Orion Group Holdings Inc (ORN) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2010 Orion Marine Group Inc. Earnings Conference Call. My name is Tom, and I will be your operator for today. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Chris DeAlmeida, Director of Investor Relations. Please go ahead.

Good morning and welcome to the Orion Marine Group First Quarter 2010 Earnings Conference Call. Joining me are Mike Pearson, Orion Group's President and Chief Executive Officer and Mark Stauffer, our Executive Vice President and Chief Financial Officer. 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 update our outlook for 2010. We will then open up the call to questions for the remainder of the time.

During the course of this conference call, we may make projections or other forward-looking statements regarding, among other things, our end markets, revenues, gross profit, gross margins, EBITDA, EBITDA margins, backlog, projects in negotiation or pending award, 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 2009, 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 the 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 more comments on the use of non-GAAP financial measures as well as applicable reconciliations to the most comparable GAAP measures. Also please refer to our earnings release issued this morning, May 6, 2010, 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. With that, I'll turn the call over to Mike Pearson, President and CEO. Mike?

Thank you, Chris. Good morning and thanks for joining us. During the quarter, we continued to execute our growth plan by growing revenues, acquiring T. W. LaQuay Dredging, and expanding into the Pacific Northwest.

Over all, revenue and EBITDA were in line with our expectations for the quarter and it laid the foundation for a successful 2010. We continue to see good bid opportunities and solid prospects for growth. We remain comfortable with our 2010 outlook and we're optimistic about the road ahead.

Looking at some of the significant events during the quarter -- as you're well aware, during the quarter we purchased T. W. LaQuay Dredging for approximately $60 million. As part of the acquisition, we acquired two dredges which are currently operational and deployed on jobs, and two dredges under construction, which should become operational later this year.

The integration of T. W. LaQuay Dredging into Orion Marine Group is progressing well. We're currently liquidating the acquired backlog and are bidding new work opportunities for the entire fleet of dredges.

Additionally, during the quarter we opened up a greenfield expansion into the Pacific Northwest by acquiring certain marine assets from a private marine construction company that was exiting the business. So far, we've established a marine base and office presence in the Tacoma, Washington, area and we've hired some key management staff. Most importantly, we've already identified future bid opportunities and we're gathering more information each day. As we previously stated, we believe this is a good long-term investment and will begin to have a positive impact on our 2011 financial results.

Over all, I'm pleased with the progress we've made with both the T. W. LaQuay and the operations in the Pacific Northwest.

Now, turning to our end markets and outlook for the remainder of the year, we continue to see solid end markets with good drivers for success. We're bidding and working on port expansion, rehabilitation projects in all our market areas. And we expect to see these opportunities in the future as ports continue to execute their long-term growth plans.

Additionally, we continue to work on major bridge projects and see good bridge and causeway bid opportunities. As you probably know, the HIRE Act was signed in March by President Obama, which included an extension of the Safety Loop program through the end of 2010.

We're continuing to see opportunities for cruise-related piers as the cruise industry looks at new destinations and facilities to handle larger ships. As with port expansion and bridges, we expect this to be a multi-year cycle of bid opportunities.

With regard to hurricane protection and repair, we see good opportunities going forward. In fact, the Coastal Protection and Restoration Authority of Louisiana has projected spending $1.3 billion between 2010 and 2012 for coastal protection and restoration programs. We are bidding on pieces of this work and last month we were awarded over $10 million in jobs related to Louisiana Coastal Protection and Restoration projects. With a multi-year spending horizon, we believe there'll be many more opportunities for coastal protection and restoration work in the coming years.

Additionally, we continue to see good bid activity and funding from the Corps of Engineers. We expect the Corps will continue with a healthy pace of job lettings as the focus on the country's inland waterways continues to gain momentum.

We also expect the Department of Transportation focus on what is now being called the Marine Highway System to provide further dredging and marine construction opportunities in the future.

And finally, a quick word on stimulus funding. The stimulus package has provided additional needed funds to the Corp of Engineers and other entities. We have had, and currently have, some jobs that, in part, are stimulus-funded. However, stimulus funds are not the main drivers for our growth. As we've said all along, our future prospects and growth opportunities are not dependent on stimulus funding. We continue to have solid end markets and good drivers for growth without stimulus.

Now, an update on policy initiatives and legislation we're following. One key item we'll be watching over the next year or so is the development of a replacement bill to the expired Safety Loop program. As you know, one of the key factors in the new bill will be how to fund the nation's highway transportation system. Ultimately, we expect a resolution will be found with growth in the overall program. Additionally, we expect bridge rehabilitation, repair, and replacements will be a key focus of any new legislation. As I said earlier, however, we would not expect to see any new legislation to replace Safety Loop until some time in 2011.

The Harbor Maintenance Trust Fund issue is another topic that we're watching. Currently, we're expecting provisions in the proposed 2011 water bill that would help ensure that the full value of the annual Harbor Maintenance Trust Fund revenues are used for their intended purpose, which is dredging. This legislation is gaining support and moving forward. It's too soon to say what any final legislation will look like, but we're pleased with the progress that the industry's made to date.

And before I turn the call over to Mark, I wanted to touch on a couple of topics that we've been getting a lot of questions on lately. One area is the ramp-up in revenues during the year. As you saw in our press release this morning, we expect to see a ramp-up in revenue in the second quarter, which should continue into the back half of the year. We're comfortable with this, based upon the anticipated liquidation of our backlog, the bid opportunities we see, and the additional capabilities that we've acquired as a result of the T. W. LaQuay Dredging acquisition.

Also wanted to comment on the oil spill in the Gulf of Mexico. At this time, we do not expect the jobs we have in progress or in backlog will be materially impacted. However, we'll monitor the situation closely for any potential impacts on our business.

Given our backlog, the activity in our end markets, and the recent additions that we've made to the Company, we continue to be excited about the remainder of the year. 2010 is shaping up to be another record year for Orion Marine Group, with a high level of backlog and good end-market drivers for continued growth.

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

Thanks, Mike and thanks again for joining us. Net income for the first quarter of 2010 was $4.8 million, or $0.18 per diluted share, which compares with $4.3 million, or $0.20 per diluted share, in the prior-year period.

Net income included a small one-time gain of $300,000 associated with accounting for the acquisitions completed during the quarter. As you will remember from our last call, we had expected this to be an expense for the quarter but due to the bargain purchase of the equipment in the Pacific Northwest, we ended up with a small gain.

First quarter contract revenues increased 7.9% year over year to $75.6 million, of which 64% was generated from federal, state, and local government agencies and 36% from private industry, which compares to 48% from federal, state, and local government agencies and 52% from private industry in the prior-year period.

Our first quarter 2010 EBITDA was $12.2 million, representing a 16.2% EBITDA margin, compared to first quarter 2009 EBITDA of $12.1 million, or a 17.2% EBITDA margin.

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

Now turning to backlog. As of March 31, 2010, we had a backlog of work under contract of $255 million, which is a record backlog for Orion Marine Group. Also, 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. As a reminder, our backlog consists of project that are under contract that have either not been started or are in progress and not yet complete. 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 $4.5 billion to $5 billion. As we look at the remainder of the year, our backlog indicates revenues continuing to build into the back half of the year, with full-year EBITDA margins in the 16 to 18% range. We expect about $1 billion of the $4.5 to $5 billion in bid opportunities we are tracking could liquidate in the balance of 2010.

As a result of the current backlog and current expected bid opportunity, we remain comfortable with our full-year 2010 revenue growth range of between $390 million and $410 million and our full-year 2010 EBITDA margin goal range of 16 to 18%.

For second quarter of 2010, we expect revenue will be in the $90 million to $95 million range, with an EBITDA margin of between 16 and 18%.

Turing to the balance sheet, we believe it is important to have a strong, stable balance sheet, low leverage, and a solid cash position. As of March 31, 2010, we had cash on hand and availability under our revolving line of credit of approximately $30.4 million. Also, we are in the process of finalizing a new credit facility that will be substantially larger than our current facility and should provide additional liquidity as we continue to execute our long-term growth plans.

We currently have no debt. However, this is not to say that we will remain debt-free in the future. As we have said before, while we want to keep our leverage low, we are comfortable with an appropriate amount of debt.

In closing, the first quarter set the foundation for a successful 2010. As Mike mentioned, we are tracking a healthy bid market with opportunities for continued growth. With a solid balance sheet, a strong financial record, and good growth drivers, we are excited about the road ahead for the remainder of this year and beyond.

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 for questions. Tom, would you please review the procedures for placing a question?

Thank you. (OPERATOR INSTRUCTIONS) Trey Grooms, Stephens, Inc.

Good morning, guys.

Hi, Trey.

Mike, can you touch-- I know you touched on it just briefly, but can you talk a bit more about the situation in the Gulf with the oil spill? I think one of the things that is a bit of a concern is that you could see that there's a chance you could see the Corps divert funds kind of away from your type of work and focus more on cleanup there. Can you give us your kind of take on that?

We haven't seen any indications of that to date. We really don't have many projects in the immediate area of the oil spill. We have one project in southeast Louisiana that's well west of the current oil spill location. But no, I haven't seen any indication from the Corps making that kind of move. I think this is in BP's court at this time.

Yes, we don't think this is a Corps issue at all, and at this point don't see that being an impact there.

Okay. As far as funding, you don't think that they're going to have to step in at all with helping the clean-up there?

It looks like they have a substantial workforce mobilized under BP's umbrella. I know they've taken on over 100 offshore boats and 700 fishing vessels and hundreds of personnel are engaged along the coastline. And to my knowledge, there hasn't been any diversion of Corps assets.

And typically on spills like these, it's the Coast Guard that's in the driver's seat with respect to the federal government.

Okay, that's helpful. And then, can you talk about any issues you guys could face with increased regulation on drilling, exploration, etc., down in the Gulf?

Well, as you know, we don't pursue the upstream deepwater offshore facilities. That's what we call blue water brain construction. Our work is more inland waterways and coastal harbors and all. And the type work that we're doing is more related to the shipping industry -- L&G tanker and cruise ships and so forth. It's not really the deepwater drilling rigs. So I don't anticipate any material impact there.

Good; okay. Thank you for that. And then also, can you talk about-- we had, I guess 85% self-performed work in the first quarter, which if I'm not mistaken was pretty close to fourth quarter, but still down from the level we've seen in the past. Do you think that we're going to continue to see it kind of trend at this kind of mid-80s level for the next few quarters?

Well, we expect it to-- our normal sort of range is 85 to 90%. So certainly this was kind of at the upper end of the subcontracting range, if you will. But if you look back and compare it to Q1 of '09, at 95%, that was well sort of outside of the norm. So it can fluctuate, but we expect-- the 85 to 90 is kind of the normal range we would expect. And we would expect that going forward, also.

Mark, how much of an impact does that have on your margin in the quarter, typically? I mean, is that-- I know it can drive margin but, really, how much of an impact does that have? So if we were to see it continue at 85, should we expect EBITDA margin to stay in this kind of range? And if we see it get up to 90%, that's what would get you up closer to the higher end of your margin range? I guess I'm just trying to figure out what you guys are going to have to do to kind of get the margins off the low end of your range and up into the mid- just something higher than where we are now.

Sure. Well, that's one thing, but again, it really depends. Because it depends on contract to contract. I mean, you can have a contract that has a decent size subcontracting component in it, but for other reasons it's got a margin that's above-- higher than normal. Or, not higher than normal but in the upper end of the range. So it really depends. It depends on-- when we refer to the timing and mix, that's one factor that goes in but it's not the only factor. So I would just kind of reiterate that based on what we see, we're comfortable with the goal range of 16 to 18% for the full year.

And I think the other thing -- it's not just that but it's also what we've talked about before, is the lumpiness of the business. By that, the continuity between ending one project and beginning another project. So there's various variables that will play into that.

Okay, thanks for that. And then, my last question is on the backlog. So at the end of the quarter, it stood at 255 million. Can you give us a sense, No. 1, how much-- kind of where the LaQuay backlog currently stands? Or how much of that 255 is kind of LaQuay backlog, if you will? If you guys can even decipher that right now.

And then, the other thing is, looking at the jobs that you've announced post the quarter's end, it looks like you guys have talked about one being the $21 million Galveston Bay pipeline project. But is that one there? I mean, it's so close to the end of the quarter -- was that one signed before quarter end, or after quarter end?

And then I guess also, the $10 million I think that Mike talked about. I guess that would be after quarter end. Is that correct?

Yes. The first part, the $21 million, was actually signed at the end of the quarter. It was so close to the end of the quarter, that timing, it was actually announced in the first week of April but it was signed at the end of March and it is included in backlog.

With respect to the project that Mike talked about with respect to the Louisiana coastal restoration, that's post-end of the quarter so that's not in the backlog number.

And then, we're not splitting out the LaQuay backlog. The only thing I would say there is that we're pleased with the acquisition. We're in the process of working the work that we inherited off and we're bidding new work opportunities for the entire fleet. And so we're pleased with how that's going.

Okay. And just one follow-up on the backlog question. So of the backlog that you currently have, I know there were a couple of larger jobs in there. But I mean, you guys typically turn jobs pretty quickly, but with the few larger jobs that are in there, is there more than typical amount of backlog that you guys expect to kind of continue into 2011 than normal? Or can you kind of give us a sense of how much of that you expect to execute in the year?

Well, it's still early. And as you said, we turn really quickly. There's some of that that is expected to, at this point, roll over into 2011. But having said that, again, we're comfortable with where our own backlog is, what we expect to burn during 2010, what our bid opportunities. We're comfortable with (inaudible).

Okay, that's all I had. Thanks, guys.

Fred Buonocore, CJS Securities.

Yes, good morning.

Morning, Fred.

Just with respect to these new LaQuay dredgers, if you could-- I know you talked about it a little bit early on. And just clarify, when do you expect them to come on line? And how is bidding for work that would be related to those two pieces of equipment going? How well do you expect them to be utilized in the second half? And could their utilization potentially impact margin in any way? Thank you.

Well, the two dredges that are currently operating are actively engaged liquidating part of that $25 million backlog that Mark mentioned. And the other two dredges, we expect to have on line on a staggered basis in the second half of the year and we feel good that we're on track to make that happen. And we're currently bidding work that either one of those dredges could be deployed on. And I think the opportunities are in front of us that we feel confident we'll be able to obtain work for the vessels.

And just to clarify, that $25 million is the backlog we acquired.

Right; got it. And then, as it relates to backlog, Mike, you alluded to a few projects that you are apparent low bidder on. Can you clarify -- are any of these maybe larger projects, ones that might be announceable? And then, as it relates to that, just kind of what you're seeing with overall project size in terms of the things that you're bidding on? Is it a lot of smaller stuff or do you still see some of the bigger ones, similar size to what you had been winning during 2009? Thank you.

Well, on the last question, we're continuing to see a mix of large and small projects. We're beginning to see some more oil and gas sector work materializing; it was kind of slow in the first quarter.

But we're pursuing projects at all levels. We've got three categories -- below $5 million, below $10 million, and greater than $10 million, and two-thirds of our business is below $10 million. So there's quite a bit of activity and work that we're securing that we never announce. Do you want to--

Yes. Fred, I'd say it's just kind of the normal process, nothing really different. As you know, it all depends on what we go after and then what we're successful in getting. And I would just say, stay tuned for any announcements that we might have. But I think it's just kind of no real change from what we've seen in the past. And so it's just sort of that timing of when we land projects and get them under contract.

Okay, that's great. I'll get back in queue, thanks.

You bet.

Rich Wesolowski, Sidoti and Company.

Thanks; good morning.

Morning.

Focusing on the dollar amount of bid opportunities that you cite in your releases, does that figure include only awards at some minimum revenue level, or is anything you're chasing in that amount?

It's anything that's in our tracking system.

We pursue projects that are as small as $50,000 and on up to $50 million or more. So it's a mix.

Okay. And I realize the figure is a bit of a swag for you provide for us. But the $1 billion cited here was $800 million below that listed last quarter and the question is, was some of the work pushed out to the right or outside of 2010, or did you have an uncommonly low hit rate on work that was actually let during the quarter?

It's really a function of as we're moving through the year, you expect the amount that's going to be liquidated in the balance of the year to decline. I wouldn't read anything more into it than that. As we've kind of said in the past, that is a very dynamic list. It's literally something that there is stuff coming on and going off all the time. And again, we expect to see work that the balance-- as we go through the year, the amount that can be liquidated in the year, we expect to decline.

Right, but the amount of decline was a great deal more than one would expect, given just one quarter's passage of time. So I shouldn't read into it that you missed some big awards that were let? Or, conversely, that some of the awards shifted out of 2010?

No, it's a number of different things. Some of it is there might be projects on a list that we choose not-- we take off the list voluntarily. It could be stuff that moves out. It could be-- there's obviously things in there that were let, were awarded. So again, I wouldn't read anything more into it than that.

And we always tell everybody our backlog kind of comes and goes on a lumpy basis, and the bid activity's very similar. We can have a surge of bid activity and then be quiet for several weeks and then have another surge. I'm not concerned with the liquidation so far.

Okay. And secondly, could you give us a little perspective on what types and what sizes of jobs you can pursue now that were out of your reach before the stock offering (inaudible) purchased LaQuay, etc.?

Well, we've been pursuing projects that are north of $50 million to $100 million. And there's really no restrictions that we have on that. We've got ample bonding capacity to go for bigger projects. Our concern is not so much the number value on the project as to whether or not it fits our core skills and we're comfortable with executing it. And I think we've demonstrated that we've taken on some bigger contracts, around the $50 million value size, that we've handled quite well. And our performance speaks for itself. So I'm going to continue to do that.

It's good to have a few anchor projects in each division with a little bit longer duration in them, that you can kind of build around.

In addition, in the heavy lift capability we acquired, it doesn't so much allow us to go after the work that we couldn't go after previously, but what it does is allows us to be more competitive in that work. So definitely the size of projects that we're going after has definitely increased in the last couple of years and we would expect that to continue with some of the stuff that we see in our tracking system.

Perfect; thank you.

You bet.

Will Gabrielski, Broadpoint AmTech.

Morning, guys. It's [Alex Hunter] for Will. How are you?

Morning.

So just on the BP spill. You guys have said that you don't see too much duress from that. Is that more of an opportunity you see from that?

Well, we've had some calls asking if we had available equipment and personnel to help if needed. We don't anticipate any huge up side with the oil spill cleanup because that's really right now more into the blue water offshore vessels that are participating in that, and shoreline cleanup. There's nine staging areas that have been set up by BP all along the Gulf Coast, from Biloxi, Mississippi, and Pensacola all the way over to Port Fourchon in Louisiana.

We're just watching the spill and seeing what's going to take place with the direction it's going and just making sure it's not any disruption to transportation or close-down of any ports. We don't think, from what the port directors have indicated, that port closures are likely. There could be some delays of shipping traffic, getting ships cleaned or something to keep the oil sheen off the boats. But right now, we feel that we're in good shape.

Great; thank you. And I know we already touched on the bid opportunities for liquidation in 2010 -- that going from the kind of quarterly rate of 450 to say around 330. Have you seen your win rate percentage going up, or is it mostly you're already booked? Is there an explanation there?

Win rate percentage is in line with historical; no real change there at all.

Thank you.

You bet.

Steve Dyer, Craig-Hallum.

Thanks; good morning, guys.

Morning, Steve.

Not to belabor the oil issue, but in terms of as you guys look at it every day, or as we would, what are the kinds of things that you'd have to see for it to worry you or to impact you? I mean, is it simply a matter of a lot of oil blowing on shore, or what would have to happen to disrupt some things for you guys?

Right now, the majority of our work is not anywhere near the oil spill. We have one project down in Grand Isle, the Caminada Bay Bridge, that we're doing work on that we have to transport goods from Mississippi. And if there's any disruption, we'll look at the alternative means of transportation.

Okay. What's the competitive picture like these days? Are you still seeing-- is it still tough kind of in the lower end, or any change there from last quarter?

There's not change at all. The smaller projects continue to see numerous players show up, some that we don't normally see. And I expect that's going to continue throughout the year until there's an upturn in the recession. But as you go up the chain in the size of contracts, there's limited players because of bonding capacity. So I think once you move above the $10 million threshold, it gets pretty much back to your normal competitors.

Okay. And then, what's sort of your thinking on acquisitions now? Obviously, you did a big one and then did a greenfields. How do you think about that now? Are we just kind of digesting what we've done for the foreseeable future or are you still looking at some things?

Well, our growth strategy's always been primarily focused on organic growth and greenfield expansion. We've kind of looked at acquisitions as opportunities, and if there's an opportunity to do a cut-and-paste with an acquisition, it makes sense, we'll jump on it. But we don't want to be driven by that since we want to get a good deal. I feel good, with the market we have out there, we don't really feel the pressure to have to do acquisitions to meet our goals. And that's the kind of position we'd like to stay in.

But we're continually looking for opportunities; that's part of our business operation. is to work that throughout the year. Some acquisitions take quite some time to bring to fruition, and the two that we just carried out, we started over a year initiating those opportunities. So you just kind of work it in parallel with your ongoing operations and if you snag one, it accelerates your growth.

Okay. And then, just one last question. Mark, just kind of wondering, the thinking behind kind of adding back the gain on the equipment to get your EBITDA margin. It doesn't really seem like an operating gain. Is there-- what are your thoughts on that?

Well, obviously you can calculate it how you want to calculate it. Our thought was, the same with the one-time expenses we incurred. I mean, they're both kind of one-time things. So we still feel good about where we are and where we're going to be for the balance of the year.

Okay. All right; thanks, guys.

You bet.

Alex Rygiel, FBR Capital Markets.

Thanks, guys. Nice quarter.

Thank you.

Thanks, Alex.

Can you quantify the total value of the low bid for awards negotiation right now that you commented on?

No, we really don't quantify that, Alex. I just say stay tuned for the ones we announce and just leave it at that.

Okay. Could you disclose what the revenue mix is between construction and dredging?

About a third is dredging.

Yes. And we've expected that to uptick a little bit, as you know, with the acquisition and as we go through the balance of the year and we bring the other assets on line. That'll tick up a little bit.

Traditionally it's run closer to 25%, or a quarter of total revenue. Since dredging's ticked up a little bit but margins are kind of flattish, I would say, over the last couple of years, what dynamic am I missing there?

Well, as we move forward, we would expect that to tick up. It does go back to the timing and mix of projects. And we have, as Mike just talked about, we've seen pressure on the smaller work. We continue to see that pressure.

But as we get through the integration of the LaQuay acquisition, there's always a little bit that you have to go through to integrate that, even on the smoothest of acquisitions. And that one is certainly-- it's in a marketplace we know, it's in a business we know, in an area we know. But there's still the things that you have to go through.

And we would expect that, particularly as we bring assets on line, we would expect to be at the upper end of our ranges. We would expect our gross margins to consistently be in the low 20s and move up. So we're expecting that to occur as we get that acquisition fully integrated and bring the other assets on line.

And what percent of revenue is from the Army Corps this quarter?

Our federal piece is about 37% and I think virtually all of that was from the Corps. And part of that, Alex, is non-dredging. So there's some construction work involved in that as well.

Yes, I think 29% of the 37 was the Corps.

Okay. And last question, does your quantification of bidding opportunities include the market opportunity in the Pacific Northwest yet?

A little piece, a very little piece. We're getting that identified, getting that in. There is some included in there, but just a very small piece at this point.

Perfect. Thank you very much; nice quarter.

You bet.

Matt Tucker, Keybanc Capital Markets.

Good morning, guys, and congrats on a solid quarter.

Thank you, Matt.

Looking again at the expected ramp-up in the second half, are you able to quantify at all how much the two new dredges from LaQuay are expected to contribute to that?

No, we wouldn't split that out, Matt. But obviously, we do have those baked into the full-year goal.

Okay, sure. And then, just looking at the awards you saw in the first quarter, it looks like they're down a little bit sequentially, still stronger than the first quarter last year. But does that decline-- do you think that just kind of reflects the seasonality in your business or do you feel like maybe you've seen a bit of a slowdown in some of those opportunities coming out to bid?

It's not unusual for us to have a light first quarter. Our seasonality that kicks in is Q2's greater than Q1; Q3's generally our most buoyant quarter because of daylight hours that are available to us; and then it goes down again in Q4.

In terms of bid opportunities, it's the same -- it's a lumpy business, as Mike talked about earlier. Certain bid dates and stuff come in surges. Again, we feel comfortable with our end markets, our bid opportunities. We're pleased with where we are. And again, I just think it's a matter of timing more than anything because that kind of depends on when you get things in backlog versus being in low bid. As you know, and as we talked about our previous question, if it's in low bid, we don't include it in backlog.

Okay, thanks. And then, looking at some of these bridge opportunities -- are you able to point to any specific states or areas where you're seeing more activity than others?

And then, kind of same question on the cruise terminal side -- can you point to maybe any ports or regions where you're seeing activity? Or even if you could talk about more specific projects.

Okay. Well, the East Coast has been more active on the bridge construction work, from Florida to Virginia. One of our bigger bridge projects this year we're carrying out is the Caminada Bay Bridge over in Louisiana. That's generally the areas that are the strongest for bridge-type work. In Texas, it's really more river-crossing around the ship channels that offer opportunities. But I'd say Florida's been very active with bridge replacement.

Cruise ship -- we anticipate some work opportunities in the Caribbean Basin. There's several cruise lines that are looking for new facilities, some of which we're in the process of bidding on. And Florida's also indicated that they'll be doing some substantial investments. Port Everglades, in particular, is going to do cruise ship expansion as well as container ship.

And we've also seen an increase in just container traffic in general. Most ports are indicating that they're having a stronger-than-expected rebound, and we've seen APL Evergreen, L.A. Long Beach, Charleston volumes up. There's some good indicators out there, I think, that things are beginning to turn around.

And on top of that, you've got a lot more larger container vessels that are being built coming out of the shipyards this year. So I think that all bodes well for marine infrastructure.

And you actually kind of just anticipated my next, and last, question. Certainly it seems like while not close to a full recovery yet, the trends in the shipping industry have been definitely positive recently. Do you guys see any kind of immediate or direct impact from that? Have you seen it yet or do you typically think you see kind of longer-term lag effect from that improvement?

We just expect that to be ongoing. I mean, that's been in line with what we've talked about in the past and what we expect to see going forward is we expect to see, for lack of a better term, like a steady diet of opportunities as these ports in our market areas execute their long-term plans. So we've seen some, are seeing some, we expect to see more. We've got some of those in our tracking system. So again, we expect that to be sort of a steady diet out over the next several years.

All right, thanks. That's helpful, guys.

Okay.

John Rogers, D.A. Davidson.

Hi, good morning.

Morning, John.

Just a couple of really follow-up things. The mark-up of the assets -- is that finalized at this point for the equipment in Tacoma?

No. That's preliminary but we think it's-- it could move a little bit but we think it's fairly close to where it's going to settle out at.

Okay. So if there's any additional plus or minus, it would be very small -- is that fair?

We think so, yes.

Okay. And then in terms of your guidance for the rest of the year, it sounds like we're going to see a pretty steady ramp through the year, both in terms of revenue and margins. Is that fair, the way you're looking at it?

Well, I think that's exactly right on the revenue side. On the margin side, we've held the same band, the 16 to 18%. I mean, we continue to point out, these are superior results compared to most of our peer companies. So we've stuck with that margin band.

And I guess, Mike, though, in the past your margins have been a little bit more volatile quarter to quarter. And as you spread out a little more and have multiple projects going at the same time, should we see a little more stability in those margins within that band?

We think so. I mean, obviously it still depends on the timing and mix of projects. But one of the things-- for a number of reasons we like the LaQuay acquisition. But increasing the capacity of assets that can do dredging projects, which typically have higher margins, helps stabilize that somewhat. So that's very possible. And again, we're going to continue to strive to outperform wherever we can. So that hasn't changed.

Okay. And is there anything that you're seeing materially different in terms of pricing, either on projects you're bidding now or that you're booking right now? Either up or down?

Not really from what we described last quarter. If you are in the $1 million or less range, it can be all over the map on bid results. The thing to remember about us is that we have a philosophy and a business model that's all based upon making money and making a profit, and we don't allow our people to bid below their cost. There's other private companies out there, particularly on the smaller jobs, that are strictly trying to work on a cash basis. And we don't intend to fall into that trap. That really gets you nowhere; it just ties up your resources when they could be deployed on profitable work. So we don't allow our folks to do that and you just have to be patient and continue with pursuing a reasonable return.

Okay. And are you seeing, lastly-- what's the acquisition market look like? Are you seeing more on your desk or is it still irregularly showing up?

There's always opportunities out there that present themselves to us every year. And we work that aspect of our business growth plan. But it's one that's very difficult to predict the timing of when one could occur. But I don't see any real change there.

And really, John, as we've kind of talked about before, it's really driven less by what you might think of as general economic drivers. We kind of refer to it as death, divorce, disability, or retirement tends to drive the opportunities.

Okay. And no changes in those rates? (Laughs)

No. we're always looking for good deals. (Laughs) That's the good thing about having a growth plan that's based upon organic growth and greenfield expansion, is you don't have to make a deal and you don't need to be throwing out a multiple that doesn't make business sense to inherit.

Okay. Thank you very much.

You bet.

Jack Kasprzak, BB&T Capital Markets.

Thanks. Good morning, everyone.

Morning.

Are you guys bidding jobs in the Pacific Northwest yet?

Well, the answer to that -- we're picking up bid documents. We are currently developing our market database and tracking opportunities and we're pre-qualifying with customers. We've got licenses all in place, labor agreements in place, and we've just started the bidding process. We're really expecting the Pacific Northwest to make an impact in 2011 and we're trying to set them up for next year.

Okay. With regard to SG&A, I don't know how much guidance you'd care to give, but in terms of dollar amount per quarter, is it-- with LaQuay and with the Pacific Northwest expansion, we look at the $10.2 million in Q1, but there was $1.7 million of acquisition expense. Is 8.5 a good run rate number for the going-forward quarters?

Yes, Jack, that might be a little bit on the lower end, to maybe slightly higher than that. Or kind of in the 8.5 to 9.5 range is probably where we would expect it to be for the rest of the year.

Okay, great.

Probably at the lower end to the midpoint of that range I just gave.

Okay, great; thanks, Mark. That's it for me. Thanks, guys.

You bet.

Will Gabrielski, Broadpoint AmTech.

Hey, good morning, guys. It's actually Will. Just a couple of follow-ups. The Pacific Northwest ramp -- have you guys now at this point realized anything different about the competitive landscape there? More competitive? Less competitive? Or have any thoughts on how you'll ultimately be positioned?

It's too early to say. I mean, we haven't gotten enough track record of bid feedback yet to know. It'll take us some time to be able to answer that question. But right now, we are excited that we're seeing opportunities there that fit our equipment and we're just continuing to prepare ourselves to capture some of that market share.

Yes, and we recognized going in, that's been a market that's been a little more impacted by the recession than our traditional markets down south. We recognized that going in. Again, we think it's a good-- we're trying to position ourselves for the long run up there, but we recognize that there's been a little bit more of an impact with the recession and the budget constraints and things like that now. But we think ultimately that'll pay off down the road.

Okay. Sorry if you guys already touched on this, but weather in Q1 -- was there any material impacts? And how has April looked? Obviously, we're all getting a better look at the Gulf weather with what's going on with BP. And contingencies in general -- what are we looking at there?

I don't think there was anything material. It was a wet winter and some places where levee work's affected. But we're pleased with our results, and not anything out of the norm.

I have taken a look at the hurricane forecast for this year and they're indicating named storms of around 15, which is kind of on line with '07-'08 activity. It was pretty quiet last year for hurricanes, at least coming in the Gulf. And so the big question is on named storms, where are they going to go? That's the issue. It's not how many, it's where are they going to go?

Okay. And then, did you guys provide an updated CapEx number for this year? And then also, with respect to some of the vessels you're recently acquired, any changes in what you're going to have to spend to get those ready for projects?

Yes, our CapEx this year is going to be somewhere around $30 million to $35 million. And if you remember, last year we had $23 million, which included some special one-time purchases for heavy-lift cranes and larger barges and various operational equipment that we needed. And that was about $6 million of the $23 million in '09. There's another $6.5 million -- in this $30 million to $35 million for 2010, there's another $6.5 million that is for those same things, the cranes and barges, that were one time.

And we also have about $5 million to $7 million that will be spent for the acquisitions; primarily, T. W. LaQuay. So another way to say that is that if you take out the special items, we would be somewhere around $18.5 million to $21.5 million this year as compared to $17 million last year.

And that's no change from what we talked about last call.

Okay. So there haven't been any surprises as you've gotten a better look at some of these dredges?

No, it's in line with what we talked about last call, so we think that's a good number.

Good news; thank you.

You bet.

Ladies and gentlemen, this concludes the question-and-answer session for today's conference. I would now like to turn the call over to Chris DeAlmeida for any closing remarks.

Well, on behalf of Orion Marine Group, 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.

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