Earnings Call Transcript - GLDD Q3 2021

Operator, Operator

Good day everyone and thank you for standing by. Welcome to the Third Quarter of 2021 Great Lakes Dredge & Dock Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, the Director of Investor Relations Ms. Tina Baginskis. Please go ahead.

Tina Baginskis, Director of Investor Relations

Thank you. Good morning and welcome to our quarterly conference call. Joining me on the call this morning is our President and Chief Executive Officer, Lasse Petterson; and our Chief Financial Officer, Scott Kornblau. Lasse will provide an update on the events of the quarter, and then Scott will continue with an update on our financial results for the quarter. Lasse will conclude with an update on the outlook for the business and market. 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 2020 Form 10-K and subsequent filings. During this call, we also will refer to certain non-GAAP financial measures, including adjusted EBITDA from continuing operations, which are explained in the net income to adjusted EBITDA from continuing operations reconciliation attached to our earnings release and posted on our Investor Relations website, along with certain other operating data. With that, I will turn the call over to Lasse.

Lasse Petterson, President and CEO

Thank you, Tina. Before we start on the results of the quarter, I would like to introduce Scott Kornblau, who has joined Great Lakes as our Chief Financial Officer. Scott will oversee our financial operations, including maintaining the financial integrity of our strategic plan and working closely with me as a member of the executive leadership team. He comes to us with nearly 25 years of financial industry experience and was most recently the CFO at Diamond Offshore Drilling. Now I will discuss the quarter and then turn it over to Scott for an update on financial results. We ended the third quarter with improved results and a solid backlog. For the first half of 2021, operations saw substantial negative impacts from the COVID-19 pandemic. Our priority has been and always will be to ensure the safety and health of all our people. And we believe that in this current situation, vaccination is an important tool in achieving this goal. As vaccines became widely available in the second quarter, we set a target to have all parts of our organization vaccinated, and we have now reached our target. Although our vaccination efforts were successful, we did experience some lingering COVID-19-related costs in the third quarter. Direct COVID-19 costs for at-home and on-site testing and quarantining of crews were $4.3 million in the first quarter, $3 million in the second quarter, and an additional $2.1 million in the third quarter for a total of $9.4 million year-to-date. Indirect costs are not easily quantified; however, we saw a decrease in our realized project margins, which we attribute largely to inefficiencies caused by COVID-19. Today, our safety protocols and vaccination efforts allow project management to increase the supervision and inspection frequency on projects and vessels. We have seen performance improving, and we are confident that our vaccine efforts will ensure reduced COVID-19-related impacts to operations going forward. In addition to the COVID-19 impact, we experienced project delays due to Hurricane Ida. Several of our projects in the Gulf and on the East Coast were impacted, and we experienced delays returning to work due to damage and debris in the ports. One of our vessels, the Terrapin Island, was damaged in the storm, which resulted in a six-week unplanned write-off. All affected vessels are back at work in the fourth quarter. We ended the quarter with net income of $13.8 million and adjusted EBITDA of $32.2 million. Given project activity, in which we are currently engaged, coupled with our backlog, new project awards, COVID-19 mitigation efforts, and fewer vessels in dry dock for the remainder of the year, we expect improved results in the fourth quarter of 2021. Unfortunately, even with improving results, we do not expect to achieve our original expectations for 2021. I will now turn the call over to Scott to further discuss the results of the quarter, and then I will provide some further commentary on the market.

Scott Kornblau, CFO

Thanks, Lasse, and good morning, everyone. Let me start by giving some color on our third-quarter results. For the third quarter of 2021, revenues were $168.6 million, net income was $13.8 million, and adjusted EBITDA was $32.2 million. Contract revenues for the third quarter of 2021 represented a $7.2 million or 4.1% decrease compared to the third quarter of 2020. The decrease was caused by lower coastal protection and foreign revenue and the previously mentioned delays due to Hurricane Ida, partially offset by higher domestic capital, maintenance, and Rivers and Lakes revenue. Despite the quarter-over-quarter decrease in revenues, the current quarter gross profit was relatively flat at $36.3 million compared to $36.4 million in the third quarter of 2020 as we achieved a quarter-over-quarter decrease in contract expenses. Gross profit margin this quarter was 21.5% compared to 20.7% in the prior-year quarter. During the current quarter, gross profit was negatively affected by direct COVID-19 costs of $2.1 million in addition to related productivity impacts and delays that further affected several projects. During the third quarter of 2021, we had the Dredge 53, the Alaska, and the Terrapin Island in dry dock. The Alaska returned to work in the third quarter, the Terrapin Island returned to work earlier in the fourth quarter, and the Dredge 53 is preparing to start operations in Mobile, Alabama. Operating income for the current quarter was $21.4 million, which is a decrease of $1.8 million over the prior-year quarter. The decrease is due, in large part, to a non-repeating $1.7 million loss of use claim credit received last year. G&A expense was up slightly from $14.9 million in the third quarter of 2020 to $15.2 million in the current quarter, primarily due to the engagement of the Boston Consulting Group discussed on last quarter’s call. Net interest expense for the third quarter of 2021 was $4.2 million, down from $6.7 million in the third quarter of 2020, primarily due to a lower interest rate on the senior notes which were refinanced earlier this year. Income tax expense for the third quarter of 2021 was $3.2 million compared to $4.1 million for the same quarter in 2020, and net income for the third quarter of 2021 was $13.8 million, up from $12.5 million in the prior-year quarter. Finally, adjusted EBITDA of $32.2 million for the third quarter of 2021 was flat compared to the prior-year third quarter. Looking ahead to the fourth quarter, we expect revenues to be in the range of $225 million to $235 million as we are scheduled to have fewer vessels in dry dock compared to the third quarter. We expect G&A to be up a couple of million dollars compared to the third quarter based on the timing of certain annual expenses, and we expect gross margin and interest expense to be in line with the third quarter. Next, let me turn to our balance sheet, where at September 30, 2021, we had $173.8 million in cash and continue to have no cash draws on our revolver. Capital expenditures for the third quarter of 2021 were $21.1 million, of which $8.3 million related to the construction of the new hopper dredge, $7.4 million was for maintenance CapEx, $2.7 million and $2.1 million for the builds of the new scows and new Multi Cats vessels, respectively, and $600,000 related to the design of the rock installation vessel. With that, I will turn the call back over to Lasse for his remarks on the outlook moving forward.

Lasse Petterson, President and CEO

As we face the challenges and impacts of COVID-19, the U.S. Army Corps of Engineers has continued to follow the big schedule and prioritize all types of dredging including port deepening, port maintenance and expansion, and coastal protection and restoration projects. In 2020, the domestic bid market reached $1.8 billion. And in 2021, we see that as on track to be just as strong. We expect that in 2022, we will see bids from multiple product phases of port deepenings in Norfolk, Freeport, Mobile, Sabine, and additional phases of the Houston Ship Channel that will continue for the next several years. These port deepening projects are ideally suited for us as Great Lakes, and we can excel with our technical expertise, experience, safety performance, and a large diverse fleet. We continue to see support for much-needed infrastructure projects, including dredging in the 2022 budget that was proposed by the House and Senate. It is slated to be approximately $8.6 billion, an 11% increase over the prior year’s levels. In the bill, the Army Corps, through the Harbor Maintenance Trust Fund, would receive $2.05 billion, which is an increase of $370 million over the 2021 budget of operations from the fund. In addition, the U.S. Senate passed the $1.2 trillion infrastructure bill, where the Corps will be granted an additional $11.6 billion in funding to improve the nation’s resilience to the effects of climate change, including projects for beach and wetlands restoration, flood control, and waterways dredging. With the continuing resolution approved in September, the Army Corps was given an additional $5 billion for disaster relief, in which we anticipate there will be about $1 billion that will go to coastal restoration and maintenance dredging. During the third quarter, we were awarded $300 million in new work, resulting in a year-to-date 37.1% bid market share, bringing our third-quarter backlog to $598 million. In addition to this backlog of awarded projects, we ended the quarter with $534 million in low bids and options pending award. Included in our low bids pending are two LNG projects that are still pending our final investment decision and notice to proceed by the client. We are optimistic that one, if not both, will receive an FID in 2022. Post-quarter-end, we were awarded the Oak Island Beach Renourishment Project for $17.1 million, the South Atlantic Regional Harbor Dredging Project for $25.8 million. We have added an additional $107 million to low bids pending award, which includes Phase I of the Houston Project 11 ship channel widening and deepening, as announced by the port of Houston. To support the strong domestic market in 2020, we announced an award to Conrad Shipyard in Louisiana to build a new midsized hopper dredge with expected delivery in the first quarter of 2023. The new hopper dredge build is on budget and on schedule. In addition to this new build, we continue to upgrade our existing U.S. fleet with new equipment and technologies to increase productivity, and we believe the fleet is well equipped to meet current demand and future growth in the market. In support of our ESG efforts, we are committed to ensuring that all projects are executed with robust environmental and safety standards and that we leave the areas that we touch in an improved state as a result of the work that we perform. To support this philosophy, we continue to build relationships with various non-government organizations and conservation groups that will assist in improving our environmental impact. For example, we continue to partner with the Jekyll Island Turtle Hospital, whose mission is to save turtles injured by man or machine, and we have partnered with the Florida Aquarium, which has a unique approach to rehabilitation of coral reefs. Now turning to offshore wind power generation. This new market will provide Great Lakes with a strong opportunity for growth. The Biden administration continues to support offshore wind generation as a valuable source of renewable energy. In March, the White House announced new initiatives that will advance the administration’s goal to expand the nation’s offshore wind energy capacity in the coming decade by opening new areas for development, improving environmental permitting, and increasing public financing for projects. The Biden administration’s 30-gigawatt target for offshore wind by 2030 confirms our plans to enter this market by building the first U.S.-flagged Jones Act compliant inclined four-pipe vessel for subsea rock installation for the wind turbine foundations. We anticipate signing a contract with a builder in the fourth quarter of 2021, with expected delivery of the vessel in the second half of 2024. In parallel, we are bidding for a multitude of offshore wind farm projects with installations planned for late 2024 and beyond. Major wind farm developers like Equinor, Dominion, Orsted, and Alan Grid have already issued RFQs this year, and they are in the process of selecting suppliers for the wind farm developments off the coast of New York, Virginia, Massachusetts, and Rhode Island. Additionally, in June 2021, BOEM issued a proposed sale notice for the New York Bight area with potential for an additional 9.8 gigawatts of offshore wind power generation for New York. As our offshore wind industry is developing here in the U.S., the global offshore wind markets are booming with more than 200 gigawatts of offshore wind duration capacity expected to be installed globally in the next ten years. In conclusion, we remain confident that our operational initiatives will see us through the short-term COVID-19 challenges for this year and will assist in improving results and product performance. Great Lakes continues to focus on strong project execution and a safe working environment for our crews and employees, resulting in positive returns to our shareholders. We are optimistic that domestic market demand will remain strong in the coming years and the ongoing developments in U.S. offshore wind generation will provide an avenue for growth for our company. Now with that, I will turn the call over to questions.

Operator, Operator

Thank you, Lasse. Our first question is coming from Adam Thalhimer of Thompson Davis. Your line is open. Please go ahead.

Adam Thalhimer, Analyst

Good morning guys, welcome to the call, Scott.

Scott Kornblau, CFO

Adam, thank you, good morning.

Adam Thalhimer, Analyst

So thanks for all the details on Q4, big revenue. I was just curious on the gross margin front if there was a little conservatism baked in there being flat with Q3?

Scott Kornblau, CFO

Yes, I mean, we do have less drydocking during the quarter. I wouldn’t say conservatism right now. When we looked forward, this was always the plan. I think we announced in the last couple of calls that the second half should look better than the first. I don’t think we gave much guidance, Q3 versus Q4, but this is aligned with our expectation that Q4 would be chunkier on the revenue side compared to Q3. But it should be in that range if you give a point or so either side on the margin. So I wouldn’t conclude that there is conservatism baked in, I think we will be in that range.

Adam Thalhimer, Analyst

And then just wanted to ask about high level waiver and inflation, just in general, kind of how that, how you see that impacting the business in Q4, and then in next year as well?

Lasse Petterson, President and CEO

On the labor supply, what we do see in the market is very tight markets. I think there are some lingering effects of COVID, which is reducing the number of applicants that we have to our new projects. So when we mobilize, we do see some impact in a tight labor market. It is fair to expect there will be some inflation on labor rates going forward.

Adam Thalhimer, Analyst

What about fuel and so how are you dealing with that?

Lasse Petterson, President and CEO

Well, we are hedging fuel consumption. So we include that in our new projects.

Adam Thalhimer, Analyst

And then on the rock fall vessel congrats on moving forward on that. How should we think about CapEx next year?

Scott Kornblau, CFO

Yes. So we are still in negotiations right now. But, you know, I think if we have said in the past that the vessel should be right around $200 million. We will have some critical equipment that is outside of the scope of the yard that we will take on, and probably in the range of $20 million to $25 million. Upon signing with the shipyard, we will put a payment and if that happens this year, you could expect to see about a $20 million payment hit this year. The payment schedule, though, is much more back-weighted in 2023 and 2024. So again, I don’t have exact numbers yet for 2022 and we are still going through the negotiations. But I can tell you will be much, much heavier on the second half of the bill than in 2022.

Adam Thalhimer, Analyst

Okay. That is helpful. I will turn it over. Thanks guys.

Operator, Operator

And for our next question coming from Jon Tanwanteng of CJS Securities. Your line is open.

Jon Tanwanteng, Analyst

Hi good morning guys. Thank you for taking my questions. I was wondering if you could talk about your growth expectations or I guess the bid market size for next year, just given what you are seeing right now, number one. And number two, given the size of your backlog, heading into Q4 and obviously you have a lot heading out into Q1. Should we think of the first quarter of next year as comparable in size Q4 or if there is any way else we think about how should we do that?

Lasse Petterson, President and CEO

Yes. We expect a strong bid market also for next year when you see the focus on infrastructure bills going through Congress and the increased funds being made available for the Corps of Engineers. I think it is, we should see a big market that is similar to or better than what we saw in 2021. In addition to that, we do have a fairly full backlog for the fourth quarter and the first quarter next year. So over the next six months, I think we will see very good activities. Still, there are some opportunities for vessels to enter new contracts next year. But for the first quarter, the activity is strong.

Jon Tanwanteng, Analyst

Okay, great. Thank you. And I was wondering to follow-up on the CapEx question. I know you have plans for next year and then for the rock fall vessel as it nears completion. I was wondering if you could talk about the other investment opportunities for new vessels and new equipment and kind of how you expect that to trend over the next three years or so as you spend to take advantage of these big opportunities that are in front of you number one, and number two, relative to the available financing options and then the inflation that is going on out there right now.

Lasse Petterson, President and CEO

I have talked a little bit about it and let’s Scott talk about financing. We have an option to build one more hopper at the Conrad yard; that option will expire next year. So we are evaluating whether we should do a copy of the one that we are building or if there are other types of equipment that will be more needed in the market that we see going forward. So I think it is fair to say that we will either exercise the option or we will come to the market for a new type of dredge fleet.

Scott Kornblau, CFO

Sorry, go ahead. Jon. I was just going to address the financing piece of it. Whether we do a new hopper or not, we still have the remaining payments on the hopper that is being built now and likely on the lock installation vessel as well. As I mentioned, we have $175 million of cash, we have an untapped revolver, and we will have very favorable payment terms on the new vessel. Meaning that there is no rush for us to make a decision with the cash on hand and the cash flow from operations, and timing will be methodical. I know we have already started looking at various options if we want to do something, but we do have the luxury of time to decide what we want to do, if anything around the financing front.

Jon Tanwanteng, Analyst

Okay, great. And I guess that was the option that you have for a second hopper. Is that relatively advantageous in terms of the price you would pay, just given how long ago that option was created and relative to how much field labor costs have gone up since you actually received that option?

Lasse Petterson, President and CEO

Yes, I would say since it is a copy of the first vessel that we are building, you can see advantages in design and also in fabrication where you have efficiencies. You are creating or building copies. So yes, it is a good project for us if we go ahead with it.

Jon Tanwanteng, Analyst

Okay. Got it. I will jump back in queue. Thank you.

Operator, Operator

And for the next question, from DeForest Hinman, Walthausen & Company. Please go ahead.

DeForest Hinman, Analyst

Hi, thank you. A couple of questions on the rock fall vessel and you were just talking about it the other hopper barge. High level, we are looking at steel prices that are at decade level highs, and these projects are built over a number of years. Is there some part of the negotiation that is going to potentially allow us to lower the price for the construction of the vessel if we do see a decrease in steel prices over time?

Lasse Petterson, President and CEO

The answer is yes. We have provisions in the contracts where we are taking part of the risk on those price developments, both upwards and downwards.

DeForest Hinman, Analyst

Okay, that is very helpful. And as it relates to the rock fall vessel, is there any contingency moving forward with this decision tied to the potential for the DOE financing or can we move forward without that financing being available?

Lasse Petterson, President and CEO

No, we obviously need to move forward with the build. We have had some slight delays in development of the discussions with the yards, possibly due to Hurricane Ida. We are moving ahead with the project. I think there is a tremendous market for rock installation in support of the offshore wind generating towers. Starting in 2025, 2026, there will be an undersupply of equipment in the market to supply the developments both in the U.S. and internationally. We believe this is a very good project to move forward into that market, and we are moving as quickly as we can to award with a yard.

Scott Kornblau, CFO

I will add on the DOE financing. Prior to my arrival, the team has had conversations with DOE, and I plan on meeting with them soon as well just to understand what that could look like. I do know that it is not our only option if we decide to move forward. So it is just another tool in the toolbox that we can use if we decide to.

DeForest Hinman, Analyst

Okay, thank you. And then in the past when we were doing the larger projects like Ellis Island, we had some comments in terms of what we call IRR 50 or incremental EBITDA. Are we prepared to discuss what we think the potential return is on this investment for the rock fall vessel?

Lasse Petterson, President and CEO

What we have said earlier on the calls is that we expect the IRR to be in the same range as we get on our dredging equipment. That is where we anticipate this investment to be.

DeForest Hinman, Analyst

Can you just remind us what that number is?

Lasse Petterson, President and CEO

What we have set on the dredging side is that we are looking at high teens. So when it is new capacity that will bring on to the market teens and in the low teens when it is replacing capacity.

DeForest Hinman, Analyst

Okay, thank you. And then just on the, I know you mentioned it briefly, but just any color on the LNG backlog in terms of notices to proceed. We are seeing a really interesting environment. Maybe the world is recognizing some of the colossal energy needs that are out there. Despite the fact we have had some rising natural gas prices in the U.S., there is still very meaningful spreads between the cost of gas in the U.S. and the price of the gas in some of these markets that are importing natural gas. Do you think this is the final push that is needed to get some of these projects to get the notice to proceed out there? I know there might be some speculation on my part asking the question, but any color that you could provide would be very helpful to everybody.

Lasse Petterson, President and CEO

It is interesting to see that we have gas prices in Europe now at $14 and we have it at $4, $5 here in the U.S., so the spread is very interesting. Clearly, if you listen to the news, what is happening around Tellurian moving to the American U.S. Stock Exchange from NASDAQ is talking about putting together a bank consortium for the financing. That is very positive and similarly next decade is also coming up with the news. My anticipation is, I would say you will see one of the projects to be considered and move to FID next year that is our expectation. If so, we anticipate dredging to start late next year or maybe early the following year.

DeForest Hinman, Analyst

Thanks for the color and thanks for taking all my questions.

Operator, Operator

And for the next question coming from Poe Fratt, Noble Capital Markets. Your line is open.

Poe Fratt, Analyst

Great, thank you so much. If we could just stick on backlog for a second, Scott, do you have an aging for the backlog? Well, first of all welcome and then second, do you have an aging for the backlog? What is going to be going off either in the fourth quarter of that backlog, your revenue number is pretty high, and then looking at 2022, if you could give me an idea of the backlog burned.

Scott Kornblau, CFO

Yes, good morning Poe. So Q4, 39% of the backlog is expected to be earned in the quarter. I don’t have the exact breakout quarter-by-quarter for 2022, but we are well covered for Q1, and a good chunk of that does roll into Q2. The first half of next year is pretty much fully covered with some of that rolling into Q3, but there are opportunities for bidding on some projects that we have visibility to right now for the second half of the year.

Poe Fratt, Analyst

Great. And then when you look at the options, thanks for putting in the press release, low bids, pending award, and options. Can you split out those low bids versus the options? I think it was $61 million options in the second quarter. Do you have a number for the third?

Scott Kornblau, CFO

No.

Lasse Petterson, President and CEO

No Poe.

Poe Fratt, Analyst

That is all right. If you could take a stab at looking at 2022, like you did for 2020 fourth quarter. And then, try to give me an idea, do you think you can - 2022 can recover to your original expectations for 2021 or sort of could you sort of frame the first half of 2022 pretty well from a backlog standpoint? But can you frame the full year from a standpoint of maybe revenues and targeted gross margin?

Scott Kornblau, CFO

Yes, so Poe. We are still going through the budget process. So I will give more color on that on the next call. I will make a couple of comments, though, in the meantime. As Lasse mentioned, budget next year is increased, which obviously is a good sign to go along with the strong backlog that we have built into the year. Hopefully, we have seen the worst of the COVID impacts, and it should be minimal, hopefully next year. I will say though, just the way the calendar, the cycle runs 2022 is a heavy dry docking period. That includes the Ellis Island, which will be down for a period of time for dry docking. We may see a slight uptick in G&A as we start gearing up to the wind side of the business. Just kind of some high level comments, but on the next call we'll give a little more color on how we see the year shaping out.

Poe Fratt, Analyst

Great, and Ellis Island, Scott, should do what time frame, sort of middle of the year or?

Scott Kornblau, CFO

Yes, it is probably middle of the year, maybe Q3.

Poe Fratt, Analyst

Okay, maybe Q2 and Q3. And then when you look at the right off the bat, you got dealing with Ida and COVID. Thanks for quantifying the COVID, but can you give us a little more color on the third quarter and the weather impact, whether it is days or any kind of maybe revenue that you might have lost that was pushed out into this fourth quarter, because fourth quarter is going to be a lot stronger. Any kind of color would be helpful, and then I know that you didn’t want to quantify the indirect costs of COVID. But can you - within 100 basis points a margin or can you just sort of try to frame that margin impact from the indirect cost of COVID?

Scott Kornblau, CFO

Let me take the COVID one. You are right. It is not even that we don’t want to quantify it. It is difficult to quantify it, but it is real. We know it is there. I would say that my belief is the indirect is higher than the direct impact. But it is difficult to put an exact number on it.

Poe Fratt, Analyst

Sorry, Scott, the indirect is lower than the direct?

Scott Kornblau, CFO

No, I would say that the indirect impact is higher than the direct impact of the $9.5 million we have seen thus far year-to-date.

Poe Fratt, Analyst

Okay. That is helpful. And then on the weather impact on the third quarter. Any way to frame that from a revenue standpoint?

Lasse Petterson, President and CEO

Yes. Well in broad terms, you could say there was about eight to nine days of the quarter impacted, where revenues were moved from the third quarter to the fourth quarter, and maybe four to five days on three of the hoppers. That also was moved from quarter-to-quarter. As I mentioned in my remarks, we had the Terrapin that got damaged in the storm, which was already at dock and was impacted by another vessel and had to spend six weeks in dry dock for repairs, which part of that was in the third quarter.

Poe Fratt, Analyst

And any way to quantify the revenue impact, Lasse?

Lasse Petterson, President and CEO

Right off the bat. No.

Poe Fratt, Analyst

Okay. And then it looks like your multi CapEx dropped from the second quarter to third quarter. Is that just a roll in the timing there, or can you give us an idea of will that bounce back in the fourth quarter and maybe a fourth quarter CapEx number would be helpful? You gave us sort of frame the 2022 number a little bit, but maybe a CapEx number for the fourth quarter would be helpful.

Scott Kornblau, CFO

Yes, sure. So, we are still on track to have $100 million in full-year CapEx. We were at $65 million year-to-date through September, kind of a quick breakdown on that. We do have a $15 million payment on the new hopper, about $11 million in maintenance CapEx, and the rest $8 million to $9 million or so on the scows and on the multi-cats. Now, I would reiterate what I said before that assumes that does not include anything that we may have for the new rock installation vessel, which upon execution of a shipyard contract will be in the range of about $20 million.

Poe Fratt, Analyst

Yes, understood. And maybe when will the Q be out? Will the Q be out later today or?

Scott Kornblau, CFO

Yes. The plan is to be later today, if not tomorrow.

Poe Fratt, Analyst

Okay. And any big working capital items, it just looks like when you look at the third quarter cash walk. I’m just trying to figure if there is anything else that I’m missing as far as just sort of looking at either working capital items or any other big cash drains that would have impacted the third-quarter cash number?

Scott Kornblau, CFO

No, I mean nothing out of the ordinary. Happy to work with you offline. If you are having problems reconciling to where we ended up, nothing jumps out to me that I would call an anomaly.

Poe Fratt, Analyst

Yes, I just had to get that - it looks like maybe the cash working capital when you was a negative $10 million or so then Scott I was just trying to figure out whether I’m looking at other things, but I will look at the Q. And then Lasse, can use just overall look at the dredging market. Your win rate, it looks like for the quarter went down - not down, but it was in sort of the high-30 level. When you look at the competition out there, can you just give a broad comment about whether you are seeing more competition, less competition, and sort of whether it is having an impact on pricing one way or another?

Lasse Petterson, President and CEO

Yes. Clearly, with a very strong dredging market the last three years, the industry is looking at refreshing the fleet. We do see our competition building new vessels, which is good for the industry because there has been quite a long period of quiet on the new build front. The dredging industry in the U.S. is really taking the challenge from good projects and good budgets to the Corps of Engineers and building to service that market. For us, as you know, we took delivery of Ellis Island, which was or is the largest dry hopper dredge in the U.S. market by a large margin. Since then, we have also taken two vessels back from the Middle East and added to the markets, and we have bought some mechanical dredges from our competition and we are now building a new harbor. We are addressing this increased market as well. The market is strong, and as you can hear and read, there is a huge focus on improving infrastructure in both the Senate and House, which then gives rise to new and improved budgets for the Corps, which is driving this good market. When it comes to competition, it is on projects that is difficult to say in general because every project is special. We have won our fair share of all the large deepening projects, and this is where we can excel with our expertise and with our diverse fleet. Sometimes you will see that smaller local dredging contractors are taking on fairly large projects in monetary terms, but most of that is inshore and fairly easy projects to execute. Once the projects get complex, we can excel with our fleet and expertise. It is a strong market. It is a good market, and both we and the competition are renewing the fleet as exactly needed with the aging fleet that we have in dredging.

Poe Fratt, Analyst

And congratulations on Houston. I’m not sure that that was discussed that much. But can you just talk about when you think that will be finalized and sort of the process that was - my understanding was the RFP process as opposed to an open bid. So can you help me understand, when that is going to get finalized and then potentially does that mean you are in a better position on additional work within project 11?

Lasse Petterson, President and CEO

Yes. As you have seen in the press, the port of Houston has announced that we are the low bidder. The contractor has selected us, and the contract value of $95 million has been announced. We are just discussing some points in the contract or some items in the contract. We are looking forward to a full award shortly. As we are looking forward, the next phase of Houston will come out very shortly for bid, and that is a larger contract. I believe the size is between $200 million and $300 million that has been announced. There is a lot of work coming up in the Houston ship channel, and winning the first phase has clearly positioned us well for the next phase or the next phases. Just to clarify the discussions on the project, one of the first phases is really there were scope options in the days, which are now being clarified with the port and we are looking forward to getting that signed up shortly.

Poe Fratt, Analyst

And just if I could just squeeze one more in on the project, it seemed like in the press release it was highlighted that your environmental footprint or your willingness to look at carbon emissions, I guess from your fleet was an important part of that. Can you talk about that and maybe what potential modifications you might have to make to your fleet, if any?

Lasse Petterson, President and CEO

We are putting scrubbers on the vessels, which are reducing our NOx emissions by 85%. As I alluded to, the U.S. dredging fleet has many new vessels with the top technology on engine. We take the existing equipment and we add the scrubbers, which improves our environmental footprint substantially.

Poe Fratt, Analyst

Thank you so much.

Operator, Operator

And the next question is from Mr. Jon Tanwanteng of CJS Securities. Please ask your question.

Jon Tanwanteng, Analyst

Hi, I just a couple follow-ups from me. One, I was wondering what the actual cost of the drydocking for the Terrapin was in both Q3 and Q4, number one on a CapEx side or an operating side and then two, does on. I think I heard correctly I was struck by another vessel, so I’m wondering if there is any insurance coverage either from their liability or from I guess a general weather clause or anything like that?

Scott Kornblau, CFO

The Terrapin drydocking is about a million dollars total. I don’t know the exact breakout between Q3 and Q4. As far as the damage, it was under a million dollars, well under a million dollars. We don’t think at this point we are going to hit our retention. So our cost is actually under $0.5 million. That is what it looks like it is shaping up right now. If it exceeds that, there could be some insurance coverage.

Jon Tanwanteng, Analyst

Okay, got it. Thank you. And then I was just wondering, given your vaccination plans and I guess the progress you have made. I was wondering if you have seen any COVID costs in Q4 so far and kind of what to expect for the quarter?

Scott Kornblau, CFO

Yes. So as I said, we had a little over $2 million in Q3, I will tell you this September piece of that was under $0.5 million. So it is starting to trend in the right direction. I don’t think it is going to be zero. But I’m hoping that trend a month-over-month going down. If we saw $400,000 in as a standalone September, my expectations will still see a decrease in that. I would call it $1 million right now, but we will give more color on the next call where it actually came up. Of course, this assumes that there are no new variants and we have not seen or anticipated. But I am very optimistic about improved and reduced COVID costs in the fourth quarter and improved operations.

Lasse Petterson, President and CEO

Just adding to that, we are now at 100% vaccination in our company. The last positive case we had was on September 21st. We have had 1,125 staff vaccinated in total. We have a few commendations, but very few. I think this is the way forward to make sure that we get back to normal operation. I am very optimistic about improving and reducing the COVID costs in the fourth quarter and improved operations.

Jon Tanwanteng, Analyst

Okay. As we look at 2022, should we think of that $9 million maybe $10 million delta on an apples-to-apples basis of cost that you shouldn’t have next year assuming - oh again you said no other variant possible?

Scott Kornblau, CFO

Yes, I mean, that is our expectation that is a 2021 event and a non-repeating cost that we will have in 2022.

Jon Tanwanteng, Analyst

Okay, great, thank you guys.

Operator, Operator

And here is our next question coming from (Ph). Please go ahead, sir.

Unidentified Analyst, Analyst

Thank you, and congratulations on the good continued quarter performance. I’m curious as to the share of the bid market more on a year-to-date basis, relative to last year and also for the third quarter. And the extent to which there are projects in that bid market that you don’t bid on at all and the extent to which it is worthwhile to talk about that?

Lasse Petterson, President and CEO

Well, when we look at our market share, so far this year it is around 37%, last year it was 39%, the year before 26%, and in 2018 it was 45%. It varies with the size of projects being awarded and the timing of the project awards, but we should be there in the high 30s to low 40s from year to year. Clearly, when we look at the projects that we did bid, we are selecting the ones that suit our fleet, our expertise the best, and our projects we decide not to bid because mainly because margins expectations on those projects. So yes, we have a fairly robust process around selecting the projects and making sure that the ones that we do bid and include in our market share are the ones that will give us the best contribution for the company.

Unidentified Analyst, Analyst

Thank you.

Operator, Operator

And we don’t have any more questions on the queue. At this point, I would like to turn it over to Ms. Tina Baginskis to continue.

Tina Baginskis, Director of Investor Relations

Thank you. We appreciate the support of our shareholders, employees, and business partners, and we thank you for joining us in this discussion about the important developments and initiatives in our business. We look forward to speaking with you during our next earnings discussion. Thank you.

Operator, Operator

And this concludes today’s conference call. Thank you, everyone, for your participation. You may now disconnect. And to all the presenters, please hold. I’m transferring you back to the speakers' conference room.