MYR Group Inc (MYRG) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the MYR Group Third Quarter 2014 Earnings Results Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call will be recorded.

I would now like to introduce your host for today's conference, Mr. Philip Kranz of Dresner. You may begin sir.

Thank you and good morning everyone. I'd like to welcome you to the MYR Group conference call to discuss the company's third quarter results for 2014, which were reported yesterday. Joining us on today's call are Bill Koertner, President and Chief Executive Officer; Paul Evans, Vice President and Chief Financial Officer and Rick Swartz, Senior Vice President and Chief Operating 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, November 12, 2014 at 11:59 PM Eastern Time by dialing 855-859-2056 or 404-537-3406 and entering the conference ID 20931489.

Before we begin, I want to remind you this discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group management as of this date and MYR Group 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 annual report, quarterly report on Form 10-Q for the third quarter of 2014 and in yesterday's press release. 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 third quarter 2014 conference call to discuss financial and operational results. I will start by providing a brief summary of the third quarter results and then turn the call over to Paul Evans, our CFO for a more detailed financial review. Following Paul's discussion, Rick Swartz, our Chief Operating Officer will provide an industry and MYR Group operational update for the quarter. I will then conclude with some closing remarks and open the call up for your comments and questions.

Our third quarter 2014 results came in strong with revenue growth of 6.7%, driven by continued strength in our Commercial and Industrial segment, where revenues increased 50% over the same quarter last year. This marks the fourth consecutive year-over-year quarterly revenue increase. Backlog was also a bright spot for the company. At the end of the third quarter of 2014, it grew to $409 million or by approximately $11 million versus the second quarter of 2014. This marks the third consecutive quarter of growth. In particular bookings within our T&D segment were up by nearly $24 million in the third quarter. Also of note during the third quarter, we were very active in our share repurchase program as we repurchased nearly 408,000 shares for just under $10 million.

With our strong balance sheet and cash position, we are comfortable of repurchasing shares under our $25 million program and we do not believe these repurchases will compromise our ability to grow. We continue to see strength in both our T&D and C&I markets and feel there are ample growth prospects in both of these markets over the long-term. Investment in electric transmission infrastructure continues to be robust in many parts of the US as well as in Canada. This outlook is also supported by recent capital spending announcements by a number of electric utilities, as well as recent regulatory developments.

Our position as a leading specialty contractor in our markets remain strong, which gives us confidence to invest further in our workforce, equipment and operation. We continue to strive to be the safest, most customer-focused contractor, our T&D and C&I clients can hire to perform their work. We believe that focus and a competitive cost structure are keys to creating long-term value for shareholders. We are confident that MYR Group is well positioned for long-term growth.

Now, Paul will provide details on our third quarter 2014 financial results.

Thank you, Bill and good morning everyone. Yesterday, we announced our 2014 third quarter and first nine months results. Our revenues for the third quarter of 2014 were $248.5 million, which represented a $15.6 million increase compared to the same period in 2013. On a percentage basis, 2014 third quarter revenues increased 6.7% over the 2013 third quarter revenues. The increase was primarily due to a significantly higher revenues from C&I projects. On a consolidated basis, material and subcontractor costs comprised approximately 36% of total contract costs in the third quarter of 2014 compared to approximately 31% in the third quarter of 2013.

Compared to the 2013 third quarter, T&D revenues decreased $7.2 million to $180 million, while C&I revenues increased $22.8 million to $68.5 million. Focusing on the T&D segment, revenues were $135.3 million for Transmission and $44.7 million for Distribution in the third quarter of 2014. This compares to $161.9 million for Transmission and $25.3 million for Distribution for the third quarter of 2013. Material and subcontractor costs in our T&D segment comprised approximately 34% of total contract costs in the third quarter of 2014 compared to approximately 27% in the third quarter of 2013. Transmission revenues decreased in the third quarter of 2014 as compared to the third quarter of 2013 as declines from several large projects, which were completed or nearing completion, were partially offset by increased work on small and medium sized transmission projects.

In the third quarter of 2014, revenues from our Transmission business were 75.2% of total T&D revenues compared to 86.5% in the third quarter of 2013. In the third quarter of 2014, revenues from our Distribution business were 24.8% of total T&D revenues compared to 13.5% in the third quarter of 2013. C&I revenues increased by 49.8% to $68.5 million in the third quarter of 2014 from the third quarter of 2013. Significant increase in C&I revenue was primarily due to increased activity in several service offerings and improved conditions in our Colorado and Arizona markets. Material and subcontractor costs in our C&I segment comprised approximately 42% of total contract costs in the third quarter of 2014 compared to approximately 46% in the third quarter of 2013.

Our overall gross profit in the third quarter of 2014 was $32.7 million compared to $32.5 million in the third quarter of 2013. Our gross margin was 13.2% in the third quarter of 2014 compared to 13.9% in the same quarter of 2013. The decline in gross profit was predominantly due to lower equipment utilization as several large transmission projects were wrapped up or nearing completion, as well as higher equipment repairs and maintenance costs. Third quarter 2014 and 2013 gross margins included net benefits of approximately 1.0% and 0.6% respectively from improved contract margins on several transmission projects due to cost efficiencies, additional work and effective contract management.

Third quarter 2014 SG&A expenses were $19.3 million compared to $19.6 million in the third quarter of 2013. The decline in SG&A expenses was due to a $2.3 million legal reserve recorded in the third quarter of 2013 pertaining to litigation regarding a traffic accident. The impact of a legal reserve was largely offset by higher personnel costs to support operations and higher stock compensation costs. SG&A, as a percentage of revenues, was 7.8% for the third quarter of 2014 compared to 8.4% for the third quarter of 2013. Excluding the legal reserve, SG&A would have been 7.4% of revenues in the third quarter of 2013.

Third quarter 2014 EBITDA was $21.9 million compared to $20.4 million in the third quarter of 2013. Excluding the legal reserve, EBITDA would have been $22.7 million for the third quarter of 2013. Our provision for income taxes increased to $4.9 million in the third quarter of 2014 compared to $4.6 million in the same quarter of 2013. Our effective tax rate for the third quarter of 2014 was 36.8% compared to 35.6% in the third quarter of 2013.

Third quarter 2014 net income was $8.4 million or $0.39 per diluted share compared to $8.3 million or $0.38 per diluted share in the third quarter of 2013. Without the legal reserve, third quarter 2013 net income would have been $9.8 million or $0.45 per diluted share.

Shifting to the first nine months of 2014. Revenues increased $44.9 million or 6.9% to $693 million compared to $648.1 million for the first nine months of 2013. The increase was primarily the result of significantly higher C&I revenues. Our overall gross profit in the first nine months of 2014 was $90.3 million compared to $91.0 million in the first nine months of 2013. And our gross margin decreased to 13% versus 14% in the first nine months of 2013. The year-over-year decline in both gross profit and gross margin in the first nine months of 2014 was primarily due to lower equipment utilization, particularly on large transmission equipment along with higher equipment repairs and maintenance costs.

EBITDA decreased to $60.9 million or $2.83 per diluted share for the first nine months of 2014 compared to $61.3 million or $2.86 per diluted share for the first nine months of 2013. Without the legal reserve, first nine months of 2013 EBITDA would have been $63.6 million or $2.97 per diluted share. First nine months of 2014 net income was $22.4 million compared to net income of $24.7 million in the first nine months of 2013. Diluted earnings per share were $1.03 for the first nine months of 2014 compared to $1.14 for the first nine months of 2013. Without the legal reserve, first nine months of 2013 net income would have been $26.2 million or $1.21 per diluted share.

We invested $36 million in property, plant and equipment in the first nine months of 2014 compared to $31.5 million in the first nine months of 2013. We expect our capital spending in 2014 will be similar to our 2013 capital spending levels. We also expect that our 2015 capital expenditures will be similar to our 2014 and 2013 capital spending levels. We are optimistic about putting most of our idle equipment to work and see the need to add more equipment to grow. Total backlog at September 30, 2014 was $409 million, consisting of $289.3 million in the T&D segment and $119.7 million in the C&I segment.

Total backlog at September 30, 2014 increased by $11.1 million from $397.9 million reported at June 30, 2014. T&D backlog increased $23.6 million or 8.9% while C&I backlog decreased $12.5 million or 9.4%. Increase in T&D backlog at September 30, 2014 was a result of a number of project awards of all sizes.

Moving to the balance sheet, stockholders' equity increased to $311.3 million at September 30, 2014 from $296.1 million at December 31, 2013. Our return on equity for the 12 months ended September 30, 2014 was 11.4% as compared to 14.2% for the prior year period. At September 30, 2014, we had approximately $64.6 million in cash and cash equivalents, no outstanding standard funding debt and $155.4 million in availability under our credit facility. In the first nine months of 2014, we spent [$9.8 million to purchase 438,577] shares of our common stock under our $25 million stock repurchase program.

In conclusion, we had another solid quarter, continuing our year-long trend of revenue growth and increasing backlog. With our strong balance sheet, we believe we are well-capitalized for sustained organic growth and as well as possible acquisitions.

I'll now turn the call over to Rick, who will provide an overall industry outlook and our view of MYR's opportunities.

Thanks Paul and good morning everyone. In the third quarter, we remained active in business development, bidding work, building backlog and successfully executing projects of all sizes. As we enter the fourth quarter of 2014 and look ahead into 2015, we anticipate a healthy bidding environment for our T&D and C&I segments. We expect opportunities for transmission projects of every size and type as a result of reliability mandate, recent regulatory developments and the continued growth of renewable energy resources.

We also expect to see increased capital investment by key clients in our C&I target markets on the heels of our country's strengthening economy. We remain proactive with our business development activities in our current markets as well as across new markets, particularly in Canada, Alaska and California. And we believe that these markets will offer us long-term growth opportunities. We are actively bidding projects in Canada's robust market and are hopeful of being able to win a Canadian project by the end of the fourth quarter.

On the regulatory front, we believe that the D.C. Court of Appeals' decision to uphold FERC Order 1000 bodes well for the future of the industry and should help advance transmission project opportunities to strengthen our nation's electrical transmission grid. The more competitive landscape should allow both traditional utilities and merchant transmission developers to pursue needed transmission projects within regional planning authorities and between regions. AEP recently announced that in their estimation, FERC Order 1000 could create up to $42 billion in new market opportunities for non-incumbent transmission developers. Also, according to a recent report from Moody's, the implementation of FERC 1000 has led some utilities to team or form joint ventures with others outside of their traditional service territories in order to pursue competitive transmission projects.

We believe that MYR Group may ultimately benefit from these activities in the future based on our longstanding relationship with both utilities and independent transmission developers. Meanwhile, recent announcements of robust capital expenditure plans on behalf of the electrical utilities, including many of our clients, continue to provide us with optimism for T&D spending going forward. For example, Xcel Energy, a longtime client of MYR, expects to spend $4.5 billion over the next five years on their transmission infrastructure throughout all of their service areas.

ITC projects $1 billion in excess funding capacity through 2018, which should provide it with adequate cash flows to fund transmission development. ITC recently announced that they are targeting $4.5 billion in transmission investments through 2018. MYR is in the process of completing ITC's V-Plan and we believe we are strategically positioned for future opportunities with ITC. We are also strategically positioned for transmission projects in the northeastern part of the US, where National Grid recently announced it would spend nearly $8.6 billion between 2015 and 2029 in New York on transmission and distribution upgrades with $3.2 billion on transmission alone.

Duke Energy announced they plan to invest $1.9 billion on their system over the next seven years, which include $752 million in transmission improvements and the U.S. Department of Agriculture announced that they would be investing $518 million in infrastructure projects for many of the nation's rural electrical coops. Aside from these investment announcements, we continue to monitor progress of single large transmission projects under development throughout the country. Some of these projects are being developed to help alleviate regional congestion, deliver low cost energy and to deliver renewable energy to population centers. Amongst these projects, is Clean Line Energy Partners' Plains & Eastern project, which was recently granted FERC approval to charge negotiated rates on their transmission line, and a new 725 mile, 500 KV transmission line that Pennsylvania Power and Light proposed to PJM that would run from western Pennsylvania into New York and New Jersey.

All of this activity helps to support our belief that we are in the midst of a historical period of transmission investment in the industry that should continue in the foreseeable future. We continue to market ourselves for transmission work across the country.

Looking at our Distribution business, we see opportunities with many of our clients throughout the country. There continues to be a focus on system reliability and the need to replace aging infrastructure on our nation's distribution system. This focus is evidenced by some of the recent spending announcements such as Duke Indiana's announcement of $868 million allocated in distribution system upgrades as part of their planned $1.9 billion budget over the next seven years. Also National Grid's 15-year T&D investment plan includes spending between $250 million and $350 million each year on their distribution system. These investments along with high-speed fiber upgrades, the continuing trend by utilities to outsource distribution work and a generally improving economy, will continue to provide opportunities for MYR.

Shifting to our C&I business, in the third quarter, we experienced continued revenue growth supported by increased bidding and project activities in our Colorado and Arizona markets. Our primary markets in healthcare, data centers, airports and industrial, continue to produce solid financial results as many of our long-term clients continue their expansion of new services, offerings and locations. Select markets with limited competition such as airfield lighting, light rail and data centers will remain a key area of focus for us in the remainder of 2014 and into 2015.

In addition to our primary markets, small to mid sized opportunities are increasing in building automation, [client-own] distribution upgrades, technology advancements and building renovations. These are desirable projects that require a moderate commitment of resources, which is important as shortages in skilled labor become more of a reality across various parts of the country. MYR Group reputation as a safe, quality, long-term employer continue to allow us to attract and retain new talent to blend in with our long-term employees, supporting new opportunities in our existing markets and surrounding states. Outside of Arizona and Colorado locations, we now have teams executing projects in Utah, Nevada and Nebraska. We are also reviewing and evaluating project opportunities in several other western states.

In all areas of our business, we remain confident we will win our fair share of project opportunities as we continuously broaden our skills and competencies throughout our operations, and as we sharpen our capabilities for successful and safe execution on all of our projects. We see positive market conditions and firmly believe we will continue to deliver solid value to our customers and shareholders. Thanks to everyone for your time today. I'll now turn the call back to Bill, who will provide us with some closing comments.

Thank you for that update Rick. I believe our results reflect the hard work we've done over the last several years to position our business for sustainable growth and success. We intend to invest in and strengthen our manpower and equipment resources, expand our geographic footprint, drive better execution and leverage our national scale and service offerings. We remain steadfast in our belief that every market we serve offers long-term growth opportunities and we are confident in our ability to remain a market leader in this business.

We believe that our reputation will continue to provide us with growing opportunities across all of our markets. On behalf of Paul, Rick and myself, I would like to thank you for joining us on the call today and placing your confidence in MYR Group. I look forward to updating you on our progress next quarter.

Operator, we're now ready to open the call up for comments and questions.

(Operator Instructions) And our first question comes from Noelle Dilts. You may proceed.

My first question, I just wanted to kind of better understand given that you talked a little bit about under utilization issue in the past couple of quarters, can you just help us understand in terms of the investments you're making in equipment, what you're investing in there, is it new capacity and what gives you the confidence that you'll be able to effectively utilize that equipment as we move into next year?

Well, first, we often see a drop in our utilization during the summer months on the transmission side because our utility customers can't give us the outages to perform work during the summer. So, we have some equipment setting. A lot of that equipment -- most of that equipment has been put back to work. So, we get into the fall when our customers give outages back to us to perform.

In terms of spending money on equipment going forward, certainly a portion of that is to replace things that need to be taken out of service. We tried to achieve an average age on our equipment, it depends whether to pick-up truck or a distribution bucket truck or a big [puller] for transmission, whatever, those ages vary considerably. But we want to give our employees the best equipment possible to perform their work. So a portion of it is equipment -- a portion of our capital is to replace equipment, but there's also a pretty significant growth component in there. So it would be a combination of both Noelle.

And second I thought it was really interesting that you used your cash position to buy back some shares in the quarter with the remaining $14 million or so on the authorization. How does that rank at this point in terms of your capital allocation priority?

Well, we positively look at all of the possibilities ranging from buying stock back to dividends, to investing capital and working capital to grow into new markets and provide new service offerings as well as acquisitions. So, we are probably one of, maybe if not the most conservative capital structure today and we think we can do both, return some capital to investors through a share repurchase program, but still fund the kind of capital needs that we see for both organic growth and acquisitions.

Tahira Afzal.

This is [Shawn] on for Tahira today. Congrats on a great quarter. First thing I want to ask is just about the C&I segment, you saw some nice growth this quarter and I'm just curious to the extent you can comment on the organic growth trajectory and sort of the capacity in this business and when it sort of might peak?

I'm going to let Rick to handle that. He is more familiar with our C&I business than myself. It's a good market. We've certainly had a nice run here recently. But Rick you have any color to add to that?

In the markets we're in right now I don't see it peaking this year or going into next year by any means. I see people continuing to spend money. A lot of our clients continue to want us to follow them into other areas. We've expanded geographically as I said into Nebraska, Nevada. We're looking at other areas to also expand into, but we'll do that step-by-step process and make sure we've got the right people in place to perform that work safety into the customers' expectations.

And then my next question is just on the material and subcontractor costs, they've sort of ticked up a little bit this quarter on the Transmission side and how are you thinking about that mix over the next 12 months versus the previous 12 months?

Paul you want to --

I'll go ahead. I mean we don't control the subcontractor and material costs. So what I would suggest you to do is sort of just take a long-term average, if that's what you're trying to use in your model. I don't see anything out there that will keep like it did in 2011. So I would just sort of take a long-term average.

Andy Wittmann.

I want to build on that first question a little bit. Paul, maybe can you talk about what percentage of the CapEx you would consider growth CapEx for this and next year, just an order of magnitude there?

I think for (inaudible) to do is to look at our depreciation as a proxy for maintenance CapEx and then anything above that would be growth CapEx.

And then just on SG&A, I guess if you look at the year-over-year comparison here, you add back -- you adjust for the legal charges last year, SG&A was up about 50 basis points as a percentage of revenue. That's despite revenue being a little bit higher this year. I guess -- maybe Bill or Paul, is there an opportunity in SG&A, was there may be something one time in the quarter or how should we think about the run rate of that line item on a go-forward basis?

Well, I guess one piece of information that is partially responsible for it, as we ramp down some big jobs, we've had project managers job, cost accounting people that were job charged previously and when those jobs ramp down, they've now become part of our marketing team to go find the next job. And as we find that next job, they will again be job charged. So, that always occurs, but when we had several jobs ramping down, we probably have had more of that kind of cost hitting SG&A and it's -- obviously we don't want to lose our key staff people on the management and in the estimating and the job cost tracking side. So that's a factor.

We haven't added any significant staff, pure corporate overhead folks, that's probably declined a little bit. So, a lot of what you're seeing would be these operating or administrative folks that were previously job charged.

I guess maybe that dovetails into maybe a broader question on margins. I think it appears that the transition from larger project work to small and mid project work is having an impact on your overall margins. I guess maybe, first would you acknowledge that's the case, if that is the case, your thoughts on that would be helpful. And maybe secondly as you look at what you're bidding today, can you talk about the inherent margin that you're seeing in the marketplace and what that could do for the direction of your margins from here?

The margins remain very competitive. Certainly, on the bigger jobs, there are fewer contractors that can handle lows. So we might be bidding against two or three other players whereas if we're bidding on a smaller and let's say $5 million job, you've got lot of regional mom and pop kind of players. So the bigger the projects probably allow for higher margins. That said, we still do very well on most of our small to mid sized jobs. It is important that we execute those jobs flawlessly and that's certainly what we're trying to do.

So looking forward, we don't comment on whether we see bid margins going up or going down, continues to be a very regional kind of thing. There are some parts of the country we think will support a little higher margin than other parts of the country. Some types of services support a little higher margin than others and we're trying to pursue those things that have the highest margins, but I don't think there's any generalization that margins are changing significantly. There's always a considerable variability from year-to-year on bid margins.

Just any comments on the amount of large projects that are out there, specifically on that one. Is that coming up again in terms of what you're looking at or bidding on or preparing to bid for or is that still -- is the trend line still mostly away from the larger projects?

There is definitely not a CREZ to package large projects in the market. There are a number of big ones that we expect to be bidding in 2015, but as I've mentioned on the call over the years that CREZ work was kind of a bubble of work. If you pull that out, I think the large project opportunities are comparable to what they have been historically. And Texas continues to have lots and lots of work, but we didn't -- there's not another 2,400 miles of 345 trying to get done in a period of 2.5 years.

Dan Mannes.

And I apologize in advance I might have missed some of the earlier questions. So if you're repeating, my apologies to you. But as it relates to the SG&A side, when looking at your T&D business, I'm still struggling a little bit to understand, if maybe that's weighing on margins a little bit on the bottom line, and is that more than just kind of the shift to project managers, especially they do some of these regional expansion and open up new offices, which I believe you've done and I want to say Texas and Oklahoma. Is that weighing at all in the margin side as you're ramping up work or not really?

Certainly, as we try to expand and get into new markets and hire people to -- that would be a factor and it's not so significant that we call it out and say we had X number of -- hundreds of thousands or millions on positioning us for the future, but that would be a factor.

And I mean you mentioned going after kind of the markets with the best margins, on the T&D side, I guess, my perception has been that those two markets, I guess, Texas and Oklahoma, wouldn't necessarily be the regions with the best margins. Can you maybe walk us through a little bit your thoughts on those expansions?

Well, Texas, you are right, there is a lot of resources coming off with those CREZ jobs that are looking to find homes, which put pressure on margins, but we're not in it for a quarter at a time, we view Texas as a fantastic place to be for the long term and we may take some work in Texas, at a little lower margins than what we'd like, but we think over the long-term, that's a great market and the margins will be strong in Texas.

And Oklahoma?

Same thing with Oklahoma.

And then I think you may have mentioned this, but I wanted to make sure I understood, you guys obviously are continuing to pursue work in Canada. Any thoughts on the potential there, and if you can kind of scope out how -- what size projects you're going after at the outset given you're kind of moving -- going from a standing start?

Well we're trying to grow smartly, probably taking on a gigantic project from the start would not be in our plans. We think projects -- $50 million project would be attractive to us, or the $20 million project. We want to quickly get ourselves in a position to do the much larger ones, but right now the kinds of things we're looking at are more modest in size.

And then the last thing and again you may have already addressed this, but as it relates to utilization I know obviously it's been kind of challenged a little bit on the transmission side the last three quarters. Some of that seasonal, some of that's been nature projects, but your CapEx budget continues to point to growth in overall equipment. Can you square that for me. I mean, I don't mean to overreact to kind of short-term under-utilization, but it's been a couple of quarters now and yet it doesn't sound like you're backing off your CapEx plans?

No, we're not. We still find lots of opportunities to invest in the business and we're rationals, we're doing it, believe me I don't want to buy iron for the sake of parking it on a parking lot, so we still see needs to add certain equipment in certain areas. Our mix of work has changed a little bit. So, [the owing and] tension equipment and string and blocks that you might use for a 500 line might not or would not be the same that we'd use on a 138 line. So, I wish we have the ability to swap those out and have perfect equipment just in time, but some of the equipment we are adding would be for these smaller, lower voltage transmission jobs.

William Bremer, Maxim Group.

Was there any material substation work completed this quarter, I'm just curious? And looking at your overall geographic regions, any particular region stood out this quarter or do you see in the next few shorter-term projects come to fruition?

We're working on our jobs, 20 to 40 substation jobs at any one point in time. Every month one of them completes, several of them complete and we keep adding to it. They're not necessarily gigantic substation jobs, but we've got a lot of substation work across the country and we haven't commented that we like this one area of the country better than the other. Clearly we're not as strong in all the markets as we like on the substation. But we are pursuing all of them and I think substation work is a great opportunity for MYR to expand its service offerings into new regions.

And Bill you voiced that you're seeing right now is a pretty healthy bidding environment. Can you sort of give us an idea, is it starting to shift in your opinion back to some of the larger projects or do you still feel as though it's more in essence just smaller blocking and tackling projects and then coupled with some of the larger ones here and there?

I think it's going to be a good mix of big jobs as well as the smaller jobs. I'm not really forecasting you know any significant changes in the makeup of that bidding environment.

And then one on the C&I, are these type of margins that have continued, they are pretty much been ramping up here in the last --

especially sequentially, should we be thinking about possibly tweaking these margins a little higher going forward in the C&I division?

Rick, you want to answer that?

I think we've gone after and had some luck I guess and skill of managing our projects as we've executed. When I look at the overall margins where they are going forward, I still see a pressure from competitors out there. We still got to be able to play in a realm of what's reality. So, I wouldn't necessarily increase that model going forward, I'd use something similar to where we've been.

(Operator instructions) (inaudible).

Regarding your C&I backlogs, it was obviously down year-over-year and sequentially, but you commented that the bidding remains very strong. Is your win way dropping a little bit or do you think this is more of a timing issue right now?

It's definitely more of a timing issue, we still see a lot of opportunities, a lot of discussions with customers about upcoming projects, areas that are going to be built in and having those on a daily basis. So it's a timing issue at this point.

And then if you could talk a little bit about your acquisition pipeline, you've obviously discussed moving into new markets and offering new services across both of your segments. Are you planning on doing most of this organically or will you need acquisitions to make a more substantial impact?

More certainly, our primary focus is on organically growing our business, but we have become a little more proactive looking at acquisition opportunities across the country and into some new service offerings, but we're still primarily focused on organic growth.

The last question, you definitely talked about high-speed fiber as being an opportunity on the distribution side. Are you doing any work there right now and if you could just describe what you are seeing in terms of the longer term opportunity there?

On the distribution side, primarily where we see it is the make-ready work of doing the utility work to allow the fiber contractors to come in. We do a very limited amount of that work. So, the majority of ours comes on the distribution side.

And you are doing -- you are actually generating revenue there right now?

We do some in our normal distribution market for our alliance customers.

Noelle Dilts.

[So the first is really] just when you're looking at the transmission awards that you picked up in the quarter, can you just talk about what the biggest award that you picked up in kind of the average size of the jobs that you're generally winning right now?

Noelle, we didn't call out specifically like we did last quarter on the certain size and we picked up awards of all sizes. Obviously, there wasn't an award of $50 million or $100 million in there. If that was at that level, we would have probably put something out in advance of the call.

And then my second question, I understand you might not -- (inaudible) talk about this, but just given that we're seeing Pike go private, I'm just curious if you're still seeing -- if you're seeing a lot of private equity folks kind of buzzing on the space and if you're being approached often and then just how you're thinking about potential offers for the company?

There is no shortage of investment bankers, but as far as Pike, you need to talk to them about how they looked out. Constantly, you can imagine there are a lot of investment bankers out there.

Andy Wittmann.

It sounds like Andy may have dropped off.

I was just saying that my questions have been asked and answered. So I don't have any other questions. Thanks.

Okay. Thanks Andy.

I'm not showing any further questions. I would now like to turn the call back over to Mr. Bill Koertner for any further remarks.

Well, I'd like to thank everyone for participating on the call. As always, we thank you for your support and we thank our employees for their hard work to produce these results. I don't have any further -- anything further and look forward to talking to you after we close out the year.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.