Quanta Services Inc (PWR) 2015 Q2 法說會逐字稿

Good day, ladies of gentlemen, and welcome to the Quanta Services second quarter 2015 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Kip Rupp, Vice President of Investor Relations. Please go ahead, sir.

Great, thank you Rebecca. Welcome everyone to the Quanta Services conference call to review second quarter 2015 results. Before I turn the call over to Management, I have the normal housekeeping details to run through.

If you would like to have Quanta news releases and other information emailed to you when they occur, please sign up for email information alerts by going to the Investors and Media section of the Quanta Services website at QuantaServices.com. You can also access Quanta's latest earnings release and other investor materials such as press releases, SEC filings, presentations, videos, audiocast conference calls, and stock price information with the Quanta Services Investor Relations app, which is available for iPhone, iPad, and Android mobile devices for free at Apple's App Store and at Google Play. A replay of today's call will be available on Quanta's website at QuantaServices.com. In addition, a telephonic recorded instant replay will be available for the next seven days, 24 hour a day, that can be accessed as set forth in the press release. Please remember that information reported on this call speaks only as of today, August 5, 2015, and therefore you are advised that any time-sensitive information may no longer be accurate as of the time of any replay of this call.

This conference call will include forward-looking statements intended to qualify under the Safe Harbor from Liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include all statements reflecting Quanta's expectations, intentions, assumptions, or beliefs about future events or performance, or that do not solely relate to historical or current facts. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict or are beyond Quanta's control. Actual results may differ materially from those expressed or implied in any forward-looking statements. For additional information concerning some of the risks, uncertainties, and assumptions that could affect Quanta's forward-looking statements, please refer to the Company's annual report on Form 10-K for the year ended December 31, 2014, and its other documents filed with the Securities and Exchange Commission, which may be obtained on Quanta's website or through the SEC's website at SEC.gov. Management cautions that you should not place undue reliance on Quanta's forward-looking statements, and Quanta does not undertake and disclaims any obligation to update or revise any forward-looking statements based on new information, future events, or otherwise, and disclaims any written or oral statements made by any third party regarding the subject matter of this call.

With that, I would now like to turn the call over to Mr. Jim O'Neil, Quanta's President and CEO. Jim?

Thank you, Kip, and good morning everyone, and welcome to Quanta Services' second quarter 2015 earnings conference call. I will start the call with an operational overview before turning it over to Derrick Jensen, Quanta's Chief Financial Officer, who will provide a detailed review of our second-quarter results. Following Derrick's comments, we will welcome your questions. In light of the challenges we are facing in 2015, I think it is important to provide a few key take-aways before I get into my usual quarterly commentary. First, we are disappointed in our second-quarter performance, and the project issues we have experienced have been addressed. Second, the downward revision to our forecast in the second half of this year is largely driven by a change in the electric transmission project dynamics, which I will discuss in detail this morning. Third and most important, our confidence in our 2016 and beyond outlook, and the stability of our industry fundamentals remains intact. Our end-market outlook is positive, and remain confident in our leadership position in those markets. As a Management team, we are resolved to create shareholder value over the long term.

Now a review of our second-quarter performance. Revenues in the second quarter increase 0.9% as compared to last year's second quarter. However, our earnings per share came in well below our expectations. There were several key factors that led to our earnings shortfall in the second quarter. In our electric power segment, I will first discuss the Island Falls to Key Lake electric transmission project for SAS Power that we have been working on since 2013. This project is in the remote areas of northern Saskatchewan, with little or no terrestrial access to the project right of way, and to date has been a very challenging project. Most of the work we are performing requires helicopter support to access this project. Production on this project was affected in the first half of this year by extreme weather conditions. Toward the end of June, this project was further impacted by work stoppage requirements due to the forest fires in the province. The project was 95% complete and three weeks away from finishing when the work stoppage occurred. As a result, we demobilized project crews, and had just recently released to return to work. This delay has increased the overall cost to complete this job. Second, we experienced delays accessing right of way on Nalcor's Labrador-Island Link HVdc transmission project, because land-clearing operations were moving slower than anticipated following the Canadian break-up season. In order to maximize our production, we had to scale back our construction activities in the quarter, which resulted in a reduction in our previously forecasted project revenues, but did not impact our overall margin profile on the projects. The land-clearing issues have been resolved, but will impact our project schedule going forward. Third, we continue to have issues with our combined cycle power plant project in Alaska, where we are the EPC provider. As you may recall, in the first quarter we discussed critical material delays on this project. Since then, engineering issues emerged creating additional scope and subsequent higher project cost, and as a result we are now recording the project at a loss for its duration. We estimate the project at 68% complete, and expect to finish the project in the middle of next year. We accrued all remaining losses on the project in the second quarter. Finally, our electric power segment was adversely impacted by record rainfall in many of our service areas, which primarily impacted transmission and distribution services for our customers. Our oil and gas segment also experienced challenges in the quarter. We experienced cost overruns on a large gas distribution fixed-cost project in Ontario. This project is now back on track, and is scheduled to complete by year end. We also experienced record rainfall, impacting several of our pipeline and facility projects throughout the lower 48. For example, our line 78 mainline construction project for Enbridge is in the states of Illinois and Indiana, which received record 100-year rainfall amounts in the month of June, which significantly impacted our production.

Now I will turn my commentary to our full-year guidance. We have reduced our 2015 guidance to reflect our second quarter results, which I have just discussed, and other factors that we expect to impact the remainder of this year. In our electric power segment, several events have developed that impact our electric power transmission forecast. First, project revenues for at least two customers are being deferred from the second half of this year into 2016. This includes approximately $110 million in revenue from the Nalcor Labrador-Island Link project, for reasons I discussed previously. It also includes the impact of regulatory delays on certain projects in the northeast region of the United States, resulting in approximately $80 million of revenues that we now expect to be generated in 2016, rather than the end of this year. Worth noting, the margins on these projects have not been impacted by the delays. Second, this year there has been and will continue to be a significant amount of electric transmission project bidding activity. In our prior forecasts, using a methodology consistent with our historical approach to guidance, we estimated a certain level of uncommitted electric transmission revenues that we anticipated would be awarded to Quanta and moved to construction this year. Our most recent forecast indicates that we will have a $300-million shortfall in electric power transmission projects for the remainder of this year compared to our prior estimate. There are two primary reasons for this shortfall. The first, our success rate on winning transmission projects over the last two months has been below our expectations due to more aggressive regional competition. The second is that several transmission projects originally scheduled to bid and move to construction this year have been delayed. However, the pipeline of electric transmission programs remains robust, and over the next three years we are currently tracking large transmission projects with an estimated aggregate contract value of up to $12 billion. As we have stated in the past, the timing of large project awards can be lumpy, and some projects can experience intermittent starts and stops during construction. As a result, forecasting these dynamics is very difficult over a discrete quarterly or calendar-year period, and can occasionally impact our results and future expectations. These dynamics have not meaningfully impacted our results historically, but have this year. However, our positive sentiment toward electric transmission is unchanged, and we continue to believe there are growth opportunities for our electric segment over a multi-year period. In addition, to active large electric transmission programs bidding activity, we're experiencing solid growth from our sub-transmission projects, and also for our electric distribution services.

In our oil and gas segment, our revenue expectations for the remainder of this year have also been reduced. We are experiencing delays on two mainline projects in backlog that will not commence construction in the fourth quarter as expected. These projects will more than likely start in the first half of 2016. Also, a major natural gas distribution pipeline replacement program in Canada is delayed from the second half of this year into next year. In total, we moved approximately $175 million of revenue from the current year to 2016. All of these projects have been delayed due to a longer-than-anticipated permitting and sighting process. We have also seen a reduction of approximately $50 million related to services we provide to our oil and gas customers in Canada, who continue to moderate CapEx due to lower price of oil, and to a lesser extent we've experienced similar impacts in the lower 48. We previously stated that the lower oil price environment has an impact to our overall consolidated revenues by about 5% to 10% since the beginning of this year. However, we now believe the impact to be on the high end of that range, due to the ongoing challenges in both western Canada and in the lower 48. We expect an acceleration of mainline pipe activity in 2016. The oil and gas segment has been building backlog momentum, with recent sizeable pipeline project wins, such as Line 78 mainline project for Enbridge, and our previously announced selection by the SemGroup for the Maurepas Pipeline project. In addition, as announced in our earnings release this morning, in the second quarter Enbridge Pipeline selected our Canadian subsidiary Banister Pipelines Construction, a Quanta Services company, for Package A of the Norlite Pipeline project. This project includes the installation of approximately 197 km of up to 24-inch diameter pipeline from the Enbridge Stonefell site to be Suncor East Tank farm near Fort McMurray. Construction is expected to commence later this year, and scheduled completion is in the spring of 2017. This project was awarded and booked in backlog as of June 30. The revenues generated from this project in 2015 will be minimal. The aggregate contract value for these three projects is close to $1 billion, and we expect the majority of these revenues from these projects to be generated in 2016. In addition, we are very close to finalizing several large mainline pipe agreements with customers. As such, we are incrementally more confident in Quanta's mainline pipe project opportunities over the next several years, and believe demand for our mainline construction and EPC services will ramp upwards during the next several years. We believe it is possible that our mainline construction resources will be at high utilization levels as we enter the second half of 2016.

It is also important to note that in the second half of the year, we are forecasting a reduction to our consolidated operating margins. This is due to several factors. I previously described the project delays impacting our electric power transmission business for the remainder of this year. Approximately $500 million of electric transmission revenues, of which $200 million is in backlog, will not materialize this year. While we have had offset, some of this decline in revenues with new electric power and gas distribution contracts, the overall gross margin impact is by far most significant contributor to our margin decline. Second, similar to our electric delays as discussed previously, we have approximately $175 million in pipeline projects in backlog, where construction has been delayed from 2015 into next year. In total we have approximately $375 million in projects in backlog that for the most part are experiencing delays in permitting and sitting of right of way. Furthermore, our G&A structure has not been adjusted to reflect the recent delays in project activity, largely because we believe any down-turn in our business will be short-term in nature. Next, in the lower 48, weather has affected production on some projects, particularly on our mainline pipe and facility services. As a result, we will experience increased cost on some of these projects going forward in order to meet completion deadlines. Finally, we continue to see pressures on our pipeline construction operations in western Canada, the Gulf of Mexico, and Australia due to low oil prices. The combination of these factors has the result of unfavorably impacting our operating margins for the remainder of this year.

In summary, we are disappointed with our 2015 results. Despite our performance, our end-market outlook remains positive over a multi-year period. The North American power grid is aging, and reliability challenges are increasing. There are regulations in effect to encourage T&D spending. The North America generation mix continues to shift away from coal to more natural gas and renewables. New technologies are being implemented for a more advanced power grid, all of which require grid expansions and enhancements. While the nature and the timing of these projects may vary from time to time, results and uneven growth on a calendar-year basis like we are experiencing in 2015, solving the North America power grid challenges could take decades and require more than $1 trillion of investment. Going forward, we remain confident in opportunities for profitable growth in all aspects of our business. The underlying drivers of our business remain intact. We remain steadfast in our focus and confidence in our ability to execute and deliver customer-driven solutions that have made us the industry leader that we are today. Confirming the confidence in our business that this morning, we announce that Quanta's Board of Directors has approved a new $1.25-billion share repurchase program. This is by far the largest share repurchase authorization in Quanta's history. This action reflects our commitment to creating shareholder value, and our ongoing confidence in the longer-term outlook for our business.

With that, I will now turn the call over to Derrick Jensen, our CFO, for his financial review results. Thank you. Derrick?

Thanks, Jim, and good morning, everyone. Before I discuss the results of the quarter, I'll comment that yesterday we closed the sale of our fiber optic licensing operations, and we presented these as discontinued operations in our consolidated financial statements for the current and prior periods. As such, the amounts presented in our earnings release and discussed in my comments this morning do not compare to our previous SEC filings, which have not yet been adjusted to reflect these discontinued operations. However, for comparative purposes, we have posted certain prior-period information on our website reflecting these discontinued operations. I will discuss the impact of the closing of the transaction later in my presentation.

Today we announced revenues of $1.87 billion for the second quarter of 2015, compared to $1.84 billion in the prior-year second quarter, reflecting an increase of 1.9% in quarter-over-quarter revenues. Net income attributable to common stock for the quarter was $46.1 million, or $0.22 per diluted share, which for the purpose of this earnings call is the number most comparable to our previously provided quarterly GAAP diluted earnings-per-share guidance. This compares to $81.1 million, or $0.37 per diluted share, in the second quarter of last year. Adjusted diluted earnings per share from net income attributable to common stock, as presented in today's press release, is also the most comparative to our previous quarterly guidance, and was $0.26 for the second quarter of 2015, as compared to $0.42 for the second quarter of 2014. Although Jim has highlighted various impacts to the quarter, I'll provide some additional commentary before discussing the detailed financial review. This quarter we had three major projects which were impacted by an aggregate of $32 million in losses, due to increased project cost associated with various items impacting production. We have included an estimate for change orders that are deemed probable of recollection in our results for the quarter, but we are currently evaluating additional aspects of these project circumstances, which we believe warrant recovery through change orders or claims that may be pursued in subsequent periods. Our results for the quarter were also impacted by lower overall reported revenues versus our expectations, with a corresponding adverse impact on gross profit, driven largely by delays associated with the Labrador-Island Link project that Jim mentioned in his comments, which resulted in a shortfall of roughly $50 million in revenues. In addition, significant rainfall during the quarter across a number of our operating areas impacted production on numerous projects, resulting in margins lower than our expectations.

Turning to a broader discussion of our results, the increase in consolidated revenues in the second quarter of 2015 as compared to the same quarter last year was primarily due to an 11% increase in revenues from our oil and gas infrastructure services segment, partially offset by a 2.4% decrease in revenues from our electric power infrastructure services segment. Quantifying an estimated impact of changes in foreign exchange rates between the quarters, consolidated revenues and earnings were negatively impacted by approximately 2.5% when compared to the second quarter of last year. Our consolidated gross margin was 12.2% in the second quarter of 2015, as compared to 14.4% in the second quarter of 2014, as a result of the negative operational impacts I've described previously. Selling, general, and administrative expenses as presented in this quarter's earnings release were $149.9 million in the second quarter of 2015, reflecting an increase of $14.7 million, as compared to the prior year's second quarter. This increase was primarily due to $7.4 million in incremental G&A costs associated with acquired companies, and approximately $7.3 million in higher salaries and benefits cost associated with additional personnel and cost of living increases. Selling, general, and administrative expenses as a percentage of revenues were 8% in the second quarter of 2015, as compared to 7.4% in the second quarter of 2014. This increase was primarily attributable to slightly higher cost structures of the companies acquired after the second quarter of last year. The impact of annual compensation increases, coupled with the lower ratio of Canadian operations, with certain units having lower selling, general, and administrative costs as a percentage of revenues than other of our operations. To further discuss our segment results, electric power revenues were $1.22 billion, reflecting a decrease of $30.5 million quarter over quarter, or approximately 2.4%. Foreign currency exchange rates negatively impacted revenues in the segment by 2.3%, which was offset by the contribution of approximately $20 million in revenues from companies acquired since the second quarter of last year, and an increase in emergency restoration revenues of approximately $6.5 million to $23 million for the second quarter of 2015. Revenues were otherwise negatively impacted by the timing of electric transmission projects and certain larger projects that were ongoing in last year's second quarter reached or near completion in the second quarter of this year.

Operating margin in the electric power segment decreased to 7.2% in the second quarter of 2015, as compared to 9% in last year's second quarter. Roughly $25 million of the project losses I referenced earlier are applicable to projects in this segment, which accounts for all of the quarter-over-quarter decline. Significant weather events impacted both the second quarter of this year and last year, such that the margin of the segment was otherwise comparable. As of June 30, 2015, 12-month and total backlog for the electric power segment decreased by 0.5%, and 2.5% when compared to March 31, 2015, due to the expected levels of roll-off from certain master service agreements which were not replaced by expected projects. As Jim commented, we continue to see the opportunity for additional awards, although they may not contribute to sequential backlog growth. Oil and gas segment revenues increased quarter over quarter by $64.6 million, or 11%, to $650 million in Q2 2015. This increase was the result of revenue contributions of approximately $50 million from companies acquired since the second quarter of last year, as well as increased revenue from mainline pipe activity ramping up from previously awarded projects, partially offset by reduced demand for services due to lower oil prices and associated impacts and customer spending. Revenues in the second quarter of 2015, as compared with the second quarter of 2014, are also estimated to have been negatively impacted by approximately $17 million, as the result of changes in foreign currency exchange rates associated with the strengthening of the US dollar. Operating income for the oil and gas segment as a percentage of revenues decreased to 5.5% in 2Q 2015, from 9.5% in 2Q 2014. Approximately $7 million of the previously discussed project losses relate to this segment. In addition, multiple other projects in this segment were impacted by heavy rainfall during the quarter, as compared to projects in last year's second quarter. Certain of our operations within the segment were adversely impacted by lower customer demand associated with lower oil prices, which resulted in decreased ability to cover fixed costs.

Twelve-month backlog for the oil and gas infrastructure services segment decreased by $157 million, or 8.4%, when compared to March 31, 2015. However, beyond-12-month backlog increased by $348.3 million at June 30 when compared to the first quarter, resulting in an overall 7.1% increase in total backlog for this segment, which currently sits at record levels. Twelve-month backlog decreases are primarily associated with the burn on existing projects and reduced spending on master service agreements compared to historical levels, as replacement projects reflect the timing of award start dates into later periods. Project awards during the second quarter include the Columbia pipeline group project award that we announced in our first-quarter earnings call, as well as the Enbridge Norlite pipeline project that Jim mentioned in his earlier comments. Corporate and unallocated costs increased to $7.5 million in the second quarter of 2015 as compared to 2Q 2014, primarily as the result of $3.7 million in higher salaries and benefits costs due to increased personnel to support strategic initiatives, as well as cost of living increases, and $1.4 million in higher cost associated with ongoing technology and business development initiatives. EBITDA for the second quarter of 2015 was $74 million, or 4% of revenues, compared to $123.7 million, or 6.7% of revenues for the second quarter of 2014. Adjusted EBITDA was $126.9 million, or 6.8% of revenues for the second quarter of 2015, compared to $168.8 million, or 9.2% of revenues for the second quarter of 2014. The calculation of the EBITDA, EBITDA, and adjusted EBITDA are all non-GAAP measures, and the definitions of these and day sales outstanding, or DSO, can be found in the Investors and Media section of our website at QuantaServices.com.

For the second quarter of 2015, cash flow provided by operations was approximately $106 million. Net capital expenditures were approximately $55 million, resulting in approximately $51 million of free cash flow, as compared to negative free cash flow of approximately $42 million for the second quarter of 2014. Prior year's free cash flow was negatively impacted by the timing of projects, as certain electric power transmission projects were ramping up during the three months ended June 30, 2014, which resulted in an increase in working capital requirements during the period, while the current quarter's level of operations and working capital requirements were generally more consistent with the first quarter of 2015. In addition, a $28-million arbitration payment was made in the second quarter of 2014 for the settlement of an earlier contract dispute on the 2010 directional drilling project. Cash flows from operations for the six months ended June 30, 2015, provided approximately $286 million, and net capital expenditures were approximately $112 million, resulting in approximately $174 million of free cash flow, as compared to negative free cash flow of $171 million for the six months ended June 30, 2014. DSOs were 85 days at June 30, 2015, compared to 84 days at December 31, 2014, and 78 days at June 30, 2014. DSOs were higher at June 30, 2015, primarily due to the timing of certain billing milestones, as well as close-out and final retainers billings on certain projects that were near completion. Investing cash flows during the second quarter of 2015 were impacted by aggregate cash consideration paid of approximately $37.9 million, net of cash acquired related to the closing of three acquisitions during the quarter. Financing cash flows during the second quarter of 2015 were impacted by the repurchase of 5.8 million shares of our common stock for approximately $172.3 million, partially offset by net borrowings of $96.5 million under our credit facility.

At June 30, 2015, we had approximately $65.4 million in cash. At the end of the quarter, we had about $324.7 million in letters of credit and bank guarantees outstanding to secure our casualty insurance program, and other contractual commitments, and we had $204.3 million of borrowings outstanding under our credit facility, leaving us with approximately $900 million in total liquidity as of June 30, 2015. Although for our second-quarter results I spoke to net income attributable to common stock in order to discuss the result most comparable to our last-quarter guidance, for our outlook and ongoing basis, except where noted, I will speak to continuing operations. Concerning our outlook for 2015, we expect revenues for the third quarter of 2015 to range between $1.9 billion and $2 billion, and diluted earnings per share from continuing operations to be $0.34 to $0.40 on a GAAP basis. These estimates compare to revenues of $2.15 billion and GAAP diluted earnings per share from continuing operations of $0.40 in the third quarter of 2014. Included within the prior year's third quarter is the impact of a $52.5-million pretax charge, or $0.15 per diluted share, to provision for long-term contract receivable associated with an electric power infrastructure services project completed in 2012, as well as $4.9 million of income, or $0.02 per diluted share from the release of income tax contingencies. Our non-GAAP adjusted diluted earnings per share from continuing operations for the third quarter of 2015 is expected to be $0.40 to $0.46, and compares to our non-GAAP adjusted diluted earnings per share from continuing operations at $0.58 in the third quarter of 2014. On an annual basis, we expect revenues to range between $7.5 billion and $7.7 billion, and we currently anticipate GAAP diluted earnings per share from continuing operations for the year to be between $1.05 to $1.20. We anticipate non-GAAP adjusted diluted earnings per share from continuing operations to be between $1.32 to $1.47. Our forecasted non-GAAP measures are estimated on a basis similar to the calculations of historical adjusted diluted earnings per share from continuing operations presented in our release.

As a result of the project changes Jim referred to, at the mid-point of our guidance for the year we see electric power revenues showing approximately a 6% to 8% decline as compared to 2014. We are currently estimating operating margin for the year to be approximately 9% in the electric power segment, which reflects $40 million of first- and second-quarter losses from the projects discussed earlier, as well as the six-month-to-date impacts of substantial precipitation events. Also, much of the decrease in annual expectation is specifically attributable to our Canadian results. When considering only US electric power operations, and removing the impact of the project loss from the power plant project on this portion of the segment, margins are expected to remain in the 10% to 11% annual range previously anticipated. For the oil and gas segment, the mid-point of our annual guidance assumes revenue growth in the high single digits when compared to 2014. As Jim commented, the anticipated start dates for several projects have experienced delays, and oil price uncertainty has created incremental softness in demand for certain of our services. When considering the first-half results for the segment, our annual margin expectations for this segment are between 7% and 8%. Since our JV relationships are winding down, we expect no non-controlling interest deductions in the latter half of 2015. We are currently projecting our GAAP tax rate for the third and fourth quarters to be between 37% and 38%. We currently estimate our diluted share count to be about $207 million shares for the remaining quarters of the year, and $211 million for the year in total. I will discuss our new repurchase program in a moment, but I will comment that our projected year-end share count does not include any repurchases from now to the end of the year. Also, both the third quarter and annual 2015 guidance reflect the current foreign exchange rate environment. Continued movement in foreign exchange rates in the future could make comparisons to prior periods difficult, and actuals different from guidance. We expect CapEx for all of 2015 to be approximately $225 million to $255 million, when factoring in 2015 to date acquisitions. This compares to CapEx for all of 2014 of $247.2 million.

As announced yesterday, we finalized the closing of our fiber optic continuing operations, and received proceeds of approximately $1 billion. This will result in a net gain from the transaction to be recorded in the third quarter of 2015 of approximately $175 million, or $0.84 per diluted share, which will be included in our results from discontinued operations. We currently estimate the net proceeds from the transaction to be approximately $830 million. As we stated when we announced the transaction, it was our intent to utilize the proceeds in a way we felt would create incremental value to our shareholders. This morning, we announced that our Board of Directors has authorized the Company to repurchase up to $1.25 billion in shares of our common stock over an 18-month program. We also announced our intent to enter into an accelerated stock repurchase arrangement to facilitate the repurchase of $750 million of our stock. Once executed, the ASR arrangement would require that we fund 100% of the arrangement in exchange for immediate delivery and retirement of approximately 80% of the expected total share repurchase, with the remaining 20% to be settled over the next seven to eight months of the arrangement. In addition, the accelerated stock repurchase can be supplemented with $500 million in open market repurchases. This expanded program comes on top of the announcement today that we recently completed our previous repurchase program, having repurchased approximately 7.6 million shares of our common stock since the first quarter of 2015 for approximately $224 million. This brings our combined year-to-date 2015 stock repurchases to 14.4 million shares, for a total investment of $406 million. The combination of these stock repurchase efforts not only shows our commitment to returning capital to shareholders, it more than eliminates any dilution associated with the disposition of our fiber optic licensing operations, and illustrates our commitment and belief in the long-term value of our Company. If one were to assume the full deployment of capital against the new repurchase program, looking at our June 30 balance sheet, our leverage profile would be around one turn of debt. Considering our outstanding letters of credit against our credit facility, our need for working capital flexibility to support the long-term growth potential we continue to observe, our bonding requirements, as well as continued opportunistic M&A and investment opportunities, we feel this is an appropriate move towards revising the capital structure of our Company.

This concludes our formal presentation, and we'll now open the line for Q&A. Operator?

Thank you. Ladies and gentlemen, the question-and-answer session will be conducted electronically.

(Operator Instructions)

We also ask that you please limit yourself to one question with one follow-up. Your first question will come from Tahira Afzal with KeyBanc.

Hi, folks.

Good morning, Tahira.

First question is really in regards to outlook. Jim, you still remain pretty positive. For me, the question is that you have seen -- you've always seen delays and hiccups on the regulatory side in the past. Is there a reason that they're taking so much of a toll this year in particular? Has something changed, and perhaps since you're doing more work in Canada, and that's added a new dimension, it seems, or perhaps you've just reached a critical mass where delays are really -- you are much more sensitive to that on the growth side?

Well, Tahira, I think there's several factors that come into play. One, projects are getting bigger, and they are getting longer in mileage. They're getting higher in voltage, which means they're more unsightly; and they're being -- they're in more populated areas. We've had a lot of our work moved to the northeast US and eastern Canada. The regulatory delays in sitings becomes a little bit more challenging. In the last four years, we've had a pretty steady amount of projects coming in. Now we were seeing bigger projects, and there's going to be more gaps in awards, because of the permitting and siting process, and because of the sheer size of these projects. The outlook and the dollars of opportunities has not changed. In fact, it's as large as we've seen. It's just the timing of these awards coming out, it creates some lulls in activity, and we're seeing some of that now. We experienced some of that over the last four years. We always had a project or two in delay, but nobody could really see that from the investment community, because we had other projects going very well. Here we're just -- it's just a perfect storm. We see a gap that's occurring, but it doesn't change our outlook for the business over a multi-year period.

Got it, Jim. As a follow-up to that, given you're seeing more delays, more lumpy large projects, clearly the buy-back will help signal to people your confidence, but obviously backlog growth will as well. How do feel, given the scenarios you're seeing on the macro side right now, and the possibility of some of these projects hitting by the end of the year, so people feel more comfortable about the next year?

Well, I don't think you're going to see any of these projects that are not in backlog today, or any projects awards that we may receive by the end of the year will be meaningful to 2015 revenues. We do anticipate that there will be some projects. There's some big projects right now that are in the bidding process that certainly we could have announcements over the next few months. But certainly can't predict the timing of when projects are going to be awarded and when they move to construction, because both of those factors are driven by the siting and permitting process. Our customers are not going to move to bidding and awards in many cases until they button-down a lot of the regulatory hurdles that they have to get through.

Your next question will come from Jamie Cook with Credit Suisse.

Hi, good morning. Two questions. The first question, Derrick, the question that I'm getting from investors is broadly how to think about 2016. I know you don't want to give guidance, but if you could walk us through the puts and takes of how we should think about the base of earnings? Because you look at it, you don't have the weather issues next year. I assume you will have the $375 million of revenue that was for 2015 that gets pushed into 2016, we have the ASR. I'm trying to think of the puts and takes, because I think 2016 broadly is critical, in particular given the execution that we've had in 2015? My second question relates to -- sorry, the second question -- are you guys still there?

We're here, Jamie.

Oh, sorry guys. Someone else was dialing in. Why don't you do the first question and then actually I have a follow-up.

I'll start a little bit, and then Jim can color from the operational side. The project losses that have been recorded in the first six months of this year accumulate to about $47 million.

Okay.

So, what I would say is that we would obviously not be anticipated that type of impact will be incurring in the future, so that would be one reconciling item. Then you asked from the ASR perspective, as an example. The ASR and the stock repurchase of the $1.25 billion, we would anticipate to be moving forward with some sort of ASR shortly. I'll comment that we have not executed that yet, but we are in the process of negotiating the aspects of the contract currently very real-time. We would anticipate that that would be something we would be moving forward with shortly. That being the case, and that would be the $750-million reduction in the overall outstanding shares of the Company, so that also would be contributing directly to 2016.

The way that we would look at that is that 80% of that will be immediately removed -- 80% of that $750 million will immediately reduce the share count, with the remaining 20% to be brought back at the end of that contract, which we would anticipate to be at the seven or eight-month time frame. I would say the vast majority of that would be taken out of the share count by the time you're at the early part of 2016. I think those two things combined would show you that it's fairly easy to see an aspect of double-digit growth for certain when you're looking at 2015 versus 2016. Does that help color that?

Yes, that helps. My second question is -- Derrick and Jim, you and I have gone back and forth on this, given some of the issues over the past five to six quarters, given the magnitude of the issues we saw in this quarter, have you gone back and scrubbed your backlog? How would you -- how should we think about the quality of the backlog ex the three or four projects that you talked about? Because obviously there's a concern that there's something bigger -- that there's something bigger going on here? Then the second question is, were any of these issues big enough where you've made internal changes or Management changes? Thanks.

Yes, Jamie. We go through backlog in great detail every quarter. I think the biggest -- the bigger issue on backlog is whether it's in 12 months or it's been pushed out of 12 months. The projects -- there hadn't been any change in backlog, as far as any of these pushes and pulls that have occurred. We've had projects in backlog, and they pushed from this calendar period into the next. The projects that didn't materialize that were uncommitted weren't in our backlog.

With that said, too, we have made some Management changes. Really, the only area that we really had execution issues due to Management is on that power plant in Alaska. We made some wholesale changes there. The Phoenix Power acquisition that we did, we put that Management team on top of that. It was a timely acquisition, and those guys are really doing a good job in right-sizing and getting that project back on track. We made that change about six months ago, and that's where we -- once they got in and dug in, we were able to uncover some of these other issues in this quarter. Other than that, most of the other issues that we've had have been driven by weather delays or issues like the fire, where we've just had cost overruns. Some of these projects, we are seeking some level of recovery, as well, that isn't recognized in the quarter.

All right. Thank you, that's helpful. I'll get back in queue.

From UBS we'll hear from Steven Fisher.

Great, thanks. You discussed the oil and gas projects and backlog moving from the second half of this year into the first half of next year. How does that affect the execution risk around those projects? It doesn't sound like they're in Canada, but I don't know if there is any particular weather risk there? What's your confidence in those actually moving forward in the first half? What has to happen for those to actually move forward?

Steve, one of the projects is the Lake [Malba] project in Louisiana. Actually, the move into the first quarter of next year really is not significant from a weather impact standpoint. The project's going to take over a year to build anyway, so the big risk in that project is any type of hurricane or storm during storm season. That hasn't been avoided by this move, if the project's going to take a calendar year to build. We're fine there.

The other project I can't discuss is under one of our MSAs that we have, and we're not allowed to disclose it by the customer. But I will tell you that the contractual relationship on that job is one where if the project did get moved into a weather-prone period that there would certainly be the ability to price that risk into the job. We're not held to a firm price because the job -- and we're taking additional risk because the job has moved into a more adverse weather potential period, if that makes sense.

But you're confident that those project's actually going to go forward in the first half?

I am confident that those projects are going to go forward, okay. I do believe that they will go in the first half of the year; but again, I've got to caveat all of this. We're coming off of a time where we have moved our forecast the second half of the year, and these are big projects again that are subject to delays. But I think those two projects are very much through the permitting and siting hurdles that -- they've only got one or two things to clear. I think I'm fairly confident they will start in the first quarter of next year. Pipe is ordered on those jobs, and that's a good sign, as well, of the customers putting more CapEx forward on those projects, which gives you confidence that they're going to go forward, as well.

From Avondale Partners we'll go to Dan Mannes.

Thanks, good morning.

Good morning, Dan.

To follow up on some of your commentary on the pipeline bidding and on timing, you made the comment that the developers are waiting until things are buttoned up before awarding. But we're seeing a tremendous amount of bidding right now on pipeline for stuff that doesn't break ground even until mid-next year. In some cases, FERC filings are only a couple of months in. I guess the worry I have is we're going to see a slate of backlog this year, but then we're going to be sitting here next year at this time going through a similar circumstance as it relates the timing. Can you maybe help us out a little bit with your expectations for all of the stuff you're looking at right now, and how confident you are that stuff will actually move forward in a timely basis?

Well, I'll put it this way. I feel like pipeline is very similar to where we were sitting with electric transmission back at the end of 2010. There's going to be so much coming that yes, you're going to have one or two projects or three projects with regulatory delays; but there's so much work there that it's going to make a meaningful impact to the Company. Now whether that ramps up in the middle of 2016 or toward the end of 2016 or -- but it's going to ramp.

There's a pent-up demand for mainline pipe, specifically take away capacity to move natural gas and to move LNG in Canada. There's a significant amount of projects out there. We've got $1 billion we talked about on the call today. I'll tell you right now that we're very close on another $1 billion that hopefully we'll be announcing soon. There's just a significant amount of work to where projects have to move forward. Even if half of them move forward, it would be a significant contribution to the Company.

Got it. The follow-on on the electric side, you mentioned maybe some -- a lower win rate more recently on some transmission. Are you referring to the competitive solicitations like what we saw in California for Calais? Are you saying more broadly? Can you maybe account for some of the changes in the competitive environment?

The competitive environment hasn't changed. We're going to have times where you're going to have competitors come in and take projects cheaply, and we're going to keep our bidding discipline. We're not going to chase revenues for the sake of revenues. We could have done that here, but we didn't. We risk-weight our pipeline of opportunities on un-committed. A couple of the non-awards to us were surprising, because we did think we were in the driver's seat, but that happens all the time to some extent. We did see a couple of regional players that really probably aren't well known in the space, but they've been around for decades. The KCP&L job, that's right in our backyard, but we've got a local competitor there that we didn't feel had the capabilities to do a job that big. I still don't think they do, but we will see how that plays out. But it happens. We're not going to win every job, and we're going to hold our bidding discipline; but I wouldn't say that the competitive dynamics have changed. I think that as these jobs get bigger and higher voltage, when you get into this -- these 500-KVdc-type lines, you're going to have fewer people that have the capabilities to do that, so that bodes well for us. It will eliminate some of these regional guys.

Your next question will come from William Bremer with Maxim Group.

Good morning, gentlemen.

Good morning, Bill.

Maybe an update what's happening in Canada and in Australia a little bit there. Some of the utilities have actually called out some positives in terms of integrity, and maybe talk about the MSAs there that's been picking up on your end?

Bill, integrity is still a very bright area for us. We've been building our business out. In fact, we've expanded into two new utilities over the last 90 days on bringing our rehabilitation -- pipeline rehabilitation program to these customers and using our utility technology. It's a core service that we offer. We offer a broader solution, I think, than others, with our program management engineering capabilities, our ability to dispatch on a national basis and in Canada our pipeline rehabilitation crews, as well as our technology. It's a growth area for us. I've seen that business grow near double-digit clips here for the last several years, and I don't see that business -- the trends in that business changing any time soon.

Australia, certainly the focus there has been big pipe. We are trying to launch some integrity capabilities there. But that's off of a very small -- smaller base. We're starting at ground zero. But Australia is a great opportunity. We continue to see an opportunity for electric to do a consolidation of electric capabilities in Australia, because they've got the same issues that we have here in the US -- an aging grid that's not built to serve the population centers that they have today. They have load-growth issues in most of the metropolitan areas there. They need significant assistance from a contractor that has the balance sheet capabilities to help them. But that's going to take time to play out. It's not going to play out overnight. It's a five- to seven-year strategy; but we feel we're in early enough to really establish our presence and grow with that market once it begins to accelerate.

And Canada?

Well, Canada on Integrity, that's a huge opportunity. We brought the -- we made an acquisition, CUC there. There's significant opportunity in BC. We bought A&B in Calgary, and certainly one of their primary focuses right now is integrity and pipeline rehabilitation. We're deploying our Microline technologies into Canada for them to augment their services and provide a differentiation there from their competition. It's a big opportunity. Again, it's going off a smaller base, but it's certainly to us one of the bigger growth areas that we see on a year-over-year basis for a multi-year period than any of our other services.

From Robert W. Baird & Company, we'll move on to Andy Wittmann.

Hi, guys. I wanted to dig in on the electric side, since it seems like that was maybe the area of the biggest change in the quarter. I think we've talked about the pipeline bidding environment for projects and what your expectations are for the near and the long term. But Jim, can you talk a little bit about the pace of bidding you're seeing today and the potential for announcements, even if they don't contribute earnings this calendar year, but what that could mean for the backlog direction, and what you're seeing there?

Yes, the pace of bidding is very active, but when you get to these larger projects, you're back and forth for six months, nine months. You're going back to the customer multiple times. It's become a more complicated process than what it used to be three or four years ago, where you would submit a bid 60 days before a project or 30 days before a project. The customer would review them; they'd call you in. They would talk to you about the technical aspects of it, and then the job would be awarded.

Now there's back and forths, back and forths. It's because the jobs are becoming larger and more complex. We're trying to take on a bigger role, too, and not just provide engineering services, but provide engineering capabilities like we did in Alberta for the West Mac line. The bidding activity's very strong, but it's different. It's different than what it was three or four years ago. It's just a different process. But the underlying electric businesses is intact, but we're going to see some growing lumpiness, I think, as this HVDC is causing this type of dynamic in the short term.

On the earnings side of that, Jim, I think you mentioned in the prepared remarks the $500 million of revenue that you previously expected aren't going to happen probably this year. I guess that means they're going to go next year. Does that mean that 2016's a double-up year for some of these things, or do you feel like the delays in the permitting that are happening it's a normal course of business -- delay things that were previously expected for 2016 and push some of them into 2017? In other words, what does the ramp potential look like with these delays? Is it all added through to 2016, or does it smooth out the build cycle here?

Let me characterize the $500 million for you, first. About $200 million of that, of the $500 million's in backlog. Part of that's the Nalcor program, which is really just because we're not able to get the right-of-way access quickly, we've had to scale down our crews to about half to what they were, just to keep efficiency and continue to make the margin profile that we expected. That work just naturally gets deferred into next year and into 2017. When you push stuff into 2016, it's going to come out of 2017. 2016 really doesn't change, the project just delays into 2017 on that project.

We had some deferrals in the northeast with customers that we have MSA agreements to do transmission due to regulatory, and that was about $80 million, $90 million. That's going to go at some point next year. We lost $110 million to competition in our forecast, so that goes away. That doesn't move. Out of the $500 million, it's really $400 million. Then there's -- the big piece of that is there's about $300 million in uncommitted that didn't materialize this year that got pushed, and most of that push was regulatory.

Those are projects that were on our radar that we were either in some form of discussion with the customer about negotiating our bidding that the projects were originally intended to start in the third and fourth quarter this year, but now they've been pushed into the first quarter next year. Do those projects get pushed further or not, that's -- I'm not going to even venture to guess that after what's just occurred. But they're there. It's part of the pent-up -- part of the bullishness we have in the overall transmission business over a multi-year period.

From FBR we'll hear from Alex Rygiel.

Thanks, Jim and Derrick. First, I want to congratulate you on the Sunesys sale --

Thanks you.

-- and complement you on the buy-back announcement. I think that's a great use of capital.

Thanks, Alex.

Derrick, real quick. Could you come back and update us on what the timeline of when you can be in the market buying back stock is, again? I have a follow-up.

Sure. We typically have a lag between what we would do to let information disseminate publicly, so we would be able to be back in the market some time at the end of this week or the early part of next week, assuming that we have no material non-public information.

Jim, thinking from a macro standpoint with regards to delays, are you seeing any of your customers -- and maybe you need to break it out between electrical and gas -- but have you seen any of your customers delay or cancel projects due to broader market dynamics like the price of oil or anything else?

We've seen that to some extent in Canada, where we've had electrification in the shale fields, to where we provide services to electrify some of those fields. It wasn't a meaningful part of our business, but it's certainly in that 5% to 10% impact that we have taken or we analyze -- the 10% impact to our business because of the low price of oil. Many of these projects, what we really have to be careful with when we evaluate these projects, is some of them compete with one another. The independent system operator's going to only pick one of three candidates. We vet that out in our pipeline of opportunities. We can't sit there and say there's three $500-million projects going in a certain region of the US, and they're all competing for each other. We don't count that as a $1.5-billion opportunity. We count that as a $500-million opportunity, because one of these projects is likely to go. But that's probably where we need to be the most prudent when we look at our pipeline of opportunities is those competing lines, and to make sure that we don't double count. That's an art more than a science, because 1.5 lines might go, or the ISO might come up with a different option and pick two of the three lines; but we try to be conservative in our pipeline of opportunities when we assess that.

Your next question will come from John Rogers with D.A. Davidson.

Hi, good morning.

Good morning, John.

Two things. First, in terms of the overhead costs, the G&A costs, is there a significant change in terms of those rates as you look out into 2016, given where the market is, given the elimination of the fiber business, or is your plan to hang on to everybody for now? I know you commented a little bit on that.

Well, I'm not in the spot necessarily to give guidance for 2016, John, but what I would say is yes, a bid as it relates to Sunesys, as an example, Sunesys had a little bit of a higher G&A structure. They were running at the 13%, 14%, 15% range. That will be a -- give us a benefit as we move forward. I'll tell you that we've not made any significant moves from a G&A structure, because when you look at our long-term growth potential to still yet be there. We've done some moves specific to some of the operations in Canada, and some of the pipeline areas that Jim has spoken to, but broadly speaking, we've not made any significant moves because we still see those growth aspects being there. I would say right now, I think G&A percentage is running comparable to what you're seeing in 2015, largely of course based upon the volume of revenue relative to absorption from a rate perspective, though.

Okay.

Our field G&A will moderate, dependent upon the activity in any given region with any given company. We've made, like Derrick said, we've cut close to 100 people in Canada. Corporate G&A, obviously we believe that this is a short-term down-tick. We don't see any adjustment at corporate at this time, because we do think this is a short-term dynamic, and the Company's grown -- doubled its size over the last two years. To some extent, I feel like we're still trying to catch up with the support we need from corporate to support our operations. Certainly we pay attention to it, like Derrick said. We'll make adjustments accordingly, if necessary.

Jim, as you look at the market now, you talk about the pick-up in pipeline activity. It certainly looks like it's coming, and transmission rebounding. Have you re-assessed at all how you think about the margin opportunities, given the potential for delays, project sizes, the competitive environment? Because I would have thought with larger projects, ultimately you would end up with higher margins? But we haven't gotten there yet.

Well, I think we did get there on electric. We were well within the 9% to 12% range, and then we moved the range to 10% to 12%. That's when we had a nice complement of large transmission projects. I think you'll see the same type of margin move once we start executing on some big mainline projects and we have the consistency of that work. Right now, because of the operational challenges that we've had for the first half of this year, and the down-tick in transmission business for the second half of the year, it's going to be more challenging to maintain that 10% to 12% margin profile. But again, I think it's short-term dynamic and at some point -- again, our multi-year outlook is very strong on transmission. You've got to have the transmission projects and the mainline pipe projects in order for us to hit into the middle or higher end of the range of the margin profiles that we have previously provided. But we're not going to change our bidding profile. Margins in backlog continue to be strong. I don't see any pricing dynamic changes for us right now, and we don't plan on having any going forward.

From Stevens we'll hear from Matt Duncan.

Good morning, guys. I want to piggyback on some of the questions, just looking out to next year. Jim, I want to make sure we understand the timing of these delayed projects. What I'm hearing is that a lot of the stuff that's been delayed you think is going to come back, probably in the first quarter. What I'm really getting at here is have the delays and project execution issues of 2015, have those things impacted 2016 as you see it, or should we really think about this being more a 2015 issue, and we're back on track when we flip the calendar?

I can't sit here and say we're back on track, because the regulatory delays are going to continue to be an issue for this industry. I want to say we're back on track, but I'm not going to sit here and put a line in the sand and say we are back on track -- because it's a wild card that I don't control. More than ever before, there's a higher percentage of these large projects in the overall mix of our consolidated revenues, and it's going to continue to grow. It used to be -- 20% of our revenues used to be from large projects. Now it's 40%, and it's probably going to get closer to 50%. Those are the projects that are subject to these delays. I have to be more prudent about my commentary there, because I thought the end of this year we were going to continue to have growth in the large projects, and that did not happen because of delays. Things get pushed. Do I want 2016 to be better? I think the pipeline markets, because of the amount of activity that's going to be going on, and if you do have some delays you're going to have enough other work going on that will overcome that. That's that dynamic that we experienced like I said with electric transmission for the last four years.

Sure.

Electric transmission, I do think the Nalcor project -- Nalcor's running now fine. We're back on track, we're getting back on track. It's still slow to recover, but we're not stopped there. We just had work push into 2016. 2016 for Nalcor should be fine, unless we run into any other weather events. This was a pretty tough year for weather in Canada, and that's what's typically going to slow things down up there. As far as the regulatory delays in the northeast, I think those are going to continue. I don't know at what pace. Infrastructure is getting built, but it's a grind. It's a challenge, and there's a lot of stops and starts.

Okay. I appreciate the commentary.

It's just hard to predict.

Last thing, just a capital allocation question. You're essentially using the cash from the Sunesys sale to buy a lot of Quanta stock. Are you also still evaluating M&A opportunities, and does this accelerated large repurchase take you out of the M&A game? Does it slow that down, or does it have no impact on how you look at acquisitions?

Yes, I don't know that it has any real impact at all. You're right that the biggest portion of the proceeds that are going for the share repurchase at this point are coming straight from the Sunesys sale. We've done roughly nine acquisitions on a year-to-date basis. We have commented in previous calls that we thought the number of acquisitions that we saw potentially happening in 2015 would probably be somewhat comparable with what we executed on in 2014 and even in 2013. But we did say that we thought that the size of those acquisitions might pull back a bit -- not for the purpose of specifically targeting these smaller deals. It's just that those are the ones that right now we feel are the opportunistically appropriate deal for us. But we continue to go out and we will look for those things we think will add some level of differentiation -- geography, customer relationship, and the like. I don't think that you will see our approach to acquisitions changing. We will still be looking at allocation of capital in that regard. I will say that in the near term, we are still probably looking at the pipeline of transactions that lead towards smaller transactions, because that's what currently is in our pipeline today.

From Deutsche Bank, Vishal Shah.

Hi, Jim. I just wanted to better understand the competitive environment. I know you mentioned there was some impact of competition in the quarter. Can you maybe talk about where you're seeing the most competition, whether it's electric transmission or oil and gas, and what kind of competitive environment you see right now? I know you mentioned there's no impact on your margins and backlog. Is that something we should be worried about going forward? Thank you.

I think the differences in competition are hard to describe. They're different between oil and gas and electric power on these mainline jobs and the big transmission jobs. But you still have the same dynamic where you can have a guy come in and take a project low. That can happen. I think the good thing about some of these bigger projects is many of our customers are getting savvy about going with just the low bid, because they're not getting the cost certainty and the desired outcome on schedule. They end up having cost overruns or more problems than if they would've taken a quality contractor at a higher price. We're seeing that. Obviously, we're seeing MSAs being negotiated on the pipeline side with customers -- that never ever happened before in the history of this industry because of that reason. They want a commitment for resources, and they want to deal with somebody who can provide more cost certainty around their projects.

On the electric side, that dynamic's been in play for a while, and we saw that starting about three years ago -- even longer than that. But certainly we had more negotiated work on the electric side than we did the pipeline side. You can always have competition. You've just got to prove your value to your customers every day and continue to be the industry leader. That's going to be around cost certainty, safety, and make sure you get the quality and the project done on time. As far as backlog, could you ask that question again, Vishal, on the backlog question, please?

No, I just meant your margin and the backlog were stable. But on the backlog question, can you maybe talk about when we can start expecting backlog to increase? Is it going to be in transmission, or oil and gas first?

Backlog's at record levels right now, or near record levels, so our backlog position looks pretty good right now. I think that you will probably see -- and I made some comments here just a few minutes ago on Q&A that we're close to inking some more big mainline pipe programs. I would think that in the near term you will probably see some up-ticks in our oil and gas backlog in the near term, before you see any big meaningful move in electric transmission.

Thank you.

From JPMorgan, we will hear from Jeff Volshteyn.

Thank you for taking my question, good morning. Really just have a few clarifying questions. First, when you look at your backlog, given the discussion on the delays, are you able to deal with a sense of what portions of your backlog has already been approved and started, versus a portion where the work has not been started yet?

All of our backlog is basically, for the most part on our fixed-price contracts -- we have to have a signed contract in place. There's no speculative backlog there. If you're going to go out and bid a $500-million job and you sign a contract, that's a $500-million contract that goes into backlog. Our MSA agreements, certainly there's -- if we sign a five-year MSA and we've been working with a customer doing $100 million a year, and their capital programs are not going to change going forward, certainly we have a more intimate relationship in outstanding what the customer's objectives are there, then we will estimate the amount of backlog that we will put into an MSA contract. But those -- certainly, we haven't had any real issues there at all since 2008 on estimating MSA backlog. But the problem is backlog again gets deferred. We've had very little backlog canceled. I can't recall of any backlog that's been canceled since I've been here at Quanta. But backlog can get pushed, and that's the issue we're having. When you look at the 12-month dynamic, you can have backlog push out of that 12 months into -- a beyond-12 period, because of some of the issues we've discussed this morning.

Okay. On the margin question and oil and gas, you gave us 7% to 8% margin expectation. You've spoken about 9% in the past. Is this just a 2015 expectation, or have you changed your longer-term outlook on margin?

No, I believe that our longer-term outlook on margins remains intact for both electric power and oil and gas. We still think we can be in the 10% to 12% range in electric power and 9% to 12% range in oil and gas. This is really more the 2015 effects of the lost jobs, the weather impacts, and some of those other head winds. But our longer-term range, I believe, at this point would still stay the same.

From BB&T we'll hear from Adam Thalhimer.

Hi, good morning, guys.

Good morning, Adam.

Jim, how would you compare this to in 2011, when you knew credits was coming in 2012, but the market didn't believe? How does this feel to you versus that time frame?

On pipeline, I think it's deja vu over again, okay? I think it's the same exact dynamic. It's melancholy in a way. That's what's going to happen on pipeline, I think. On electric it's a little different, because we're operating at a high level right now, and we're maintaining that high level. We're operating at three-ex what the business was operating at five years ago on transmission, and in the segment in general. But I do see program opportunities out there that are very massive in size - a lot of these HVDC lines that could take us to the next level. It's just a matter of when that could happen. But certainly I'm still very bullish on our business on a multi-year period.

On the buy-back, can you give us some flavor? You bought a lot of stock back in July, when presumably you knew you were going to miss and guide down. You're committing to buy back in total about 20% of the stock from here. It's a massive buy-back. Was there any internal wranglings over the timing, whether you should do it now or maybe wait for more certainty on the pipe cycle?

Yes, actually any of the stock that was bought back in the second quarter time frame was really under a 10b5-1 program that we had put in place much earlier in the year. There really wasn't anything that was going on unique to that buy-back versus what we were stepping into.

Then as it relates to the new program itself, we started on the new program really once we saw that the Sunesys repurchase was going -- sale was going to be accelerated into this time period. When we had provided guidance earlier this year, we really did look at it as though it was possible that the Sunesys disposition was something that would close although this year, much later in the year. Then we got wind of that effectively within a very short period of time close to here to quarter end, that it looked like this was actually going to move to close. In fact, the PEC approval for it just happened last Friday. We moved very quickly in that regard to align the current share repurchase to the closing of Sunesys.

Ladies and gentlemen, that does conclude today's question-and-answer session. At this time, I will now turn the call over to Management for any closing comments.

Well, I'd like to thank all of you for participating on our call this morning. We appreciate your questions and your ongoing interest in Quanta Services. Thank you, this concludes our call for today.

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.