Orion Group Holdings Inc (ORN) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2012 Orion Marine Group, Inc. earnings conference call. My name is Ayesha, and I will be your coordinator for today's call.

At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session toward the end of this conference. (Operator Instructions).

As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to your host for today Mr. Chris DeAlmeida, Vice President of Finance and Accounting. Please proceed, sir.

Thanks Ayesha. Good morning and welcome to the Orion Marine Group fourth quarter and full year 2012 earnings conference call. Joining me today are Mike Pearson, Orion Marine 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 have allocated about 15 minutes for prepared remarks, in which Mike and Mark will highlight our results for the quarter and year, and update our market outlook. We will then open up the call for sell-side analyst questions for the remainder of the time. We would ask that you limit your questions to one question and one follow-up before getting back in queue.

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

These statements are predictions that are subject to risk and uncertainties, including those described in our 10-K for 2011 that may cause actual results to differ materially from those statements. 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 of forward-looking statements whether a result of new developments or otherwise.

Also, please note that EBITDA, 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 comments on the use of non-GAAP financial measures as well as applicable reconciliations to most comparable GAAP measures.

Also, please refer to our earnings release this morning -- issued this morning, February 28, 2013, 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 wanted to note that we do expect to file our 2012 Form 10-K with the SEC by the end of next week. With that I will turn the call over to Mike Pearson, President and CEO.

Thank you, Chris, and thanks for joining us this morning. I would like to take a moment to thank our nearly 1200 coworkers for their hard work and dedication. It is really because of their skills and perseverance that we been able to find success in these challenging market conditions.

2012 was a validation of our ability to adapt our operating strategy to the prevailing market condition. And we are pleased to see the results of the effort from the entire Orion Marine Group come to fruition in the fourth quarter.

Now turning to our results and market outlook, while several challenging factors continued during 2012, our bidding strategy was successful in growing our backlog and increasing equipment utilization. This strategy produced continued gross margin and topline improvement throughout the year. It delivered positive quarterly net income for the first time since the beginning of 2011.

As we have demonstrated through our results this year, we are headed in the right direction. We remain focused on executing our strategy by maintaining a high level of backlog through bidding effectively and focusing on opportunities that best suit our specialized marine construction and dredging asset.

Now as we look ahead, we remain encouraged with our long-term end market drivers. There is no doubt we still face some challenges, particularly with the dredge utilization. However, we believe we have demonstrated our ability to operate profitably even in these challenging market conditions.

There remains a strong bid market in front of us, and we are confident in our long-term outlook. Today we are tracking over $6.5 billion worth of bid opportunities over the next few years. About 15% of that is federal projects, 19% estate, 30% of local, and 36% are in the private sector.

Currently we have approximately $250 million worth of bids outstanding, and that includes approximately $40 million on which we are apparent low bidder. Overall, we continue to see steady bid margins with pockets of pricing improvements on specific jobs. While we remain in uncertain economic times, we are optimistic about our long-term pricing improvement.

With regard to market specifics, we continue to see a very strong demand from the private sector. We are currently working on several private sector turnkey projects that utilize our entire suite of services. Additionally, we continue to see multiple bid opportunities from the private sector for infrastructure improvements, replacements and new builds from multiple types of clients, including the energy-related companies and private terminal operators.

More specifically, we believe the increase in energy-related opportunities is largely a function of the recent development of additionally domestically produced natural resources. With increasing volumes of product coming to the market, the need for port-related storage and transfer facilities has increased. Additionally, we expect to continue to see multiple opportunities from state governments related to transportation spending and environmental restoration and repair.

Now today we are working and bidding on several bridge projects and we will remain optimistic about bridge-related opportunities in 2013 and beyond. Also, we expect to see an increasing number of environmental restoration and repair opportunities as a result of funding from the RESTORE Act. And the RESTORE Act is dedicating 80% of the fines collected from the 2010 Gulf oil spill towards coastal restoration in five Gulf States, and also there is the Hurricane Sandy emergency funding.

Now while we don't expect the Hurricane Sandy emergency funding to directly impact our geographic operating regions, we do expect to see a tightening of industry capacity as the $50 billion in funding is spent over the next several years.

Additionally, we expect to continue to see the benefits of increased port infrastructure spending during 2013. According to the most recent data from the U.S. Census Bureau, the United States continues to see increases in exports and imports. 2012 saw exports increase by 4.4% and imports increase by 2.8% as compared to 2011 levels.

Also, the American Association of Port Authorities released a five-year marine infrastructure spending forecast during 2012 that estimates about $46 billion will be spent overall, of which about $34 billion will be spent in our markets for forward infrastructure improvement projects by 2016. Funding for these projects will come from a mix of private dollars totaling $24 billion in our market areas and $10 billion from Port Authority capital expenditure. As we've said before, the widening of the Panama Canal should bring a healthy amount of bid opportunities into our market areas.

Now, finally, we will have to keep a close eye on federal spending during 2013. A continued source of uncertainty for us is the budgetary situation that is unfolding in Washington today. With one month left on the continuing resolution passed in October, which funded the Army Corps of Engineers budget, another stopgap bill will need to be put in place for the remainder of the government's fiscal year unless a budget can be passed.

In the past, short-term continuing resolutions have affected the Corps' ability to let projects efficiently. It is our hope that Congress is able to pass a budget to fund the Corps for the remainder of the fiscal year.

Budgetary uncertainty could further exacerbate the uncertain Corps letting environment, which could affect utilization of our dredging asset. However, as we left beyond the current funding situation, we continue to believe there is a building pent-up demand for projects that involve dredging services, and ongoing demand for marine construction projects.

Finishing a challenging year with positive bottom-line results in the fourth quarter proves that our strategy is working. Over the past couple of years we have gained valuable experience in operating in this tough environment, and we know what it takes now to succeed. We are pleased with our end market drivers and we believe significant opportunities for continued growth exists.

As I have said before, we are pleased to see the result of all the hard work and dedication in the entire Orion Marine Group team finally come to fruition in the fourth quarter. And we're very excited about the road ahead.

With that I will turn the call over to Mark Stauffer, who is going to discuss our financial results in more detail. Mark?

Thanks, Mike, and thanks for joining us today. For the full year 2012 we reported a net loss of $11.9 million or $0.44 per diluted share, with most of this loss occurring in the first half of the year. These results compare with a net loss of $13.1 million or $0.49 per diluted share in the prior-year period.

Full-year contract revenues increased 12% year-over-year to $292 million, of which 49% was generated from federal, state and local government agencies and 51% from the private sector, which compares to 76% from federal, state and local government agencies and 24% from the private sector in the prior-year period.

For the fourth quarter of 2012 we reported net income of $1.5 million or $0.05 per diluted share, which compares with a net loss of $5.2 million or $0.19 per diluted share in the prior-year period.

During the fourth quarter we made a strategic decision not to reinvest in some underperforming assets. As result, we took a $1.8 million charge associated with the write-down of these assets. The disposition of these assets will not affect our ability to continue to grow revenue, and we believe the remainder of our fleet has a fair market value that is at or above the current book value.

Fourth quarter contract revenues increased 78% year-over-year to $98.6 million, of which 30% was generated from federal, state and local government agencies and 70% from the private sector, which compares to 64% in federal, state and local government agencies and 36% from the private sector in the prior year period.

During the full-year 2012 we bid on approximately $1.5 billion worth of opportunities and were successful on approximately $312 million. This resulted in a 21% win rate for the full year with a book to bill ratio of 1.07 times. As of December 31, 2012, we had a backlog of work under contract of $184.1 million, of which 22% is for federal government projects, 17% is for state projects, 18% for local projects and 43% is in the private sector.

Subsequent to the end of the year, we have been successful in continuing to obtain additional awards for new work. We are pleased with our backlog as we begin 2013.

As Mike mentioned, we are also pleased with our current level of market activity and future prospects. As we demonstrated in the fourth quarter, we can have profitable results at today's job margin levels with the right mix and volume of work.

Turning to the balance sheet, for the full year 2012 we increased our cash position to $43 million. We believe maintaining a strong cash position is vital during these uncertain times. Additionally, we remain in a low leverage position with minimal debt outstanding, and available capacity on our credit line.

Our bonding program remains solid, and is more than adequate to support our bid activity. We continue to enjoy an excellent relationship with our surety. Overall, we are pleased with our balance sheet, and remain focused on maintaining a strong balance sheet.

Finally, as our fourth-quarter results have demonstrated, profitable operations in the current environment are possible. However, we still expect a challenging first half of 2013 due to normal seasonality and lack of clarity on federal spending which will result in idle dredges during the beginning of the year. Still, we continue to believe the obstacles and challenges we are currently facing are not insurmountable.

We believe our specialized fleet, workforce and support facilities position is to be a leader in the market for this and foreseeable future. The plan we put in place to manage through this downturn has produced positive results in the fourth quarter and we remain positioned to take advantage of a return to more normal market conditions.

Our confidence in our long-term end market drivers gives us optimism about the future. With that I will turn the call back over 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. Would you please review the procedures for placing a question?

(Operator Instructions). Rich Wesolowski, Sidoti & Company.

You bid on $1.5 billion of projects in 2012. Would you expect that figure to be markedly higher or lower, 2013?

The market will be higher than the prior year, and we don't always bid on everything that is out there. I think last year we had close to a couple of billion, and we ended up bidding on $1.5 billion of that. But there is an increase in the market in our database for this year.

That kind of goes to the heart of the question is that in construction, in the last year, you have been pursuing greater profit through volume as opposed to your typical price when times are good. And now that construction bidding opportunities seem to be expanding again, should we expect Orion to over time go back to its historical criterion more price-heavy, or is it still volume-heavy strategy for you?

That is our ultimate objective is to get back to historical margins. It is all a matter of timing, and right now we are comfortable where we are at. We are not -- we would like to see these margins come up, and we have opportunities during the year to selectively make that happen. And we just have to manage the process. But it is very important for us to keep our utilization up.

Yes, and I think short-term, near-term it is still a volume equation for us. Certainly, our ultimate goal and our belief long-term is that we will get back to the pricing levels that we historically enjoyed.

Quite honestly, we have a feeling that pricing should be better today than it is, just given the activity and the volume. But there is still a lot of uncertainty out there in the economy and I think we probably have to see some of that improve over time, and then we can start seeing some pricing improvement.

Through that also we are starting to see some pockets of improvement in different places. It is not consistent across the board, but at the same time we are starting to see some pockets of pricing improvement.

Have you seen any evidence at all that the contractors who may not have been in the marine space when the times were good in other areas are leaving your space now, in anticipation of better housing or DOT or non-res activity?

The bigger projects that we have been going for haven't had an enormous volume of bidders showing up. There are still -- the $1 million and less projects you can get 10 bidders to show up pretty routinely now.

But I don't feel that there has been any addition to the competitors that are pursuing the work. We have actually seen a few of them drop out with underpricing and bonding constraints, which we fully expected when we saw that happen a couple of years ago, but I think we are comfortable with -- (multiple speakers)

There is -- like Chris said a minute ago, in terms of -- there is pockets of pricing improvement. That goes hand-in-hand to the heart of your question is -- there is areas where we are -- we continue to see more bidders than others. There are other areas where we are seeing a reduction in the number of bidders for certain projects.

So, again, it is a little uneven. But, again, I think we have said in the past couple of calls we are seeing a lot less irrational pricing. And I guess we would term it as we are seeing the normal amount of irrationality out there. And so, again, we are encouraged and we think it is moving in the right direction.

I think another thing to point out too, Rich, is we have been very successful in getting some turnkey work where it utilizes all of our resources in the Company and we have been able to essentially negotiate some contracts that way. And it enables our client to fast-track their projects, and we are one of the very few marine contractors that can do that. And particularly in the oil and gas sector, that is very important where you want to get that product delivered to market quickly. We can deliver the goods.

And then, lastly, if you could just update us on your headcount. Appreciate your time, thanks.

We are just about 1200 employees now, and continuing to hire.

Trey Grooms, Stephens.

It is Trey Grooms with Stephens. Thanks a lot, guys, and congrats on a great quarter, by the way.

Okay, can you talk a little bit more -- you mentioned that first half in 2013 challenging, some seasonality playing a role there. Can you talk a little bit more about the seasonal aspect of what occurred in the quarter, in the first half and what you guys are referring to there? And at least directionally what we should think about what that means, that seasonality, what that means for margins, and any color you could give us there would be helpful.

We don't give guidance, but we do -- as we said in our remarks, as we come into the first half of 2013, certainly there is just the normal seasonality. As we have talked about in the past we tend to build as the year progresses. Certainly, this year backlog is up over where it was 12 months ago coming into 2012. But as we head into the first half, again, we just remind you about that normal seasonality in terms of how our quarters kind of build.

But just a couple of other points -- we do have the uncertainty with the Corps of Engineers. One of the things that occurred in Q4, which was beneficial to us, is we did have an uptick in private sector work that involved our dredging services, so we had the benefit of that. A lot of that work has completed as we finished Q4.

We certainly have further prospects upcoming, but based on where the Corps is and some of that private sector work coming to an end, we do expect gaps in the first, particularly the first quarter. But will lead to some idle equipment in the dredging fleet for a period. So, again, hence our comments on the first half of 2013.

But just generally speaking, looking at the backlog and where you are in the opportunity, and a lot of the quick turn work and just overall speaking, while obviously the seasonal aspect of it could have a sequential impact relative to 4Q, just directionally, though, the first half should be up year-over-year. That would be reasonable to --?

I think that is a reasonable assumption. Again, we do expect the normal seasonal pullback and then the other issues that I just talked about are going to impact. But I think that is a fair statement. We would expect one half 2013 to be up over last year.

Okay, and then to this point, too, that you guys have been -- I guess, the last question you touched on quite a bit. But on the steady bid margins that you are seeing, you mentioned some pockets of pricing improvement. Is that specifically on construction? And are you seeing any kind of improvement there on the dredging front as far as pricing and the bidding there being a little bit more rational?

We have seen both improvements in marine construction and dredging. And one of the things that we are pleased with is it varies region by region, but as I said, we have had some turnkey opportunities. We have done some work associated with deepwater developments where companies do have facilities that support that, needed the infrastructure work done, which we are capable of doing both construction and dredging.

What is most important to us is we think the bid margin pricing has kind of stabilized now. We are not seeing anything continuing to drive down. If anything, it has been inching back up, so we are happy with that.

And we are being a little bit more selective, too, in what we go for. As I mentioned, we did not bid on everything last year that was out there. And we're trying to get the jobs that give us the biggest bang for the buck.

I guess the caution to that on the projects that involve dredging services is that with uncertainty and choppiness, if you will, in Corps lettings, that can lead quickly to just short of pricing fluctuations. Again, not necessarily irrational, but just pricing fluctuations because people get concerned about their utilization and things like that with their dredging assets.

All right, thanks a lot, and, Mike, what -- this is my last question, but I got to just see what you think on -- just your gut on what happens with the Corps of Engineers with the continuing resolution expiring and the hopes for a budget being passed. And that is all I have got. Thanks.

One thing about the Corps is Civil Works program is they can't shut it down. It has to continue, but and dredging in particular is a perpetual business. You have to keep these channels open.

And the Corps has just been unable to meet their mission goals, to keep channels wide and deep enough, and it has caused all kinds of problems with shipping throughout the country, all the way up into the Upper Mississippi. I am sure we have all read the articles about the difficulties with having to short load and transport and so forth.

But, in a nutshell, we don't really know yet what the sequestration means. We are watching both the Corps and the Navy to see what is going to fall out of this. There is just a lot of uncertainty and it is hard for us to really comment on it until they come out and say, here is what we are going to do.

We know what the full year is and -- for 2013. We have seen about $57 million awarded since this fiscal year, since first of October to end of February, and that compares to about $51 million in the same time period last year. And we were successful on $18 million of that $57 million, so we had a 32% win rate on the work that was out there.

But it is just going to be hard for us to give you an answer on that until we get some clarity from Congress. There is no doubt that when there is an inconsistency in Corps letting, that is when they have these short-term resolutions, creates that environment. If they get a long-term resolution, everybody has got good visibility. We know what is going to get spent, and you can manage your fleet good.

So it is just a big question mark right now.

Yes, I think, as everybody knows, the three short-term issues that we will be dealing with in the first half is sequestration, the CR, the continuing resolution ends up at the end of March. And then you push the debt ceiling, which I think the latest estimates on that are -- that is a problem in May. So we have those three things that are causing uncertainty. So we will have to see how it plays out over the next month or two here.

Fair enough. Thanks a lot and good luck.

Jon Tanwanteng, CJS Securities.

Really, really nice quarter there. I know you are expecting some seasonal headwinds going into Q1 or maybe Q2, but Q4 is usually flat to down for you guys as well and you really blew it out. Now that where two-thirds of the way through Q1, does it feel better or worse than normal seasonality for you guys?

It feels like general normal seasonality, so we expect sequentially from the fourth quarter to see some level of pullback here. And, again, as the comments we have made before, we still have the uncertainty with Corps of Engineers. Some of the private sector work that involved some of the dredges has ended. So we have got some gaps here between jobs. So we will have some idle dredging equipment again.

Okay, and then does that reverse in Q2 as you get those federal dredging jobs in the books?

We will have to see the full impact yet. We still have some gaps there and some places to fill in, and, of course, we normally start to see a little bit of hiccup as we get a little bit daylight hours. We will burn a little more cost. But we will have to see how that picks up.

Okay, and then, obviously, gross margin is very nice as well. Was that just a function of the private dredging or overall utilization? And, again, how sustainable is that going into 2013?

I think it was really a function of a couple of things. It was a function of the volume, equipment utilization across the board. Certainly the pickup in private sector work, which helped out the equipment utilization of the dredges, contributed to that. So, again, I think overall we are pleased with where we are in terms of stabilization in the pricing realm, as Mike talked about a minute ago.

Again, we see pockets of improvement there. But of course the issue is, as we come into the first half of the year, is the gaps and the uncertainty with the federal side of things. But, overall, we are pleased with the backlog coming into the year, the opportunities we see in front of us and the stabilization of the pricing. Again, the focus on is maintaining that backlog and driving the volume.

Got it. Maybe to put it a little differently, I know in Q1 you're going to have a dredging gap. But in Q2 with the federal work, could you expect gross margins to be similar to the ones you saw in the fourth quarter?

It is tough to tell, and again, I think it is just that is why we had our comments regarding the uncertainty with respect to the piece you're asking about. We do have -- we did pick up some dredging work at the federal level, as Mike touched on, and we commented on in our update, the investor update in January.

But how much -- how the process goes in the next -- at the federal level with the budgets and the sequestration and everything, I think that is going to tell the tale as to how much work comes out. Is it choppy? Do they execute on their full-year plan for the back half of the government's fiscal year, which, of course, is going to have an impact on Q2?

Got it, and then one quick housekeeping one. Your tax rate was about [60%]? What went into it?

[58%]. Yes, we had -- our final reconciliation for the year and true-up occurred in Q4. And, of course, that was impacted for 2012 with whole NOL carryforwards and the date impacts. So it got pretty interesting in truing that up. But, of course, that was trued up in Q4, so that impacted the quarterly tax rate.

I think for the full year we had an effective tax rate of around 28% or so. We would expect that to be back to a more normalized 35% to 37% rate for 2013.

Great, thanks a lot, guys. Again, nice quarter.

Alex Rygiel, FBR.

I just noticed this was actually your second highest quarterly revenue of all time, so congrats on that; very nice. Couple of random questions. First, the Army Corps MATOC that you won earlier in the year, the hunting license for the $500 million opportunity, has anything been awarded under that umbrella yet?

Yes, the seed project we were successful in getting. So that has been awarded.

So that is part of the $18 million that you have gotten year-to-date?

Yes.

And is the MATOC -- how we should we think about that as it relates to sequestration? Is it at risk or could money move from one pocket to the other inside the Army Corps?

Boy, if you can get the answer to that, please let me know (laughter). Seriously, we are just not sure. We know what the Corps plan is for 2013. We know what their plan is for 2014. The question is, is the funding flow going to allow them to get those projects liquidated the way they planned. We just can't tell you until we get the Congress to -- settle.

And, you know, because there is a whole lot of discussion out there, Alex, as I am sure you are aware of -- of authority, granting authority under -- changing the authority so that government agencies do have the ability to move money around. So it is hard to tell.

I guess the short answer is -- I guess everything is at risk. But I think longer-term they certainly -- they have that ability, regardless of whether it is $500 million or something less than that, to put a workout under that over the next period time here.

Helpful. And, Mike, a couple of years back you were pretty confident when there was good visibility to be able to offer up guidance. Where do we stand on your comfort level with visibility? Obviously, we are not there yet or you would have maybe given us some guidance here. But are we getting closer?

Let's just fast forward past CR and sequestration. Do you think you might have enough visibility come the summertime to feel comfortable about providing some guidance?

I think it is a matter of how far out can we see with confidence with the federal funding. On the private sector side, we have got tremendous visibility on projects out for the next 3 to 5 years. And we're beginning to bid work for 2014, 2015 period and feel extremely good about the marine construction environment right now. And that is about three-fourths of our business.

But the federal, they're just going to have to either have a long-term continued resolution or a plan that goes long-term for us to be able to state with confidence that we can give guidance like that. I think it is hard for me to predict a time on it.

And, Alex, clearly that is something that we consider, but whether or not -- we will just have to stay tuned on how we view guidance.

And, lastly, I apologize if I missed this, what asset did you sell in the quarter to recognize a loss and what asset is held for sale right now?

Actually, it is related. We had some smaller dredging assets and some modular barges, also, that those were what we refer to that we chose not to reinvest in, and the two are related, Alex. The loss on the P&L on the sale is related to the assets held for sale on the balance sheet.

Very helpful, thank you.

John Rogers, D.A. Davidson.

Good morning and congratulations as well. A couple of things. I think, Mark, you gave us a backlog by customer. Do you have fourth quarter revenue by customer?

Fourth-quarter revenue by customer was -- 22% was federal, 12% was state, 15% -- hang on, that is for full year 2012. Hang on one second.

We got that.

For the quarter, 70% was the private sector. About 10% was local, 6% was state and 14% was federal. That is for the quarter.

Okay. And, actually, I was curious about the private sector, (technical difficulty) was there one big project in there during the quarter?

No, there was a series. John, partially as you remember when we go back last year, we had a lot of private sector work in backlog that was going to get kicked off in the second half of the year. So we were liquidating on that.

We also saw a number of projects in the private sector that involve dredging services, maintenance type dredging and things of that nature in the private sector, so that added to it. And then, of course, is a function -- it is a function of two things. As Mike said, we are seeing a lot of opportunities in the private sector, so there is strength in terms of the opportunities.

But the other piece of it is what do we go after and what are we successful in getting? So those two things contributed to the uptick in private sector revs.

And any guidance or comment you can give us on utilization rate for the dredges for the percentage of revenue (technical difficulty) in the quarter?

As you know, we don't give specific utilization information just for competitive reasons. But I think it is fair to say that utilization of the overall fleet was up in the back half of the year. Specifically, we did see a pretty nice uptick in dredge utilization, I would say not quite close to historical norms, but closer to historical norms than we saw in the first half of the year last year.

Okay. Okay. I'm just trying to understand the margin (technical difficulty).

Sure.

Okay, and then I guess in terms of the private sector market, as you look at it, more maybe into what you are bidding in 2014, how much of it is related to just industrial type work as opposed to (technical difficulty) (multiple speakers)

It is kind of a mix. The oil and gas sector has got a lot of drive now with import/export product. We are seeing coal handling facilities coming down here, because they don't want to go into the Pacific Northwest.

We are seeing deepwater offshore construction has land-based infrastructure that has to be -- maintain their facilities. It is bulkheads, dredging, deepwater, these big, heavy deepwater semi-submersibles that have to be lowered and submerged in order to topsides on them.

And we are one of the few contractors that can provide the services to enable them to ballast those big TLP type structures in place. We do the dredging and preparation for that and we build the bulkhead for pipe spooling bases and things like that.

So you've got the offshore industry, you've got the oil and gas loading terminals; you have got bulk cargo taking place, wind power components coming through, and just general port expansion. We are just seeing -- not just with the big ports, but some of those smaller ports as well, everybody is --.

And just as -- not ready to call this one a trend or anything like that for certain, but we have also seen some marina opportunities come back. And it has been quite some time since we -- it is smaller, and again, it is not a trend, but it is just -- it is encouraging to see that again. And obviously that is private sector type opportunities as well.

Okay. And what are you looking at in 2013 in terms of CapEx?

Probably about mid-teens. I think we finished up the year last year at around $12 million or so in CapEx, so we would expect a slight uptick there, but call it mid-teens for 2013.

I think we got the right asset mix. Some of our big CapEx expenditure programs are behind us now. It is into more of a normal CapEx expenditure program, which will help us generate more net cash flow, and I just feel real good about the mix of equipment and team of people we got in place. We are ready for an uptick.

Is there anything, Mike, you need in terms of acquisitions to take advantage of what you see coming?

I tell you, I think this acquisition we just did up in Alaska is really going to be very good for us. When we bought the company they had about $10 million of backlog and we're going to be building on that. And we have just identified a lot of opportunities for marine construction up in Alaska, and I think we will be focused on trying to grow that group. And I think that could be really good for us as an adder.

We are always looking at acquisition. Even when times are tough, sometimes that is the best time to look. But we will be opportunistic and -- but we are being practical in managing our money and -- but I am sure there will be some more opportunities down the road.

Okay, great. Thank you. Nice quarter.

(Operator Instructions). Jack Kasprzak, BB&T.

The SG&A in the quarter, $6.8 million, down sequentially and year-over-year, is that a function of higher revenue and more people being on jobs?

No, that is a function of a couple different things. Clearly, as you know, we've been working on cost containment throughout the year. We talked a lot about that in previous calls.

But also, we had a decrease in professional fees just related to the function of how those flow through and the timing and things like that. We would expect there -- for 2013, we would expect there to be an increase in G&A, not necessarily a function of headcount per se, but just normal things that creep up plus just wage pressure that we are seeing as a result of a lot of activity out in the marketplace and things like that. So we would expect there to be an uptick in SG&A for 2013.

Okay. You anticipated my follow-on question, Mark. So I think that does it. Thanks very much.

There are no further questions in the queue at this time. I would now like to turn the call over to Chris DeAlmeida for closing remarks. You may proceed.

Thanks. I'm behalf of Orion Marine Group, would like to thank you for taking the time and joining 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 Drew or me a call. Thanks.

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