Matrix Service Co (MTRX) 2011 Q4 法說會逐字稿

Greetings, and welcome to the Matrix Service Company fourth-quarter and full-year 2011 results. At this time, all participants are in a listen-only mode. A brief 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, Kevin Cavanah, Vice President and Chief Financial Officer for Matrix Service Company. Thank you, Mr. Cavanah. You may now begin.

Thank you, Rob. I would now like to take a moment to read the following. Various remarks that the Company may make about future expectations, plans, and prospects for Matrix Service Company constitute forward-looking statements for the 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 various factors, including those discussed in our annual report on Form 10-K for our fiscal year ended June 30, 2011, and in subsequent filings made by the Company with the SEC. I would now like to turn the call over to John Hewitt, President and CEO of Matrix Service Company. John?

Thanks, Kevin. Good day, everyone, and thank you for joining us today to discuss the results for the fourth quarter and fiscal year ended June 30, 2011. In a few minutes, Kevin will review the financial results. However, I would like to briefly comment on the Company's operating performance in fiscal 2011. [Over] fiscal 2011 was a good year for Matrix Service Company, as both revenues and backlog increased from lower levels experienced in the recession that impacted fiscal 2010. Gross margins are improved significantly in fiscal 2011, reflecting better project execution and the recovery of construction overhead costs due to a higher business volume and man-hours. Our Electrical and Instrumentation group was a major contributor to the Company's improvement in fiscal 2011, with E&I group achieving a revenue growth of 58% in fiscal 2011, compared to the prior year.

In addition, our Aboveground Storage Tank Construction group achieved revenue growth of 35% in fiscal 2011. Growth in these groups was partially offset by continued weakness in the downstream petroleum market, with both Repair and Maintenance Services and Construction Services segments combining for an 8% decline year over year. We are, however, optimistic about the near-term prospects for the downstream petroleum market, as backlog has increased over the last half of fiscal 2011. Finally, our balance sheet and liquidity remain very strong, positioning the Company to execute on our strategic plans, which I will discuss later on this call. I would now like to turn the call over to Kevin to discuss our financial results for the period.

Thanks, John. In our press release yesterday, we disclosed the results of the fourth quarter and the full year of fiscal 2011. As I go through my prepared remarks, please note that the fourth-quarter and full-year results for fiscal 2010 included certain non-routine charges that were previously disclosed in our SEC filings. We did not incur similar charges in fiscal 2011. First of all, revenues for the fourth quarter ended June 30, 2011 were $164 million, compared to $141 million in fiscal 2010. The increase of $23 million was primarily due to turnaround activity in the downstream petroleum market, new awards in our AST Construction Services segment, and continued growth in our Electrical and Instrumentation Repair and Maintenance business.

Consolidated gross margins for the quarter were 12.8%, compared to 2.7% in the fourth quarter last year. SG&A expenses were 6.9% of revenue for the fourth quarter, compared to 7.4% in the same period last year. This produced net income for the fourth quarter of fiscal 2011 of $5.7 million, or $0.21 per fully diluted share, compared to a net loss of $4.2 million, or $0.16 per fully diluted share, in the fourth quarter last year. Construction Services segment revenues were $86 million in the quarter, compared to $87 million in the same period last year. Gross margins in Construction Services segment were 14.2%, compared to 1.5% in the prior year. The gross margins benefited from strong project execution throughout the quarter.

Repair and Maintenance services segment revenues increased to $78 million in the fourth quarter, compared to $54 million in the prior year. The increase resulted from higher demand in the downstream petroleum and electrical and instrumentation markets. Gross margins in Repair and Maintenance services segment were 11.2% in the fourth quarter, compared to 4.6% in the prior year. For fiscal year 2011, revenues were $627 million, an increase of $76 million from consolidated revenues of $551 million in fiscal 2010. This 14% increase reflects improvement in many of our end markets, in spite of the continued effects of the global recession.

Business activity increased for our AST Construction Services and for both our Electrical and Instrumentation Construction and Repair and Maintenance Services. Consolidated gross margins were 11.9% for fiscal 2011, compared to 9.6% in the prior year. SG&A expenses in fiscal 2011 were 7% of revenues, compared to 8.2% in the prior year. Net income for fiscal 2011 was $19 million, or $0.71 per fully diluted share; compared to $4.9 million, or $0.18 per fully diluted share, in fiscal 2010. Construction Services segment revenues increased to $365 million in fiscal 2011, compared to $321 million in fiscal 2010, due to the higher demand in the AST and the E&I markets. Construction Services gross margins were 13.6% in fiscal 2011, compared to 10.7% in the prior year.

Repair and Maintenance Services segment revenues increased to $263 million in fiscal 2011, compared to $230 million in the prior year. This increase resulted from substantially higher volume in our E&I business. Repair and Maintenance Services gross margins were 9.7% in fiscal 2011, compared to 8.1% in the prior year. Operations generated $23 million in cash flow in fiscal 2011, and the Company invested approximately $10 million for capital expenditures and $4 million for an acquisition in the year, which resulted in a cash balance of $59 million at year end compared to $51 million on June 30, 2010.

During fiscal 2011, the Company did not draw on our $75 million senior credit facility. And at June 30, 2011, $7.5 million in letters of credit were outstanding. Our balance sheet and liquidity remain very strong, providing significant financial flexibility to address changing market conditions and emerging strategic opportunities. With that, I would like to turn the call back over to John to discuss our market outlook and guidance for fiscal 2012.

Thanks, Kevin. Since joining the Company in May, I've had an opportunity to visit the majority of our regional offices, and have met with many of our outstanding employees and customers. I find our Executive Team to be extremely competent, and our business unit Management Teams and employees to be highly dedicated to the success of Matrix Service Company. I am confident in all of our employees' belief in a zero-accident workplace, and live in our safety culture every day.

The business has a great foundation for growth, from a leadership, operations, and financial perspective. And it is well-positioned in the energy sector, with a strong repeat client base and highly skilled operations teams. I will be working with our Executive Management Team over the next two quarters to evaluate trends in our end markets and update the Company's strategic plan. The goal is to [strategically review], to be sure our tactical plans are focused and aligned with our long-term growth objectives. We will share the details of our plan in the future. However, we remain dedicated on delivering safe and high-quality construction and maintenance services to the energy industry in North America and select international locations. Matrix Services Company will continue to invest in personnel and training to achieve world-class safety results.

A little bit about the market -- we've seen improvement in both the Construction Services and Repair and Maintenance Service segments in fiscal 2011, and we continue to experience a solid volume of bidding activity. Apart from the limited construction opportunities in the downstream petroleum refining market, the overall outlook for our core markets, such as aboveground storage, high-voltage delivery systems, and power generation, is positive. Demand for our AST Construction Services remain high, with a number of opportunities emerging in Cushing and Western Canada. And our E&I business in the Northeast remains a strong growth area for the Company, while our excellent reputation and capabilities should allow us to add new customers as we look further to expand geographically.

Our Refining Maintenance and Turnaround business is stable; however, we expect to see an uptick in revenue throughout the next few quarters. Finally, our newly added engineering capabilities in the bulk material handling sector should produce additional engineering and construction opportunities in both power generation and raw materials transportation market, as well as entry into the mining and minerals industries, both domestically and internationally in the coming year.

From a guidance perspective, given the positive outlook of our base business, our core markets, with a backlog as Kevin has discussed of $405 million at the end of June 30, 2011, we expect revenues to increase in fiscal 2012. Revenues are projected to be between $650 million and $725 million, with earnings per fully diluted share in a range of $0.75 to $0.95. Our business will continue to be seasonal, due to various factors including weather, clients' spending patterns, and energy demand.

These factors may results in earnings fluctuation during the fiscal year, while we continue to expect modest growth in the overall economy and we are confident that our financial strength, high-quality customer base, and highly skilled and competent employees position the Company to achieve profitable growth in the upcoming fiscal year. With that I will open the call for questions.

Thank you. We'll now be conducting a question-and-answer session. (Operator Instructions) Rich Wesolowski, Sidoti & Company.

First, roughly what share of your new tank construction work in revenue or in backlog comes from Cushing, specifically, versus anywhere else?

I would say that our Cushing AST work, I'd say -- it's probably a little over half of the total AST new construction at this point. I would say long-term, that might change. We're seeing a lot of opportunities elsewhere in Western Canada and a lot of other places in the US.

What are your midstream customers saying regarding the duration of strong activity in Cushing, and then separately in other regional terminals?

I don't -- this is John. Right now, we're not seeing any -- we're not either seeing any softness in our work at Cushing and other storage locations, nor are we hearing anything from any of our clients. Our expectation through the course of this coming -- this fiscal year, 2012, is that we'll continue to see the types of revenues that we saw in 2011, if not a slight marginal increase.

Okay. On the guidance, your backlog is up some15% from a year ago, and the bottom half of the guidance implies sales growth in the mid single digits, which seems out of sync to me. What prompted you to put the bottom half of the range so low, relative to the positive commentary from the customers and relative to your recent bookings?

I would say that it's probably fairly simple, and the same thing that's troubling a lot of other people, is -- while we feel very good about our business, we feel good about our positioning, our bidding activity is strong in most of our markets, but the general uncertainty around the economy, the national and global economy, has to put us in a bit of conserve thinking in about what the next 12 months will bring. So, our -- so the low end of our range is primarily driven by our uncertainty around that.

So, it's more sentiment-driven and not anything tangible that is changing your bookings, say, in the September quarter?

I would say over the last couple months, our -- I think I said, our bidding activity has been strong, if not stronger, than it has been over the last six months. And our trend -- our booking trends and our bidding trend is up. So, from that perspective, if that was the lone perspective, we would feel good about the mid to higher end of our range. But with what's going on in the national economy and around the globe, we have some concerns like everybody else does.

Thanks, I appreciate it.

Matt Tucker, KeyBanc Capital Markets.

Congrats on a nice year.

Good morning.

Just to follow up a little bit on the guidance -- if you look at the midpoint, I believe it does suggest some margin expansion, although it may be incremental. But would you see that as coming more from pricing utilization? Is it the operating leverage? Could you give a little color there, please?

I think -- and Kevin can chime in -- I think there's a little bit of both. I think there's some operating leverage and increased volume. I think that the -- some of our businesses right now, what we're seeing on bidding activity will allow us to get a couple additional points on some of our projects that we're bidding. And -- but I would say overall, anticipation for '12 would be gross margins in a similar range as '11.

I would agree with that, from consolidated perspectives. I think if you break down the two segments, I think Repair and Maintenance was -- the margins were a little low in fiscal '11, and we saw that throughout the year. Longer term, we would expect those to improve a little bit. Construction Services margins were very strong most of the year, and with great project execution. As we expand into new markets on the construction side, we might see the mix of work change, so that the margin opportunities may be a little bit different in the future. We might see margins a little bit lower, construction on a consolidated basis.

Okay. I guess if you break down fiscal '11, it was kind of a tale of two halves, in terms of the margins, with the second half being a lot stronger. So, are you expecting -- assuming that execution remains solid, can you continue to do more of the second-half type margins? Or are you expecting, as you alluded to, this mix shift -- are you expecting it actually to trend down more towards the margin for the full year?

I think what we're seeing in our -- as Kevin said in the mix. Because we have a mix, there's obviously a mix of businesses and types of contracts in our portfolio. Some are by nature a little lower margin than others. But based on what we're seeing in bidding activity, in a similar nature to the back half of fiscal 2011, we have an expectation that 2012 will be more like the back half of 2011 than the first half.

The only exception, I would say, would be -- as you recall in the third quarter, our Construction Services margins were, I think, over 16%, if I recall. And that was due to some incentives that were probably a little higher than normal. I don't think we would expect 16%, 15% gross margins on Construction Services. I think more in line with the full-year average would be more what we would expect.

Great. And then, one last one, and I'll jump back in the queue. When you think about your revenue guidance, could you give us a sense, in terms of the end markets, what you expect to be the leaders and the laggards there? You already mentioned that downstream construction looks like it continued to lag, and that AST might be flattish to slightly up. Could you highlight the other key drivers there?

Probably two. One would be our high-voltage delivery markets, where we're doing work in substations and short-run transmission and distribution. Both on a maintenance side and a capital side. We're seeing extensive amounts of bidding activity there, and the size of the projects are larger than what we have seen over the past few quarters. So, we expect that the E&I business will be one of the -- certainly one of our strong points in fiscal 2012. The other thing is, that we've mentioned before, the -- we mentioned in our release here about our acquisition on the materials handling. We believe that that -- we're seeing a fair amount of bidding, good bidding activity there, both on a domestic and international side. And we think that that has some good potential for us for growth through 2012.

Great. Thanks a lot, guys.

Matt Duncan, Stephens.

The first question I have is on the sales number from the quarter. If I remember correctly, it looks like the revenue came in a tiny bit below what you guys were expecting in the quarter. What changed from May through the end of the quarter? Was there anything that shifted to the right? Did you face adverse weather conditions? What caused the number to be a little bit below what you had expected in the June quarter?

I think it's a little bit of timing on some of our projects and when they occurred, when they moved. It wasn't any specific contracts that were canceled. But I would say most -- probably the majority of that was related to timing of when we expected a bid in, versus when it's going to come in, or an award. And so, there can be some month-to-month movement in our business with our contracts.

Sure, absolutely. And then, focusing on more -- a little bit more detail on the E&I segment, the construction number there has been down the last couple quarters. I know you guys had a big project back in the second half of calendar 2010, the first half of your fiscal year. It sounds like the bids that you're seeing today are for some bigger projects. Are they -- does the bid level that you're seeing today for E&I construction suggest that you can start getting back to the revenue numbers that you put up in the September and December quarters for that E&I business?

I don't know if I can specifically say what those revenue numbers would be, but I would say that our anticipation is that through the course of calendar year and the fiscal year, that our month or quarter over quarter, our revenues in the E&I business will grow rather than stagnate. Certainly, the first quarter here is going to be a little off. The majority of that business for us is in the East Coast. And with the results of Hurricane Irene, although we were involved with some of the remediation work that went on there, some of the work that the power companies and utilities were doing in that area were basically put on hold for two, three weeks till they got everything back up online. So, there may be a little bit of a deflection here this quarter. But overall, through the course of the year, we have an anticipation that our E&I business will grow through the year.

Okay. And then, the last thing, getting back on your guidance, just to make sure I understand you correctly -- it sounds like the upper half of your range is probably really where you see the year shaking out. The bottom half of the range is conservatism, based around macro-uncertainty. Is that a fair way to think about the guidance?

Yes.

Okay, thank you.

(Operator Instructions) Martin Malloy, Johnson Rice.

Could you talk a little bit about the AST business outside of Cushing? And I guess, in terms of when you look at the oil rig count climbing in different areas of the country that's been climbing, and as well as the NGL production -- could we see this business pick up meaningfully, going forward?

I would say a couple things there. One is, like we said, we continue to see the business, our base in Cushing to be strong. We're growing our business in Western Canada. Other parts of the country, we are -- we don't see -- there's bidding activity, and while we don't necessarily see the same margin levels in the small pocket areas outside of Cushing, we would say that -- I would say that our bidding activity continues to be strong throughout North America, related to storage requirements. And that the -- on a global basis, the three- to five-year forecast in storage demand is continuing to be up, which is part of the reason for our focus on an international perspective, to export our know-how related to tanks and aboveground storage tanks and terminals.

On the natural gas side, that -- while we think long term, that's going to be a strong business line for us, as that market unfolds, depending on the price of gas and going forward, energy demand, drivers in the country related to power generation or offshoring, liquid natural gas or chemical plant feedstock -- all those things we believe in the long term will help be a growth area in our business, combined with our capabilities with our engineering groups around dealing with the cryogenics and cold chemical applications -- we think all puts us in a pretty good position going forward over the next three-year period, for it to become a nice chunk of our business.

Okay. And could you comment about the recent weather in the Mid-Atlantic and the impact on your E&I operations there?

Yes, what we did is that we've -- over the past year or so, we've increased our capability and skill sets related to transmission and distribution. We're not interested in doing the state-to-state long-haul type transmission, distribution. It's more the smaller-type systems, the 5-mile, 10-mile-type stuff, 25-mile. And as a result of that -- of our Eastern business unit growing their skill sets, we were in a pretty good -- plus our reputation with our prime utility clients in that area and our contractors of choice, our arrangements with them, when the Hurricane Irene hit, or as it was coming up the East Coast, we put over 100 people in place in certain defined areas with our utility clients to provide immediate service, to repair downed power lines and other parts of the distribution system.

And that went very well. So, there was a -- for us, largely a reputation builder, although certainly it was profitable work for us. But it's a reputation builder, gets us close to our clients, gives us opportunity to bid on other transmission and distribution-type projects a little bit outside of what we normally do for those clients. So, it's -- while our normal day-to-day, day-in business that we're doing for them and for other people who get shut down during these kind of weather events, we were able to perform other work for them, and doing this repairs and replacement.

Okay. And then, just one final question. Could you give us a few more details about the material bulk handling business, what exactly you're doing there? Is it for power plants and coal mines moving coal? And is there the ability to grow this business and maybe work internationally, as well?

What we've done is that we purchased a very small engineering company in northern New Jersey. They provide engineering and procurement-type services related to bulk material handling. So, when we're talking about bulk material handling, we're talking about moving some kind of a raw ore or material from point A to point B. And that could be either loading or unloading ships, that could be transportation of coal from a coal pile into a coal-fired generating station, it could be moving ore in a mining -- in either a ferrous or non-ferrous mining activity from the mine to a processing station or grinding station or ball mill.

So, they do that design work and that procurement. The construction of that. And so, we're able to take that engineering and procurement skill set that they have, combine that with our North American construction presence, and offer anything from an E&P to [EPC]-type opportunities to a variety of clients in power generation, materials transportation, mining and metals, the steel companies. So, there's a lot of opportunities, we think, there for us to build on their business. They were a smaller company that was limited to some extent by their depth of resources and their balance sheet. So, we're able to provide those strengths that they were missing to be able to grow that business.

And in addition to that, that they are able to -- they also provide an offshore opportunity for us, where we can essentially provide the engineering and procurement services, put those -- in essence, put those drawings and equipment parts on a barge, and send those offshore for our clients who erect or install, while we don't have to get physically involved on a [sea] basis with those projects. So, we have high hopes and opportunities. We think that this combining of their business with ours is going to provide a nice growth engine for the Company.

Thank you.

Rich Wesolowski, Sidoti & Company.

Is there a great disparity in the competition in the tank work bid in Cushing versus that of other terminals for Matrix?

No, I don't believe overall there's that great of disparity in the competition. We've just had great success in Cushing. We see a lot of the same players, when we bid other tank jobs throughout the US.

And we have some pretty steady -- you see a lot of the same steady clients in Cushing. They're very happy with our safety performance, our level of quality we provide. We meet or beat our schedules. They are satisfied with our pricing level. So, we get more than our fair share of work at Cushing, a lot of it based on our past performance and reputations.

Okay. Separately, would you review of the Company's capabilities with regard to natural gas infrastructure, treatment plants, compression stations and pumping stations, and maybe give an overview of how you're aiming to tackle that market, which has been underserved, let's say, in the past?

I would say we're -- over the next two quarters, as we mentioned, that we are -- we're kind of taking a bottoms-up view of our entire strategy. Certainly, the -- how we benefit from the natural gas value chain, from the wellhead to the user, is going to be something that we're going to be working on. In general, I think we have a lot of the skill sets required to work in those -- along those value chains. We have the ability to do compressor stations. Certainly have all the skill sets to do storage and pumping stations, and we have skill sets in LNG, we have skill sets in power generation, and we have skill sets working in refineries and chemical plants.

So, we have all the pieces as a Company to be able to take advantage of that value chain. The thing we want to do is get tactically focused on the value chain as a business, for which pieces we think we're going to want to play and operate in. And that will be something that will fall out of our strategy over the -- development over the next four months.

Okay. Thanks for that. If you haven't said it already, how much of your fiscal '11 sales came from Canada?

It was probably a little over 5%.

Okay. Is there a tangible push within the Company to raise that share and to greater penetrate Western Canada, specifically?

Yes. Longer term, I think we would expect to see Canada increase to 10% and then exceed it. The growth opportunities in Western Canada are significant; and even in Eastern Canada, we're seeing some good opportunities there.

Okay.

It certainly is part of our strategy, too, is looking at our geographic diversity, and -- (inaudible) [great to Canada]. The Province of Ontario, in particular, is how we may bring our services into -- to take full advantage of all the industrialized areas in Canada.

Okay. Lastly, in the last couple calls, John, both before and after you were at the helm, the Company has expressed a desire to move internationally, which I've taken to mean outside of North America, not just into Canada. My question is, with so much going on in North American energy infrastructure, what is the give and take between taking on what I sense would be riskier projects internationally, when there's a lot of opportunity here at home?

Right. That's a good question and good comment about Canada. Canada and the United States two are countries separated by a common language, so we don't necessarily see them as international.

Right.

But we think that, as a business, to continue to be sustainable and consistent, we need to have a piece of our portfolio that has some international aspect to it. And so, we have two areas that we're going to be doing that on. One is -- I talked about on the material handling business. The other piece is, as a contractor, we have to be able to take offshore our know-how, what's our strongest suit. And obviously, this Company has an extremely strong position in know-how and history in the construction of aboveground storage tanks and terminals.

So, we have very selectively in Latin America and South American markets selected countries that we think that we can operate the most successfully in. We're taking that at a very, I would say, as a very conservative and slow pace. We've bid two or three what I would call important, significant projects down there -- have been close, but have not won those, but we're not willing to go buy a job. And so, we're going to continue to work at that and try and develop those opportunities in Latin and South America, where we can expand our tank business.

Okay. Thanks again, and best of luck in your 2012.

Chris Sheehan, Colorado Capital Advisors.

I don't know if you can help me on this, but I was looking at the Plains All America presentation yesterday, and they talk about phases 9, 10, and 11 being finished by the end of -- in the second half. Can you give us an update in terms of where you are in progression of that? And how big phase 11 is relative to 9 and 10, in terms of tanks and generally where you are along the line on that?

Well, you win the award for the stump-the-panelists question of the day. [Laughter]

I didn't mean to do that, I'm sorry.

I don't have a specific answer on that. We can take a look at that and certainly get back to you on that question. I don't have that in front of me.

Okay, okay. And just one other quick question. Magellan -- I think they've also indicated that they're looking at three areas where they could be adding storage. Have you worked with them outside Cushing?

Yes, yes we have.

Okay, okay. I'll pull up more -- I'll find that.

(Multiple speakers) In fact, we've done both -- the aboveground storage tanks and conventional aboveground storage tank and [spheres].

Okay, okay. Thank you.

Matt Tucker, KeyBanc Capital Markets.

Looking at the fourth-quarter awards, could you give us a sense of the mix, in terms of end markets?

Yes. Looking at that, I don't think there was one individual market that just dominated the awards. It was good to see that the backlog additions throughout the quarter were hitting most of the markets.

And thinking about 2012 backlog, the trajectory there, kind of putting macro-uncertainty aside, based on the visibility you have with the current bidding activity, would you expect to grow your backlog next year?

Yes, yes we would. That would be -- we would anticipate that.

Great. Thanks a lot, guys.

Mike Harrison, First Analysis Securities.

Was wondering if could you comment a little bit on the competitive environment you're seeing in the Repair and Maintenance side of the business. It looked like margins -- gross margin showed a nice step-up. And I'm wondering if you can comment on -- was that a product of the competitive environment improving? Was it you guys being a little bit more selective on what kind of presence you're doing? Or what's the driver there, and how sustainable is it?

I think part of the answer -- you've said a couple of the answers there. One is, the competitive market there continues to be strong -- or weak, I guess, depending on what your viewpoint is there. But there's certainly, when we bid a repair and maintenance job, there is more bidders than there are ones where we can bid a capital project, either an aboveground storage tank or a large refinery turnaround. So, those are -- that lowers the suite of people that can bid that.

When there's more people bidding a small repair and maintenance-type activities, the margins have a tendency to be lower. But I think we've -- there's been some, over the course -- probably in the last six months, there's been some fall-out of the -- of some of those bidders that just aren't able to compete any more. For instance, I know in our Western US operations, several of the people that we competed with out there have either gone out of business or decided to leave the Western US for other markets. So, I think to some extent, that's helped to buoy up some of those pricings.

And then, in terms of the E&I market and the commentary you had around the Mid-Atlantic weather, Hurricane Irene, et cetera -- I tend to think of the emergency-type business as being higher margin or higher price than your sort of normal business you're doing in E&I. So, is it fair to assume that we might see a little bit of a dip on the revenue side in E&I next quarter, but see a benefit in margin that's actually -- more than offsets the lost revenue?

I can't -- any kind of mathematical combination is possible. We're just basically coming down off of and kind of getting back to some normalcy in our E&I business on the East Coast from that repair and maintenance. We had a couple weeks there of some pretty strong work, with upwards of 130 people out doing the repair and maintenance for long hours during the course of a week. But we have not -- I can't tell you whether the combination of shorter -- of smaller revenue, higher margins, mathematically on a net positive basis replaced higher revenues, lower margin work to where it's a net increase for the business. We're just not there yet.

And then, last question is on the downstream refinery construction side. Just given your commentary about your customers being a little bit healthier there and your expectations of improvement there, I guess I was a little bit surprised to see the construction top line be as weak as it was this quarter. Can you just give us a little bit of a sense of kind of what that project timing or what was going on this quarter, and what are your expectations as you look out a couple quarters?

You know, I think the backlog roll-off is something that we continue to look at. Now, for the fourth quarter for Construction Services, there were a couple of projects that slid a little bit. I don't know that it was a game-changer, but it did come in below our expectations on the other side. There were some projects on the Repair and Maintenance side that grew from what our expectations were.

All right, thanks very much.

William Bremer, Maxim Group.

Can you provide what your competitive advantage is in the E&I sector? My second question is -- what is the highest kilovolt that Matrix is able to operate on?

Part one, I would say some of our -- on the East Coast, some of our competitive advantage there, I think we have extremely good relationships with the building trades, unions in that area, particularly the IBEW. So, we work very closely with them. Two is, is that our performance, both from the reputation from our -- we had, over the past few years before I got here, had done acquisitions from -- with [Bogan] Electric, and then, with the last two years, S.M. Electric. Both those companies had strong brand recognition in that area.

So, those companies mixed with Matrix's performance characteristics has created a lot of comfort with our utility clients there. We're contractors of choice for them, we deliver for them on a day in/day-out basis. So, they know when they -- on the projects they have that they award to us, that we're going to get those done, and they're going to get them done in a timely fashion, and they're going to be safe and high quality.

So, I think those kind of things, for us, is one of the -- those are some of the key drivers from a competitive basis, for us. As it relates to the -- I'm a civil engineer, not an electrical engineer, so I can talk in [kips] and I can talk in moments and loadings, but kilovolts and amps, I think, are a struggle for me. So, I'm unable to tell you the highest voltage that we're able to work on. But I will tell that you that certainly, the delivery of electrical energy across transmission and distribution lines is, for the most part, all extremely high-voltage, in the 13kv and up. And so, we're able to work on -- safely to work on all those types of systems.

Should we be expecting an increase in CapEx in this particular segment, going forward?

Some of the drivers in that business are -- there's obviously the normal maintenance and repair-type things, systems and transmission, distribution delivery systems get older and got wore out. There's what you would call congestion-relief issues mandated by FERC, that as a utility business, that they have to -- are mandated to make upgrades and changes for that. And then, there's the renewable space, which is growing in a lot of places around the country, has to have interconnect areas. And so, as that business -- as the renewable generation comes online, their interconnect requirements also grow; and so, that's another area in which we are able to provide services.

And then, lastly, can you provide us -- what -- how much did emergency restoration provide you for the quarter? And do you expect some of it potentially to fall into the first quarter here?

I would say that to date, we have not -- like I said, we just are now sending our crews back to -- into what I would call normal operations. So, I don't have -- we don't have those numbers available today, of what that looked like. Like I said, we had approximately a peak of 130 people working 16, 20 hours a day for two to three weeks on preparation and repair after Hurricane Irene. Those final numbers, whatever that -- would come out in our first-quarter results.

Okay, John --

I would say that in the fourth quarter, I'm not sure there was that much emergency restoration work in the E&I revenues.

Okay. Thank you, gentlemen.

Thank you. There are no further questions at this time. I would like to turn the floor back to Management for closing comments.

I want to thank everybody for being on the call, for some great questions, and look forward to talking to you in the next quarter.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.