May 7, 2009
Executives
Douglas Mackie – President and Chief Executive Officer Deborah Wensel – Chief Financial Officer
Analysts
Richard Paget – Morgan Joseph Jiong Shao – Barclays Capital Jack Kasprzak – BB&T Capital Markets John Parker – Jefferies
Operator
Good day ladies and gentlemen, and welcome to the first quarter 2009 Great Lakes Dredge & Dock Corporation earnings call. My name is Robin and I will your coordinator for today.
At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference.
(Operator instructions) I would now like to turn the presentation over to your host for today Ms. Deb Wensel, Chief Financial Officer.
Please proceed.
Deborah Wensel
Thank you. This is Deb Wensel and I welcome you to our quarterly conference call.
I will begin our discussions by presenting the financial highlights for the quarter ended March 31, 2009 and 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.
I hope that all of you had a chance to review our press release issued this morning, which includes financial highlights for the quarter-ended March 31, 2009. We achieved record revenue for the quarter ended March 31, 2009 of $179.2 million, which was up 32% from $135.7 million for the first quarter of 2008.
Dredging revenue of $166.3 million increased 66% compared with the 2008 first quarter as fleet utilization was improved across all the dredging sectors. In addition, during last year’s first quarter, utilization was negatively impacted by the temporary loss of the dredge New York and mobilization of several vessels to the Middle East.
Gross profit increased to $27 million for the first quarter 2009 from $12.0 million a year earlier. Gross profit margin reached 15.1% versus 8.8% last year, due to increases in fleet utilization and operating efficiencies on certain domestic projects, which more than offset a margin reduction recorded on our Diyar contract in the Middle East.
During the quarter we agreed in concept to allow the customer to break up the remaining contracted backlog into two pieces. Approximately $57 million of our backlog on the project, which was higher margin work became an option, that may or may not be awarded in the future.
As a result of the contraction the project our margin work on the base work is reduced and therefore negatively impacted our first quarter. Gross profit in the demolition segment was down, due to the decrease in activity and a reduction in the price of scrap.
In addition, a reduction in margin was taken on a demolition contract related to a large development project and downturn Boston that has been delayed due to the economic downturn. General and administrative expenses were on par with the prior year as the company has worked to control costs throughout the organization.
Consequently, operating income reached $16.4 million, up from $1.8 million in last year’s first quarter. First quarter pretax earnings were $11.6 million, compared with a loss of $1.7 million last year.
Net income attributable to Great Lakes Dredge & Dock Corporation for the 2009 first quarter was $7.3 million, or $0.13 per diluted share, versus a net loss of $1.2 million, or negative $0.02 per diluted share, a year ago. EBITDA was $28.4 million for the 2009 quarter compared with $9.4 million in the previous year, again driven by strong operations in the current quarter, versus last year’s first quarter, which was impacted by much lower utilization.
At this point, I would 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.
Douglas Mackie
Thanks, Deb. With another active domestic dredging bid market in the first quarter generating a $182 million of work with projects primarily from the capital and maintenance sectors.
The Company won 51% of the projects put out for bid, including 44% of the maintenance work and 62% of the capital projects. In February the President signed the American Recovery and Reinvestment Act authorizing a $787 billion economic in his plan.
Last week, the Army Corps of Engineers published a list of projects that it intends to complete using stimulus plan fund. Based on our review of the planned expenditures it appears that between $350 and $400 million will be allocated to dredging projects.
Primarily maintenance work but also include some capital work and should be put out to bid and awarded in the next 18 months. We can see some of this work coming out quickly as add-ons to current projects and expect new projects may begin as early as the third quarter.
While the stimulus package should create a needed upswing in the funds spent on maintenance dredging, a long-term solution still remains in the harbor maintenance trust fund initiative. There continues to be positive support for the harbor maintenance trust fund legislation.
It currently appears that a new water bill, the Water Research and Development Act, will be introduced by the end of 2009. And the harbor maintenance trust fund legislation will be included within the water amendment.
We are hopeful for the passage of the bill in the first half 2010. The need to deepen U.S.
ports and not just maintain them is expected to become more important over the next several years as deeper draft cargo vessels are being built in the Panama Canal expansion moves forward. Near term domestic capital projects include another section of the New York Harbor, a project in Jacksonville, work for the Navy in Norfolk and other deepening work along the East Coast.
In addition, the programs we spoke out in the last call are still on track to add dollars to the dredging market in the next few years. The Coastal Impact Assistance Program is a Federal plan to provide money’s from offshore oil drilling in the Gulf to six coastal states.
The other longer-term plan is the Offshore Continental Shelf Program, which appropriates money from offshore oil drilling leases back to the impacted states. While none of these dollars has been spent yet, we are seeing efforts by Louisiana and industry coalitions including the oil and gas industry to push for these expenditures to be made.
In total, we see capital projects, which in the aggregate could provide more than $200 million of opportunities over the next 12 months. We believe the state and local authorities may be struggling with budget shortfalls due to the current economic recession and as result state funding of beach nourishment work is down again this year.
Nevertheless, we see a number of beach projects that are schedule to be bid toward the end of the next 12 months, as we believe many beaches along the East and Gulf Coast are at critical stages. And finally $5.25 billion expansion plan for the Panama Canal, which is slated for completion in 2014 continues to move forward.
Panama Canal Authority held a site visit and pre-bid conference at that the end of April for the Atlantic Entrance Channel Dredging Project, which is scheduled to be bid in July of this year. This project could be a good opportunity to occupy certain vessels in our fleet.
Even more importantly the Panama Canal expansion program will make maintaining and deepening our East and Gulf Coast ports even more critical. Deeper draft vessels are too large to navigate in our ports.
Goods lessened for the US will bear higher transportation costs. In summary, the domestic market remains steady during the first quarter 2009, with the exception of beach work which appears to continue to be constrained by funding issues.
Looking forward we anticipate an increase in work coming out to bid from this stimulus plans and there is real optimism that the Harbor Maintenance Trust Fund initiative will be successful early next year to provide ongoing funding to maintain our course at this state of depth. For the long-term, the growth in foreign commerce, which is expected to accelerate with the expansion of the Panama Canal, should apply real pressure to bring U.S.
ports to competitive standards. These reasons we remain quite positive about the domestic dredging market outlook.
Throughout 2008, our foreign operations ramped up steadily and in the first quarter of 2009 continued this momentum. However beginning in the fourth quarter of 2008, with the decline in oil prices and contraction in the region’s real estate market, the economic boom in the Middle East stalled, we have felt the impact of the downturn and the results of our negotiations with our DR contracts.
While we maintained good utilization of our fleet overseas in the first quarter, this will slow as we move into the second half of the year with less DR work in backlog and other projects in backlog are completed. It is also unclear whether additional work we have the negotiating will be awarded.
Given the uncertain timing of projects in this region, we will continue to review the opportunity to reposition vessels to other international opportunities or back to the United States in light of the development here related to the stimulus plan and other anticipated funding legislation. At this time I’d like to ask Deb to walk through in more detailed analysis of our first quarter performance.
Deborah Wensel
I will start with the general overview of contracts contributing to the quarter’s performance. Revenue during the quarter included $54 million of domestic capital, $44 million of foreign capital, $22 million of beach work, $46 million of maintenance, $13 million of demolition, for a total first quarter revenue of $179 million.
This compares to the fourth quarter of 2008, where we had $40 million of domestic capital, $53 million of foreign capital, $29 million of beach, $28 million of maintenance and $13 million of demolition for totaled fourth quarter revenue of $163 million. And the numbers for the first quarter of 2008 was $31 million of domestic capital, $33 million of foreign capital, $18 million of beach, $18 million of maintenance and $36 million of demolition for total first quarter 2008 revenue of $136 million.
Capital revenues for the first quarter totaled $98 million, up from $34 million from a year ago, $23 million from domestic operations and $11 million from foreign operations. Majority of the recent quarter’s capital revenues were generated by our dredge New York, which was fully utilized during the quarter working with three of our Clamshell Dredges on deepening projects in the New York and New Jersey harbors.
Our Hopper Dredge Terrapin Island, continuing work on the Columbia River deepening project on the West Coast, our Hydraulic Dredge Alaska was working on a Louisiana coastal restoration project, and finally employed most of our fleet stationed in the Middle East on a variety of projects in Bahrain including DR. The company also concluded work on a cruise terminal in Honduras with the Clamshell Dredge 53 and started work as a sub on a project in the Panama Canal.
Beach revenue was $22 million in the first quarter compared with $18 million a year earlier, as the Company worked on projects in New York and New Jersey. First quarter is typically have higher beach revenue due to open environmental windows at this time however the last two years have been impacted by permitting and funding issues.
Maintenance revenue in the first quarter was $46 million, up from $18 million a year ago. The maintenance market was strong throughout 2008 due largely to spring flooding along the Mississippi River and Hurricanes in the Gulf with bids nearly doubling the 2007 maintenance bid market, 2009 has started up strong as well.
The number of maintenance projects contributed to this quarter’s revenue including dredging in Maryland, North Carolina, Texas and Georgia. Margins in the dredging sector improved overall as most of fleet was working at good portion of the quarter and several domestic projects experienced significant operating efficiency.
In addition, the company did not experience an increase in G&A expense with the increase in dredging activity. Contracted dredging backlog at March 31, 2009, totaled $344 million, compared with $418 million at December 31, 2008.
The decreases is the result of their restructuring ofthe DR contract previously mentioned, approximately half the remaining backlog or $57 million was reclassified as an option pending award by the customer. Additionally the March 31, 2009 dredging backlog does not reflects approximately $63 million of domestic low bids pending award, and additional phases pending on projects currently in backlog.
Revenue for the company demolition business was $13 million for the quarter down from $36 million last year. Beginning in the third quarter of 2007, demolition generated record revenues for four consecutive quarters due to series in larger project.
However this revenue has now moderated to levels experienced prior to the third quarter of 2007. The margins in the demolition sector have negatively impacted in the first quarter by the decrease in activity, and the loss recorded on a large project in Boston that is stalled because of the economic downturn.
In January the demolition business acquired a 65% interest in an asbestos abatement company, Yankee Environment Services Inc. The $1.2 million transactions was completed an asset person.
Yankee’s provides Environmental Remediation Services including asbestos abatement and removal of other hazardous materials for private and government entities including schools, universities, hospitals and other businesses throughout the New England area and has been a sub-contract on many NASDI projects requiring such services. This acquisition enables us to broaden our service offering to include abatement capabilities, which will make NASDI more competitive.
Demolition services backlog including Yankee in March 31,2009 were $24 million on par with backlog at the end of 2008. Recently the demolition business has taken on several projects in the New York market and is looking to expand its presence there in 2009.
Our backlog by dredging type and segment at December 31, 2009 was $185 million of domestic capital; $121 million of foreign capital; million of beach work, 36 million of maintenance, our total dredging backlog of $344 million and demolition backlog of $24 million, for total company backlog of $368 million. This compares to year-end backlog at the end of 2008.
$176 million domestic capital, $196 million of foreign capital, $19 million of beach work, $27 million of maintenance, our total dredging backlog of $418 million and adding again $24 million for demolition our total company backlog of $442 million. Capital expenditures for the first quarter totaled 4.7 million, which included 1.5 million spent by NASDI on equipment to expand its footprint beyond Massachusetts primarily into New York.
As of March 31, 2009, senior and subordinated debt, net of $6.3 million in cash and cash equivalents, was $229.4 million. Including $60.7 million of borrowings under the revolving credit facility.
The revolver balance is up from year-end due to the increase in quarterly activity and continued slower payment terms on foreign receivables. The company’s $155 million facility matures in June 2012 and includes an $85 million sublimits for the issuance of letters of credit.
Availability at March 31, 2009 with $59.5 million excluding $7.3 million attributable to a defaulting lender. Lien positions in our credit facility are held by Bank of America, Charter One, GE Capital Corporation, and Wells Fargo Bank.
At quarter-end our total leverage was 3.06 times and interest coverage was 4.9 times. First quarter 2009 was a record quarter for the company.
We are able to achieve these result with our sizable backlog at year-end and a strong win percentage in the domestic bid market in the first quarter, coupled with favorable weather condition and minimal mobilization and mechanical downtime that resulted in that resulted in utilization of our fleet. Looking at the rest of this year, there is still several unknown.
A strong backlog domestically and a possibility of additional opportunities from the recently passed stimulus plan on top of the 2009 federal budget should bode well for our domestic operations this year. In the international side of the business of the fleet currently positioned in the Middle East all but one of our vessels are now fully operational and available to work throughout 2009, but the situation remains fluid.
And while that fleet has been busy to-date, the pace of current project and prospects for future work maybe further impacted by the current economic uncertainties. Therefore, we may need to look at opportunities outside of the Middle East to employ some of this equipment.
Therefore, we again will not provide specific EBITDA guidance for 2009. However as the year progresses and the impact of the variable dimension becomes clear, it will allow us to provide more clarity on full year EBITDA expectations for 2009.
This concludes our prepared remarks, I would also note that we will provide a summary of the operating and backlog information provided year-end, as well as the reconciliation of our EBITDA, which is a non-GAAP measure to net income, a GAAP measure in the financial section of our company’s website at gldd.com. I will now like to open the call up for your questions.
Operator
(Operator instructions) Your first question comes from Richard Paget from Morgan Joseph. Please proceed sir.
Richard Paget - Morgan Joseph
Good morning every one.
Deborah Wensel
Good morning.
Douglas Mackie
Good morning.
Richard Paget - Morgan Joseph
Just getting back to the guidance or lack thereof, I know in the past you had said, do you expect 2009 to at least meet 2008 levels and given that the first quarter you basically almost hit half of what you did or last year. I mean at that very minimum we still expect that correct?
Deborah Wensel
Yes, yeah that’s correct I mean that was a good quarter. But we certainly felt comfortable before and do now that we would do better than we did last year.
Richard Paget – Morgan Joseph
Okay. I mean it’s the bigger variable what’s going happen with international bodes.
And then if you do when you do end up the redeploying them that will be the kind of big uncertainty on what the cost are going to be surrounding their transport?
Deborah Wensel
I thing those are some of the issues, whether or not they will stay in the Middle East and has worked their, whether we can find other opportunities, whether there would be mobilization and the time that we take to mobilize. But I think on the other side we also talk about the uncertainty we just don’t know yet how good things might be here at domestically as well.
So, it’s kind of the mixture of those two unknowns that make it difficult to say.
Richard Paget - Morgan Joseph
Okay. And then domestically now that you’ve combed through the Army Corps list I mean I remember there had been some estimates that dredge number could be billion, I’ve heard some higher, it’s comes down on the lower end of expectations.
Did anything change or people just getting overly enthusiastic with the influx of money?
Deborah Wensel
Well as we always, when we talk about the Corp, I think we try not to be too enthusiastic. We had seen the billion dollar number but I think we always said a portion of which would be dredging.
So, think this is sort of within our expectations. We had originally said somewhere between for instance for as and then I think.
Richard Paget - Morgan Joseph
Okay. Now in terms of the stimulus money are you seeing any other types of potential dredge market I mean, for instance up in Wisconsin there's a Fox River Redemption or there cleaning up some PCBs and I know there's a dredge portion of that.
Are you seeing any other projects in type of range, I think it’s like a $600 million program?
Douglas Mackie
The Fox River, I mean we’ve dabbled with that years ago but it’s really not worked for a large dredging company, it’s that it’s like to clean up for GE, where that’s very small quantities are being readmitted at a time. What we’re seeing mostly is as the core stated was going to be mostly maintenance work, we are little bit surprised they are putting some construction work which is at a good surprise, they put some money in for construction.
In some ways it may been a little bit disappointed but in another ways it’s they did put in some work that we can readily win and some of the work authority adding on to projects were we’ve already working on and they will increase the amount on these projects.
Deborah Wensel
I think, Richard, was asking anything outside of the stimulus
Douglas Mackie
Outside the stimulus plan, I mean we have the 2009 budgets, which is going to be stimulus plan will be incremental to that. So that’s a very solid and good reason and bodes well for the domestic markets.
Richard Paget – Morgan Joseph
Okay. And then typically if you look at the seasonality of your business, margins in the first quarter are some of the lower ones.
I mean is this first quarter, I don't necessarily want to call it an aberration but I mean can we possibly see margins increase sequentially?
Deborah Wensel
Well, I think that if you talk about quarter being low margins, I mean if you look at last they were low because utilization was so low. We had various issues the dredging New York out mobilization of dredges.
We have sort of the pricing that we build into our contracts and we look that overtime and we've been saying with a better market, you can get better margins. But what also happens is you start to get incremental margin once your utilization is higher.
And so that's kind of what happened here in the first quarter is while we had good margins on projects we also had this overriding utilization issue. If utilization comes down, that impacts to margins overall as well.
So the real story for the first quarter was the big utilization.
Richard Paget – Morgan Joseph
Okay, thanks. I’ll get back in queue.
Operator
And your next comes question Andrew Kaplowitz from Barclays Capital. Sir, please proceeds.
Jiong Shao – Barclays Capital
Hi this actually Jiong Shao in place of Andrew Kaplowitz. Good morning, Doug, good morning, Deb.
Deborah Wensel
Good morning.
Douglas Mackie
Good morning.
Jiong Shao – Barclays Capital
The question of DR project in Bahrain, were there any positive gains from contract renegotiations with the customers. In other words, did they pay you any penalties to move part of the backlog into the options status, and when will you finish the current $57 million in backlog and when will the customer make a decision on the other 57 million?
Deborah Wensel
No, I mean, really on the whole, it was a concession that we gave to our customer, they asked for it. We decided they are big customer of ours they are in an other projects that we are currently looking at and are currently working on so, while we ended up taking a hit on the project, we felt that,that was the prudent thing to do at this point in time.
As far as the remaining work, it's not necessarily clear. We’re sort of working with them as to what sort of time table that will be so that’s not yet certain.
And I believe they will have 18 month period over which they can award that option or not.
Jiong Shao – Barclays Capital
When will you finish the current 57 million?
Deborah Wensel
That's why I am saying it, it's not necessarily clear, we've been working that
Jiong Shao – Barclays Capital
Okay.
Deborah Wensel
Continuously, through the first quarter, but we think that will probably slow down.
Jiong Shao – Barclays Capital
Okay. So, what other projects are you currently working on in the Middle East besides DR, and do you see any prospective large projects to be bidding on in 2009/2010?
Deborah Wensel
We do have a couple of other projects that we did work on in the first quarter, they are continuing here in the second quarter. And we do have additional work that we're negotiating and looking at but it's just not certain how and when we might be able to sign those up.
Douglas Mackie
And during the, in DR right now we have, we obviously in Bahrain right now, we have a DR project and we have two other projects of medium size and some smaller projects and we're and there are projects, we are negotiating and bidding for in that area. And we still have a presence in the Middle East, but I don’t think it will be as large as it has been in the past year.
But there are still opportunities not only in Bahrain but throughout the region that we will be bidding on.
Jiong Shao – Barclays Capital
Okay. What was the fleet utilization rate in the first quarter in domestic and foreign, and how does it compare to 4Q?
Deborah Wensel
Well again, that's a question everyone always wants to know. We don't have a good metric to say, it was highly utilized during the first quarter.
Jiong Shao – Barclays Capital
But it’s not theoretical max utilization, was it?
Deborah Wensel
No, not every vessel was working everyday. It was a very high utilization but it's possible that we could have done more.
Jiong Shao – Barclays Capital
Okay, fair enough. And on the $350 to $400 million in dredging contracts funded under the stimulus plan, is there any reason to think that you can't achieve the same win rate as you have on a normal biddable market?
Douglas Mackie
Well I think, it would be somewhat lower simply because there is a portion of the work that is set aside for small business association which takes some chuck of that, we are still analyzing this list and don’t have all the information on the list but it will and since it's dominated with maintenance work, generally we take a smaller percentage of the work in maintenance than we do in capital and beach. However, the fact that we have this add-on of the stimulus bill, it will occupy our competitors and there is capital work and beach work out there, and work on Louisiana, so we may see better utilizations simply because our competitors will be fully occupied.
Jiong Shao – Barclays Capital
Gotcha. And finally, on the beach prospects in 2009.
Are you including any delayed projects from 2008?
Douglas Mackie
Well we think there is beaches delays from 2007.
Jiong Shao – Barclays Capital
Okay
Douglas Mackie
As a matter of fact, that there are
Jiong Shao – Barclays Capital
Yeah, I remember you mentioning last year that there were some delayed projects that could be awarded in 2008 but it wasn’t, so those projects are still alive in 2009?
Douglas Mackie
That’s correct, they are. And we are seeing in the budget, the Federal budget, there are several beach projects but most of them will be bid, probably in the third quarter and fourth quarter to work off into 2010.
Jiong Shao – Barclays Capital
Okay, thank you. Congratulations on the quarter.
Douglas Mackie
Thank you.
Deborah Wensel
Thank you.
Operator
And your next question comes from Jack Kasprzak from BB&T Capital Markets. Please proceed.
Jack Kasprzak – BB&T Capital Markets
Hi thanks, good morning. I was going to ask about the margin impact in the first quarter of having the New York Dredge back on line, the Dredge New York back on line?
Deborah Wensel
Okay the Dredge, the New York is working on I mentioned there is three projects in the New York area that we have in backlog right now and it works in conjunction with some of our other clamshell fleet, so the dredging market is big for us and it’s important when that dredge is working and with the job that it works on. Although all three were bid at various difference times so the first job little bit lower margins and then second and third job margins coming back up and that's important dredge for us to have working.
Jack Kasprzak – BB&T Capital Markets
But, there is no way to pinpoint the impact of, I guess to say it differently, what was the negative impact in the first quarter last year?
Deborah Wensel
Again, we don’t typically talk about, what any one particular dredge is contributing at any point in time. Obviously, there is a lot of competitive information, right with regard to the New York we have a claim against the ship owners that ran in that vessel in that.
So we typically don’t give out that sort of information. And again, we’ve talked about it, any particular dredge can have sort of a wide range of results.
Jack Kasprzak – BB&T Capital Markets
How about for the second quarter of this year, will you have a potential positive comparison from having that dredge, back on line versus second quarter last year?
Deborah Wensel
Yes, I think that fair. That vessel will be working in the second quarter this year, and it was not working last year.
Jack Kasprzak – BB&T Capital Markets
Okay. And how about an estimate for D&A for the year, if you could give us that?
Deborah Wensel
I think our G&A this year.
Jack Kasprzak – BB&T Capital Markets
I’m sorry D&A, it's depreciation?
Deborah Wensel
Okay, I think we ran at about 30 million.
Jack Kasprzak – BB&T Capital Markets
30.
Deborah Wensel
Yes.
Jack Kasprzak – BB&T Capital Markets
I shouldn't have interrupted you, Deb, if you wanted to give G&A as well?
Deborah Wensel
Sorry.
Jack Kasprzak – BB&T Capital Markets
I should know better.
Deborah Wensel
I can usually talk, we saw in the first quarter we sort of held even with the prior year, a little bit of inflation increase there, but we don’t have. I think is we have a G&A in place that's capable of doing a wide range in utilization here, so.
Jack Kasprzak – BB&T Capital Markets
Okay.
Deborah Wensel
We don’t expect that G&A number to change significantly.
Jack Kasprzak – BB&T Capital Markets
Great, thanks. And earlier this morning a competing company mentioned on their conference call that there is a meeting being held by the Army Core on May 20, talk about how they are going to I guess roll-out stimulus related projects, I guess, if you could comment on that in terms of, is there such a meeting?
I assume there is and is this work going to be competitively bid or is it situation where there so much of it, they are going to try and parcel out in a more efficient manner to get it out quickly, if you could give us your views on that?
Douglas Mackie
Well, the meeting on the 20 is an annual meeting that they hold every year.
Jack Kasprzak – BB&T Capital Markets
Okay.
Douglas Mackie
And obviously, a lot of the focus will be the stimulus work. That will dominate, I am sure the program, and as far as the bidding it will be slightly different there.
It will all be competitively bid but they may give you a menu of jobs to bid within a certain area rather than a single job at a time, and so and they don’t have to award all of the menu. But In order to get all these jobs out there, they are looking at a different bidding process.
And we’ve seen it before and it's been used infrequently in the past.
Jack Kasprzak – BB&T Capital Markets
Okay
Douglas Mackie
Now they might put out a few jobs at the same time and you may or may not get off three or four of the other projects that are bid in that grouping.
Jack Kasprzak – BB&T Capital Markets
The Army Corp has to put their money stimulus money out by September of 10 but seems to be some talk that they want it obligated faster, perhaps by the end of the year, have you heard that same discussion?
Douglas Mackie
Yes, we have.
Jack Kasprzak – BB&T Capital Markets
Okay, great. Thanks very much.
Operator
(Operator Instructions) Your next question comes from John Parker from Jefferies. Please proceed.
John Parker – Jefferies
Hi, guy. Can you give me a little bit more color on your foreign backlog is only 57 of it in Bahrain and it seems like you picked up some more business and perhaps this Panama work and Honduras work, but can you break down the foreign backlog between Bahrain and the rest of the world?
Deborah Wensel
That $57 million is just the Diyar contract but that’s what remaining on that particular contract there is more work in Bahrain, the Honduras job we've completed so there wouldn’t be backlog on that one and the Panama that I don’t know how much. It's not a big place.
Douglas Mackie
It's not a big job. It’s a rental job, which we are working for one of competitors but we still have significant backlog in the Middle East other than the Diyar job.
John Parker – Jefferies
Okay, if I look at your $120 million you say that bulk of that is in the Middle East.
Deborah Wensel
That’s correct.
Douglas Mackie
Right.
John Parker – Jefferies
And I tried to approximate base year disclosure as a percentage of fleet that is deployed in the Middle East. In terms of capacity, do you have a number that you’ve guys use say for what percentage of your capacity deployed in the Middle East at this time?
Deborah Wensel
No we don’t we’ve only given the number of vessels because there halper drudges, then there is been hydraulic drudges, there is no mechanical drudges there. But again no different from capacity from that and we don’t have a way that we look that.
I mean the first quarter revenue, 27%. I think our capacity must be somewhere around, it has been 35 last year and now 27 this quarter, of course depends on the basin that we have here domestically.
Douglas Mackie
And then if you look at the work in the Middle East is at lower rates than it is at domestically. So you can’t really translate when domestic and foreign because the fuel was so much cheaper over there and the labor is so much cheaper over there and that’s why if you’re looking at the numbers in the Middle East versus and you look at the revenue on the Middle East versus the revenue in domestics, you will see that the domestic work bears higher revenues so it’s and the next of the dredges in the type of work which makes it difficult for our competitors and our analyst to figure it out .
John Parker – Jefferies
Okay and then it seems you’re very strong beach quarter and that was coming half of pretty small backlog at the end of the year and again you’re faced to the very small beach backlog and you’re not into summer slowdown season yet, do you see any sales coming in the second quarter and keeping some level of beach or the beach was going to be tough for the pursuable future?
Deborah Wensel
That the first quarter this year and last year our beach were comparable and we were considered down from what we’ve seen prior to that because again the environmental windows are open and that’s only we view typically. So last year we thought there was funding issue, this year committing issues, this we are kind of assuming as more of a funding issue.
Again it looks like there is some work it should come out at the end of the year again. Typically we don’t see any of that work in the summer, that’s a little bit difficult to tell here.
John Parker – Jefferies
And you don’t see I mean adding to that $1.5 million backlog you have there in the short-term.
Douglas Mackie
There is some of competitors and Great Lake has one bid but hasn’t hit backlog yet.
John Parker – Jefferies
Douglas Mackie
From beach, so there is some and there is some coming out but we are looking at most of the bidding in the third and into the fourth quarter there will be a few small jobs this quarter but bulk of the beach work will come out later in the year.
John Parker – Jefferies
Okay and then finally it seems with your gross margins been remarked upon were very strong and due to high utilization and smaller rough mechanical problems. But, is there any particular area of your business the way you break it down and had higher than normal gross margins and is that sustainable.
I mean if I look at my modeling an try to calculate your gross margins based on the revenue level I come with much lower ones than you ended up having so there is any particular one segment that is higher than usual gross margins.
Deborah Wensel
Well, again I think there is sort of the overall effect of utilization across all of the dredges whether they were working on maintenance or capital. It doesn’t really matter at that point once you have high utilization.
So I mean as you look forward if we cant maintain that level of utilization that will have some impact on the margins going forward.
Douglas Mackie
It would be difficult to sustain this for four quarters obviously for two reasons, the market will not allow us because there will be breaks in biddings especially in the summer period and also we had decent weather and good weather in other areas and we expect in the summer that we will get difficult winter weather through the hurricane season which obviously helps us in the long run but hurts us while we are working so there is always a little bit of risk during the hurricane season.
John Parker – Jefferies
Okay and the EBITDA, I think you said you’re not going to give us any guidance at this point but with the last guidance we gave for this year was somewhere in the mid-50’s, is that correct?
Deborah Wensel
Not really giving guidance but we did indicate that we thought that we could do better than last year and I believe last year was a little high.
John Parker – Jefferies
Okay. All right, well that’s all for me thank you very much for you help.
Operator
And your last question comes as a follow-up question from Richard Paget from Morgan Joseph. Please proceed.
Richard Paget – Morgan Joseph
Just getting back to the Middle East, I know things have slowed down as you’ve said, the real estate markets tough over there but as oil has crept backup both $50 per barrel, have you started to see your clients over there becoming more comfortable moving ahead on potential projects at all?
Deborah Wensel
I don’t think so, it’s been a short amount of time here the pricing has been coming up so just as a kind of takes a bit of time for everyone to take in the downturn, in the effet of an upturn I think it will take them a bit torecognize that and maybe change their plans. So its just difficult to tell that we don’t see anything different at this point yet.
Richard Paget – Morgan Joseph
And then does these customers kind of have like a bench mark of where they start getting active. I know oil and gas industry I know some people can talk about where the cut-off is but for some of your customers have you heard at $50, $ 75, $ 60?
Douglas Mackie
We’ve heard in the newspapers and magazines and everything else and analyst but I think they will be measured as a price of oils go up. I think one of the biggest areas of issue is Dubai which may have gone too far, too fast but other areas in the Middle East have been not at that pace so if that oil comes up in a measured way., There is still bidding work and negotiating work but it’s nowhere near the pace it was two years ago.
Richard Paget – Morgan Joseph
Okay, thanks.
Operator
At this time, I will now like to turn the presentation over back to Deb Wensel for closing remarks.
Deborah Wensel
Thank you for joining our first quarter update and we look forward to talking to you after the second quarter of 2009.
Operator
Ladies and gentlemen this concludes your participation. You may now disconnect, good day.