MasTec Inc (MTZ) 2009 Q2 法說會逐字稿

Welcome to MasTec second quarter 2009 earnings conference call initially broadcast on July 30, 2009. Let me remind participants that today's call is being recorded. At this time, I like to turn the call over to Marc Lewis, MasTec's Vice President of Investor Relations. Please go ahead.

Thank you, Stacy, and good morning, everyone. Welcome to MasTec's 2009 second quarter earnings conference call. The following statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In these communications we may make certain statements that are forward-looking statements regarding MasTec's future results, plans and anticipated trends in industries where we operate. These forward-looking statements are the Company's expectations on the date of initial broadcast of this conference call and the Company will make no effort to update these expectations based on subsequent events or knowledge.

Various risks, uncertainties and assumptions are detailed in our press releases and filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect, actual results might differ significantly from results expressed or implied in these communications.

In addition, we may use certain non-GAAP financial measures in this conference call. A reconciliation of any non-GAAP financial measures not reconciled to these comments to the most comparable GAAP financial measure can be found in our earnings release from yesterday or on the earnings at the investor relations section of our website located at www.MasTec.com.

With us today we have Jose Mas, our President and Chief Executive Officer, and Bob Campbell, EVP and Chief Financial Officer.

The format of the call will be opening remarks and analysis by Jos followed by a financial review from Bob. These discussions will be followed by a question-and-answer period and we expect the call to last approximately 45 minutes. Jos.

Good morning and welcome to MasTec's second-quarter call. First some second-quarter highlights. Revenue for the quarter was $388 million, a 27% year-over-year increase. Net income was up 21% to $19 million. Earnings per share were $0.25 this quarter versus $0.23 the second quarter of last year. And EBITDA was up 36% to $36 million for the quarter. All in all, we had a slightly better quarter than expected. Revenue for the quarter was impacted by acquisitions made in 2008. Acquisitions completed the second quarter of 2008 accounted for about $105 million of our 2009 second-quarter revenue.

Organic revenue came in as expected, down approximately 7.5% on a year-over-year comparison. I will cover the performance of our different markets in a minute, some of which are doing better than others, but I would first like to make some comments on general market conditions.

While we delivered strong second-quarter results, we are obviously in a very difficult overall market. In spite of that, we are seeing significant activity around new opportunities, bids, RFPs, etc. Quite frankly, at no point in this Company's history have we ever had the magnitude and diversity of business opportunities that we are seeing today.

However, delays in the implementation of the stimulus plan regulations coupled with the resulting lack of access to capital have caused our customers to hesitate on turning those opportunities into workable project. Over the course of the last few months, we have been surprised and disappointed by the stagnant nature of new awards.

Historically, our Company has experienced a significant ramp up in business activity and contract awards heading into the third quarter. This year, we expected that increase to be even more pronounced, given the diversity of our service offerings, our involvement in alternative energy projects, and the positive impact we expected to see from stimulus spending.

While we still anticipate an acceleration of business over the next two quarters, the lack of actual committed start dates has tempered our expectations. Again, our business outlook remains positive. We are aggressively managing the Company, leading up to what we believe will be a period of significant growth opportunities for us.

We have spoken extensively over the course of the last two years on our commitment to margin improvement. We feel we have executed extremely well on margin improvement over the last two years and continue to expect to see further margin expansion.

However, in the short term, margins have been and will continue to be somewhat impacted by utilization levels. We are holding onto our skilled workforce and expect to be in a position to quickly mobilize and react to spikes in activities and volumes.

One more general comment related to the first six months of 2009. I am very pleased with the progress our team members have made from a business development standpoint. We have been very aggressive in getting in front of both existing customers as well as new potential customers.

In difficult economic times, customers take a closer look at their long-term partners. We have done an excellent job of putting ourselves in a position to participate on many more future projects with the more diverse customer base.

Now I would like to cover some industry specifics. Within our communications group, our install of a home business had a very solid quarter. Revenues with DirecTV were up just under 10% on a year-over-year basis.

As stated in our last call, earlier this year AT&T began selling DirecTV as a bundled product. That relationship has been very successful and has had a positive impact on our operations. We expect revenue with DirecTV to remain strong and increase as we entered there seasonally strongest quarters.

As expected, our wireline communications market continued to struggle. We are seeing reduced levels of maintenance stand from many of our customers and a more moderate approach to fiber rollouts. While we do not expect much improvement in this market in 2009, we are more optimistic today about the potential impact that broadband stimulus spending will have on these markets in 2010.

During this last quarter we have been involved in discussions with many customers that will be applying for government grants. Currently, applications are due on August 14 and award announcements are expected by November.

To recap, over $7 billion had been allocated to broadband stimulus and a large portion of the money has to be used to build physical networks. We expect to get our fair share.

Our wireless market also performed as expected. Our largest customer in this area, AT&T. recently announced CAPEX for the first six months of approximately $7 billion and annual CAPEX guidance of $17 billion to $18 billion. That translates to CAPEX growth of nearly 50% for the second half of the year.

Order activity has been very strong and we expect these markets to deliver strong growth for the balance of the year. Wireless data continues -- wireless data growth continues to stress many of the carriers' networks requiring significant investments in their infrastructure.

Our natural gas market continues to face pressure. Activity has been spotty and competition has increased. There are a number of sizable projects bidding in the next few quarters and we continue to have a very positive long-term outlook. Obviously natural gas prices are depressed and we believe the activity will pick up nicely as prices recover.

Our electrical utility distribution and transmission markets also performed as expected. Revenues for these markets were flat year over year with distribution revenue declining and transmission revenue increasing. We continued to be very bullish on the long-term outlook of the transmission market and continue working at positioning ourselves to be a bigger player in that sector.

A market that we haven't talked much about is our heavy industrial construction market, which we entered as a result of our acquisition of Wanzek. Earlier this year, we were awarded our largest power plant project. The plant, a combined heat and power plant, will be capable of producing 100 MW of power at completion by mid- to late 2010.

We are also currently working with customers on proposals for both geothermal and biomass facilities.

Finally, I would like to cover our renewables market. We have made a significant investment in growing our renewable business and believe that our involvement in this market will lead to solid long-term growth. I spoke earlier about delays in customer spending and I would like to try to quantify some of those comments.

Since the beginning of 2009, we have bid or provided pricing on over $1 billion worth of wind projects. Of that total, we have been formally awarded approximately $100 million; we have lost approximately $275 million and are awaiting final results results on over $600 million worth of projects, a large number of which we believe we have a very high likelihood of winning.

Part of the challenge we're having is that that number of these proposals and bids have been out since earlier this year. While pricing activity and dialogue with customers on these projects is very active, final awards and firm start dates are not materializing. (technical difficulty)

Part of the challenge we're having is that a number of these proposals and bids had been out since earlier this year. While pricing activity and dialogue with customers on these projects is very active, final awards and firm start dates are not materializing. However we believe that this is a temporary issue. We expect a major catalyst to be the adoption of final language and guidelines around the stimulus is federal government loan guarantee program. The program currently has allocated $7 billion to be used to pay for credit subsidy costs which will translate in approximately $70 billion of loan guarantees and projects bidding. That should fund well over 40,000 MW of renewable energy projects that would need to begin construction by September 30, 2011.

Considering that there are less than 30,000 MW of installed capacity to date, and that installed capacity only increased by 1200 MW in the US in the second quarter, the efforts and resources required to even approach these numbers is significant.

Yesterday, for the reasons I have discussed, we have lowered revenue guidance to approximately $1.6 billion with earnings of approximately $0.85 per share for the year. While we are disappointed with the level of growth we expect to experience for the balance of the year, it is important to note that we expect to deliver record revenue and record net income for 2009.

Again we believe long-term prospects of MasTec have never been better. I will now turn over the call to our CFO Bob Campbell. Bob.

Thank you, Jos, and good morning. My Q2 headlines are as follows. Q2 revenue was up 27% to $380 million compared with $305 million last year. That is record Q2 revenue.

Q2 EPS was $0.25 per diluted share compared to $0.23 last year. Our margins continued to improve. Q2 gross profit margin improved to 15.4% from 14.9% last year.

Q2 EBITDA was $36 million compared to $26 million last year. That is a 36% increase, reflecting revenue growth and margin expansion.

EBITDA margin grew to 9.3% compared to 8.7% last year, so we continued to improve margins. Cash flow from operating activities has been strong this year, $52 million year-to-date versus $14 million last year.

The improvement is due to better earnings, good collections and minimal tax payments.

And finally our financial condition and liquidity remains strong, and our capital structure is in good shape. In the quarter, we replaced the $55 million [Wanzek] convertible note with a new $115 million convertible note. The old Wanzek note had an 8% coupon and a $12 conversion price and the new note has a 4% coupon and a $15.76 conversion price.

Now for the details.

The Q2 revenue was up 27% to $388 million. The increase comes from organic growth with DirecTV and from acquisition revenue in the windfarm and wireless markets. I will cover the top 10 customers in a moment. And as I mentioned, it was a record Q2 revenue.

Q2 gross profit margin improved from 14.9% last year, up to 15.4% this year. The improvement reflects continued productivity gains and lower fuel costs.

Depreciation and amortization was up 63% to $11 million, reflecting primarily the growth in fixed assets. But another big driver is $1.5 million increase in amortization expense for acquisition-related intangible assets. For Q2 G&A expense was flat at 6.4% of revenue.

Net interest expense for Q2 was $5.8 million compared to $3.7 million last year due to higher debt and lower interest income. It is worth noting that the annualized interest expense on the new $115 million convertible note is only $200,000 higher than the interest on the $55 million Wanzek note that was redeemed. That is the result of a 4% coupon on the new note versus an 8% coupon on the redeemed note.

I will talk about our capital structure and share count a little later.

Q2 diluted EPS was $0.25 versus $0.23 last year. And as I mentioned, we had a pretty dramatic growth in EBITDA. Growing to $36 million from $26 million last year. The EBITDA growth is stronger than the EPS growth, primarily because of a $4.2 million increase in depreciation and amortization, $2.1 million higher in interest and a higher share count.

For the second quarter of 2009, the 10 largest customers were -- DirecTV was 30% of total revenue, down from 35% last year. With the future growth in the other markets that Jos talked about, we expect the DirecTV percentage to drop into the 20s over the next year or so and eventually to be under 25% of total revenue.

We believe that we have successfully addressed our DirecTV concentration issue.

AT&T was 15% of total revenue, up from 6% last year. The growth is coming from our relatively new wireless business.

Duke Energy was 7%, Verizon 6%, [Ebidrola], One Oak and [Mortensen] were 3% each. Dominion Virginia Power, La Salle and Progress Energy were 2% each.

Regarding diversification, our top 10 customers now include one satellite television customer, two telecom customers, three windfarm customers, two natural gas pipeline customers and two electrical utility customers. Today, backlog is about $1.7 billion and that is an 18 month backlog number.

The comparable number for Q2 a year ago was about $1.4 billion. And it was about $1.7 billion last quarter.

Now let me make three comments about backlog. First, even though we believe that fiber deployment work will last for many years, our backlog includes only the specific work for which we have current visibility. Second, since almost 60% of our revenue comes from master service agreements or other contracts for continuing services, our backlog includes an estimate of the revenue from those contracts, but it is limited to 18 months.

And finally for the project work, Jose gave you a pretty thorough review of our different markets and current market conditions. The soft market conditions and project delays that Jos talked about have caused backlog to be flat.

As I mentioned, about 60% of MasTec's Q2 revenue comes from what we call master service agreements or other similar contracts for recurring services. Therefore, unlike many other construction companies, we have a large base of contractual, non project, and generally recurring revenue.

These master service agreements are generally for three to five years and generally are exclusive for a stated geographical territory. None of them have revenue guarantees, but the revenues are reasonably predictable.

Having said all of that, as Jos said, our electrical utility distribution work and our telecom wireless maintenance work is very soft as a number of our customers are trying to spend minimal dollars on maintenance.

Now let me talk about cash flow, our financial condition and balance sheet. Second quarter net cash provided by operating activities was about $3 million and year-to-date net cash provided by operating activities was $52 million compared to $14 million year to date last year. The dramatic year-to-date increase in cash flow from operations comes from higher earnings, good collections and minimal cash taxes.

Our cash flow from operations for both Q2 and year-to-date would have been even better, but we had several cash payouts on legacy legal settlements. This year we have paid $11 million for legacy legal settlements. If you will remember, we took a $39 million charge in Q3 of 2007 to accelerate closure of some cases going back to 2000 to 2004. We said at the time that the charge would be about half non-cash and half in cash. And that is how it has worked out.

Also, we have now basically settled and paid the cash for substantially all of the legacy litigation we recruit for in 2007. If you read our litigation footnote in the 10-K and in this 10-Q, you can get more details regarding our settlements. Most of the remaining open litigation has cash and P&L upside, but we don't attempt to forecast outcomes.

Our cash flow continues to be helped by our tax position. Currently we have a federal tax net operating loss or NOL of $164 million which we can carry forward against our future cash tax liabilities. Book taxes for the quarter just ended were about 2%.

We expect to resume accruing normal book taxes on a portion of the net before tax earnings next quarter, giving us a third-quarter tax rate in the range of 11 to 13%. The Q4 tax rate should be a full book tax rate of about 40% and that will give us a full year 2009 book tax rate in the range of 16 to 18%.

Please note that I am talking about our [books] tax rate for financial statement purposes. Because of our NOL, the overwhelming majority of our book tax accruals are non-cash. To be more specific regarding cash taxes, we expect to pay very modest cash taxes for both 2009 and also 2010.

We may be an almost full taxpayer in 2011 and then finally be a full, normal taxpayer by 2012. Our tax position really helps our cash flows until 2012.

At quarter end, our accounts receivable days sales outstanding or DSOs were 63 days, down one day from last quarter. We always have more room for improvement with DSOs. But I was reasonably pleased to see the DSO improvement in this tough economy.

Given our current business mix, our DSO goal today is to reduce DSOs to 60 days or better. Three days doesn't sound like much, but I think 60 day DSOs is a real stretch goal given today's economy. Every day a DSO is worth over $4 million in cash.

Regarding capital spending, we have only spent $11 million year-to-date. That is significantly lower than we originally expected due to a slower wrap up of business in 2009 and, frankly, some conservatism in our estimate.

We have been saying that we expected CAPEX to be $47 million this year. Now that we are at midyear and generally know what we are going to buy over the rest of the year, we are reducing our estimate to about $20 million to $29 million. We spent $35 million last year.

However we do expect increased CAPEX for 2010 and beyond. We are now much larger in size; and our windfarm and natural gas pipeline businesses are more capital-intensive than the historical core MasTec businesses. We will share our 2010 CAPEX estimate with you when we give 2010 earnings guidance.

To summarize our cash flow characteristics, I would say this -- EBITDA is going up nicely, DSOs are reasonable and improved, CAPEX in the 20s is modest, and our tax payments are immaterial. Therefore our cash flow should be very good.

At the end of the quarter, we had a strong financial position with cash, cash equivalents, securities available for sale and availability under the Company's credit facility, totaling $198 million. $18 million of the cash is restricted.

I will talk about our capital structure in just a moment, but we obviously have an extremely solid financial position which gives us an enormous cushion to ride out the worst economy that I have experienced in my career. It also gives us what we need to fuel above average growth over the next few years and we have some dry powder to finance acquisitions.

I'll talk about the securities available for sale, which are auction rate securities, in just a moment.

Now let me talk about our capital structure. Personally I remain very pleased with our overall capital structure and also the recent convertible note transaction which I will talk about in a moment. As a quick capital structure summary, at quarter end, we had $480 million in equity, $313 million of total debt, only $235 million in net debt -- that's net of cash -- and we estimate $140 million to $150 million in 2009 EBITDA.

Therefore, all of our balance sheet and credit ratios are in very good shape.

Now let me remind you two things regarding our debt. First it's very attractively priced and, second, almost half of our debt matures in 2017 and most of the remaining debt matures in 2014. For a quick review of the debt we have the following -- $150 million of 7 5/8%, 10 year notes maturing in 2017 and that is almost half the debt.

We have $[115] million in the new 4%, five-year convertible note. The note matures in 2014 and it is convertible at $15.76 per share. We currently have no draws on our bank revolver at quarter end; and it does support letters of credit backing up our insurance reserves.

Now let me make a few comments about the recent convertible note transaction. And I will also cover the secondary stock sale.

During the quarter, we improved our capital structure and our liquidity with the sale of the new $[115] million 4% percent convertible note and we substantially reduced the overhang on our stock by assisting [John Wanzek] in his viewing secondary offer in which he sold 5.2 million acquisition-related shares.

When the Wanzek family sold to MasTec last year, we were able to get them to agree to take mostly paper, stock and a note instead of the initial all cash deal. With the recent offering and note redemption, we were able to give them the liquidity they originally sought, and at the same time, get rid of the bulk of the stock overhang.

By redeeming the Wanzek 8% coupon, $12 conversion price note and replacing it with a 4% coupon note with a $15.76 conversion price, we in essence got incremental proceeds from incremental dilution equivalent to selling stock at $20 a share. It was a terrific transaction for us in terms of interest costs, capital structure and liquidity.

Now let me clarify the accounting for the new convertible note. On the P&L and on the balance sheet, we treat the par value of the note as long-term debt and our interest expense as equal to our coupon interest rate which is lower on a convertible security.

For EPS we used the if converted method. For this calculation we add back the interest expense during the period to net income, and we add the number of average shares that may be converted to the share count. For most periods we will be adding back 7.3 million shares to our share count to calculate EPS.

If you need to know more, footnote 4 in our 10-Q has additional details or you can call me.

Now back to the rest of our debt structure. Although we have no draws on our $210 million bank line, I would still like to make three comments about it.

First, we were fortunate in July of 2008 to expand the size of the revolver from $150 million up to $210 million. Second, we extended the bank line maturity until 2013 and, finally, it is very attractively priced. The pricing is LIBOR plus 225 effective August 1 or prime plus 125.

Obviously, these terms are significantly better than could be obtained today.

To round out the debt discussion, we also have about $48 million in other debt. The other debt consists of normal course equipment financing and capital leases. While there are modest maturities of this debt in 2009, they will be likely replaced by new normal course equipment financing and capital leases.

In our quarter -- in our quarter end balance sheet, we have $23 million of securities available for sale which are our auction rate securities. We have taken an $11 million life to date temporary impairment charge against equity to reflect the estimated market value of these securities. We continue to monitor the market value and liquidity for the securities.

In our litigation footnote in the 10-Q we did disclose that we have filed a binding arbitration claim against Credit Suisse, our investment manager. In our arbitration claim we are asking that Credit Suisse buy back our auction rate securities at par, which is $34 million.

The arbitration is currently set for September. So we should resolve the matter with Credit Suisse this year.

Now let me cover some details about our guidance. Our 2009 earnings guidance is revenue of approximately $1,600,000,000 with diluted EPS of about $0.85.

Full-year EBITDA should be in the range of $140 million to $150 million. We expect Q3 revenue to be approximately $425 million with EPS of about $0.25. There is an EBITDA reconciliation table in the back of our earnings release.

I mentioned this on the Q1 call. But I would like to re-emphasize the two items that are negatively impacting our 2009 EPS.

First, we have a much higher book tax rate for the full year of 2009 and, second, we have much higher amortization expense of acquisition-related intangibles. Note that the amortization is non-cash and almost all of the tax expense is also non-cash because of our NOLs.

Our book tax rate on the P&L for 2008 was 11% and we now expect the 2009 book tax rate as a percent of pretax earnings to be in the 16 to 18% range. Also our amortization expense of acquisition-related intangibles will grow from less than $4 million in 2008 to about $9 million for 2009.

The impact of the jump in tax rate and in amortization expense significantly impacts EPS. In fact, these two items have a roughly $0.21 to $0.23 negative impact on 2009 EPS.

I would also like to make a couple of comments about the profit margins implicit in our 2009 guidance and about our profit margin trends. First let me talk about pretax profit margin, which we think is useful since we do not currently pay any significant amount of cash taxes.

Our pretax profit margins have run from 4.4% for 2007 to 4.9% for 2008 and the margin in our revised 2009 guidance is 5%. Also note that the 2009 pretax margin is burdened with about $9 million of non-cash amortization of acquisition intangibles. Our EBITDA margins have grown grown from 7% in 2007 to 8% in 2008 and the EBITDA margin implicit in our new 2009 guidance is 8.8 to 9.4%.

As a reminder, our short- to medium-term pretax profit margin goal is 6 to 8% and our EBITDA goal is to hit double digits. We continue to believe that our goals are very attainable although it is obviously difficult to hit them in this awful economy.

The Company's guidance assumes continuation of today's pretty awful economy and is not dependent on a recovery and also assumes the current slow pace of business activity primarily in the wind, transmission, and natural gas markets. The guidance assumes that there will not be any significant stimulus impact on 2009.

On the other hand, it does not assume an economy getting worse than today. Our guidance also does not include an additional impact of our legacy litigation or any mark to market valuation adjustments on auction rate securities. These items are excluded either positive or negative. That concludes my remarks.

Now let me turn the call back to the conference operator for the Q&A session.

(Operator instructions). Alex Rygiel. FBR Capital Markets.

Thank you, good morning. I appreciate you giving us that end market color in the very beginning of your conversation. What would also be incrementally helpful is if you could break out the percent of revenue from each one of those end markets -- wireline, wireless, natural gas and so on.

You know, obviously, our utility revenues were about 36% of the overall total volume for the quarter. And if you listened over the course of the last couple of years, our goal is to get that to 50%. We think that is achievable and, obviously, wind is going to play a big role in that.

So when you look at where we are expecting that to be for the balance of the year, it's probably within that range, a couple of points up or down from that. Obviously our guidance has been impacted more significantly by the wind. So if you added that back in we would actually be pretty close to those numbers.

Of that, obviously, of the utilities wind is a small -- we have always said we thought we would be half of our utilities business. You kind of back out the portion that were dropped in from a revenue guidance perspective and the percentage is pretty much equal out on the communications side of the business. Again, about half of that is -- continues to be our DirecTV business and the other half is pretty evenly split between wireline and wireless.

And in the second quarter it appeared as if gross margins from the acquired businesses declined about 500 basis points from the first quarter of 2009. Can you talk a little bit about why the margins in this business has eroded despite revenues increasing?

So a couple of things. I think it might have been you, Alex, you asked a similar question in Q1 about the strength of those gross margins and our answer in Q1 was around the natural gas business. And what we said was going into Q1 of '09, we actually had a lot of backlog in that business with good margins which, obviously, helped those acquired businesses from a gross margin perspective.

And I think I went to the extent to say that it was probably overstated by the strength in the natural gas business. If you were to back out the natural gas business it would have been a lot worse. And since a lot about natural gas business has kind of followed into the organic revenue line because we made that acquisition in early Q2 last year, you are seeing what the gross margins for those acquisitions were in Q2.

So for those businesses, it wasn't much different in Q1. And if you listen to our comments earlier, we kind of say that obviously utilization levels are low and it is having a margin on impact, it's having a bigger utilization impact, obviously, on those businesses that we acquired post second quarter of '08 -- primarily wireless and the wind business or a big piece of our wind business.

The wireless business is wrapping nicely. We always expected it so we had modeled in an increase in gross margins as the year went on. On the wind side, obviously, it's very volume driven in the fact that volumes to be less than what we anticipated -- that is driving margins down and while we have built that into Q2, we are seeing that continue through Q3 and Q4. Although they will get a little bit better.

And lastly as it relates to AT&T, your comment and their comment with regards to their CAPEX being up close to 50% in the second half of the year from the first half, have you actually seen a 50% increase in your activity with that customer in the month of July and going into August?

The way we manage that business is we manage it, based on work order activity. They actually have laid out for us since early in the year the projects that they expected us to be working on in 2009. And as the year goes on they actually give you the individual work orders to begin on those projects.

So as we look at Q3, we are expecting a pretty dramatic ramp in the business. I would say it's just slightly under 50% and then we are actually expecting a bigger ramp in Q4. The realities are from -- and that business in particular, the customer continues to give us pretty much the same color they've given us all year although, internally, we probably have taken a little more tempered approach because the more you push out, obviously the harder it is to complete those projects over that six-month period.

So that is a pretty aggressive ramp. Our customer says they are going to do it. Our customers expect us to do it and if the work is there we will do it. But we have not built in a full 50% ramp in that business because we think it's a tall order and we are not 100% sure that they get there. But if the capital is there and the work is there and then you should see it in our numbers.

Thank you.

Liam Burke. Janney Montgomery Scott.

Thank you. Good morning. You talked about the bidding on the wind contracts roughly $1 billion and the award of $100 million, a loss of 275.

What were the deciding factors there and you seem to feel that you will get a higher percentage of the wind -- of the wins on the balance of the bids. What would be different?

That's a good question. We've got obviously a number of different customers that we are working with on the renewable side, especially on the one side. And we have a couple of customers that we operate under with something similar to what we call an MSA.

We don't classify them as MSAs and we don't book them as MSAs, but the reality is that there are certain customers out there that have signed on in some cases, two, and in some cases, three, and in some cases, one, and they pretty much try to either negotiate to work with those selected companies or they bid it to a very small group and you obviously get a higher percentage of that business because there's just less competition.

And that is a big subset of the customer base that we work for there. Now we have also worked very hard at expanding our customer relationships to try and get on a lot more people's bidders lists. Re-introducing MasTec and Wanzek really since we purchased them and we explained to a lot of customers what our capabilities are and I think done a great job at introducing and re-introducing, to a much broader market, our skill set which I think is going to pay huge dividends in years to come.

So we have seen a lot more bidding activity from some customers that may not have known us as well that, in those cases, they may have been more price sensitive. We think we missed many of those -- we think we came and the ones that were price-sensitive, we know we were shortlisted on a lot of those projects to maybe two or three finalists. We feel good about that.

But I think the nature of who we bid to or who we lost those bids to was a little bit different than our historical customer base, and I think with our historical customer base we are going to get a higher win rate. And as we look at a lot of the bids that are still out there waiting for the work they happened to be with customers that we have historically done more work with and we think we will do better with.

But again, in general, we've done a good job at expanding the customer base. We feel good about where we are from a cost perspective in that business; we think we are extremely competitive. We think there are very few people who can be as competitive as us in that industry and we can still do very well with those numbers.

So from a positioning standpoint in the market we are in great shape. What we need is obviously for the activity to hit, the projects to turn into work and as the volume comes in the door, the rest of the story is going to take shape because the margins are going to fall.

And are there any other opportunities in wireless outside of the AT&T business?

Yes, there are. We have been working hard on them. Obviously Verizon has been very vocal about their LT project or their long-term evolution. They've got two trial markets that are starting at the end of this year and then they are going into a bunch of markets in 2010 probably ahead of most of the other carriers.

So we have been working hard at expanding our relationship with them. I think we've talked about it on previous calls. We think we are in a good position there; and we've said all along that our goal is to grow that business and grow the customer base of that business.

The one challenge that we are having obviously is as AT&T's significantly ramping it's been in the second half of the year, we have a lot of resources dedicated to obviously meeting that. But we are working hard on expanding the business. We have made some actually pretty nice inroads in the last couple of months. And we hope we can start talking about some solid awards here over the next couple of quarters.

Thank you.

Todd Mitchell. Kaufman Brothers.

Thank you. Can you just give me a little more color on your DTV business being up? Is there anything specifically in the comp and was there any sort of shift in the mix of the work that you saw? What are the dynamics that you're seeing because of the BellSouth [line] coming on?

Couple of points. Obviously last year's second quarter was negatively impacted by the loss of the BellSouth relationship. Obviously, when AT&T bought BellSouth they converted their bundled product from DirecTV to Dish.

That affected our second quarter of '08 a little bit more than traditionally. So our second quarter of '08 had a bigger sequential drop than in previous years.

Obviously, since that has changed in '09 and the whole AT&T family has gone back to AT&T, it has almost been a double whammy. We had a, quite frankly, a pretty easy comp, based on what happened in Q2 of '08 and in Q2 of '09 we've had obviously the AT&T which has helped.

So business was up almost 10%. Q2 over Q2. As we look at the balance of the year, we continue to expect to beat last year's comps and actually to see sequential growth over the next couple of quarters. So business is great. They are obviously doing very well. They are going into the NFL season. Just came out with a very, very aggressive package in my opinion -- probably one of the more progressive packages they've ever had.

It is a $55 offer. It is a five month free offer actually including the NFL Sunday ticket. And we think it is going to do extremely well and that just went live, I believe, last week.

So pretty bullish on that business for the balance of the year. It has been a real bright spot this year for us.

Have you seen a shift in the mix between new customer [re-initiations] and upgrades?

Not much. I think obviously a little bit of impact on new installs just because of the AT&T relationship and where we sit geographically, relative to that. But if you look at our overall mix, our existing customer versus new customer mixes has just changed by a couple of points.

Thank you very much.

Adam Thalhimer. BB&T Capital Markets.

Good morning. Jos, with regards to the outlook for some of these wind projects to move forward, I guess we have a couple of difficulties. One might certainly to credit markets, you've got uncertainty related to stimulus. And I guess a third bucket would be the economy and decreased load growth.

It seems like credit markets are getting a little healthier. You might get some clarity on stimulus the next month or so. I mean, how big of a factor is the economy in the lower load growth and booking these products moving forward?

We are actually quite surprised at the number of projects that are on hold that currently have PTA agreements executed. So many of the projects that we have been quoting, many of the customers that we've been talking to actually have power purchase agreements signed with utilities. Their issue is financing.

That is a very good sign because it obviously gives those farms the revenue source for which they are going to make their business successful. So it truly becomes an issue of getting the right financing forum and many of them are counting on the loan guarantee program to start their projects.

So when we look at the pending, the $600 million bucket that we're talking about, we actually think that that business is very healthy with the exception of, obviously, the support of the financial credit markets. We think that is going to improve.

You've got a lot of different customers of developers in the wind mix. You've got big companies, you've got small companies and obviously you have some that have been somewhat active in 2009 and many that were active in 2008 that haven't been active in 2010.

So I think it has a lot to do with the geographic location of where your resources are, where you can potentially build. And I think there are certain parts of the country that are obviously going to be a lot more active than others based on renewable portfolio standards of specific states. So I actually do not think that that is going to have a big impact to the overall wind business as we look at a book 10.

The wind business in '09 is going to be significantly down from where it was in '08. On a go forward basis only 1200 MW were installed in the second quarter which is a very, very low number. And we think there is just enough out there, even the stuff we haven't bid that we are just talking to customers about.

We think there is a huge funnel of opportunities out there that are in good shape to go forward so we feel good about that.

The other thing that we really haven't talked about today and we really tried to stick to the loan guarantee program and the stimulus because it is what we really think is going to create a catalyst in the short-term, but obviously some of these regulations have dates assigned to them. Some of the tax credits expire. If you haven't started construction by September of '10 obviously the loan guarantees go through 2000 -- you have to start your projects by 2011.

So there are certain things happening that I think are going to spur investment. And the big one out there that we are really not giving -- we are not talking a lot about, but ultimately could have a big impact is the national renewable portfolio standard in the house.

Part of the energy bill, there was a 15% national RPS that is obviously being discussed in the Senate. It is still important to note that only 2% of our energy or just under 2% of our energy comes from renewables. So even 15% which is a much lower number than what was being talked about is a huge increase and a dramatic number that would force a lot of utilities across the country to sign PPAs and go forward.

The economy plays a role, but there is, I think there's so much other energy and interest around is that it's not going to have as big of an impact.

Thanks for that color and then I mean, I guess as analysts, callous as I look at the $250 million that you took out of the [H2] '09 guidance. I mean, if that's mostly due to wind and if we feel pretty confident that those projects will start to move forward next year, I mean is that a number that we can make into 2010 and view that as real projects that were deferred and that's growth versus '09?

I think, undoubtably, we are going to see a lot of that. Things are getting pushed out. There are a lot of plans for '010 and our '010 view hasn't really changed from what we originally anticipated. Because we have a lot of customers that haven't put anything out to bid, that haven't really looked for pricing and we know what they're '010 activity looks like. And it is a lot more than obviously what a lot of them were doing in '09.

So I think that a lot of the stuff that's getting pushed off is going to be incremental to what was going to happen in '010 but obviously things have -- things are turning out a little bit different. We are taking a more tempered view and I think that over the course of the next few months as a lot of this plays out we are going to have an extremely good look into 2010. And we are going to be able to provide a lot more color to where we think 2010 will be relative to both 2009 and to where we originally thought 2010 would be.

Great and then, lastly, the housing start numbers kind of look like they are bottoming out, maybe not getting materially better. I mean, have you seen any positive signs in either your last mile telecom business or your electrical distribution business? And if not, do you have a feeling for where housing starts a need to be before those businesses start to improve?

The answer is no and I think that you've got a couple of things right. I think we are -- when the housing market starts to decline, we are probably a little behind the curve in that the utilities aren't going in after significant, the houses are pretty much completed or close to completion.

So as the funnel and backlog of those houses finished, we obviously still had some work going through that period. As housing starts start, we are going to be probably a couple quarters behind it as some of that construction starts getting to the point where actually utilities are coming into the ground.

So bottom line is, we haven't seen any impact yet. Obviously the fact that it is getting better is great news for everybody. And it will over time have an impact on our business, but we haven't seen it yet.

(Operator instructions) Veny Aleksandrov. Pritchard Capital Partners.

Good morning. I have a question you mentioned that the final language on guidance from the stimulus bill is going to be a catalyst. When do you think this will happen? Is it going to be September event or later or 2010? What are your internal predictions?

The language is supposed to come out obviously in July and we are at the tail end of July and the language isn't out yet. We know drafts. We know that there have been some drafts that have come out on the language. We are actually expecting the language any day whether it falls into the first week of August or the end of August, we really expect this to happen in the short term.

Obviously once the language is out everybody -- I think most people already positioned to move very quickly and then we think funding will come in shortly thereafter, but I think that you also -- what you're also seeing is you have got a lot of people that are willing to finance these projects that are on hold waiting for that language to come out to ultimately determine if the way they are trying to position themselves to finance that is accurate.

So I actually think we will see some activity relatively quickly as that language comes out and again we are expecting it any day. We kind of backed off of what we expect for the balance of the year from a workload perspective to hit us from that, but hopefully we will be positively surprised.

Thank you. Then, on the Metro Gas infrastructure business, do you see any new work coming or do we have to see sanctions in natural gas price so that new projects are coming? What and how much of your backlog is from natural gas infrastructure purchases?

In Q1, we talked about how during that quarter there wasn't a lot of activity and we have seen a ramp up towards the back end of that quarter from an activity perspective. Actually Q2 from pure activity was kind of stayed the same way it was at the back end of Q1 which was a little bit better.

Obviously challenges competition is a lot more competition because there it's just overall less work and a lot of players going after the same work. So there's been a lot of pricing pressure in that market and I think part of the positive, and we mentioned it earlier in the script, is there are some pretty large projects that are coming up to bid in the next couple of quarters. So we think that with some luck and some hard work, we hope to be in a position where that business actually starts looking a little bit better from a backlog perspective as we go into 2010 in spite of the prices and where they are at.

As prices get better, we are going to see a lot more work in that industry, but obviously prices continue to be very depressed. As a total backlog, our natural gas backlogged piece of it actually went down a little bit quarter over quarter. And it is a very small piece of our $1.7 billion.

Okay. Thank you so much.

John Rogers with D.A. Davidson.

Good morning. Just following up a little bit more in terms of the wind projects, and I guess this applies to the heavy construction projects as well. With the market slowing down or being pushed out six months a year, what are you seeing in terms of margins embedded in your bids? I mean, is pricing coming down or have you felt any pressure to become more aggressive with your bids there?

I think that we have been very disciplined from the bidding approach. Our price is down over where they were at the peak last year. The answer is yes. Our price is dramatically down, the answer is no. So we continue to believe that on the work that we are looking at and the work that we have priced, we can do well from a margin perspective.

There is a lot of costs both from a material perspective and even from a labor perspective that have come back in line a little bit. And we tweaked those models. So even if we are offering lower prices to really try to get the same margin profile out of the business, we think that is doable. I think the good thing about wins is that there is a small number of players that have done very well in that industry that have a very good reputation and I think most projects are being awarded to a small group. And I think that small group while obviously competitive and we have seen prices come down a bit, I think it's reasonable bidding.

Okay and just to be follow up on your comments about the 600 -- I think it was $600 million in pending awards out there. Based on your conversations with [bidders] at this point, do you expect those at least the awards to come out in the second half of this year or --?

Yes.

Okay. And anything more on the timing on that? Is this something we are going to be hearing about in the next month or is it spread through the course?

No. Again, it's pretty tied into the ability to finance the project. So what we perceive happening is we think ultimately the rules are going to come out. Ultimately there is going to be funding sources available for these projects and then we are going to -- we think we are going to see an avalanche of projects getting announced all at the same time.

Okay. Great. Thank you.

This concludes our question-and-answer session. At this time I'd like to turn the conference back over to Mister Jos Mas for any additional or closing comments.

Again we would like to thank all of you for participating on today's call. We look forward to speaking again after our next quarter. Thank you very much.

And this concludes today's conference. We thank you for your participation.