MasTec Inc (MTZ) 2011 Q4 法說會逐字稿

Welcome to the MasTec fourth quarter 2011 earnings conference call, initially broadcast on March 1, 2012. Let me remind participants that today's call is being recorded. At this time I'd like to turn the call over to Marc Lewis, MasTec's Vice President of Investor Relations. Marc?

Good morning. Thank you everyone. Welcome to MasTec's fourth 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 such as statements regarding MasTec's future results, plans, and anticipated trends in the industries where we operate. These forward-looking statements are the Company's expectations on the day of the 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 filings 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 may differ significantly from results expressed or implied in these communications.

In today's remarks by Management we will primarily be discussing adjusted financial metrics as discussed and reconciled in yesterday's press release, 10-K, and supporting schedules. In addition, we may make use of certain non-GAAP financial measures in this conference call. Also a reconciliation of any non-GAAP financial measures not reconciled in these comments to the most comparable GAAP measure can be found in our earnings press release, our 10-K, and on the Investor Relations side of our website at MasTec.com.

With us today we have Jose Mas, our Chief Executive Officer, Bob Campbell, our Executive Vice President and Chief Financial Officer. The format of the call will be opening remarks and announcements by Jose, followed by a financial review from Bob. These discussions will be followed by a Q&A answer period, and we expect the call to last about 60 minutes. We have a lot of things to talk about today, so I'd like to turn it over to Jose.

Thank you, Marc. Good morning and welcome to MasTec's fourth quarter and year-end call. Today I'll discuss our full-year results and provide an overview of 2012. Before getting into details, I'd like to take a step back and make some observations. A few years ago we publicly set out to diversify our business and put ourselves in a position to have greater growth opportunities with improved margins. Over the course to the last five years we've tripled revenues and almost quadrupled EBITDA. We've accomplished our objectives despite a difficult market environment. While these are impressive financial results, our greatest accomplishment is how we positioned ourselves across a number of growth industries which we feel will offer us expanding opportunities for both continued growth and better margins during an improving market environment, which we are today clearly seeing.

For 2011 annual revenues were $3.009 billion, a 30% increase. We had solid and broad based growth with our install-to-the-home business growing 25%, our wireline and utility business growing 24%, our wireless business growing 59%, our pipeline business growing 38%, our transmission business growing 205%, and these were offset by a reduction of 35% in our renewable business.

As I mentioned earlier, we've done an excellent job of both diversifying our business and positioning ourselves to capitalize on some great growth opportunities. More importantly, we believe every one of these markets, including renewables, will continue to provide significant opportunities for consistent growth for the foreseeable future.

From an earnings perspective, we finished 2011 with $1.07 of EPS, $261 million of EBITDA and an EBITDA margin of 8.7%. While 2011 was another record year for MasTec, I am not satisfied or happy with our margin results. Our margins were negatively impacted by the second half performance of both our wireless and pipeline businesses. While disappointed, I'm encouraged by our progress and believe we will see significant margin improvements in 2012.

Again, just to reflect, we made tremendous margin improvements from 2007 to 2010, taking EBITDA margins from 7% to 10.4%. While we slipped in 2011, we have set an initial goal of 10% EBITDA margins for 2012, a 130-basis-point improvement from last year. I can guarantee that as a company, we are focused and driven to improve margins in 2012 and beyond. We expect margins to steadily improve as the year goes on, especially as we complete our challenged projects in the Marcellus area and as wireless spending begins to aggressively ramp up.

Now, I would like to cover some industry specifics. Our communications revenue was up 12% for the fourth quarter of 2011 versus 2010, and up 33% for the full year. Our install-to-the-home business was up 24% for the fourth quarter of 2011 versus 2010 and up 25% for the full year. Growth was driven by both organic growth and our acquisition of Halsted, a provider in the northeastern United States. The integration of this business has been smoother than expected and in 2012 we'll enjoy a full year of contribution from Halsted. We expect organic growth to be in the mid single digits and anticipate the sale of our retail sales business sometime in the second quarter.

Our wireline business was up 32% for the quarter, and 24% for the full year. The growth is being driven by work associated with broadband stimulus and we expect strong results for both 2012 and 2013. We also expect to see continued improvement in this market as new housing construction begins to rebound.

Our wireless business was down 2% in the fourth quarter versus 2010, down 22% or $41 million sequentially, and up 59% for the full year of 2011 versus 2010. During the quarter, we announced the extension of our wireless contract with our largest customer. This new three-year agreement covers all of the geographic area we previously had with expansion in two new markets. The renewal and extension of this contract was extremely important for the future growth of this business.

As we explained in our last call, wireless margins were negatively impacted by a dramatic increase in our workforce and self-perform capabilities and the inefficiencies created by this less experienced workforce. While we had strong annual revenue growth, the impact of the break-up of the AT&T and T-Mobile deal led to certain delays which negatively affected both the fourth quarter revenues and the first quarter of 2012. We expect wireless revenue to be down about 10% in the first quarter but be up for the year. We now have excellent visibility into our full-year plan with our largest customer, and we continue to pursue a number of opportunities to expand and diversify our customer base in this business. We believe that this market affords us long-term growth prospects as data continues to play a larger role in wireless devices and as 4G continues to be rolled out throughout the world.

Our utility revenue was down 2% for the fourth quarter of 2011 versus 2010, and up 28% for the full year. Revenues in our transmission business more than tripled in both the fourth quarter of 2011 and for the full year. The revenue growth came from our acquisition of EC Source earlier in 2011 and from about 60% organic growth for both the quarter and the year. We expect significant continued growth in this market for 2012 and beyond. The bidding activity for transmission projects remains very strong, and there are a number of very large opportunities that we are pursuing.

Shifting to our pipeline business, revenues were up 38% for the year, and down about $60 million in the fourth quarter. I would like to note that in the fourth quarter of 2010, the Ruby pipeline represented about $143 million of revenues. We offset $83 million of the Ruby revenue in our pipeline business despite a difficult quarter in Marcellus due to weather. Had we had normal weather conditions, we believe that the business would have been almost flat for the quarter. The Ruby pipeline accounted for approximately $200 million of revenue in 2011, and we are confident in our ability to backfill that work and deliver similar results in 2012.

Our activity levels in the different shale basins across the country remains high, and we are seeing an increasing number of opportunities across all regions. The delay of the Keystone pipeline has had a negative effect on both competition and pricing, and any positive developments related to that project will have a very positive impact on the industry. During 2011, we successfully closed on our acquisition of a Canadian pipeline company and are very bullish on that market and the opportunities available to us. In addition to the shale business, there are a number of large interstate jobs that will start in late 2012 and go well into 2013 and 2014. We are well positioned in this market and continue to believe that it will be a source of growth for us for years to come.

Moving to renewables, revenues for 2011 were down 35% compared to 2010. While 2011 was a tough year for renewables, 2012 is shaping up to be a great year. Our bookings in the wind market are at record levels, and we expect to construct and deliver over 1500 megawatts in 2012. With the expiration of the 1603 cash grants at the end of 2011, this year is expected to be one of the best years the industry has seen. As we look forward beyond 2012, we are encouraged about the level of activity associated with the extensions for wind-related tax credits and are optimistic that an agreement will be reached. In any case, we are taking a more macro view of our renewable business and expanding our power generation capabilities.

We are focused on participating in the construction of power generating assets, whether they are wind, solar, or thermal related. The solar market will be an area of solid growth as we were awarded a number of projects in late 2011 and early 2012. The solar market enjoys tax credits that extend through 2016 and we expect this market to be an increasing part of our business.

We have also, over the last year, spoken about our desire and investment in growing our thermal power business. We are pleased to announce that within the last few weeks, we have been awarded contracts to construct two 50-megawatt peaker plants. These are gas turbine plants located in North Dakota that will provide needed power to support the Bakken oil and gas boom. These are important projects in the evolution of our power business and hopefully the first of many. Based on our currently contracted work in this business, we expect 2012 to be a great year and revenues to more than double those of 2011.

I would now like to comment on guidance for 2012. We expect revenues of approximately $3.25 billion with approximately $325 million of EBITDA. Since we expect to sell our DirectStar business sometime in the second quarter this represents about 12% revenue growth and a return to double-digit EBITDA margin. I strongly believe that we have never been in a better position to take advantage of the opportunities our different markets are affording us, and I am certain that 2012 will be another record year for MasTec. I would now like to turn the call to our CFO, Bob Campbell.

Thank you, Jose, and good morning. Today I'm going to cover fourth quarter and full year 2011 financial results and Q1 guidance and 2012 full-year guidance, and I will also cover cash flow, liquidity and our capital structure. Before I start, I want to remind you of two material items that are included in our 2011 results. First, in the second quarter, we had a $29 million pretax remeasurement gain related to our purchase of 100% of EC Source, our big project electrical transmission company.

And second, in the fourth quarter, we had a $6 million pretax expense for the withdrawal liability related to our leaving the underfunded Teamsters Central States Pension Plan. Both of these items are in our financial statements, of course, but I have backed out both items for my remarks today. Therefore, all of my remarks today will refer to adjusted earnings and adjusted EBITDA without these two items.

The impact on our P&L of backing out the $29 million EC Source remeasurement gain and adding back the $6 million Teamster Pension withdrawal expense is as follows. Backing out the two items lowers full-year net before tax profit by $23 million and lowers EBITDA by the same amount, and the two items lower fully diluted EPS by $0.16. We have provided adjusted numbers and reconciliation to GAAP data in the tables attached to our press release and also in our SEC filings.

Before I get into details, let me give you a quick overview. Q4 was at the upper end of our earnings guidance. For the full year of 2011, we had record revenue, record EBITDA, and record net income. Despite the record year, as Jose mentioned, 2011 should have been better, especially regarding margins and cash flow, and in a minute I will give you a bridge from 2011 to 2012 for both margins and cash flow.

In 2011 we had good renewals with our two largest customers. We renewed with AT&T Wireless for three more years, and we extended our DirecTV contract for four years. We made five good acquisitions in 2011. EC Source gave us a platform in the big project electrical transmission world. FabCorp in Western Canada gave us an oil and gas pipeline and facilities platform in Canada and a beachhead from which to add other MasTec businesses in Canada. We were pleased to add significant new territory in the northeast with DirecTV via the Halsted acquisition.

For 2012 we are projecting revenue of $3.25 billion with $325 million of EBITDA and fully diluted earnings per share of $1.42. We are assuming that we will sell DirectStar, our DirecTV marketing company, in the second quarter, and after adjusting for the DirectStar sale, that's about 12% revenue growth in 2012, and that's 10% EBITDA margin, bouncing back to margins similar to 2010. 2012 is about solid execution, better margins, and better cash flow.

And finally, let me say that our capital structure and liquidity remain in great shape. One of the highlights of 2011 was securing a $600 million bank credit facility on very favorable terms and which dramatically increased our liquidity. Our liquidity at year end was $470 million, compared to $284 million a year ago. We calculate liquidity as unrestricted cash plus availability from our bank credit facility.

Now let me go into the details of our results. As I mentioned, fourth quarter earnings were at the upper end of our guidance range; although revenue was higher than guidance, margins were below guidance levels. The two issues impacting margins in Q4 were the same as in Q3. First, we had several pipeline projects with wet terrain and margin and profit issues, and second, we had lower productivity and margins in our wireless business. Q4 revenue was $774 million, up a respectable 6% versus last year, given the tough comps related to the strong Ruby pipeline revenue in Q4 of 2010. The growth was led by our electrical transmission business, which was up 246%, helped by the EC Source acquisition.

Our legacy transmission business in Q4 was up 62%, and that was all organic. Install-to-the-home, which is primarily DirecTV, was up 24% in total and up 6% organically after backing out the impact of the Halsted acquisition. Wireless was down slightly year over year in Q4 and wireless was down about $40 million sequentially from Q3. Pipeline in Q4 was down $60 million year over year. In the fourth quarter of 2010 the Ruby pipeline project was going at full speed. Renewables was down about $20 million in Q4 ending a really soft year for this business. Q4 EBITDA was $52 million compared to our guidance of $46 million to $51 million, but well below last year's blow-out quarter where we had $88 million of EBITDA. Q4 fully diluted earnings per share was $0.15, at the top end of our $0.12 to $0.15 guidance, but substantially below the $0.44 we earned a year ago. Q4 EBITDA margin was 6.8% which was hurt by productivity and margin issues in wireless and profit issues on several pipeline jobs. Fourth quarter of 2010 EBITDA margin was 12.1%. I will provide an EBITDA margin bridge to 2012 a little later.

For the fourth quarter of 2011 the ten largest customers were, DirecTV was 25% of total revenue in Q4. We were up 24% in Q4 and 26% for the full year of 2011. And the organic growth without Halsted was 4% in Q4 and 15% for the full year. AT&T was 19% of total revenue in Q4. Our revenue with AT&T was down 10% in Q4 versus last year but up 45% for the full year. Mid-American Energy was 5% of revenue. Included in that number is our big electrical transmission project in Utah being handled by EC Source, and wind farm work handled by Wanzek Construction. EQT and Duke Energy were both 4% of revenue. EQT is a shale pipeline customer, and Duke is a wind farm customer.

Dominion Virginia Power, Energy Transfer, DCP Midstream, and Spectra Energy were all at 3% of revenue. Dominion, Energy Transfer and DCP Midstream are shale pipeline customers. And Spectra is a Canadian natural gas facilities customer. And finally, Talisman, a shale pipeline customer, rounded out the list with 2% of revenue. Regarding diversification, our top ten customers in Q4 include one telecom customer, one satellite television customer, six oil and gas customers, one wind farm customer, and one electrical transmission customer.

For the full year of 2011, we had record revenue, record EBITDA, and record net income, and we topped $3 billion in revenue for the first time. It is worth noting that revenue has grown from $1 billion dollars in 2007 to $3 billion in 2011. And more importantly, EBITDA has grown at a faster rate, from $73 million in '07, up to $261 million in 2011. Over the last four years, our compound average revenue growth rate has been 30%, and the compound average EBITDA growth for the same period is somewhat higher at 38%. We're pretty proud of the improvement in our results, especially because the improvement has come during a period of generally soft markets and a weak economy.

2011 full year revenue increased by $701 million to $3 billion, or a 30% increase, and organic revenue growth was 19%. 2011 full-year EBITDA of $261 million was up 8%. 2011 fully diluted -- full-year fully diluted EPS was $1.07 compared to $1.05 a year ago. On a 2011 full-year basis, we had broad based revenue growth in all areas except renewables. Transmission revenue more than tripled, wireless was up almost 60%, pipeline up almost 40%, wireline and install-to-the-home both grew about 25%, with renewables, which has become a smaller part of our overall mix, that was down about 35%.

Our revenue mix is split between one-time nonrecurring construction projects and what we call master service agreements and other similar contracts for generally recurring services and therefore recurring revenue. For 2011, 59% of our revenue came from master service agreements or similar contracts, and 41% came from one-time nonrecurring construction projects.

What we call master service agreements and similar contracts are briefly as follows. Generally these contracts are for multiple years, often three to five years, and generally they are exclusive for a certain geography or territory. Most of these contracts have some kind of price escalation language or some other price adjustment mechanism. Although these contracts do not contain revenue guarantees, and they do allow cancellation under certain circumstances, in reality the revenue from these contracts is pretty predictable. These contracts generally go to full term and are not canceled, and our renewal rate is extremely high. I just wanted to highlight that even though our one-time nonrecurring project revenue is growing nicely, we do enjoy a large and stable revenue base from these master service agreements and similar contracts.

At year end our backlog was $3.3 billion, and that's a record level for us. As always, I'm giving you an 18-month backlog number. The comparable number at year end a year ago was $2.4 billion, and $3.1 billion at the end of the 2011 second quarter. Our backlog includes an estimate of the next 18 months of revenue from master service agreements and other similar contracts.

Now let me talk about our cash flow liquidity and our balance sheet. We had negative free cash flow in 2011 after having very good cash flows in recent years. The cash flow deterioration was primarily due to the large increase in accounts receivable, but it was also negatively impacted by increases in inventories, CapEx, and cash taxes. We are currently projecting a dramatic improvement in free cash flow for 2012, and we expect that improvement will come in three areas. First, EBITDA should grow from $261 million to $325 million, and earnings are always a great source of cash flow. Second, we expect our accounts receivable days sales outstanding, or DSOs, to level off in 2012 after a dramatic increase in 2011. And third, after a big increase in capital expenditures in 2011 as compared to '10, we currently expect that CapEx will be down slightly in 2012.

Now let me add some color to my cash flow comments. As I mentioned, the biggest negative cash flow item was accounts receivable growth. Part of the growth in AR is understandable. 2011 revenue did increase by about $700 million. However, the real issue is that our accounts receivable days sales outstanding, or DSOs, went up dramatically in 2011.

We closed 2010 with an almost too good to be true DSO of 56 days, and we closed 2011 at a too high 79 days. Our DSO calculations include our unbilled revenue. Every day of DSO is worth $8.4 million in cash, so the DSO increase hurt our 2011 cash flow by about $180 million. For your information, the year-end 2010 56-day DSO was helped by some very favorable early payment arrangements for projects that we worked on during 2010 and were completed in 2011.

And as we discussed on the third quarter call, in our wireless business we had a backlog of projects to close out and bill that could not be cleared out by year end. And as a practical matter, from a mix standpoint, normalized wireless DSOs are substantially worse than company average, even without a backlog and close-outs of billing. We had a pretty good cash flow quarter in Q4 driven by improvement in wireless collections. However, as I mentioned on the third quarter call, some of the collections on the catch-up wireless billing will take place in 2012.

I have said for years that our long-term DSO goal was 60 days. And after years of trying, we hit and beat that goal in 2010. However, when we look at our current mix of business and customers and contracts, I believe that we are now destined to have DSOs in the 70s, although we believe we can do better than our current 79 days. And for your information, our peers are generally in the 70s and 80s. As I've said before, you will likely see going forward some volatility in DSOs due to either the positive or negative impact of big projects with different payment patterns.

We had a $29 million increase in inventories in 2011. The majority of that was to support wireless growth, although there was some growth related to DirecTV. Regarding capital spending we spent $72 million for 2011 compared to $30 million for 2010. We're a much bigger company today and pipeline and electrical transmission are more capital intensive than the rest of MasTec. Some of the 2011 increase related to our shale pipeline growth and a portion of the increase was accelerated expenditures to take advantage of the 100% bonus tax depreciation for 2011 expenditures. Our current forecast for 2012 CapEx is $65 million, down just a little from 2011.

Earn-out payments have been declining. They peaked in 2010, and that year included the $67 million buyout of the majority of the wireless Nsoro earn-out. In dollars we spent $81 million on cash earn-outs in 2010, $45 million in 2011, and our current estimate for 2012 is $22 million.

The biggest earn-outs have been for wireless, which we have now substantially bought out, and for Direct Star, our DirecTV marketing company that we expect to sell in Q2.

Another use of cash in 2011 was stock buybacks. In November we announced a $75 million buyback, and we completed the $75 million in purchases last year at an average price of $16.33. In December last year, we announced another $75 million stock buyback authorization, but we have not bought any shares under that authorization.

Now let me talk for a minute about our capital structure. As a quick capital structure summary, at year end we had $811 million in equity, $495 million of total debt, only $475 million in net debt -- that's net of cash -- and we expect to have $325 million of 2012 EBITDA. Therefore, all of our balance sheet and credit ratios are in very good shape. I would like to note three things about our capital structure. First, we have no significant maturities until '14, '16, and '17. Second, all of our debt has attractive interest rates and terms. And third, we have tremendous availability from our new $600 million, mostly unused bank credit facility. Availability from our new bank credit facility at year end was $450 million.

Our 2012 full-year guidance is revenue of $3.25 billion, EBITDA of $325 million, and fully diluted EPS of $1.42. The 2012 revenue projections represent an 8% increase over $3 billion for 2011. And after adjusting for the likely Q2 sale of DirectStar, that's a 12% year over year revenue increase. Our 2012 EBITDA projection of $325 million is a 25% increase over EBITDA of $261 million last year. The 2012 EBITDA margin implicit in our guidance is 10%, which compares to 8.7% last year, and I will discuss margins in more detail in a moment. EPS of $1.42 is a 33% increase over $1.07 of EPS last year.

Our 2012 full-year guidance assumes a tax rate of about 39.75% and cash taxes of about 90% of book taxes. Acquisition amortization expense is estimated at about $12 million for 2012, down from $14 million last year. Our estimate for a full year share count for fully diluted EPS is about 86 million shares. Remember that our share count for EPS purposes can fluctuate up and down with our stock, because of the accounting for our convertible notes. There's information about share count for EPS purposes in footnote 2 in our 10-K.

My final comment about our 2012 full-year guidance is about margins. The EBITDA margin implicit in our guidance is 10%, bouncing back to a level similar to what we achieved in 2010. Now let me bridge from the 8.7% EBITDA margin in 2011 to the 10% expected in 2012. Let me give you five reasons that give us comfort that we can bounce back to double-digit margins in 2012. First, we believe that the wireless productivity and margin issues in the third and fourth quarters were mostly contained and corrected in 2011. Second, the pipeline, Marcellus Shale, wet terrain profit issues on several projects were mostly dealt with financially last year, although there will be some margin drag through the first half of the year.

Third, the Halsted DirecTV acquisition that we made in 2011 was a fixer upper that contributed modest margin in 2011. However, we're making good progress improving that business. So instead of roughly $60 million in revenue with modest margin in '11, we should have a full year of about $110 million in revenue at better margins. Fourth, our renewables business is expected to double in 2012, and the majority of the incremental gross profit should flow through to the bottom line. And finally, we expect that our electrical transmission revenue will grow this year and the margin should be higher than company average.

Now let me give you Q1 guidance numbers and some color about the quarter, and I will share with you how we see the year unfolding. We currently project Q1 revenue of about $725 million compared to $618 million last year, and that's an increase of 17%. We project EBITDA of $50 million to $53 million compared to $58 million last year. We project Q1 fully diluted EPS of $0.15 to $0.17 compared to $0.26 last year.

I will cover three issues relative to the year over year comparisons. First, Q1 2011, including the Ruby project going at full speed with excellent margins. Second, we expect our wireless volume to be soft in Q1. We now have visibility for the full year's build plan with AT&T, and it looks good, but our volumes are light in the first two months of this year, and then we expect to start rolling with good volume in March. And third, we have several pipeline projects with depressed profitability to finish in the first half of the year. So conceptually, we see Q1 as somewhat light, and then anticipate much better results in the remaining quarters.

For those of you who may not be familiar with MasTec, it is worth noting that Q1 is normally our weakest quarter by a wide margin and then we start rolling in Q2. So Q1 2012 pretty much fits our normal seasonal pattern.

In summary, 2011 was a record year in terms of revenue, EBITDA, and net income. 2012 is all about execution, and we expect to bounce back to 10% EBITDA margin and to generate much better cash flow. We expect another record year for MasTec in terms of revenue and earnings. That concludes my remarks. Now let me turn the call back to the conference operator for the Q&A session.

Thank you. (Operator Instructions)

Andy Kaplowitz, Barclays Capital.

So, Bob gave us a lot of information on why the margins are going to go up again in '12. When I look at a 10% or better EBITDA margin, Jose, if I compare it to 2010, it almost seems like as long as you get the Marcellus issues out of the way, that it is a pretty low bar. At first I thought maybe it's a bit aggressive, but when I look at it, you've got a much bigger transmission business in '12 than '10. Renewables should be better. Wireless, maybe the same; pipeline, maybe a little worse. So, is that the right way to think about it, or is this harder than I think to do?

Andy, I think we've said all along that 10% isn't our long-term objective or goal. We set 10% as a goal back in 2007 when we were at 7%, and we said we wanted to get to double-digit EBITDA margins. It took us a couple of years, but we got there. It's not our optimal goal. We've said all along that we think there's significant margin improvement available to us over time with -- and I know we keep saying it, and I think it's really important. What we've done over the last couple of years has been in a very difficult market environment. It hasn't -- our markets are not affording the different contractors across the country to get optimal pricing, to increase pricing. It's almost been quite the opposite for the last few years, where people have really been struggling to get work to keep their people busy. That's going to have a substantial impact on margins across our entire Company as the market environment improves, which it is clearly doing today.

So, 10% is not our long-term objective by any stretch of the imagination. 10% is our objective for 2012 because we're coming off some issues from 2011. So, if you think about our margin story for 2012, it's all about getting the troubled pipeline projects behind us, which we think we do in the first half of the year. Having a normal seasonal ramp in wireless, which I think was a little bit slowed because of the AT&T and T-Mobile deal. If not, I think fourth quarter and first quarter would be a lot better, but it's definitely going to ramp as the year goes on because we've got great visibility into our annual plan.

With those two issues, with pipeline being normalized, and I think that there's a lot of work in the pipeline business, and I think that's going to be a very good business for the next couple years at least, and just getting back to a normal ramp in wireless, the margin story kind of takes care of itself. And then the question really becomes -- how much better can we perform over time than the 10% that we're talking about for 2012?

It seems like it should be better over time, I agree, Jose. So, just following up on the margins in a different sense, you're building out your power generation capabilities. That's going to result in larger, more chunky projects. How do you look at risk of these, like these peaker plants? They don't seem hard, Jose, but at the same time, it's different than your MSA business of the past. So, how do you look at that?

I think our business is very different than it was in the past, right. We've absolutely changed from being predominantly an M&A-driven business, to being a business that's much more diversified and much more balanced, I think. Over the course of the last few years, I think we've delivered on our project work, obviously with some exceptions, and we got a black eye on us from the fourth quarter. But outside of that, I think we've done a phenomenal job at managing our projects and managing risk.

What I do think is really important to think about when you think about MasTec is our projects tend to be short duration, so even these peaker plants are about a year long, one-year-long projects. It's not like we're out there for multiple years. And they're not really large. So, we're not bidding on multi-$100 million projects. We're bidding on projects that are sub-$100 million, in that world, and we think it's very easy to manage that risk as it relates to our total portfolio.

Okay, I'm going to get back in queue. I'm sure there's lots of other people that want to ask questions.

Thank you, Andy.

Thanks.

Tahira Afzal, KeyBanc.

Good morning, gentlemen, and good quarter, given the circumstances.

Good morning, Tahira.

I guess my first question is a follow-up on Andy's thing, but I guess not a concern, but maybe perhaps the other way around. If you look at the natural gas power plant business, in terms of the structure of how a power plant is built, it's probably one of the simplest things to do within that range, and given that Wanzek, in terms of its capabilities, and in terms of the equipment it has, should be able to do peaker plants. Are you also looking at opportunities beyond the peaker plant side? You're going to see 20 to 30 gigawatts of coal really being retired, and the whole chunk of that seems like it's going to go the way of natural gas. Are you looking beyond the 50-megawatt plants, and even looking to perhaps subcontract on some of the larger ones?

The answer, Tahira, is really one step at a time. For 1.5 years we've been talking about our desire to enter that market. We've gone out and really secured what we think is exceptional talent within that marketplace, and I think we've now delivered, right. So, we're building a business. We've built this business organically from scratch, so we also know our limitations, and we're going to manage our own risks. So, we're going to take this one step at a time.

These are two extremely important projects for both our assessment of the business, our reputation, our resume, and this will absolutely lead to more opportunities. We're probably more focused on peaker plants today, but there's no question that we're very bullish on this business long term and what's going to happen with natural gas generation over the long term, and we're going to participate as much as we can.

Okay. And, Jose, the other question is -- obviously a back-end loaded year, and you are going to see a bit of a drag from the shale issues in the first half. As we look at what you've learned from weather, which typically does happen and does impact conditionalities in some of the shale plays in Winter, have you built some conservatism and cushion regarding weather in the fourth quarter in particular for this year?

Then I guess the second question is, for EC Source, clearly we had a good year last year, but we haven't heard of any bookings since then. And there are, as you said, a lot of large bookings, but it seems the mid to small size market is now also picking up. Is that also an opportunity for EC Source?

Two things. I think, one, we've dealt with weather throughout our entire history as a company. Weather is not something that's foreign or new to MasTec. We do a lot of our activities outdoors, and we're subject to all different kinds of weather patterns. I know we talk about weather in the Marcellus, but it's not that it rained in Marcellus. We often get asked -- well, it rained. Well, it really wasn't rain.

What happened in Marcellus was atypical. It was the issue of having multiple feet of standing water for an extended period of time because of floods, and that is not normal. That is completely atypical, and something that we're not used to seeing. We are used to the normal weather patterns where we'd have the ground freeze over, or you might have rains for a period of time, but not something that would deem a job unoperable, which is where we were in the fourth quarter on a couple of our jobs in Marcellus. So, obviously the fourth quarter of this year is further away. We don't know what projects we're going to necessarily be working in the Marcellus at that time. We will absolutely take that into account as we -- you learn from obviously your experience, so there's no question that our team has learned from that experience, and tried to figure out ways to protect itself better in the future. But I think we've had a great track record of over time delivering on projects and overcoming the weather issues.

As it relates to the mid-size projects in transmission, it's both an opportunity for both MasTec's transmission business, historical legacy business, as well as EC Source. We've obviously had phenomenal growth rates in our transmission business. We had over 60% organic growth in both the quarter and for the year. We expect EC Source to have considerable growth in 2012. That's not all coming from major projects. There are a number of mid- to small-size projects that we continue to win.

It's an improving market; it's getting healthier and we're having success in that market. We've just taken the approach that we don't think we need to announce every project, and we're going to announce the big projects. But we are absolutely engaged and winning small- to mid-size projects across all of our transmission businesses.

Thank you very much.

Thank you, Tahira.

(Operator Instructions) We would like to remind everyone to please limit yourself to one question and one follow-up. (Operator Instructions)

Peter Chang, Credit Suisse.

Thanks for taking my question. Jose, could you comment on how your pipeline backlog stands right now, compared to last year? I know -- I mean, without Ruby. I just want to see what kind of visibility you guys have. Then also talk about your bids outstanding.

Also, you talked about the interstate pipeline opportunities later in the year in 2012. If you could talk to that, and how that will be bid, if it's going to be bid differently than how you bid the Ruby pipeline, if it's different, if it's a fixed price contract versus maybe cost plus.

All right, so we can start there. We've done a lot of interstate pipeline jobs over the years, both as we purchased the different pipeline assets that we've bought, as well as the legacy of those businesses that perform pipeline jobs for an extended period of time. Obviously, Ruby was a cost plus job. Obviously a large one that we did, and we performed under MasTec. Aside from Ruby, in the first year or so that we bought Precision, they did a lot of interstate pipeline jobs, fixed price. So, we have a lot of experience doing those jobs, both from a fixed price perspective and a cost plus perspective.

There's no question that the industry moved more to fixed price over the last couple years, and we expect it to stay there. Other than obviously there will be a few customers that want to do cost plus, but for the most part we expect it to be a fixed price business. And we think we're well equipped and that the margin profile in those businesses aren't very different. So, we're not worried about our ability to compete or the risk profile we have to take on those jobs.

It's a market that, over the last couple years, has been depressed. There's been a smaller number of projects with obviously the same competitors, so it's been a challenged market. And really what was carrying our business and the growth of our business, again, which we had substantial growth in 2011, was being driven by shales. The good news is that shales continues to be an expanding opportunity. We're seeing greater levels of activities on the shales than we've ever seen before, and at the same time we're going to start to see greater levels of interstate work. Combining the two is going to make it a healthier market for all participants, and we're going to get our share of that, and hopefully continue to grow the business.

As it relates to our backlog on the shales, again, an enormous amount of activity on the shales -- all geographies. We've done extremely well here at the beginning of the year in building our backlog. Our backlog is obviously down in that business, because we don't have the Ruby project on a comparison basis year-over-year. But I think that to basically back into our guidance numbers and what we're planning for the year, we're in good shape.

Do you still expect flat revenues in the pipeline business? Is that something we should be modeling in?

That's what we're guiding to, yes.

Okay, great, thank you. I will get back in queue.

Thank you, Peter.

Alex Rygiel, FBR.

Jose, what is your expected cash inflow from the sale of DirectStar?

Alex, I don't know that we've publicly given a number. We've said that the sale is going to be somewhere -- the purchase price -- and it's formula driven -- but it's somewhere around that $100 million to $110 million range.

Is that in all cash?

Mostly cash. I think there's a small financing contingency on there for a small piece of it. It's almost all cash.

And what was the EBITDA contribution from DirectStar in 2011? I know you gave us the revenue in your K, but what was the EBITDA contribution?

I think what we've said is that it's slightly above Company averages.

And what was the total commission paid to Red Ventures in 2011?

I don't have that number, Alex.

Fair enough. And Bob, you mentioned that DSOs would level out in 2012. But why wouldn't they improve? Because I thought the payment terms, as it relates to AT&T, get better under the new contract.

Well, they are going to improve. But I think they are going to improve and more likely stay in the 70s than get back into the 60s. And I haven't totally given up on the 60s, but the conservative and right thing to say on this call is we -- for everyone's models, is better than the 79 days we closed out last year, but in the 70s. I'm not prepared at this point to forecast -- as I look at our mix of customers and contracts and payment arrangements, I think we're more likely in the 70s than the 60s.

And what's your -- Jose, what's your revenue growth assumption for the wireless segment in 2012?

Around 10%, probably a little bit south of 10%, depending on the back end of the year.

And lastly, any chance you could disclose revenue by segment? I know you give the year-over-year growth, dollars and whatnot, but could you run through 2011 -- what the revenue contribution from end market was?

You know, Alex, I think we gave a lot of color on our script in terms of -- obviously, you have the revenue contributions from AT&T and DirecTV. The balance of our communications business is really wireline, from a utility perspective. We haven't done that. We'll look at doing that in the future, but I don't know that we're in a position to be able to do that now.

That would be helpful. Thank you.

Thank you, Alex.

William Bremer, Maxim Group.

Good morning Jose, Bob, Marc. Adding on to Alex's question, how about -- can you give us a breakdown of the backlog at this point?

Again, Bill, we don't break out our backlog by our different groups. It's something that we've considered, and we'll consider doing in the future, but it's not something that we've done to-date.

Okay. Can we at least talk on the current bookings, and the pricing of those bookings in the current market? First on the transmission side, and maybe blend that into pipeline?

Sure. So, I think from a transmission perspective, what you're hearing from the industry is there's absolutely been a pricing improvement, almost across the board, especially in the smaller- to mid-size projects. I think that started in 2011, in a meaningful way, so I think that a lot of the work that we're either winning or starting today is priced better than where it was historically priced. I think we saw some of that already impact the second half of 2011.

As it comes to the larger projects, there's obviously a number that have been awarded, and at some point here, hopefully in the very near future, the demand outstrips the supply, and pricing really begins to improve in a meaningful way on the larger projects, which we think will happen as well. So, it's a very positive pricing environment as it relates to that industry.

In pipeline, I think you've got much more geographic discussions because of the delay of the Keystone project, so a lot of the union area work that was tied to Keystone, obviously was looking for ways to fill up and improve utilization. I think that had a negative impact on pricing in those markets, late in 2011. I think since then it's really improved. So, we also see that as an improving pricing environment as we look out for the rest of 2012.

Okay, great. And then going to wireless, you called out the operational issues. Where are you with that? And what inning do you perceive that you are there? And what can you -- can you help us -- give us a little more color on the operational issues going through 2012?

Bill, what we said all along was we had a big ramp, big growth year in 2011. We decided to bring some work in-house. Retrospectively, a very bad decision. We pretty much closed that division down for the particular type of work, and that happened in the fourth quarter. So, beginning in 2012, we've gone back to our normal operating model that we employed in 2010 relative to that work. So, I would say the ball game is over, and we're starting a new year in '12. And the issues that we had in '11 are completely behind us in that business.

Okay. All right, gentlemen, thank you.

John Rogers, Davidson.

Hi, good morning.

Good morning, John.

Just one follow-up. Jose, how much large pipeline project work are you anticipating in '12 -- large diameter work?

Don't necessarily understand the question, John. We do a lot of large diameter work in the shales.

Okay.

Really all of our work is -- we don't really do much in the gathering system side of the business. So all of our work is midstream, so we're working on larger size pipe almost exclusively.

Okay. But the acquired business -- not Pumpco, but the other one, and I'm sorry, the name --?

Precision?

Thank you. Is their business growing in '12?

Their business should be --.

I mean, beyond Ruby and --?

Again, so we've got multiple businesses as we look at our pipeline business, right. We've got the shale businesses, we've got the interstate business. Obviously all of the Ruby work sat within that acquisition, and sat within the Precision acquisition. What we've said about 2012 is we expect the year to be flat with 2011. Obviously Precision will see a slight downtick, with the other portions of our pipeline business seeing an uptick. So, will Precision make up its entire $200 million worth of Ruby work as we look at '12 to '11? That's not what we're guiding to. They very well may do it, but that's not what we're guiding to.

Okay. Thank you. I appreciate the clarity.

Thank you, John.

Liam Burke, Janney Capital Markets.

Thank you. Good morning, Jose; morning, Bob. Jose, you've got growth in pipelines, or the end markets -- pipeline, transmission and wireless. Do you anticipate any capacity issues in terms of attracting personnel or resources to get this work done?

Well, we're not where we were in the mid-2000's where a number of these businesses, labor was really tight. We're absolutely not there today. Do we end up getting there over time again? We very well may. That's a positive in our industry. The tighter the capacity gets, ultimately the better the pricing is across the industry. We're not there yet. There's plenty of availability of manpower to execute on the work and the plans that we have for 2012.

Okay. You talked about wireline. You've got firming housing market as a positive. You've got stimulus-related funds as a negative in the sense that those will run their course. How do you look at the wireline business generally? Do you see that as a liability with the dependence on stimulus?

No, I think stimulus has obviously been good for that business at the right time because we're not in a housing correction. No question that housing markets may not be getting worse, but it's not getting significantly better. I believe that it will over time, so in a couple of years from now I think the housing market will be a lot more active than it is today. That will be an extremely positive event for that industry in particular. And I think that's going to happen when stimulus starts tapering down over the next two years.

So, I actually think that could fit in real well with the business. As stimulus starts to go away, housing really rebounds, and helps offset some of the broadband stimulus issues. So, we're still very bullish long term in that industry. A lot of requirements, the more data that gets consumed on wireless network, the more backbone that's required to move that data. That business isn't going anywhere, and we think it's got a great future.

Great. Thank you.

Thank you, Liam.

Adam Thalhimer, BB&T Capital Markets.

Thanks, good morning, guys. First, Jose, you said that you feel like the environment as a whole is clearly improving. Where are you seeing the most improvement? Which end markets?

Across all end markets. Last couple years, there's obviously been some end markets that have been doing okay in the last couple years, irrespective of the overall economy. But today we're seeing our customers a lot more confident, we're seeing them plan out even beyond '12, just their outlook for '13 is improving. So, I think just in general, our customers' outlooks on their own business is improving, which will ultimately have a very positive impact on us. And we're just seeing a lot of activity across a number of our different end markets, which I think is extremely positive.

When does the Utah transmission project, when does that complete for EC Source?

Sometime in 2013.

2013. And I still don't have -- you have probably given us enough data to figure this out, but versus your forecast, what drove the revenue upside in the quarter?

In the quarter of -- the fourth quarter?

Fourth quarter, yes.

From where we expected to be?

Yes.

I think it was the strength of our transmission business was better than what we expected across all of our transmission groups. The strength of our pipeline business outside of Marcellus was better than what we expected. I think that our DirecTV business was slightly better than where we expected to be, and our communications business was better than where we anticipated it to be in the fourth quarter. Really, almost an across-the-board improvement with the exception of Marcellus, and wireless was where we thought it was. And even though we had a tough quarter in renewables, it still probably did a little bit better than what we expected when we originally gave guidance.

And the AT&T contract, the new three-year contract that started in '12, seemed like when that first hit there was a lot of uncertainty about primary, secondary contract, or I think they did some changes to the pricing in the contract. And now that you're two months into it, do you feel like we have a better sense for how some of those things are going to shake out?

I think we, maybe not at the investment community at large, but I think we always had a good sense of how that would shape up, and I think it is going to shape up as we expected.

Then lastly from me, just going forward, how do you think about the use of cash, buybacks versus maybe paying down some debt?

It's a good question. We really don't have many sources of debt to pay off in the short term. The majority of our debt is tied into our long-term notes, and our converts. The earliest maturity is on our converts in 2014. Those are obviously instruments that trade in the open market. We don't think it's worth buying those back, so there's really -- we really don't have many opportunities for debt repayment.

When you look at our line, we obviously have a $600 million credit line that Bob spoke about in a lot of detail. When you look at where we were on that credit line at the end of the third quarter, we repurchased $75 million worth of shares. If you look at it today where we're at, we think that a lot of that $75 million is going to be made back up through cash generation in the business between the fourth quarter and Q1. We've got the sale of DirectStar, which is going to infuse a lot of cash into the business. So we expect to be in a very healthy cash position outside of our structured debt in the second quarter, and have full access to our line, which means we're in a really good spot. We've got a lot of availability of cash to do anything that we need to do for the business, in our opinion.

So, we still feel that the value of our stock isn't where we think it will ultimately be, so we'll still be active in the market supporting our stock at certain levels. Today the M&A market is surprisingly strong and improving, so there are a number of opportunities that we're intrigued by and following up with. And I think that with where we're at, with where our cash position will be over the first half of the year and where we are from a line of credit perspective, we have a lot of opportunities to do just about anything we think is right for the business.

Great. Thanks, Jose.

Thanks.

William Bremer, Maxim Group.

Jose, just a follow-up. Two things. Number one, can you comment on inspection? There seems to be a lot of regulatory environment, and whether or not your pipeline services will possibly go into a more inspection-type services.

Second, can you comment on the Sand Hills pipeline? Looks as though that Pumpco received some type of award here, it's a 720-mile line. Can you give us some color of the magnitude of that contract?

Couple things on the inspection side of the business. Inspection is not a big part of our business or the overall business. Obviously inspection leads to finding issues in the pipe that then need to be replaced, so that remedial work we believe is going to be a huge opportunity in the industry because public service commissions and utilities all across the country are going to have to deal with it. We think it is a growing market. We think it is a fairly new market that will grow substantially over time.

We do participate in that market today for certain customers, where we're actively fixing lines. And we think that will be a growing part of our pipeline business over time, and one that we're looking to continue to invest in. So, it's absolutely on our radar screen; it's something that we think has great opportunities, and both organically and even acquisitively we'll look at that market to expand in.

From a individual project perspective, again, we don't like to talk about individual projects. So, I think we gave some clarity on our backlog, and feel good where we are from our pipeline business, and really don't want to specifically talk about any particular project.

Okay. Thank you.

Thank you, Bill.

At this time, that will conclude today's question-and-answer session. We'd like to turn the conference back over to our speakers for any additional or closing remarks.

All right. Once again, I'd like to thank everybody for participating on today's call. We look forward to updating everybody on our first quarter call. So, thank you and have a great day.

Thank you. That will conclude today's conference. We thank you for your participation.