Deb Wensel - CFO Doug Mackie - CEO

Gorge Shaw - Lehman Brothers Daniel Weissman - TradeLink Capital John Parker - Jefferies and Company Peter Ehret - Invesco Mark Brostowski - Regiment Capital John Rogers - D.A. Davidson Seth Weber - Banc of America Jason Yellin - WRA Investment Chris Bamman - Morgan Joseph

Thank you. This is Deb Wensel and I welcome you to our quarterly conference call.

I'll begin by discussing -- or I'm sorry. I'll begin our discussion by presenting the financial highlights for the first quarter of 2008.

Then, Doug Mackie, Chief Executive Officer of Great Lakes, will share his market overview, which will provide a useful context within which to view my more detailed discussion of operating results. Following our comments, there will be an opportunity for questions.

Before I begin, however, I need to remind you that certain matters discussed maybe considered forward-looking statements and participants in this call are cautioned not to place undue reliance on such forward-looking statements. Furthermore, any forward-looking statements speak only as of the date hereof and Great Lakes assumes no obligation to provide any future updates.

Revenue for the quarter ended March 31, 2008 was $135.7 million, up 7% from $126.7 million a year earlier. The 2008 first quarter activity reflected a decrease in dredging utilization, which was more than offset by a sizeable contribution from the Demolition Union.

The Company's demolition business, North American Site Developers, or NASDI, generated revenues of $35.5 million versus $11.4 million a year earlier. NASDI has seen an increase in activity since the third quarter of 2007 and is continuing at these higher levels in 2008.

Foreign dredging operations continue to be strong producing 33% of dredging revenues in the quarter versus 22% last year. Beach work was down as state and local governments continue to experience delays in getting the approvals necessary to put projects out to bid.

This has become increasingly significant as these jurisdictions play a growing role in funding beach nourishment projects. Revenues were also impacted by the mobilization to the Middle East of four dredges, in particular the dredge Texas, which has been a big contributor in previous quarters.

In addition, as Doug will discuss later in the call, the dredge New York was in dry dock undergoing repairs. This dredge is currently expected to resume operations late in the second quarter.

Gross margin for the first quarter of 2008 was 8.8% versus 10.8% for the first quarter of 2007. Gross margin was down as a result of lower utilization rates in the dredging business and a substantial amount of subcontract work in the projects that drove the increased activity in the demolition business.

Operating income in the 2008 first quarter decreased to $1.8 million from $5.7 million a year ago. This decrease was the result of the lower gross profit noted above, as well as increase in general and administrative expenses.

The higher general and administrative expenses were primarily driven by an increase in incentive pay in the demolition business as a result of its strong results and normal salary increases quarter-over-quarter. EBITDA of $9.4 million for the 2008 quarter was down 24% from $12.4 million in the previous year as anticipated due to the mobilizations to the Middle East, the lower level of beach work going into the quarter, and the impact of the temporary loss of the dredge New York.

Interest expense was $3.6 million for the first quarter of 2008, a reduction of $0.6 million from the first quarter of last year. This savings resulted from the market value of the Company's interest rate swaps increasing by $0.6 million versus the first quarter of 2007.

The Company recognized a net loss of $1.2 million, or negative $0.02 per diluted share, in the first quarter of 2008, compared with net income of $1 million, or $0.02 per diluted share, a year ago. However, in our press release this morning there was a typographical error that indicated the 2008 first quarter net loss was $1 million and the 2007 first quarter net income was $1.2 million.

These numbers were correctly stated in the condensed consolidated statement of operations at the end of the press release, and an 8-K will be filed later today with the correction. At this point, I'd like to turn the call over to Doug Mackie, our CEO, who will give you an overview of what's going on in the dredging market.

Thank you. As anticipated, the first quarter of 2008 was not a strong quarter for the dredging segment.

The temporary loss of the dredge New York at the end of January, the low level of beach backlog at year end, coupled with a lower first quarter beach bid market and the mobilization of four vessels to the Middle East, resulted in decreased utilization for the quarter. As a result, revenues were lower and margins declined as fixed expenses increased relative to the lower level of activity.

Despite the lower level of beach work, the total domestic bid market in the first quarter was $210 million, nearly double from a year ago, largely driven by maintenance projects and award of options on capital projects. The Company won 28% of the first quarter bid market, including five maintenance projects totaling approximately $24 million, and an additional option awarded on our Newark Bay capital project for approximately $22 million.

These first quarter projects add $60 million to our backlog, bringing our total backlog at quarter-end to $300.3 million, up 12% from this time last year. With our increased backlog, a significant portion of our dredging fleet is booked through the remainder of 2008.

In addition, during April, the Company bid and won a capital project in the Kill Van Kull, New York/New Jersey channel, valued at just over $115 million. This project added to our backlog for our dredge New York into 2010 and two other vessels through 2009.

Unfortunately, there is not much new to report regarding the federal budget process. As we've mentioned in previous calls, the Water Resources Development Act, or WRDA, the primary vehicle for authorizing capital projects to deepen the nation's ports, and the 2008 Federal Budget were both passed in the last few months.

While WRDA authorizes capital projects, it's through the budgeting process that funding gets appropriated to get the projects done. The 2008 budget that was passed was higher than previous years, but halfway through the fiscal year, it's still difficult to understand where the funds are being sent.

The one positive we have seen, however, was in the first quarter's bid market the core was able to reprogram funds from other areas to meet the emergency needs created by flooding of the Mississippi River. This was one of the reasons for the increased bid market in the first quarter.

Looking further ahead, the President's 2009 budget was released and is generally disappointing. There was no increase for any work authorized in the recent water bill and in fact the budget is down overall from 2008.

Therefore, it will require a substantial effort by Congress to add on funds especially in an environment of anti-earmarking and this seems unlikely to happen. In addition, with the election pending, it is very likely nothing will be passed in the near term.

So the current status of the domestic market remains substantially unchanged with little chance to see much additional work come out over what has already been identified. There has been a positive momentum building with regard to the use of the Harbor Maintenance Trust Fund.

The fund has over the last 20 years collected tax revenue annually that was originally designated to fund harbor maintenance. However, since early on, these tax revenues have been commingled with general funding and only a portion of the revenues has been allocated to dredging each year.

The maritime industry has formed an alliance, the Harbor Maintenance Trust Fund Fairness Coalition, to work toward dedicating all future tax receipts from the Fund to port maintenance work, which could add approximately $500 million to $600 million a year to fund essential dredging needs. Recently, a representative of the Coalition testified before the Water Resources and Environmental Subcommittee of the House of Transportation and Infrastructure Committee.

He asked the Subcommittee to consider legislation to ensure that monies taken in through the Harbor Maintenance Trust tax be spent on dredging. The testimony appeared to be well received and already there has been some vocal Congressional support.

While these efforts will not impact 2008, the maritime industry is hopeful that these monies will be utilized for their intended purpose within the next couple years. With regard to the near term capital projects from the Corps, as anticipated another New York contract came out for bid in the second quarter of 2008, which the Company won.

Additional capital bidding opportunities are not expected until much later in the year. At that time, we should see more work come out in the New York/New Jersey area, a port expansion project in Jacksonville Harbor, Florida, as well as work in the channels of Pascagoula and Pensacola, and several smaller projects in the aggregate are expected to total over $110 million by year end.

Additionally, it is likely that a former dredging disposal site in Norfolk, Virginia at Craney Island will be expanded to provide for a new container terminal facilities. This effort should require over $200 million in dredging beginning sometime in 2009.

In 2007, we generated approximately $60 million of revenue on capital contracts for private customers, a very similar number to the previous year. However, the bid market for 2007 did not include much volume from private customers for future projects.

No significant LNG starts have come this year as various potential projects continue to work through permitting and sourcing issues. It appears that the next most profitable dredging project for LNG terminals, one which we have been involved with for some time now, will not likely be bid until 2009.

However, there continues to be a number of potential projects on the drawing board that could provide dredging demand over the next few years. With regard to non-federally funded Louisiana Coastal Restoration projects that we've talked about in previous quarters, two of the four were bid in the first quarter.

The Company was the low bidder on one for $34.7 million, which was awarded in April. This project is included in the amount we are reporting as low bids pending award at the end of the first quarter.

The two additional projects are expected to be bid in the next 12 months. In March, a large project was bid for the work on the Panama Canal, which is the start of a $7 billion expansion plan for the canal that is expected to be completed over the next six years.

This first project was won by a European dredging company, but we anticipate there will be several more projects that will come out in the next couple years that will be good opportunities for employing our equipment. With respect to the beach nourishment market during 2007, we saw a mix of both federally and privately funded contracts that produced a $146 million bid market up from 2006's a $126 million bid market.

Funding from state and local municipalities represented 34% of the 2007 beach market. However, in the fourth quarter of 2007 and first quarter of 2008, we have seen a number of both federally and privately funded projects postponed until later this year.

The 2008 first quarter beach market was only $22 million and with our 2007 year end beach backlog down to $30 million our revenue was negatively impacted in this year's first quarter. In the last two years, beach work has been a big revenue producer earlier in the year.

However, looking out we still expect over $145 million of beach projects to be bid during the next 12 months, with a good portion of the funding from non-federal sources. In summary, we do not see any significant change in the domestic dredging bid market for the remainder of the year, but we continue to see good news on the longer term horizon.

There is more evidence that Congress is softening on their issues of continuing contracts and the ability of the Corp to redirect funding from one dredging project to another as we saw in the first quarter bid market. These changes will help the Corp by providing more flexibility to get work out in a difficult budget environment going forward.

On the international side of the business, we reported strong growth throughout 2007 and the first quarter of 2008 has set the stage for another outstanding year. Last year, foreign operations generated 32% of our dredging revenues and this level of work continued in the first quarter.

The Middle East market continues to be robust, with many opportunities for our services, particularly in Bahrain. Two more projects worth $40 million are now expected to be signed in the second quarter of 2008.

Our four vessels have now reached Bahrain and are being readied to begin work. The hydraulic dredge Texas and the hopper dredge Reem Island will be the first vessels to begin working on the projects in backlog during the second quarter.

The hydraulic dredge Ohio and the hopper dredge Noon Island will take additional time before they will begin working. Both of these vessels require additional upgrades before they will be employed at their full capabilities.

Finally, I will update you on the Company's dredge New York, which has sustained extensive damage as the result of being struck by an orange juice tanker in the approach channel to Port Newark, New Jersey in January. At the time of the collision, the New York had commenced dredging on the Company's capital project in Newark Bay.

The dredge is now out of dry dock and top side repairs are proceeding on schedule and are currently expected to be completed in June 2008. This estimated timetable allows the Company to meet its obligations under both the Newark Bay and Port Newark contracts with the Corp of Engineers.

The New York is fully insured for hull, collision, and pollution exposures, under the insurance coverage with Great Lakes. However, insurance related to the loss of use of the vessel is not economically viable in the marine market.

Consequently, we are pursuing a claim against the owner of the vessel, which struck the New York. Nevertheless, the losses in New York will negatively impact this year's financial results.

Now, let me ask Deb to walk you through a more detailed analysis of our first quarter performance.

Thanks, Doug. I'll start with a general overview of contracts contributing to the quarter's performance within the context of the dredging markets we serve in our demolition segment.

Revenue during the quarter included $31 million of domestic capital, $33 million of foreign capital, $18 million of beach, $18 million of maintenance work, and $36 million of demolition, for a total Company revenue of $136 million. The comparative numbers for the fourth quarter of 2007 were $44 million of domestic capital, $45 million of foreign capital, $20 million of beach, $20 million of maintenance, and $28 million for the demolition segment, for a total of $157 million.

And then, for the first quarter of 2007, we had $16 million of domestic capital, $25 million of foreign capital, $37 million of beach, $37 million of maintenance, and $11 million for demolition for total Company revenue of $126 million. The majority of our $64 million of capital revenues were generated by our clamshell dredges continuing work on the deepening projects in Newark Bay and Port Jersey, continuing work on our Columbia River deepening project on the west coast with our hopper dredge Terrapin Island, and finally, three projects in Bahrain - Diyaar, Durary, and Durrat marina, where we employed four hopper dredges and two hydraulic dredges working for most of the quarter producing $31 million of revenue.

Beach revenue was $18 million in the first quarter, compared with $37 million a year earlier, due primarily to the low amount of beach backlog at year end coupled with the decreased level of beach work bid in the first quarter of 2008, as many [SCs] delayed projects till later in 2008 due to permitting difficulties. Two projects in South Carolina and one in New York accounted for most of the revenue.

Maintenance revenue in the first quarter was $18 million, down from $37 million in the first quarter of 2007, which was a higher level than typical for the Company. A number of maintenance projects contributed to this quarter's revenue, including dredging in Baltimore, the Mississippi River, Savannah, and Wilmington, North Carolina.

NASDI had another very strong quarter generating a record $36 million in demolition revenue. Over the last two years, NASDI has been consistently producing $11 million to $13 million of revenue per quarter.

But since the third quarter of 2007, revenues have increased significantly. A good portion of these additional projects include subcontract work, so the gross profit margins are not as high as NASDI typically generates.

Nevertheless, total gross profit is up and this work is expected to lead to additional direct demolition activity for NASDI, yielding more typical margins. The first quarter 2008 domestic dredging bid market representing work awarded during the period totaled $210 million, of which Great Lakes won a 28% share.

It was a strong quarter for maintenance work, including a maintenance project on the west coast, which Great Lakes won. The Company also won several smaller maintenance projects and a beach project.

As mentioned, the remaining option for the Newark Bay capital project was awarded during the quarter. The work from the Newark Bay and Port Jersey projects, coupled with a new low bid for the work in the Kill Van Kull channel, will provide solid utilization for our mechanical backhoe Dredge New York, once it is back in service, into 2010 and a clamshell dredge and our drill boat Apache through 2009.

Given the Company's bidding success over the last few quarters, dredging backlog at March 31, 2008 totaled $300.3 million, compared with $267.3 million at March 31, 2007. The March 31, 2008 backlog does not reflect approximately $282 million of low bids pending awards and additional options pending on projects currently in backlog.

This number consists of approximately $172 million for various projects in Bahrain, including the second phase of the Diyaar land reclamation contract, which is currently expected to be awarded this year, with a balance of $110 million relating to domestic projects. The March 31, 2007 backlog excluded approximately $256 million of pending work, $156 million for work in Bahrain, and $100 million for domestic work.

Demolition services backlog at March 31, 2008 was $29.2 million, compared with $15.2 million a year earlier. Backlog for the demolition unit increased significantly during the 2007 second quarter and has remained at a high level thereafter.

Increased backlog levels translated to record revenue for the segment during the second half of 2007, which has continued into the first quarter of 2008. Current backlog includes numerous projects with $1 million or more in remaining revenue.

Our backlog by dredging work type and segment at March 31, 2008 and some recent comparative periods were, at the end of the first quarter of 2008 we had $164 million of domestic capital, $90 million of foreign capital, $20 million of beach, $26 million of maintenance, for a total dredging backlog of $300 million, plus $29 million for demolition backlog, for total Company backlog of $329 million. At the end of the year of 2007, we had $175 million of domestic capital, $107 million of foreign capital, $31 million of beach, $9 million of maintenance for a total dredging backlog of $322 million.

NASDI had $39 million of backlog for a total Company backlog of $361 million. And the comparative numbers for the end of the first quarter of 2007 were $60 million of domestic capital, $159 million of foreign capital, $39 million for beach, $9 million for maintenance, for a total Company dredging backlog of $267 million.

NASDI had $15 million for a total Company backlog of $282 million. Capital expenditures for the first quarter totaled $15.7 million.

This includes spending of $8.6 million on the dredges Ohio, Reem Island, and Noon Island, for mobilization and other activities related to placing these vessels into service. The remaining $7.1 million included work on a variety of dredges, including steel renewals and other upgrades to the dredge Illinois and Victoria Island, as well as new [yellow] equipment for the demolition business.

$0.2 million was spent this quarter on continuing construction of the power barge that will enhance the utilization and operating efficiency of the dredge Florida. We expect to complete this vessel mid this year.

First quarter 2008 maintenance spending, which is equipment related costs that are expensed in the year incurred, was $10.5 million, up $2 million from the prior year. The higher cost of maintenance shows no signs of abating as steel prices and labor rates continue to rise.

As of March 31, 2008, senior and subordinated debt net of $11.5 million in cash and equivalents was $193 million, including $29.5 million of borrowings under the revolving credit facility. At the end of the first quarter, outstanding performance letters of credit totaled $41.1 million.

The cash balances at quarter-end include amounts held in Bahraini dinar. With the recent pressure in the Middle East to appreciate their currencies, we are holding dinar to meet our dinar liabilities.

Our contracts in Bahrain are denominated into local currency, and therefore, we do not expect any unfavorable impact from a revaluation or change in the peg of the Bahraini dinar. At quarter-end our total leverage was 3.45 times and interest coverage was 3.57 times.

During 2007, the Company's investment and working capital increased due to higher levels of pipe inventory to support operations both domestically and internationally, increased dredging activities overseas, and a higher level of activity in the demolition segment. In the first quarter of 2008, we experienced a slight decline in our working capital due to normal fluctuations in the timing of receivables and payables.

And finally, with regard to personal injury claims related to our hourly workforce residing in Texas, we had one new claim filed against the Company during the first quarter. However, several more were settled as well.

We're still hopeful that with the venue law change enacted last year, we'll see an ongoing reduction in the number and cost of these types of personal injury suits that the dredging industry has faced over the last few years. Having won a 53% share of the U.S.

bid market during 2007, the Company began 2008 with a solid domestic backlog complementing the continuing momentum in the international market. Foreseeing no improvement in the amount of work coming out for bid in the domestic market in the near term, we decided to move more equipment from the U.S.

market to the Middle East where we see better opportunities to keep these vessels utilized. Moving ahead into 2008, we look forward to getting our recently redeployed dredges operational, completing repairs on the dredge New York, upgrading our recently acquired vessels, the Ohio and Noon Island, and completing work on the power barge for the dredge Florida, which in total will approximate $28 million.

By making these expenditures our dredging fleet will be well positioned to take advantage of market opportunities going forward, whether they are in the domestic market or overseas. This year we are anticipating base capital spending of approximately $23 million, which is similar to the 2007 spend of $22 million and continues to reflect the labor and steel cost increases that are also impacting our maintenance costs.

In total, then, we expect capital spending for 2008 on the specific vessels mentioned and base capital spending together to be just over $50 million. While I believe there are demand drivers that will positively impact the domestic market in future years, we're countering a softness we foresee short-term by increasing our international activities.

As Doug said earlier, our total backlog at March 31st for $300.3 million are 12% than this time last year. With our increased backlog, a significant portion of our dredging fleet is booked through the remainder of 2008.

Given that, we are reaffirming our guidance for the year of EBITDA in the range of $51 million to $56 million. This concludes our prepared remarks, but I would also note that we will provide a summary of the operating and backlog information provided herein, as well as the reconciliation of EBITDA, which is non-GAAP measure to net income and GAAP measure in the financial section of our Company's website at www.gldd.com.

Now, I'd like to open the call for your questions.

Hi. This is actually [Gorge Shaw] in place of Andy Kaplowitz.

Hi.

Good morning. Can you talk about the current commodity inflation in regards to the rising fuel and maintenance CapEx costs and how you're managing those?

You mentioned the steel prices show no sign of abating. Are you hedging any of these costs?

No. In the projects that we have we do not have -- we haven't hedged the steel costs.

I'm not sure what we can do as far as on the labor side of things. I mean, fuel is a separate item for us and that we do hedge.

We have a program for hedging fuel related to our backlog. So that is one item that we are able to hedge.

But as far as the steel costs and that, I mean, you go into the shipyard and get estimates and go ahead and perform the work. The work on the bigger vessels, again, we've moved those overseas and most of that will be done overseas, which I think helps a bit, although I think there's still rising steel prices overseas as well.

And we have -- for maintenance and long-term maintenance work we have raised some rates on certain vessels, so that any future work -- and we started to do this early in the year. Any future work that we will bid and win will have higher rates built-in and accrued for maintenance.

So you're able to pass-through some of these costs, but not all of them.

That's correct.

Okay. One of the companies in the SBC space has raised -- usually makes comments about harsh weather conditions affecting their utilization rates with their offshore construction vessels in the Middle East.

Can you just talk a little bit about weather related contingencies built into your contracts in the Middle East? And are we seeing a little bit of that in the first quarter of '08, and if weather delays have ever impacted margins in the past?

What I'm getting at is, if you're doing Middle East work that has lower margins than the U.S., but you make it up with higher utilization rates, I'm just wondering how and if that could be impacted.

Well, they do have especially in the northern end of Bahrain where we do work. We do get harsher weather in the January/February time period.

There's no relief, but we have had a lot of experience in there. So we have built-in to our projects that we will be utilized at a lower level during those periods.

So we've already have that built-in. But it's not all of Bahrain, it's just the north end.

Generally, there's also some work in the south end, which is not affected nearly as much.

Have we seen that a little bit in the first quarter?

We saw some, yes. We had some.

These projects and most of this equipment are scheduled to work through the whole year. And we do put in major downtimes for both weather and equipment repairs into the estimates, so that we built that into our overall estimates.

Okay. And last question.

Your market share in the first quarter seems to have come down a little bit to 28% versus, I think, over 53% in 2007. Could you just comment on the difference and whether -- if its timing related --?

Sure.

And your outlook for 2008.

Well, the biggest factor is there was a -- one of the biggest factors was there was an option that was awarded to one of our competitors, a joint venture competitor, on a project that was bid in 2005. And the way we do these bid statistics, until the option is awarded we don't put it in.

So one of our competitors lobbed in about a $50 million -- $30 million to $40 million option, went in there from a job that was awarded to them in 2005. So in addition to that, it was a much higher percentage of maintenance work of which typically we do not -- that is not our strength -- maintenance work.

We generally get a higher percentage of the beach and capital work and there was very little beach work that came up for bid and not a great amount of capital work. So it was just lobbing in that one option dropped our percentage, plus the amount -- the work that came out was not in our sweet zone for bidding.

But it's untypical for us to go up and down in a quarter.

Right.

So that's why we try and focus on the longer term and the positive in the first quarter was the amount of backlog -- or amount of projects put out as opposed to having. We picked up a good chunk of work, not atypical for what we would.

So again, we don't necessarily focus on that statistic on a month -- or on a quarterly basis, because it can fluctuate just in normal course.

And as you can see from our call, we did in April pick up $115 million project in New York, which is not in any statistics. And also, in April we also got awarded a $35 million Louisiana project.

So if you put April in there, you'd probably see us close to where -- 50% again.

Okay. Thank you.

Good morning, guys. As it relates I guess to the last question related to the percentage of the bid market that you won, you just stated that your -- the maintenance market is generally your weakest in terms of winning the bid market.

But in 2007, you guys were 40% of the bid market in maintenance and you're actually 37% of the beach market. So you actually won more of the maintenance in 2007 than you did of beach.

Is that correct?

That is correct.

Okay.

That is correct, and this was -- and again, it's the type of maintenance that comes out. If there's a lot of maintenance in the northeast and on the west coast we've done very well, but down in the Gulf, where a lot of this maintenance work was coming out, it requires non -- a lot of the work requires non-load line, non-offshore vessels.

So rather than getting two or three competitors, you could get four or five competitors.

Got you. Okay.

I guess as it relates to that, and just in general, has the Company revisited its pricing algorithm or its pricing model for the domestic market in light of the fact that they're moving -- that you're moving so much of your fleet overseas? Are you considering being less aggressive on pricing, continuing along the same path?

Just I guess could you comment a little bit about the factors that have gone into your pricing model and have they changed now that you're able to utilize more of your fleet overseas.

I think every time we bid a project, it's a different pricing model. Because it depends, as Doug was saying, what kind of work it is, where the work is located, how many competitors there's going to be, who's available, is there a project down the road that we think is better suited for our equipment.

So every time we go and bid, we are changing that pricing model. And of course, we clearly take into account how many vessels are available to do that.

I mean, probably where we able to change our model more aggressively was in the New York, where our biggest competitor exited the market last year. Clearly, we take that into account and we've been very successful in bidding better margins on that work.

Yeah. I mean, obviously, prices move drastically just based on how many competitors.

And we think the northeast where a lot of the more -- and all the capital work, we get much better margins. Generally, we bid every project to try and -- once we look at our estimate, we just look at the market and try and get as close as we can without exceeding the second bidder.

Right.

So it's much more of an art. In Bahrain and in the Middle East where there's a lot of projects that are similar that are coming out very often, you get a lot of jobs to look at, a lot of big jobs.

There's still somewhat of a shortage of equipment there. And so, that's a different dynamic where you don't even know how many bidders there are because often most of the bids are just proposals, so you're not even sure who you're bidding against.

But the word gets around and you get better information on pricing because -- and we think that that market will go up and continue to go up simply because of the inflation in the Middle East and the fact that our competitors are European and they're euro-based, so they're getting paid in dollars. So it's a little bit easier to read in the Middle East than it is here in the U.S.

Got you. And my final question is related to NASDI.

What are your goals for NASDI, I guess, in the medium and the longer term? I mean, it seems to obviously be growing nicely and you seem to have found a sweet spot in the subcontracting space.

I mean, it's such a niche non-core asset of yours. Obviously, the capital markets right now would -- it may not be advantageous to look at a sale of NASDI.

But perhaps have you considered expanding NASDI geographically, selling NASDI? What are your thoughts or your goals with that asset?

Well, all of those. I mean, it is a non-core asset, but it has over the last few years been gaining momentum and been taking more market share and has been expanding into other markets.

And there's always -- I mean, if we believe that it is an asset that will continue to grow for a while. And if there's an entity who is interested, I mean, we would talk to people, but we've no for sale sign out there, especially with the way it's performing.

And of course, as you said, the way the capital market is. So we're always talking about it.

We'd like to see them grow a little more and hold on to it and see if we get the best price for it. Because we think we still think it has more upside.

Okay. Very good.

Thank you very much.

Hi. Can you talk about the 210 domestic bid market -- $210 million.

Did you bid on all of those projects? ]

We would have bid on all the projects. I don't think there was one that we didn't.

However, some of it was awarding of options on projects that had been bid in previous quarters, so of course, we don't have a second opportunity.

Yeah. Probably 25% to 30% of that market was just options being awarded.

And I would be surprised -- we probably bid on all of those whether we won or lost them.

Yeah, which were originally bid.

Which were originally bid. So, yeah, I mean, there might have been one job, small job, in the Gulf we didn't bid of the $200 million that was only $3 million or $4 million, where we didn't really have a good way to do the job at that time.

But other than that, we bid all of that work.

And we typically bid a very high percentage of the work in our market.

I guess the point of my question, are you getting to a point with your deployments in the Middle East where you might not be able to bid on everything, or you still think you've the capacity to bid on everything in the domestic market?

No, I don't think it's affected us. I mean, the one job we didn't bid was -- had several bidders, it was probably seven or eight bidders really.

Actually, the SBAs could bid and everything. Right now, we don't feel that our lack of equipment in the U.S.

is hurting us. I mean obviously, when you get some of this emergency work you might have wished that you had one more hopper dredge in the market, but that would just be short-term.

I mean, you might gain a nice job for $3 million or $4 million in a couple months, but it's not going to be sustainable we don't think for the next couple years. That's why we sent these hopper dredges to the Middle East where they'll work 10 months a year.

I feel there's a little bit of a disconnect between -- your year's capital backlog continues to be very strong, but you talked in the beginning of the call about more of the same out of the Army Corp of Engineers, and especially if you consider your $115 million contract win in April. You continue to do very well in the capital segment relative to your historical backlog.

Can you comment on that at all? It seems like despite the weakness you continue to really keep your domestic capital backlog strong.

Well, the Company has focused on doing capital work for the last 30 years and we continue to -- when we purchase assets or build assets from competitors when we get the opportunity, we generally will only purchase the assets that can do capital work and/or beach work, offshore work, difficult work, because there are fewer entities who have the stomach to do that type of work. So we had a tough competitor, which was Bean Stuyvesant, who did not have a history of going after the capital and beach work.

And of course, they failed in that area and those assets were either purchased by us or went foreign. So we still believe that there's a lot of infrastructure work to be done here in the U.S.

And we believe that the beach work will continue to grow for the long-term and you need the larger assets to do that. So I don't think it should be a surprise, because we're seeing some of the small competitors who tried to work in New York are either bidding so high they couldn't get the work or they're just not bidding.

And I think one aspect when you talk about our capital backlog or the capital work coming out from the Corp, I mean, I suppose the one area in the U.S. that continues to be able to put their jobs out has been New York/New Jersey.

And so, a lot of our capital backlog right now is in that region and is for a certain segment of our equipment. And what we like to see or what we think needs to happen here in the U.S.

is that we need to see capital work done in other ports along the east and west coast. And that's really where we talk about the capital market has not been what it has been in the past.

There's just one sector which has been this New York/New Jersey area that's continued. And clearly, with the loss of -- or the exit of Bean Stuyvesant, we've done very well there, although we've always done well in any of the capital areas.

So I think maybe that's a little bit of what you kind of see as a disconnect.

Okay. And the Kill Van Kull $160 million project, was that -- I'm surprised that wasn't -- with two phases, there was an option.

How were they able to get together that much money to make that happen in one contract award?

Well, they haven't awarded it yet. We're low bidder and it was just bid the 29th.

They've always been able to get the money. I mean, this job will -- it has a finish point.

We have until probably the first quarter of 2010 to complete it. So they will raise the money.

They've got the money. They have to have it in order to bid it.

But they have a series of options. The base bid, which they'll award pretty soon, will be the $40 million to $45 million.

And I think we'll get half of it awarded to us in 2008, and then probably the rest in 2009. But we have plenty of backlog for the equipment for the New York and some other vessels through 2010.

So they have the money. They had to have it put aside.

But they will still put it out in options.

Just moving to the foreign segment quickly. The upgrades, it sounds like some are being done in the Middle East.

And is that due to a lack of capacity here or better rates that you're finding over there?

Well, some of the vessels we -- two of the vessels we took over there were foreign built and foreign owned. We couldn't bring them back to the U.S.

So they were specifically bought to work in the Middle East or overseas. As far as the Ohio and the Texas, well, the Texas will start work very soon.

Ohio will have to be rebuilt substantially. But I mean, they will -- based on what we see over the next couple of years, we don't think we will need either one of those vessels two or three years in the U.S.

just based on the way the capital market is going right now. And we believe we could keep those vessels occupied for a number of years.

Okay. Can you give me an estimate of when all of those four vessels will be up and running and you'll have your full capacity overseas available?

Well, I could give you a range between -- the last two vessels to be fully up and running will be the Noon and the Ohio. The Ohio, we're going to put it to work.

And if we could find work for it right now at a decent rate, we will put off the upgrade. But it's not a very long-term upgrade, maybe a two or three months upgrade.

So the Noon could be ready anytime between the end -- November and into the first quarter of 2009. I believe the Ohio will be working for a point in time here in probably the third quarter, and then we will take it out probably of service in the fourth quarter.

And it probably won't be finished till the end of -- I'm sorry, in the fourth quarter. And it probably won't be finished until the end of the first quarter of 2009.

It all depends on our -- we've ordered all these parts. We have fabrications going on.

But if we have jobs for them, we would put them off until we could take them out of service. But generally by the end of the first quarter of 2009 they should be all up and running, unless we get an opportunity to work them as they are for longer.

And is there any -- can you give us any idea of the run rate revenue your full overseas fleet is capable of producing? It looks like you had a strong revenue, which dropped off from the back half of last year because I think the Freeport project was over.

But if you were to take all of the Middle Eastern assets and have them running kind of full utilization, can you give us an indication of run rate revenue for that segment?

Well, that's not something that we have put out there. I mean, again, we're not talking till sometime in 2009 where we have all of the vessels working at full capability.

So at this point, we really haven't put out what level we think. And of course, it's very dependent on what type of projects they'll be working on as well.

So I mean, there's a fair range of which these vessels can be working.

I mean, we're adding four vessels, which increases the fleet by probably 40%. Whether or not it will be 40% increases in revenue all depends on what work we get.

I mean, it's not apples and apples, but we have two large vessels coming on and two hoppers, which are lower level producers. So it really depends on -- we've got several proposals that we're working on.

We believe we have work for these vessels for three or four years. We'll have a better idea when we ink these other projects.

Okay. That's perfect.

Thank you very much for your help. I'm all done.

Hi. Good morning.

Just a few questions on leverage. Moody's has you CCC rated.

Any discussions with them that would make you think that would change?

We don't have a lot of discussion with them. I mean, generally, they take a look at the year end results and that, and so we've had sort of basic discussions.

I've started the discussion or the topic of why don't we look at our rating. And so, both Moody's and S&P have been in preliminary discussions.

And I think that I'll continue to do that. I don't know.

In my experience I've never seen them move positively very quickly, certainly not as quickly as they move negatively. But we're in preliminary discussions to talk about that as a topic and something I think they should do.

Okay. And just to make sure I heard the CapEx number right, it was about 23 for maintenance this year?

23 for the rest of our fleet, which is our typical enhancement efficiencies, maybe, some small equipment additions. And then, on top of that we had another 17 -- or I'm sorry -- $27 million planned for the upgrades and the mobilization of those other vessels.

Okay. And you'll be a taxpayer this year I imagine as well?

Yes. We were a taxpayer last year and will be --.

Okay. So that leaves you borrowing money again this year.

When do you think that process stops? When does the company stop borrowing money and start perhaps repaying some funds or maybe even start a dividend?

I think we'll be close to that. I mean, I also in the last call talked about that we're in the process of doing a sale leaseback once we have completed the building of the ancillary vessel that works with the dredge Florida.

So there would be cash coming in on that. But I don't think we see a big borrowing here this year.

And so next year, there's only a small amount left to spend on these upgrades to these vessels and we would expect to have something in the neighborhood of our typical 23 or so million to spend.

Okay. So this is probably the last year of more borrowing then?

Yes, assuming that there's no other transactions that happen.

Yes. Okay.

Good. Thanks.

Yeah, hi. Can I just get a general idea of the redeployment and the dry docking in the quarter, what it cost you as far as the revenues go?

Well, again, we didn't put that out. I mean, obviously, the quarter is down on the dredging segment because of the inability to use both the New York, because it's in dry dock, and the Texas, because it was being mobilized.

So there is clearly an effect there, as well as the -- typically, we pick up more beach work in the first quarter and we would have other vessels employed doing that. So there's a combination of items that could have happened, which would have increased revenue, but we didn't give out a number as to what that might have been.

Okay. And then, as far as the Panama Canal goes, can you just talk about the dredging portion of that, kind of what the potential opportunity is and when does that really start to hit and over what timeframe?

It's scheduled for six to seven years. This is the first major project.

It's a $180 million project. It was won by a European who was much lower than any other bidder.

I think it was Dredging International. But there is scheduled -- going on for the next few years some -- I think there'll be another project over $200 million coming out end of this year.

And then there'll be a series of smaller projects in the $20 million to $30 million for some smaller jobs, which will come out over 2009-2010. So there'll be many opportunities for us.

The smaller the jobs are, probably in our case, we'll have a better advantage because we're much closer to the Panama Canal than where most of our European competitors have their equipment in the Far East and in the Middle East. They have some in South America.

But we have a nice -- we believe we'll have some nice opportunities for the Panama Canal over the next five, six years.

All right. And then, with all the movements, the ins and the outs over the last couple of years, can you just give us an idea of U.S.

dredging capacity, kind of where it is today versus where it was like two years ago?

Well, in the last two years there has been no additions. So I mean, we've taken eight vessels out of the country and Bean Stuyvesant took two out.

So it's been nothing but reductions. And so, there is substantially fewer vessels in the United States than there was two years ago in our market.

So we -- obviously, if the work comes back we should see much more occupancy and better margins.

All right. And then, the last question.

I guess someone talked about this, but the Moody's rating again. I mean, since they downgraded you, your debt's come down about $100 million and your EBITDA's doubled.

I mean, I just don't understand it and trying to kind of get more clarity from you on why they're still keeping you at CCC. Are they just too busy keeping (inaudible) at AAA and they don't have time to review you or what?

It just boggles my mind.

I wouldn't necessarily speak for them as to how quickly they respond. We are a smaller company and I don't have a lot of ongoing contact with them.

But they're responsive. And as I said, we've had some initial discussions and that.

I don't know. They've been sort of changing their process and I think if you look at the rating on our senior facility and that, that's gone up because they look at some sort of recoverability or something.

I don't know. So I think, too, Moody's has had a lot of internal stuff going on because they've been changing a lot of the way they're doing their ratings.

So I don't know. I mean, I think we should have -- I personally think we could have a higher rating, but it's not happened.

Okay. Great.

Thank you.

Hi. I just wanted to follow-up on your comments relative to the loss of the New York dredge.

Your -- I know you don't give us the exact numbers for the claim there -- the loss on it. But given your EBITDA assumptions stay the same, I am assuming there is no recovery in those numbers.

Is that right?

That's correct.

Okay. And then, on your international contracts, are they all in local currency or U.S.

dollars?

Well, they're U.S. dollar-based.

Okay. Great.

They're in the local currency, but currently those currencies are pegged to the dollar.

Right.

Okay. And that would also be with the Panama project?

Yes.

Okay. Great.

That's all I have. Thank you.

Hi. Thanks.

Good morning, everybody. Just sticking on the foreign question, can you give us just a big picture idea of what the margin differential is on foreign projects versus domestic and speak to your view as to do you think that there's an opportunity to close that gap?

Well, I think it will close. I think there is -- we have some longer term contracts that -- certainly the big DR project, which was signed almost three years ago.

And that's going to run through our backlog for the next couple of years. But seeing which projects, a couple smaller ones and the ones that we are negotiating now, it appears that we could be closing the gap with the U.S.

market within the -- again, we have this DR project, which is the lower one, but we certainly will start closing the gap over the next two years I believe. And we believe assuming the market stays bad in the U.S., I think we'd be probably in the same ballpark.

We're hopeful that the U.S. market will get better in the next two years, so we'll still have a gap.

Right.

I really think that should happen in the next couple years.

Okay.

I think generally we'll have a gap simply because of the overprotected market.

Including the big project from a couple years ago, is it safe to think it's like 200 basis points? Is that a fair --?

Yeah.

Okay. And then, switching over -- switching back to the input costs, the steel discussion, I mean, is it possible to peg how much of your backlog was priced before steel prices really started running up this year?

And what kind of your exposure is on the backlog there? And is it possible to give us an idea how much -- how big is steel as a percentage of your COGS?

Oh, that's… .

Well, I think generally, I mean, over the last year we've certainly been pricing into our bids higher maintenance work. Now, again, to the extent you can, because of course, there's only so much coming out in the market.

You have to bid the market. But everyone's facing these same costs.

The percent of maintenance costs is -- well, I don't know. I mean, we could look at maintenance costs in total, but that's labor and steel and….

Right. I mean, it has -- when we look at going into the shipyard and we've looked back over the last 2.5, 3 years, and we see overall a 30%, 40% jump in prices, however, how much of that is steel versus labor versus the fact that there is a shortage of shipyards.

So you put that all together. But I mean, steel has almost doubled…

Right.

….a year or so. That's pretty much -- that's probably easy to calculate.

But we haven't split it out. Because when we're going into a shipyard, there's fuel involved, there's steel involved, there's labor involved, for them to do the work.

So we're just trying to accrue up to the level that we can get to even. But the problem is we still are running off some older jobs.

Right.

Which are hurting us.

Right. That's what I was trying to understand.

How--?

We were thinking in a year we might -- if we do 40 -- if we do $35 million to $40 million of maintenance and $20 million of capital work, that's $60 million out of $500 million of revenue. So it's hard to split out which ones.

But we're -- the rest of our jobs -- every job we bid now going forward we're raising those rates up to what we believe the price is going to be. And if we have a multi-year contract then obviously, we're putting every year a factor into the rates.

Okay.

So it's the best we can do.

Okay. And then, just one last follow-up.

On the $210 million market this quarter, do you have any sense how much of that was related to the Mississippi emergency work?

When I say Mississippi River, it's really the whole Gulf.

Okay.

And a lot of -- there were like six vessels, or like six or seven vessels on the Mississippi River all at the same time. And it was probably -- I mean, there was -- half the market was maintenance work.

Okay.

The 200.

Right.

Which is very unusual. And I would -- Mississippi River might have been an extra $30 million or $40 million of that.

And there was flooding other places -- mobile -- and even some of the east coast markets, especially in the southeast, a lot of their channels, including Baltimore also had huge overruns in their maintenance. So the weather overall was very helpful to the market.

Okay. Thanks very much for your comments.

Hi, Doug and Deb. How are you guys?

Okay.

Just real quickly on the Kill Van Kull channel project, I'm curious how many other credible bidders there were on that. And assuming you went in as low bidder, maybe you could just give us a little bit of color of how much better either the pricing or margins will be on this project than some of the other work that you've done in the New York/New Jersey harbor over the past few years.

Well, we don't like to comment on the margin on each project, but there was only -- a few years ago, we had five bidders. Now we're down to three.

And I mean, I guess the color I can give you is that…

[Stay with the government.]

Yes. We went just over the government estimate.

That's what we were shooting for and they're going to raise it. And so, the next -- there was a bidder $10 million higher than that and another bidder $25 million higher than us.

So that's all I could really speak to is to -- I don't want to say what our margins were, but certainly we're not often able to hit the government estimate.

That's great. Thanks, guys.

Okay.

Yes. Good afternoon.

I just had a quick housekeeping question. If you could just repeat some of the revenue numbers by the type of work.

For the quarter?

Please.

Okay. For the first quarter of 2008, we had $31 million of domestic capital.

Right.

33 of foreign capital.

Okay.

18 beach, 18 maintenance, 36 demolition.

Okay. And the backlog on the capital in the U.S.

was $164 million?

Backlog was $164 million for domestic capital. That's correct.

Okay. And 90 on the European?

Yes.

All right. That's it for me.

Thank you very much.

Okay. Well, thank you for joining our first quarter update and we'll look forward to talking to you after the second quarter of 2008.