MYR Group Inc (MYRG) 2015 Q4 法說會逐字稿

Good morning everyone and welcome to the MYR Group fourth quarter 2015 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 Philip Kranz of Dresner. Please go ahead, sir.

Thank you and good morning everyone. I would like to welcome you to the MYR Group conference call to discuss the Company's fourth quarter results for 2015. Joining us on today's call are Bill Koertner, Chairman, President, and Chief Executive Officer; Betty Johnson, Senior Vice President, Chief Financial Officer, and Treasurer; and Rick Swartz, Senior Vice President and Chief Operating Officer.

If you did not receive this morning's press release please contact Dresner Corporate Services at 312-726-3600 and we will -- 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 Thursday, March 10th, 2016 at 11.59 PM Eastern Time by dialing 855-859-2056 or 404-537-3406 and entering conference ID 29114629.

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 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 31st, 2015 and in this morning'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 measure is set forth in this morning's press release. With that said, let me turn the call over to Bill Koertner.

Thanks, Phil. Good morning, everyone. Welcome to our fourth quarter and full year 2015 conference call to discuss financial and operational results. I will start by providing a brief summary of the fourth quarter and full-year-results and then turn the call over to Betty Johnson, our Chief Financial Officer, for a more detailed financial review. Following Betty'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 am pleased to report that 2015 marked the first time in MYR Group's history that annual revenues exceeded $1 billion, a 12.5% increase. Also of note, our year-end 2015 backlog increased 4% compared to the prior year, which is the direct result of our efforts to expand our business both organically and through acquisitions. This also represents an increase of backlog for seven of the last eight quarters.

Throughout 2015 we supported customers in our existing markets and focused on executing our three-prong strategy for capital allocation, for organic growth, acquisitions, and capital returns. These initiatives, which have expanded our business throughout North America, further solidified our position as a top industry performer and contributed towards adding shareholder value.

First, we grew organically by establishing six additional offices in promising new US markets including California, Kansas, Colorado, Nevada, Texas, and Washington State. We also opened two Canadian offices and received our first major project award in Manitoba. All of these offices are staffed with local management talent who have established customer relationships as well as firsthand knowledge of local labor and market conditions. We will continue to explore opportunities for organic growth in markets that align with our core capabilities and that are viable long-term investments.

Second, we acquired two companies in 2015; E.S. Boulos, which we acquired in April, has a long history of performing quality work safely and in a cost-effective manner throughout the region it serves and has expanded both our T&D and C&I capabilities throughout the northeast. High Country Line Construction, which we acquired in November, strengthened our position to capture new T&D projects throughout the West and Midwest. Importantly, both of these acquisitions met our long-term investment return thresholds and have Management Teams and businesses that are compatible with MYR's values and culture. Looking forward we will pursue additional acquisitions that meet our criteria as we position MYR Group for future growth.

In addition to pursuing organic growth and acquisitions, our Board considers capital returns as an important value driver for shareholders. I am pleased to report that in 2015 we returned $27 million of capital to shareholders through our share repurchase program. Additionally, in February our Board again increased the share repurchase program to $142.5 million, extended it through April 2017, and approved certain provisions to potentially accelerate the payer -- the pace of share repurchases.

These moves reflect the Board's confidence in the Company's long-term strategy and its belief that at current levels, our stock represents an attractive investment opportunity. We intend to remain disciplined in our approach towards allocating capital. MYR has operated as a public company for eight years. During that eight year period from 2008 through 2015, we have a strong record of operational excellence and have delivered consistent returns to our shareholders with positive earnings and book value growth in each and every year through good and bad markets.

Further, MYR has not experienced a financial statement/restatement, nor have we had any impairment charges, discontinued operation charges, or extraordinary losses to report during this period. We believe that our track record is strong evidence of our disciplined approach to managing shareholder capital wisely. Our Board and Management Team regularly review the Company's business and capital allocation to ensure MYR Group is best-positioned for growth and value creation. The decision to increase the size adpace of the share repurchase authorization and implement new financing strategies followed such a review. The Board worked with outside advisors and also considered the feedback we have received from a number of our shareholders.

We have spoken with numerous shareholders about the Company's strategies. These have been productive conversations. During most of these discussions, shareholders emphasized long-term value creation and indicated support for the actions we are taking to contribute towards that objective. We believe our shareholders recognize that we have a strong record of directing capital to investments that generate the greatest returns. This is evidenced by MYR Group's outstanding performance as compared to many of its peers on fundamental financial metrics such as return on assets, return on invested capital, and return on equity; as well as pre-tax income and revenue growth.

This performance demonstrates our focus on strategic execution and long-term value creation. It also reinforces our belief in the Company's strategic plan. We strengthened our executive leadership team and Board of Directors this year through the appointment of Ken Hartwick and Don Lucky as new independent directors, both of whom have extensive industry experience as well as considerable international experience.

In addition, Betty Johnson transitioned from her role as an MYR Group Board Member to become our Chief Financial Officer. She brings broad industry insight, knowledge, and a hands-on approach to further enhance our growth strategy. As most of you know, the Company received a letter in December from Engine Capital recommending our Board undertake an evaluation of the sale of the Company or a levered re-capitalization. Since that time, we have received other emails and letters from Engine Capital advocating for its proposed changes, including a letter on January 6th notifying the Company of Engine Capital's intentions to nominate three individuals to stands for election to our Board of Directors at our next annual shareholders meeting.

In mid-January Ken Hartwick, one of our independent directors, and I met with the principal of Engine Capital in New York to gain a better understanding of its position. A few weeks later, our attorney contacted Engine Capital's attorney offering to enter into a settlement agreement that would include the a addition of once of Engine Capital's nominees or a mutually agreed upon independent nominee to our Board. Engine Capital rejected this offer. We are disappointed that Engine Capital rejected our Board's offer.

However, our Board open to reaching an agreement that serves the best interests of the Company and all of the Company's shareholders. We remain open-minded about the options available to deliver on our value creation objectives. However, we do not believe that a sales process at this time is in the best interest of MYR Group shareholders. While a sale might provide an immediate return, we do not believe it will maximize our shareholders' long-term return in the current environment. We believe there are multiple factors that could limit the effectiveness of a sales process at this time. These factors include the current volatility in equity markets, which is clouding market values, stress in the credit markets, which can impact the availability and cost of debt financing, and -- in a depressed market as well as headwinds across the transmission market as a whole.

Selling with lots of underlying uncertainly rarely delivers full value to anyone but the buyer in such markets. We are well-positioned fundamentally to successfully manage and grow through the current cycle, and do not need to rely on a forced-sales process to preserve and maximize shareholder value. Given all of these considerations we believe a sale at this time is not in the best interest of MYR Group shareholders. We want everyone on this call to know that we value input from all stockholders including Engine Capital.

You can also be assured that all such input is shared with our Board of Directors. Our Board is committed to maximizing long-term shareholder value. There have been many rumors circulating about MYR over the last couple of months. We will not be commenting on these rumors on this call. The focus of this call is to explain our financial results and to discuss the outlook for MYR in the industry. Now, Betty will provide details on fourth quarter and full year 2015 financial results.

Thank you, Bill, and good morning everyone. Our fourth quarter 2015 revenues were $271.2 million dollars, which represented a $20.2 million dollars, or 8.1% increase, compared to the same period of 2014. The increase was primarily due to geographic expansion and acquisitions, which contributed to both the T&D and the C&I segments. This gross -- this growth was partially offset by a decline in revenue from large multi-year projects. Our last three quarters were the highest three revenue quarters in the history of MYR. Compared to the 2014 fourth quarter, T&D revenues increased $10 million or 5.2% to $201.2 million dollars.

C&I revenues increased $10.2 million dollars, or 17% to $70 million. The breakdown of T&D for the fourth quarter of 2015 is $144.1 million for transmission, and $57.1 million for distribution. Our overall gross profit in the fourth quarter of 2015 was $32.6 million, compared to $42.1 million in the fourth quarter of 2014. The decrease in gross profit was primarily due to the lower gross margin offset by higher revenues.

Our gross margins was 12% in the fourth quarter of 2015 compared to 16.8% in the same quarter of 2014. Although an improvement over the last two quarters, margins were negatively impacted by under-performing jobs due to labor productivity below previous estimates, primarily due to weather and project constraints. These margin impacts had a .9% negative impact on the fourth quarter of 2015 gross margin. The impact of those under-performing jobs was partially offset by improved fleet utilization. The unusually high margin of 16.8% in the fourth quarter of 2014 presented a very tough comparison for the current quarter.

As we have previously reported, the fourth quarter of 2014 benefited from the successful execution and closeout of several large multi-year transmission projects, and included the resolution of significant change orders and claims; which had a 3.5% positive impact on the fourth quarter of 2014 gross margins. Fourth quarter 2015 SG&A expense was $22.7 million, compared to $19.6 million in the fourth quarter of 2014. The $3.1 million increase was due to the reversal of a $2.3 million legal reserve in the fourth quarter of 2014. $1.4 million associated with an executive transition, and a higher personnel and overhead cost to support our organic and acquisition geographic market expansion. Partially offset by lower bonuses and profit sharing cost.

SG&A as a percentage of revenue was 8.4% for the fourth quarter of 2015, up from 7.8% for the fourth quarter of 2014. Fourth quarter 2015 EBITDA was $20.1 million, compared to $31.1 million for the fourth quarter of 2014. Our provision for income taxes decreased to $4.1 million for the fourth quarter of 2015, compared to $8.2 million dollars in the same quarter of 2014. Our effective tax rate for the fourth quarter of 2015 was 40.8% compared to 36.6% in the fourth quarter of 2014. The increase in effective tax rate was primarily caused by the year-to-date changes and the mix of business between states and the impact of the foreign rate differential.

Fourth quarter 2015 net income was $5.9 million or $0.29 per share -- per diluted share -- compared to $14.1 million or $0.66 per diluted share in the fourth quarter of 2014. Shifting now to our full year 2015 results, revenue increased $117.7 million or 12.5% to $1.062 billion compared to $944 million for the full year of 2014. The increase was primarily the result of an increase in the number of jobs of all sizes, organic growth, and to new geographic markets and in the acquisition of E.S. Boulos. The increase was partially offset by a decline in large multi-year transmission projects. As Bill noted earlier, 2015 was a record for us and the first time we topped $1 billion. Our overall gross profit in the full year of 2015 was $122.3 million compared to $132.4 million in the full year of 2014, due to lower gross margin partially offset by our higher revenue volume.

Gross margin decreased to 11.5% versus 14% in the full year of 2014. The decline in our gross margin in the full year of 2015 was primarily due to favorable closeouts on several large multi-year transmission projects in the full year of 2014. In the full year of 2015, margins were lower due to increased competition in many of our markets, and an increase in the number of shorter duration projects. Additionally certain jobs under-performed in the full year of 2015 due to labor productivity below previous estimates as a result of excessive labor turnover, rework on certain jobs, and severe weather conditions in some of our markets.

Changes in estimates of gross profit on certain jobs resulted in a .5% increase in gross margin in the full year of 2015, compared to a 1.9% increase in the full year of 2014. SG&A expenses for the full year of 2015 were $79.2 million dollars compared to $73.8 million in 2014. The $5.4 million increase was primarily due to higher personnel and overhead costs to support our organic and inquisitive geographic market expansion.

The reversal of a $2.3 million legal reserve in the fourth quarter of 2014, $1.4 million associated with an executive transition, and costs associated with the E.S. Boulos and High Country Line acquisitions, partially offset by lower bonuses and profit sharing costs. Acquisition costs and start-up costs for organic geographic growth were in the $3 million to $4 million range in 2015. SG&A as a percentage of revenue was 7.5% for 2015, down from 7.8% in 2014.

EBITDA declined to $83 million or $3.95 per diluted share for the full year of 201, compared to $92 million or $4.29 per diluted share for the full year of 2014. Net income for the full year of 2015 was $27.3 million compared to net income of $36.5 million in the full year of 2014. Diluted earnings-per-share were $1.30 for the full year of 2015, compared to $1.69 for the full year of 2014. In the full year of 2015, we invested $46.6 million in property plant and equipment, $4.6 million of which was to purchase real estate, while the remaining was mainly to acquire fleet assets.

We expect our total 2016 capital expenditures will be lower than the last few years as we look to expand our fleet through an increased use of alternative financing approaches, such as leasing. Total backlog at December 31, 2015 was $450.9 million, consisting of $323.6 million in the T&D segment, and $127.3 million in the C&I segment. Total backlog as of 12/31/2015 increased by $25.8 million from the $425.1 million reported at September 30th, 2015, an increase of 6.1%. This quarter represents the seventh quarter increase in the last eight quarters in our backlog. T&D backlog at December 31, 2015 increased $27.9 million or 9.5%, while C&I backlog decreased $2.1 million or 1.7% from September 30th, 2015.

Moving to the balance sheet, stockholders equity increased $7.3 million to $329.9 million at December 31st, 2015 in spite of significant share repurchases. At December 31, 2015 we had approximately $39.8 million in cash and cash equivalents, no outstanding funded debt, and $155.7 million in availability under our credit facility. For the 12 months ended December 31, 2015, our return on equity was 8.5%; and our return on invested capital, or ROIC, was 11.3%.

You should note that we modified the numerator in our calculation of our ROIC to reflect EBIT net of taxes extensive net income. That impact was just 20 basis points. We feel this is a better measure of our results by excluding the impact of financing costs. The details of that calculation can be found in today's earnings release. As it relates to our share repurchase program and the full year of 2015, we purchased approximately 1.2 million shares of our common stock.

On December 10th, 2015 we increased the capacity of the program by $25 million. We further amended the program on February 10th, 2016, increasing the capacity by $75 million to $142.5 million. Updating its provisions to accelerate the pace of repurchases and extending the program through April 30th, 2017. Through March 1st, 2016 we have purchased -- we have purchases of 582,000 shares in 2016 for $11.5 million, leaving $88.3 million of availability under the program. I will now turn the call over to Rick who will provide an overall industry outlook and our view of MYR Group opportunities.

Thanks, Betty and good morning everyone. Throughout the fourth quarter, bidding activity was strong in both our T&D and C&I segments as we pursued opportunities in our existing and newly-established markets. We executed a variety of projects, and further refined our skills an processes related to successful project delivery, safe work performance, and client satisfaction. Operationally our T&D and C&I segments successfully completed and executed a number of high-profile projects throughout the US in 2015, including the northern loop of the main power reliability program and the southern -- and the South Terminal Re-Development project for Denver International Airport.

While our 2015 year end backlog increased nearly 4% over 2014, it does not include two significant projects that were awarded early in 2016. Our T&D division won the MVP 16 project for Mid-American; which is an engineer, procure, and construct project or EPC project, that consists of an approximately 32 miles of double-circuit 345 transmission line from Oak Grove, Illinois to Galesburg, Illinois. This project is scheduled to complete in late 2016.

In Denver, our C&I group was awarded a major contract to bring the new million square foot Denver Veterans Medical Center to completion, which is anticipated to complete in January of 2018. This project award demonstrates the confidence we have earned in the industry for successfully completing large complex projects. Looking ahead, we remain optimistic about future growth prospects for both our T&D and C&I segments. We are encouraged by a number of recent industry events related to favorable regulatory developments, forward progress on planned major projects, and new capital spending announcements by utilities.

Competitive transmission solicitations heard by the FERC 1000 ruling continue to come to market, and MYR Group has been and will continue to actively pursue these opportunities. In January of this year the California Independent System Operator announced that Desert Link LLC, a subsidiary of LS Power, was selected as the approved project upon for to develop, construct, own, and operate a 500 kV electric transmission project. The mechanically driven to (inaudible) El Dorado project includes approximately 60 miles of transmission line connecting these stub stations operated by MV Energy and Southern California Edison; and the in-service date is targeted for 2020.

MYR Group teamed with LS Power as the project constructer for the proposal to [Cal Iso] and we anticipate Desert Link will seek final contracts to be placed during 2016 or 2017. Also on the regulatory front, while the Clean Power Plan, or CPP, was recently issued a stay bit US Supreme Court we believe the implementation of state-level mandates will continue to drive the need for additional transmission to deliver new generation of natural gas and renewable energy resources to load centers. States such as California are aggressively moving towards an increase in renewable energy production, as evidence of Governor Jerry Brown signing of Senate Bill 350, which will continue the state to generate 350% of its electricity from renewable resources by 2030.

MYR Group has a strong operational presence throughout the West, and we anticipate several new opportunities for construction projects as western states aim to increase their renewable generation resources. Another positive development is the recent congressional approval of the five-year production tax credits and investment tax credit to help stimulate investment in wind and solar generation. As a result, we believe MYR Group stands to benefit from an increase in these projects as wind and solar resources are generally located in remote areas, and require additional transmission to help deliver those resources to market.

From a major project planning standpoint, announcements in the fourth quarter regarding several large transmission projects throughout the Midwest, Northeast, and Texas; indicate progress in the planning and permitting stages, which is a positive sign they may be moving one step closer to construction incoming years. In the Midwest, Minnesota Power recently announced they have been given their final environmental impact report for their Great Northern transmission line, which will consist of 220 miles of 500 kV transmission, and is valued between $558 and $710 million.

The ruling paves the way for the Minnesota PUC to issue a route permit on the project. We have a long and established presence working in this region, and have completed a number of major transmission projects throughout in area; ranging from the CapEx 2020 in Minnesota, North Dakota, South Dakota, and Wisconsin; to the recently completed Antelope Valley Station; to Judson 345 kV transmission line in North Dakota for Basin Electric Cooperative. The depth of the experience positioned us well for future opportunities, due to our familiarity with a wide variety of project considerations unique to this region.

In late 2015, the New York Public Service Commission announced a public policy need to build new 345 kV transmission facilities to cross central, east, and upstate New York to allow for more transmission capacity to move power from upstate to downstate regions. New York regulators believe this approval is an important first step in addressing aging infrastructure and strengthening the reliability of the electric grid in up state New York.

As a result, MYR Group stands to benefit due to our experience on projects for a variety of utility clients in this region, as well as through our recent acquisitions of E.S. Boulos, which has bolstered our capabilities in the northeast. In the fourth quarter several utilities and transmission operators announced increase in investment plans to build additional Transmission and Distribution; which also indicates that overall, T&D market is poised to remain strong over the next several years.

One of our largest clients, American Electric Power, announced they will be increasing their planned capital expenditures by $1 billion per year in 2017 and 2018 to $5 billion annually in those years; citing that the increased investments will enable the company to put money to work on behalf of customers for needed infrastructure, including transmission. PJM, the transmission operator in the northeast and Mid-Atlantic, announced their Board has approved $490 million in regional transmission project aimed at resolving reliability violations and boosting market efficiency.

In 2015 we experienced steady, broad-based growth in our distribution business, primarily due to increased utility spending and improved market share. We continue to perform large portions of work through a number of long-term alliance agreements. We expect this positive growth trend to remain steady as the housing market improves and the need to replace aging infrastructure and mitigate internal utility resource constraints remain key priorities. As a result, we look forward to increased opportunities related to these trends in both our established and new markets through 2016 and beyond.

Shifting to our C&I business, bidding and project activity continues to increase in the majority of our C&I regions. The healthcare markets throughout Colorado and Arizona remain strong, which led to awards for design assist healthcare projects; including the Banner University Hospital tower in Tucson, and the expansion of the St. Francis Hospital in Colorado. Large transportation and airport projects are also in the pipeline throughout the western United States. Due our vast experience in this area, we have secured teaming agreements with several strong civil contractors in order to pursue public-private partnerships.

Our reputation for quality and data center work has allowed us to explore expansion into new geographic territories, while the execution of projects in our traditional markets remains consistent. Sizeable aerospace opportunities are also reaching final design, and bidding opportunities are for the coming. Meanwhile as water storage and water treatment concerns continue to increase across the west, opportunities have emerged in many of our operating regions. Due to our successful track record on complex water structures, we placed a high priority on further developing our project management resources to capture work in this market.

Finally, the hospitality industry is building momentum in Nevada and Colorado as new ventures are on the planning horizon. In Seattle we are building a quality base of operations while bidding, winning, and executing new work. We were recently awarded a new project where our C&I and T&D groups will be jointly performing work.

In closing, current and planned spending by utilities and transmission developers remain at historic highs in our T&D market, and the action we have taken throughout 2015 demonstrate our commitment to ensuring MYR Group is poised to capture and successfully execute every opportunity entrusted to us. Thanks everyone for your time today. I will now turn the call back to Bill who will provide us with some closing comments.

Thank you for the update, Rick. In conclusion, we closed our 2015 with record revenues, increased backlog and maintained a strong balance sheet. We continued our organic growth strategy and our T&D and C&I segments, and closed on the acquisitions of E.S. Boulos Company and High Country Line construction. We also further enhanced our share repurchase program and modified our capital allocation strategy. By expanding organically and through acquisitions, refining our capabilities for the improvements of the nation electric infrastructure, and maintaining financial strength and liquidity; we are positioning MYR Group for long-term profitable growth providing meaningful careers for our employees and increasing shareholder value.

We are excited about 2016 and believe we can effectively meet the challenges of being a low cost, high value service provider to our customers. MYR is a people business. We are committed to provide our people with the best tools and training, and strive to ensure our employees are valued and empowered to grow the business and are motivated to the advancement of their careers at MYR. These efforts have resulted in stable long-term employees that enhance our safety performance and serve as a powerful resource to innovate and customize solutions for our clients in an increasingly competitive market.

Before I open the call for Q&A I want to reiterate that today's call is about our results and I ask that you keep your questions and comments focused on that topic. To conclude, on behalf of Betty, Rick, and myself, I sincerely thank you for joining us on the call today and for your ongoing confidence in MYR Group. 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.

Thank you. (Operator Instructions). Our first question comes from the line of Tahira Afzal of KeyBanc. Your line is now open.

Thank you very much. And, Bill and Betty, congratulations on a good quarter given everything.

Thank you.

Thank you.

First question is really in regards to what Rick said backlog is up 4% but we booked a couple ever projects since the quarter closed. So as you look to 2016 are we at a -- do you think you are at a point where you can potentially say that you can do sort of high-single digit revenue growth this year as you look out right now)

Tahira, as you know, we do not provide revenue guidance. We are optimistic about 2016 and 2017. You know, there are opportunities in front of us to bid. The market remains extremely competitive. That really has not changed since we reported last November; so the market remains tight, and really still a perhaps oversupply of contractor resources. We definitely need some of these -- more of these big projects to be let, and we are chasing a number of them as well as our competitors are so, Rick, do you have anything you want to add?

I do not have anything to that, Bill.

Okay. All right. You put Bill in a tight spot to keep himself from saying anything more. So second question is, you know, you obviously did pretty decent margins in the fourth quarter, you know, post choppy quarter. So, Bill, how should we -- and Betty how should we look at your gross margin line? Should we look at the fourth quarter as more reflective of what you see, or should we look at the entire year as a better idea of what is going to happen?

I think, Tahira, as we have kind of talked about in the past, we need to -- we do not give specific guidance on our margins as Bill was commenting just a little bit ago, and in the past. But overall margins, looking at them from a longer term perspective excluding some of the -- the years of the high volume like in the 2013 period, with specifically on our C&I business and that market. We are not seeing much in the way of changes from the margin from a bidding perspective; as we have talked about in the past C&I being somewhere in the gross margin level of 6% to 8%. Not really changing. And, you know, distribution market 8%, 10%, 11% in good time, transmission a little bit higher. Those of course are our gross margins bid and we typically do everything we can to control the risks. And our costs to manage that and improve that as you see the overall margins improving from there, but we continue to see a tight bid market as Bill just referred to when we were talking about revenue.

Got it. Okay. Betty, that is actually helpful. Just to clarify would that be segment margins that you are giving the guidance for or gross margins?

Gross margin.

Got it. (Multiple Speakers).

Tahira, I have one thing to add to Betty's comments. Every quarter including this last quarter we always tell our investors and sell-side analysts what was unusual and we quantify that at the gross margin level, so as you and your analyst team go back and look at MYR historically, every quarter we are trying to quantify and inform you what we thought was unusually good or -- or unusually bad during the quarter so you can normalize historical results, and I think those long-term historical normalized results are probably the best measure you have on margins going forward.

That is helpful and thank you for that and I will hop back in the queue.

All right. Thanks.

Thanks.

Thank you. Our next question comes from the line of Adam Thalhimer of BB&T. Your line is now open.

Morning.

Hey. Good morning. The -- the MVP job is that under your $50 million threshold for releasing that separately?

We do not have a set amount on what we release on usually we give as far as releasing separate it is due to the customer, the requirements they have, everything else. So we do not -- we do not release that, but we do reflect it in the quarter in which it is received impossible our backlog. So those numbers will be added into our backlog going forward.

Okay. And then trying to understand the Desert Link job. That is -- can you just repeat that about -- that is not a signed contract that is something that could get signed this year?

LS Power was awarded that project. They are still working through the final agreements with Cal ISO and working through that side of it, so we are teaming with them. We have been teamed with them since it was in the design stage and we went after that project together, so when they receive their contract, we will receive ours. It is just the timing of that award winner comes in 2016 on 2017.

Got it. Okay. Bill, I feel like we can always -- and I know that you -- there has been some competitors have been bidding perhaps more aggressively than you traditionally would and we have always been able to trust you in terms of not cutting your bids to just to win work. I mean, as you start to book some larger projects here which is great to see, can we continue to trust that you are being disciplined on those bids?

Definitely intend to remain disciplined on the bidding. You know, my -- my goal is and Investor Relations to be a credible source of information for all of our investors, and sell side analyst, and give you a realistic view of what the market is currently and expectations going forward; but we are constantly refining our bid review process, focusing on what risks are inherent in each opportunity, and make sure we talk about those, try to mitigate them will you contractual language or shift risks back to the owner or shift risk to subcontractors. Or in the case where we retain the risk, which is often the case, we try to make sure we price that appropriately. So I think the discipline towards our -- our bidding there has nothing changed. We obviously try to get better at it, but we do not want to go backwards.

Okay. Great. Thank you.

Thank you. And our question comes from the line of John Rogers of D.A. Davidson. Your line is now open.

Hi. Good morning.

Good morning.

Good morning.

Morning. A couple of things. The -- first of all for 2015 of the fourth quarter, can you give us a sense of what the organic growth was for each of the segments? Ex the acquisitions?

Let me start, Betty can chime in. The one acquisition of High Country Line was not completed until I think like late November so --

Yes.

Virtually no revenue could be associated with that one. The acquisition of E.S. Boulos closed sometime in April, and we obviously do not report revenues from individual subsidiaries, but we did report it's $70 million, $80 million annual run-rate contractor, so I think you could probably impute from that what kind of revenues might be assigned to an eight-month operating period.

Well, I appreciate that, Bill. I mean but, with the seasonality and all, I am just trying to figure out if the T&D business was growing organically as you closed out 2015.

Well, I do not know what more I could add. I think I have given you a hint on how to adjust for E.S. Boulos, and I really do not know that I have anything more to add.

And E.S. Boulos does do part, bothT&D and C&I work, so it is a combination company.

Right.

And it was growing kind of offset by some of those very large projects that -- that just -- that completed in -- early 2015 or late 2014.

Okay. Okay. And then in terms of your comments relative -- especially the large transmission projects and the higher -- higher margin work, it sounds like a lot of the bidding activity -- some -- much of the very large projects are out, are bidding this year 2016, for execution in 2017, 2018, beyond. Am I understanding your comments correctly?

They are, but there has other projects that are -- that are bidding -- you know, that continue to have a rollout if you take the Ameren's Illinois River Project, it was basically a large project that was split into 20-some jobs and it is being, you know, given out to contractors as -- to keep that project moving. So there are other projects out there that we see starting this year late on the large side. So Dominion has some work coming up; a few other clients. So we do see some large projects that are continuing to come to market. Or at least we project they will. I just truly wish we had control over the release of them.

Sure. Sure. Okay. I guess -- but in terms of the -- the margins that we have seen kind of declining over the past two years, are you comfortable yet that we are -- we are at a bottom there? Is ultimately what I am trying to get to.

I will go back to Bill's comments earlier. We refine our process on our bidding. We try to make sure we understand the cost and the risks going forwards and really focus on our cost. At that point we try to put the margin we feel we can capture the job at. That is a business decision that we can make, but if you do not understand your costs upfront, the margins never is going to make the difference.

Sure.

So whether we are, you know, a percent or higher or lower on our bid margin; a lot of that is associated with the risk we have and we carry forward, as Bill says whether it is us, the owner, whether it is transferable to subcontractors. So we spend a great amount of time with our team training and refining that process and trying to make the right business decisions.

And if I can just add, you know, you talk about the margins declining in the last -- from the last couple of years. As I think Bill and Rick have talked about quite a bit in the past this 2013 and 2014 were the -- were the unusual exception years from a margin perspective with all the work that was out there, and thinking about margins overall for the -- over the longer period of time would be a better perspective. More of this being a little bit closer to the norm than the 2013 and 2014.

Okay. And that is what I was trying to get to. I mean do you think we have stabilized here and we are in line with those norms? Because the numbers that you mentioned earlier in terms of the goals -- I mean it seems as if we are still at the lower end of those ranges in -- at least in 2015 and --

Yes.

And the -- and then you have also said that the larger more projects are really being executed out into 2017, which I assume offer the highest margins; but then Bill you also commented that the bidding activity is active. So I am just trying to think about all those different factors.

Yes. And just to be clear when I was talking about those margins, the qualifier; that is what we bid at and we typically do a lot of work to make sure we are controlling the cost as Rick was referring to, and our risk, and you will see it historically we do -- we make improvements upon that as we execute on the jobs. But that is how it is bid, because the overall margins that you see historically including this past year, are higher than those bid margins from execution.

Okay. Thank you for that. And one more if I could I guess, Betty. The -- in terms of the property and equipment that you had at year-end, how much more of that can you put out on lease? And still control what you need to.

I think maybe I will answer that. You know, you can lease virtually everything. That is not the most cost-effective approach, so as we are deciding what it is we want it lease and what it is we want to continue to own, certainly the things that we think have greater potential for increasing the residual value we will try to own those, or lease that equipment with options to buy it so we can hang onto that potential -- not appreciation because clearly it is going to go down in value.

Sure.

Physical utility of the equipment goes down, but some things hold their value a lot better than others and so we are -- we are trying to lease the things that -- that make sense and buy the things that make sense, but theoretically you can lease anything.

Okay. But Bill, as you think about the business an where you are, I mean we have got $160 million of equipment. I mean could you lease out half that?

Well, over time you could. That would be possible. But there would be an impact on your gross margin.

Right.

So that financing cost inherent in that lease giving the tax benefits to the lessor as opposed to keeping them yourself have put -- you know, have an impact on your margins so, you know, leasing is no panacea.

True. But just as the way you think about balancing the business.

Yes. And we look at our go-forward expenditures the ability it lease half -- when we look at our mix of equipment, is doable.

Okay. And also add that our decision to lease is more of a leveraging decision, capital structure management. We are not in a situation where we can not use tax benefits. We can efficiently use tax benefits so that -- that might be a motivator for -- for others that engage in leasing, but that would not be a big factor for ourselves.

Okay. Thank you very much. Appreciate the help.

Thanks, John.

Thank you. Our next question from the line of Dan Mannes of Avondale Partners. Your line is now open.

Good morning, Dan.

Thanks. Good morning everyone.

Morning, Dan.

Couple quick follow-up questions. First congratulations on both MVP and MVP 16 and (inaudible). On MVP 16 this is an EPC. Is this -- are you taking any kind of long-term warranty exposure here? I know some of the developers look for that in the EPC bids.

It does have some -- some warranty exposure. A lot of that we have transferred to our -- our partners on this project, plus we have accepted a certain amount, but we do have an -- we to have experience with that with MVP and a track record for what we have accepted in the past, and this is similar to that so we understand the cost of that warranty provision.

Got it I just know that that had been an issue for you guys at some point with certain developers. Switching over to your CapEx plan and utilization, can you -- I may have missed it if Betty said it, what the 2016 CapEx plan is number one, in terms of total dollars and; number two, can you comment on where utilization is right now and if there really is a need at this point to be increasing your fleet because I know utilization has been an issue the last several quarters.

Yes. I didn't talk about the compact level of 2016 outside of the fact that it would probably be down from our historical levels with the fact that we would use alternative financing for some of our equipment needs. So the needs are still there. Assuming the market comes through with the jobs that we are looking at, and we only have -- we only purchase them at the point everyone time we know we need it with anticipation of the level of -- of equipment needs that would be similar. And a portion of it would be leased.

And Dan we can not just shut off CapEx spend when it comes to equipment completely. We have got upgrades we have got to do, we have got equipment that wears out, light dilute pickups, a lot of that stuff; so we got to continue to invest to be able to do the work productively. So there is a certain amount of that comes down to whether you are calling it replacement or maintenance, part of your CapEx goes to that.

Understood and we would inspect you would maintain at that level. It just seemed like you had been growing your fleet on average in the last couple years and I was just wondering if there was maybe an opportunity to at least slow the growth given the utilization.

We try to balance. I think our goal is to get enough business that we can continue to grow our Company. That is our goal, but we balance our fleet in accordance with the work we have on hand. Bill.

One thing was kind of unusual this past year where we spent quite a bit of money on real estate and we talked about that on the last call. We had a situation where we had three business units operating in the same region. Some operated under an owned facility, others operated in rental facilities, and we consolidated those operations which overall will result in a lower long-term cost and give us a more productive facility to work out of. I do not anticipate that we will have anything of that magnitude on the real estate front going forward. We probably still have to do some upgrades and improvements to some of our facilities, but at least right now we are not aware of any new buildings that would be comparable to what we did last year. And on the fleet side our -- you know, our fleet utilization is had declined, but it appears to have kind of stabilized now. We would like to see that fleet utilization go back to the 2013 levels, and we get a bunch of big projects that is very possible that will happen, but it does appear that utilization of the fleet has stabilized.

Got it. Two more quick questions if you will indulge me. First, as it relates to the buy back. I mean the size of the buy back program has grown dramatically. I think you did what $27 million roughly during 2015, but you have over three times that amount of authority. Given your float in the trading liquidity, how do you realistically execute it, given the size of the program, or is this something we just interest to assume is going to take long time to work out?

I mean we -- certainly have guidelines from our financial advisor, we have spent a lot of time talking about the size of the program. You can engage in open market purchases and there has certain parameters or limits that are provided by the SEC, but we could significantly ramp it up over the historic pace we have been on for the last couple of quarters, so I think you could look at the last couple of quarters at the pace and assume that would increase and you could extrapolate how long it would take to use the added authorization, but I would not say it is a long time. It is something that should be done within a year.

Okay. Got it. And the final question is on the competitor environment. Obviously some of the key players have been around will continue to be around, but we have seen particularly some of the foreign players who will be aggressive in the market backing off. Have you seen the impact of maybe their departure on more recent bids? Is that something that maybe makes you a little bit more enthusiastic about the margin environment?

I have not seen them completely depart. I have seen maybe a pull-back from a couple of them. I see them remain right now. I guess time will tell on whether they remove themselves completely and what their overall financial position ends up being.

So at this point it has not really helped you out yet?

I have not seen them pull out. I will go back to -- I mean, I have not seen them completely remove themselves. I have seen them not be on on some bid lists, but I have not seen them completely pull out. And like I said I think their financial position and where they are at today and going forward will state whether they stay here or not.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Min Cho, of FBR Capital Markets. Your line is now open.

Great good morning.

Morning.

Good morning.

Just a couple of questions here. The six new offices that you started up in 2015, were they all tied to the T&D business?

No. They were a mixture.

Okay. A mixture.

Yes.

Okay. And are any of the offices housing both services? Or they are separate?

Yes. A couple of them are housing both services.

Okay. Do you have any expectations for more in 2016 as of right now?

We are continually looking. I look at every market out there; our people continually bring us business plans on where we can expand, where our clients want to go. There is nothing I would like more to be able to combine both -- both of our operations into one facility. If there is a growth prospect that will take our C&I and T&D capabilities into that, I would like that because you are cutting down on your SG&A, your sharing expenses; you are doing a lot of stuff to help grow the business. Sometimes the clients do not quite work out that way, but once we are in an office, we definitely try to pursue both opportunities. So as a Company our marketing group hits that, and our management group hits those customers on both side because of our capabilities.

I would add, rest assured we put together business cases before we open up an office. We are not in a competition to see how many offices we can open. We want solid business cases with business plans, with people and we -- and when Rick is operating, people float ideas and try to sell those things; it's Rick's job, and my job, and Betty's job to scrutinize how realistic are those plans. And we are willing to invest some money in the way a start-up costs because they are probably not going to be profitable from the beginning, but we are trying to be a very disciplined user of shareholder capital and open offices where it makes good long-term sense.

Okay. That makes sense. Betty, when you are talking about gross margins, especially in the fourth quarter, you talked about labor constraints and some excessive labor turnover is that more project-specific or is there something else that you are kind of seeing on the labor side?

That was just very specific projects that we experienced, not holistic. It was select jobs.

Okay. And then just a final question. In terms of weather, so far in the first quarter for the market that you are currently in, do you see a big difference between so far this quarter versus what we saw last year?

The weather is something that -- I mean some of these areas that are warmer than anticipated right now, frost is coming out of the ground quicker than we anticipated so we see some impacts on that side. Other areas we are seeing better work. So I mean better work environments so we see an improvement. It is a balancing act when it comes to weather.

Okay. But nothing -- nothing stands out? Nothing too different.

Not too different right now.

Okay. Actually -- okay. And then one more question. In terms of acquisitions, obviously you will continue to pursue acquisitions, but just based on the books and kind of based on what you are seeing now, do you expect anything for 2016?

Well, we are definitely looking at some transactions.

Okay.

And nothing I would say is imminent, but we are constantly looking at opportunities and some of those opportunities are because some contractors are maybe in a little distress, so there are opportunities that are maybe different than the ones that would have been available two years ago. So we are constantly looking and, again, trying to be disciplined with how we approach them.

Okay. Great. Thank you very much. Good luck.

Thank you.

Thank you.

Thank you. Our next question comes from the line of William Bremer of Maxim Group. Your line is now open.

Good morning, Bill, Betty, and Rick.

Good morning.

Morning.

Rick, I appreciate the commentary on water and water treatment opportunities. We are definitely hearing it throughout the field. Can you just enlighten us, give us a little bit more about your capabilities there, your capacity, what you are seeing and what type of jobs you are looking at right now?

I would say primarily in three areas, Colorado, Arizona, and then when you go to Washington State, we are seeing quite a bit of opportunities there. It continues to be aiding infrastructure. Our capabilities on that side as we do all the C&I work associated with it. We also do communication work inside that, or low-voltage work, so we do a lot of that work internal. We have been doing it for years. In both the Colorado and Arizona market. We have gone outside of those to follow certain contractors, and we see those same opportunities because of aging infrastructure in other areas, and we will continue to follow that.

Is there going to be a need to maybe position some additional CapEx for that end market, or is that not necessary?

Not too much CapEx on that side. Our C&I side. I mean, it is relatively limited compared to our T&D side as far as CapEx investment. Now, if we do have to, you know, get facilities, do stuff that way, there could be some CapEx spend if we have the right opportunities, as Bill said to go into a new area, but those are heavily vetted out through our process between Bill, Betty, and myself to make sure that opportunity is long-term.

Okay. Great. And Betty for you, just two (inaudible) questions. One being on overall corporate expenses for 2016. Are we to assume that we maintain these levels and, secondly, the overall tax rate going forward given the mix of what you are seeing in terms of the projects for bookings?

Yes. From an expense perspective, just like Bill talks about us normalizing our margins in SG&A, you can see some of the things that are the unusual items and you take those items out and just overall when it comes to -- as a percent of expenses continuing at a fairly normal pace growing with the growth of the Company and as far as -- sorry. What was the second piece?

Tax rate please.

Yes. The tax rate. I can not tell you exactly, looking more on the annual basis, and from the 2015 annual rate versus the fourth quarter is a little bit more normal. And of course that is always impacted by our mix that I can not project the compact mix of the states that we will be in in this coming year.

So you are saying to utilize sort of a blended rate between the fourth quarter and the end of 2015 where you guys ended up on a fiscal year?

More of the full 2015. 2015 blended rate versus the fourth quarter and 2015 just looking at the -- at a full year picture.

Okay. Betty. Thank you.

But again it depends on where our mix is year-by-year.

Sure. I understand.

Thank you. Our next question comes from the line of Tahira Afzal of KeyBanc. Your line is now open.

Hi folks. Just one last question. How should we think about your G&A run-rate given you are still expanding into some offices?

I would put it probably similar to our 2015 run-rate. I mean everything -- if we see an opportunity, we will continue to expand or seek those opportunities; but with that as Bill said, we go into there -- we go into new areas with a market -- with a business plan, we try to execute on that, if there is a delay in projects, it could increase our SG&A for a period of time, but we believe there has a solid business foundation and/or we would not have gone into those markets in the first place. So rights now I would say it would be similar run-rate to 2015, and we will monitor it closely.

Tahira, one thing to add. We are pulled out of some markets, too, where the work has dried up, and we are not hesitant to close offices if they are not justified. So not only are we looking to expand in locations where we think there are opportunities, we are always trying to shrink our occupancy expense to what we can support with our business. So if we finish up a large job, or the client has a big cut-back in its capital budget, you know, we do not stick around unless we feel it is going to pick back up in the near future. So we are constantly looking at our offices to right-size size it for the business we have.

And just I was mentioning previously just kind of look at the SG&A, and some of the commentary to normalize so that you get some of the one-time costs adjusted --

Right.

And past that -- you will see that 2014 and 2015, our SG&A as a percentage is fairly consistent for the full year.

Got it. And that is what I wanted to clarify when Rick said same run-rate I assume it means as a percentage of revenues?

As a percentage of revenue, correct. Not -- not on dollars but as a percentage of revenues as we -- as we grow the business, the overhead will come with that, and sometimes we have ability to leverage that more, but for the most part its fairly consistent as a percentage of revenue.

Okay. Thank you, folks.

Thank you. Our next question comes fat line of John Rogers of D.A. Davidson. Your line is now open.

Hi. Just one follow-up. Bill, up in Canada I mean with the -- the slowdown of the economy, especially western Canada, the market opportunity up there; has that changed for you?

It has had a lot of changes in the last two years.

Yes.

But we still see opportunities there, but they are probably nowhere near as great as what people were projecting two years ago.

Okay. And any other thoughts you might offer on just regionally? Are you seeing -- you made a couple of comments along the way. But I am thinking more especially out over the next two years in terms of the expected build? On the transmission side?

Certainly there has still I think an ongoing ripple effect of what has happened to oil and natural gas prices, so the areas of the country like Texas and Oklahoma, I do not know that we have fully seen the ripple effect of that, but some markets are more robust than what they were a couple of years ago. So we -- we operate in a lot of individual regional markets and we are trying to allocate capital and people accordingly.

Okay. Thank you.

Thank you. I am showing no further questions at this time. I would like to hand the call back over to the MYR Group for any closing remarks.

I would like to thank everyone for participating on the call. We greatly value your input, so if you have thoughts about the Company or the markets, we always enjoy hearing what you have to say. I would like to thank our Management Team and employees for the hard work; to produce a $1 billion of revenue is quite an accomplishment. I am very proud of that and I am also very proud of the safety record that our groups have achieved this year, which is very important to winning and retaining business. So, pleased with that. So with that I will close the call and look forward to talking to everybody next quarter.

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Have a great day everyone.