MYR Group Inc (MYRG) 2011 Q4 法說會逐字稿

Good morning everyone and welcome to the MYR Group fourth quarter 2011 earnings results conference call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Philip Kranz of Dresner. Please go ahead, sir.

Thank you and good morning everyone. I'd like to welcome you to the MYR Group conference call to discuss the Company's fourth quarter and full-year results for 2011, which were reported yesterday. Joining us on today's call are Bill Koertner, President and Chief Executive Officer; and Paul Evans, Vice President and Chief Financial Officer. If you did not receive yesterday's press release, please contact Dresner Corporate Services at 312-726-3600 and we will send you a copy, or you can go to www.MYR group.com, where a copy is available under the investor relations tab. Also, a replay of today's call will be available until Wednesday, March 14, 2012 at 11.59 PM Eastern time, by dialing 855-859-2056 or 404-537-3406 and entering conference ID 52510106.

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 annual report on Form 10-K for 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 fourth-quarter 2011 conference call to discuss financial and operational results. I'll provide a brief summary of the fourth quarter and full year results before turning the call over to Paul Evans, our new CFO, for a more detailed financial review. Following Paul's analysis, I will provide some additional information on our major projects and an outlook for the industry. I am pleased to report that our revenues grew to $234.3 million in the fourth quarter of 2011 from $155.1 million in the fourth quarter of 2010. An increase of 51%. Full year 2011 revenues also increased to $780.4 million compared to 2010 revenues of $597.1 million, a 30.7% improvement.

Over the last five years, we have made significant investments in equipment, tooling, and workforce development to capitalize on major expansion of the transmission grid. Our 2011 revenues represented an all-time record for MYR and validates our strategy to position the Company for the transmission build out now at hand. Diluted earnings per share were $0.28 for the fourth quarter 2011 compared to $0.29 for the fourth quarter of 2010 while full year 2011 diluted earnings per share were $0.87 for 2011 compared to $0.78 for 2010. Meanwhile, MYR's backlog increased 33% from $520.9 million reported at December 31, 2010 to $692.8 million at December 31, 2011. The increase in backlog in 2011 was primarily related to several large transmission projects that were awarded in the first half of 2011. While we are enjoying record revenues and a robust backlog, we believe the industry is facing the challenges of shortages of qualified labor in certain areas of the country such as Texas, where an unprecedented number of large transmission projects are being built during the same time frame.

As many of you are aware, on June 30, 2011, Electric Transmission Texas or ETT announced that they had executed master agreements with MYR and two other construction contractors for transmission in infrastructure services for CREZ projects assigned to ETT. There was no commitment to award work to MYR under the agreement unless and until we came to an agreement on commercial terms for individual line segments. As the labor market in Texas has tightened and costs have increased, we were unable to arrive at mutually agreeable commercial terms, and as a result, the master agreement with ETT was terminated. The potential ETT CREZ projects were never included in our backlog as the scope of the work had not been defined nor had all terms been agreed upon and therefore the potential projects did not meet our backlog criteria. We continue to stay focused on those projects and opportunities that best fit our resources and will allow us to earn operating margins that are representative of the current market dynamics. We expect transmission opportunities to remain strong for all sizes of transmission projects for the next several years. As the large transmission build out moves forward we also anticipate there will be an increase in upgrades to existing transmission systems to accommodate these major new lines.

Furthermore, we believe that we have additional capacity and continue to bid new work in most areas of the country. We expect the business environment for our Distribution and our C&I segment to continue to be challenging as some of our customers are being affected by the economic conditions in their areas. While the revenues in both of these businesses increased in 2011, our margins were pressured due to the competitive environment, a trend we expect to continue in 2012. To support our efforts to position the Company to take advantage of expected growth in transmission activity and explore other market opportunities, in December of 2011, we entered into a new five-year credit agreement that provides $175 million revolving credit facility with a syndicate of lenders led by JPMorgan, Chase Bank and Bank of America. Now, Paul will provide details of the fourth quarter and full-year 2011 financial results and I'll be back to provide some additional insight on some of our major projects and current market conditions in our -- for MYR. After that, there will be opportunity to ask questions. So with that, Paul, please begin.

Thank you, Bill, and good morning, everyone. Yesterday after the market closed we announced our 2011 fourth quarter and full-year results. Let me first start with our fourth quarter results. As Bill previously mentioned our revenues for the fourth quarter of 2011 were $234.3 million which represents a $79.1 million increase over the same period in 2010. On a percentage basis, our fourth quarter revenues increased 51% over the fourth quarter 2010 revenues.

From a revenue segment standpoint, our T&D revenues increased $74.8 million to $193.5 million and our C&I revenues increased $4.3 million to $40.8 million compared to the fourth quarter 2010. Focusing on the T&D segment, we recognized $156.4 million from Transmission revenues and $37.1 million for Distribution revenues in the fourth quarter 2011. Which compares to $83.2 million for Transmission revenues and $35.4 million for Distribution revenues for the fourth quarter of 2010. Most of our increase in the fourth quarter 2011 revenues, approximately 92% can be attributed to our Transmission business. The fourth quarter 2011 increase in Transmission revenues primarily related to a number of large transmission awards in late 2010 and early 2011 that are in various stages of their respective construction cycles. Our increases in Distribution revenues related to increases in storm work, which in turn was offset by less distribution work from our master service agreements. Our backlog at the end of fourth quarter 2011 remained relatively flat compared to the end of the third quarter 2011.

Our C&I segment realized an 11.8% increase in fourth-quarter revenues versus the fourth quarter of 2010. The increase in quarterly revenues which primarily relates to a number of large inside electrical jobs in the hospital and refinery industries. Our gross profit in the fourth quarter 2011 increased to $24.6 million from $21.8 million in the fourth quarter of 2010. However, our gross profit as a percentage of revenues declined to 10.5% versus 14.1% in the fourth quarter of 2010. The decline in gross margin resulted from increased estimates in labor, equipment, and other costs on certain projects. Additionally, we did experience some project delays in the fourth quarter 2011 that resulted in decreased job productivity and margin reductions on a few jobs. These margin reductions were partially offset by improved fleet utilization.

Fourth-quarter 2011 SG&A expenses were $15.6 million which compares to $12 million in the fourth quarter 2010. The higher SG&A costs were primarily due to an increase in employee compensation related to higher employee headcounts and an increase in profit sharing and bonus related expenses. Our SG&A as a percentage of revenues improved to 6.7% in the fourth quarter of 2011, compared to 7.7% in the fourth quarter of 2010. In the fourth quarter of 2011, EBITDA increased to $14.8 million from $14 million in the fourth quarter of 2010. While our provision for income taxes remained flat at $3.4 million, the effective tax rate increased to 36.9% versus 35.9% in the fourth quarter of 2010. The increase in effective tax rate is associated with certain discrete tax adjustments. Finally, our fourth quarter 2011 net income was $5.9 million or $0.28 per diluted share compared to fourth-quarter 2010 net income of $6.1 million or $0.29 per diluted share.

Now let me turn to the full year 2011 results. First, from a revenue standpoint, we recognized $780.4 million, which is an increase of $183.3 million or 30.7% compared with the full year 2010 revenues. From a segment standpoint, our T&D business reported revenues of $622 million for the full year of 2011, which is a 39% increase over 2010 revenues. Our C&I business reported revenues of $158.4 million for the full year of 2011, an increase of 5.8% over the same period of 2010. Our Transmission business reported $160.8 million revenue increase, Distribution revenues grew by $13.7 million and C&I revenues gained $8.7 million. The overall increases are attributed to the ongoing construction of large transmission projects, increased storm work in our Distribution business, and increased inside electrical work in data centers and hospitals in our C&I business. Our consolidated gross profit increased 21% from $70.7 million for the full-year of 2010 to $85.6 million for the full year of 2011. However, declines in our fourth-quarter 2011 gross margins coupled with higher insurance expenses earlier in the year reduced our consolidated gross profit as a percentage of revenues to 11% for 2011 versus 11.8% for 2010.

SG&A expenses for 2011 increased approximately $12.2 million to $56.8 million. The increase relates primarily to higher employee headcount, increased profit sharing and bonus expense, and higher employee benefit costs such as group medical insurance. As a percentage of revenues, SG&A decreased to 7.3% for the full year of 2011 from 7.5% for 2010. EBITDA for the full year of 2011 was $49.1 million an increase from $42.7 million for the full year of 2010. For the full year of 2011, net income was $18.3 million or $0.87 per diluted share compared to net income of $16.1 million or $0.78 per diluted share in 2010. In 2011, we increased our investment in property, plant and equipment to $42.3 million from $21.9 million in 2010. We believe our strategy to invest in equipment and tooling will result in better execution on current projects and position us to capture additional business in the coming years.

We expect that our capital expending in 2012 will be slightly less than our 2011 capital spending as we continue to expand our fleet through the ongoing transmission build out. As Bill previously mentioned, our total backlog in 2011 grew 33% to $692.8 million as of December 31, 2011. On a segment basis, our T&D backlog ended the year at $612.2 million and our C&I backlog ended the end year at $80.6 million. While our T&D backlog increased 42.7% in 2011, our C&I backlog declined 12.3% in 2011. The primary driver for the substantial increases in our T&D backlog was associated with several large transmission projects awarded to us in the first half of 2011. Our decline in the 2011 C&I backlog was related to fewer opportunities in the markets we serve in Arizona and Colorado. I want to remind people on the call that our backlog only includes projects that have a signed contract or agreed-upon work order to performing work on mutually accepted terms and conditions.

Moving to the balance sheet, our stockholders equity increased to $215.7 million at year end 2011, up from $192.7 million at year-end 2010. We ended 2011 in a very strong liquidity position with approximately $34 million in cash and cash equivalents, $147.8 million in availability under our new five-year credit facility. Our cash balance declined $28.6 million on a year-over-year basis. The decline was primarily associated with our decision to reduce outstanding debt by $20 million and continued purchases of fleet equipment and tooling. As of December 31, 2011, we had $10 million in revolving loans outstanding under the credit facility. Which was subsequently paid off -- paid down after year-end. And approximately $17.2 million in letters of credit outstanding under the facility. In conclusion, we believe our strong balance sheet gives us an advantage over many of our competitors to pursue additional business opportunities, acquire new equipment and continue to invest in our highly skilled workforce. Now I'll turn the call back to Bill.

Thanks, Paul. I would now like to take a few minutes to provide an update of how some of our major projects are progressing and will then provide an outlook on the industry and expand on my earlier comments about MYR's development going forward. Our Mountain Storm project for Dominion includes approximately 96 miles of 500 kV work in the mountains of West Virginia and Virginia. The project continues to progress according to plan and we have met all key interim scheduled dates. This project, like so much of our work, requires close coordination with the owner when an existing line is being wrecked out in phases to make room for the new line.

We also remain on track to meet the schedule of our Central Maine Power work. There are 18 separate 115 or 345 kV lines as part of the Northern Loop and we have completed four of them on schedule. While the conditions on the right-of-way have been challenging due to muddy, rainy conditions and lack of frozen ground this winter we expect to complete the entire project on time in 2014. Our 180 mile, 345 kV KETA line in Kansas for International Transmission Company or ITC remains on track. We have completed over half of the line and expect to finish the project in late 2012. The One Nevada Transmission Line at or ON Line project consists of 235 miles of 500 kV transmission. The in-service date was originally scheduled for December 31, 2012 has been delayed at least three months due to recent wind related damage sustained by some of the owner furnished tower structures. We are on hold from erecting new structures and stringing new conductor but continue with right-of-way clearing, road building, installing foundations, following and framing structures.

In addition to our base contract work, we are assisting the ON Line owners to repair the wind related damage to certain existing structures. Our Sunnyside to Hugo project for Oklahoma Gas and Electric is 124 mile 345 kV project in south-central Oklahoma. It is expected to finish early in the second quarter of this year, a little later than expected. Our Cross Texas Transmission project or CTT, consisting of 235 miles of 345 kV, is in its early stages. Much of the work to date relates to right-of-way clearing, installing foundations and setting tower structures. We have just started the wire stringing on this project. While our CapEx 2020 contract is still under final negotiation, and thus is not included in our backlog, we have started unloading materials on the Alexandria to St. Cloud segment of one of the 345 kV lines. The project was originally scheduled to begin in late fall of 2011, but has been delayed partly due to issues with right-of-way acquisition and permitting. We expect it will now start in early fall of this year.

While we are focused on the execution of several large projects, and making sure we have the skilled workforce, equipment and tooling, we continue to bid on new projects which strategically fit our resource capabilities and margin expectations. With the possible exception of the Southeast, the market for major new transmission projects remains strong across the country. In the Midwest, we expect increased work opportunities in Illinois, Indiana, Iowa, Minnesota, Michigan, Nebraska, Ohio, the Dakotas, Kansas, and Wisconsin. We expect these new transmission lines to be built by traditional investor-owned utilities, utility affiliated transmission companies, often referred to as transcos, and projects financed transmission developers. ITC holdings announced on its February 26 earnings conference call a $4.2 billion capital investment plan from 2012 to 2016. According to ITC's announcement about $1.7 billion of this spending is planned for development projects and $900 million for generator interconnection projects. This does not include any impact from ITC's ongoing merger discussions with Energy Corp.'s transmission business.

Although the 2400 mile CREZ build out in Texas has received most of the publicity which is probably -- what has probably received less attention are the other projects being planned in the ERCOT and SPP regions of Texas and Oklahoma in the years ahead. These projects include upgrades in interconnection opportunities related to large transmission build outs. In its annual transmission report, released on January 16, ERCOT said about $8.7 billion in transmission improvements are planned for the five-year period from 2012 to 2016, with $6.87 billion for the CREZ program. On February 3, SPP announced its approval of over $1.7 billion of transmission expansion projects over the next 10 years. We see this area as a strong market for MYR for several years to come. Over the next few years, the eastern United States should continue yielding opportunities as significant new transmission lines move forward into New England, New York, New Jersey, Pennsylvania, Virginia, West Virginia, and Maryland.

There are also a number of major projects in various stage of development throughout the western United States in involving reliability and transporting renewable energy from Wyoming and Montana to major load centers in the southwestern United States. That includes the northern part of the SWIP 500 kV line which would add another 250 plus miles and make the total line about 500 miles in length. It also encompasses the TransWest Express transmission project which includes a 725 mile proposed DC line delivering renewable energy from Wyoming to electric utilities in Arizona, Nevada, and California. Additionally, we expect to see ongoing bidding opportunities with Bonneville Power Administration and Western Area Power Administration for the next several years and we continue to be optimistic about being awarded some of these projects. At a recent conference in Seattle, BPA said it expects to spend between $600 million to $900 million annually for capital investments for the foreseeable future.

Moreover, federal efforts continue on several fronts to move new transmission development forward. As we noted on our last call, one is FERC Order 1000 passed last July to establish a number of reforms in planning, cost allocation, and non-encumbant development. Additionally last October, the Obama administration announced the creation of an interagency rapid response team for electric transmission projects or RRTT as it is known, to streamline the permitting and review process of electric transmission projects among federal and state agencies and to resolve interagency conflicts. Seven proposed transmission projects were selected as the focus for the response team's streamlining efforts. These projects are located in the northeast, midwest, and west and have a combined estimated total cost value in excess of $9 billion. We understand the RRTT has been actively reviewing the targeted projects. On January 13, the team met with Idaho officials and local residents to discuss the planned Gateway West project and the numerous delays that project has experienced. While it was a reported to be a productive meeting, there is still no anticipated date for a decision on this work.

The projected growth in transmission spending from Edison Electric Institute was confirmed on January 18 at a national energy briefing in Washington. Tom Kuhn, EEI's President and CEO, stated the transmission spending has grown dramatically since 2005 and the levels should remain high through 2014. Mr. Kuhn told the US Energy Association that shareholder owned transmission utilities invested $12.2 billion in 2010, which is up from $7.4 billion in 2005. He went on to say that when the books are closed on 2011, it should show an investment of roughly $12.6 billion. Meanwhile, transmission spending is expected to increase to $13.9 billion in 2012 and remain above $13.5 billion in 2013 as well as 2014.

Now I'd like to shift the focus to our C&I business. As I had mentioned earlier, although projects are still being bid, there remains excess capacity within the industry as more contractors are pursuing the available work which continues to place pressure on margins. Our market focus continues to stay on healthcare, government office buildings, research centers, smart highway work, and data centers, mining and wastewater treatment which makes us somewhat less susceptible to the slow economic recovery at the national level. As always, we remain focused on creating additional value for MYR shareholders. We continue to monitor and make adjustments to our cost structure in an effort to ensure MYR remains one of the lowest-cost and highest value providers in the industry. Our 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 utilities and C&I clients. That's it for now. As always, thank you for your interest and support. And now I'd like to turn the session over for your comments and questions.

(Operator Instructions)

Alex Rygiel, FBR

First, Bill, can you just touch upon whether or not a tight labor market is good or bad for you?

It depends on what region of the country, Alex. It obviously could be good for us if we have resources and a tight labor market leads to higher margins. That would be great. It could be detrimental to us if we bid a job 3 months ago or 12 months ago and we did not anticipate the cost increases on labor. So, it is very region specific and project specific and could be good for us or it could be a negative for us.

And historically, you've called out certain quarters that reflected $2 million worth of sort of positive one-time items associated with the project closeout. Were there any negative items in the fourth quarter that are worthy of getting called out?

Well, we do not comment on specific projects, Alex. Every quarter, including the fourth quarter of this year, we have some projects that we're able to write up some and some projects that have to be written down a little. As it turns out, in the fourth quarter, those margin reductions more than offset the projects that we were able to write up. So, that's just a normal part of the contractors accounting. We do a very thorough cost to complete each quarter for all of our projects, not just the large projects, but all of them. And make necessary adjustments to the margins.

And one last question. Should we read into your reduction in CapEx in 2012 to suggest that the growth rate is slowing or is it more a function of you've kind of spent what you really felt you needed to spend going into this cycle and you are really just going to take a breather, here?

Well, we're definitely not taking a breather. Even though we are not likely to duplicate the $42 million spend in 2012, we are still spending a lot of money upgrading our transmission capabilities and adding capacity. But it is not going to be at the same pace as certainly 2011, but we are continuing to spend a lot of money on equipment and tooling.

Thank you, nice quarter.

Adam Thalhimer, BB&T Capital Markets

I wanted to ask about the corporate costs in the quarter, you mentioned there were some bonuses in there. For corporate overhead, what do you feel like a good run rate is going forward into 2012?

I think I would take a four or five year average and what it's been and I guess that would be the guidance I'd give you, Adam.

Well, I guess I'm kind of thinking about it as you were between $6 million and $7 million for the first three quarters of 2011 and then it jumped up to $8.5 million in Q4. I'm just wondering what the -- you kind of like the $6 million to $7 million range or is $8.5 million the new norm?

I would stick with a longer-term average and not focus on a particular quarter.

Okay, and then, Bill, on the C&I segment you had a great quarter there. The commentary is maybe a little bit more cautious than the results in the quarter. How do you feel about that business in 2012?

Well, there continue to be market opportunities on healthcare and certainly there is a lot of intel work that is in the market in Arizona that has been helpful, but there is a lot of contractors scratching for work in those markets and some of that work has gone really cheap and we are trying to be selective. So, we are not buying a job. So, I still think it's at depressed levels and I would like to see some of the competitors get out of the business and go back to what they do historically and that is residential construction and small commercial. But, we have to contend with some of those smaller players that are putting pressure on the bidding environment.

Okay, and then I guess the other part of that question is the margin in Q4. At a little bit over 6% was your best since 2009, was there anything in there or should we read that as just that's a reflection of your discipline on pricing?

I think it would be a reflection of our discipline on pricing and just like an earlier comment, as we do our cost to completes on these C&I jobs, every quarter we've gotten some jobs that we can write up a little bit, some jobs we have to take down a little bit. And the improvement that you referred to, the jobs we are able to take a little more margin, more than offset those that we had to reduce our margin on.

Okay. Great, thanks very much.

Justin Hauke, Robert W. Baird

I guess I wanted to talk a little bit more about the ETT contract, and you mentioned the labor constraint and how in a tight labor market, if you don't have the resources, that can be a negative. I guess, can you just give us a little bit more color about, was it that you wanted to bid higher rates and the client just wasn't willing to accept that or what all kind of went into those negotiations?

We weren't attempting to bid any higher profit margins. When that project originally was put out on the street, I think we proposed on it, initially, was indicative pricing in September of 2010 and we entered into a master agreement, I think in June of 2011. The project when it was originally put out on the street, was a hypothetical line segment. It was perfect right-of-way. The line was a straight arrow, very few angles, very few dead ends. A perfect right-of-way and that's the way they wanted all the contractors put together indicated pricing and then as the project got permitted and the final line and the final design got completed, it ended up being something more complicated than a straight line on perfect right-of-way. So we went through multiple iterations of bidding and trying to true up our pricing.

During this period, obviously, the world did not stay static. The labor market was changing. The equipment market was changing. And we tried to continue to reflect those market changes in our cost structure, to the client. We never changed the profit margin expectation, but we were just trying to reflect what we saw happening to our costs and at the end of the day, we were unable to reach an agreement with ETT on price and schedule. As you know, ETT is a joint venture between AEP and MidAmerican. They are both really good clients of ours. We do a lot of work for those two utilities in the midwest and Texas and in the west. And we value those two utilities greatly, but we just weren't able to come to an agreement on price and schedule on this ETT CREZ piece.

Okay, and I guess how should we think about the equipment and the resources that you -- I would assume were scheduling to work with that project. Are there other places where those can be deployed or how do we think about that?

Yes, there are other places where those resources can be deployed.

Okay. And then I guess, my last question is, on the gross margin true up that I think you mentioned several large projects. So, I guess, first of all, the question is, the Nevada One Line, is that one of those with the wind issues that you mentioned? Is that one of the things that went in there and I guess were there multiple contracts beyond just that one project?

We are not in a position to comment on margin changes for any particular project, but what is going on in Nevada, that is going to change the characterization of that contract as opposed to being a lump sum job, now there's going to be elements of that job as we assist the owner in repairing these structures and testing new designs. A portion of that job will now be on a cost plus time and equipment basis. So, I wouldn't read just because that project was delayed, that that meant that that would somehow be detrimental to our margins on the job.

Okay. Thank you very much.

Tahira Afzal, KeyBanc

I guess my first question is, you clearly saw an uptick in a lot of the small to midsize transmission work which is great. Could you talk about the margin profile of those projects and if you feel that the momentum you're seeing is enough to really plug-in holes between projects, large project starts and stops and really plug-in volume of when projects are delayed a bit?

So you're I guess asking for our outlook on margin going forward?

Well on the small, I guess on the small to midsize projects, it seems like the activity is picking up. Are the margins catching up in terms of the mix in your Transmission side?

Okay, I'm sorry, I'm misunderstood your earlier question. I think there is some margin improvement on the smaller work, on the Transmission side. As these resources, both equipment and tooling and manpower get tighter in more and more areas of the country, I think that is starting to be reflected and fewer bidders for even the smaller $5 million, $10 million, $15 million jobs. So, I think that market should improve so it wouldn't be limited to potentially higher margins on larger projects.

So, I mean even if you don't see big sexy projects being announced every day, the underlying activity seems like it's how would you say coming back actively enough for the Transmission outlook to remain strong?

Yes, just because it is big doesn't mean it is sexy. I think all of these projects are attractive, assuming you can negotiate the terms and conditions on a fair basis. I do think the small projects can be great contributors to our profitability going forward and we are actively pursuing those jobs.

And I might be pushing my luck here a bit, Bill, but you'd did close to $200 million in revenues on the Transmission side. On the T&D side with a bit of $150 million coming from the Transmission side, so, could you talk about if everything was running and humming as planned and there were no delays et cetera like you have seen? What is the optimal revenue rate you think you could handle right now, you would've liked to see in the fourth quarter?

I think you are pushing it Tahira, we don't give revenue projections. Certainly, you can take what has happened in the last six quarters and see what is going on there and make some educated guesstimate of what it might mean going forward. Clearly the industry is in a growth spurt here. How long it will last I don't know but there is definitely plenty of work in the market right now.

Got it. Thank you very much.

William Bremer, Maxim Group

Good morning Bill, welcome Paul, and Marco I wish you the best wishes in your new position. I would like to start off with the current transmission wins during the quarter. Out of the 149, can you sort of give us an idea of the size of those? I know you mentioned a lot of smaller to mid, but can you give us a sort of size in which is the sweet spot of those wins there and also the underlying pricing of them? Are those getting better?

I'll -- Paul, you want to handle that one? Bill, if you would, just restate that again in talking about the growth of our backlog in the quarter?

Right, your current wins for the quarter in T&D were approximately $149 million. My question relates to the fact of, can you give us an idea of the size of the T&D business there, primarily on the Transmission side, what is the sweet spot that you landed during the quarter? And finally, can you give us an idea of the underlying pricing that came with those types of bookings versus say, six months ago?

Well, on the projects and I'm not sure a sweet spot is an appropriate word. There were a couple of good-sized substation jobs that were booked and some smaller transmission projects, none of which would be over $50 million, but, again, I would not characterize that as a sweet spot. It just -- that is the nature of the opportunities, so, we did not have any big $100 million kind of contracts assigned during the period.

Can you give us an idea, Bill, of what you are currently bidding on at this point and where you are -- what your underlying capacity is right now?

The capacity side, again, it is very much region by region basis. There are some areas of the country that we need work. We have an office there, we've got equipment that fits best for that region and we would be aggressively pursuing it with very sharp margins. There are other areas of the country where we are -- our resources are pretty much tapped out. We may have some additional capacity, but it's not significant additional capacity and we would do what you would expect us to do, we would put more and more margin in those bids. So, it's very much a region by region thing. And in terms of overall capacity, there is not a number there, as long as we have access to capital and can buy equipment and we can recruit and train people, I don't think this business, or I don't think our business is self-limiting. The real key is finding the people, training the people, and finding and financing the equipment and tooling. So, it's not just a zero sum game. We are trying to grow our capacity and certainly our competitors are trying to grow their capacity, too.

Okay, and one final one for Paul. Just, can you provide for us a sort of a tax rate for '12?

I think probably the tax rate you should lean to is probably our statutory rate. Let me give you, probably I would use, just as a going forward for your model, 38%.

Okay. Paul, thank you.

Liam Burke, Janney Capital Markets

During this fourth quarter, your cash flows were very strong even though the full-year with the capital projects you had -- you were generally negative cash flow. You gave us a sense on the CapEx 2012, do you anticipate anything out of the ordinary to affect cash flow in 2012?

I don't think we do. Certainly, we got these big projects and we've got retention to deal with on those big jobs and we are trying to minimize that retention and negotiate with our clients to cap it after it gets to a certain point. There are lots of working capital management issues. I don't know that they are any different than normal. We try to make sure we collect our receivables, we want to try to minimize our under billings. We want to maximize our over billings and we really don't lean on our vendors to stretch the accounts payable out. We try to treat all of our vendors, both material and subcontractors, and not rely on them to finance jobs, but working capital management is -- continues to be very important for our business.

Great. Thanks, Bill.

Dan Mannes, Avondale

A couple of quick follow-up questions. First, looking forward to Q1 and we're already sitting here in March, can you give us some thoughts here about maybe how much seasonality there is going to be this year given the amount of large project work and also how maybe the changes in scope on SWIP play into that? Normally we would expect Q1 to be fairly soft and I'm just trying to think if that changes a little bit now.

Well, probably with all of these big projects, some of our historic patterns of revenue recognition may not hold true. Some of these big jobs, I think probably the more pertinent thing is what is going to happen in the summer, this year. Some of the jobs will continue to be held up because of outage constraints, but some of these jobs are also on greenfield right-of-way is where you are not trying to deal with the wreck out of an old line that needs to be energized during the summer. So, these big projects, on a case-by-case basis, will determine the seasonality of the revenue that we recognize.

And the SWIP specifically, is that one where given the three-month delay, does that sort of just stretch out the project a little longer or and maybe even push a bit of it out given a different scope of work while there is -- while the tower testing is going on?

Right, it is certainly -- we are not doing the conductor work and setting the structures right now. That is what we had planned to be doing under the original schedule. All of that is going to get pushed out into later in the year and maybe into the first quarter of 2013. The work is still there, but it should be a pretty busy summer and fall out in eastern Nevada.

What happens to the labor force during those three months, the guys who would be doing the conductor et cetera, do you keep them on site and do you have to be eat that cost or are you able to reallocate them elsewhere in the meantime?

A combination of both. Some of the labor is being, certainly, the subcontractors we have there for road building and foundations, that hasn't been affected. We are self performing the installation of the anchors, the foundations, and the hauling and the framing of the tower. So, that work continues. What is not happening is setting the structures and the wire work and, fortunately, we have got plenty of places to move those individuals. Some of them are required to move a distance away from Nevada, eastern Nevada is a pretty remote spot, so, whether you are working in a remote spot in eastern Nevada or another more rural area, it doesn't make a difference. So, with all of the work going on across the industry, good wire crews are in high demand and we didn't have any problem finding a home for those individuals.

Got it. So maybe a little bit of transition, but you're not going to lose people. You're not going to have a major issue with start up -- with shutdown startup or that kind of issue?

Right, and I don't see a major issue. We would certainly prefer to just have continuity of work to go from one wire pull to the next and the next. So there would be some impacts and we will probably be discussing that with the owner of that line and they have treated us very fair so far on those kind of off issues and I have no reason to believe they won't continue to treat us fairly going forward.

Okay and one other topic I just wanted to touch on. Your commentary on ETT and some of the cost differences there. How does that play in at all to the contract that you have at CTT which you had previously signed or when you talk about puts and takes, I know you don't want to talk about projects in much detail, is that one where, maybe it's a -- that's one that's maybe seeing more headwinds than some others?

Really can't talk about individual projects. We actually put together pricing on CTT after we put together the pricing on ETT. So, that market in Texas is evolving. 45 days could make a huge difference in the labor availability. A good portion of our CTT work, in that case we are providing all the materials other than the structures on that job. So, it is not just labor and equipment installation. There are a lot of subcontract costs in that job and there is a lot of material costs in that job. Clearly, we are dealing with the local Texas market the best way we can.

Got it. Thanks for all the color.

(Operator Instructions)

John Braatz, Kansas City Capital

Bill, I don't know if you will address this, but when you look at the projects that you are bidding on now, you talked about some of the local conditions allowing you to maybe enhance margins a little bit. Can you tell us, maybe sort of on a percentage basis, how many of these projects you might get quote unquote a little bit higher margin or an enhanced margin and if so, what kind of increased margin might you be talking about? Is it a full percentage point, 0.5 percentage point? Can you give us a little idea on that front?

I can't discuss how many of these projects, but there is potential to do 100 plus basis point better margins on some of these jobs. There are some jobs that we are bidding at a couple hundred basis points higher than maybe what we would have bid that job a year and a half ago.

Okay, and some of the transmission projects in the fourth quarter that you had to change some of the estimates, was that reflective of the changing conditions in the market during this period or were there estimate errors if you want to call it that, made during the bidding process itself?

I don't think there would be any estimate errors, of course, when you're estimating work and putting together a bid, you're using your very best information at that time and you cannot hold the world constant. So, you bid something in March of 2012 to be executed in October of 2012, you cannot hold the world constant. So, we try to anticipate. In some cases put in escalation factors, sometimes those aren't enough escalation. Some cases that might contribute to a little better margin. We try to use our crystal ball to look forward to make sure that we've put together the very best estimate we can, given the time period we think the work is going to be performed.

Some of the jobs that we have, have been delayed. We talked about the SWIP job. That job, through no fault of ours, was delayed to a later period of time. So that would give us grounds to talk to the owner about being compensated for cost increases that may have resulted from that delay. There are other jobs that have issues with permits or delays in owner furnished material or delays with engineering or a right-of-way issues. There are lots of things that are beyond our control and contractually not our responsibility in the contract that might lead to change orders.

Okay. All right. Thank you very much.

Craig Irwin, Wedbush

Quick question, so, as we progress on these jobs, these large transmission jobs, are you going to see a potential improvement in margins from the change of activity on the jobs as you move towards stringing, other people in the industry have traditionally talked about that as a higher-margin service? Can you maybe give us some color on the way that you have costed these and whether or not that should start to benefit you as we see more stringing activity this summer?

I don't think that would be the case the way we would look at it. If we bid a job, I'll just use for example purposes, say we bid a 15% margin and the components of that job are road building, right-of-way clearing, hauling materials, setting structures, putting in foundations, and wire stringing. If we bid that entire job with a weighted average margin of 15%, so that would be the for instance. And as we start out with the early activities like road building and right-of-way clearing, we would be marking up that cost by that same percentage in the same way at the end of the job, as we are finishing the job, doing the wire stringing work, it would be that same 15%. Now, the fact is as we start off a job, if we're showing improvements in, we're doing better than our cost estimate or if we're doing worse than our cost estimate, we're constantly doing cost to completes on all of our jobs and adjusting them up and down based upon the performance of the job relative to the estimate. But I think the premise of your question, we would not be recognizing higher margins on wire stringing versus hauling structures to the right-of-way.

Okay, and then, as we look at the rest of the year and your very large transmission projects, what is there that is going to raise the margins? I mean labor is only going to get tighter. And we are already trying to catch up from change orders him a so, is there anything very specific you'd point us to there as far as a discrete item that would help raise your margins as this year progresses?

Well, what we are focused on is really managing the job. A big part of that would be to manage the job for change orders that we would be entitled to. That is good contract administration. The other thing is, there is a learning curve on these jobs. You put 100 guys in Maine or 100 guys in Nevada or Texas or wherever you have them, invariably they are not the most productive with the first 25% of the job. And as they become familiar with their fellow crew members, they become familiar with our equipment and our tooling and our expectations as far as safety, their productivity should improve. Now, we contemplate that as we bid the work, but that has the potential. We really want to, at the end of the project, have a well oiled machine and not be late coming up on the learning curve on these big jobs.

Okay, so then I know this is backwards looking, but Dominion really had some significant out performance when that project was completing. And a number of those employees I would expect have been transitioned over to the new line that you are doing for them. Shouldn't we expect that that would be a positive?

Well, certainly, a number of employees were transitioned over to the work we are doing in West Virginia. We've got people from Dominion that were on that Dominion job working in midwest, we have people on that job that are working in Maine. So, that work didn't transition, the two jobs we completed for Dominion didn't exactly sync in with the Mountain Storm job. Certainly a bunch of those people are the same, but we do have some new crew members on that job as well. And it's attracting people to Virginia versus West Virginia. Slightly different markets so there would be a local presence of people that want to work there. We probably have picked up some people from one of our competitor's jobs that was for Allegheny that was part of the Trail project. We have a number of those employees on our job, today.

Excellent, excellent. And then last question, if I may? Several projects over the last couple of years, obviously, you were successful in competing to win the work and I think it is admirable that you are willing to step away from ETT CREZ if it's not going to give you the profits that you want. How do we look at the future? How do we look at the probability of future large-sized project bookings and whether or not you have capacity to serve them and whether or not we would see higher margins potentially on any future bookings than what is being achieved today?

Definitely there are going to be more big projects out and we're doing our darndest to try to build the people resources and the equipment resources to be competitive on those jobs. And our expectation is if the volume is where we think it's going to be, there should be higher margin potential. But with this work, it can always get delayed because of permit problems. So that's the big unknown on the timing of this big build out that we all read about.

Great. Thank you for taking my questions.

Thank you. I'm showing no further questions in the queue this time. I'll hand the call back to Management for closing remarks.

Well, I appreciate everybody's time this morning. This is certainly an exciting time for our industry and certainly appreciate all of your support. Certainly, as we finance the resources for our business, we need your ongoing support. We look forward to our next call which will be in May. And I guess everybody have a great week.

Thank you, ladies and gentlemen this concludes the conference for today. You may all disconnect and have a wonderful day.