Matrix Service Co (MTRX) 2010 Q4 法說會逐字稿

Greetings. And welcome to the Matrix Service Company fourth quarter and fiscal yearend 2010 results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Mr. Thomas Long, CFO for Matrix Service Company. Thank you Mr. Long, you may begin.

Thank you, Doug. I'd like to now take a moment to read the following. Various remarks that the Company may make about the future expectations, plans, and prospects for Matrix Service Company constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of the various factors, including those discussed in our annual report on Form 10-K for our fiscal year ended June 30, 2010 and in subsequent filings made by the Company with the SEC. The presentation contains non-GAAP numbers and we have provided the necessary reconciliation to GAAP and related information on our website at www.matrixservice.com and in our press release today. I would now like to turn the call over to Mike Bradley, President and CEO of Matrix Service Company. Mike?

Thanks, Tom, and good afternoon, everyone. We appreciate you joining us today to discuss the results for the fourth quarter and fiscal year ended June 30 2010. We apologize for the short notice, but given the circumstances, hope that you understand. We felt it was important to discuss our earnings at the time we file our 10-K. Before I turn the call back over to Tom to discuss the financial results, I would like to comment on our overall operating performance in fiscal 2010, address the special items impacting our results in the fourth quarter and for the fiscal year, and comment on the delay in filing our 10-K.

Regarding the delay, during the week of September 7, we became aware of a potential fraud scheme against Matrix involving an outside party and a small number of employees in one of our US operating units which we believed warranted a thorough investigation to identify whether and to what extent wrongdoing had occurred. Our initial findings did not reveal a material loss as stated in our press release on September 10th which was verified upon further investigation. In addition, our investigations confirmed that no accounting personnel were involved. In light of the results of our investigation, we will not be discussing this matter further except to say that we intend to report our findings to appropriate law enforcement authorities and are committed to conducting business in conformity with the highest legal and ethical standards. Because this matter may be referred for prosecution, I am unable to provide you with further details beyond those which are included in our 10-K filing.

To summarize the overall performance for fiscal 2010, the business environment continued to be very challenging and competitive across most of our business lines. The biggest impact came from delays in project awards and a much softer than expected turnaround in maintenance environment during the last two quarters. While our fourth quarter remained soft, several project awards did materialize which resulted in a 17% increase in backlog compared to the third quarter. Excluding non routine charges and losses at a Gulf Coast project, the Company earned $0.54 per fully diluted share in fiscal 2010. Our balance sheet remains very strong and we generated positive cash flow despite a very tough environment.

While the fourth quarter was softer than expected, we are beginning to see improvement in our business, particularly in the aboveground storage tank, electrical instrumentation, and power markets as we roll into fiscal 2011 which I will discuss later. Clearly the results of the fourth quarter and the fiscal year did not meet our expectations due in part to some non routine charges which I will now comment on.

On September 7, we successfully mediated the legal matters in the State of California related to wage and hour disputes which were disclosed in the third quarter 10-Q. We reached a preliminary resolution on these matters which when approved by the court will constitute a full and complete settlement. We anticipate the court's approval will occur in the near term. Consistent with the preliminary settlement, we recorded a $5.1 million pretax charge in the fiscal year or a reduction in fully diluted earnings per share of $0.12.

Regarding the Gulf Coast project, our Gulf Coast small cap construction unit entered into a series of small contracts to provide civil and mechanical services for a new customer as part of a larger plant expansion. The owner awarded the work in a series of small contracts to multiple contractors which led to an extremely congested jobsite resulting in low productivity. In addition, the site experienced substantial weather delays during the course of construction. Together these issues resulted in significant cost overruns and the issuance of numerous change orders. While we are working with the client to recover a portion of our costs, we recorded a pretax charge of $5.4 million in the fiscal year given the uncertain of collection on change orders. Our scope of work is substantially complete, therefore our future exposure is not material. Our review of these projects led to some operational changes that will further enhance our project selection criteria.

While the impact of these items is disappointing, we are encouraged given a number of recent positive developments. In the fourth quarter we received several major project awards with a number of additional opportunities developing in the near term. The power, electrical instrumentation business is picking up and we are increasing capital spending and hiring to build capacity in response to new project awards and developing opportunities. Our cash position remains strong and we finished the fiscal year with excellent safety performance.

Finally, with the exception of the items I just spoke to, our operating units have maintained a high level of execution excellence throughout this period of challenging economic and competitive conditions. Our overhead absorption rates in the fiscal year were impacted by retention of key personnel given our expectation of project awards that did not materialize until much later in the fiscal year. This did have an adverse impact on our overall gross margins. However, many projects have now been awarded and we are well positioned to effectively execute this work.

We are encouraged with the market activity in our core business but remain cautious on the downstream petroleum turnaround and repair/maintenance markets. While the ability to predict the timing of future awards remains challenging, we are optimistic that the increased level of project awards and the breadth of near term opportunities will result in improved financial performance in fiscal 2011.

After Tom's comments, I will conclude the call with a discussion of our outlook and guidance for fiscal 2011. I will now turn the call over to Tom to discuss our financial results.

Thanks, Mike. In our press release this afternoon, we disclosed the detailed results for the fourth quarter and the full year of fiscal 2010. I'll briefly review the financial results excluding the impacts of the non routine charges and the project losses at the Gulf Coast site that Mike mentioned.

Revenues for the fourth quarter ended June 30, 2010 were $141 million compared to $180 million in fiscal 2009. The decrease of $39 million was primarily due to a decline in our business volume as many customers continue to be cautious with their capital spending plans leading to delays in project awards, downsizing of project scopes, and reductions in maintenance spending.

Net income for the fourth quarter of fiscal 2010 adjusted for the non routine charges and the Gulf Coast project losses was $0.9 million or $0.03 per fully diluted share. Net income was $6.7 million or $0.26 per fully diluted share in the comparable period a year earlier.

Construction services segment revenues declined to $87 million in the quarter compared to $101 million in the same period last year, primarily due to lower demand in the downstream petroleum market. Revenue in the E&I market increased in the fourth quarter compared to the same period last year as a result of improved performance at S.M. Electric which helped to partially offset the slowdown in the downstream petroleum market.

Repair and maintenance services segment revenues decreased to $54 million in the fourth quarter compared to $79 million in the prior year. This decline resulted from lower demand in the downstream petroleum and aboveground storage tank market. Excluding the impact of the non routine charges and the Gulf Coast projects, consolidated gross margins were 8.1% for the fourth quarter with construction services achieving gross margins of 8.4% and repair and maintenance services generating gross margins of 7.8%. Gross margins in the quarter were negatively impacted by the non routine charge in the Gulf Coast project and under absorption of construction overhead costs as volumes remained low. This resulted in gross margin in construction services segment being 1.5% and 4.6% in the repair and maintenance services segment. Consolidated gross margins were 2.7%.

In the fourth quarter we reduced SG&A expenses by an additional $2 million compared to the same period last year before these non routine charges and the project losses at the Gulf Coast site as a result of the reductions in personnel and administrative costs. As we move into fiscal 2011 we will continue our focus on maintaining a competitive cost structure based on the volume of work we believe we can capture. Fiscal year 2010 revenues were $551 million, a decrease of $139 million from the consolidated revenues of $690 million in fiscal 2009. We did not experience the full year effect of the recession in our core markets until the second quarter of fiscal 2009. Therefore the comparable prior year revenues were only partially impacted by the effects of the recession.

Net income for fiscal 2010, adjusted for charges, was $14.4 million or $0.54 per fully diluted share. Net income was $30.6 million or $1.16 per fully diluted share in fiscal 2009. Construction services segment revenues declined to $321 million in fiscal 2010 compared to $395 million in fiscal 2009 due to the lower demand in the downstream petroleum market and aboveground storage tank market.

Revenues in the electrical and instrumentation market increased from fiscal 2009 to fiscal 2010 as a result of the S.M. acquisition which helped to partially offset the slowdown in the downstream petroleum and aboveground storage tank markets. Repair and maintenance services segment revenues decreased to $230 million in fiscal 2010 compared to $295 million in the prior year. This decline resulted from lower demand in the downstream petroleum market and the aboveground storage tank market.

Excluding the impact of the non routine charges and project losses at the Gulf Coast site, consolidated gross margins were 11.7% for fiscal 2010 with construction services achieving gross margins of 13.4% and repair and maintenance services generating gross margins of 9.3%.

Gross margins for fiscal year were negatively impacted by the non routine charges and under absorption of construction overhead resulting in gross margin in construction services segment of 10.7% and 8.1% in the repair and maintenance services segment, with consolidated gross margins of 9.6%. The adjusted results for fiscal year 2010 excluded charges related to first the losses on the project at the Gulf Coast site where we recorded a pretax charge of $4.6 million during the fourth quarter and $5.4 million for the year.

Preliminary settlement of a legal matter in California where we reported a pretax charge of $3.1 million during the fourth quarter and $5.1 million for the year. Next was the write down of the claims receivable acquired in the February 2009 acquisition of S.M. Electric where we recorded pretax charges totaling $2.9 million in fiscal 2010. There were no charges in the fourth quarter.

Claims receivables collection costs incurred to pursue recovery of the claims acquired in the S.M. Electric acquisition, which were higher than estimated and resulted in a pretax charge of $0.4 million in the fourth quarter and $1.9 million for the year.

GAAP net income fully reflecting all of these (inaudible) was a loss of $4.2 million for the fourth quarter, and for the fiscal year ended June 30, 2010, net income was $4.9 million. The GAAP fully diluted earnings per share reflecting all these charges was a loss of $0.16 for the fourth quarter 2010 while fully diluted earnings per share were $0.18 for the fiscal year ended June 30, 2010.

Cash flows from operations generated $23 million from May 31, 2009 to June 30, 2010. Overall, capital expenditures totaled $6 million with capital lease payments of $1 million which resulted in a cash balance of $51 million on June 30, 2010 compared to an opening balance of $35 million on May 31, 2009.

During fiscal 2010, the company did not draw on our $75 million senior credit facility and at June 30, 2010 we utilized $12 million in capacity for letters of credit. In addition, during fiscal 2010 we increased our bonding capacity significantly to $400 million which we believe is necessary to support the continued growth of our business.

With our strong balance sheet and financial flexibility, we are well positioned to capitalize on future business opportunities. Finally, as a result of the charges related to the California legal matter, at June 30, 2010, the Company violated the fixed charge coverage ratio covenant under our senior credit facility. The Company was granted a waiver for the covenant violation in the fourth quarter and we executed an amendment on September 24th to allow for the add back of the costs associated with the California legal matter to our trailing fourth quarter EBITDA calculation. This amendment will favorably impact the calculation of the fixed charge coverage ratio and the senior leverage ratio beginning in the first quarter of fiscal 2011. And with that, I will turn the call back over to Mike to discuss our outlook and guidance for fiscal 2011.

Thanks, Tom. While the economic downturn impacted all of our business sectors throughout fiscal 2010 as I mentioned, we are beginning to experience improvements in many of our markets led by aboveground storage tank and the power and electrical instrumentation markets. In our press releases of June 4th and June 30th, 2010, Matrix Service announced major awards for the design, procurement, fabrication, and construction of new oil storage facilities. Since the close of fiscal 2010, Matrix Service has received additional awards for approximately nine million barrels of new storage capacity and we are actively bidding new project opportunities whose execution will extend throughout fiscal 2011 and beyond.

The increase in storage construction is in part the result of continued development of the Canadian oil sands and related pipeline construction. In addition, we are seeing energy trading companies looking to add storage as well. Many projects which were delayed or cancelled in reaction to the recession and drop in oil prices are now moving forward as the long term outlook improves. Matrix Service is equipped to respond quickly to these market needs as we have retained our key execution personnel and maintained significant throughput capacity at our fabrication facility in Oklahoma.

In addition to the strong ASP new tank market, a significant overhaul is taking place to the high voltage infrastructure throughout the US. These initiatives are driven by a combination of factors including a need to improve the reliability and efficiency of the nation's electrical grid and the need to connect renewable projects to the grid as well.

The growth in these two market sectors has enabled Matrix Service to increase backlog by $51 million in the fourth quarter to $350 million at fiscal yearend. This positive trend has continued in the first quarter of fiscal 2011. We are also seeing more opportunities in the construction services segment with potentially significant opportunities in our specialty ASP business line which includes spheres, project storage, and import/export terminals. Our job funnel remains robust and includes a broad range of projects across all markets driven by our business development efforts and diversification strategies.

As the new fiscal year unfolds, we expect our focus in the Gulf Coast, Western Canada, and Latin America arenas will begin to produce significant opportunities for the Company. The downstream repair and maintenance market however remains relatively soft. While a modest uptick in bid volume has occurred, it is offset by continued pressure on gross margins. The scope and complexity of these opportunities has diminished and the timing between major outages has lengthened. We believe these conditions are likely to remain unchanged in the near term as refiners continue to evaluate their capacity and cost structure.

With regard to our turnaround market, fiscal 2011 is shaping up to be consistent with fiscal 2010 with many announced facility outages being delayed into calendar year 2011. While we expect some fluctuation in the revenue stream during the first half of 2011, the upward trend in refinery utilization rates suggests that the cycle of domestic turnarounds may firm up during the course of calendar year 2011. At this time, Matrix Service is anticipating more than a dozen turnaround projects of varying scope and complexity during the upcoming fiscal year. These projects include both traditional customers as well as new facilities resulting from our diversification and business development efforts. We remain cautious in our outlook for the downstream petroleum market. However, it appears capital spending may be slightly higher in calendar year 2011, but the timing of projects remains difficult to predict at this time.

Looking at the electrical instrument and power markets, Matrix Service has recently received our N-Stamp certifications which enable us to engineer, design, fabricate, and construct certain nuclear components and structures. This certification covers our fabrication shop in Oklahoma and our engineering offices. The N-Stamp certifications represent our commitment to expand our capabilities and provide the US nuclear power industry with another reliable domestic source of quality design and fabrication.

We are also in the process of pursuing our NR-Stamp. This will enable us to perform certain maintenance and repair work in existing nuclear facilities which we believe will offer more near term opportunities.

As I mentioned earlier, domestic utilities are implementing a series of electrical infrastructure renewal programs. These initiatives include many miles of new and upgraded transmission lines, transformer replacement, and the rehabilitation and addition of high voltage substations. As a contractor of choice of many investor owned utilities in the northeast corridor, we are playing a major role in this electrical infrastructure build out which will continue through fiscal 2011 and beyond.

The electrical instrumentation and power market is not limited to the capital spending programs and domestic utilities. There are a number of new business opportunities from both traditional and nontraditional markets. For example, the development of the Marcellus Shale gas play, for which we are uniquely positioned, will require the installation of a series of compressor stations, many of which are expected to be powered by electric motors. These compressor installations and associated electrical substations represent a significant new source of projects for the organization.

Our nation's commitment to improving air quality continues to introduce more restrictive emission standards for domestic coal generating stations. In addition to the capital construction modifications required, we also have the capabilities to install and commission the corresponding electrical system upgrades. The security of our domestic nuclear generating stations is creating opportunities in our electrical instrument sector as well. We are currently supporting several nuclear facilities with the installation of enhanced surveillance and monitoring systems. This market is expected to continue throughout the next fiscal year. Additionally, we are currently performing and see additional opportunities to perform maintenance and electrical upgrades. Further, we expect the addition of an NR-Stamp to open up new opportunities to serve the nuclear industry as well.

Also recently we have begun leveraging our capabilities and customer relationships in the upstream petroleum market to further diversify our business. We are actually bidding on mechanical work to support new drilling programs such as collecting piping, flow lines, and infrastructure improvements such as dehydration facilities, steam generators, as well as plant maintenance. Matrix Service is providing shop and field directed tanks and mechanical services for new plants and plant expansions throughout the western US and western Canada. The company has also received verbal awards to provide ongoing plant maintenance for two major customers. We believe these opportunities represent significant revenue potential for the Company as we move into calendar years 2011 and 2012.

Regarding natural gas, the exploration and development of the natural gas shale reserves in the United States represents a significant opportunity for the Company. Given our strong position in the northeast, we are well positioned to capture mechanical and electrical construction projects associated with the Marcellus Shale. Matrix Service can provide construction services associated with gas compression infrastructure including tankage, process vessels, gas/liquid processing facilities, and electrical substations related to the electric compression stations. The Company also has the capability to provide services of varying scope and complexity in the construction of future gas fired generating stations.

As Tom mentioned, in fiscal 2009 and fiscal 2010 we made significant reductions in costs company wide in response to the economic slowdown in North America. We will continue to manage our cost structure in response to changing market conditions. However, we remain committed to our growth strategy and have retained key staff during fiscal 2010 as we expect the number of project awards to increase in fiscal 2011 as previously discussed. The extended project delays experienced last fiscal year led to significant under absorption of overhead costs. However, with the number of project awards now increasing, we expect increased utilization of our personnel as we go forward.

Regarding guidance, in fiscal 2011, we expect to achieve earnings per share in the range of $0.60 to $0.80 per fully diluted share. We are very encouraged by recent improvements in the aboveground storage tank, power E&I markets. However, as I mentioned, we remain cautious in the downstream petroleum market as it is difficult to forecast at this point. Refinery spending is expected to increase slightly in calendar 2011, but significant overcapacity still exists in the repair and maintenance market, keeping gross margins under pressure.

The above ground storage tank repair and maintenance business is showing some signs of improvement, but the timing of project awards continues to be very lumpy. Overall, we believe we are through the trough as business volumes appear to be ramping up and we anticipate continued improvement into calendar year 2011. However, markets in general still remain very competitive. We continue to retain talent for projects we expect will be awarded in the near term which will have some impact on our overhead absorption in the first quarter, but expect this to be less of an issue as the year progresses. Given our financial strength and positive earnings, we remain focused on profitability growing our business and continued market expansion. With that, we will open up the call for questions.

(Operator Instructions). Fred Buonocore, CJS Securities.

Good evening, gentlemen. First question pertains to gross margin on the construction services side of the business. Typical in construction related businesses, you've got contract true ups and write downs, the normal part of operations. And I'm just wondering if in the -- on the back of your press release where you show the adjustments to get to your 8.4% gross margin in the construction services business in the quarter, were there some contracts that were included, some write downs that were included in the adjusted number that you didn't break out as special items? I'm just kind of trying to reconcile the relatively weak gross margin during the period.

No, Fred, there was not really -- it's really the under absorption, Fred, that we referred to throughout that drove that weakness that you're referring to. It's not -- it's really not even the projects other than the ones we disclosed of materiality, so--

Okay, it just -- it looked like the margin declined sequentially from Q3 on somewhat decently higher revenue, so I was just kind of wondering if there was something unusual there.

No, I would -- Fred, to answer your question, I wouldn't say there was anything unusual there. It really was the under absorption of the costs that we're carrying as we're seeing the backlog ramp up.

Okay. And then also on SG&A, was there anything more one time in nature in SG&A that may be having that a little bit elevated?

No, Fred, there really wasn't. I think overall we have been progressing forward with some cost savings and some SG&A initiatives that we've got ongoing. But I wouldn't put any one time other than kind of the stuff we're talking about right now in the non-recurring.

Okay, and then just thinking about your full year guidance and realizing you don't give quarterly guidance, can you give us some help in understanding what Q1 maybe should look like relative to Q4? Obviously it's usually seasonally a sequentially down quarter from Q4, but I'm wondering if you can just give us a little help about how to think about Q1.

Fred, this is Mike. I think a couple of things that I want to mention about our guidance is one, as we mentioned, the fourth quarter was soft and there was a slow start to the quarter, but things are ramping up and they're ramping up nicely. I think that's one impact. The second thing is, we continue to be cautious on downstream petroleum. We're not anticipating a great year there. That could change, but right now we think it's going to continue to be very challenging. And then I think the third element is, one is the project awards came in, and as we mentioned, we continue to see that positive trend in the first quarter. But a lot of those projects are just now getting started and so there will be a little bit of impact from under absorption as these projects ramp up. But like I mentioned, we expect that to be less of an issue. So the good news is, the projects are coming in, backlog is up and we're seeing things ramp up. It was just a bit of a slower start than what we had anticipated.

Okay, that's helpful. Thank you all. I'll get back in line.

Tahira Afzal, KeyBanc Capital Markets.

Good evening, gentlemen. I have lots of questions, but I'll start with two and then just jump back in the queue. Just following up on the earlier questions, your revenues were up sequentially, yet your gross margin was down. When you're saying that it's essentially the anticipation of backlog ramp that's flowing through, are you saying that incrementally you took on more overhead costs in the fourth quarter than the third quarter? And that in anticipation of what's happening with your backlog?

No, I wouldn't say that Tahira. It's more of not all of our business units are equal there. Meaning that the absorption is not something you can kind of evenly apply. So when you -- like you said, the revenue can be up, but I think it's a lot of times dependent upon various areas that we look at. So that's probably as much of a determinant as any.

Got it, okay. And then the second question was in regards to the cost overruns and change orders you've seen on the Gulf Coast side. Could you elaborate about where, why the cost overruns occurred? Was it because you underbid on certain projects? If you could just give a little more color over there. And then if you can talk about the operational changes you mentioned that you have made to insure you don't have these change orders or minimize these change orders going forward. And any accountability there that you can elaborate on as well would be helpful.

Tahira, this is Mike. I will give you as much color as I can. Let me start with that as we laid it out, this was a series of small capital projects that rolled into a very, very large project that was managed by the client utilizing a series of small contracts across the entire project. What this created was an environment where you had a lot of complexity with multiple contractors working and it resulted in very low productivity.

The second major impact that we had was weather. We had a lot of weather related issues on this project that were not foreseen. I think that number one is we do have a lot of outstanding change orders that we haven't worked through yet, and so we can't determine yet what the amount of recovery we're going to get. That's why we booked the full charge in the fourth quarter.

I think that going back and looking at this particular project, I talked about some operational changes. I won't get into those specific, but I will say that we've gone back and looked at the process of project selection a little more carefully and particularly in this kind of, these small cap projects, and have made some adjustments to prevent that from occurring.

One thing I can say is that the remainder of our projects throughout the year have been performed I think exceptionally. This was an exception. We're not proud of it but we have dealt with it and feel like this sort of thing, at least in this particular project, will be prevented.

Got it, okay. And Mike, just as a follow up to that, do you have other projects of a similar profile that are currently in your backlog?

None that I'm aware of, Tahira. And we review that pretty consistently.

This project got a lot of attention, okay? Even though a small project, it got a lot of attention.

Got it. Okay, thank you. I'll get back in the queue.

(Operator Instructions). Michael Harrison, First Analysis.

Good evening, guys. I was wondering if you could talk a little bit about what your expectations are for the top line next year and how that's factored into your guidance, your EPS guidance.

We are expecting to continue to grow our top line as we go through fiscal 2011. We see a lot of opportunities. One is our recent backlog growth as well as the projects we have in the hopper. So I think that's our expectation for 2011.

All right, and then in terms of the refinery turnaround market, I mean you talked a little bit about what you're seeing there, but can you give us a little bit more detail on what your expectations are there? How long before some of these refiners just need to move forward on certain projects and take downtime? Is there a logical endpoint here where they just delay it too long?

I think that number one is that utilization rates have been -- depending on what part of the country, not all parts of the country, have been much higher this year. And so you would expect there to be a corresponding increase in maintenance. And we're sensing that would occur more in 2011. The -- I think the big issue right now in this market is there's just too much capacity. You've still got a lot of people out there bidding work very, very low and so it's putting a lot of pressure on gross margins and so we're being as cautious as we can in this market. So I just think right now it's a very challenging market and I don't see that probably changing much until calendar '11. As I would expect if utilization rates remain like they are that we would see more maintenance opportunities. We have focused in looking at markets besides downstream petroleum as well.

Got it. Okay. And then I wanted to congratulate you on getting your N-Stamp and maybe just ask a couple of questions around that. What kind of opportunities are you chasing? It sounds like that's an area that you were working on previously. Are there projects that you were looking at and now you can formally bid on and we could see some action there momentarily?

Mike, I think that our focus was to be in position to design and fabricate containment vessels associated with the nuclear build out as well as other nuclear components associated with new plants. My take right now is those are probably going to get pushed out a bit. We are pursuing our NR-Stamp which is a natural progression and this will allow us to do maintenance and repair work in existing facilities which we believe is amore near term opportunity for us and while we are focused on getting that certification, hopefully shortly after the first of the year.

After the first of the year, okay. Thanks very much.

Tahira Afzal.

Great. I guess a lot of people are unaware that you had your call today, so I'm going to have a field day with my questions.

We understand.

Okay, great. So I just wanted to start off with the 9 million barrels that you said that you won since the close of fiscal 2010. Can you kind of help put us, put that in perspective in terms of classify how much roughly a million barrels is for you in terms of bookings?

We typically don't give that information, Tahira. I think it's obviously the cost per barrel depends on the size, the tank, and the complexity. And we'll talk about more at the end of our -- when we release our Q1 earnings on that. But I think it is substantial addition to our current projects, so we're pretty pleased with that. And we see, continue to see opportunities. This Company has tremendous strength and expansive capability in the storage market and we are very well positioned to continue to build that out.

Got it. Okay. And is this -- do you see when you're looking through your bidding pipeline, are there other customers who are planning on doing something similar? Is that a fairly decently sized portion of your pipeline of projects and bids?

Sorry -- are we seeing different clients?

Are you seeing, when you look through your prospects, are you seeing other customers who could potentially, who are potentially thinking of doing the same thing, i.e., are you seeing more ASP projects out there in your bidding pipeline?

Oh yes, we're seeing more projects out there, most definitely. Both here and Canada and then Latin America. So we have moved north and we're moving south as well.

And is your win rate around the same on these? Has it sort of reached a stability point? I know at one point things were still very competitive.

I think things are still very competitive. I don't want to leave you with the idea that this isn't a very competitive market, it still is. And I think that, again, we've got a great execution team. We did retain a lot of key talent as we've talked all year, and we're in excellent position to continue to develop and build these opportunities.

Got it, okay. The next question is really to do with your E&I business. Number one, you talked about reliability and high voltage. Could you talk again about the regions where you're seeing this activity? And I know you're basically in the northeast over there, but within the northeast, which areas look a little stronger? And how the pricing in that segment is holding out versus relative to your other businesses?

I think our focus is primarily in the northeast, in mid Atlantic, Tahira. Obviously there's a tremendous amount of infrastructure in that part of the country and we have continued to build out our territory and markets relative to the combination of the S.M. Electric and existing Matrix Service E&I capabilities. We continue to add new clients under our arrangements that, contractor of choice arrangements that allow us to provide certain services. We continue to look at some of the non traditional opportunities which include solar, wind, and as we talked, on the electric compression.

So we're pretty excited about our market and opportunities. Like in general, I think every market is competitive. I think we have some very specialty capabilities I think which our team has demonstrated very well and so we look forward to continuing to build our relationships with existing clients and new clients in that market.

Got it, okay. And on the Marcellus, on the compressor installation opportunities, could you talk about what the size roughly in terms of dollars such an opportunity tends to be? And if you could put that in perspective to your average opportunity size right now in the E&I segment.

I would say, Tahira, that the size of the opportunities in the Marcellus -- and they go beyond just electrical, okay? We have full mechanical, civil, millwrighting capabilities to do turnkey stations as well as gas plant facilities. So while the electrical piece would probably fall in line with similar size scale of what we're doing with utilities, I think that the compressor station opportunities could create some pretty good revenue opportunities for the company as these projects move forward. So we're approaching the Marcellus as a total turnkey service provider given our skill sets and capabilities. We're very well positioned.

As you look at these new opportunity and add on to that upstream opportunities you're looking at, is it -- I mean how much risk are you taking with turnkey opportunities and fixed price opportunities in new regions, new businesses? How much risk capacity do you really think you have? And could you provide some color on how you're trying to control the risks as you look at these opportunities?

I think that in the parts of the country we're talking about in the Marcellus and really the northeast, it's a -- I would say that we have a combination of P&M and cost plus, plus lump sum. And I think I would tell you the mix up there right now is probably a little bit higher on the P&M side than on lump sum. I think we always do a thorough risk analysis on major projects in determining whether or not we're comfortable taking on lump sum, whether we would prefer to do a portion of it fixed. So we go through a pretty thorough analysis. But you have to remember, in the projects that we look at, a lot of these folks -- S.M. and Matrix have been working in this part of the country a long time and have built a lot of substations and other projects So we're very comfortable with the scopes that we take on.

Got it, okay. And I guess last one has to do with your bid pipeline. Could you provide any color on how that has changed since your last conference call in terms of mix?

Well I would say that the pipeline is becoming more diverse. Obviously we've talked about a pretty strong ASP pipeline for some time. The awards just were slow, but were coming in. We're seeing increased opportunities in renewables, solar, waste energy, landfill energy. All projects that we have and feel comfortable taking on. Then I think just the general substation work and electrical work is very strong as well.

As I mentioned, we're starting to see signs that CapEx spending on the downstream side could pick up in 2011, calendar 2011. Just not ready to predict the timing on that right now. So I think we've got a much broader set of opportunities plus Canada looks very strong right now as well as some of the stuff we're looking at in Latin America.

If you look at last year and rewind and obviously it was a very uncertain business environment, and if you look at your guidance now, how different -- what part of your guidance in terms of how conservatively you want to state it or how cautiously you want to build in prospects given your experience over the last year?

I'd say going into last year our expectations in the turnaround and ASP repair/maintenance business were probably a little stronger than -- well they were stronger than what turned out. We really saw a drop off as we talked in the second half of our fiscal year. I think we were anticipating a very slow construction year. And that project awards would be pushed out. Some got pushed out a lot farther than we expected. So we're probably a little bit more optimistic on the downstream and less optimistic on the construction and that kind of flipped. I would say right now we are very encouraged on the power, electrical instrumentation, and the aboveground storage tank business. Obviously we're seeing it's ramping up. Last year we were not ramping up. Things were dropping off. We were a little more pessimistic on downstream petroleum and I think in general until there is less capacity in the construction and service business, gross margins are going to be challenged. So I would say we're trying to give a realistic view of the year, number one. But number two, as I mentioned, the year started out slower than we expected but is ramping up nicely right now, so we're encouraged.

Okay. I'll just hop back in the queue and if there's no one there, maybe I'll just follow up with you later then. Thank you.

There are no further questions in the queue. I'd like to hand the call back over to management for closing comments.

Well again, we appreciate everyone joining us today. It was short notice and we apologize, but again, I think given the circumstances, I hope you understand and that we did want to have this discussion at the time we filed our 10-K. I think as you hopefully took away from this call number one, 2010 was a challenging year in this business. I think that with the exception of some of the one time charges and project losses, this team did a great job. We kept a lot of our key people and we continued to generate positive cash. And we have positioned this Company very well going into 2011. You've seen the awards coming in. We're seeing a lot of activity and remain encouraged and we feel very good about our future. And this company remains focused on growing our top line, growing our profitability, and expanding our markets And some of that requires a bit of investment but we're strong financially, we've got good execution capabilities, and I would say we're excited about our future and very glad we're in this position. And I want to thank our team. They did an excellent job this year despite some of these challenges and continue to position this company very well fort he future. So with that, thanks again, and have a good evening.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have wonderful day.