MYR Group Inc (MYRG) 2009 Q2 法說會逐字稿

Good day and welcome to the MYR Group second quarter 2009 conference call.

(Operator Instructions)

At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Philip Kranz of Dresner. Please go ahead, sir.

Thank you and good morning, everyone. I'd like to welcome you to the MYR Group conference call to discuss the Company's second quarter results for 2009 which were reported yesterday. Joining us on today's call are Bill Koertner, President and Chief Executive Officer and Marco Martinez, Vice President and Chief Financial Officer. If you did not receive yesterday's press release, please contact Dresner Corporate Services at 312-726-3600, and we will send you a copy. Otherwise, you may go to MYR's website at www.myrgroup.com where a copy is available under the Investor Relations tab. Additionally, a replay of today's call will be available until Tuesday, August 18, 2009 at 11:55 pm Eastern by dialing 888-203-1112 or 719-457-0820 and entering conference ID 8576043.

Before we begin, I want to remind you that this discussion may contain certain forward-looking statements. Any such statements are based upon information available to MYR management as of this date, and MYR assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could arise -- could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. These risks and uncertainties are discussed in the Company's Form 10-K for the year ended December 31, 2008, and in yesterday's press release. With that, let me turn the call over to Bill Koertner.

Good morning, everyone. Welcome to our second quarter 2009 conference call to discuss financial and operational results. I'll provide a brief overview of the 2009 second quarter results before turning the call over to Marco Martinez, our CFO, for a more detailed review. 2009 continues to be a challenging year for the national economy, our customer base, as well as for contractors like MYR. Our T&D and C&I customers continue to be under pressure to defer capital and maintenance projects in the near term due to the recession and tight credit markets. That translates into fewer shovel-ready projects to bid, which means more competition and pressure on margins for the work that is available.

However, we are beginning to see signs the economy is turning as credit markets begin opening up, and Federal stimulus spending starts producing some positive effects. As you saw in our press release, our revenues rose 10.7% in the second quarter of 2009, as compared to the second quarter of 2008. The majority of the increase in revenues was the result of increased activity with a few large transmission projects which were bid prior to the commencement of the credit crisis last fall. This was partially offset by the reduction of revenues from smaller distribution projects, as well as a reduction in C&I revenues. Notwithstanding the revenue increase, our net income decreased by approximately 6% from second quarter of 2008, and earnings per diluted share decreased $0.01 a share from $0.22 to $0.21 cents for the 2009 second quarter compared to the same quarter last year. Given the current climate, we are satisfied with these results. Marco will give you more detail on the numbers in a few minutes, and provide some added color behind those results.

As you know, we operate in two broad market segments, commercial and industrial, and transmission and distribution, as well as several sub markets under these two segments. The majority of our C&I work occurs in Colorado and Arizona. Our C&I business is dependent upon commercial, and industrial, and government spending, all of which has been adversely affected by the recession. On a positive note, we do see some signs of stabilization in these areas, and we are starting to finally see some transportation spending to the stimulus package. It also appears that health care related spending has been fairly resilient these last six months.

On the T&D side, distribution spending seems to have been particularly hard hit by the recession, as utilities have cut back their contractor work force to keep their own crews busy. Some of the cut back in distribution spending is due to the down housing market and weak commercial and industrial activity. The rest of the reduction in distribution work relates primarily to deferred maintenance which, as we all know, can only be put off for so long. Transmission and renewable spending has also been hurt by the recession as well, and uncertainty over how some new Federal programs will work. However, it appears that a number of large transmission projects are moving forward with permitting, which should begin benefiting large T&D contractors like MYR beginning in 2010.

With some of the most experienced and best employees in the industry, we are well positioned to bid and execute these larger projects. Although the economic conditions have been and still remain challenging within our markets, we remain extremely positive about the long-term outlooks for both our T&D and C&I segments. MYR stands to be a major beneficiary of Federal stimulus spending, and we also believe that we will benefit from the movement to expand the use of wind and solar power. Marco will now provide details on the second quarter 2009 financial results. And I'll be back to provide some insight on current market conditions and our perspective on the future of MYR. After that, there will be an opportunity for you to ask questions, so with that, Marco, please begin.

Thank you, Bill. Thank you for joining us this morning. As Bill mentioned, 2009 continues to be a challenging year. Our revenues for the second quarter of 2009 increased 17.8% in the T&D segment, and decreased 7.7% in the C&I segment over the 2008 period. In our T&D segment, transmission revenue increased 44.6%, and distribution revenue decreased 33.6% compared to the second quarter of 2008. T&D segment revenues increased due to an increase in revenues from a few large transmission projects. This increase was partially offset by a reduction in revenues on smaller distribution projects that were in production in the second quarter of 2009, compared to the second quarter of 2008. Our C&I segment revenues also decreased 7.7% in the second quarter of 2009, due primarily to reduced spending by our customers, largely caused by the current weak economic environment.

The second quarter gross profit decreased 6% from $20 million in the 2008 period, to $18.8 million in the 2009 period. While gross profit margin decreased period-over-period from 13.6% in the 2008 second quarter, to 11.5% in the 2009 second quarter. Operating income, excluding corporate SG&A, decreased $1.2 million, or 9% in the 2009 second quarter over the 2008 second quarter. T&D operating income decreased approximately $900,000, while C&I operating income decreased approximately $300,000. The decrease in gross profit and operating income in the 2009 second quarter was primarily attributed to strong performance and increased margins on a few large contracts that contributed approximately $2.1 million in additional gross profit during the second quarter of 2008. The large projects in 2008 have not been replaced by projects with similar margins in the second quarter of 2009. The remainder of the decrease can be attributed to an increase in estimated cost to complete on certain contracts that resulted in approximately $1.3 million reduction in gross profits in the 2009 second quarter.

T&D margins decreased in the 2009 second quarter as compared to the 2008 second quarter. This was a result of strong performance and increased margins on a few large contracts in the second quarter of 2008 that produced about $1.1 million of additional gross profit. The margins on the 2008 large projects have not been replaced by projects with similar margins in the second quarter of 2009. We also had certain contracts experience margin reductions of approximately $1.3 million in the second quarter of 2009. C&I contract margins remain constant in the 2009 second quarter as compared to the 2008 second quarter. The C&I operating income in both periods benefited from strong performance and increased margins on a few large contracts that resulted in approximately $1 million in additional gross profits.

EBITDA is a non-GAAP financial measure and is reconciled to the GAAP measures in our press release. EBITDA in the 2009 second quarter was $10.6 million, compared to $10.5 million in the same period of 2008. Second quarter SG&A expenses decreased to $11.4 million in the 2009 period from $12.2 million in the 2008 period. The decrease related primarily to a decrease in profit sharing, and other incentive compensation accruals, slightly offset by annual salary increases and other incremental employee benefit costs. We reported second quarter 2009 net income of $4.3 million or $0.21 per diluted share, compared to second quarter 2008 net income of $4.6 million or $0.22 per diluted share. Comparing the second quarter of 2009 with the same period of 2008, our net income decreased by $300,000, and our diluted earnings per share decreased by $0.01.

We are continuing our capital expenditure program to strategically position MYR for the transmission work we anticipate in the coming years. During the first six months of 2009, we invested approximately $10.8 million in capital expenditures, compared to $16.1 million for the first six months of last year. Purchasing the equipment we expect to need long term for our work, versus leasing will reduce our equipment costs, and allow us the opportunity to improve contract margins. Total backlog at June 30, 2009 was $316.6 million, consisting of $232.1 million in the T&D segment,. and $84.5 million in the C&I segment.

T&D backlog at June 30, 2009 increased 8.4% since the end of last quarter, and 49.8% compared to backlog at June 30, 2008. The year-over-year increase is largely attributed to the Dominion project announced in October of 2008. C&I backlog at June 30, 2009 decreased 1.2% compared to June 30, 2008. Backlog can significantly fluctuate as awarded new work offsets projects being completed. We continued to market and bid new work to compensate for backlog being reduced as projects are completed. We count 90 days of backlog from our Alliance agreements, while many of our peers count one or more years of Alliance business.

Moving to the balance sheet, our stockholders equity increased from $155.4 million at the end of 2008, to $163.2 million at June 30, 2009. We believe our strong balance sheet gives us a competitive edge over many of our competitors for pursuing new work, financing the best fleet equipment in the industry, and investing in our employees. This is very much a people business as everyone knows. It is essential that we provide our employees the best tools, equipment, training, and supervision available so they can perform at the highest level to serve our customers. At June 30, 2009, we have approximately $44 million in cash and $30 million in debt. We maintain a low debt to total capitalization of 15.5%, which we believe is favorable to many of our peers.

We currently have a $75 million long-term credit facility, which has not come up for renewal until August of 2012. We have a $15 million letter of credit outstanding under the credit facility ,leaving $60 million available. The combination of cash and available credit under our facility provides us with approximately $104 million in total liquidity, which can be used for organic growth, or other investment opportunities. We are very focused on maximizing the utilization of our assets, which has resulted in an asset turn over ratio of about two times on an annual basis, which we believe compares favorably to others in our industry. We believe our financial strength, industry experience, specialized fleet, safety record and our national presence puts us at a competitive advantage to continue benefiting from the infrastructure build out by our customers. Now I'll turn the call back to Bill for discussion of operations.

Thanks, Marco. I'd like to expand on my earlier comments about how we see things shaping up going forward. As we proceed into the second half of the year, please be mindful that the second half of 2008 was an exceptional six-month period for MYR, as well as a few other T&D contractors. As we reported in our third and fourth quarter 2008 press releases, our results in the second half of last year benefited from an unusually high level of storm work, and a couple of high performance jobs. We reported that those factors combined produced about $4.9 million of incremental pretax income in Q3 2008, and about $3.3 million in incremental pretax in Q4 2008. We continue to see steady bidding activity in both our T&D and C&I markets. There continues to be some weakness in the market for shovel-ready projects in all aspects of our business, which obviously puts pressure on margins. However, the market for big transmission projects remains strong, although many of those large projects are months, or even a year or two away.

In the western United States, along with the approval of the $1.9 billion Sunrise Powerlink project in California, we anticipate other major projects will move forward later this year and into 2010, depending upon regulatory approvals. This includes several projects related to the Southwest Intertie Corridor running from Las Vegas into Idaho, and work associated with the Gateway West build out in Idaho and Wyoming. Activity in the west also includes projects related to stimulus package allocation of funds for two Federal transmission utilities for system upgrades at a value of about $6.5 billion. Those include Bonneville Power Administration and Western Area Power Administration. MYR has a long history of performance with both of these public power entities.

In April, WAPA received proposals for over 100 transmission projects for partnering with WAPA to leverage the lending authority from the stimulus package. Those proposals are still being evaluated. WAPA have announced a preliminary agreement for two of the proposed projects, one is the Great Basin Transmission, a LS power affiliate for 500 miles of 500 kV transmission on the Southwest Intertie Corridor mentioned earlier. The second is with Tonbridge Partners, Inc of Toronto, Canada for the construction of the Montana-Alberta Tie Line. This is a 214-mile, 230 kV project to interconnect electricity markets of Alberta, Canada and Montana. Also, there has been progress with respect to Midwest project approvals.

As we noted on our last call, CapX 2020 work in the upper Midwest received their Certificate of Need approval in April to construct three projects consisting of 650 miles of 345 kV in Minnesota and Wisconsin. The routing permits will follow, and construction will likely get underway in 2010. Additionally on July 9th, Minnesota regulators granted a Certificate of Need for a 230 kV line which runs 68 miles, which this line is needed for reliability and support of wind generation in the area. On July 13th, ITC Great Plains received approval to build Phase 1 of the Kansas Electric Transmission Authority line, consisting of 89 miles of 345 kV transmission. The total project will ultimately be 215 miles. The highly publicized work CREZ work in Texas remains an exciting opportunity for MYR, especially given our history of utility construction in Texas, and the relationships we have with several of the participants.

We believe that MYR is well positioned when a portion of the 2400 mile 345 kV build out of the Texas Competitive Renewal Energy Zone. The selected participants for CREZ projects are preparing their Certificate of Need applications, which will be submitted in early October for priority projects. Applications for the remainder of the projects will be submitted in early 2010. While much of the actual construction may not break ground until 2010, 2011 time frame, contract awards and preconstruction services are anticipated later this year for at least some of the work. Also across the country, we see significant opportunities in the renewable energy market with overall renewable energy support from the Obama administration, and specific incentives in the stimulus package.

To add momentum, on July 29th, the US Energy Secretary Steven Chu announced that the Department of Energy will provide up to $30 billion in loan guarantees for renewable energy projects, and another $750 million will support several billion dollars more in loan guarantees for projects that will increase reliability, efficiency and security of the nation's transmission system. Although the long term prospects of the renewable energy market are bright, the enthusiasm for all of this renewable work should be tempered a little. Our nation's capital markets are improving for their renewable projects, but they are still not close to being back to normal. The renewable industry is also still faced with a lack of investors with appetites to efficiently utilize all of the Federal tax incentives. We believe these issues will be resolved over time, just like we believe progress will be made on reducing siting delays, that are critical for these projects to move forward.

Now I'd like to shift the focus to our C&I business. Although work projects are still being bid, there are more contractors chasing the available work which places pressure on margins. However as we said in the past, our continued focus on health care research centers, smart highway work, data centers, mining, and waste water treatment facilities makes us somewhat less susceptible during these uncertain times. Over the long term, we anticipate these markets will also be beneficiaries of infrastructure stimulus spending. In fact, we have recently seen an increase in highway bidding due to the stimulus package.

We continued to monitor and make adjustments to our cost structure to ensure that MYR remains one of the lowest cost providers in the industry. A low cost structure, coupled with a steady focus on our markets will ensure that MYR maximizes its potential when the economy rebounds, and various T&D and C&I projects come to fruition. Additionally, our focus on safety, providing high quality customer service, and meeting client schedules will make sure we remain a valued partner for utilities and our C&I clients. Finally, as some of you may have noticed, MYR Group joined the Russell 3000 and the Russell 2000 indexes on June 26th, when Russell Investments reconstituted its set of US and global equity indices. We are very proud of MYR Group's progress since returning to the public markets, and we look forward to the additional exposure the Russell index inclusion might provide us. That's it for now. As always, thank you for your interest and support, and I would like to turn the session over for your comments and questions.

(Operator Instructions)

We'll take our first question from Carter Shoop with Deutsche Bank.

Good afternoon. I have a first question here in regards to bookings. and I was hoping you guys could discuss what the linearity was in the quarter for bookings and how they've trended thus far through the first half of the third quarter.

Carter, bookings for the current quarter were $143 million for T&D and approximately $42 million for the C&I group. That's comparable to the 2008 second quarter of $110 million versus the C&I at $46 million.

And just to clarify, I was curious what the linearity was in the quarter? Did you see bookings pick up throughout the second quarter, slow down, was June stronger than May, etc?

I don't think we've seen any trend. It's obviously pretty lumpy. We go a month where we have very little bookings, and then we might book one or two fairly significant jobs, but I wouldn't read anything into a trend going month by month. In fact, I wouldn't read a lot into quarter by quarter variations.

And then --

Go ahead, Carter.

Sure. So it sounds like there's a few contract renegotiations in the second quarter. Have you seen those continue in the current quarter?

We -- I don't know that it's any greater than normal. We have a number of Alliance agreements that come up for renewal, virtually every quarter. I think that's been pretty steady. So I don't think there's any trend there.

And you all referenced the difficult pricing environment several times on the earnings call. Can you discuss what type of margin profile some of the recent bookings have had? Are we seeing margins in the recently booked business significantly below the corporate average today?

We said throughout the call, that we have seen pressure on margins and that would be true of small to medium-sized transmission projects, as well as distribution and commercial and industrial activity. They certainly are not as strong as what we experienced in 2008, but, I think they are reflective of the market condition, and there are more contractors chasing the work that is available.

And historically it looks like the second half of the year is usually stronger than the first half, even if you exclude the strong second half '08. Do you envision a similar type of linearity in the fiscal year '09?

As to (inaudible) Carter?

In regards to second half '09 being stronger than first half '09, even if you exclude second half '08, it seems that you usually experience a stronger second half than first half.

As you know, we're not providing revenue guidance, so I wouldn't really have a comment on that.

I mean, really -- it really would be dependent on the market, Carter. I mean the market that our customers start spending their capital -- things may be different, but we're not providing any kind of forward-looking guidance or numbers.

We do see, and I think this is historical that at the end of the year, if utility has budget money available, there is a little bit of spend it or leave it or lose it as they go through their budgeting cycle. Last year may have been a little atypical because they were all scrambling -- trying to secure money in the capital market, so that phenomena probably didn't have much impact in 2008. But over the very long term, there is a tendency for the utilities to spend a little more money in the latter part of the year if they've got budget dollars available.

Great. That's helpful. Thank you very much. And congratulations on a good quarter.

Thanks.

Next we'll hear from Jeff Beach with Stifel Nicolaus.

Yes, good morning, and also congratulations on really good performance in the recession. Two questions. I was looking back over previous notes. I don't know if it's been asked, but can you give us an idea how much business you've done in the renewable markets in 2008, and year-to-date in 2009?

On an annualized basis, the last couple of years that's been running $40 million, $50 million. And I'd say we're probably pretty much on that pace for this year.

All right. And over on the C&I side, that's pretty impressive in this recession to see the business holding up. Can you expand a little bit on the -- some of your key end markets that you've seen in the second quarter, and entering into this third quarter there causing your results to, I think, hold up better than a lot of people have been worried about?

Well, certainly. We're very proud of the performance that we've achieved in our C&I business. As being located in Colorado, that market is not immune from the recession, and nor is the Arizona markets. Both of those have been significantly affected by the recession, so it's quite gratifying to see our results hold up as well as they have. Certainly the focus on hospital work, water treatment facilities, and other government funded kind of projects, that's a better segment to be in than if you were a C&I contractor doing residential or small commercial work. But what we have seen is some of those smaller contractors move out of their historical market, and try to bid the larger commercial projects that come up. So it has put pressure on the markets, but our customers which in this case would be general contractors, they show some good loyalty to a proven performer that's helped them with their electrical work, so they're not going to always just jump for the lowest price. They're looking for someone that will make that hospital job, or that water treatment facility a successful project and meet the schedule. So, I don't know -- that doesn't explain everything, but we are very gratified with the results we've had in our C&I business, Jeff.

I think just to add a little more color to that, I mean you could say that our C&I group is a well-oiled machine with their contract management, they are managing the jobs and their productivity levels, which is also contributing to the margins that you're seeing this quarter versus the 2008 quarter.

And specifically, are you seeing any change, deterioration in the data center work?

No. There are a number of data centers that are in the market this year. And we expect to have an opportunity to bid one or two more before the end of the year.

All right, again, thank you. Great quarter.

Okay. Thanks, Jeff.

Our next question comes from Liam Burke with Janney Montgomery and Scott.

Thanks. Good morning, Bill.

Good morning.

Bill, you talked about your renewable business being flat year-over-year, 2008, 2009. If I step back and look at some of the end markets in terms of things like wind farm construction which have been delayed, how come your business has remained flat, when typically the end markets were down year-over-year?

Well, I think most of what we're working on were projects bid prior to the credit crisis.

Okay.

So, there's a bit of a carry over effect in all of our work, including the wind work. As you probably know, the wind projects tend to be fairly fast track, but a lot of the things that we're working on were projects that were planned and put together last year.

Okay. And on -- I'm sorry.

Some of them had their financing pulled and many of those projects are back out trying to get financing.

Okay. And there's been a lot of excitement around CREZ. Obviously it sits and starts. You mentioned some general time frames in which you would expect projects to begin to roll, beginning with permitting. Is that moving along better or worse than you'd anticipated, say, six months ago?

Well, it never works faster than I anticipated.

All right.

The potential for regulatory delays. So I have yet to see a transmission project get accelerated. I -- many times they stay on track, and that's what we like to see, but there is potential for delays when you have all these regulators to get lined up to approve it.

Thank you.

We're still expecting, Liam, to see that completion of the CREZ work by the year 2013. The start of it has been pushed back a little bit here, but the completion still hasn't moved back. It's 2013 is what we're aware of.

Great. Thanks, Marco.

Next we'll go to Alex Rygiel with FBR Capital Markets.

Thank you. Good morning, Bill, Marco.

Good morning, Alex.

Bill, your total revenue in the quarter was up 11% year-over-year, your T&D revenue was up 18% year-over-year, and your T&D backlog is up 50% year-over-year. I appreciate your modesty, but I have to hand it to you, you're doing an outstanding job here, of either picking up market share or at least capturing your fair amount of market share. Can you comment on some of the larger transmission bookings that you might have received in the quarter if any?

We don't have any projects that rise to the size that we are disclosing them individually. We did have a couple of nice contracts that we booked that -- that certainly helped our backlog, but none of them rose to the size of let's say the Dominion job. Certainly if we record another job like the Dominion project, we'd certainly be discussing that individually, given its overall size. But if we pick up a $10 million or a $20 million project that's still part of our bread and butter business.

And you commented that you were seeing some increased pricing competition out there for smaller to medium transmission projects. And it sounds like maybe that was your bread and butter in the quarter. Understanding that you are seeing increased pricing pressure in the broader market, do you think you have seen increased pressure to your margins that are actually in backlog right now?

We probably have seen some pressure on projects that are in backlog. Yes, certainly, if things have gotten more competitive, we -- we try to bid our costs when we bid projects. We don't try to bid what we think the competition is going to bid. But we also are cognizant of the need to keep our men and equipment busy, so that means shaving a little bit off of the margin on our bid, we're prepared to do that in this market.

Hey, Alex, I think it's fair to say that on the larger projects, the margins haven't come down. You got a handful of contractors that could do the work, so for the most part, the larger sized projects, their margins have been held in steady. It's the lower ones, under $10 million that you could probably say have been impacted.

Okay. And, Bill, a number of times you mentioned stimulus and actually seeing a pickup in transmission -- or excuse me, transportation projects associated with stimulus. Can you give us a few examples of the types of projects that you've seen, and the types of projects that MYR could get involved with?

Well, first, when I say finally seeing a little pick up as a result of the stimulus money, to put that in context, for probably the first four or five months after the stimulus package was implemented, we think it cost us business because projects that were already out on the street, and we bid, some of which had been tentatively awarded to us, got pulled back so they could be rebid with a provision that said they'd only do this job if they got stimulus money. So for the first few months, it actually was a net net loss to our business. We finally see now, it's starting to be a net net benefit to us. But this would be typical street lighting work, putting cameras at intersections to monitor speeders like you, Alex, and traffic flow and so on and so forth. So widening of roads, those types of projects.

I'll be sure to avoid Colorado. Thanks. Great quarter, guys.

Good.

Our next question comes from John Braatz with Kansas City Capital.

Good morning Bill, good morning, Marco.

Hi, John.

A couple of questions. The energy bill is being discussed, and we may have an energy bill by year-end. Sort of along the lines of the stimulus bill, is there anything in the energy bill that if it's delayed, could impact your business whether it be renewables or the transmission build out? Would you see a -- could you see a similar circumstances developing like the stimulus package delaying projects?

I suppose that's possible. We definitely would like to see an energy bill passed. One of the down sides if it gets delayed, that then takes the pressure off of the states for doing siting. As I think you know, there's a provision in there that would allow the Federal government under the Federal Power Act to have some siting authority. And I -- I doubt that that's going to be actually used very often, but just having that in place puts pressure on states and other local government entities to do what's right for the country in terms of rebuilding our transmission grids. So we definitely, want to see the energy bill passed. It doesn't have to be the identical form that the House passed it, but if one doesn't get passed, that will -- that will not necessarily be good for contractors like us.

Okay. Secondly, we talked a little bit about the margin. You're talking about margin pressure in your -- sort of bread and butter area, the small transmission build out. You talked earlier about some of the bigger projects that are -- that are coming online. Would you expect to see pressure on your margins as you bid on those projects too? And how difficult is it for somebody that may not have experience on the bigger projects like you, to sort of morph into that area because of the lack of business elsewhere?

I expect some of the smaller contractors will raise their sights on what they think they're capable of doing. And that will put some pressure perhaps on margins, at least for the couple -- first couple of projects that get bid. If there were a period, let's say over the next 60 days. And I'm not anticipating this. But let's say there were four or five major awards and announcements that would maybe tie up some of our resources, or tie up some of the other large T&D contractors' resources, that's the kind of thing that's really needed to put -- to let margins go up, when the buyers of our services realize that it's no longer a buyer's game, that the sellers have some -- something to do with the market too. That's what will drive margins. But for the few -- first few large project awards, that doesn't necessarily soak up a lot of the available capacity. But once enough of them get announced and we -- we -- our crew is tied up and some of our competitors have their big transmission line crews tied up, that's one -- there's a potential for margin improvement.

Okay. Okay. Thank you very much, Bill.

Next we'll go to Will Gabrielski with Broadpoint Amtech.

Thank you very much. Congratulations on a really nice quarter. I know you didn't give much color on terms of the awards in the quarter, but could you just quantify maybe, what was the biggest award in dollars in the quarter? And then regionally, how you guys looked in the quarter, where these awards were coming from mostly?

No, I can't quantify it. It was over $10 million, I think, a couple in that vicinity.

And then geographically, how are they shaping up across the country? Any particular region stronger than another right now?

Well, we had some east of the Mississippi, and some west of the Mississippi, so I'd say kind of spread out.

That's very helpful. Thank you. Just curious, if you don't see an energy bill at all, and you take into consideration the fact tha 80% of the US generation is covered under statewide RPS requirements. And then you look at a number of projects that you talked about in your prepared commentary, do -- does the energy bill matter in a material way to those projects as it stands today? Or does it matter more to some of these mega AEP or ITC Green Power Express type projects, and your sense around that, please?

First, I think you said that I don't see an energy bill passing this year.

No, no, I said if one -- if one doesn't see an energy bill pass ever, would that impact any of the projects that you spoke about in the first half of your prepared commentary?

Potentially it could and I am optimistic that we will see an energy bill, and it probably is not going to look identical to the House version, but I my expectation is there will be an energy bill this year.

Yes. Most likely. It looks more like the Senate version anyway, I would think, would be optimistic for you guys versus the watered down House version, or am I misreading that?

I don't think trying to reconcile the Senate and the House version as to which ones the -- one's -- the most favorable to us and other contractors, I don't think I'm qualified to really -- to get into that, but clearly there's going to be more debate in Congress. This is going to get thrown over to a committee of the House and the Senate, and they'll reconcile something, and then take it back to both houses for a vote. So there are many chapters to be played out in this come the fall session.

Okay. Curious if you're seeing any issues from competitors get -- they're running into financial problems from a surety bond standpoint, and how that's impacted maybe the competitive landscape?

We've seen some of that with the commercial and industrial contractors. There seems to be quite a few of them that are under pressure from their -- my belief is they're under pressure from their banks and surety to raise capital or to sell their businesses. I see probably every week, four or five little C&I contractors for sale and that seems like it's maybe more than normal.

Okay. Fair enough. And the Dominion project, can you quantify what percentage of that project has been completed to date?

No. The only thing we could say is, that it's on schedule. It's moving along quite well for us. We -- the amount for Dominion, I believe we indicated it was $107 million. Construction started in the first quarter of 2009.

We actually have energized a segment of that line, at a second 230 under build circuit that we actually have completed that section. And also the 500 line that was on top, so we've actually got quite a bit of wire in the air. We still have a lot of foundations to put in, and a lot of structures to set and a lot of wire to put in, but some of it, a small segment of it, is actually completed.

Okay. That's great news. And then lastly, the -- the question I had early in terms of distribution activity, and one of your public competitors had talked about maybe seeing some additional distribution crews finally coming on to being put out to work in the third quarter. And I was wondering if you could just talk a little bit about maybe your expectations around that segment, and how long those utilities can really put off that work, and are we at that point yet?

Well, I think deferring maintenance, having been a former utility officer, is something you can get by with for a year or a year and a half. But ultimately, there's a day of reckoning, and it may be we're getting close to that. As far as what one of my public company competitors say, you have to ask them if they have a specific reference to a utility adding distribution crews. We've seen both examples with our customer base, where some have added distribution crews, and some have cut back distribution crews.

Okay. Great. Hopefully we get a chance to chat intra-quarter. I really appreciate it. And nice job. Talk to you soon. Thanks.

Next we'll hear from in Matt Tucker with KeyBanc Capital Market.

Good morning, guys.

Good morning.

I have a few questions on behalf of Tahira Afzal. First off, clearly this was a very strong quarter in terms of revenue, backlog, bookings. From a historical perspective, particularly in light of the macro environment, and kind of the lack of the large amount of storm work that's kind of led to out sized quarters for you in the past. We were somewhat surprised at somehow strong the quarter, was in light of your commentary on the last quarter's call, which we just viewed as kind of more conservative versus how strong the quarter ended up being. So I guess the question is was your commentary on the last call kind of kind of reflective of low visibility you had on how the quarter would play out at that time, or did we kind of misread that?

Well, it certainly is not my intent to try to be optimistic or pessimistic on these calls. I try to call it, like we see it. So, trying to go back whether we were more conservative than what we should have been, I'm not prepared to get into that. Obviously our earnings were down this quarter, so although our revenues are up, and we probably at least with some public company competitors, maybe our results look a little more favorable. The fact is our earnings were down, and we have seen our margins come down, so we are by no means high fiving one another in our conference room. We've got a lot of work to do, as well as our competitors have a lot of work to do to get profitability back to where it needs to be.

Okay. Thanks. Fair enough. Also, and I apologize if I missed this, but I was hoping if you could give a little color on the increased estimated cost to complete in the quarter? And if you were able to indicate whether that was related to the same projects where you saw that increase last quarter?

A lot of the increase has to do with larger projects, and they can be related to weather, related to productivity, related to change in scope where we can't take margins on the costs, until we get those approved with the customer. It's a little combination of all of those factors. There is going to be times where in some quarters, we report some incremental profits associated with those large (inaudible) and in this situation, these are one of the times we reported a loss attributed to the increase in costs associated with those projects.

I think it's fair to say every quarter we have jobs that do better than our estimate margin. And every quarter we have jobs that do worse than our estimate margin. And certainly every quarter those net out to either being a positive or a negative, but it's pretty lumpy. I don't think I'd read any -- anything into a trend that for the last two quarters, we've had some deterioration in margin on our work because of having assigned higher costs to complete. That's just, I think, a normal fluctuation of our business.

Okay. Thanks. That's very helpful. And then finally, SG&A in the second quarter was pretty low relative to some of the past quarters. I was hoping you could talk a little bit about some of the things you were able to do there to bring that down, particularly in light of the stronger revenue. And as well if that's something that is kind of sustainable going forward, if we should expect something like this level for the second half?

As Marco indicated, some of that has to do with accruals for bonuses and profit sharing. That's part of it. A lot of it, we know things are tight, we're not adding people unless we absolutely need them, raises are pretty skinny around here these days. We're putting a lot of pressure on our vendors to -- and these would be everybody from lawyers to accountants to consultants to the people that supply our paper clips -- we're really trying to hold the line on costs because of the market we're in. And, the fact that our revenues are up 11% one quarter over another, the fact remains their profits aren't where they need to be.

All right. Thanks, guys. Very helpful. Congrats on the strong quarter.

Thank you.

Our next question comes from (inaudible) with WM Smith & Company.

Hey, good morning.

Hi, Chris.

Appreciate the time you spent this morning. Most of my questions have been answered, but just briefly as a follow up to the commentary on the large projects. You said there was some lumpiness in the earnings there. I was wondering if you could maybe clarify, or give some numbers as to the average duration of those projects? Or how long you're expecting to continue to receive benefits from those?

Well, normally our projects would last three to six months. Obviously we're going to have some projects that go longer than that, for example, Dominion, I believe, is like a two and a half year project. We have some other C&I projects that are a little over a year. But I -- but on average, I would say it's three to six months in duration.

Okay. And then briefly out of curiosity for the -- it seems like there's quite a bit of competition, as everyone tries to get a piece of this stimulus package. I guess the question is two-fold. The first part being, do you know when you expect the majority of that to hit, as you provided commentary on the uncertainty of how these federal programs will work? And then the second part of the question being is this competition purely price driven or is -- how much of it is, you know, related to other things -- related to other things such as relationships or political or anything like that?

Well, a big part of it is price driven. And some of it is -- as we market our services and our competitors market theirs, it isn't just price, you have to have a good reputation, you have to know who the movers and shakers are with your clients that make decisions. I think we do a good job with that, but certainly could do better. Your safety record, your record for meeting schedule, maybe would call out the ability to meet schedule. That is becoming increasingly important to our clients with projects that are tied to tax benefits, and hitting certain in service dates in order to qualify for tax benefits, they are really looking for contractors that have -- we have a fast track project that lasts 25 weeks, or whatever it might be, that if we can hit that schedule, or even beat it a little bit, that wins us more work. Conversely, if we don't meet those schedules that -- that doesn't do any good for our reputation, and the same would be true of our competitors. So really adherence to schedule is really critical on these big projects, especially the renewable ones that are tied to tax benefits.

Okay. Great. Thank you. I appreciate your time.

Next we'll go to Tristan Richardson with DA Davidson.

Good morning, guys, this is Tristan for John Rogers.

How are you?

Good. Just a question related to -- earlier you had mentioned that weather was somewhat of a benefit to the quarter. I was just wondering if you could talk about the weather in some of these geographies, maybe year-over-year and how exactly that helped you guys?

I don't recall saying that weather was a benefit.

I think what we were talking about that weather is -- could be one of the factors that contributed to the increase in estimated costs on these large projects. And weather always plays a factor depending on what part of the country you're in. and what time of the year you're in. Winter hits -- you're going to be less productive being out there, during the springtime when it's rainy, and you're working up to your knees in mud, it really depends on what time of the year, and what part of the country you're working in.

I think if you look at the weather pattern for the first six months of the year, the Midwest and the northeast have been rainier than normal, cooler than normal, and we've got a number of projects in that region. And we've pulled our equipment, we've sloshed it through the mud, and the men are walking in mud knee deep in some cases, so the productivity on those jobs has not been helped by the weather. I think the rest of the country, probably normal or maybe it's been hotter and drier than normal, but certainly some of the work in the east has been adversely -- or productivity has been adversely affected by the heavy rains.

Okay. Great. Thank you, guys, very much.

(Operator Instructions)

Next we'll hear from Steve Gambuzza with Longbow Capital.

Good afternoon.

Hey, Steve.

The CapEx in the quarter, is that a pretty good run rate to use forward?

We were -- we didn't spend quite as much the first six months of this year,versus the first six months of last year. We have a number of purchases where we'll take delivery on the assets in the second half of the year, so I would think the pace that we ran last year, we probably will come pretty close to that. This year we may be off of that a little bit, but I wouldn't just take first half, the $10 million that we spent, and double that, and say that's what we're going to spend for the year because I think we'll spend more than that.

And do you expect it to be close to 30 again next year?

Yes, yes, fairly close to 30.

Okay. And --

I assume you meant 2010?

Yes.

Yes. We -- we -- as we said repeatedly on these calls, we're in the third year of about a four-year program to get our fleet to where we need it to be in terms of what's owned and what's leased, and 2010 would be the fourth year of that -- that investment.

Great. Thank you. Very helpful. You mentioned in your remarks that you're seeing opportunities related to wind and solar. I was wondering if you could just comment on what you guys had done to date on the solar front, and looking forward what type of opportunities you see for your company related to solar?

We have done a couple of small solar related projects, but frankly we've done more bidding and estimating, than actually performing that work. There hasn't been a lot of solar work done. There's a -- a lot of it being talked about, but I think solar isn't going to have the same potential to move the needle, as wind does for a company like ours.

Okay. And finally, as it relates to distribution in the second quarter, obviously you talked about how weak the distribution market was in the first quarter. I'm just curious from a revenue standpoint in the second quarter, how do things trend sequentially, kind of adjusted for normal seasonality, was it relatively flat? Or did you see movement one way or the other?

I don't have that information. I don't think there's anything remarkable about the seasonality of it. And, of course, you get into the third quarter and fourth quarter, that would be the hurricane season. So every year you either have the potential of doing quite a bit of hurricane related work, or there aren't any storms, you may not benefit from any of that work. So that would, you know, certainly skew the numbers trying to trend it.

Okay. Thanks very much.

With no additional questions in the queue, we'll turn things back to Mr. Koertner for any additional or closing remarks.

Well, I'd just like to thank everyone for participating on the call. We're very excited with the opportunity and the energy delivery markets that we serve. We want to thank our management team and our employees for all of the hard work to produce these results. And we'd like to thank our stockholders because they've showed continued support in our Company and management team. I don't have anything further. We look forward to working with you folks going forward, and visiting with you on our next conference call.

With that, that does conclude our conference for today. We thank you for your participation.