MYR Group Inc (MYRG) 2014 Q4 法說會逐字稿

Good morning, everyone, and welcome to the MYR Group fourth-quarter and full-year 2014 earning results conference call. Today's conference is being recorded.

At this time, for opening remarks and introductions, I would like to turn the conference 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 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, March 18, 2015, at 11:59 PM Eastern time by dialing 855-859-2056 or 404-537-3406, and entering conference ID 89786618.

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 the year ended December 31, 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 fourth-quarter and full-year 2014 conference call to discuss financial and operational results. I'll start by providing a brief summary of the fourth-quarter and full-year 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 overall industry outlook, and discuss some of MYR's opportunities going forward. I will then conclude with some closing remarks and open the call up for your comments and questions.

I'm pleased to report that we closed 2014 with a strong fourth quarter, driven by higher gross profit and margins. Our strong fourth-quarter results contributed to higher profitability for the full 2014 period compared to 2013. We ended 2014 with a strong financial position, including $77.6 million of cash, no outstanding debt under our credit facility, and $155.7 million of borrowing capacity.

For the full year of 2014, we repurchased just over 650,000 shares of our stock, of which approximately 210,000 shares were purchased in the fourth quarter. Our backlog increased for the fourth consecutive quarter, ending the year at $433.6 million, which is 33% year-over-year increase. In addition to delivering strong results and key financial performance measures, we made progress on several strategic initiatives to position MYR for sustainable long-term growth.

We expanded our geographic reach and broadened our portfolio of large, complex projects in both our transmission and distribution and commercial and industrial segments. We've been able to forge new client relationships and strengthen existing relationships, both of which are key to our long-term success.

Now Paul will provide details on fourth-quarter and full-year 2014 financial results.

Thank you, Bill, and good morning, everyone. Yesterday we announced our 2014 fourth-quarter and full-year results. Before I go into the summary of results, I would like to talk to you about why we delayed our filing date. As you are aware, we delayed our previously announced fourth-quarter 2014 earnings release and 10-K filing because we received a notice on February 27, 2015, that the District Court of Appeal of Florida, Second Circuit, reversed a 2013 judgment against our subsidiary, L.E. Myers, that involved a traffic accident, and determined that punitive damages would not be available in any new trial.

As a result of this ruling, and based on the relevant accounting rules, we reversed the $2.3 million legal reserve we had recorded in 2013. In order to ensure that we properly accounted for this change and complied with all of our relevant corporate governance policies, we decided to delay our year-end filings.

Now let's move on to our 2014 results. We enjoyed a strong fourth quarter in 2014, highlighted by increases in gross profit, net income, earnings per share, and backlog compared to 2013. Our revenues for the fourth quarter of 2014 were $251 million, which represented a $3.6 million or 1.4% decrease compared to the same period in 2013. The decrease is primarily due to lower revenues on several large transmission projects which are substantially complete or nearing completion, partially offset by higher C&I revenues.

On a consolidated basis, material and subcontractor costs comprised approximately 39% of total contract cost in the fourth quarter of 2014 compared to approximately 34% in the fourth quarter of 2013. Compared to the 2013 fourth quarter, T&D revenues decreased $9.5 million to $191.2 million, while C&I revenues increased $5.9 million to $59.8 million.

Focusing on the T&D segment, revenues were $142.4 million for transmission and $48.8 million for distribution in the fourth quarter of 2014. This compares to $172.6 million for transmission, and $28.1 million for distribution for the fourth quarter of 2013. The decrease in transmission revenue was primarily due to lower revenues on several large transmission projects which are substantially complete or nearing completion, while the increase in distribution revenue was due to a broad-based increase in distribution work.

Material and subcontractor costs in our T&D segment comprised approximately 32% of total contract cost in the fourth quarter of 2014 compared to approximately 31% in the fourth quarter of 2013. In the fourth quarter of 2014, revenues from our transmission business were 74.5% of total T&D revenues compared to 86% in the fourth quarter of 2013. In the fourth quarter of 2014, T&D revenues from our distribution business were 25.5% of total T&D revenues compared to 14% in the fourth quarter of 2013.

C&I revenues increased by 10.8% to $59.8 million in the fourth quarter of 2014 from the fourth quarter of 2013. The increase in C&I revenue was largely due to increased activity in most of our service offerings, and improved market conditions in our primary locations in Colorado and Arizona. Material and subcontractor costs in our C&I segment comprised approximately 57% of total contract cost in the fourth quarter of 2014 compared to approximately 46% in the fourth quarter of 2013.

Our overall gross profit in the fourth quarter of 2014 was $42.1 million compared to $33.8 million in the fourth quarter of 2013. Our gross margin was 16.8% in the fourth quarter of 2014 compared to 13.3% in the same quarter of 2013.

Fourth-quarter 2014 and 2013 gross margins included net benefits of approximately 3.5% and 0.8%, respectively, from improved contract margins on several transmission projects due to the resolution of claims, change orders, cost efficiencies, additional work, and effective contract management.

The increase in both gross profit and gross margin was partially offset in the fourth quarter of 2014 by lower equipment utilization, as several large transmission projects wrapped up or are nearing completion, as well as higher equipment repairs and maintenance costs.

Fourth-quarter 2014 SG&A expenses were $19.6 million compared to $18.1 million in the fourth quarter of 2013, primarily due to an increase in employee compensation and fringe benefits related to the increased number of personnel assigned to support operations and higher profit sharing costs, partially offset by the $2.3 million reversal of the legal accrual I mentioned earlier. SG&A as a percentage of revenues was 7.8% for the fourth quarter of 2014 compared to 7.1% for the fourth quarter of 2013.

Fourth-quarter 2014 EBITDA was $31.1 million compared to $23.5 million in the fourth quarter of 2013. Our provision for income taxes increased to $8.2 million in the fourth quarter of 2014 compared to $5.6 million in the same quarter of 2013. Our effective tax rate for the fourth quarter of 2014 was 36.6% compared to 35.7% in the fourth quarter of 2013. The increase in the effective tax rate was primarily caused by higher state taxes due to changes in the mix of business between states.

Fourth-quarter 2014 net income was $14.1 million or $0.66 per diluted share compared to $10 million or $0.46 per diluted share in the fourth quarter of 2013.

Shifting to full-year 2014 results, revenues increased $41.3 million or 4.6% to $944 million compared to $902.7 million for the full year 2013. The increase was the result of significantly higher C&I revenues partially offset by lower T&D revenues. Our overall gross profit in the full year of 2014 was $132.4 million compared to $124.9 million in the full year of 2013. Our gross margin increased to 14% versus 13.8% in the full year of 2013.

Full-year 2014 and 2013 margins included net benefits of approximately 1.9% and 0.8%, respectively, from improved contract margins on several transmission projects due to change orders, resolution of claims, cost efficiencies, additional work, and effective contract management. The increase in full year 2014 gross margin was partially offset by lower equipment utilization, as several large transmission projects wrapped up or neared completion, as well as higher equipment repairs and maintenance costs.

Our financial results for the fourth quarter and full year of 2014 included higher margins due to claim and change order settlements. It's unlikely that future periods will benefit to a similar extent from such favorable developments. We also benefited from a year-over-year impact of the reversing the legal accrual.

Full-year 2014 net income was $36.5 million compared to net income of $34.8 million in the full year of 2013. Diluted earnings per share were $1.69 for the full year of 2014 compared to $1.61 for the full year of 2013.

We invested $39 million in property, plant, and equipment in the full year of 2014 compared to $42.7 million in the full year of 2013. We expect our 2015 capital expenditures to be similar to the levels of the last two years. We expect to see improving equipment utilization, and plan to add more equipment to grow.

Total backlog at December 31, 2014, was $433.6 million, consisting of $320.4 million in the T&D segment, and $113.2 million in the C&I segment. Total backlog at December 31, 2014, increased by $24.6 million from the $409 million reported at September 30, 2014. The increase in backlog represented our fourth sequential quarterly increase in backlog. T&D backlog increased $31.1 million or 10.7% while C&I backlog decreased $6.5 million or 5.4%. The increased T&D backlog at December 31, 2014, was the result of a number of project awards of all sizes.

Moving to the balance sheet, stockholders' equity increased to $322.6 million at December 31, 2014, from $296.1 million at December 31, 2013. Our return on equity for the full year of 2014 was 12.3% as compared to 13.6% for the prior-year period. And our return on invested capital for the full year of 2014 was 16.6% compared to 14.8% for the prior-year period. At December 31, 2014, we had approximately $77.6 million in cash and cash equivalents, no outstanding funded debt, and $155.7 million in availability under our credit facility.

In the full year of 2014, we have spent approximately $15.6 million to purchase 651,258 shares of our common stock under the $25 million stock repurchase program. At the end of 2014, we had $9.4 million of remaining authorization to purchase additional shares under the program, which runs through August of 2015. Because of our profitability, cash generation, and strong balance sheet, we are able to add shareholder value through these stock repurchases while not compromising the long-term growth of the Company.

In conclusion, we had another solid quarter, and closed 2014 with higher revenues, gross profit, gross margin, and EPS while continuing to increase backlog. As we look forward to 2015, our strong balance sheet and borrowing capacity will allow us to expand our organic growth initiatives, consider acquisitions, and seek further ways to enhance shareholder returns.

I will 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. The fourth quarter of 2014 was an active period of developing new business, bidding work, successfully executing projects, and further sharpening our skills and processes in all areas of performance.

Looking ahead into 2015, we anticipate a healthy bidding environment for both our T&D and C&I segments. We expect opportunities for transmission and distribution projects of every size. And we also anticipate that some major clients in our C&I target markets will increase their capital investments on the momentum of the strengthening economy.

In the fourth quarter of 2014, the Edison Electric Institute released projected T&D spending by utilities and private development companies, both here in the US and in Canada, over the next three years. These projections continue to show planned spending above the historical amounts which we witnessed from 2008 to 2013. EEI's data forecasts spending on T&D projects of approximately $19 billion annually from 2015 to 2017.

Reinforcing the positive outlook for T&D capital investment, several utilities and regional transmission operators announced expansion plans. For example, MISO, the transmission planning authority for much of the Midwest US, announced they have approved $2.5 billion in additional transmission spending under their ongoing transmission expansion plan. Collectively, their current expansion plan through the year 2023 includes $12.9 billion in approved projects of various design or construction phases.

In the Northeast, National Grid announced plans to invest more than $1.3 billion to improve the energy infrastructure in Rhode Island from 2014 to 2019, including significant capital spending on T&D projects to enhance the region's power reliability, and upgrade aging and outdated electrical infrastructure. We are excited about the opportunities we see throughout the US and Canada and believe the evolving needs of the electric grid system places us in the early stages of an historical, multi-year investment cycle in the electrical infrastructure industry.

Robust spending in the T&D markets should continue to be driven by reliability mandates, renewable, and other new generation integration into the grid, and the replacement of the aging infrastructure.

In keeping with our goal of geographic expansion in 2014, we established three new district operations to help us better focus on opportunities in those areas. Our Kansas operation supports our new seven-year T&D contract for Westar Energy. The Oklahoma operation supports our continued work on projects for AEP and other clients throughout the Oklahoma and Texas markets. And finally, our Dallas operation will help us serve a regional clients, such as Oncor, as they proceed with their recently announced $1.2 billion electrical infrastructure enhancement plan over the next four years.

Furthermore, we anticipate that our Canadian-based operations will provide opportunities to build our business and bolster our strategy as we pursue projects in Canada.

We are also positioned to benefit from an abundance of distribution work, driven largely by the necessity to replace aging infrastructure, reliability mandates, and a better housing market, as well as the utilities' ongoing trend to outsource distribution work to contracting crews. In 2014, we further strengthened relationships with our major US utility clients as we executed several multi-year master service agreements for distribution work. Several contracts were renewed last year for major clients such as Xcel Energy, while new regions were added to our established alliance with National Grid.

In 2015, we plan to continue to add distribution crews to serve clients throughout the US. Along with this positive industry outlook, our T&D backlog continues to grow. In 2015, we will begin construction of two significant transmission projects that we were awarded during 2014 for American Electric Power, including the 27 mile, 500 kV Cloverdale to Lexington line replacement in Virginia; and the KVA project, consisting of approximately 50 miles of 138 kV transmission line rebuild in West Virginia.

The electric utility industry as a whole is going through constant change, including regulatory issues such as the EPA's Clean Power Plan and the implementation of FERC Order 1000. We believe that these regulatory changes could have a positive impact on our business in both the near- and long-term, possibly bringing the need for increased capital spending by our utility clients to deliver affordable, clean, reliable power to their customers.

Shifting to our C&I business, in the fourth quarter we experienced continued revenue growth, supported by increased bidding and project growth in the Company's market niches, as well as improved market conditions in Colorado and Arizona.

Our markets in healthcare, data centers, airports, and industrial facilities continue to produce solid financial results, as many of our long-term clients expand their existing facilities and build in new locations. Our Colorado market is particularly robust in aerospace, healthcare, water treatment, office buildings, and manufacturing. Large projects in these areas present a favorable bidding scenario with limited competition, and are becoming key targets for growth in 2015.

In addition to our primary markets, small to midsized opportunities are increasing as many of our competitors may be reaching their capacity. Bidding activity in Arizona continues to improve, although competition remains high as local contractors still have excess capacity. Throughout 2014 we saw increased activity within the mining, manufacturing, and transportation sectors, and we added internal resources in order to pursue projects in these growing markets. All indications are that designers are also busy developing projects in our primary markets of education, healthcare, and data centers, which should lead to a greater opportunity as we move through 2015.

Outside of Arizona and Colorado locations, we have teams executing projects in Utah, Nevada, and Nebraska, and we are evaluating project opportunities in several other states.

In the fourth quarter, Engineering News-Record ranked MYR Group among the nation's top five specialty electrical contractors for the 20th consecutive year. As we continuously reinforce our partnerships with established clients, we also pursue new clients across the T&D and C&I markets. We believe our steadfast commitment to safety and our pursuit of excellence in all aspects of our service provide the foundation for our continued growth and expansion over the next several years.

Thanks to everyone for your time today. I will now turn the call back to Bill, who will provide us with some closing comments.

Thank you, Rick, for that update. MYR has the resources and financial strengths to execute growth strategies on a variety of fronts. From potentially broadening our presence in existing markets to evaluating acquisition opportunities in new markets, we will maintain our disciplined approach and proceed in the best interest of our stockholders. We remain committed to growing smart without compromising our business principles or accepting unmanageable risks.

We are striving to be the employer of choice for the very best talent in the electrical construction industry. That is as important to our long-term success as being the contractor of choice for our target clients. We are committed to recruiting and training the best staff. We are committing to empowering our employees. And we are committed to providing them the right tools, equipment, and support to deliver for our clients.

We are confident in our future and our position within the T&D and C&I markets. And we are determined to remain one of the lowest-cost, highest-value providers of electrical contracting services. As always, we hold ourselves to a high standard in all that we do, work to exceed our clients' expectations, and provide a superior return to our investors through exceptional execution.

On behalf of Paul, Rick and myself, I'd like to thank you for joining us on the call today, and for your continued confidence in our ability to successfully and responsibly grow our Company. I look forward to updating you on our progress next quarter.

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

(Operator Instructions). Tahira Afzal, KeyBanc.

Congratulations on your strong quarter. So, first question is for Paul. So Paul, I'm going to put you in a tricky spot. For the last couple of years, you have seen gross margins at 14%-ish range, and those have been helped by some very good execution on these large transmission project. Before that, if I look at your gross margins around 12%. So if you look at where your margins will go this year, if you see less favorable claims, are we looking back to 200 basis points below? Or are we somewhere in the middle because utilization and momentum are picking up again in general?

Well, I think as I've said before, Tahira, for our mix of business, our revenue mix, I think the range for your model, you should focus on 12% to 14% gross margin.

Okay. So second question is in regards to your revenue line and momentum. We have seen pretty positive momentum on the distribution side. You've grown at very high double digits. Should we assume a more sustainable pace going forward, or maybe in the low double digits? Or how should we look at that growth factor, given you still have so many opportunities ahead of you?

Tahira, as we've said before, we target for a high single-digit top-line growth. And our ability to grow is a function of the work that's out there. And I think if you factor that in to what Bill said and what Rick said today, I think that's reasonable to assume. It can change quarter to quarter, but I think that's our -- our long-term target hasn't changed.

Got it, thank you. And I'll hop back in the queue.

Justin Hauke, Robert W. Baird.

I guess I just wanted to follow up on that margin question. I think I know the answer to this. But, Paul, is there any material difference in the amount of material in subcontract work in the backlog, versus the 30% range that you've been running at recently in the T&D business?

I don't know that answer. I don't have that available in front of me.

Okay. I guess I'm just trying to understand if there's anything that's a mix difference that would be impacting the margins going forward.

Without having it in front of me (multiple speakers) of that. What we've said in the past, if we did announce a very large award, we would also offer up what is the material and subcontractor component of that. And so, when those happen, we will certainly let you know that.

Okay. And then maybe dovetailing on that, the SG&A -- I guess if we back out the $2.3 million reserve that you took out, it was pretty high. And I know you mentioned some of that was the compensation and benefits related to the profits that you posted this quarter. I'm just trying to understand a run rate we should be thinking about for that line item in 2015.

To go on what I've said in the past, I think you should focus on 7% to 8% for SG&A as a percentage of revenues.

Great. Okay, that's helpful. And then maybe my last question, and then I'll jump back in queue, is on the cash flow. So the operating cash flow came down a little bit in 2015 versus 2014. Kind of sounds like you're ramping up on some projects, so I don't know what the working capital needs are. But with CapEx staying at this $40 million-ish a year, are you expecting your operating cash flow to be in excess of what it was in 2014?

I guess I don't have a view on that right now. We continue to have a healthy cash balance, and continue to evaluate opportunities out there. We continue to spend money on CapEx. So, as Bill said, I think we're in a good position to take advantage of opportunities on many fronts.

Okay, great. Thanks, all. I will jump back in queue. Thanks.

John Rogers, D.A. Davidson.

Congratulations on the quarter. A couple of things. First of all, in terms of Canada, how close are you to getting some work up there? And is that expansion on plan? I know when you opened up there you had indicated it might take a while, but is this about what you expected?

This is Rick. And I would say we're not where we want to be. We continue to market it. We continue to bid projects up there. We were hoping that we would have something fourth quarter of last year. But we do see it as a very positive market going forward, and something that we will continue to pursue.

And Rick, would you look at acquisitions up there, as well?

We're not opposed to acquisitions, but we can also internally grow that area.

Okay, okay. And I appreciate the comments on the new offices that you opened. As you look at the geographic spread of your -- especially on the transmission operations -- are there markets that still MYR can expand into? (multiple speakers) I'm sorry, in the US.

In the US, yes, there's markets we can go into. There's future expansion plans that we're taking on our strategy side and looking at that. It's not something that we publicly disclose where we are heading at this point.

Okay. All right. Let me ask you this: in terms of your utilization rates at this point, you've got record bookings for the year. Where are you in terms of capacity utilization -- is your sense of it now? In other words, how much more work can you do without adding significant capacity?

We continue, as Paul said, to invest in our CapEx right now with our projects and mix changes we've described in previous quarters, where maybe there's not as many large projects, what I would call mega projects being released right now, but the small to midsized projects continue to be released. So we have a lot of visibility on that front. The awards are a little choppy, and fluctuate a little bit. We have no control over when the customers are going to award those to us. But we do see we have additional capacity with what we have, but we'll continue to invest in our CapEx.

Okay. But given the growth that you're seeing in the market in 2015, 2016 that you referred to do you have to change your capital spending from what it's been over the last couple of years?

No. As Paul said in his prepared comments, we see that continuing similar to what we've done over the last two years.

And then lastly, just back to the acquisitions, for Bill or whoever -- are there more acquisition opportunities out there? You've talked about it for years that you'd be opportunistic. And I guess I'm just wondering are there -- has pricing become more realistic? Or is it over the next couple of years should we see MYRG in the M&A?

John, in terms of flow of opportunities, we receive a offering memorandum, at least one a week, on something being offered. And some of them we don't pursue at all. Others we pursue; some very rigorously, trying to -- that present really good strategic fits for us. In terms of the valuations on some of the acquisitions, it kind of depends on how many people are chasing the opportunity. We'd much prefer to be in a situation where there's a limited number of bidders, as opposed to every strategic and private equity party in the world being shown the opportunity.

But there are deals out there. We are working hard at trying to find deals that fit us well. And as Rick mentioned earlier, places like Canada, there are some opportunities there that have a keen interest for us. So we are working at it.

All right. I appreciate the color. Thank you.

Steven Folse, Stifel.

Nice quarter. First question is on the -- regards to the geographic expansion that you referenced. I think at least in two of the markets, Oklahoma and Texas, that a lot of the electrical work there has at least been partially driven by some shale activity in the oil and gas markets. So I'm just wondering if in those areas you continue to see a robust outlook, given the recent decline that we've seen in oil prices.

I do. Most of it is the aging infrastructure of what we're going after with our clients, so what they have identified and what they have on their books. A portion of it is tied to the shale, but I wouldn't say it's a major portion of it, at this point.

Okay, great. Thanks. And then piggybacking off of some of the earlier questions here about utilization, do the two projects -- the large projects that you referenced that you won that are in 2014 that are going to be ramping up in 2015 -- did those alone get you back up to where you're not going to be calling out underutilization drags on the large project side? Or is the view of improving utilization more a product of your overall increased bullish outlook on the transmission market next year?

I would say the latter. I don't think those two projects by themselves gets us back to the utilizations we had before. But it's really just [brought of] the opportunities that we have, and that is supporting our decision to continue to invest in our CapEx.

Okay, great. Thanks. Then as far as first quarter, we've seen some pretty harsh winter weather around parts of the country. Do you expect to see, or have you been seeing, any impact from that on either of your businesses?

We have seen some impact through the cold weather, and I guess substantial snow amounts that have taken place in the Midwest and the Northeastern US. We haven't seen a lot of storm revenue come out of that. There wasn't a lot of ice associated with any of this weather, so we have had some impacts with our crews and our projects.

Okay, great. Thanks. And then lastly here, turning to C&I for a second, margins in the quarter were down about 200 basis points, quarter over quarter. I know that's probably some seasonality, but was there anything else there that caused a little bit of weakening there?

I would say it was more of a mixture of the projects, and the margins associated with those projects as they were being built through that period of time. Really no major fluctuations on any one project during that quarter.

Okay, thank you.

Adam Thalhimer, BB&T.

Did you have any $50 million-plus awards in 2014?

I think probably the largest award we had was KVA, which that's a project that Rick mentioned. That's the 138 kilovolt project.

Okay. And then just reading through the K, it sounds like you are more bullish about the bidding opportunities for the $50 million-plus jobs. Can you give us any flavor for how many of those types of jobs you bid in 2014, and then how many you think are going to be out for bid in 2015? Just trying to quantify the increase.

I don't have that information with me, in front of me right now. But I can tell you, our number of bids and the average price of bids within that -- during our 2014 period increased from previous periods within that range. The mega projects, what I'd call the $200 million plus, really we haven't seen those in 2014. In 2015, we don't see a lot of those coming up. But we do see that sub-$100 million type project coming up. But I don't have an exact list in front of me of those projects available.

Okay. All right. And I think most everything else has been -- just on the buyback authorization. What's the sense within the Company on how successful you feel that's been? And maybe what would your appetite be to expand that, come September?

Let me handle that one, Adam. I think it's been successful. It's done what we wanted it to do. We would certainly consider expanding that program, but we still have capacity under our existing authorization. So I think it's done what it was intended to do.

Okay. And then, Bill, what's your sense of the competition within the transmission bidding environment right now? I think that is something you've complained about in the past. Is it getting a little better?

It's still very regional. Some areas of the country, it's horrible. Other areas, we're satisfied with it. And those areas don't stay the same necessarily from year to year. But there's definitely plenty of competitors out there for the jobs. We would like there to be more large jobs, because that tends to reduce the bidding list a little bit, but we don't control that. So it's very regional. Some areas, intense bidding competition; other areas are substantially better.

Okay. And those really large jobs, which I guess, Rick, you referred to as $200 million, would your sense be you'll see more of those in 2016, or is it too early to know?

It's too early to tell what the flow -- environmental, permit-wise, we don't know the release of those projects. Some of them seem to be -- continue to be pushed out a little ways.

Okay. And then just lastly, it sounds like you're seeing a fair amount of improvement just from the economy and from housing. What does the overall US construction feel like? Do we feel early in the cycle for the non-res and the res-sensitive pieces of your business?

To me, it does. It looks like, in the markets we compete in, it's the non-res and the residential side is expanding and growing. And I think it's a benefit for our Company going forward.

Does that feel sustainable to you, Rick? It's still, even as we sit here in March, it's picking up with the weather type of thing.

I hope it's sustainable. The economy, long-term, I wish I could predict that one.

Okay, thanks.

Dan Mannes, Avondale.

Nice quarter, guys. A couple follow-ups. So first, as it relates to the fourth quarter and the margins on T&D, you called out certainly a big piece of it -- or a piece of it -- relates to resolving change orders, and such. Can you talk about maybe the time frame those were related? Where these projects from multiple periods ago, or are these projects that you've been working on for the last year? Just trying to think through how we can amortize those gains over a period of time. Because obviously it wasn't all related to projects that you worked on wholly in this quarter.

No. It was a sum total of a number of projects that we've worked on over the last couple of years.

In the last couple of years?

Yes.

Okay, got it. So it's fair to say there would be some amortizing of this. The challenge has been the margins the last couple of quarters have been a little bit lower than we expected. We're just trying to figure out what the right steady-state is. Because we're obviously -- it felt like we were a little too low the last few quarters, and maybe a little high this quarter. But you are just saying, stick to that kind of 12% to 14% on a gross margin basis?

Yes, based on our revenue mix, I think that's the appropriate range to have in your models.

Got it. On the large project basis, you did say in your K there were a couple wins. And I assume they were mostly in the fourth quarter. Was that primarily the two big AEP jobs, or was there anything else in there?

Primarily that.

Okay. Any updates maybe on some of the other big jobs that are out there? I know you guys have been certainly associated, for instance, with Ameren's Illinois Rivers job, which we believe is moving into construction. Is that one you can talk about at all?

There's nothing on that side that I can talk about, as far as pending jobs out there. I think we're in conversations with quite a few of our clients over upcoming work. And if it's something that's worthy of a release, we'll do that, or we'll talk about in next quarter's results as we're awarded those projects.

Got it. On the energy side, I think a previous question was asked about maybe a slowdown in some of the markets. I'm wondering if you can talk about maybe any margin benefits from lower energy prices, given the number of pieces of equipment you have on the road. I realize some of that under MSAs is probably unit priced, but I'm wondering if you might get any net benefit, particularly under longer-term jobs, given where diesel has gone.

I haven't really seen it, Dan, in our numbers in diesel. It didn't really go down by that much. And obviously if the price does go down, then as we bid on work, we just roll that right into our bid. So nothing that I could call out as a big benefit.

Sure. Two last ones relating to the new field offices. You mentioned the three of them -- Kansas, Oklahoma, and Texas. How recently did those ramp? And does that correlate at all with the uplift in SG&A? And I guess the third piece of that would be, is there maybe any underutilization as those offices start up that maybe should get better as we look forward?

Well, we set those offices up for a growth model; so, yes, it did have an impact, I'd say a smaller impact on our SG&A. But it's something long-term we believe those are areas and clients that want us to do work in those areas. And it's areas we've got people that want to compete, and they are from those areas. So we do see it as a growing market for us, but it was an investment we made into each one of those areas.

Paul, you got anything to add on that?

No, I think that covers it.

No, that was -- I was kind of saying, the opportunity set. If maybe your results in the fourth quarter were maybe a little bit ham -- not hamstrung, but held back as you start up those offices, that might be an area for some improvement as we look forward.

That's probably the case. But to be able to model that out, I think you're getting into the world of small numbers.

Okay. And the last thing on regional expansion, and then I'll drop off. Historically you talked a decent amount about the West and California. Can you maybe give us any update on what your plans are for that market?

We continue to look at those markets. Some of those utilities in California do have some long-term alliance agreements that are expiring in the next year or so. We continue to explore that area, and we've got people looking into the work out there.

Sounds good. Thanks a lot.

William Bremer, The Maxim Group.

I'd like to go into the bookings for the quarter, in the fourth quarter, in T&D. They were very solid. Can you possibly give us a little more granularity between T versus D there? And then just to follow up on that, how's the current pricing environment specifically here? And then, Rick, if you could maybe touch base a little bit about Canadian bids there, and how the pricing is up there and how you're bidding there.

Let me take the first part of the question, and then I'll turn it over to Rick. Yes, obviously our T&D backlog benefited from a number of awards. Rick had mentioned some of the AEP jobs, but probably more so on the T than the D in Q4.

This is Rick. I think Bill alluded earlier, or actually said, we see different parts of the country with more competition in it, so it varies from region to region. And it varies from quarter to quarter on how tight the competition is, how loose they are, how much work they have received. So we have to look at each job as a standalone in each area as we evaluate that job and figure out the margin and the team we have available for it. So I don't see one area as being -- I have never carved out just one area to look at alone.

As far as the Canadian front goes, we continue to bid work and market work up there. We see it as a viable area for us to go into. We haven't -- we currently do not have a signed contract. So I would say the pricing we think we can compete favorably in that area long-term, but we have really no history to compare it with, at this point, as far as what margins are in that area.

Okay. That's all I got, gentlemen. Thank you.

(Operator Instructions). Jon Braatz, Kansas City Capital.

Turning to the C&I segment, during the year we saw very strong top-line growth, and then it slowed down here as we got to the end of the year. Paul, what are the resources you have available, or the utilization that you have in that segment to continue that growth? And can we see that continue to grow in the double-digit area? Or are you a little bit capacity constrained in that regard?

I will let Rick talk about it. I think you're talking human capacity.

Yes, yes, absolutely.

On the human capacity side, when I look at that, we've got room for growth, but I wouldn't take it as a double-digit. I wouldn't use that in your model. I think as Paul said earlier, we strive for probably in the single digits. We always want to try to exceed that, but I wouldn't use that in your model going forward. The team we have in place in our areas, we have grown outside of what I would call our base area, being Arizona and Colorado, and follow their customers to other areas. We will continue that model. And we've got people that are willing to go, so I would say we do have some capacity on the human side.

Rick, would you like to see additional investment on the labor side in that area? Do you think the market would support an additional investment?

We are not restrained from going after any projects right now, so I guess when you're saying the additional investment, I don't see that we have to make one at this time to expand that area.

Okay, all right. Thank you very much.

Tahira Afzal, KeyBanc.

Just a couple of quick follow-ups. Number one, Rick, when you look at your transmission business, and you talked a bit about clean air, et cetera; and I know right now there's a big conference going on, and they're talking about the same thing. If we look at a lot of your projects on the small to midsize on the transmission side, can you give me a flavor of how many of those might be tied to reliability, because of maybe some coal power plants being retired, et cetera? How many of those are roughly tied to just general economic growth?

I can't tell you that. When we bid the projects, when we go after it, we know some of them have to do with reconnection between plants, but some of them are also upgrades. Some of them are both. A few projects are just aging infrastructure. But we really don't receive that information from our clients.

Got it, okay. And Paul, not to belabor the margin point, but given that 12% to 14% swings your EPS year-on-year by 20% both ways, can you at least give us a bit of a flavor around the two bookends? 12% seems fairly drastic, given utilization is picking up and offsetting some of the change orders fading away. So, what would -- when you look at your variance, in what circumstances do you see margins on the gross side going to 12%?

It's a function of if we're bidding more work in one market, and as Bill said that's a very competitive market, and we want to keep our guys continuing to work and our equipment being used. Or it could be that we have more distribution work or we have more C&I work. So, while I understand your challenge with me giving a range of 12% to 14%, but I guess that's the range that I'm most comfortable talking about.

Got it. That's actually helpful in itself, so thanks.

John Rogers, D.A. Davidson.

Just one thing on the C&I side. In terms of the markets where you are going into new states, Rick, is that data centers or is it just a variety of projects?

It's a variety. It's not one set project or one set type. We've got opportunities to follow a couple clients into areas. That's how we look to expand that area -- the C&I business.

So I'm assuming, then, it's almost all private sector work.

Some public sector that we're looking at, but primarily private.

Okay, okay. And Paul, did you give us a CapEx number specifically for 2015, or just similar to past years, in that $40 million range?

I didn't give a specific. I had said, just look to 2014 CapEx and 2013 CapEx. So in ballpark, the $40 million number is probably what will pop out from both those years.

Okay, great. Thank you.

Thank you. And that concludes our question-and-answer session for today.

I would like to turn the conference back to MYR Group for closing comments.

Thank you, operator. I'd like to thank everyone for participating on the call. We're very excited about the opportunities in our markets, and want to thank our management team and our employees for all of their hard work. And we also would like to thank our stockholders for their continued support. I don't have anything further. We look forward to our call at the end of the first quarter. And, everybody, have a good day.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.