MYR Group Inc (MYRG) 2012 Q1 法說會逐字稿

Good morning, everyone, and welcome to the MYR Group first-quarter 2012 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.

Good morning, everyone. Thank you, and good morning. I'd like to welcome you to the MYR Group conference call to discuss the Company's first-quarter results for 2012, 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.MYRgroup.com where a copy is available under the Investor Relations tab. Also, a replay of today's call will be available until Wednesday, May 16, 2012 at 11.59 PM Eastern Time, by dialing 855-859-2056 or 404-537-3406, and entering conference ID 75315152.

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 2012 and in yesterday's press release.

Also, certain non-GAAP financial information will be discussed on the call today. A reconciliation of this non-GAAP information to the most comparable GAAP measure is set forth 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 2012 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 Paul Evans, our CFO, for a more detailed financial review. Following Paul's discussion, I will provide some additional information, and an outlook for the industry.

I am pleased to report that our revenues grew to a record $240.2 million in the first quarter of 2012 from $150.3 million in the first quarter of 2011. This represents a 59.8% increase. All of this growth was organic, as MYR has not made an acquisition for several years. Diluted earnings per share were $0.29 for the first quarter of 2012 compared to $0.21 for the first quarter of 2011. Meanwhile, MYR's backlog increased 6% from $603.9 million reported at March 31, 2011 to $639.9 million at March 31, 2012.

Our results are gratifying, and we believe validate the strategy we adopted about five years ago to position the Company to benefit from a major ramp up of transmission investment across the country. We remain focused on executing the projects already in our backlog, as well as bidding new work. We are targeting project opportunities that best fit our resources and will allow us to earn operating margins that are representative of the current market dynamics.

We expect large transmission project opportunities to remain steady for at least the next several years. However, the large project bidding environment was less intense in the first quarter than the bidding activity we experienced in the last half of 2010 and the first half of 2011. Meanwhile, bidding activity for small- to medium-sized transmission projects continues to be strong across the country. Some of the large transmission projects, such as the CapX2020 work in Minnesota, are being divided into smaller segments for awards, as opposed to single awards for the entire line. Therefore, our backlog may not materially increase in any one quarter as it relates to particular large projects. As such, we will include these smaller segments of the overall larger projects in our backlog when contract terms are finalized.

We expect the business environment for our distribution business in our C&I segment to continue to be challenging, as some of our customers remain affected by regional economic conditions. As a result, our margins continue to be pressured due to competitive environment, and we expect this environment will continue through 2012. We believe MYR maintains one of the strongest balance sheets in the industry, providing us with the working capital and investment capability necessary to support our growth. We believe our strong balance sheet, coupled with the investments we've made in specialty transmission equipment, tooling, and workforce development, place us at a competitive advantage to capitalize on new transmission investments.

Now, Paul will provide details on the first-quarter 2012 financial results. And then I will be back to provide some additional insight on current market conditions, and our perspective for the future of MYR. After that, there will be an opportunity for you to ask questions. So, with that, Paul, please begin.

Thank you, Bill, and good morning, everyone. Yesterday after the market closed, we announced our 2012 first-quarter results. As Bill previously mentioned, our revenues for the first quarter of 2012 were a record $240.2 million, which represents an $89.9 million increase over the same period in 2011. On a percentage basis, our first-quarter revenues increased 59.8% over the first-quarter 2011 revenues. From a revenue segment standpoint, our T&D revenues increased $87 million to $205 million. And our C&I revenues increased $2.9 million to $35.2 million compared to the 2011 first quarter. To give some historical perspective on how our business has changed, 43.6% of our revenues came from transmission in the first quarter of 2008. By contrast, our transmission revenue for the first quarter of 2012 represented 71.4% of our total revenues.

Focusing on the T&D segment, revenues were $171.6 million for Transmission and $33.4 million for Distribution in the first quarter of 2012, compared to $80.5 million for Transmission and $37.5 million for Distribution for the first quarter of 2011. The first-quarter 2012 increase in Transmission revenues primarily related to a number of large transmission awards in late 2010 and early 2011 that are now in various stages of their respective construction cycles. Lower Distribution revenues related to a decrease in work on master service agreements, which in turn was slightly offset by an increase in storm work.

Our C&I segment revenues increased by 9.2% in the first quarter of 2012 versus the first quarter of 2011, due primarily to a large number of inside electrical jobs in the hospital and refinery industries. Our gross profit in the first quarter of 2012 increased to $26.1 million from $21.6 million in the first quarter of 2011. However, our gross profit as a percentage of revenues declined to 10.9% versus 14.4% in the first quarter of 2011. The decline in gross margin was primarily due to an approximately $5.8 million in above-average margins recognized in the first quarter of 2011 on a few large transmission projects that were in the final stages of completion last year. Comparing first quarter of 2012 to the fourth quarter of 2011, our gross margin increased to 10.9% from 10.5%.

First-quarter 2012 SG&A expenses were $15.9 million compared to $14 million in the first quarter of 2011, primarily due to increases in employee compensation related to higher employee headcounts, increases in stock compensation costs, and increases in employee-related benefit costs including group medical insurance. Our SG&A as a percentage of revenues declined to 6.6% in the first quarter of 2012, compared to 9.3% in the first quarter of 2011. First-quarter 2012 EBITDA increased to $16 million or $0.76 per diluted share from $11.9 million or $0.57 per diluted share in the first quarter of 2011.

Our provision for income taxes increased to $3.8 million in the first quarter of 2012, compared to $2.9 million in the first quarter of 2011. Our effective tax rate decreased to 38% versus 39.4% in the first quarter of 2011. The decrease in the effective tax rate was associated with certain discrete tax adjustments and lower state income taxes. First-quarter 2012 net income was $6.2 million or $0.29 per diluted share, compared to first-quarter 2011 net income of $4.5 million or $0.21 per diluted share.

In the first quarter of 2012, we invested an additional $8.3 million in property, plant and equipment, which compares to $12.2 million in the first quarter of 2011. We expect that our capital spending in 2012 will be slightly less than our 2011 capital spending, as we continue to expand our fleet for the ongoing transmission buildout. 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 had higher bookings in the first quarter of 2012 compared to the fourth quarter of 2011 in the T&D segment, which were offset by a decline in bookings in the C&I segment. T&D bookings in the first quarter of 2012 were $156.1 million. And C&I bookings were $31.3 million in the quarter. As we have discussed before, much of our revenue never flows through our quarterly backlog reporting. This is because the award of work, as well as the execution of the work, all take place within the quarter.

Total backlog at March 31, 2012 was $639.9 million, consisting of $563.3 million in the T&D segment and $76.6 million in the C&I segment. T&D backlog at March 31, 2012 increased 7.5% compared to the backlog at March 31, 2011. The increase in our T&D backlog was primarily due to several large transmission projects awarded to us in the trailing 12 months. C&I backlog at March 31, 2012 decreased 4.5% compared to the backlog at March 31, 2011. As we have discussed on previous calls, our backlog only includes projects that have a signed contract or an agreed-upon work order to perform work on mutually accepted terms and conditions.

Moving to the balance sheet, our stockholders' equity increased to $222.6 million at March 31, 2012 from $215.7 million at December 31, 2011. On March 31, 2012, we had approximately $3.8 million in cash and cash equivalents. And $157.8 million availability under our five-year credit facility.

Our cash balance declined $30.3 million from December 31, 2011. The decline was primarily due to a $28.4 million increase in our accounts receivable, which was a result of our increased revenue and increased retainages on our large projects. The reduction of our cash balance was also a result of our decision to reduce outstanding debt by $10 million, and continued purchases of fleet, equipment, and tooling. As of March 31, 2012, we had approximately $17.2 million in letters of credit outstanding under the facility, and no revolving loans outstanding under the credit facility.

In conclusion, we believe our strong balance sheet gives us an advantage over many of our competitors to acquire new equipment and tooling, to invest in our workforce, and to consider such things as share repurchases and acquisitions. Now, I'll turn the call back to Bill for a discussion of the overall industry.

Thanks, Paul. While our construction management teams continue to build several large projects concurrently in various stages of completion, our estimating teams are focused on evaluating and pricing projects throughout the country. Transmission bidding activity remained strong in the first quarter of 2012, particularly for small- to medium-sized projects. We also began to see a slight increase in electric distribution demand in certain geographical regions. We believe the industry outlook continues to be favorable as we see ample opportunities for continued growth in transmission construction of all sizes, including new lines and upgrades, as well as associated substation work.

With the possible exception of the Southeast, the market for major new transmission projects remains strong across the country. We believe PJM, MISO, ERCOT, SPP, NISO, ISO, New England, and [Canaliso] will be strong markets for MYR for several years to come. Each of these regional independent system operators has many large and small projects at various stages of the approval process. Federal efforts continue to move new transmission development forward. One of these efforts is FERC Order 1000, which was passed last July, and establishes a number of reforms in planning, cost allocation, and non-incumbent development. We will better understand the implications of the rule as we see how FERC acts on compliance filings due this October.

In addition to independent transmission companies like International Transmission Company and American Transmission Company, referred to as ITC and ATC, some traditional utilities are moving forward to pursue competitive transmission development projects, particularly in response to FERC Order 1000. AEP recently announced its Transource Energy joint venture with Great Plains Energy to expand its footprint in Missouri and Kansas. This complements their transmission investments through existing partnerships and state level transco's.

Last year, Duke Energy and ATC also established a joint venture company to build, own, and operate new electric transmission infrastructure in North America. Also, over the last several years, Ameren formed its subsidiary, Ameren Transmission Company, to build new transmission projects in Illinois and Missouri, which allow them to expand beyond their current footprint. Exelon Transmission Company has also established, through its parent, Exelon, for the purpose of pursuing transmission projects beyond their current service areas. NV Energy joined LS Power in the development and ownership of the online project in Nevada, also known as SWIP, or the Southwest Intertie Project.

These are just some examples of the transmission development activities taking place across the country. As the needs for reliability of our nation's grid become more clearly defined, and cost allocations and benefits are clarified, we anticipate the forming of additional partnerships and new transmission companies in the competitive transmission/development market.

The projected growth in transmission spending was reconfirmed in April when the Edison Electric Institute released its annual Transmission Projects at a Glance Report. EEI said its member utilities plan to spend at least $64 billion on more than 100 major projects from 2011 through 2022. This investment is only a portion of the total transmission anticipated through 2022 by EEI members, and is a sampling to highlight the industry's commitment to needed and beneficial transmission investments.

To keep the focus on major projects, the report used a minimum project investment threshold of $50 million for transmission system projects, $20 million for transmission projects to support integration of renewable resources, and $10 million for smart grid projects. Meanwhile, according to EEI, the total planned investment from 2012 to 2014 is approximately $41 billion. This represents a 24% increase over the $33 billion estimated spend from 2009 to 2011.

Now, I would like to shift over to our C&I business. As I mentioned on other calls, although projects are still being bid, there remains excess capacity within the C&I industry, as a large number of contractors are pursuing the available work, which continues to place pressure on margins. Our market focus continues to be healthcare, government office buildings, research centers, smart highway work, data centers, mining, and wastewater treatment. This makes us somewhat less susceptible to the slow economic recovery at the national level.

As always, we remain focused on creating 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 commitment to safety, high-quality customer service, and on-time execution will ensure MYR remains a valued partner for utilities and C&I clients.

That is it for now. As always, thank you for your interest and support. And now I would like to turn the call over to your comments and questions.

(Operator Instructions) Tahira Afzal with KeyBanc Capital Markets.

Congratulations on a very strong quarter. I'm surprised your stock is down. You gave a fairly phenomenal performance in the first quarter. And so the concerns that might be impacting your stock are, you have talked about backlog opportunities being lumpy. But on the T&D side, as you look out and play out as planned, do you see backlog growth over this year and next year? And could you talk a bit about your capacity to accommodate that? Thank you.

We certainly expect our backlog to continue to be lumpy. As you know and others on the call know, our definition of what goes in backlog is not identical to everybody else that is in our sector. We do see backlog growth over the long-term. That doesn't necessarily mean it's going to be quarter after quarter of growth. But we do see a lot of opportunities out there as evidenced by the EEI report I referred to in my comments.

And we certainly expect to earn our fair share of that business. I don't know if I have anything really more to add on that. It's been a pretty phenomenal couple of years in terms of adding backlog. And just now to maintain it at its current level is no small task.

Got it. And I've got a second follow-up. Could you talk about how your DSOs and cash flows are going to play out for the rest of the year? Clearly you are ramping into some large projects and that plays in certain ways on your balance sheet. Thank you.

Tahira, I'd like Paul to answer that, if he would.

Sure. Tahira, as I look at the cash flows going forward, it is true that year-over-year our DSO has increased. But I feel very comfortable that we have adequate liquidity to see additional retainages be held by our customers. And as these projects get further into their cycle, the AR balance should decline somewhat. So I don't see any concerns for this Company going through this year.

Tahira, just to add to Paul's comments, certainly each contract we have is somewhat unique. I think the standard is that the client asks for 10% retainage on jobs. Sometimes we are successful in negotiating that to a lower number. Oftentimes the start of the project, it will be 10% and then we will reach an agreement to cap it at some point in the middle of the project. So, we are constantly focused on trying to minimize the cash that we have tied up in AR, including retainage.

Thank you very much.

Alex Rygiel with FBR Capital Markets.

Good quarter, congratulations. Bill and Paul, could you comment on, and remind us, about your profit recognition for large projects versus small projects, and how it differs? And how you tend to be conservative at the start of projects but release contingencies through the process?

The accounting rules don't change because it's a small project versus a large project. The way we handled profit recognition every quarter on every project, we scrub our books and do a detailed cost to complete on that job. And after we finish that process, every quarter we are able to write up some projects and we always have a few projects we have to write down.

So, it is a pretty rigorous process we go through actually every month, but particularly rigorous on the quarter. So that would be how we would handle profit recognition on lump-sum jobs. Contracts that are primarily cost-plus or unit priced add a little different twist to profit recognition. But basically we adhere to cost-to-complete accounting and do a rigorous cost-to-complete each quarter.

We do not recognize unapproved change orders, so when you have a large project and maybe have added scope or something that might entitle us to a change order, we don't recognize that until it has been approved by the client. And we are certainly trying to get the client to approve them as we go along. Oftentimes, the contract requires us, in some cases, to wait till the end of the project to resolve all of those pending change orders. So, that, I think, has been a factor historically that maybe has contributed to a little higher profit recognition on the end on certain projects.

Can you remind us the timing of any upcoming large projects that could be completed in 2012?

Sure. Our project in Oklahoma is substantially complete now. Our project in Kansas for ITC is well underway and that should complete by the end of the year. Those would be the two that should wrap up this year. Our work in West Virginia and Virginia for Dominion, that is a multiple year project. Our work in Maine is a multiple year project. Our work for LS Power in Texas should finish in 2013.

The work that we are doing for NV Energy and LS Power in Nevada, I think, as everybody on the call knows, that project had the tower erection and wire setting shut down temporarily until they dealt with an engineering issue that relates to vibration on the towers. We are continuing on that job with a lot of road building, environmental work, putting foundations in, putting the anchors in. So that project continues to move forward with all of those activities. Other than setting towers and stringing new wire.

That would be a going-around-the-horn major projects that are currently in our backlog. The work in Minnesota the CapX 2020 work, as we stated on the call, those segments are in the process of being awarded. We have a small contract to do some material yards on one of the jobs. And are continuing to have discussions with the CapX utilities on a couple of those jobs. So, that one really is not in backlog at this stage.

And lastly Bill, can you talk a little bit about pricing in the electrical transmission market? And the intermediate term outlook for profit margins in Transmission over the next 12 to 24 months?

The market I think is a little bit stronger. It's all about execution now. All of us in the industry have a number of projects under contract. And it's all about execution. I do think there is some firming on certain projects on pricing, the way we evaluate them. There are other areas of the country where we still find way to many bidders. That is very much a regional thing, where some areas seem to be stronger from a margin opportunity than other areas.

Thank you very much. Nice quarter.

Justin Hauke with Robert W. Baird.

I just wanted to dig a little bit into the revenue. Obviously, very strong. And just a couple questions to get our arms around it a little bit. First, was there any pull forward of just moderate weather that allowed you to do more work? That smoothed maybe the traditional seasonality from here? That would be the first question.

Then the second one is, to the extent you could quantify maybe how much of the revenue was from the projects you define as large projects, so over $10 million, how much of your revenue this quarter was from those projects?

Let me start off with that and maybe Paul will jump in with some added color. Certainly, throughout much of the country, we experienced a more mild winter than what any of us expected. That is both a good news and bad news situation. I think most people would think it should be good news. In certain areas, certain projects we bid the job as though we are going to have frozen ground for several months during the winter. That makes moving heavy equipment and material easier in some of those areas. We got very little frost in the ground so we had probably more environmental issues to contend with. In some cases the weather helped us. Other cases it made our work more challenging.

Some of our jobs have significant contractor provided materials. Normally, the typical utility job, the utility would provide the poles, the wire, the insulator and a lot of the hardware for a job. On some of our work that scope of providing material has been assigned to us. So that has a little more revenue potential as we install that material. Not only are we recognizing the cost for our labor and equipment, we are also recognizing the cost of the material because that's part of our scope. So that, I think, has probably been a source for helping drive some of the revenue. Paul, do you have anything more you want to add on that?

Sure. Justin, your question along the lines of how much of the total revenue was contributed by the large projects. What we look at is about maybe 15 of our projects make up about 50% of our revenue in the quarter. That was consistent, roughly consistent with Q4 of 2011. In Q1 of 2011 our top 15 projects made up about 31% of revenue. So as these larger projects get further into their cycle this is something we expected to occur.

Got it. That's actually very helpful. The second question I had, it's maybe a little more theoretical. I noticed several of your peers have pulled out of their multi-employer pension plans. I know you are involved in a couple of those plans. Just any thoughts on the funding status there, and any change in maybe how you might organize those plans going forward? Thanks.

As we look at that, we are certainly aware of some of our peers, their issues with the multi-employer plans. Our contributions to those plans have been immaterial. Less than $50,000 in any one year. So we don't see it as a material issue for us.

Got it. Thank you very much.

Craig Irwin with Wedbush.

This is David for Craig. I would like to drill into the Transmission and Distribution a little bit further, piggybacking on that last question session. Can you maybe discuss the split of the margins for the large and the small projects? And then, could you talk to whether you have the labor and capacity to handle additional small T&D projects going forward?

Let me comment on the last part of it, and then Paul can comment on the first part. Certainly, we feel we have capacity for the small- to mid-sized projects, as well as additional big projects. There is a lot of what I think the industry typically calls NERC reliability work, that is upgrading 69 lines and 138 lines and 115 lines. That's an important source of business for us.

We have a number of our clients that are engaged in that and they have hired us to assist them with that. So, that has been a strong opportunity for us. And we think we have a lot of capacity across the country to assist our customers with that.

Okay. David, to address your question, what we see on a quarter-to-quarter basis is we see growth in the margin that we recognized on our top 15 projects. That said, the margin on all of our other projects continues to track higher than our top 15. But with the trend we are seeing hopefully that is a positive trend going forward. But we do continue to see on our smaller projects higher margin opportunities.

Okay. Is there a spread that you could give us a sense of between the large and the small project margins?

I don't think we can. That is something we don't disclose and categorize our projects by size. As we look at projects, there are a lot of the ways you can group them. By region of the country, by type of service, by client, by size. And all of those things might be somewhat interesting. That's not how we manage the Business.

I see. But the general take away then is that you are seeing margin improvements on both the large and small projects?

In terms of the bidding environment? We think certain areas of the country we see a little more favorable bidding margins available. But it isn't necessarily across the board in all 50 states so it is a region by region situation.

Thank you for the details.

William Bremer with Maxim.

Can you give us an idea of what type of underlying capacity you have, given the level of G&A that is currently showing?

Capacity on the G&A side, I would not view that necessarily as a constraint. What would potentially be capacity constraint is whether you have the tools and equipment to do the work, and whether you can find the management and the skilled resources to perform the work. Finding the administrative support, I think, is something we can expand at. As you see in this quarter, our SG&A as a percent of revenues went down, only because the revenues were up so dramatically. I think the business is scalable. So if you look at a long period of time, if we achieve the growth we think we are capable of, SG&A should be less as a percent of revenue than maybe what it ran in the five-year period before the transmission growth really started to ramp up.

That's exactly what I'm looking for. And then, Paul, if you could just help me out, can you provide what MSAs made up for the quarter and how that compares year-over-year?

That's actually something I don't think we report that and we don't track our Business that way.

All right, gentlemen, that's all I have. Thank you.

Adam Thalhimer with BB&T Capital Markets.

I have two questions here. Number one, Bill, maybe help us think about, I understand it is a lumpy business, particularly when you get to the mega projects. Can you give a sense for how many mega projects you are bidding right now and when you might expect to hear back on those?

Right now, in the market, there are a couple of large projects that are active. We expect more to come out in the market in the next couple of months. But as I have told you in the past, Adam, the period of the late 2010, early 2011, that's when the CREZ work came out and a lot of the other big things that MYR and our competitors are working on. I don't ever see that kind of bidding activity being duplicated within a 9- or 12-month period. But there are a couple of good-sized jobs in the market today and we expect to see more of them as the year unfolds.

Okay. And then, help us think through the T&D op margin in the quarter, around 8%. You had a couple quarters, Q4 '10, Q1 '11 where the operating margin was closer, let's call it low teens. And that's when you finished up the first Dominion job. Is that low teens margin what you think you can do in an environment where you are closing more jobs than you are starting?

The margins, as we indicated on the call, and the comparable quarter last year, as we were closing out a couple of large contracts we had some above normal margins that we put out in our release. Hopefully, we will be able to do the same thing as we close out some of the current large jobs that are under contract. But in terms of a normalized margin, I would not necessarily say the first quarter of 2011 was normal, nor would I say the first quarter of 2012 was normal. What I'd suggest you do is look at a longer period of time, multiple years, and those things balance out, as opposed to trying to conclude from one quarter or one year even what's normal.

What is the one thing that frustrates you maybe the market is not getting? Is it the strength of small transmission work? Is it the NERC reliability? Maybe you can give us a sense for when that work related to NERC reliability starts. Will the story shift here over time as less mega projects but more just base transmission work, and then you have distribution coming back, then C&I comes back. How should we think about the story now that you are through that? That bubble, so to speak, of the mega projects?

There's not one thing that frustrates me about the market. The market is what it is. And you've got buyers and sellers, and our stock, as well as our competitors, to drive it. And if you've got somebody trying to sell, the price goes down. If you've got somebody in size trying to buy, the price goes up. So I generally think, because of guys like you, the market is pretty efficient. There's a lot of information on our Company out there and our industry. I do think this NERC reliability work is going to be with us for a long time. Whether the market fully gets that or not I don't know. But I think it's a situation where probably a lot of things come into play explaining why we trade where we do versus maybe a peer or some broader market index like the S&P.

On the NERC reliability, that offsets one mega project? You're thinking it's a $50 million to $100 million a year driver?

I think it has the potential of being more important than that. It's not just one utility system in one state. There's quite a bit of NERC reliability work across the country. It's an odd way to look at it but to me it is the equivalent of a couple of large projects.

Okay. That's perfect. Thanks Bill, thanks Paul.

Dan Mannes with Avondale.

A quick follow-up question, and I think you got this question on seasonality as it relates to what was a very strong Q1. I wanted to layer on there, can you also talk about the status of your projects and the potential for continued ramp in terms of your revenue recognition on projects as we move through the year. Or does this mark, maybe not the high point but a plateau in terms of revenue realization on your existing backlog?

Dan, I don't have much more to add. I went around the horn earlier in the call discussing where some of our large projects are. I do think when you go through a quarter where your revenues are up 60% from the same quarter the prior year, that kind of thing is pretty difficult to duplicate.

What we would hope that you'd normalize our revenues over a longer period of time. I think the industry and our Company is capable of growing at 10% a year. But it is not going to be every quarter and you should put your ruler down because this is not a straight edge business.

Okay. Understood. And then real quick, in your press release you obviously talk about the strength of your balance sheet. Can you talk a little bit about maybe some of the opportunity there to put some capital in play to either add capabilities or potentially even on the M&A side? What would you like to add, and what would you like the Company to look like in 12, 18, 24 months.

Our balance sheet first is to support our internal growth. We are a company that strategy is primarily trying to grow through organic growth. We are very cognizant of how many shares of stock we've got outstanding. That's an important number as you calculate EBITDA and earnings per share and so forth. So we are very focused on not splitting the buy up among any more shares than we have to.

Second to supporting our internal growth with equipment and tooling and training. Before we do an acquisition and as we consider those, the alternative is to always give the money back to shareholders. I don't think we would want to lower our criteria for making an acquisition to something that would not be as valuable to existing shareholders as perhaps buying back stock, for instance.

In terms of the acquisition market, we see a lot of pitch books each month. Really haven't expressed publicly where we would really like to grow. Certainly, some acquisitions have more appeal to us beyond just the relative valuation of them. We would be looking at things that would be strategic in terms of, not just financial whether the deal is priced right.

Understood. Thanks.

(Operator Instructions) Tahira Afzal with KeyBanc Capital Markets.

Just because you account more conservatively on the backlog side, which is prudent, than some of your peers, can you talk on a higher level about your bid opportunity out there. When you combine the large projects and the small and mid size projects, and you really see that opportunity versus, let's say, at this point a year ago, would you say that that opportunity is a smaller set, around the same size?

And then the second question is, when you're looking at the market out there, how much are you factoring in what is likely going to happen over the next, let's say, couple of years as utilities shut down, and (inaudible) start retiring coal power plants, starting up natural gas power plants potentially? Is that going to be an opportunity of notable magnitude for you, as well?

I think there were about six questions in that, Tahira. Let me address the backlog part of it. Compared to a year ago, as I indicated in the last half of 2010, first half of 2011, that's when I saw the bidding activity being a multiple of anything the industry had ever experienced. As you compare the first quarter or my expectation for the second quarter of 2012, will that be at the same level as the first quarter and second quarter of last year? I don't think so. I don't think there are that many jobs that are going to be awarded during that period.

But again, that period I referred to at the end of 2010 and first part of 2011, the industry had never seen anything like it. And it was not percentage greater than historical, it was a multiple times anything the industry had seen. Now, back to your question about coal plants potentially closing, and whether that could have a positive impact on our industry, I'm of the opinion that it could. Because as these coal plants get closed the alternative probably is to put a gas plant in that area to support the load, or to perhaps upgrade the transmission facility, and in some cases, upgrading those transmission lines so you don't have to put any plant in that location. I'm sure the utilities are all going through those analysis.

Putting the gas plant in itself will trigger some transmission work, it will trigger some sub station work. So, we would be the beneficiary of that. And if they choose not to put a new plant to replace that coal plant and choose instead to upgrade their transmission facility, that might have a greater potential benefit to MYR and its peers.

Thank you. And then a last question, I know Susquehanna (inaudible) is back on the map, near-term opportunity for some of your peers. I know you looked at it in the past. Any comments on that?

We have looked at that. That is a project that is of interest to us and one that I expect there will be some decisions made on it probably this year.

Thank you.

William Bremer with Maxim.

Bill, can you give us some color on your substation work, how much you did this quarter, what the bidding opportunity looks like there throughout this year and next?

We typically roll our substation work up under Transmission. It has been, I think, pretty strong. I don't have the details and we don't break that down. But the substation work has been pretty strong and there are a number of substation bidding opportunities that would be sizable additions, or greenfield substations that we will be looking at this year.

Okay. Thank you.

Thank you. I show no further questions at this time. I would now like to turn the conference back over to MYR Group for closing remarks.

Again, I would like to thank everybody for participating on the call. We are very excited about the opportunities in the energy delivery markets. We think we've got the right management team and skilled resource base for all of the hard work that we see in front of us.

As I indicated, now it's largely a lot about execution, to execute the jobs that we have been backlog. And we certainly appreciate the ongoing support from our shareholders. We certainly value your interest and support in our Company. With that, everybody have a good day.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day.