MYR Group Inc (MYRG) 2011 Q1 法說會逐字稿

Good morning everyone, and welcome to the MYR Group First Quarter 2001 Earnings Results Conference Call. Today's conference is being recorded. At this time for opening remarks and introductions over to the conference over to Mr. Philip Kranz of Dresner.

Thank you and good morning everyone. I like to welcome you to the MYR Group, Inc. conference call to discuss the Company's first corporate earnings results for 2011, 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 at yesterday's press release, please contact corporate services at 312-726-3600, and we will send you a copy. Or you can go to www.myrgroup.com where a copy is available under the investor relations tab. Also, a replay of today's call will be available until Monday, May 16, 2011, 11.59 PM Eastern Time by dialing 800-642-1687 or 706-645-9291, and entering conference ID 60139160.

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, these statements are no guarantee of future performance. These risks and uncertainties are discussed in the Company's quarterly report on Form 10-Q for the first quarter of 2011, and in yesterday's press release. With that said, let me turn the call over to Bill Koertner.

Good morning everyone. Welcome to our first quarter 2011 conference call to discuss financial and operational results. I will provide a brief summary of the first-quarter 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 the outlook for the industry.

Diluted earnings per share were $0.21 for the first quarter of 2011, which represents a 61.5% increase over the first quarter of 2010. Revenues increased $1.4 million in the first quarter 2011 compared to last year, which is acceptable given the challenging economic climate for both of our market segments. It's important to note that while we have begun work on some of our recent large project awards, the revenue contribution during the quarter was minimal.

With respect to the improvement in earnings for the first quarter 2011 we benefited from the favorable close out of some of our major projects as was the case last quarter. This resulted in our gross margin improving by 420 basis points on a year over year basis for the first quarter of 2011. These projects will be substantially completed by the end of the second quarter. We expect to replace these revenues in the second half of the year with a ramp up in construction of some of our recent project awards. However, the margins on these new contracts may not match those of the work we are currently completing.

Most of you are probably aware of MYR's two large contract awards announced so far in 2011, for Dominion Virginia Power and Cross Texas Transmission. The Mountain Storms to Dobbs project in Virginia booked in the first quarter, will allow MYR to continue working on Dominions 500 KB transmission expansion of new and upgraded lines. Meanwhile, the Cross Texas transmission project announced in April, marks our first award of a major Texas CREZ project, and will be reflected in our second quarter backlog. Additionally, we announced the MYR Group was selected as one of two alliance contractors to perform construction services on Group One projects for the CapEx 2020 work in Minnesota. None of that work is included in backlog, because we do not yet have a contract for a specific scope of work.

Outside of the large transmission project area, recovery at our utility distribution at C&I business remains soft, as a result we are still experiencing margin pressure in these markets. The same number of contractors are competing for fewer available projects in order to keep their labor and equipment resources busy. We expect margin pressure to continue out 2011 in our end markets other than for large transmission work. As you know, we operate in two broad market segments, transmission & distribution or T&D, and commercial and industrial or C&I. These segments can be further broken down into many sub-markets by geographic 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 substations and distribution projects. We continue to expand our renewable business which it includes underground collection facilities and solar panel installation as well as the typical T&D services associated with a renewable project. Finally, we participate in the construction of large transmission projects which often includes large substations.

While the distribution of small project market was weak throughout 2010, we continue to anticipate slightly increased spending in 2011 in these markets. Based on a recent projection from the Edison Electric Institute at its annual financial conference last November. Additionally, as 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 remain confident about our long-term investment in our distribution with our small project markets. MYR's business model continues to rely on the belief that outsourcing of services will a crease may become more attractive to utilities over the long-term as opposed to the utility's hiring new employees to self perform the work. We believe outside contractors will comprise a larger percentage of the overall T&D workforce in the future due to the contractor's flexible in the to ramp up and down to their workforce and other cost advantages.

Bidding activity for major transmission projects should continue to be strong over the next few years, but may not be as robust for the remainder of this year as it was for the last half of 2010 and early 2011. We are optimistic regarding our long-term opportunities as we believe the overall a market for large projects and related upgrades will remain quite robust. We are proud of our recent awards and the confidence 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 can bring to a project to ensure a successful project completion. These large project awards have resulted in an increase in our total backlog at March 31, 2011 to $603.9 million from $199.5 million at March 31, 2010.

While most of this growth was a result of large transmission awards, it should be noted that our smaller T&D work and C&I backlog remain strong as well. Marco will provide additional detail on our backlog in a few minutes. As we noted in our last call, the construction of these major projects will be spread over several years. Additionally, there will likely be lags of several quarters from the announcement of any award, until the successful contractor performs any meaningful construction and reflects any significant revenue on its books. We see the first half of 2011 as the transition period of winding down some existing large projects, while at the same time we began to ramp up some new multi-year large transmission projects.

Although we did see an increase in our C&I backlog in the first quarter 2011 compared to the first quarter of 2010, this business continues to be challenged due to the slow 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 large commercial industrial and governmental sectors of these two regional markets. We expect that there will continue 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 and healthcare facilities waste water treatment facilities, government office buildings, or large manufacturing facilities, data centers, other high-tech projects, and smart highway work.

Our focus for a number of years in these market segments has been key in sustaining our strong competitive position, and we believe it will continue to benefit us, specifically in Colorado and Arizona, as the economy sees improvement. In the meantime, we continue to be smart and in our bidding and execution of this work.

Now Marco will provide details of the first quarter 2011 financial results, and then I will be back to provide some additional insight on the current market conditions in our perspective for the future of MYR. After that, there will be an opportunity for you to ask questions. So Marco, please begin.

Thank you, Bill, and good morning everyone. Yesterday after the market close we announced our 2011 first quarter results. Our revenues for the first quarter 2011 were $150.3 million, an increase of $1.4 million or 0.9% as compared to the first quarter of 2010. For the 2011 first quarter, our T&D segment revenues increased $13.2 million to $118 million, and our C&I segment revenues decreased $13.8 million to $32.3 million as compared to the 2010 first quarter.

Within our T&D segment, we recorded revenues of $80.5 million for transmission and $37.5 million for this distribution, during the first quarter of 2011. For the first quarter 2010, we recorded revenues of $63.1 million for transmission, and $39.7 million for distribution. In the first quarter of 2011, transmission revenues increased $17.3 million or 27.5% while distribution revenues decreased $2.1 million or 5.4% as compared to the first quarter of 2010. Overall our distribution market continues to remain soft, with increased competition. The majority of the increase in revenues was the result of an increase revenues from several medium-sized T&D projects between $3 million and $10 million in contract value, which was substantially offset by a decrease in revenues from a few large C&I projects rated at $10 million contract value.

Gross profit in the first quarter of 2011 increased to $21.6 million or 14.4% of revenues, compared to $15.2 million or 10.2% of revenues for the first quarter of 2010. The increase in gross profit as a percentage of revenues was mainly the result of an overall increase in contract margins on a few large transmission projects of approximately $5.8 million as a result of increased productivity levels, cost efficiencies, and at work and effective project management. These large projects which generated favorable margins in the current quarter will substantially complete in the second quarter of 2011.

First quarter SG&A expenses increased 32.1% to $14 million, compared to $10.6 million in the first quarter of 2010. The increase was primarily due to an increase of profit sharing and other employee related compensation and benefit costs in the first quarter of 2011. In addition, we benefited last year in the first quarter from the elimination of a $1.6 million severance liability as a result of amending the employment agreement of our six executive officers. This was a one time benefit last year, and helps explain why SG&A expenses for this quarter are up over last year. EBITDA, which is a non-GAAP financial measure and is reconciled to the GAAP measures in our press release, increased to $11.9 million in the 2011 first quarter compared to $8.7 million in the first quarter of 2010. The provision for income taxes was $2.9 million for the three months ended March 31, 2011 with an effective tax rate of 39.4% compared to $1.7 million for the three months ended March 31, 2010 with an effective tax rate of 38.1%.

First quarter 2011net income was $4.5 million or $0.21 per diluted share, compared to first quarter 2010 net income of $2.8 million or $0.13 per diluted share. During the first quarter of 2011, we increased our investment in equipment and tooling in anticipation of the start of several large projects. For the first quarter of 2011, we used to cash of $12.2 million for the purchase of equipment, compared to $1.4 million for the same period of 2010. We also have additional outstanding commitments or options to purchase about $10 million of equipment and tooling, and are investigating additional purchases beyond those. We anticipate 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 a belief that transmission infrastructure spending by utilities will increase over the next several years. We continue to focus our capital spending, and ensuring that we will have specialty transmission equipment capacity to grow. Our goal remains to be the contractor of choice for large-scale transmission projects as well as bread-and-butter small, capital, and maintenance projects. We continue to defer for some of our distribution capital spending due to the soft distribution market. We plan to fund our investments in additional property equipments substantially through internal cash flows and cash on hand. We believe that purchasing equipment makes the most sense, provided the equipment is needed for the long-term, and utilization rates is expected to be high. This should reduce our overall cost structure, improve our margins, and make us even more competitive in the future.

Total backlog at March 31, 2011 with $603.9 million consisting of $523.7 million in the T&D segment, $80.2 million in the C&I segment. T&D backlog at March 31, 2011 increased to 266.6% compared to backlog at March 31, 2010. C&I backlog at March 31, 2011 increased 41.6% compared to March 31, 2010. The increase in total backlog comparing first quarter of 2011 to the first quarter of 2010, was primarily related to several large contracts that were awarded in the Company's T&D segment late in 2010, and the first quarter of 2011.

Keep in mind that we do not include a client's intention to award the Company's work in backlog, unless there is an actual contract or work ordered to perform a specific scope of work. The CapEx 2020 work in Minnesota would be an example of a situation where the client's intention has not yet been converted into a contract and thus, under definition, it is not included yet in our backlog. Total the backlog at March 31, 2011 was $83 million higher than the $520.9 million reported in the prior quarter ended December 31, 2010. By segment, we had an increase of $94.7 million or 22.1% in our T&D backlog and a decrease of $11.7 million or 12.8% in our C&I backlog, compared to the backlog reported as of December 31, 2010.

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

Moving to the balance sheet, our stockholders equity increased to $198 million at March 31, 2011, from $192.7 million at year end 2010. March 31, 2011, we had approximately $44.7 million in cash and cash equivalents, and $10 million in debt. During the first quarter of 2011, we prepaid $20 million of our $30 million term loan. Our debt to capitalization ratio is 4.8%, which we believe is lower than some of our peers. We currently have a $75 million credit line under our credit facility which matures on August 31, 2012.

We have a $15 million letter of credit outstanding under the revolving credit line leaving $60 million available. The combination of cash and cash equivalents, and available credit under our facility, provides us with approximately $104.7 million in total liquidity which can be used for organic growth and other investment opportunities. We are focused on maximizing the utilization of our assets, which has resulted in an asset turnover ratio of approximately 1.84 times on a trailing 12-month basis. We believe our asset turnover ratio compares favorably to others in our industry.

In summary, we believe our strong balance sheet gives us an advantage over many of our competitors, when pursuing new work, when financing the best equipment and tooling available, and when 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. Over the past several months much of our attention has been focused on pre-job planning, and recruiting and training the workforce needed to execute these major new transmission jobs. We also remain focused on bidding and executing our small project and maintenance work for our long-term existing clients. Our success will depend on being able to safely execute all of our work, large and small, consistent with the productivity assumptions used when we bid the work.

Our clients continue to make progress on obtaining regulatory approvals and securing right away access on projects in the Midwest, Texas, Northeast, and the West. This movement should provide us with many opportunities to bid large transmission projects over the next few years. The Midwest, including North Dakota, Nebraska, Kansas, and Oklahoma, should experience brisk bidding activity for transmission projects of all sizes. The 2400-mile through 345kV build out associated with CREZ work in Texas remains on track. Some of the CREZ projects have begun, some have been awarded, but not yet started, some have been bid and the bids are being evaluated, and some CREZ work has yet to be bid. We see the CREZ market as well as the rest of Texas market as a great opportunity for MYR.

The eastern US has some significant new transmission lines planned over the next few years in New England, Connecticut, New York, New Jersey, Pennsylvania, New Jersey, West Virginia and Maryland. A few these projects have experienced delays, but for the most part they remain on track. They are also a number of major projects in the planning stages throughout the Western US involving reliability and transporting renewable energy for places like Wyoming and Montana two major load centers in the Southwestern US. The northern part of the [SQIP] 500kV line, which would add another 250 miles, and make the total line about 500 miles in length, is still in planning.

Another major project in the planning stages involves a public private venture including a non-binding agreement between Western Area Power Administration and Trans-West express to potentially acquire a 50% equity stake in Trans-West Express transmission project. This 725 mile proposed DC line will deliver renewable energy from Wyoming to electric utilities in Arizona, Nevada, and California. We expect to see bidding activity with Bonneville Power Administration or BPA and WAPA for the next several years. The BPA and WAPA federal set-asides are valued at approximately $6.5 billion in total. MYR has a long history of solid performance with both of these public power entities and we continued to be optimistic about being awarded some of these projects.

We also 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 Colombia with renewable standards, and another 9 states with renewable goals. The US solar market is expected to continue growing at a rapid pace with 16 states having renewable portfolio standards that include solar provisions. MYR Group is primarily focused on the delivery systems for all types of generation. According to the US energy information administration's April 2011 short-term outlook, electricity consumption in our country is forecasted to grow by 0.2% for 2011, and 2.3% for 2012.

Meanwhile, virtually all forecasters expect increased electricity consumption over the long-term as the economy continues to recover. Deferred maintenance and upgrade work by utilities because of the economic slowdown can only last so long before reliability begins to suffer. None of us can predict exactly when that turnaround will happen but it will happen, and then there will likely be a major push to catch up on the part of the utilities. Specifically, as it relates to transmission. The Edison Electric Institute forecast that investor owned electric utilities will increase their investments in transmission from approximately $9.7 billion in 2010 to approximately $12.3 billion in 2013. This is remaining on track. This does not include additional transmission investments from independent transmission developers and public power entities.

Now, I would like to shift the focus to our C&I business. Although projects are still being bid, there remains excess capacity within the industry, as more contractors are pursuing the available work which continues to put pressure on margins. However, as we've said in the past our focus on healthcare, government office buildings, research centers, smart highway work, data centers, mining, and waste water treatment has made us 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 our shareholders. It appears the long-awaited transmission build out is well at hand. Our management and construction teams are focused on executing the recent new project awards. And our estimating teams will continue to focus on bidding additional work as we understand the importance of an ongoing stream of large and small projects to reach our long-term goals for our owners.

Finally, we continue to monitor and make adjustments to our cost structure in an effort to ensure MYR remains one of the lowest cost providers in the industry. A low cost structure, coupled with the steady focused on the 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 utility and C&I clients. That's it for now. As always, thank you for your interest and support, and now I would like to turn the session over to you for your comments and questions.

(Operator Instructions)

Will Gabrielski from Gleacher.

Thank you so much, good morning.

Good morning.

Can you talk about your capacity to book work from here? As it pertains to you specifically, and then your view on the industry in general given the pipeline, it seems is quite large. Quanta made comments that they see the industry constrained by the back half of this year. What's your view?

You have two questions there. As far as responding to a comment Quanta may or may not have made, I didn't hear that. I will let you ask the folks at Quanta about that. We have additional capacity to continue bidding work. We've obviously put a lot of work in the last 6 months and our focus is on executing that work and we will be doing a lot of pre-job planning but we have that pulled our estimators off of the street. They are continuing to look at additional work. We have additional bonding capacity, and we feel optimistic that we're going to have other opportunities coming down the pike, but as I said on prior calls the breakneck pace of awards and bidding opportunities in the last half of 2010, I don't see that repeating itself. I do think that the bidding activity will remain robust but the industry experienced something in the back half of 2010 that I don't think it had ever experienced in the past.

Okay. Then when you move into the execution phase on these particular transmission projects, I'm curious if you could provide some color around the level of contingencies you have made both of these particular contacts versus the big contracts in the past.

We would have taken a similar approach to the way we bid projects in the past. Each project stands on its own. They each have unique risk factors as we go through our bid review, there are probably 12 or 15 major risk factors that we focus on. Some of them are not significant in that particular job, so we tend to focus on the risk factors inherent to that particular work, and if we think it is necessary to assign some contingency to cover ourselves, or seek other methods of pushing that risk off onto someone else, we may try to push the risk back to the client. Or we may try to push it to a material supplier or a subcontractor. But the methodology that we have used to assess risks, and price risks, and take exception to risk hasn't changed.

Okay. Lastly, there has been some issue it sounds like in terms of government bureaucracy and permitting on some the bigger lines, across state lines. In your expectations, around the project you have won, is there any potential that we could see that show up as we head into the construction phase on anything you are working on?

There is always that potential. I would say that given my background, coming out of the utility, I have always been a little more conservative on that in recognizing how regulatory delays can snag a project. I do feel good about the projects that we have booked. We are conducting environmental assessments, our clients are conducting environmental assessments that can always raise an issue. But we haven't found anything on work that we have under contract that is going to result in any meaningful delay.

Okay. That is really helpful. I appreciate you taking my questions.

Andrew Whitman of Robert W. Baird.

Hello. You have managed to find yourself with a good problem which is lots of big projects to work on. In addition to the planning that you are doing ahead of executing some of these projects, what else are you doing to head into this unchartered territory and deliver these projects on time, and on budget or below budget, that can give us some confidence that MYR Group is ready to deliver this level of work. I know, in the past you've talked about key personnel at the site, talked about the foreman who have really been good partners for you over a long period of time, things like that, can you just talk about the level of experience that you are going to have on some of these larger projects and how they can help you deliver the projects.

The key to success, be it MYR or another company, is how well you do on a pre-job planning. Our experience, for every dollar we spend on pre-job planning, we get $10 back at the back end. What you want to avoid are having a whole bunch of people out on the job, and for instance running out of material, or having a question about right of way access or having a question about the drawings that we are to build to. On all of our work, and I wouldn't say we are by any means perfect on this, we start months in advance pre-job planning.

Sometimes--or I would say, most of the times our clients want us involved on constructability reviews as they look at alternatives routes, alternative ideas on the design, so many cases were involved 6 months or 8 months a year in advance of the project. But as the project is awarded, and a work order is let. We marshal all of our resources and go to work on the job. We try to lay out all of those details and so, you can imagine we've got a number of big projects that we are about to execute. A couple of them have started with right away clearing, and building access roads. The real key is pre-job planning and that's where our focus is today.

That makes sense, is very helpful. I also wanted to follow up with a question on the margins. It seems like you cautioned a little bit that the last 2 quarters that you posted may not be indicative of what might be coming, at least in the near term, out of the chute. Is that a result of the bidding activity that you have done having structurally lower margins or would you say that just as you've gotten along in the projects that you've already delivered or nearly completed, that you are releasing some of the contingencies which are allowing you to book margins at a higher rate, and that as the projects that you're about to start complete, could those projects also near the end, if you are executing well because those deliver a similar type margins to the end?

The projects that we have a bid and recently been awarded would have very similar margins to the projects that we are now wrapping up. So it isn't like we are building in higher or lower margins on the work that we are bidding today and that we have been recently awarded. Ultimately it all boils down to execution, how well you execute against your estimate, and how you managed the job. So certainly on the work that we are just getting started, there is a potential. We could realize higher margins than what we bid the work, but these projects are at such early, early stages it would be impossible to say whether we are going to be successful or not successful and obviously there is always a risk that we will under-perform on a job, where we fail to anticipate something, or have some condition occur that we weren't protected in the contract for. Back to your basic thesis. We bid the jobs at very similar margins to the jobs that we are wrapping up.

And just to add a little bit to that. All of these jobs we set out we set them up whatever margins we bid them at. Every month and every quarter, when we close the books, we are always estimating the cost to complete on each of these projects. Based on the cost to complete, and the actual cost, that is what is really driving the recognition of those margins, so as we move along from early stages towards the final stages there is always going to be better information on determining what that cost to completes are going to be. You tend to see some adjustments being made towards the tail end of a project.

Absolutely. Very helpful. I'll jump back in and pick up a couple more later. Thanks.

Thanks.

Alex Rygiel of FDR.

Thank you very much. Bill, I want to thank you for putting to rest the inaccurate view that MYR was at capacity, and that MYR's backlog is priced with work below the marketplace. Thank you for being brief and addressing those 2 points. Could you give us a little bit of color on how 2Q and 3Q are going to play out regards to the transition. Obviously revenues are going to ramp down on a couple of projects and there will probably be a little bit of time there for mobilization, and then revenues will ramp up. How does the seasonality across the quarters look this year?

Alex, I don't know that I can offer more than what I put in my earlier comments. Certainly we have some jobs that are breaking down. We have some jobs that are starting up. Some of those jobs have multiple wire set ups but, from the get-go we may not mobilize both wire setups. We have jobs, we are spending a lot of money building roads and clearing trees and putting gates in to access farmer's fields. When you fully ramp up a job that means you have got all activities going on from digging the holes, setting the foundation, setting the structures, and setting the wire. When you have all of those activities you are burning a lot of the cost, and you are marking that cost up wherever you are carrying the job.

Several of these jobs are going to be months before we get full speed with all aspects up and down the right of way, including the wire. So if you're asking for -- is that going to be at the month by month thing. These jobs are really starting to ramp up now. We are hiring a lot of people. We are training a lot of people. Whether that is going to be a full force come July 1 or August 1 or September 1. I'm not smart enough to be that exact in my predictions.

I was wondering is there any chance that Q2 revenues are down a little bit during the transition period from 1Q?

It could be.

As it relates to your 12 month backlog disclosure, at the end of March, it was $353 million and that compares $188 million last June. How should we think about projected 12 month revenue growth? I'm sure you don't want us to extrapolate that 80%, 90% kind of growth in the last 9 months but how should we think about that playing out?

You should be smart in how you do that, Alex. That's really-- Marco, do want to add something on the backlog?

No, I didn't have any -- Alex, are you referring to the $143 million of backlog for T&D and $57 million for C&I?

In your Q, you disclose effectively you can back into the backlog that will be burned over the next 12 months.

Yes, I got you. You're looking at the $233 million, and then the $17 million?

Right.

Historically our backlog is always burnt anywhere from 3 to 6 months but obviously you have now a lot of large projects out there that are going to be 2 or 4 years. That average is going to obviously be longer at this point forward. What you could do is back out these large projects and still consider a 3 to 6 month burn on the (inaudible).

That's helpful, thank you very much.

Tahira Afzal of KeyBanc.

Good morning gentlemen.

Good morning Tahira.

Couple of questions. Could you start off by maybe perhaps, talking about the difference in the structure in the projects, and I know it's been played to death in earlier on in the call. If you look at the large projects now, are they still more glass materials oriented, are they more fixed price oriented, also in particular to your first Dominion project, so that's the first question. The second questions is in regards to as you put out your press releases on your large projects, and you know the details that you've provided in that, if you look at just what project, basically the pricing works out to be 0.5 per mile, so, $0.5 million per mile, yet for me, obviously, it's all the way up to over $1 million. So, love to get a sense of the difference in the cost structures to the extent you can comment, is that really reflective of labor pricing in the different regions? Is it also reflective of perhaps, different kinds of geographical risks that you are taking into account? Any color you can provide will be helpful.

I counted at least 10 questions there, Tahira. I'm sure I missed half of them. In terms of the mix of the contract structure between what is lump-sum, what's unit price, and what is cost-plus, virtually all of our contracts have elements of all 3. Where there is this part of the scope was probably lump sum, we probably have in our proposal quotes to do different adders, based upon the unit pricing that is established and invariably, there is little bit of work that get done on T&E rates that was totally unexpected by the client or us when the work was bid.

Many of the jobs that are coming out now, are coming out in sections. As we bid the work, and as our competitors bid the work, they would give us a sample project, like bid this 20-mile segment of this 100-mile job, and give us the unit prices for which you would perform that 20-mile segment of work, and then they did their evaluation of price and quality and team that was being proposed, and so forth, and made their award to us or to a competitor. And then those unit prices that we quoted to do the various activities then get built up into a lump sum price for that section of work. And then as you go to the next section, the starting point are the unit prices that you quoted, and you've built in unique factors that might have to do with the design, or the right of way, or the condition.

Ultimately, when we book the contract, most of them end up being lump sum, but I think you need to know how the client puts out their solicitation, and how they evaluate their bids that ultimately leads to a fixed price. Some of the work that is now in our backlog has a fairly significant material components. Certainly the work in Maine has significant material component that would be part of the reason why the simple statistics of cost per mile would differ from a project, let's say in Nevada, and I'm sure you can recognize the terrain in Nevada, there's not a lot of things that get in your way in Nevada, whereas there are a whole bunch of things that can get in your way environmentally, and with landowners in a place like Maine. Each project has it's own specifics and challenges and I think using simplistic statistics like cost per mile really isn't that useful.

Got it, okay. That's very helpful though. I guess the following question is really regarding margins again, and on your G&A line, your quarterly G&A ticked up a bit. How should we be modeling this out going forward? An then, really talking about your gross margins, the range from 10% to 14% as we see these new projects ramping up. Where in that range would you be comfortable with us placing your margins, given your moderate exceptionally sensitive to margin projections?

I expect you to use good judgment. We've tried to give you signals about what we thought during the period may have been unusual margins, to the extent you want to back all of that out, and re-calibrate, or whether you want to back a portion of it out, should be based on your judgment. We're not providing revenue guidance, we're not providing earnings guidance. You've certainly monitored and followed our performance for 3 or 4 years, so you know the track record of the management team. That is really up to you as to how much adjustment you may want to do in terms of pulling out margin to normalize things.

Okay, thank you. A just a G&A question, though?

Would you repeat that?

Your G&A ticked up to around $14 million in the quarter. Typically it's been between $10 million to $11 million with the exception of the fourth quarter. Should we be modeling out $14 million, or does that dip back down? Is anything one time in that?

Tahira, we don't give any guidance on forward looking numbers for our G&A either. But, certainly 2010 SG&A numbers were lower, but since the company has now picked up quite a bit of work, there's a lot of additional personnel that we are hiring. So SG&A is going to go up in comparison to previous years. I would just look at where we are at this quarter compared to the last couple of quarters and adjust it from there.

Thank you a lot, Marco.

Craig Irwin of Wedbush Securities.

Good morning, gentlemen. I want to ask a housekeeping question. Apples to apples comparison versus your peers obviously requires that we normalize the MSA backlog but you only include 90 days versus most of your competitors that include a full 12 months and some of them actually include more. How should we look at normalizing this? Is it fair to take a look at your distribution revenue over the trailing 4 quarters and basically add-on 75% or is there another way that you would recommend that we've normalize for MSA work in your backlog?

That might be one way. It would be a valid calculation to take our distribution work and see what we did in the quarter and model it forward. What that would miss is if we have got a significant customer who's -- or our MSA agreement with them might expire in October or a year from now you might not have that. Certainly our intention is with existing clients even if the alliance agreement is set to mature, that we are highly confident that we are going to renew the vast majority of those alliance agreements. But I think your approach is a reasonable one.

If you look at our base business, you could also see historically what we've done on the distribution site. Obviously, right now that is soft. So you could look at the past several quarters on the distribution revenue side and use that as a basis if you wanted to project 12 months.

Great. Thank you very much. All of my other questions have been answered. Congratulations on the solid execution.

Jeff Beach of Stifel Nicolaus.

Good morning Bill and Marco. Congratulations on a great quarter. A couple of questions I will ask here. I don't know if I will get the answer, but you've won projects that aren't in your backlog. Can you give us a rough estimate of how much revenues that you have won that you have, or and estimate of roughly how much you won that's not in your backlog, and can you give us an idea how much bids are outstanding on work right now within the T&D area.

The only 1 that is not in backlog -- or 2 of them that are not in backlog is the CapEx 2020, there hasn't been a contract awarded as of yet. So that's not in there. And then the CTT was awarded after quarter end. So that number would go to the second quarter.

Jeff, on the CapEx work the client indicated to us, they are still working on permitting and other regulatory issues, and they have asked us not to get specific about price for different sections. The section that they indicated that they intend to award us I think is a 60-mile section of a couple hundred mile line, but that client has not put a total value on construction, and they've asked us and our competitors to refrain from doing that. So I really can't help you any further even though I would like to. I'm really not able to do that.

Jeff, on the CTT, we did put on the press release that was $160 million. The CTT work would show up in the second quarter.

And bids outstanding, would you care to make a guess? Or give us an idea.

We have a few bids outstanding. I wouldn't say that they are major.

Okay. The projects that you have won so far are you winning most of these as a low-cost bidder or are you winning some of these projects based on your repetition and your quality.

Probably some of both. In some cases I think as our clients have evaluated our proposal, we came out as the low-cost provider, and not just considering construction cost but the overall cost of the project. So in some cases we have been low. In other cases we have been awarded work in spite of not being low because they liked our management team and our approach to performing the work. So it is a mix of both.

My last question the significant profits that you have booked on projects and close up the last couple of quarters is quite significant. What would you attribute --I know there is productivity in a number of things. You've spent a long time putting in your bids to win those. What is maybe 1 or 2 major factors that are causing that significant profitability over what you bid.

It's what we have indicated in our press release and our script this morning. Certainly the productivity against our budget is a key part of it. Those projects also have some additional work that was added to the project, that helped and I think we did a good job of managing the risk factors that could have been present on those jobs, so we didn't need all of the contingencies that maybe we put in our original bid.

All right thank you.

William Bremer of Maxim Group.

Good morning gentlemen.

Good morning.

Can you give us an idea of how many substations you performed during the quarter?

We don't have that number with us.

We worked on probably 10 or more substations during the quarter but we don't have that number.

Okay I appreciate that. Very robust CapEx deployment in the first quarter. Can you breakdown exactly what you are buying? I'm assuming it's the Hyatt breakdown cranes, but what other materials are you currently buying out there, and can you give us an idea of what the overall capacity is on the lease side.

On the lease side, we have really backed off of operating leases. We have, I wouldn't say unlimited , but we'd have plenty of capacity if we were to choose to go back to operating leases. A lot of the money that we spent the first quarter would be what we would consider support equipment. We have a lot of equipment and manpower to move on the right of way. Those require a lot of heavy-duty kind of pickup trucks. They involve a lot of road tractors and trailers to move pieces of equipment up and down the right or way so a good deal of our spending has been on that.

We were -- previously the specialty wire equipment the big wire pullers and tensioners, and the stringing blocks that we use, those of the items that have a longer lead times. We are pretty comfortable with having secured those where much of that earlier. So the real question was now we got the award, and we have to move all that manpower and equipment. You need a lot of support equipment to do that efficiently.

Thanks Bill, I appreciate it.

Liam Burke of Janney Capital Markets.

Thank you. Good morning Bill, good morning Marco.

Good morning.

Bill, you talked about the distribution business being tough competitive, many still very active in terms of aggressive pricing. You also noted in your prepared remarks that the medium-sized transmission projects you saw some growth there. How is the pricing look and how did the margins look in that business vis a vis more normal times?

The pricing on the medium sized transmission work is still very competitive, very soft. I wouldn't say as soft as the distribution business. But it still would be pretty soft.

Okay, great thank you.

Andrew Whitman of Robert W. Baird.

Thank you for taking my follow. Given the weather that we've had in the last few months here, can you comment on if the storm work has been part of your portfolio in the last couple of months?

Yes, we have done some storm work in April and May but as you know that is not a really big part of our business, so if it happens it happens. We hope to support our clients as best we can so there will be some storm revenue in our second quarter results. I wouldn't say that it would be significant.

Given that last year, I don't think it was significant at all. It would probably be above a last year's levels.

I wouldn't be able to say. I would have to do a little bit more digging, Andrew, to comment on that.

Fair enough. We noticed that your bonded backlog, just given the larger projects your working on is now about 75% or so of that backlog. I was curious as to the impact that might have on your ability to generate margins, or what the margin impact of that bonding could be?

In terms of bonding capacity, is that your question?

No, it just seems like in the past the percentage of your backlog that is bonded work has been significantly lower than it is today, just as a reflection of the overall projects sizes that you are working on. I was curious as to how that might impact your margins, now that you are having to pay bond insurance on a larger proportion of a larger base of backlog.

It would be insignificant. Our bond premium would always be a pass-through to the client. Typically our clients on small projects, they realize MYR is a very financially strong entity, and unless they are required by some hard and fast policy, or some statute in the case of a public power entity, they wouldn't require MYR's companies to bond the work. Now that these bigger jobs -- we're being asked to provide bonds because they want to be sure that we have the financial where-with-all, as well as the people and equipment to perform the work. But the bond premiums, we would approach the client, we'd would be happy to bond it, if you want us to bond it here's the cost. We'd be happy to not bond, and here would be the savings. But it's not a significant factor.

That is helpful thank you.

I am showing no additional questions at this time. I'd like to turn the call back over to Mr. Koertner for closing remarks.

Thank you. I would like to thank everyone for participating on the call. We are very excited about the opportunities in the energy delivery markets. We want to thank our employee base for all of their hard work and our stockholders for their continued support and confidence in the company. I don't have anything further. We look forward to working with you going forward and speaking with you again on our next conference call and with that have a great and the safe day, and we will talk to next quarter.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.