Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2012 Orion Marine Group Incorporated Earnings Conference Call. My name is Alicia, and I will be your coordinator for today’s call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Chris DeAlmeida, Vice President of Finance and Accounting. Please proceed, sir.

Thanks, Alicia. Good morning. And welcome to the Orion Marine Group fourth quarter and full year 2012 earnings conference call. Joining me today are Mike Pearson, Orion Marine Group’s President and Chief Executive Officer; and Mark Stauffer, our Executive Vice President and Chief Financial Officer. Regarding the format of the call, we’ve allocated about 15 minutes for prepared remarks in which Mike and Mark will highlight our results for the quarter and year, and update our market outlook. We will then open up the call for sell side analyst questions for the remainder of the time. We would ask that you limit your questions to one question and one follow-up for getting back in queue. During the course of this conference call, we will make projections and other forward-looking statements regarding among other things are end markets, revenues, gross profits, gross margin, EBITDA, EBITDA margin, backlog, projects and negotiation of pending award, as well as our estimates and assumptions regarding our future growth, EBITDA, EBITDA margins, gross margins, administrative expenses and capital expenditures. These statements are predictions that are subject to risks and uncertainties, including those describes in our 10-K for 2011, that may cause actual results to differ materially from those statements. Moreover, past performance is not necessarily an indicator of future results. By providing this information, we undertake no obligation to update or revise any projections or forward-looking statements, whether results of new developments or otherwise. Also, please note that EBITDA and EBITDA margin are non-GAAP financial measures under rules of the Securities Exchange Commission, including Regulation G. Please refer to the reconciliation accompanying this earnings call available on our website at www.orionmarinegroup.com for comments on the use of non-GAAP financial measures, as well as applicable reconciliations to the most comparable GAAP measures. Also, please refer to our earnings release this morning -- issued this morning, February 28, 2013, and our quarterly and annual filings with the SEC, which are available on our website for additional discussions of risk factors that could cause actual results to differ materially from our current expectations. Before I turn the call over to Mike, I want to note that we do expect to file our Form -- our 2012 Form 10-K with the SEC by the end of next week. With that, I’ll turn the call over to Mike Pearson, President and CEO. Mike?

Thank you, Chris, and thanks for joining us this morning. I’d like take a moment to thank our nearly 1,200 co-workers for their hard work and dedication. It’s really because of their skills and perseverance that we’ve been able to find success in these challenging market conditions. 2012 was a validation of our ability to adapt our operating strategy to the prevailing market condition. And we’re pleased to see the results of the efforts of the entire Marine -- Orion Marine group come to fruition in the fourth quarter. Now turning to our results and market outlook, while several challenging factors continued during 2012, our bidding strategy was successful in growing our backlog and increase in equipment utilization. This strategy produced continued gross margin and top line improvement throughout the year. And it delivered positive quarterly net income for the first time since the beginning of 2011. As we’ve demonstrated through our results this year, we’re headed in the right direction. We remained focused on executing our strategy by maintaining a high level of backlog through bidding effectively and focusing on opportunities that best suite our specialized marine construction and dredging asset. As we look ahead, we remain encouraged with our long-term end market driver. There is no doubt, we still facing challenges particularly with the dredge utilization. However, we believe we’ve demonstrated our ability to operate profitably even in these challenging market conditions. It remains a strong bid market in front of us and we’re confident in our long-term outlook. Today we’re tracking over $6.5 billion worth of bid opportunities over the next few years. About 15% of that is federal projects, 19% of state, 30% of local and 36% are in the private sector. Currently, we have approximately $250 million worth of bids outstanding and that includes approximately…

Thanks, Mike, and thanks for joining us today. For the full year 2012, we reported a net loss of $11.9 million or $0.44 per diluted share, with most of this loss occurring in the first half of the year. These results compared with the net loss of $13.1 million or $0.49 per diluted share in the prior year period. Full year contract revenues increased 12% year-over-year to $292 million, of which 49% was generated from federal, state and local government agencies, and 51% from the private sector, which compares to 76% from federal, state and local government agencies, and 24% from the private sector in the prior year period. For the fourth quarter of 2012, we reported net income of $1.5 million or $0.05 per diluted share, which compares with a net loss of $5.2 million, or $0.19 per diluted share in the prior year period. During the fourth quarter, we made a strategic decision not to reinvest in some underperforming assets. As a result, we took a $1.8 million charge associated with the write-down of these assets. The disposition of these assets will not affect our ability to continue to grow revenue and we believe the remainder of our fleet has a fair market value that is at or above the current book value. Fourth quarter contract revenues increased 78% year-over-year to $98.6 million, of which 30% was generated from federal, state and local government agencies, and 70% from the private sector, which compares to 64% from federal, state and local government agencies, and 36% from the private sector in the prior year period. During the full year 2012, we bid on approximately $1.5 billion worth of opportunities and we’re successful on approximately $312 million. This resulted in a 21% win rate for the full year with the book-to-bill…

Thank you, Mark and Mike. We would now like to open up the call for questions. Alicia, would you please review the procedures for placing a questions?

[Operator Instructions] Your first question comes from the line of Rich Wesolowski with Sidoti & Company.

You bid on 0.5 billion of projects in 2012, would you expect that figure to be markedly higher or lower ‘13?

The market will be higher than the prior year and we don’t always bid on everything that’s out there. I think last year we had close to a couple of $1 billion and we ended up bidding on 1.5 of that. But there is an increase in the market and our data base for this year.

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

Well, that’s our ultimate objective is to get back to historical margins. It’s all the matter of timing and right now, we’re comfortable where we’re at. We’d like to see these margins come up and we have opportunities during the year to selectively make that happen. And we just have to manage the process, but it’s very important for us to keep our utilization up.

Yes, Rich. I think short-term, near-term, it’s still kind of a volume equation for us. Certainly, our ultimate goal and our belief of long-term is that we will get back to pricing levels that we historically enjoyed. Quite honestly, we kind of have a feeling that pricing should be better today than it is just given the kind of the activity and the volume. But there is still a lot of uncertainty out there in the economy, and I think we probably have to see some of that improve overtime then we can start seeing some pricing improvement.

And, Rich, to that also, we are starting to see pockets of improvement in different places, not consistent across the board. But at the same time, we are starting to see some pockets of pricing improvement.

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

Well, the bigger projects that we’ve been going forward haven’t had an enormous volume of bidder showing up. There are still the million dollars in last projects and you can get 10-bidder ship up pretty routinely now. But I don’t feel that there has been any addition to the competitors that are pursuing the work. We’ve actually seen a few of them drop out with underpricing and binding constraints, which we fully expected, when we saw that happened a couple years ago but I think we are content with, it’s very good.

This part is kind of like what, Chris said a minute ago. In terms of there is pockets of pricing improvements that kind of goes hand-in-hand to the heart of your question is, there is areas where we are -- we continue to see more bidders than others in other areas where we’re seeing a reduction in the number of bidders for certain projects. So again, it’s kind of -- it’s a little uneven. But again, I think we’ve said in the past couple of calls, we’re seeing a lot less irrational pricing. And I guess we would term it as we’re kind of seeing the normal amount of irrationality out there. And so again, we’re encouraged and we think it’s kind of moving in the right direction.

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

And then lastly, if you just update us on your headcount?

We’re just about 1,200 employees now and continuing to hire.

Your next question comes from the line of Trey Grooms with Stephens.

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

Yes. Well, I guess we don’t give guidance. But we do, as we said in our remarks I mean, as we come into the first half of 2013, certainly there is just the normal seasonality as we’ve talked about in the past. We tend to build as the year progresses. Certainly, this year the backlog is up over where it was 12 months ago coming into 2012. But as we head into the first half, again, we just remind you about that normal seasonality in terms of how our quarters kind of build. But just a couple other points, I mean, we do have the uncertainty with the core of engineers. One of the things that occurred in Q4, which was beneficial to us is we did have an uptick in private sector work that involved our dredging services. So we had the benefit of that. A lot of that work has completed as we finished Q4. We certainly have further prospects upcoming, but based on where the core is and some of the private sector work coming to an end. We do expect gaps in the first, particularly in the first quarter, but it will lead to some idle equipment in the dredging fleet if for periods. So, again, that’s -- hence, our comments on the first half of 2013.

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

I think that’s a reasonable assumption. Again, we do expect kind of the normal seasonal pullback and then the other issues that I just talked about are going to impact. But I think that’s a fair statement. I mean, we would expect one half ‘13 to be up over last year.

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

We’ve seen both improvements in marine construction and dredging. And one of the things that we’re pleased with is it kind of varies region by region. But as I said, we’ve had some turnkey opportunities. We’ve done some work associated with deepwater developments. We do have facilities that support that needed to infrastructure work done, which we’re capable of doing, both construction and dredging. And what’s most important to us is we think the bid margin pricing is kind of stabilized now. We’re not seeing anything continuing to drive down if anything has been inching back up. So, we’re happy with that and we’re being a little bit more selective too in what we go for. As I mentioned, we did not bid on everything last year that there was out there and we’re trying to get the jobs that give us biggest bang for the buck.

And, Trey, I guess the caution to that on the projects that involved dredging services there is that -- with uncertainty and choppiness if you will in core lettings, that can lead quickly to just sort of a pricing fluctuation, again, not necessarily irrational but just pricing fluctuations because people get concerned about their utilization and things like that with their dredging assets.

And, Mike -- and this is my last question. I got to just see, what do you think on the -- just your gut on what happens with the core of engineers with the continuing resolution expiring and the hopes for the budget being passed and that’s all I have got? Thanks.

Well, what we are thinking about the core is there are several works program as they again shut it down. It has to continue in both and dredge in particular is a perpetual business. You have to keep these channels open and the core is just been unable to meet their mission goals, to keep channels loud and deep enough and it’s caused all kinds of problem with shipping throughout the country, all the way up into the upper Mississippi. I’m sure we’ve all read the articles about the difficulties with having to short load and transport and so forth. But in the nutshell, we don’t really know yet what the sequestration means. We are watching both the core end of the navy to see, what’s going to fall out of the seas, just a lot of uncertainty. And it is hard for us to really comment on it until they come out and say, here is what we’re going to do. I mean, we know what the full year is and for 2013, we’ve seen about $57 million awarded since this fiscal year, since 1st of October to end of February. And that compares about $51 million, same time period last year. And we were successful on $18 million of that $57 million. So we had a 32% win rate on the work that was out there. But it’s just going to be hard for us to give you an answer on that until we get some clarity from Congress. I mean, there’s no doubt that when there’s inconsistency in core letting, that’s when they have these short-term resolutions creates that environment. If they get a long-term resolution, everybody’s got good visibility. We know what’s going to get spent and you can manage your fleet good and so it’s just a big question mark right now.

Yes. And I think as everybody knows, what kind of the 3 short-term issues that we’ll dealing within the first half is sequestration, the CR, the continue resolution ends up at the end of March and then of course the debt ceiling, which I think the latest estimates on that or that’s a problem in May. So we’ve sort to have those 3 things that are causing uncertainty. We’ll have to see how it plays out over the next month or month or 2 here.

Your next question comes from the line of Jon Tanwanteng with CJS Securities.

I know you’re expecting some seasonal headwinds going into Q1 and maybe Q2. But Q4 is usually flat to down for you guys as well and you really blew it out. In mean, in other words 2 thirds of ways to Q1, does it feel like better or worse than the normal seasonality for you guys?

No. It feels like general and normal seasonality. So we expect sequentially from the fourth quarter to see some level of a pull back here. And again, as the comments we’ve made before we saw the uncertainty with the Corps of Engineers. Some of the private sector work that involved some of the drudges has ended. So we’ve got just some gaps here between jobs, so we will have some auto dredging equipment again.

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

We’ll have to see the full impact yet. We still have some gaps there and some places to fill in. And of course we normally start to see a little bit of pick up as we get a little bit of day light hours. We’ll burn a little more cost, but we kind of have to see how that picks up.

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

I think it was really a function of couple of things. I mean it was a function of the volume, equipment utilization across the board. Certainly, the pick up in private sector work, which helped out the equipment utilization of the dredges contributed to that. So again, I think overall we are kind pleased with where we are in terms of stabilization in the pricing room as Mike talked about a minute ago. Again, we see pockets of improvement there but of course the issue is, as we come into the first half of the year is, the gaps and sort of the uncertainty with the federal side of things. But overall, we are pleased with the backlog coming into the year, the opportunities we see in front of us and the stabilization of the pricing again the focus on is maintaining that backlog and driving the volume.

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

It’s tough to tell and again I think it’s just a -- that’s kind of why we had our comments regarding the uncertainty with respect to the feature asking about. We do have -- we did pick up some dredging work on at the federal level as Mike touched on and we commented on in our update -- investor update in January. But how much -- how the process goes in the next -- at the federal level with the budgets and the sequestration and everything, I think that’s going to tell the tale as to how much work comes out as choppy. Do they execute on their full year plan for the back half of the government fiscal year which of course is going to have an impact on Q2.

Got it. And then one quick question, if I could, your tax rate was about 6%?

Yes. We had our final reconciliation for the year and sort of true up occurred in Q4. And then of course that was sort of impacted for 2012 with the whole NOL carry forwards in the date impacts. So that got pretty interesting in truing that up and of course that was trued up in Q4. So that impacted the quarterly tax rate. I think for the full year we had an effective tax rate of around 28% or so. We would expect that to kind of be back to a more normalize 35% to 37% rate for 2013.

Your next question comes from the line of Alex Rygiel with FBR.

I just noticed that this was actually your second highest quarterly revenue of all time. So congrats on that. Very nice.

Thanks.

Couple of random questions. First, the Army Corps Maytag that you won earlier in the year, the hulling license for the $500 million opportunity. Has anything been awarded under that umbrella yet?

Yes. The sea project we were successful in getting. So, that’s has been awarded.

Was any of -- so, that’s part of the $18 million that you’ve gotten year-to-date?

Yes.

And is the Maytag, how should we think about that as it relates to sequestration? I mean is it at risk or could money move from sort of one pocket to the other inside the Army Corp?

Hey boy, if you get the answer to that, please let me know. Seriously, we’re just not sure. I mean we know what the core plan is for 2013. We know what their plan is 2014. The question is as the funding flow, we’re going to allow them if our projects liquidates to where they plan. We just can’t tell you until we get congress to settle.

Well, and you know because there is a whole lot of discussion out there, Alex, as I’m sure you’re aware of authority, granting authority under -- changing the authority, so that government agencies do have the ability to move money around. So, it’s hard to tell. I mean I guess the short answer is I guess everything is at risk. But I think longer term, I mean, it’s -- certainly they have that ability regardless of whether it’s $500 million or something less than that, pretty work on that over the next period of time here.

Okay. And Mike, couple of years back, you are pretty confident when there is good visibility to be able to offer up guidance. Where do we stand on sort of your comfort level with visibility, obviously, we are not there yet or you would have may be given us some guidance here? But are we getting closer, let's just kind of fast forward past, CR and CS sequestration. Do you think you might have enough visibility to come in the summer time to feel comfortable about providing some guidance?

I think it’s a matter of how far that can we see with comps with the federal funding. On the private sector side, we’ve got tremendous visibility on projects up for the next 3 to 5 years. And we are beginning to bid work for 2014, 2015 period. And I feel extremely good about the marine construction environment right now and that’s about 3/4 of our business. But the federal, they are just going to have to either have a long-term continued resolution or a plan that goes long term for us to be able to state with confidence that we can give guidance like that. In fact, it’s hard for me to predict the time on it.

Yes. And Alex, I mean, it’s clearly that something that we consider but whether or not we just have to stay tuned on how we view guidance.

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

Actually it’s related. We had some smaller dredging assets and some modular barges also that those were all we referred to that we -- it shows not to reinvest in. And the 2 are related, Alex. The loss on the P&L on the sale is related to the asset held for sale on the balance sheet.

Your next question comes from the line of John Rogers with D.A. Davidson.

Couple of things, I think Mark, you gave us the backlog by customer. Do you have fourth quarter revenue by customer?

Fourth quarter revenue by customer was 22% was federal, 12% was state, 15% -- well, hang on, that’s for full year 2012. Hang on one second. 70% was the private sector, about 10% was local, 6% was state and 14% was federal. That’s for the quarter.

Okay. And also I was curious about the private sector, was there one big project in there during the quarter?

No. There was a series, John. Partially as you remember when we go back last year, we had a lot of private sector work in backlog that was going to get kicked off in the second half of the year. And so we were liquidating on that. We also saw a number of projects in the private sector that involve dredging services, kind of maintenance type dredging and things of that nature in the private sector. So that added to it. And then of course, it’s a function -- it’s a function of 2 things. As Mike said, we’re seeing a lot of opportunities in the private sector. So there is strength in terms of the opportunities. But the other piece of it is, it’s -- what do we go after and what are we successful in getting. So those 2 things contributed to the uptick in private sector rise.

Okay. And any guidance or comment you can give us on the utilization rates for dredges for the percentages of revenue for the quarter?

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

Okay. Okay. So, I’m just trying to understand one, the margin local [indiscernible].

Sure.

Okay. And then I guess in terms of the private sector market if you look at, I’m seeing more maybe into what you’re bidding in 2014. How much of it is related to just industrial type work as opposed to...

It’s kind of mix. I mean, the oil and gas sector has got a lot of drive with import export product. We’re seeing co-handling facilities coming down here because they don’t want to go into Pacific Northwest. We are seeing deep water. Off shore construction has land-based infrastructure that has to be maintain their facilities, which bulkheads, dredging deep water. I mean, there is -- these big heavy deep water submersible that have to be lowered and submerged in order to put top slides on them. And we are one of the few contractors that can provide the services to enable them to balance those big POP [ph] type structures in place. We do the dredging in preparation for that. And we have built the bulkhead for pipes pooling bases and things like that. So you get -- in offshore industry, you get the oil and gas loading terminals. You've got bulk cargo taken place. Wind power components coming through and just general port expansion. We’re just seeing not just with the big ports but some of the smaller ports as well. Everybody is…

And just as -- I mean not ready to call this one a trend or anything like that for certain. But we’ve also seen some Marina opportunities come back and it’s been quite some time since we -- since it’s smaller. And again it’s not a trend but it just as encouraging to see that again. Obviously, that’s private sector type opportunity as well.

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

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

I think we’ve got the right assets mix. Some of our big CapEx expenditure programs are kind of behind us now is into a more of a normal CapEx expenditure programs, which would help us generate more net cash flow. I just feel real good about the mix and equip, maintain the people we’ve got in place. We’re ready for an uptick.

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

I tell you -- I think this -- this acquisition we just did up in Alaska is really going to be very good for us. We bought the company that had about 10 million of backlog, we will be building on that. We just identified a lot of opportunities for marine constructions up in Alaska. And I think we will be focused on trying to grow that group. And I think that could be really good for us as an adder. And we’re always looking at acquisition, even when times are tough. Sometimes that’s the best time to look, but we will be opportunistic. But we’re be in practical in managing our money but I’m sure there will be some more opportunities down the road.

[Operator Instructions] And your question comes from the line of Jack Kasprzak of BB&T.

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

No. That’s kind of -- that’s a function of the couple of different things. I mean, clearly as you know we’ve been working on cost containment throughout the year. We talked a lot about that in previous calls but also we had decrease in professional fees, just related to the function of how those flow through in the timing and things like that. We would expect there for ‘13, we would expect there to be an increase in G&A, not necessarily a function of headcount per se, but just normal things that creep up plus just wage pressure that we’re seeing as a result of a lot of activity out in the market place and things like that. So we would expect there to be an uptick in SG&A for ‘13.

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

Thanks, Alicia. On behalf of our Orion Marine Group, we’d like to thank you for taking the time and joining us this morning. And we look forward to speaking with you in the future. Also if you have any follow-up questions, please feel free to give me a call. Thanks.

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