Orion Group Holdings Inc (ORN) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q1 2018 Orion Group Holdings, Inc. Earnings Conference Call. (Operator Instructions) As a reminder, this conference may be recorded.

I would now like to turn the conference over to your host, Mr. Shane Martin. Sir, you may begin.

Thank you, Valerie. Good morning, everyone, and welcome to Orion Group Holdings First Quarter 2018 Earnings Conference Call and Webcast. Joining me today are Mark Stauffer, Orion Group Holdings President and Chief Executive Officer; and Christopher DeAlmeida, 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 Mark and Chris will highlight our results and update our market outlook. We will then open the call for questions.

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

These statements are predictions that are subject to risks and uncertainty, including those described in our 10-K 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 or forward-looking statements, whether as a result of new developments or otherwise.

Also, please note that adjusted net income, adjusted earnings per share, EBITDA and EBITDA margin are non-GAAP financial measures under rules of the Securities and Exchange Commission, including Regulation G. Please refer to the reconciliations and definitions inclusive of the most comparable GAAP measures and reconciliation tables accompanying this earnings call within the press release issued this morning. The press release can be found on our website at www.oriongroupholdingsinc.com.

Also for additional discussion of risk factors that could cause actual results to differ materially from our current expectations, please refer to our quarterly and annual filings with the SEC, which are also available in the Investors section of our website.

And with that, I would like to turn the call over to Mark Stauffer, President and Chief Executive Officer. Mark?

Thank you, Shane, and thanks for joining us this morning. I'd like to first thank our 2,500 coworkers for all their hard work, dedication and commitment to our company. It's through our combined efforts we strive every day to safely meet our customers need, while working towards our strategic objectives.

I'm pleased with our start to 2018. During the first quarter, we had solid execution with continued strong market drivers. While weather patterns impacted production in our concrete segment, our marine segment experienced solid execution. Additionally, we continue to see strong end market drivers across our business, and we continue to expect 2018 will see improvements over 2017.

As we go forward, we will continue to execute on our strategy of seeking to be the premier specialty construction company, focused on providing solutions for our customers across the infrastructure, industrial and building sectors, while building our market share and enhancing our operations in these areas.

We will continue to look for opportunities in these areas through both greenfield and M&A efforts. As we previously discussed, we made several changes within our marine segment during 2017 to solidify and improve our operational results, while continuing to provide high-quality services to our customers.

As we saw in the fourth quarter of 2017 and the first quarter of 2018, these changes are helping to produce improved operational performance and leading solid bottom line improvements. We have been and continue to be committed to our marine segment and providing quality services to meet our customers unique need.

Within our Concrete segment, we will continue to focus on expanding our services and market share in our Central Texas and Dallas-Fort Worth markets, while focusing on maintaining market share in Houston. We believe there continues to be solid demand drivers for our concrete segment and expect to see continued long-term expansion and growth opportunities.

Finally, I'm pleased with our efforts to date in the industrial sector. While leveraging our skill sets and customer base, we are expanding our addressable market to provide high-quality services to meet more of our customers' need. We are pleased with the progress within the sector and expect to see further opportunities throughout 2018.

As we've stated before, we will continue to work -- to deploy new capital to the high-return, high free cash flow businesses with a focus on increasing our return on invested capital. We expect to continue to see solid demand drivers across the infrastructure, industrial and building sectors. Additionally, with the favorable macroeconomic conditions we see, we believe conditions exist for improved bid pricing and we remain hopeful that our markets will recognize the prevailing positive conditions and adjust accordingly.

The infrastructure sector, which consists of our marine segment, continues to provide both public and private opportunities to maintain and expand facilities on U.S. waterways. Throughout our operating areas, market fundamentals remain positive and we are seeing pockets of margin expansion.

Private sector bid opportunities continue from downstream energy customers, as they expand their waterside facilities associated with refining and storage. In addition, recreational demand continues from private and public customers with bid opportunities related to cruise lines remaining promising, as we track projects related to new destinations or refurbishment of existing destinations in the Caribbean.

Finally, we continue to see demand from port authorities, which are generating opportunities as they execute their expansion plans to handle larger vessels and increased traffic flow. The underlying fundamentals of our marine business remain sound with solid demand drivers, bid opportunities and a good backlog. We will continue to provide -- be a leading and premier marine construction company.

Turning to the building sector, which consists of our concrete segment, we continue to have solid long-term demand drivers as well. The markets we currently serve continue to retain their positions as leading centers for population growth and business expansion. Population growth throughout our markets continues to drive new distribution centers, office expansion, retail and grocery facilities, multifamily housing units, educational facilities and medical facilities.

In Houston, we continue to experience a competitive environment, but we are focused on providing high-quality services and maintaining market share. We are also focused on expanding our market share and service offerings in the Dallas-Fort Worth market and the Central Texas market, both of which we continue -- we expect to continue to provide long-term opportunities.

In all markets, we will continue our pursuit of structural projects, in addition to light commercial work. In the industrial sector, we are continuing our greenfield expansion by combining talent and resources from the marine and concrete segments to continue to pursue and execute foundation work inside the industrial environment and other land-based environments.

We are beginning to execute work in this sector and are pursuing additional opportunities that could build backlog. The massive long-term petrochemical-driven opportunities, along the Gulf Coast, provide significant potential to expand our addressable project opportunities.

In closing, we had a strong first quarter and a nice start to our year as we continue to focus our efforts on solid execution of work to produce solid bottom line results. The combination of strong fundamentals, improving efficiencies in our business and opportunities for targeted acquisitions, we believe we are extremely well positioned to take advantage of improved economic conditions and increased infrastructure spending.

We are also focused on maintaining and enhancing the improvements we made in the marine segment, seeking profitable growth opportunities in the Dallas-Fort Worth and Central Texas markets in our concrete segment and continuing to expand our addressable market by pursuing bid opportunities in the industrial sector.

We remain focused on delivering high-quality projects to our customers with continued expansion of our services across our operating segments and areas. We are excited about the future as we continue to execute our strategic plan, and believe we have solid fundamentals for future success.

Now I'd like to turn the call over to Chris to review the financial results in more detail. Chris?

Thank you, Mark, and thanks for joining us. For the first quarter 2018, we reported net income of $4.1 million or $0.14 diluted earnings per share. These results compare to a net loss of $1.8 million or $0.07 loss per diluted share in the same period a year ago.

During the first quarter of 2018, we settled on an operational legal matter that impacted our ability to win certain projects in 2017. This settlement helps recoup certain loss revenues and expenses incurred to settle the matter. Excluding the onetime other gain, results for the first quarter of 2018 would have been net income of $98,000 or approximately breakeven diluted earnings per share.

Contract revenues for the first quarter of 2018 were $136.8 million, of which 46% came from our marine segment and 54% came from our concrete segment. Within the marine segment, 47% of first quarter 2018 revenue was generated from federal, state and local government agencies, while 53% was generated from the private sector. This compares to 63% of first quarter 2017 revenues being generated from federal, state and local government agencies and 37% from the private sector.

In the concrete segment, more than 75% of first quarter 2018 revenue was generated from the private sector as compared to 90% in the prior year. As we move forward, we expected -- continue to see a higher mix of private sector revenues, driven by the contracts we are pursuing and the overall mix of our concrete and industrial business.

First quarter 2018 gross profit was $15.8 million or a gross margin of 11.6%, which compares to first quarter 2017 gross profit of $13 million or gross margin of 9.4%. SG&A expense for the first quarter of 2018 was $15 million or 11% of contract revenues, which is flat compared to the prior year. SG&A expense for the first quarter of 2018 was slightly better than anticipated due to lower bonus accrual expense and other cost savings.

As we move forward, we expect leverage from our SG&A expense and we expect this expense as a percentage of revenue to decline. For the full year 2018, we expect SG&A, as a percent of revenue, to be around 11%. Beyond 2018, we expect to continue to see leverage from SG&A below the 11% mark.

First quarter 2018 EBITDA was $13.8 million or a 10.1% EBITDA margin. This compares to first quarter 2017 EBITDA of $6 million or a 4.4% EBITDA margin. For the first quarter of 2018, we bid on $747 million worth of opportunities and we're successful on $132 million, which resulted in an 18% win rate for the quarter and a book-to-bill ratio just under 1x.

As of March 31, 2018, we had backlog of $355 million, of which $182 million was related to the marine segment, while $173 million was related to the concrete segment. Moreover, we are the apparent low bidder or we have been awarded subsequent to the end of the first quarter an additional $33 million worth of opportunities. Of that $26 million is related to the marine segment, while $7 million is related to the concrete segment. In total, this means we currently have $388 million of projects between backlog and low bid.

Now turning to the balance sheet. As of March 31, 2018, we had $9 million of cash on hand and access to $44 million under our revolving line of credit. We ended the quarter with approximately $80 million in total debt outstanding, of which $5 million was related to the revolver and approximately $75 million was related to the term loan.

As we go forward, we will continue to focus on paying down debt with excess free cash flows. We believe our liquidity position is more than adequate for general business requirements and for servicing our debt going forward. Additionally, we are in compliance with our financial covenants, including being below the 3x leverage ratio required at the end of the first quarter.

Finally, our bonding program remains solid and is more than adequate to support our bid activity. As we look ahead, we are pleased with the level of opportunities we have in front of us across our business sectors. Our backlog and low bid activity remains strong and we are optimistic given the healthy bid opportunities we've been seeing over the past several months.

Currently, we have $886 million worth of total bids outstanding, of which $338 million are related to the marine segment and $548 million are related to the Concrete segment. As Mark mentioned, we are pleased with our start to 2018. While weather patterns affected our concrete segment, our marine segment performed well with solid execution.

As we continue throughout the year, we will focus on maintaining improvements on our marine business, while seeking growth opportunities in our concrete segment. Additionally, we will continue to focus on developing our industrial services both on and off the water.

In closing, we're excited about the future and look forward to seeing continued improvement in 2018. With that, I'll turn the call back over to operator to begin the Q&A portion of the call.

(Operator Instructions) Our first question comes from Matt Duncan of Stephens Inc.

This is Will, on the call for Matt today. Can you touch on the other gain, again, and explain what that was? It seems like a big tailwind that's probably nonrecurring in nature, so I just want to better understand on what's flowing through there?

Yes, it is nonrecurring. But as Chris said in his remarks, it's a settlement of an operational legal matter related to data loss and market data that impacted our ability to win certain projects last year. So it's a recovery -- a favorable recovery in that matter. It helps us recoup certain loss revenues and then also the expenses we incurred to pursue that matter, so we're very pleased with that. However, even without that, we think we had a nice quarter, nice start to the year. Very pleased with where we are with respect to 2018.

Okay. Great. That's very helpful. And yes, I think that the SG&A expense line was better than we and others had expected. So what were the drivers behind that expense leverage this quarter and what should we expect? I guess, from a quarterly basis, Chris, you alluded to the 11% for the year, but just kind of as we go through the year what are you expecting?

Yes. So again, the kind of better performance this quarter was driven by bonus accrual expense directly related to overall performance which can fluctuate, clearly, on the performance of the company. We did have some additional cost savings along the way. As I said, I expect it to be around 11% for the full year and I expect that to be fairly even between the quarters for the remainder of the year.

Okay. Great. And switching over to backlog trending lower in the past 3 quarters. Trying to figure out -- are competitors gaining share on work there at margins below your return threshold? And when do you start to think that book-to-bill will move above that onetime mark?

Well, again, there is kind of a normal ebb and flow of the letting cycles and bids as we talked about for a couple of calls. We have, on the concrete side, seeing some margin -- or excuse me, some competitive pressure in Houston. That's impacted our win rate, some on the concrete side. But again, overall, we like the opportunities we see in front of us. We are focused on maintaining market share in Houston and with that being the short term. And we think that the short-term issue in Houston, again, we're very bullish on all the markets in concrete long-term and in Houston as well. We've -- last year in 2016, we had a large project come in at the tail end of '16 that was in backlog. It did not burn much in the front half of the year last year. So that's also -- we've kind of got that tough comp there on that. So -- but where we are with backlog and the opportunities we see in front of us, we've got $887 million of bids outstanding. Almost $0.5 billion of that on the concrete side. If we look back, historically, at where we are with bids outstanding, I mean, we're very pleased with that. So as we look at all of our data points backlog, bids outstanding, upcoming bid opportunities, yes, we like where we are. And again, are pleased with the start to the year and think that we've got the markets in front of us to achieve our objective this year.

Great. And last thing for me on guidance. Is it too early to give a revenue outlook at this point? And given the strong profits we've seen, what are your EBITDA expectations? Or we still looking for the high 30s to low 40s, excluding that gain? Or how should we be thinking about that?

Yes. Matt -- or sorry, Will, we don't do revenue guidance, I'll steer clear of that, I'll let you come up with that one. On the EBITDA side, yes. We still are comfortable with the upper 30s to low 40s, and that would be pre the onetime gain -- the onetime other gain that we had in Q1.

Our next question comes from Benjamin Klieve of NOBLE Capital Markets.

One follow-up question to the legal sentiment here. I'm wondering if you can elaborate a bit on how this impacted your 2017 operations. And then with the settlement now concluding, how will this impact 2018 operations? What -- is there anything that we can -- I'm trying to understand how to compare 2017 to 2018 given that this event transpired?

Fair question, and it's kind of a difficult one to answer. We definitely think it impacted opportunities that we would have otherwise had in 2017. How much of that -- it's possible some of that impact would have occurred in 2017. Some of it would have occurred in 2018, obviously. As you know, as we both work in or pursue opportunities, there is a time delay between when you obtain work and execute work. So again, I'm not going to try to quantify what impacted that last year, definitely, I think it had -- would have had impacted this year. And again, we're very pleased with that settlement and I think that is rightfully shown as an operational item because that's where it impacted us.

Okay. Very good. And a couple other questions. One, curious about the status of hurricane-related work on 2 fronts. One, with the passage of the budget, do you expect any bid or proposal activity to come to light in a meaningful way here over the next couple of quarters? And then, second, how have commercial opportunities come to market over the past few months?

Well, again, as we -- I think the opportunities related to the hurricanes from last year are playing out according to the playbook. We did have opportunities late last year, particularly survey work and some dredging work that occurred late last year Q4. We are hopeful that we'll see -- continue to see opportunities moving forward. There's a little bit of a longer tail for infrastructure work, which is what we anticipate. We are tracking opportunities related to that. We have seen further modifications to our -- some of our core of engineers projects that will start burning as we go through the year. So we're pleased about that, and some of that is directly related to the hurricane activity from last year. Again, we are expecting to see, as you said, with some of the funding approved for the balance of the fiscal year. We are expecting additional opportunities to come out with respect to the core of engineers work in particular that will provide additional opportunities for us, so we're pleased about that. But again, I think it's playing out about as we expected. We, typically, will see a survey and dredging work, initially, in the shorter term, which we're seeing. And then we'll see more of the infrastructure longer-term fixes throughout the next couple of years, quite frankly. That will be additive to other opportunities that we would normal be pursuing and bidding on.

Very good. Another question with regards to the industrial segment. With that segment, in its infancy, but now a couple of quarters -- a few quarters deep here, I'm wondering to what degree you are investing in either physical assets or business development efforts that would have any impact on -- any negative impact on margins given that work is being done just on a couple of awards at this point. Is there any drag on margins from that segment? Or is it so nominal at this point that it's just not anything we should consider?

It's the latter. It's nominal. It's nothing. It's not a drag. We're being very careful about standing this up in a way such that it is not a drag. We are adding folks as we add business. And so -- and again, it's not a particularly capital-insensitive business that pursuing and/or it's utilizing assets that we otherwise already have in each of our existing segments. So some of this work that we pursue are opportunities that will involve, again, the skill set of the existing segment. So again, not a drag at all. And again, we're being very careful about how we stand it up to make sure that it's additive and not a distraction.

Okay. Very good. And then one final question from me, and I'll get back in queue here. I'm curious, in the marine segment, if you can point to any of those kind of larger point or deepening awards coming in the market here in the next few quarters that you think you are -- or kind of uniquely attractive to you given your geographies and asset base.

Yes. Thanks. Well, I think, a lot of -- as we've said, this is kind of a long-term play out I made comments in my remarks today. The port authorities are executing on their plans in multiple phases over several years. There's been a lot of that work ongoing already in the last few years, which we participated in. We continue to expect to see that. And it varies from port to port. There are some -- East Coast ports that are -- have significant deepening projects underway. We expect to continue to monitor all the opportunities that those provide, along with all the other opportunities that we see from other end market drivers and pursue those that make the most sense of it. So we view it as a positive regardless of whether or not we pursue and win any particular project or not. We view it as a positive thing for our business, and so we continue to see those opportunities. And again, we think those are going to stretch out over the next several years. Just kind of the -- further, specifically, there's nothing in particular that I would say today is, hey, this is one we really want to get. We're tracking stuff. We're bidding on stuff. It's providing opportunities along with all the other opportunities we see from our other end market drivers.

Our next question comes from Jon Tanwanteng of CJS Securities.

It's Pete Lukas for Jon. Just on the concrete business, you mentioned overall paying down debt is a priority, but also looking for grow in the Dallas-Fort Worth area. So fair to say still looking at acquisitions in those areas? Or are you guys happy with where you are and looking to grow organically there?

Happy with where we are. Looking to grow organically. We've got a great team in all of our areas, a great team up in Dallas-Fort Worth market and believe that we can achieve our objectives organically. Obviously, never say never if the right opportunity presents itself. Of course, we would take a hard look at it, but we think we can achieve our objectives organically.

And staying with the concrete business, any color you can give us on what the growth rate would have looked like without the rain delays?

Well, keep in mind, Q1 is our seasonally weakest quarter across the company, in fact, in both segments. We would have expected probably a little bit more margin expansion than we had. If you look at -- think of fourth quarter into the first quarter, fourth quarter was impacted by -- again, weather. However, is $74 million of revenue in that period, $3.1 million of operating income. If you look at Q1, we did a similar $74 million of revenue and about $0.8 million of operating income. So that is impacted by both weather and some of the market compression that we saw. Overall, I would expect it probably to be 5% to 10% better had we not have some of the weather.

Our next question comes from Marco Rodriguez of Stonegate Capital.

I had a really quick follow-up question on the concrete side of the business. The -- you mentioned that, obviously, sequentially, normally, you have a bit of a down quarter here on -- especially, on the concrete side. Just wondering how much revenue you saw from TBC in the quarter?

We don't split that out any further.

So no organic growth figures that you can provide or anything of that nature?

Not really. I mean, because we don't split that out specifically. Obviously, we got the historical stuff from TBC when we took it over. But again, I think going back to Chris' prior answer, clearly, on the year-over-year comparisons, we had the addition of Central Texas to the business, but that was offset by the things Chris was talking about, particularly the weather patterns. And I want to be very -- I talked about this on the last call, but -- just a tough, tough quarter in terms of the timing of front coming through, the pretty massive temperature swings that we would see week in, week out. We had a couple of freezes, hard freezes, which in South Texas are a big event for us down here. And then just kind of the pattern of every couple of days having some rainy weather come through and then being good for a couple of days and then coming back to rainy weather. Just tough continuity for the -- for production in the quarter. But again, I go back to what Chris said in the prior answer, that's factored in to it. And again, certainly, the addition of Central Texas has been positive and -- but again, offset by some of those challenges we faced in the quarter. We are starting to see weather improves. We're hopeful that, that pattern is behind us now, and we can get to pouring more concrete.

Got you. It's helpful. And then in the second half of '17 on the concrete side at least, staying on that segment, there was quite some impact from the revenue side from hurricane-related activity, delaying projects what have you. Was there any of that revenue being caught up into Q1 or you kind of passed that?

Well, I think with respect to the concrete segment, I think, it's a big -- and your point right there, it's exactly that. That didn't necessarily create any new opportunities for us on the concrete side, but what it did was it just pushed everything rightward. So obviously, in Q3 last year, we had the massive, massive impacts in Texas on -- particularly, from Hurricane Harvey. And then, of course, we sort of went into the winter months where we've had this sort of difficult weather pattern, so a different impact than Harvey. It was just kind of a total shutdown thing and shut the jobs down for a period of time, both in terms of just securing our personnel and their families from the effects, but also getting job sites dried out and being able to move around the city again to start pouring work and stuff like that. So again, just a tough weather pattern for the last few months. Coming out of that, coming into the winter months it was just kind of a difficult weather pattern in the winter months as I just kind of talked about. So again, basically, shifted work rightward. Having said all that though, again, we like the opportunities we see in front of us. Again, we're pursuing both structural work and light commercial work. We've got a lot of bids outstanding, as Chris mentioned in his remarks, and we're focused on winning that work and getting out and executing it.

And one thing I'll point, Marco, is really for the entire business, both segments, there was not a map that catch up the work in Q1. So kind of the results that we saw in the first quarter were driven by normal operations, but not necessarily a big catch up.

Got it. Appreciate that. And last quick question just on the industrial side. The projects that you're out there bidding on, I was wondering maybe if you could talk a little bit about the market itself kind of what you learned thus far from the bid markets? What might have been a little different than what you're expecting? And kind of maybe talk a little bit how perhaps your expectations might be shifting?

Great question. I think, I mean, again, we spent a lot of time last year in 2017 really laying the groundwork for this. We spent a lot of time on the business development side. Again, leveraging our existing customer relations and just really looking at sort of projects that we would have already been pursuing, but just really only on the marine portion of that work, the waterfront portion of that work. So we did learn some from some of our bids submitted last year. We came close on a couple of things that we didn't quite get there on, but they were great learning experiences, so we've fine-tuned our bidding process there with respect to this type of work. So that's kind of what we -- to your point about the learning experience, we kind of learned with some of the bids we did last year. But now we feel like we've got a lot of momentum with us in that -- in this area. We continue to track work, bid on work. And again, a lot of this is from customers that we already have as existing customers. And some of these things that we're pursuing as well, there's a marine component to it that we're pursuing, but then there's also sort of the more industrial, off the water opportunity with it. So we like where we are. We're starting to execute on work, that's the payoff from some of the stuff we did last year, and so we're real pleased with where we are.

Our next question comes from Min Cho of B. Riley.

Just a couple of random questions here. First of all, can you talk about your marine asset utilization currently?

In Q1, we've -- it was down from where we would have liked it to be. I think we -- some of the core work that we were hoping to get modifications on, from related to hurricane work, there's a little bit of a delay. We did some of that work in Q4. Some of it was delayed in getting modifications done with some contract, so we didn't quite get as much utilization as we were hopeful for in Q1. I think just the results we had, though, we're very pleased with just in spite of that point. We had good utilization with -- around some of the other marine assets, but now we're -- we won some work in the last quarter. We've gotten some of these modifications done to core projects. So we do anticipate, as we go throughout the next couple of quarters that we'll see some uptick in some of those asset utilizations. But overall, we were pleased this quarter, but there were some assets that we would have liked to seen a little more utilization in Q1.

Got you. Also, was there any positive impact in the quarter from the emergency dredging work that you saw in the fourth quarter following the hurricanes?

Well, in the fourth quarter, yes, we did execute on some in the fourth quarter. We did have a higher utilization in the fourth quarter with some of those assets. There was a little bit -- there was a break -- not a little bit of a break, there was a big break in Q1 where we really didn't execute on any of that in the quarter. And -- but as we were getting some mods done and the core was also letting other projects out, so kind of that normal lull in letting activity that occurs at the tail end of the year and then gets cranked up at the beginning of the year. So again, we expect to see a little bit of a benefit from that on the utilization front going forward in the next couple of quarters, but not much of that happened in Q1.

Okay. And then, Mark, you talked about M&A kind of opportunities driving growth going forward. Obviously, you don't really need that on the marine side. And it sounds like on the -- on most of your Texas business, you're pretty okay on concrete. I mean, where are you looking for M&A opportunities? Are you looking for new geographies for concrete or just on the industrial side? Or if you could just talk a little bit about M&A.

Sure. Sure. Well, to be clear on my remarks was in both greenfield and M&A. So kind of going back to my prior answer on the concrete side of the things is, we don't think we, right now, currently, we can -- we've got a lot of growth opportunities in front of us just on an organic basis. So we're not necessarily targeting any M&A activity there. Clearly, we want to be -- as always, we'll be opportunistic if the right opportunity presents itself. But I think, where I could see M&A potentially occurring would be in the industrial space, to your point, I think on the marine side, on the concrete side, while it's a possibility, it's not necessarily something that's a necessity to drive our strategy. The industrial side, it's not necessarily a necessity to drive our strategy either, but it certainly is something that we've got a keener eye out for as a potential to help boost our growth in the industrial space. So again, we intend to be selective, opportunistic. We're not going to do something just to do something because we think we have a plan in place now to achieve our strategy. But we definitely -- I think that, to the extent we see something, and again I'll say this, there's nothing -- there's no news to report today on this front. But to the extent, I think something that makes a lot of sense to execute our strategy on where that might occur would more than likely be in the industrial space.

Okay. And then just, finally, in the couple of quarters, you've been talking about increased competition on the concrete side in Houston and your expectations to maintain share. I mean, are you -- I mean, if you could just kind of weigh the maintaining of share versus kind of margin opportunity in Houston. Like why is it so important that you continue to maintain share if you see competition continuing to increase there?

Well, a couple of points is, one, because we think this is a short-term problem; two, it's a very much a relationship-driven business. Just a reminder in the concrete business, we're working through the general. We're subcontractor to the general. We want to be certain that we're able to maintain those relationships, provide good quality service to them. We got the geographic footprint in all -- in Houston to meet their needs across the market. And it's just very important, I think, that we continue to maintain those relationships and provide the service to those guys. Again, we think this is a shorter-term issue, as I said in my remarks. And this is not a comment related just to concrete, it's related across-the-board of our businesses. We believe the economic conditions are positive. There's positive macro drivers. We believe that the market should recognize these positive indicators and react accordingly and sometimes we kind of scratch our head at some of what our competitors are doing with respect to pricing. But clearly, long term, we think Houston as well as the other markets we service in Texas on a concrete side are going to be areas for growth that's going to continue to provide us good opportunity, and so we view any of this competitive (inaudible) as temporary.

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Shane Martin for any closing remarks.

Everyone, thank you for joining us on the call this morning. And we look forward to seeing everyone on the next call.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.