantify that amount that occurred during the first quarter?

Well, there's always those jobs that are awarded that we don't announce. And we have been awarded jobs since the end of the quarter. We just don't announce them if they're under $10 million. But there's not anything I could convey at this point. We'll announce those projects as they're awarded. And we're comfortable about meeting our second quarter bills and the year end. So, we'll announce those as they come.

Okay. And bigger -- longer-term in terms of the big picture, you have lots of bidding opportunities coming out, it appears. And the fact that, as you commented earlier, visibilities may be improving, there's more projects coming through the stimulus program. So, have you guys stepped back and thought about how much revenue your company can handle if you were optimally -- fairly optimally utilized?

Well, I mean we can continue to add to our fleet. And one of the questions Alex with FBR was asking about use of cash. We continue to look at equipment out there that will enable us to incrementally grow our fleet with out existing base of operations. And that could be a possible use of cash proceeds. And so, I feel like we'll be able to organically grow to meet the demand.

Labor's been available. There have been quite an amount of people laid off in the construction industry's, not necessarily related to marine, that give us the ability to increase our work force if need be. But if you remember, last quarter I said that we could pretty well handle the revenue growth issue with our existing fleet.

Yes. I was just thinking maybe a little longer term what factors would limit you or not. And it sounds like the limit -- there aren't too many factors that are that limiting in terms of continuing to pursue organic growth.

I think that's a fair comment. I think it's all a matter of -- it comes down to people and equipment. And I think that we have demonstrated that we've been able to add personnel, also with respect to the equipment side. I mean that's kind of a day-in and day-out process we go through, to match up what we think our fleet needs to be in terms of the opportunities we see in front of us.

We also want to be careful that we don't get too far ahead of ourselves, because we don't want to have -- wind up with idle equipment. But I think as we go through each period, as we're kind of looking out in the future, we look at what capacity we have available within the existing fleet versus our capital expenditure program. And it depends on the areas of the types of projects we see. And some assets may have longer lead times. Other assets we can add to our fleet on a relatively quick basis, sometimes even through a rental basis, if need be. So, we -- it's all about getting the right mix of equipment for what we see. And we do look at that as we're looking out to the future beyond 2009.

Great. Okay, thanks. And congrats on the next quarter

Thanks.

Sure.

We'll take our question from Will Gabrielski with Broadpoint Amtech

Sure. Thank you. A lot of my questions were actually asked and answered at this point, but I have a few left. Self-performed work going forward. Do you guys have any visibility on what we're looking at in 2Q? Similar to Q1 or any significant changes there?

It's kind of hard to say. That can fluctuate. I mean, historically -- I think for Q1 it was a little higher than normal. Normally, we've run in the 85% to 90% self-performance range by cost. I think it was a little above that, obviously, in Q1. But I wouldn't want to comment further on that. I think it's just going to somewhat fluctuate, depending on the mix of work that we have during the quarter.

Okay. In terms of your hit rate in the quarter, was there any significant changes there in general on bidding activity and how successful you were?

Our win rate during the year was in line with our historical rate of around 25%.

So, there's no real change, Will.

Okay. That's helpful. Thanks. And then, lastly, if you could just talk bigger picture on the -- not just your own utilization and when -- what you can grow your business to, but the industry as a whole. If you're looking at 12 months or 24 months, and from a pricing standpoint, what do think this industry can really handle from the Corps and some of the other funding initiatives and then eventually reauthorization of the transportation bill? Is that something that's in conversions today? And how would you describe kind of the market, the process and everyone getting ready for this increased level of work; not only yourselves, but what your seeing in the industry?

Yes. I really don't know that I could answer that for the industry. That's a very, very difficult question. It's one that the Corps themselves were challenged with in putting the stimulus package together. I think they had some concerns of could our industry respond to this volume of work.

And I can tell you I think the general feeling of the contractors in the industry that have talked with the Corps have indicated that, you bring the work we'll get it done. And that's certainly the case with our company, is we've been able to grow every year. We've been able to add to our fleet. We've hired the people necessary to do the work. And I don't see any obstacles to growing.

Alright, great. Thank you very much.

You bet.

(OPERATOR INSTRUCTIONS.) We'll take our next question from David Yuschak with SMH Capital.

Yes. Good morning, gentlemen. I think in the quarter you had outstanding cash flow from operations. Is some of that reflected maybe just in -- with that back -- kind of a backlog burn that you had there? A lot more shorter-duration projects that cashed out in the quarter, plus maybe whatever residual you have left over in the fourth quarter as far as receivables that pushed that kind of cash? Because it was impressive given first quarter results.

Well, I think we did have a fair volume of smaller, quicker-turn projects and whatnot during the quarter. I don't think it was necessarily any different than unusual. I think we did have some good collections during the quarter with respect to receivables and I think that that's kind of reflected in the growth in cash.

Now, as far as your thoughts on the rest the rest of the year's concerned as far as cash generation, got any thoughts as to how that might play out as far as using cash versus cashing out as the year goes on, as far as some trends? Could you give us some sense of that?

Well, I guess it somewhat depends on the timing and mix of projects in terms of the working capital needs to get -- again, it's going to depend on the size of the mix and timing of projects. As we get projects up and running, we can have fluctuations in cash. I think beyond that, again, we'll look to execute our growth strategy with respect to capital expenditures and also remain opportunistic with respect to either any asset acquisition opportunities or otherwise on the M&A side.

Do you think as you go through the rest of the year, given the potential for new business opportunities, is the duration of that backlog potentially -- could begin to sneak up on you as you see some of these projects coming on and we have bid activity, so that maybe you're looking at more elephant-related projects versus some of the shorter duration projects? Trying to get a sense as to how you see that maybe potentially affecting business as you go through the rest of the year.

We're certainly pursuing larger projects. We like to get projects around the $25 million, $30 million size as a good anchor to build on. And they are out there. We intend to pursue them. But --.

Yes. I would say, David, if -- we're looking at -- again, at any one time we look at what are the best opportunities we see in front of us to help achieve our goals. But I would say though that, as we've grown over the last couple of years, we are able to look -- and as our bond program has grown, we are able to look at larger and larger projects.

I think the caveat there is that we still look at the duration of those projects. And that, even on the larger projects, really does not get out of sort of our risk comfort zone in terms of duration. But I think it's fair to say that we have some large projects we're looking at today in our tracking system and we intend to go after some of those. But again, we expect to have a good mix of larger project work and the smaller work as well. We're not going to give up on that market if we take on larger work.

And I might to add to that, that we've made a practice here in the last couple of years with teaming up with other contractors to be able to pursue bigger contracts that, in the past, we hadn't been able to bid on all. And that's worked very successfully for us, and the Belaire Causeway is a good example of that. And some of the projects that we're currently pursing, particularly on the bridge side, bridge building side, we are teaming up. And we've done that on smaller scale projects as well, where it makes sense that you can have a competitive advantage, so --.

I would think that the bidding, the potential pipeline out there, though, just looks a lot better for bigger projects as you go through the rest of the year. Is that fair to say, too?

There's some good opportunities out there. And we certainly want to be a player. And we're not going to go out and take a $0.5 billion job. We're not in that kind of league. But certainly, we've been bidding projects anywhere from $50 million to $100 million for our portion of work.

So, is your comfort zone maybe at the top end right now about $100 million?

We've billed projects greater than $100 million, but the duration as such is like two or three years. And we discuss those with our bonding company. I think they're comfortable with our performance and our track record to date. We're having a very successful JV on some of the bridge work that we've been doing.

And so, yes. I'm not really concerned about the size of the project as long as it fits our risk matrix for taking on a project. We're not going to go out and take on a big job just to run revenues up at the expense of deteriorating our profit. We're very careful about how we approach jobs and we want to make sure that what we book is going to be profitable.

I think that's probably a good correlation between risk management and profitability.

Absolutely

As far as -- and as you look at the potential business, it looks like a $16 million to $18 million probably on the CapEx would probably -- pretty well set right now, unless you would end up having maybe some little -- some longer duration projects, is that fair to say? And then maybe you wont' be able to make that kind of decision about how much may ramp up spending for CapEx for 2010 probably -- until you get probably later in the year.

Yes. As we've kind of talked about that, that will adjust. And sometimes as we get -- as we take on work in the next several months and look at some of these projects, even just to the last answer, I mean dependant on some of the projects size that we get may warrant us to look at that CapEx number. And then also, as we start moving through the next couple of quarters and look at 2010, we may want to position ourselves for those opportunities in 2010 and spend CapEx dollars, setting ourselves up for that in the back half of this year.

Okay. And then one last question. You did kind of allude to it a little bit earlier in the discussion, guys, is on the workforce. At this point, what has been your employment growth in this first quarter versus year-end? And how do you see that maybe potentially playing out here as far as growth in employees?

Right now, we're still at about 1,100 employees and we're going to continue to be around that level through most of the year.

Okay. So what this would kind of tell me is you're in pretty good shape as far as your workforce then, given the kind of potential you see there?

We think so, yes. But to the extent that we see the need to increase that as projects demand, we think we will be able to get -- I think Mike mentioned earlier some of the things going on in some of the other industries. And we've been able to attract and retain people to support our growth. And we've even added sort of a day-in, day-out challenge that's never going to go away, but we think our track record demonstrates that we've met the challenge. And so, we're not concerned about that going forward.

And as far as the capital -- just one quick one. On the cap spending between maintenance and new growth, what does that look like out of that $16 million to $18 million?

It's fair to say that it's probably in line with historical and about 50 maintenance and 50 new growth.

Okay. That's all I got. Thanks.

Okay.

And at this time we have no further questions in our queue. I'd like to turn the conference back over to Chris DeAlmeida for any closing remarks or additional remarks.

Alright. Well, thank you. And on behalf of Mike and Mark, we'd like to thank you for taking the time to talk with us this morning and we look forward to speaking with you in the future. Also, if you have any follow-up questions, please feel free to give me a call. Thanks and have a good day.

That does conclude today's conference. Thank you for your participation.