Good day, ladies and gentlemen and welcome to the Second Quarter 2016 Great Lakes Dredge & Dock Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

[Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Mary Morrissey, Director of Investor Relations. Please go ahead..

Thank you. Good morning. This is Mary Morrissey and I welcome you to our quarterly conference call. Joining me today on this call is Jonathan Berger, our Chief Executive Officer; and Mark Marinko, our Chief Financial Officer. They will discuss the operational and financial results for the quarter and six months ended June 30, 2016.

Following their comments, there will be an opportunity for questions. During this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations.

Certain risk factors inherent in our business are set forth in our earnings release and in filings with the SEC, including our 2015 Form 10-K and subsequent filings.

During this call, we also refer to certain non-GAAP financial measures, including adjusted EBITDA from continuing operations, which are explained in the net income to adjusted EBITDA reconciliation attached to our earnings release and posted on our Investor Relations website along with certain other operating data.

I will turn the call over to Jon Berger to provide commentary on the company’s announcement regarding the conclusion of our review of strategic alternatives as well as a quick update on our second quarter results and our outlook going forward.

Jon?.

Thank you, Mary, and thank you for joining us on the earnings call today. Good morning, everybody. I would like to start out by giving everyone a full review of the strategic alternatives process and why we have concluded it at this time.

As most of you know, on October 16, 2015, the company's board of directors initiated a process to review potential strategic alternatives for the company. Since that date, the board undertook a deliberate and comprehensive evaluation of potential alternatives.

When we started the process, we were clear to our advisors that we would execute a transaction, only if it provided for the value we saw in our investment in the ATB into which we have already invested approximately $102 million and secondly, if we could receive appropriate value for attributed to our turnaround of the environmental and infrastructure segment, which is still underway.

The board and management considered a wholesome set of alternatives with our financial advisors and engaged in a comprehensive process, talking to strategic acquirers, financial sponsors and alternative investment platforms.

Prior to engaging in a more traditional broad market test, our financial advisers, Greenhill undertook an intensive process, meeting with many of the potential investors to gauge market appetite. We had many firms interested in our story, validating our strategic direction and believing in the turnaround steps we are taking with our E&I segment.

At the conclusion of this thorough analysis, the board, in conjunction with our advisors, concluded that we would best serve our stakeholders by maintaining the course of having the ATB join our hopper fleet and demonstrating its respected returns and also completing the E&I turnaround plan.

Where we stand today, we are confident this decision is in the best interest of our stakeholders. I understand that many of you have questions on the details of the process. And I want to let you know that due to confidentiality constraints, we will not be providing additional details regarding the process during the Q&A portion of this call.

As far as executing our strategic plan, including our effort to turn around the E&I business segment, we announced this morning that we are divesting the services portion of our Terra Contracting Services, LLC business.

We determine that these services lines are not in our long-term strategic interest of being a leading provider of remediation and geotechnical construction on large-scale contracts. These business lines are more regional in nature and best operated at the current size by private local partnership.

In exiting the business, we will recoup a minimum of $11.5 million of asset value from the sale and we will additionally run off approximately $5 million of working capital retained in the sale.

Just as important, we’ll withstand significant operating losses under our ownership structure, allowing us to focus on our core competencies of remediation and geotechnical constructions.

Regarding the CEO search, as stated in October 2015, I announced my intention to retire by April of 2017, with the intention of giving the board significant time to evaluate the strategic alternative review process and provide consistent leadership through any transition.

The CEO search has been ongoing alongside the strategic alternatives review process. But as you can imagine, has been somewhat hampered by it, while [indiscernible]. Up until this point, we interviewed several candidates, but did not identify one with a desired background and experience. As a result, we recently hired Heidrick & Struggles.

The firm has significant reach into qualified candidates, including those with construction or contracting experience. We are reviewing a set of resumes that have been prescreened by Heidrick and we are confident that now that we have determined the strategic direction the company is taking, there will be no impediments to the CEO search.

Interviews will begin in mid-August and my expectation is that we will find a qualified candidate in the coming months. Now, let's turn to the financial results. The dredging segment domestically had a good second quarter, primarily as a result of strong project execution, offset by the slowdown of work internationally.

We executed well on some of our coastal protection and river and lakes projects, keeping margins in line with our second quarter last year, but on lower revenue.

Domestically, we executed on a mix of coastal protection jobs, along the East Coast, including some of the large Sandy-related projects, such as the $92 million Great Egg Harbor and $160 million Long Beach Island projects, both of which are on the Jersey Coast.

Work continued on the $77 million Shale West and $27 million Chenier Ronquille coastal restoration project in the Gulf of Mexico as well as the Corpus Christi LNG project in Texas. On larger projects we work on, we performed the annual Baltimore Harbor maintenance project valued at 28 million.

Finally, our rivers and lakes division had a very strong quarter, with highlights including exceptional execution on the multi-year lake [indiscernible] that included a first phase executed by our E&I segment. And also on the John Redmond reservoir project in Kansas.

With the rivers and lakes operations fully integrated within our domestic dredging division, we have been pursuing opportunities in the broader region and exploring more complex projects that our large dredging operations team is experienced in estimating and executing.

We are pleased with the progress that this division has made since it was consolidated in September of ’14 and looks forward bidding and winning successful projects. Internationally, we commenced work on two projects in the Middle East valued at $55 million.

The international market has experienced a slowdown and there are several attractive opportunities that we are tracking, which are a good fit for our equipment based in the Middle East.

Due to the international slowdown and part of our strategic vision to modern our Gulf, which include retiring older vessels that are difficult to consistently and profitably put to work, we sold the Reem Island, a dredge based in Middle East for net cash proceeds of $10 million.

Although we recorded a book loss of approximately 700,000, we expect to save approximately 1.6 million in operating costs for the remainder of the calendar year. As we continue to assess the market and execute on our fleet modernization plan, we will continue to take into consideration potentially selling or retiring other vessels.

Regarding the bidding market, it was in line with what we expected in the quarter. As we have stated during the past several earnings calls, we entered 2016 with significant more backlog in place than the previous years, meaning that we have been more focused on project execution and on securing new work.

Going forward, we expect bidding activity to accelerate, particularly for the hoppers and cutters. The Panama Canal expansion project was completed in June, which was a truly historic event. With the success of its opening, we continue to execute -- to expect to see ports along the East Coast pursue deepening projects in the next few years.

Although we cannot be certain, it appears that Jacksonville has made the most progress in its plans for a port deepening and will likely be the next port that tenders a bid.

We continue to track the progress of the other ports along the East Coast and are making plans and funding for these port deepenings, which are critical to remain competitive, by having the debt to accept the newest generation of the most efficient fleet vessels.

In the Gulf of Mexico, significant progress is being made on the project planning to utilize the $18 billion in oil spill sediment.

To remind you, the 18 billion will obviously not be used exclusively for dredging projects, but environmental restoration and protection projects are in the process of being planned and designed and we are engaged in helping plan projects.

While the plans are still in process, we expect to see some bidding opportunities funded by the BP money in the near-term. On the East Coast, we continue to expect to see projects funded by the superstorm Sandy appropriations.

In Washington DC, despite the positive news earlier in the year, that both the House and the Senate approved appropriation bills with record funding levels for the Army Corps project and the harbor maintenance trust bonds, it appears that Congress is not going to pass a budget on time this year.

As a result, we expect a continued resolution, which puts the Corps’ budget back in the previous year's level. We are disappointed with the outcome, but are hopeful that omnibus budget is passed soon after the continuing resolution takes effect. At this point, we don't know when it will be passed.

Turning to the environmental and infrastructure divisions. Let me go through our outlook for E&I. As I already have mentioned, we think executing the definitive agreement to divest the services portion of Terra Contracting Services, LLC business best positions us to return the segment to profitability.

We will continue to diligently focus on the turnaround of this business, pursuing projects that are in our wheelhouse and will drive profitability. We are pleased with the performance of GLEI, the entity we acquired at the end of 2014. They have had an excellent first six months with their business picking up in the second quarter as expected.

Project execution was strong and exceeded our expectations. With that, I will turn the call over to Mark to review some of the financial highlights of the quarter..

Okay, thank you, John and good morning to everyone joining us. I'll move right into reviewing the financial results of the second quarter 2016.

The company's revenues in the second quarter of 2016 were 192 million, which is a 20% decrease [ph] compared to the second quarter last year and was a result of decreased revenue in both of our business segments. Total company consolidated gross profit was 24 million, a decrease of 25% compared to the second quarter of 2015.

Gross profit margin for the quarter was slightly lower at 13%, compared to 14% in the prior year with the dredging segment’s essentially flat margin offset by a decrease in margin in the environment segment.

Total company operating income was 4 million for the quarter, down from operating income [Technical Difficulty] million in the prior quarter, driven by a decrease in dredging operating income at a greater loss in the environmental and infrastructure segment.

Drilling down to our results by segment, the dredging segment’s revenue was down 90% in the current year quarter at 154 million, with lower foreign and domestic capital revenue, partially offset by higher coastal protection, rivers and lakes and maintenance revenues.

Dredging’s gross profit margin was for the most part flat at approximately 16%, with strong contract margin on some of our domestic dredging projects offsetting the absence of the strong performance we had during the second quarter 2015 at the Suez Canal project.

Operating income decreased to 11 million for the quarter, a 41% decrease from the same period in the prior year, driven primarily by lower gross profit on lower revenue.

Our E&I segment’s revenue decreased 20% to 40 million for the second quarter, primarily as a result of not replacing several large remediation projects that were awarded to our Midwest-based operation.

The segment’s gross profit margin was essentially breakeven in the second quarter of 2016, compared to 4% in the second quarter in the prior year, with improvements in projects execution at our Great Lakes environmental and infrastructure division, offset by increased overhead under-utilized equipment and an additional loss of 1.8 million at the one remaining legacy project that entered into a loss position during the first quarter.

We continue to expect to recoup part of the losses on this project once we finalize the pending change orders and claims, with some of the smaller ones expected to be finalized this month.

The Great Lakes environmental and infrastructure division, which is the acquisition we made at the end of 2014 is executing well, is performing more in line with its pre-acquisition levels and above our expectations for the first six months of the year.

The E&I segment reported operating loss of 7 million, compared to a loss of 4 million in the second quarter of 2015, due to lower gross profit margin and the presence of some one-time items in the second quarter of 2015.

First, there was a write-down of the seller note associated with the Magnus acquisition that was reduced by 7 million due to the entity being unable to meet 2015 performance targets set forth in the note. That reduction had a positive impact on G&A in the second quarter of 2015.

G&A was also impacted by 1.7 million in amortization of intangibles versus 2 million or 0.2 million in the current year period. G&A expense primarily related to labor decreased 1.8 million in the current quarter, compared to the second quarter 2015.

We also recorded a goodwill impairment charge of 2.8 million related to our Terra Contracting Services business during the second quarter of 2015, which had a negative impact. The net benefit of these one-time items in 2015 was 2.7 million.

Moving to the balance sheet, at June 30, 2016, we had 21 million in cash on our balance sheet and had drawn 45 million on our revolver. Our credit facility became current in June, so the 45 million drawn on our revolver was classified to current debt, previously was included in long-term debt.

We are currently negotiating a new facility and expect to have it in place in the coming months. Total CapEx through the first six months of 2016 was 29 million, with approximately 11.3 million for the ATB through the first six months of the year.

Turning to bid results, the domestic dredging bid market for the second quarter of 2016 was 222 million, which is 10% lower than the second quarter of 2015. This quarter’s bidding market included the 39 million Dare County Beaches coastal protection bid that Great Lakes was awarded.

In total, the company won 27% of the overall domestic dredging bid market during the second quarter of 2016, which was below our prior three-year average of 49%.

Please remember that variability in contract wins from quarter-to-quarter is not unusual and that the win rate for one quarter is not indicative of the win rate the company is likely to achieve for the full year.

During the second quarter, Great Lakes won none of the 5 million in capital projects awarded, 70% or 52 million of the coastal protection projects awarded, none of the 90 million in maintenance projects awarded and 15% or 8 million of the rivers and lakes projects awarded.

Contracted dredging backlog at June 30, 2016 totaled 623 million, compared to a backlog at December 31 of 2015 of 678 million. The environmental and infrastructure segment’s backlog was 54 million at June 30, 2016 versus 73 million at year-end.

In conclusion, with the sale of the Reem Island and the pending sales of the Terra Services business assets, we have or will have monetized approximately 25 million of assets on our balance sheet that will result in approximately 10 million in annual operating losses. With that, we'll open up the call for questions..

Thank you. [Operator Instructions] Our first question today comes from the line of Jon Tanwanteng with -- your line is open..

Good morning. It's Pete Lucas for Jon.

Just wanted to know if you could talk about expected profitability for the remaining E&I business, either for this year or next, and kind of, if it's possible to give some color on the run rate of revenues related to the assets that you’ve sold?.

Mark, why don't you handle that one?.

Yes. So, we don't give guidance on these individual segments, but related to the services business that we sold, the trailing 12 months operating income for the services business was $7.2 million loss and about 4.4 million EBITDA loss..

Okay, great. And just to follow up.

As far as the international business goes, we've been waiting for the large mid-east projects to hit for a while now, any update to that or does that change with the sale of Reem Island?.

This is Jon. No, it does not change with the sale of Reem Island. We have a memorandum of understanding that we are in the process of extending to allow the owner of the project to put in place third-party financing.

So we’re in the process of finalizing these that will give us more time to allow him to do that, while keeping our [Technical Difficulty]. It is still there and we still anticipate being able to bring that into operations..

Any sense on the timing on that?.

He's out there financing it, our hope is that we get it done by the time we roll-off and can begin work after we complete the $55 million of work we're doing there now, because obviously if we have to demo, it will cost them more..

And last one for me before I jump back in queue, as far as the proceeds between the sale, that sale and the E&I assets, any plans to pay down debt or more CapEx or anything else you’re looking at?.

Mark, do you want to handle that/.

Sure. So moving forward, we still have a remainder of about $40 million left on the ATB. So we will use our free cash flow to pay that. You can see in the quarter versus last year, our CapEx is down.

We’ve been actually a little more conservative on CapEx going forward, in particular in our E&I business, so the big chunk of it for the remainder of this year is the 40 million that we have remaining on the ATB..

Great, thanks. I'll jump back in the queue..

Thank you. The next question comes from the line of Scott Levine with Imperial Capital. Your line is open..

Hey, good morning guys.

So I was hoping you can just elaborate a bit further on the type of business, exactly what you are divesting from Terra and/or now E&I guess, what the distinction is strategically and why you’re confident, in the viability of the business you are retaining and the reason these types of jobs make sense for you guys strategically and feel like you can execute them well in the future?.

[Technical Difficulty].

This is Mark. I’ll take this for Jon. He seems to be breaking up on the call. Sorry, this is Mark. I’ll answer that, because Jon, you are breaking up on the call. I’ll take this one.

Okay, so, yes, so the Terra Services business, that's made up [Technical Difficulty] essentially emergency response or those types of things, abatement services where we clean, take-out asbestos, the oil and gas business, we’re doing tank cleaning, some pipeline cleaning and underground infrastructure, which is sewer cleaning.

So this is the group that we do hundreds to thousand jobs a year, smaller size jobs. Moving forward, the remainder of the business is really the remediation and geotechnical. There will be some remediation left under the Terra brand.

We are selling assets, but that will be under the guidance of the Great Lakes and Environmental & Infrastructure Group, the former Magnus. So where they do -- the remediation they do is essentially the mine job, reclamation they’re doing that’s been very good for us in the geotechnical [indiscernible].

So with the additional, so those are right in their expertise area, they have a competitive advantage in those areas. But also with [indiscernible] coming on board and the improved project controls, we look forward to having a solid remediation of geotechnical business going forward.

So we have those proper project controls, contract controls, bidding controls and really our one project that we've had an issue with this year was an old legacy project we signed in the middle of last summer..

Got it.

And then as a follow-up Mark, I think you said there was a 1 plus million dollar charge on one legacy contract in the quarter, but that there were no additional projects that deteriorated into a loss position, do I have that right?.

That's correct. There was 1.8 million in the quarter, it's the job we took, the $3 million in the first quarter, so additional 1.8, but yes, there has not been any additional deterioration on jobs. In fact, as we've said, it's been performing well..

And when do you expect to complete the loss project, the one that you had to charge on this quarter?.

Yeah. In third quarter..

Complete in the third quarter, got it.

And then just as a follow-up, with regard to the dredging operations, it sounds like you expect bidding activity to pick up in the back half of the year, despite the fact that we are not getting a budget from the government, potentially, it seems like the policy outlook is kind of mixed, but I'm guessing as this kind of relates to some of the beach type jobs that you guys have discussed in the press release is picking up in the back half or maybe just a little bit more elaboration as to why you expect bidding activity to pick up in the back half of the year?.

So, historically, this kind of third quarter has been a busier time as the Army Corps lets these jobs out, we’re seeing that right now, there is a lot of bidding activity we’re working on right now to prepare for bids. So some of the Sandy work is a piece of that. So we expect it to be strong as it was last year.

We don't have a large port deepening yet in this quarter, coming up as we stated before about potentially see Jacksonville coming online, but probably in 2017..

Got it.

Would that be first half ‘17 or it’s too early to tell?.

Yes. We think it's first half of ‘17..

Got it. Great, thank you..

Thank you. Our next question is from the line of Matt Duncan with Stephens Inc. Your line is open..

Good morning, guys. So, look, I appreciate that there may not be a lot you can say about the strategic review, but I'm hoping we can squeeze may be a little bit more information out.

Can you tell may be about how many offers the company received whether you got any offers for the whole company or just for the E&I segment, just trying to get a better sense for what the options were that the board had to evaluate?.

I'm just going to say the most I can say is the board evaluated a lot of different options, I can't give any more detail or color into those items but they looked at it, a full range of different options related to the business as John said earlier..

So, Mark from the comments then should we assume that you are not able to get anyone to give you an offer that's fairly value the impact of ATB is that really the way we should read the news that you are going to keep going it alone..

I think that it was pretty clear that we expected value of the business to be incorporated. The ATB and our investment into ATB as well as a turnaround E&I and that value wasn't there at this point..

On the ATB, is that still on track to hit the water in January?.

It will start working for us and actually March of 2017 delivered in the first quarter to us..

And that is still on par with your previous expectation?.

Yes..

Okay, on the E&I business is the sale of Terra assets alone get business profitable or is there more work to do that, it sounds like that business lost seven, I think you said a little over $7 million last year but the operating losses so far this year have been greater than that amount.

So, what still needs to happen to get that business profitable?.

Right so, we need to finish, you are correct there is losses in the remediation portion of Terra which is really remaining portion there and this one job that I mentioned with the $5 million loss is in that group so we need to finish off that legacy job and move that business essentially under the glee portion of our business and it will run through that business.

So we do have the finish off these legacy jobs that are - the remediation portion..

When will that be done?.

Q3..

So, I'm going to put you on the spot here, will the segment be profitable in the fourth quarter?.

The segment - I don't give any guidance going forward but I will say we said our Great Lakes is an environment and infrastructure group, our division is part of this group and it ramps up in Q3 and Q4 and its exceeding our expectations in the first six months of the year..

And so, kind of where I was going next, the seasonality of the business isn't really changing any with these assets going away, it sounds like it's still going to be a back half loaded segment?.

Yes, that's correct..

Whatever the revenues of the assets that you are divesting, we just need to be able to get some sense from an annual basis how much revenue goes away with that segment?.

Sorry, someone asked earlier I just talked about it, it is $30 million of revenue..

And was that $30 million trajectory wise was an increase or declining?.

No, it was actually pretty flat in that services segment. Some pieces up there, some pieces down..

So $30 million of revenue and over $7 million of operating losses or what goes away plus the $5 million I guess the project loss that you have had in that business and also maybe....

Right, right that is correct..

Alright so all things considered then if I am reading the [indiscernible] correctly here, this segment should get back to a profit late this year or next year too early to tell probably on what's that is going to be but to put a little bit wider timeframe around it, we should expect this business to get back to profitability in the next 12 months?.

Yes, that's correct. I do want to add one thing to the kind of impact for 2016 related to selling these services. As I said it was about $7 million of operating loss, 7.2 so we got four months left in the year essentially you would save $2 million there.

I will have about $2 million of one-time costs related to getting rid of the segment in terms of severance, retention bonuses, couple office leases will write off the legal fees to sell the deal, so it won't have a material improvement to this year's 2016 numbers related to that sale because of those one-time costs..

On the sale is done, I don't think in the release that is about the end of this month, correct?.

That's correct. We will close this month that's right..

And the last thing before I hop back in the queue, just on dredging, and your segment margins there I think continue to do better than what you have expected? Comping against last year when you have [indiscernible] job is pretty impressive you are only down 30 basis points on a much larger revenue decline, so obviously you're doing something right there was there a benefit from any project that closed out that were well executed upon or is this a gross margin level that is safe to model on a go forward basis?.

I wouldn't say there is any big anomaly out the like [indiscernible], I mean we had a very good performance on some of the Sandy jobs in particular Long Beach Island, but I wouldn't say anything sticks out that really skewing the numbers..

Okay, so there is nothing to be considered of in terms of mix going forward?.

I don't know, I wouldn't say there is..

Okay, so 16% is the level, if I'm hearing you correctly you can maintain?.

Yes..

Thank you. Our next question comes from the line of [indiscernible]. Your line is open..

Good morning guys, Bill on for John Rogers thanks for taking my question.

Just wanted to give a little bit more color on the judging opportunities that you guys are seeing internationally, obviously there is kind of slow down recently but what you're seeing for the remainder of this year and then into ‘17?.

Mark, you want to take that?.

Sure, oh good Jon you are back clear, sounds good.

I think Jon talked about a little bit we have to finish up this $55 million job we’re doing in Saudi Arabia, the big one that is in the queue is this job which is, what we working on right now is actually phase 1 of that looking for that to - it's a big job potentially $150 million job now we are doing kind of the first $55 million of it.

So, that is the one we are working on extending the memo of understanding that we've already signed. That is really the big job on the short-term horizon, we are looking to close..

There are some other jobs in Bahrain that we are looking at, and I think there is a very big job sort of like the [indiscernible] coming out in ‘18 in Kuwait. So, getting this job for ‘17 would be would be very critical for us along with doing in some other opportunities in the Middle East, in Bahrain in particular that we are looking at..

Thank you. And our next question comes from the line of [indiscernible], a Private Investor. Your line is open..

I just have a couple of follow-ups, I have a question regarding the E&I business you already addressed a context, I'm a little unclear as it relates, so we have one contract that's a problem that is finishing up this quarter but then you went on to say that you have several remediation losers so is it one or several? And then I guess why aren't we confident in saying that there will be from profits there is in fact the one loss contract runs of this quarter and the other parts of the business are doing reasonably well, I'm confused on why we are not committing to being profitable there, I wanted to start with that?.

This is Mark, first we didn't say there are several remediation contracts, we just had the one that was a losses, $5 million the loss and I didn't say we wouldn't be profitable I said I'm not going to give guidance for the rest of this year but I did state that going forward now in the third and fourth quarter is our most profitable time for this business particularly in Great Lake environmental infrastructure historically and going forward and they are performing about what expectations through the first six months of the year..

May be a quick update on the status of the Georgia depending project?.

Savannah?.

Savannah?.

Yes, you're talking about the Savannah project, it is going on as expected that is on the Windows with which to dredge so it is going to we got I believe four years to complete that project, so it is on and off project it is not as if we are going to do all 130 or 140 million that we won the award in one year it is going to be spread out over many seasons and that's just due to environmental windows..

And I thought you just won kind of phase 1 but is there more work or somebody else got that work?.

No, it has not been did, but don't forget we are doing the kind of shipping channel out, there is a 17 mile or 19 mile river in Savannah that we expect will be a more competitive bidding process and then additionally because you have certainly have seen quotes that the whole project will be 500, 700, 800 million there is a lot of environmental work that is also being done on the river that really not work we do.

One example is oxygenating the river water to maintain marine life. That's not something that we do that's more of an engineering type project. So there will be more, it will be a more competitive because it will be protected waters.

So, there is no guarantee that that is that's actually in our sweet spot as much as it will be more competitive so pricing will be tighter is my guess..

And then lastly, on the large international, is that expected to conclude favorably this year or the funding that they are waiting for is like, I guess some trying to take [indiscernible]?.

Let me try to go to through it with you. We are doing phase 1 of the project right now, we are doing subcontracting work for another entity that had trouble completing it.

It really has to get done because it is a major investment in a port that has both industrial and commercial and residential one of these kind of whole mixed-use projects if you will. And doing phase 1 without doing other phases doesn't really make sense.

The family it is one of the big Saudi families extremely wealthy but they are having a generational transfer and the newer generation would rather fund this with some debt as opposed to funding it all through their own pocket. So, I think we are confident it will get done.

We just think it is taking a little bit of time and if you have ever done work in the Middle East during the summer, most of the people of the wells leave because it's so hot so that is also my guess slowed down as financing but they have been very accommodating and wanting to continue the MOU.

They are happy with the work we are doing on phase 1, it is a subcontract and they actually insisted that the prime contractors was having trouble engage us complete this work. So, we feel very good that we will actually get the work, it is just we have to go through the process and wait and be patient..

And then lastly on a line of credit, are you having constructed dialog on that to reaffirm?.

I've got it thank you, on the replacement revolver, in a current revolver is a expires in June 2017 at this point we have signed a term sheet we have also it is led by member of current firm group, and they have been here and doing field appraisals, we are currently working on a turn of the credit facility itself so, yes moving along very spend a lot of time on it right now.

Yes..

Thank you. Our next question is a follow-up from the line of Jon Tanwanteng with CJS Securities. You're line is open again..

Hey guy it is Pete just a quick question for you on the E&I business, last quarter on the fall it seemed more like a you were playing defense when just trying to get your house in order that not bidding on some of the bigger projects, have we seen a change there and any more colour you could give us on what Chris has done to turn things around?.

Yes, I will start and Mark you can just fill in any hole. Clearly, there is a lot of opportunity that we see the bidding market is actually very promising.

There were couple of things that Chris had to do which he did do, system, you know misses on estimates, misses on execution Chris has turned over a significant amount of people put in a significant amount of control on the profits that is taking an opportunity and turning it into turning it into a bid and I think in doing so we got a little bit risk adverse and wanting to make sure we made no mistake.

Now that we gotten away from our old bidding processes and in the pipeline now, with controls in place, we are we feel much more comfortable we brought in a couple of very experienced salespeople, we traded out a couple of them and we're making some good progress with clients that we want to have, some utilities that we are getting invited to bid.

Incrementally, we also have done a nice job with the safety statistics that have driven it down so, we feel that we will start picking up backlog and we do see a lot of bidding activities but as Mark said, we have a big project we have to replace the holes in mine project in ‘17 we have consistent good work coming out of the Florida marketplace there are some big project coming out to bid with the one historically it was about 50% of them, geotechnical levee work the office we stood up in Atlanta for the south-east is really hitting stride this year and have an excellent opportunity and you know long-term I think when we talked earlier about the cyclicality of the business we really do hope that the office down there and the office in Texas will help us get more year-round around work and smooth out some of the and we stood up in office with an excellent salesperson in the north-east which has probably more work than most areas of the country and he is 25 year sales veteran in this marketplace he knows everybody and we got a significant amount of bidding activity to him.

So, the long answer feed is we've tightened our control significantly but the pipeline does look good for bidding activity..

Great thanks, and last one from me I know quarter over quarter you really can't read anything into it but as far as the win rate, down significantly from the historical average dredging, anything we can look into for that to see a change of I know you mentioned your busy so not as active on the bidding just a little more colour on that if you could?.

[indiscernible] quarter over quarter it is so hard, you are going to see in the third and fourth quarter and in the first quarter next year some of those really big projects coming out of Sandy some of these very large projects some of the big coastal restoration in the Gulf and if you look at our win rate on those over the last three years 50% or more I think the Jacksonville project is another one that probably has hard rock and some opportunity for differentiate ourselves with our big cutters.

So, honestly on our domestic dredging side we have very little worry that we will be in the right number and continue to win our share of those projects..

Thank you. Our next question comes from the line of [indiscernible]. Your line is open ..

I think this is the first time I have seen colour on the August or margins of Magnus, you give as I guess what the revenue was for Magnus this quarter and maybe on a trailing 12 month basis?.

Mark, can you jump in on that?.

We generally, I don't think I give margin on madness but okay, yes,.

You guys broken out in that PR, I think it was 17% gross margin..

Elevated gross margin, okay, yes, the Magnus piece of this business is about hundred $10 million from a revenue standpoint..

I guess the sale of the services side of Terra, does that affect the Terra JV?.

No, no..

You guys had any progress on I guess recovering any of the net advantage advances for that JV?.

No, we are still in discussions with them no change it. Operator [Operator Instructions] Our next question is a follow-up from the line of Matt Duncan, Stephens Inc. You're line is open again..

Just maybe a one follow-up up on the strategic review I don't know if you're going to be able to answer or not.

What type of value what the board have wanted to see different decision?.

I really don't want to get into the details but I think it is safe to say that the board has a tremendous amount of confidence in investment we've made over the last three years in the ATB and I think we said I think I said we had over hundred and $2 million in into it we think that the sale of services business and hard work that Chris and his team have done.

We think 17 is going to look good for the E&I business and return to profitability from the losses and you know they need to see some of them included in the price. I look at where we trade versus E&I companies and we trade at in a band pretty similar but no one has that type of investments certainly in our ATB.

And the board we are pretty strong about if we weren't going to see value for the hard work we all put into that and that and investment we put into that it just wouldn't be wouldn't make sense for us sell it. And so, you can kind of the basic math on that..

Fair enough of Jon, so moving on international you know the $55 million of work that you're working on so far providers when that is scheduled to be completed?.

Matt assumed that our schedule says that that's going to be completed on before year-end, January..

So when would you need to win the next the contract, the 150 million when will that be need to be awarded for that to be a smooth transition from one job to the next?.

To be clear we are on site, we are in the same exact area that we are using the same two so, if we have no other logical place to move the equipment to keep it there one of the precious we are using is if we have to demove and remove back in that is certainly cost associated with moving significant pieces of equipment because we actually have that to cut judges and all that support equipment.

In an ideal world, we will write to it you know into January when we complete the work on phase 1 that would be our hope..

And what is your level of confidence John that you will have that job in time smoothly transition to the end of January?.

I wish I can give you been talking about this job for years international and the Middle East goes up and down these people are absolutely real investment family one of the day understand is the engineer understand this it wouldn't surprise me if the post of hundred and 80 million 207 million and whatever the contract is if the break into pieces just to keep us there.

So they may come back and say you're a $40 million fee is why don't we do this one while we can while we move forward that would surprise me as a way to avoid you know them having to eat more cost or something like that..

So what is the right way then for us to think about foreign dredging and annual sales at this point John?.

Mark, any I think you are going to see certainly not the level of that we had at the last couple of years you know I think we demonstrated that by getting rid of the Ream so I think we will run at lower levels for the next few years would be my expectation you know I'm not sure I want to take a number but certainly not at our Apex and you know probably a little bit towards the middle to lower ranked of what we've done in the live last five years or seven years..

Agreed John..

And the last question just annual revenue capacity in the asset that you sold internationally, what was that?.

First of all the vessel has been idle, so really it hasn't been doing any work in 2016 at all..

Did it do anything on Suez?.

No..

just if I'm a remember I think we talked about that we bought these two assets probably ship the moon we bought both of them I want to say in 29 and 2010 so work on some projects in the Middle East than we had an introduced capacity they have never been real drivers of the business for us and I would suggest to you that over the life was assets we haven't had a possible return on them.

So when we as we talked about and as we been doing we can continually look at our fleet we try to get rid of assets but aren't providing us a return and hopefully when we execute well on the ATB we have other opportunities continue to operate a fleet for the next 20 years but these assets hadn't really gain positive performance of the whole time as Mark said the last probably year and have I think it's been idle almost the whole time..

Thank you. And I am showing no further questions at this time I would like to turn the conference over to Mary Morrissey for any closing remarks..

Thanks for the joining us this morning and we look forward to talking to you November..

Ladies and gentlemen thank you for participating in today's conference this does conclude with this program you may all disconnect everyone have a great day..