MYR Group Inc (MYRG) 2010 Q4 法說會逐字稿

Good morning, everyone and welcome to the MYR Group fourth quarter 2010 earnings results conference call. Today's conference is being recorded. At this time for opening remarks and introduction, I would like to turn the conference over to Mr. Phillip 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 fourth quarter and full year results for 2010 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's corporate services at 312-726-3600 and we will send you a copy, or you can go to MYR's website at www.MYRGroup.com where copy is available under the Investor Relations tab. Also, a replay of today's call will be available until Tuesday, March 15, 2011 until 11.59 PM eastern time by dialing 800-642-1687 or 706-645-9291 and entering conference ID 41886299.

Before we begin, I want to remind you that this discussion may contain 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 cause actual results to differ materially from the forward-looking statements. Accordingly, the 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, 2010 and in yesterday's press release. With that said, let me turn the call over to Bill Koertner.

Good morning, everyone. Welcome to our fourth quarter 2010 conference call to discuss financial and operational results. I will provide a brief summary of the fourth quarter and full year results before turning the call over to Marco Martinez, our CFO, for a more detailed financial review. Following Marco's analysis, I will provide some additional information on our outlook for the industry.

I am pleased to report that our diluted earnings per share were $0.29 for the fourth quarter, which represents a 38.1% increase over the fourth quarter last year. We achieved the higher earnings despite a 10.5% revenue decrease compared to the fourth quarter last year. This increase was primarily driven by improved gross profit margins on a few large transmission projects that Marco will discuss later in the call. Diluted earnings per share for the full year 2010, were $0.78 per share, a consolidated revenue of $597.1 million. Both numbers are slightly below last year. We are pleased with our results, given a very challenging economic climate for both of our market segments.

I am sure you are aware of the two large contract awards announced in the fourth quarter in Maine and Nevada as well as the announcement of the CapEx 2020 work in Minnesota. What you may not remember, is how tough the first nine months of 2010 were as our customers cut back on their spending for small projects and maintenance related work. This continued to put pressure on margins as the same number of contractors bid for fewer available projects in order to keep their labor and equipment resources busy. We expect similar margin pressures will continue in 2011 in certain end markets of our business.

We further strengthened our balance sheet during the year to prepare for the expected ramp up in bidding for large transmission opportunities. A strong balance sheet, access to new capital, and continued profitability are major strengths for MYR as we compete for these larger projects.

We operate in two broad market segments, transmission and distribution or T&D and commercial and industrial or C&I. These segments can be further broken down into many sub markets by geographical region, by type of service such as transmission, substation, distribution, and inside electrical, by project size, and ultimately by end customer.

In the T&D segment, we provide a full range of services across the country. We execute hundreds of small project work orders during the year for transmission, substation, and distribution projects. We are expanding our renewable business which includes underground collection facilities and solar panel installation as well as typical T&D services. And finally, we participate in the construction of large transmission projects which are often include large substations as well.

The distribution of small project market was weak throughout 2010, as utilities deferred work waiting for their electricity sales to increase and/or rate relief from their public service commissions. While recovery has been slow, we anticipate the capital expending may increase slightly in 2011 based upon recent statements made by investor owned utilities and others attending the Edison Electric Institute annual financial conference last November. Additionally, as the large transmission buildup starts to move forward in 2011, we anticipate there will be an increase in upgrades to existing transmission systems to accommodate these major new lines. We are similarly confident about the long-term investment in our distribution and small project markets.

Our business model continues to rely on outsourcing increasingly becoming more attractive to utilities over the long-term, as opposed to the utilities hiring new employees to self perform the work as their existing workforce reaches retirement. We believe outside contractors will comprise a larger percentage of the overall T&D workforce in the future, due to the outside contractors flexibility to ramp up and down a workforce and other cost advantages. There could be a silver lining with the current recession, as it might accelerate the outsourcing trend as some utilities offer early retirement incentives to their line workers to sustain profitability in the short-term.

Bidding activity for large transmission projects is as robust as we have seen in many, many years. Our estimating staff burned the midnight oil in the second half of 2010 to keep up with unprecedented bidding activity. As we have announced, we have been awarded a number of large projects since our last earnings release. We are proud of these awards and the confidence that our customers have placed in MYR Group's proven ability to execute large-scale projects. The traditional utilities and financial developers of these major projects value the resources MYR brings to a project to ensure a successful completion.

These large project awards have resulted in an increase in our total backlog at December 31, 2010 to $520.9 million from $204.4 million at December 31, 2009. While most of the growth was result of transmission related awards in our T&D segment, it should be noted that our C&I backlog is up as well albeit at a lower level. Marco will provide additional detail on our backlog in a bit.

With regard to large transmission projects, we anticipate there may be additional projects award announcements over the next few months as other utility and transmission developers complete evaluation of bids and negotiate definitive contracts with their chosen contractors. We remain hopeful of winning a number of these large transmission awards, and we continue to invest resources to increase our large project capacity. As you know, the construction of these major projects will be spread over several years. Additionally, there will be lags of at least a quarter or two from the announcement of an award until the successful contractor performs any meaningful construction and reflects any revenue on its books.

We see the first half of 2011 as a transition period of winding down some existing large projects while we begin to ramp up on our new multi year large transmission work. Although we did see an increase in our C&I backlog since the third quarter, this business continues to be challenged due to the slow pace of economic recovery. As you know, the majority of our C&I work is performed in Colorado and Arizona where virtually all of our work is in the large commercial, industrial and governmental sectors of those two regional markets. It continues to be fewer C&I opportunities in these markets than there were prior to the recession. And the competition for these opportunities remain intense.

We are very fortunate to be a leading player in our regional markets for electrical construction of health care facilities, wastewater treatment facilities, government office buildings, large manufacturing facilities, data centers, high tech projects, and smart highway work. Our focus for a number of years in these market segments has been the key to sustaining our strong competitive position, and we believe we will continue to benefit us as the country and specifically Colorado and Arizona sees economic improvement. In the meantime, we continue to be smart in our bidding and execution of this work.

Now, Marco will provide details on the fourth quarter and full year 2010 financial results, and then I will be back to provide some additional insight on current market conditions and our perspective for the future of MYR. After that, there will be an opportunity for you to ask your questions. With that, Marco, please begin.

Thank you, Bill. And good morning everyone. Yesterday after the market closed, we announced our 2010 fourth quarter and full year results. As Bill indicated earlier, given the challenging market conditions, we are pleased with our overall results for the full year of 2010, despite a decrease in revenues and EPS as compared to the full year of 2009.

Our revenues for the fourth quarter of 2010 were $155.1 million, a decrease of $18.2 million or 10.5% as compared to the fourth quarter of 2009. For the 2010 fourth quarter, our T&D segment revenues decreased $6.5 million to $118.6 million, and our C&I segment revenues decreased $11.6 million to $36.5 million as compared to the 2009 fourth quarter . Within our T&D segment, we recorded revenues of $83.2 million for transmission and $35.4 million for distribution during the fourth quarter of 2010. For the fourth quarter 2009, we recorded revenues of $92.2 million for transmission and $33 million for distribution. In the fourth quarter of 2010, transmission revenues decreased $9 million or 9.7% while distribution revenues increased $2.5 million or 7.5% as compared to the fourth quarter of 2009. Overall, our distribution market remains soft with increased competition. We believe that the increase in our distribution revenue simply reflect that we have taken some market share from other contractors.

Meanwhile, transmission revenues were down mainly as a result of decrease in revenues from a few large transmission projects being executed in the fourth quarter of 2010 as compared to the fourth quarter of 2009. This decrease was partially offset by period-over-period increase in revenues generated from distribution projects. The decrease in consolidated revenues in the fourth quarter of 2010, compared to the fourth quarter of 2009, was mainly attributable to reduction in revenues generated from a few large T&D projects as well as an overall reduction in revenues from the C&I segment. Storm revenues in the fourth quarter for 2010 and 2009 were minimal.

Gross profit in the fourth quarter of 2010 increased to $21.8 million or 14.1% of revenues compared to $19.4 million or 11.2% of revenues for the fourth quarter of 2009. The increase in gross profit as a percentage of revenues was mainly the result of margin increases on a few large transmission projects of approximately $4.4 million. Partially offset by reduction in margins of smaller C&I projects of approximately $0.7 million. The margin increases in the large transmission projects were due to increased productivity levels, cost efficiencies, added work, and effective contract management. Fourth quarter SG&A expenses decreased 4.4% to $12 million compared to $12.5 million in the fourth quarter 2009. The decrease was primarily due to a net decrease of profit sharing and other employee related compensation and benefit costs.

EBITDA, which is a non-GAAP financial measure and as reconciled to the GAAP measures in our press release, increased to $14 million in the 2010 fourth quarter compared to $10.5 million in the fourth quarter 2009. The provision for income taxes was $3.4 million for the three months ended December 31st, 2010 with an effective tax rate of 35.9% compared to $2.4 million for the three months ended December 31st, 2009 with an effective tax rate of 35.5%. Fourth quarter 2010 net income was $6.1 million or $0.29 per diluted share compared to fourth quarter 2009 income of $4.3 million or $0.21 per diluted share.

Now for the full year 2010. We reported revenues of $597.1 million, which represents a decrease of $34.1 million or 5.4% as compared with the full year of 2009. Our T&D segment reported revenues of $447.5 million for the full year 2010, a decrease of 4.5% over the same period of 2009. Our C&I segment reported revenues of $149.6 million for the full year of 2010, a decrease of 7.9% over the same period of 2009.

The overall decrease in our consolidated revenues for the full year 2010, was mainly the result of a decrease in revenues from a few large transmission projects, which was partially offset by an increase in revenues from several medium-size transmission projects. In addition, the C&I segment had an overall decrease of revenues from contracts valued at less than $10 million. Storm revenues for the full year 2010 and 2009 were minimal and did not have a significant impact on our operating results. Consolidated gross profit decreased 6.8% from $75.9 million for the full year 2009 to $70.7 million for the full year 2010. Consolidated gross profit as a percentage of revenues for 2010 decreased slightly to 11.8% as compared to 12% for 2009. As a result of an overall reduction in contract margins on smaller T&D and C&I projects of approximately $8.5 million, which was mostly due to margin pressure from increased competition.

This decrease in margins on smaller contracts in both segments was mostly offset by net increase of margins of large projects in the T&D segment of approximately $7.4 million. Margin increases in large projects were due to factors described earlier. SG&A expenses decreased approximately $3.9 million or 7.9% to $44.6 million for the full year of 2010. The decrease related primarily to elimination of the $1.6 million severance liability as a result of the amended employment agreements for our executive officers in March of 2010. In an overall reduction in profit sharing and other employee related compensation and benefit costs.

As a percentage of revenues, SG&A decreased to 7.5% for the full year of 2010 from 7.7% for 2009. For the full year of 2010, net income of $16.1 million or $0.78 per diluted share compared to net income of $17.2 million or $0.83 per diluted share in 2009. EBITDA for the full year of 2010 was $42.7 million or 7.1% of revenues compared to $40.8 million or 6.5% of revenues for the full year of 2009. The increase in EBITDA as a percentage of revenues was mainly due to an increase in depreciation expense partially offset by the slight reduction in gross profit margins year-over-year as I discussed.

During 2010, we continue to invest in equipment and tooling in anticipation of increased T&D infrastructure spending across the United States. For the full year of 2010, we used cash of $21.9 million for the purchase of equipment, compared to $29.7 million for the same period of 2009. We anticipate that our investments in capital expenditures for the full year 2011 will be higher than our total capital expenditures in 2010. Our investment strategy has not changed and is based on our belief that transmission infrastructure spending by utilities will increase over the next several years.

We continue to focus our capital expenditures on ensuring that we will have sufficient specialty transmission equipment to be a major player when the build out of transmission lines start in earnest. As you'd expect, we have deferred some of our distribution equipment, capital spending due to the soft distribution market. We plan to continue to funding our investments in additional property and equipment substantially through internal cash flows and cash on hand. We believe purchasing equipment needed long-term, as opposed to leasing, will continue to reduce our long-term equipment costs which should allow us the opportunity to improve contract margins.

Total backlog at December 31st, 2010 was $520.9 million consisting of $429 million in the T&D segment and $91.9 million in the C&I segment. T&D backlog at December 31st, 2010 increased 222.1% compared to backlog at December 31st, 2009. C&I backlog at December 31st, 2010 increased 29.1% compared to December 31st, 2009. The increase in backlog comparing year end 2010 to year end 2009 was primarily related to two major contracts that awarded to the Company in the T&D segment toward the end of 2010. Total backlog at December 31st, 2010 was $325.8 million, higher than the $195.1 million reported in the prior quarter ended September 30th, 2010.

By segment, we had an increase of $313.4 million or 271.2% in our T&D backlog, an increase of $12.4 million or 15.6% in our C&I backlog compared to the backlog reported as of September 30th, 2010. We reported T&D backlog of $429 million as of December 31st, 2010 as a which we estimate $244.2 will not be recognized in the next 12 months. In the C&I segment, we reported $91.9 million of backlog as of December 31st, 2010 of which we estimate $1.1 million will not be recognized in the next 12 months.

Our backlog can significantly fluctuate as awarded new work offsets projects being completed. We continue to market and bid new work in an effort to compensate for backlog being reduced as projects are completed. And where our method of calculating backlog may differ from methods used by other companies, the timing of contract awards and with the duration of large projects can significantly affect MYR's backlog at any point in time and may not accurately represent revenues that MYR expects to realize during any period. Therefore, it should not be viewed or relied upon as a stand-alone indicator of future results. We count 90 days of backlog from our master service agreements while some companies make out one or more years.

We leave to the balance sheet. Our stockholders equity increased from $174.1 million at year end 2009 to $192.7 million at year end 2010. At December 31st, 2010, we had approximately $62.6 million in cash and cash equivalents and $30 million in debt. We maintain a debt to total capitalization ratio of 13.5%, which we believe is lower than some of our peers. We currently have a $75 million long-term credit facility which matures on August 31st, 2012. We have a $15 million letter of credit outstanding under the credit facility leaving $60 million available. The compensation of cash, cash equivalents and available credit under our facility provides us with approximately $122.6 million dollars in total liquidity, which can be used for organic growth or other investment opportunities. Subsequent to December 31st, 2010, we made a $10 million prepayment on our term loan which reduced the outstanding balance of our borrowing to $20 million.

We are focused on maximizing the utilization of our assets which has resulted in an asset turnover ratio of approximately 1.7 times on an annual basis. We believe our asset turnover ratio compares favorably to others in our industry. In total, we believe our strong balance sheet gives us an advantage over many of our competitors when pursuing new work. Financing the best equipment fleet in the industry and investing in our employees. Now, I will turn the call back to Bill for a discussion of operations.

Thanks, Marco. I would like to expand on my earlier comments about how we see our business developing in the near future. As I have already mentioned, we have seen a significant uptick in our large transmission bidding activity, and we have also announced several large awards including the online transmission project in Nevada, formally known as Swept and the Northern Loop of the Central Maine Power Reliability Project.

Additionally, we were named as one of two alliance contractors selected to provide the construction services on Group 1 CapEx 2020 projects in Minnesota which includes four projects totaling approximately 700 miles of 345- and 230-kilovolt transmission lines. We continue to see positive movement for regulatory approvals on projects in the Midwest, Texas, Northeast, and the West. This movement should continue to provide opportunities to bid larger transmission projects over the next several years. The rest of the Midwest, including North Dakota, Kansas, Oklahoma, has also experienced brisk bidding activity for major transmission work.

The 2400 mile 345-KV build out associated with CREZ work in Texas remains on track. Some of the CREZ projects have begun. Some have been bid and are under evaluation, and a few have not yet bid. Encore and Lower Colorado River Authority has started some of their projects in Texas. I also understand that Lone Star has announced its contractor selection for CREZ, but that work has not started. The other CREZ transmission developers will likely make their contractor selections soon with most constructions starting late in 2011. As we have stated before, given our history of utility construction in Texas, strong relationships with the participants and available resources, we believe MYR is well-positioned to win a portion of the CREZ work.

The eastern US has had some significant new transmission lines planned over the next few years in Connecticut, New Jersey, Pennsylvania, Virginia, West Virginia, and Maryland. We are, obviously, aware of the recent decision to defer the Path Project. However, most of the rest of these eastern transmission projects remain on schedule.

Our industry is seeing major awards in the West this year for projects in California, Nevada, and Utah. There are also a number of major projects in the planning stage through all the western US involving reliability and transporting renewable energy from Wyoming and Montana to major load centers in the southwestern US.The northern part of the Swift 500-KV line, which would add another 250-plus miles and make the total line about 500 miles in length, is still in planning.

Another major project in planning involves the public private venture including a non binding agreement between Western Area Power Administration or WAPA and Transwest Express to potentially acquire a 50% equity stake in the Transwest Express Transmission Project. The 725 mile proposed DC line, will deliver renewable energy from Wyoming to electric utilities in Arizona, Nevada, and California. We will continue to see bidding activity with Bonneville Power Administration or BPA and WAPA. The BPA and WAPA Federal setasides are valued at approximately $6.5 billion in total. MYR has a strong history of solid performance with both of these public power entities and we continue to be optimistic of being awarded some of this work.

Across the country we continue to see opportunities in the renewable energy market, while the proposed federal renewable electricity standard has still not passed. We currently have 29 states, plus the District of Columbia, with renewable standards and another seven states with renewable goals.

The extension of the Federal Treasury Grant Program, section 1603 in the code, in the final days of 2010 void the opportunities for companies trying to meet the construction deadline now set for the end of this year.

US solar market is expected to continue growing at a rapid pace. There are now 16 states with renewable portfolio standards that include solar provisions. The Federal Treasury Grant Program extension in 2010 for renewable energy projects and the potential federal budget dollars from the DOE loan guarantee program bode well for development of large scale solar generation and solar manufacturing facilities. MYR Group is focused on the delivery systems of all types of generation.

Electricity consumption in our country increased by 4.9% in 2010 after declining in both 2008 and 2009 according to the US energy information March 2011 short-term outlook. Meanwhile, the forecast for 2011 and 2012 shows growth of 0.5% and 2%, prospectively for 2011 and 2012. Virtually all forecasters expect increased electricity consumption over the long term as our economy increasingly is dependent on the modern convenience made possible by electricity.

Utilities have deferred a number of maintenance and upgrade projects because of the economic slowdown and their inability to get rate relief. These deferrals can only go unnoticed so long before reliability begins to suffer. A severe storm or a strong uptick in system demand will eventually expose the lack of long-term investment in the yield utility T&D infrastructure. None of us can predict exactly when that will happen, but it will happen, and then there will likely be a major push to catch up. Specifically as it relates to transmission, EEI forecast that investor owned electric utilities will increase their investment in transmission from approximately $9.7 billion in 2010 to approximately $12.3 billion in 2013. EEI also predicts that there will be additional transmission investment from independent transmission developers and public power entities.

Now, I would like to shift the focus to our C&I business. Although the projects are still being bid, there remains excess capacity within the C&I industry as more contractors are pursuing the available work which continues to place pressure on margins. As we have set in the past, our focus on health care, government office buildings, research centers, smart highway work, data centers, mining, and wastewater treatment have made us somewhat less susceptible to the slow economy at the national level. We remain focused on our existing markets and executing our strategic plan to drive growth, increase profits, and create value for shareholders.

Over the last several years, we have made significant investments in developing the key management and craft personnel and procuring the specialty equipment and tooling required to support the expected growth. It appears the long-awaited transmission build out is at hand. Now is the time to execute on our plan and put those assets to work.

Finally, we continue to monitor and make adjustments to our cost structure in an effort to insure 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 position MYR to maximize its potential as the economy rebounds and various T&D and C&I projects move forward. Additionally, our focus on safety, high-quality customer service and on-time execution, will ensure MYR remains a valued partner for our utilities and C&I clients. That's it for now.

As always, thank you for your interest and support in the Company. And now I would like to turn the session over for your comments and questions.

Thank you, sir. (Operator Instructions)Our first question comes Min Cho at FBR Capital.

Good morning Bill and Marco and congratulations on your recent new awards and on a strong quarter despite the economy.

A couple of questions for you, first of all, I just wanted to clarify when you talk about the first half of 2011 being a transition year, that you're really just trying to temper expectations in terms of revenue and EPS, but you are not saying that it is a transition period in terms of bidding opportunities and awards that you are actually expecting new awards over the next few months. Is that a fair statement?

Yes, we are expecting new awards over the next few months.

Okay.

We were just kind of referring to the other large projects winding down and then starting up at the two recently awarded ones. As we said, it would take one to two quarters before we get up and running on those.

Exactly, which should not be a surprise to anyone. You've been talking about that for a while now.

Secondly, in terms of the CapEx 2020 Alliance award, so, it looks like there are two projects that have unofficially awarded that equate to about 130 miles. I would suggest the other two projects that are still left are fairly large in size.

Any sense of timing on when those projects come out? Is there a chance that those projects are broken up into smaller projects? In terms of being awarded to you or Quanta, do you have to bid on those individual projects, or are the price sheets and everything already out? Just any more details regarding the contract.

Okay. Well, there is a possibility that those four lines will be broken up into smaller pieces. The 230 line that was awarded to Quanta, I believe is that entire 230 line.

The award that has been tentatively earmarked for us is a section of the Fargo line. I think it is around 60 miles and is a much bigger line than 60 miles. I don't think it has been totally determined how the balance of the Fargo line will be awarded to -- and to who it would be awarded.

I am sure that will play out over the next couple of months, as well as the Lacrosse and Brookings line. I don't know that lends itself to be broken up or not or if they will be inclined to do that. It is certainly a lot of planning. I think it would be very desirable for both the utilities and the contractors to be brought into that pre construction planning, because I think we offer some real value in planning the most efficient projects.

So, a lot is yet to be determined there. We did all submit all the bidders, including MYR and Quanta, submitted pricing when we submitted our bids last July. Of course, that pricing was predicated on a schedule at that time. I know there have been some changes to that, so there probably is a possibility for revised pricing to be sought, but that hasn't played out yet.

Okay.

Also, since you have been winning some of these larger -- larger EPC or the potential to win some larger EPC contracts, are you potentially considering bringing some of those services in-house versus subcontracting, like the design and engineering portions of the business? Or are you pretty much focused on the construction aspect now?

We are pretty much focused on the construction. We have expanded our internal purchasing capabilities, but we will still use supply integrators for projects for the P part of an EPC.

We don't have any current plans to internally bring in engineering capacity. So, long as there are good, viable engineering firms that we can partner with and other subcontractors, that would be our preference. But that would remain to be seen how all of that is going to play out.

Okay. Thank you. I will get back queue.

Thanks.

Our next question comes from Jeff Beach from Stifel Nicolaus.

Morning guys, it's Nathan Jones in for Jeff this morning.

If I can start with a fourth-quarter margin in the electric segment, can you tell me if there were any profit estimate adjustments from previous quarters that contributed to the very strong margin?

I think, in any construction industry or contractor, you are always going to need margin adjustments just on the fact that we based our revenues on the percent complete basis .

As I indicated on the call, based on productivity increasing, cost efficiencies, better contract management, you will have quite a bit of that activity going on back and forth from year-over-year.

Is there any way you could quantify that for us (inaudible)?

I don't think there is. We do I think a pretty rigorous job, certainly, on the quarter ends, but we also do it on the month ends.

We are talking to our operations folks getting their best thinking on the total cost to complete for the remaining portion of the work, and that drives the accounting according to the accounting standards.

So, every quarter we look at all of our big jobs and small jobs as well, and look at what is the total cost for the project, what is the current thinking on that, and what costs remain to be incurred. That is how we approach it. I am sure all the other contractors do it similarly.

We did try to provide some information there in the fourth quarter. Roughly $4.4 million. $4.4 million in large project margin adjustments was indicated, so we do try to provide some of that information for you, but we can't be real specific on what jobs or anything like that.

That's fine. But the $4.4 million, was that all related to previous quarters?

No, that was for the fourth quarter. We did a good rigorous look at the end of the third quarter and then we did another one at the end of the fourth quarter and made the adjustments that caused us to recognize more markets.

Okay. Fair enough.

Onto the Maine and Nevada projects. Can you give us an idea when you are expecting them to start and when they should get a full run rate?

Both projects are already started, but there isn't a lot of work being done in the field. There's a tremendous amount of planning going on in the main work. We have got a significant amount of procurement that is under our scope, so we are getting a lot of those materials ordered.

So, a lot of pre-planning is going on. We have very few people in the field performing in a physical construction. I would expect, that will start to ramp up in the second quarter, but in terms of a really getting full-blown, probably not until early to mid summer.

Okay, great. Am I right in calculating that Nevada will be about $15 million a quarter in revenue and Maine will be about $10 million a quarter when its set for run rate?

You can take the life of the project, the Maine work -- how long, Marco?

The Maine work is a little less than four years. A little less than two years on Nevada.

So, I think what I would do, if I were in your shoes, just not assume a lot in the first and second quarter of both of those projects, and then take whatever the balance is an spread it out over the remaining quarters. That would be a decent swag approach for calculating that.

Okay. That's what I did.

I will get back in queue. Thank you.

Our next question comes from Will Gabrielski with Gleacher and Company.

Hi, good morning, guys.

Good morning.

If you go back over the last few years, and you touched on it today in terms of your capital investment to own equipment, can you just touch on where you are now in terms of your own view of capacity utilization and what the mobilization might look for projects might look like particularly in the Northeast?

Well, I don't think it makes sense to talk about it specifically as to the Northeast .

That was the second part of the question. I'm sorry.

Okay. From a manpower standpoint, I hope we are 100% and utilized all the time. I don't want people on the payroll drawing paychecks unless they are working and doing something productive.

That productive work might be planning work, so we don't have, nor do any of our competitors hire linemen and apprentices and operators to go sit waiting for work to materialize, so there are available workers that we have targeted. They know that when these things ramp up, there is a very good chance that they will be working on our job. So, our utilization of manpower should always be pretty close to 100%.

On the equipment side, we have bought some equipment that is not being used, but in anticipation of using it for the work in Nevada and the work in Maine and other opportunities that we think we will get, so, some of the equipment has been acquired in advance. I don't have any kind of utilization number on it.

And we are also trying to expand the equipment resources to take on more work. I don't know if that is responsive to your question.

That's helpful.

I guess if you are still looking -- obviously, leasing equipment, have you seen any changes in the recent bids that suggest the leasing market might be tightening up? Are you adjusting that now in the bids that you are placing now?

On the leasing market, we monitor that. We will continue to lease some of our equipment. If we have a long-term, reliable need for it, we are likely to want to own it. But if it is something that, we think we are only going to need it for a year or 18 months, we might lease part of it.

And in terms of the leasing market, some equipment is readily available through some of the vendors that lease that type of equipment. There is other equipment that is not so readily available. As you would imagine, we've tried to focus our buying power on that equipment that we think we need long-term and aren't confident it would be available in the rental market.

When you look at the cost structure, we also believe that owning it, is more cost efficient than leasing it. Especially if you are doing short-term rounds as well. So, we look at it from that perspective.

So, I guess to re-ask my question versus a year ago, has the leasing market tightened up for you?

I don't --

I'm just trying to gauge what the mom and pop company that's competing against you that doesn't own equipment is now facing in the leasing market versus a year ago based on the fact that we have seen recent awards that should be taking capacity out of the market.

I'm not sure I have seen tightening happening.

I don't think we have enough knowledge to really comment on that . Some pieces of equipment are scarce, but other equipment is readily available. I don't think we have the knowledge to say today it is tighter than it was in March of 2010.

I expect you could talk to some of the rental agencies, and they might be able to comment on it to say that they are getting higher prices or not, but we haven't really seen it.

Okay. The lastly on weather. Did that impact you in Q4 in any way? And in Q1, shall we thinking about whether it's having a negative impact like we've heard from some other companies?

I would say not necessarily for us. There were some impacts in the East related to all the storms happening, but nothing that was material to our results.

And probably the work in Maine, if we were ready to get rolling on that in all the engineering and all the permits and all of the material on hand, we probably would have been adversely affected, but you can do pre-planning in an office setting or a hotel room, whether it is two feet of snow out there were two inches.

We did not see, I guess, maybe some of the work in the mid-Atlantic, the weather this year maybe was not quite as extreme as prior years. So, it really depends on where you are with where the construction on a particular project. And there's probably- with the Maine work, it wasn't really ramped up to be a factor.

Okay, great. Thank you.

Our next question comes from Justin Hach with Robert W. Baird.

Good morning, guys. Congratulations on the quarter.

So, I was just trying to get a little bit more color around the bidding environment. It sounds like you are still expecting more awards and that things are still very elevated. Last quarter, prior to the awards that you announced, I think you are talking about that there were five or six $100 million plus projects that you are currently bidding on. It was something like $1 billion dollars worth of work.

I was hoping you could just give us an update on kind of where that is now after the awards that you have announced.

There are a number of big awards yet to be decided down in Texas. I mentioned three that I think have been determined. Certainly, the ETT work, which is AEPand Mid-American, the WETT work, the Cross Texas work, and the Sharyland work. Those four have large projects. The rest of them, there are a number of players that have smaller pieces of it.

I know Stet is one, South Texas electric co-op, I think, has a significant project, so those are large projects that haven't been awarded yet in Texas that are continues to be, lots of discussion in the Great Plains, places like the Dakotas and Oklahoma and Kansas.

I think you may have said that -- at least I thought I heard you say, $500 million projects, multiple $500 million projects. I don't think I would say that they are that big .

Actually, I said last quarter you talked about that there were five $100 million dollar plus projects that you had bid outstanding.

Yes. I would agree with that.

I think the ones we talked about the four were [CapEx] 2020, Central Maine, the Iron Lines with Project, and just the ones that Bill had mentioned. I think those were the ones we referred to before.

Okay. Great, thank you.And then the only other question .

I know you don't give guidance, but with the transition period that you're talking about, would you expect , the traditional seasonality in your business to be more pronounced in 2011 than it is normally, or just kind of in line with normal seasonality in terms of the earning contribution in the second half?

You are right. We don't give guidance, but I think these large projects, depending upon the timing of that, could alter the normal seasonality of the business. If we get a very large project, that could overwhelm, percentage wise, the rest of the work. That could change some of those historical relationships.

Some of these projects that are out are dependent upon summer outages -- or not summer outages. There are prohibitions on doing the work during the summer and winter. Other projects are more greenfield kind of projects where you can, once you get started, you will be able to work it year round.

Depending on which ones we get, the availability of outages or outages are a big factor, that could change the revenue recognition from quarter to quarter.

Great.

Just one last one. Just housekeeping. Dominion. I think in your 10-K, think you said it was 19% of your total revenue. Is it possible you can quantify how much that was related to the two large lines that you have press released?

Not necessarily. As you might imagine, a big portion of that has to do with the large project, but there's other work that we also deal with for Dominion.

Great. Thank you.

Thank you. Our next question comes from Carter Shoop with Deutsche Bank.

Good morning. This is [Peesh Majolti] for Carter. Could you please comment on your expectations of the tax rate in 2011?

I think you could use 38.5% for 2011.

Okay. Thank you.

Our next question comes from Adam Thalhimer with BB&T.

Good morning, Bill. Good morning, Marco. Great quarter.

Let me ask first of all. How do you guys view the 14% margin in Q4? Is that more of a one off in your opinion, or do you think that is kind of, hey, we will get that later in '11 and we get more of these large transmission projects at full steam. This14% is a preview of what's to come, a normal margin for NYR before, or is that just sort of a one off? Can you help us with that, please?

I think it would be better to maybe look at the annual margins. Certainly, there will be --I think a quarter is too short of time.

And to say, well, to extrapolate off that last quarter and say you are going to continue with that pace, I would take more at an annualized approach and say that is more normal. And then, as we've indicated on quarterly calls in the past, we do expect there to be an uptick in the margin long-term, but I think it would be misleading to just take one quarter and try to extrapolate that, that is going to continue forever and ever.

Okay. That's fair. And then in terms of transition period in the first half of '11, I'd love for you to say, hey, that means EPS down flat or up in the first half. I know you are not going to say that.

I mean, directionally, how concerned are you about earnings? What should we read into that transition comment as to how concerned you are about earnings in the first half?

We are totally focused on producing earnings. I wouldn't say we are concerned or not concerned, but we are focused on it.

And then, Bill, I think the bidding opportunity for the large projects really picked up over the summer of '10. In terms of -- if that was the big first wave in the summer of '10, how would you say the bidding environment now compares to what it was back then?

Has been in a little bit of a rust bit here since the first of the year. We are still --got lots of things that we are bidding, but there is no way that the pace of the July through December would continue, because that is when most of the CREZ proposals were submitted.

That is when the CapEx was submitted. That is when the Nevada work was submitted. I am not sure if the California work, when that came out, but there have been strong bidding activity here in the first quarter, but I don't think it would be at the same pace as the last six months of 2010.

With the bidding season at all, is there a chance as we get into the summer, is there anything special about the summer? As we get into the summer of '11, is it maybe as strong as it was in the summer of '10?

It's all about when they get all of their regulatory approvals and permits in hand. As soon as they get their permits in hand, they are out lining up bids, and they may be lining up this in advance.

If you look at the kind of bread-and-butter work that we all do, there would be some seasonality to that. Part of it would be most utilities are on a calendar year basis. They've put their budgets together at October/November, have their boards of directors approved them in let's say December or January, and then once they have their board approvals, they go out on the street with their bid packages.

So, the bread-and-butter small project work has been kind of annual cycle that ties into a calendar year utility, but these big projects, they are coming out. Not necessarily driven by that same cycle.

It's just FYI. In the second half there was the uptick in what we see still outstanding as quite a bit of awards. There are also medium-sized projects out there, not just the mega projects that everybody typically focuses on. There is still quite a bit of what we would say are good sized projects out there.

Okay. Thanks a lot. Congrats again on the quarter.

Our next question comes from William Bremer with Maxim Group.

Good morning, gentlemen. Nice solid quarter.

Good morning, Bill.

Can you give us an idea of your overall capacity? Let's just say in a simultaneous project of $100 million, given your CapEx initiatives that you've been doing since late 2006 to the present time?

Well, I've got to answer that with a it depends kind of answer. I use an example from an equipment perspective.

The work in Nevada is much more equipment intensive than the work in Maine. And the work in Maine in terms of total dollar value is greater than the work in Nevada, but it is spread out over a longer period of time. Some of the circuits that we will be building in Maine are not 345. There is no 500 in Maine.

Each project has to be looked at on its own, so it would probably be easier to do multiple projects like the Maine project or a project like the Nevada one would be more taxing because it is 500. Where short timeframe, at lots of equipment and manpower out on the right of way at the same point of time.

Good point, Bill,I agree.

Marco, just a housekeeping on SG&A. Should we -- given what is approaching us here in terms of mobilization, should we be tweaking it, especially in the second half of a '11 higher?

Well, it definitely will increase slightly, but we don't give any numbers as far as how much. We kind of gave some commentary as to why it came down somewhat here in 2010, but that SG&A number will likely go up. I would kind of look at the historical numbers that we have done over the last several years and kind of average that out.

Okay. All right, gentlemen. Thank you.

Our next question comes from Tahira Afzal with KeyBanc.

Good afternoon, gentlemen. Excellent quarter.

Hello Tahira.

Couple of questions. Number one saw a bigger execution on the transmission side in the fourth quarter. Prior to that with the nine months, it was more of a mixed regard.

Could you comment on any potential closeout that you see coming up? And I know you can't-- don't know which way they are going to go, but would you have a similar opportunity based on your prospects right now as you look in the first half of this year?

Tahira, I think what I indicated to one of the other analysts, when we follow a pretty rigorous close each quarter and we are recognizing the revenue and the margin, based upon the facts and our judgment at that period of time, so we -- so when we close the books in December along towards the end of January, that reflected our very best thinking.

Certainly, we hope to close out projects that are ramping up in 2011on a positive note, but we don't carry over anything. We go through a rigorous close every quarter.

Got it. Okay.

And then could you comment a bit on the profile of the projects you are booking. You've talked about it in the past and these large transmission projects in terms of their margins. Just because of, whether you are doing more EPC oriented work, are there more fixed price or cost plus?

How should we compare the margin profile of these projects in context to those that you are still completing or have done over the last two years?

Well, each of the projects -- again, it depends. A number of the projects have significant subcontractor work and significant materials . As we have told everyone, we are not in a position to mark up those costs. We would mark up our own labor and equipment.

Conversely, some of the projects are more labor and equipment with very little material, very little subcontractors. If I knew exactly which ones of the opportunities that are pending, that I would ultimately get, I would have a better sense for margin, but it really depends on what we end up with.

Got it. Okay.

And I guess last question. A follow-up on an earlier question. If you look at your equipment, et cetera, and you move in transition more toward doing these large transmission projects, will you be using more helicopters, et cetera, and really is that market still fairly well based in terms of capacity?

We have not had any difficulty finding helicopter resources for the large projects that we been awarded. The work in Nevada would have significant helicopter work. The work in Maine, other than maybe a river crossing or something like that, I don't think there will be much helicopter work there. There probably will be a fair amount of helicopter work in Texas if we get any of those jobs. The same way we pick up work in the Great Plains states of Kansas and Oklahoma, Nebraska, those kinds of places.

But in answer to your question, we have not had a problem finding subcontractors, quality subcontractors, to provide those airships to do that work.

Thank you, that's all I have. And great execution again.

Thanks.

Our next question comes from Liam Burke with Janney Capital Markets.

Good morning, Bill, or good afternoon, rather.

Good afternoon.

Bill, on the transmission bidding activity, are you seeing more or different competitors in the mix, or is it just usually the same suspects?

Well, all of the usual suspects are there. Depending upon the region, we are seeing some new players, come in, so certainly the Quantas and the Hinkles, so certainly the same players are virtually always there, but there are some new players coming in.

And on the distribution front, you did say that there is a potential that you are taking share when you saw the step up in revenue in the fourth quarter. Is pricing getting any firmer in that environment, or are people dropping out of the competitive arena there?

I don't think it's getting any worse, but we have not seen a big uptick in available pricing, so it -- it's not as attractive as I think it needs to be to have contractors to invest a lot of money in distribution equipment. So, we have not personally experienced significantly different margins.

Thank you.

Marco, you mentioned that in 2011 you did pay down $10 million in outstanding debt. Is that right question might?

That's correct.

And if I think about your step up in capital expenditure plus probably a additional working capital in these as these bids ramp-up, are you comfortable that you have the existing cash on hand to be able to fund all of this without having to go back outside for additional capital?

Absolutely. We are very comfortable with the liquidity we have at this point. There shouldn't be any issues there.

Great. Thank you.

Our next question comes from Dan Mannes with Avondale Partners.

Good afternoon, Bill and Marco.

Hello.

The first follow up on CREZ. Given the sizable amount of bidding and work in the next two to three years, how are you thinking it through--and it all in one location, how are you thinking through labor availability, and are you starting to see any impact on bidding behavior given that potential labor crush in CREZ?

Well, we talk about that , certainly, at the time we submitted our proposals, and we continue to talk about it. We've got some strategies that we think will be effective in making sure we have quality manpower to perform the work.

I don't really want to get into that on this call, because some of them probably aren't that unique, but some of them might be somewhat proprietary. We are constantly talking about labor resources, about the skilled guys in the field, the estimators, the construction managers, as well as equipment and tooling resources.

That is something, obviously, you are pretty aware of the bidding process. I would just say that it seems like that is something your peers are focusing a bit on, just given how much work in one large area, but still all one area at the same time.

Right and certainly, one part of your strategy has to do with your compensation.

I think on any of these jobs that we bid, that's typically a big part of our discussion is where that labor, where is it coming from, how do we attract it, and so forth. So, we are aware of what's going to happen in Texas, and we are preparing ourselves for it.

Got it.

And then just on another note, on the C&I business, you are backlog grew surprisingly given your commentary about the amount of available work, how do you sort of reconcile the difficulty of that market to your growth in backlog there. They are at some pretty high historical levels.

Is this share -- is this you growing share, or is it also may be an indication of taking weaker margins there on future business?

That's probably driven by just a couple of projects . Maybe we have taken some margins.

Certainly, we have been maybe, pretty aggressive on some of the margins we have taken with this work. But you pull one or two projects out of there and any increase that you saw would not have been an increase. When you have a relatively small base number, one or two projects really kind of can skew it.

Got it. Makes sense. Thanks.

Our next question comes from Craig Irwin with Wedbush.

Good afternoon, gentlemen. Congratulations on a solid quarter.

Thank you.

Thank you.

So, most of my questions have been asked and addressed quite thoroughly, but just one housekeeping question. Was there anything associated with CapEx 2020 included in backlog at the end of the fourth quarter?

No.

Okay. Excellent.

Another general question has been asked a couple different ways, and I was wondering maybe if you can give us a little more color here. So, the benefit on a large transmission projects, $4.4 million in the fourth quarter, $7.4 million in the full year.

Everybody wants to know, are the lessons that you've learned, or are these things that went your way on executing these projects, likely to repeat themselves? Are these things that you can use in executing other contracts that you have in backlog, or was this fortuitous execution, basically, weather being in your favor or geography may be slightly better than you had originally bid.

No, every job is unique within itself. Certainly, all the lessons learned on the large projects we tend to carry them over to other projects. We take our management team out on these and try to move them over, learn from our experiences.

It's all going to vary. It just all happened that in the fourth quarter we had some good productivity levels and cost efficiencies and so forth that gave us the $4.4 million we reported.

There's opportunities in the future to, to move people over and get those type of results, but it is all dependent.

I would say that we probably learned more on the disappointing jobs than we do on the positive jobs, so we tear a job apart, whether it does meets estimate or does a little better than estimate or does worse. We try to do post-mortems on all of them, so, we transfer that knowledge across our company.

Great, great.

And I hate to focus on areas that aren't working, but I guess the distribution market is really tough with the competitive dynamics out there.

Can you give us a little color on whether or not the overall competitive environment there continues to intensify in whether or not we are seeing probable continued softness, maybe even declines, in the distribution market over the near term?

We see it steady at a low level. We don't think it is getting worse, but we haven't seen signs where it is getting better either.

Okay.

There are areas we will pick up some additional work, with a client in one part of the world, and that's a positive, and then we will lose margin or lose a client in another part of the world. When it all balances out, we think there is not a trend up or a trend down.

And do you have any visibility on tightness may be being in the market for distribution labor? I mean that availability of labor for distribution given that the movement of people into the transmission market?

Well, we have taken a bunch of distribution hands and made them -- or made some of them transmission hands.

We aren't perfect in being able to make that happen, but there are a lot of linemen that would rather work distribution, would rather work in their home location that are traveling for us and other contractors doing transmission work.

If the work picks up back home for them or if there is a big storm related damage, certainly, risk that the transmission contractor might dare is, how do I hold onto those people who would really rather be working distribution ? So, if I knew exactly how many hurricanes there we're going to be this season and when, I would like to know that, because I would be planning accordingly.

Great. Thank you for taking my questions. Congratulations again on the solid quarter.

Thank you.

Our next question is from Rob Young with William Smith and Company.

Hey, guys. Good afternoon.

High, Rob.

Just a couple quick questions. I was hoping that you could comment on the bidding environment as it pertains to new versus replacement work. Especially on the transmission side.

Most projects go down and existing right-of-way. In some cases, that right-of-way accommodates the additional line. In some cases, you're just adding the conductor on the other side of the towers, so there's an empty side of the towers .

In many cases, probably most cases, you are ripping down existing towers building new, taller towers that will likely hold two circuits of wire. One on each side. That's probably the most common.

There are some greenfield situations where you are out in the middle of the prairies and the utility has been able to get the right-of-way to build it. Certainly, from a constructor standpoint, a lot of the safety issues and the complexity is a lot different if you have wide open spaces to perform your work.

So, we I think are pretty skilled at doing both, and we reflect that what I will call congestion factor in our bids, so we are having to perform work in a congested right-of-way where there is other energized circuits. There is lots of things you got to do to keep your men safe.

Okay.

And then how do you foresee -- you talked a little bit about labor inflation. I was hoping that you could possibly comment on just-- the pricing environment for the entire industry. I mean, is that something that you are seeing is rising for the transmission side, or how do you view that?

Well, on both the union and the non-union market, I think you will see wages go up. I think there have bee a number of settlements that have held wages flat. And there are still many areas of the country where there are unemployed, quality people, and in those areas probably the wages will continue to remain flat.

Where you have full employment, as you would expect, that puts pressure on raising salaries and the escalating cost of benefits.

So, do you foresee that you would be able to pass that through in your bids, or is that a cost that you might have to eat?

I think it goes sometimes both ways. Sometimes you take the risk that, there will be such an increase.

There's local agreements across the country . Depending on the size of the project, the duration of it, we get into discussions about wage escalations and how much money do we put in there for wage escalations.

Other times if that job is a short duration, it's really not an issue. But like Maine or Nevada, which are longer than one year period of time, you would take that into consideration when putting your pricing together.

Okay.

It's really difficult to get any clients to index you for wage inflation, other than a few have a TND alliance to do, let's say, distribution work or small project where many of those, they will reimburse you based upon whatever the local union contract says.

We have had a fairly good success on indexing for fuel. We are exposed in a couple situations on fuel, but that is an important negotiating point as we talk about these multi year projects. Given what we are going through right now, we are burning lots of fuel. And when diesel fuel is $4.00 a gallon versus $3.25 a gallon, that can make a heck of a difference.

Right and as you look into 2011, I know you commented a little bit on your capital employment strategies. Are M&Aopportunities included in those at all?

We always look at M&Aopportunities. I get a couple of them every week across my desk. Some of which I throw away, others, I look at and do at least some cursory due diligence.

Okay.

As you know, we have not been a particularly acquisitive company. We like the space we are at. We like the fact that we are a national player. I think we've got -- I don't think we have any big disadvantages in competing for these major jobs.

Okay. Okay. Makes sense.

Can you just comment on what the new orders were in the quarter as well as for the full year?

For the quarter, you are looking for TND, $429 million. I'm sorry. $432 million for TND, roughly $49 million for C&I, and then for the year total bookings were $743 million for TND and $170 million C&I.

Perfect. Thank you very much.

Thank you. I am showing no further questions at this time. I'd like to turn the call back over to management.

I'd like to thank everybody for participating in our call. We certainly appreciate your interest in our company, and I speak for the entire management team and employee base.

We understand the importance of the capital markets to provide the resources that we need to perform our work, so certainly appreciate the support of all the self side analysts as well as the institutional investors that own us or are considering us.

I don't have any further comments. We look forward to getting back together in May as we have our first quarter call, and with that, we will conclude today's call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the conference and you may now disconnect. Everyone have a wonderful day.