MasTec, Inc.
Q4 2011 Earnings Call Transcript

Published: 1 Mar 2012

[Operator:]

Welcome to the MasTec Fourth Quarter 2011 Earnings Conference Call, initially broadcast on March 1, 2012. Let me remind participants that today's call is being recorded. At this time, I'd like to turn the call over to Marc Lewis, MasTec's Vice President of Investor Relations. Marc?

[J. Marc Lewis:]

Good morning. Thank you, everyone. Welcome to MasTec's Fourth Quarter Earnings Conference Call. The following statement is made pursuant to the Safe Harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. In these communications, we may make certain statements that are forward-looking, such as statements regarding MasTec’s future results, plans, and anticipated trends in the industries where we operate. These forward-looking statements are the company’s expectations on the day of the initial broadcast of this conference call, and the company will make no effort to update these expectations based on subsequent events or knowledge. Various risks, uncertainties and assumptions are detailed in our press releases and filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should any of our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in these communications. In today's remarks by management, we will primarily be discussing adjusted financial metrics as discussed and reconciled in yesterday's press release, 10-K and supporting schedules. In addition, we may make certain -- use of certain non-GAAP financial measures in this conference call. Also, a reconciliation of any non-GAAP financial measures not reconciled in these comments to the most comparable GAAP measure can be found in our earnings press release or 10-K and on the Investor Relations side of our website at mastec.com. With us today, we have Jose Mas, our Chief Executive Officer; Bob Campbell, our Executive Vice President and Chief Financial Officer. The format of the call will be opening remarks and analysis by Jose, followed by a financial review from Bob. These discussions will be followed by a Q&A answer period, and we expect the call to last about 60 minutes. We have a lot of things to talk about today, so I'd like to turn it over to José.

[Jose Ramon Mas:]

Thank you, Marc. Good morning, and welcome to MasTec's fourth quarter and year-end call. Today, I'll discuss our full-year results and provide an overview of 2012. Before getting into details, I'd like to take a step back and make some observations. A few years ago, we publicly set out to diversify our business and put ourselves in a position to have greater growth opportunities with improved margins. Over the course of the last 5 years, we've tripled revenues and almost quadrupled EBITDA. We've accomplished our objectives despite a difficult market environment. While these are impressive financial results, our greatest accomplishment is how we've positioned ourselves across a number of growth industries, which we feel will offer us expanding opportunities for both continued growth and better margins during an improving market environment, which we are today clearly seeing. For 2011, annual revenues were $3,009,000,000, a 30% increase. We had solid and broad-based growth with our Install-to-the-Home business growing 25%, our Wireline and Utility business growing 24%, our Wireless business growing 59%, our Pipeline business growing 38%, our Transmission business growing 205% and these were offset by a reduction of 35% in our Renewable business. As I mentioned earlier, we've done an excellent job of both diversifying our business and positioning ourselves to capitalize on some great growth opportunities. More importantly, we believe every one of these markets, including renewables, will continue to provide significant opportunities for consistent growth for the foreseeable future. From an earnings perspective, we finished 2011 with $1.07 of EPS, $261 million of EBITDA and an EBITDA margin of 8.7%. While 2011 was another record year for MasTec, I am not satisfied or happy with our margin results. Our margins were negatively impacted by the second half performance of both our Wireless and Pipeline businesses. While disappointed, I'm encouraged by our progress and believe we will see significant margin improvements in 2012. Again, just to reflect, we made tremendous margin improvements from 2007 to 2010, taking EBITDA margins from 7% to 10.4%, while we slipped in 2011, we have set an initial goal of 10% EBITDA margins for 2012, a 130-basis point improvement from last year. I can guarantee that, as a company, we are focused and driven to improve margins in 2012 and beyond. We expect margins to steadily improve as the year goes on, especially as we complete our challenged projects in the Marcellus area and as wireless spending begins to aggressively ramp up. Now, I would like to cover some industry specifics. Our communications revenue was up 12% for the fourth quarter of 2011 versus 2010 and up 33% for the full year. Our Install to the Home business was up 24% for the fourth quarter of 2011 versus 2010 and up 25% for the full year. Growth was driven by both organic growth and our acquisition of Halsted, a provider in the northeastern United States. The integration of this business has been smoother than expected, and in 2012, we'll enjoy a full-year contribution from Halsted. We expect organic growth to be in the mid-single-digits and anticipate the sale of our retail sales business sometime in the second quarter. Our Wireline business was up 32% for the quarter and 24% for the full year. The growth is being driven by work associated with broadband stimulus and we expect strong results for both 2012 and 2013. We also expect to see continued improvement in this market as new housing construction begins to rebound. Our wireless business was down 2% in the fourth quarter versus 2010, down 22% or $41 million sequentially, and up 59% for the full year of 2011 versus 2010. During the quarter, we announced the extension of our wireless contract with our largest customer. This new 3-year agreement covers all of the geographic area we previously had, with expansion in 2 new markets. The renewal and extension of this contract was extremely important for the future growth of this business. As we explained on our last call, wireless margins were negatively impacted by a dramatic increase in our workforce and self-performed capabilities and the inefficiencies created by the less experienced workforce. While we had strong annual revenue growth, the impact of the breakup of the AT&T and T-Mobile deal led to certain delays which negatively affected both the fourth quarter revenues and the first quarter of 2012. We expect wireless revenue to be down about 10% in the first quarter but be up for the year. We now have excellent visibility into our full-year plan with our largest customer and we continue to pursue a number of opportunities to expand and diversify our customer base in this business. We believe that this market affords us long-term growth prospects as data continues to play a larger role in wireless devices and as 4G continues to be rolled out throughout the world. Our utility revenue was down 2% for the fourth quarter of 2011 versus 2010, and up 28% for the full year. Revenues in our Transmission business more than tripled in both the fourth quarter of 2011 and for the full year. The revenue growth came from our acquisition of EC Source earlier in 2011 and from about 60% organic growth for both the quarter and the year. We expect significant continued growth in this market for 2012 and beyond, the bidding activity for transmission projects remains very strong and there are a number of very large opportunities that we are pursuing. Shifting to our Pipeline business. Revenues were up 38% for the year and down about $60 million in the fourth quarter. I'd like to note that in the fourth quarter of 2010, the Ruby pipeline represented about $143 million of revenues. We offset $83 million of the Ruby revenue in our Pipeline business despite a difficult quarter in Marcellus due to weather. Had we had normal weather conditions, we believe that the business would've been almost flat for the quarter. The Ruby pipeline accounted for approximately $200 million of revenue in 2011 and we are confident in our ability to backfill that work and deliver similar results in 2012. Our activity levels in the different shale basins across the country remains high, and we are seeing an increasing number of opportunities across all regions. The delay of the Keystone pipeline has had a negative effect on both competition and pricing and any positive developments related to that project will have a very positive impact on the industry. During 2011, we successfully closed on our acquisition of a Canadian pipeline company and are very bullish on that market and the opportunities available to us. In addition to the shale business, there are a number of large interstate jobs that will start in late 2012 and go well into 2013 and 2014. We are well-positioned in this market and continue to believe that it will be a source of growth for us for years to come. Moving to Renewables. Revenues for 2011 were down 35% compared to 2010. While 2011 was a tough year for Renewables, 2012 is shaping up to be a great year. Our bookings in the wind market are at record levels and we expect to construct and deliver over 1,500 megawatts in 2012. With the expiration of the 1603 cash grants at the end of 2011, this year is expected to be one of the best years the industry has seen. As we look forward beyond 2012, we are encouraged about the level of activity associated with extensions for wind-related tax credits, and are optimistic that an agreement will be reached. In any case, we are taking a more macro view of our Renewable business and expanding our power generation capabilities. We are focused on participating in the construction of power-generating assets, whether they are wind, solar or thermal-related. The solar market will be an area of solid growth as we were awarded a number of projects in late 2011 and early 2012. The solar market enjoys tax credits that extend through 2016 and we expect this market to be an increasing part of our business. We have also, over the last year, spoken about our desire and investment in growing our thermal power business. We are pleased to announce that, within the last few weeks, we have been awarded contracts to construct 2 50 megawatts peaker plants. These are gas turbine plants located in North Dakota that will provide needed power to support the Bakken oil and gas boom. These are important projects in the evolution of our power business and hopefully the first of many. Based on our currently contracted work in this business, we expect 2012 to be a great year and revenues to more than double those of 2011. I would now like to comment on guidance for 2012. We expect revenues of approximately $3.25 billion with approximately $325 million of EBITDA. Since we expect to sell our DirectStar business sometime in the second quarter, this represents about 12% revenue growth and a return to double-digit EBITDA margin. I strongly believe that we have never been in a better position to take advantage of the opportunities our different markets are affording us, and I am certain that 2012 will be another record year for MasTec. I would now like to turn the call to our CFO, Bob Campbell.

[C. Robert Campbell:]

Thank you, José, and good morning. Today I'm going to cover fourth quarter and full-year 2011 financial results and Q1 guidance and 2012 full-year guidance. And I'll also cover cash flow, liquidity and our capital structure. Before I start, I want to remind you of 2 material items that are included in our 2011 results. First, in the second quarter, we had a $29 million pretax remeasurement gain related to our purchase of 100% of EC Source, our big project electrical transmission company. And second, in the fourth quarter, we had a $6 million pretax expense for the withdrawal liability related to our leaving the underfunded Teamsters Central States Pension Plan. Both of these items are in our financial statements, of course, but I backed out both items for my remarks today. Therefore, all of my remarks today will refer to adjusted earnings and adjusted EBITDA without these 2 items. The impact on our P&L, of backing out the $29 million EC Source remeasurement gain and adding back the $6 million Teamster pension withdrawal expense is as follows

[Operator:]

[Operator Instructions] We'll take our first question from Andy Kaplowitz from Barclays Capital.

[Andy Kaplowitz:]

So Bob gave us a lot of information on why the margins are going to go up again in '12. You know, when I look at sort of a 10% or better EBITDA margin, Jose, I mean if I compare it to 2010, it almost seems like as long as you'd get the Marcellus issues out of the way, it's a pretty low bar. I mean, like at first I thought maybe it's a bit aggressive but when I look at it you got a much bigger Transmission business in '12 than '10, Renewables should be better, Wireless maybe the same, Pipeline maybe a little worse. But sort of is that the right way to think about it or is this harder than I think to do?

[Jose Ramon Mas:]

Andy, I think we've said all along that 10% isn't our long-term objective or goal. Actually, we set 10% as a goal back in 2007 when we were at 7% and we said we wanted to get to double-digit EBITDA margins, it took us a couple of years but we got there. It's not our optimal goal. We've said all along that we think that there's significant margin improvement available that was over time with -- and I think -- and I know we keep saying it and I think it's really important, what we've done over the last couple of years has been in a very difficult market environment. Our markets are not affording the different contractors across the country to get optimal pricing, to increase pricing. It's almost been quite the opposite for the last few years, where people have really been struggling to get work, to keep their people busy. That's going to have a substantial impact on margins across our entire company as the market environment improves, which it is clearly doing today. So 10% is not our long-term objective by any stretch of the imagination. 10% is our objective for 2012, because we're coming off some issues for 2011. So if you think about our margin story for 2012, it's all about getting the troubled Pipeline projects behind us, which we think we do in the first half of the year, having a normal seasonal ramp in Wireless, which I think was a little bit slowed because of the AT&T and T-Mobile deal, if not I think fourth quarter and first quarter would be a little bit better because, but it's definitely going to ramp as the year goes on because we're great visibility into our annual plan. So with those 2 issues, with Pipeline being normalized and I think there's a lot of work in the Pipeline business and I think it's going to be a very good business for the next couple of years at least. And just getting back to a normal ramp in wireless. The margin story kind of takes care of itself, and then the question really becomes, how much better can we perform over time than the 10% that we're talking about for 2012.

[Andy Kaplowitz:]

It seems like it should be better over time, I agree, José. So just following up on the margins in the different sense. You're building out your power generation capabilities. That's going to result in larger, more chunky projects. How do you look at risk of these -- like these peaker plants. They don't seem hard, José, but at the same time, it's different than your MSA business of the past. So how do you look at that?

[Jose Ramon Mas:]

I think our business is very different than it was in the past, right? So we've absolutely changed from being predominantly an M&A driven business to being a business that's much more diversified and much more balanced, I think. Over the course of the last few years I think we've delivered on our project work, obviously, with some exceptions and we've got a black eye on us from the fourth quarter. But outside of that, I think we've done a phenomenal job at managing our projects and managing risk. What I do think it's really important to think about when you think about MasTec is our projects tend to be short-duration, so even these peaker plants are about a year-long, 1 year-long projects, it's not like we're out there for multiple years, and they're not really large. So we're not bidding on multi-hundred million dollar projects, we're bidding on projects that are sub-hundred million dollars in that world and we think it's very easy to manage that risk as it relates to our total portfolio.

[Operator:]

Moving on we'll take our next question from Tahira Afzal with KeyBanc.

[Tahira Afzal:]

I guess my first question is sort of a follow-up on and Andy's thing but, I guess, not a concern but maybe perhaps the other way around. If you look at the natural gas power plant business, in terms of the structure of how a power plant is built. Probably one of the simplest things to do within that range, and given that Wanzek, in terms of its capabilities and in terms of the equipment it has, should be able to do bigger plants. Are you also looking at opportunities beyond the peaker plant side? You're going to see 20 to 30 gigawatts of coal really being retired and a whole chunk of that seems like it's going to go the way of natural gas. So are you looking beyond the 50-megawatt plants and even looking to perhaps subcontract on some of the larger ones?

[Jose Ramon Mas:]

So the answer Tahira is really one step at a time. For a year and half, we been talking about our desire to enter that market, we've gone out and really secured what we think is exceptional talent within that marketplace. And I think we've now delivered, right? So we're building a business, we've built this business, organically, from scratch. So we also know our limitations and we're going to manage our own risks. So we're going to take this one step at a time, these are 2 extremely important projects for both our assessment of the business, our reputation, our resume and this will absolutely lead to more opportunities. We're probably more focused on peaker plants today, but there's no question that we're very bullish on this business long term and what's going to happen with natural gas generation over the long term and we're going to participate as much as we can.

[Tahira Afzal:]

And José, the other question is obviously a back-end loaded year and you're going to see a bit of a drag from the shale issues in the first half. As we look at what you've learned from weather, which typically does happen and does impact conditionalities in some of the shale plays in winter. Have you burned some conservatism and cushion regarding weather in sort of the fourth quarter, in particular, for this year? And then I guess the second question is for EC Source. Clearly, we've had a good year last year, but we haven't heard of any bookings since then and there are, as you said, a lot of large bookings but it seems the mid- to small-size market is now also picking up. Is that also an opportunity for EC Source?

[Jose Ramon Mas:]

So 2 things. I think, one, we've dealt with weather throughout our entire history as a company. Weather is not something that's foreign or new to MasTec. We do a lot of our activities outdoors and we're subject to all different kinds of weather patterns. And I know we talked about weather in the Marcellus, but it's not that it rained in Marcellus. We often get asked, well you know what? It rained. Well, it really wasn't rain. What happened in Marcellus was atypical. It was the issue of having multiple feet of standing water for an extended period of time because of floods. And that is not normal, that is completely atypical and something we're not used to seeing. We are used to the normal weather patterns where we'd have the ground freeze over or you might have rains for a period of time but not something that would deem a job un-operable, which is where we were in the fourth quarter on a couple of our jobs in Marcellus. So, obviously, the fourth quarter of this year is further away. We don't know what projects we're going to necessarily be working in the Marcellus at that time. We will absolutely take that into account as we -- you learn from, obviously, your experience. So there's no question that our team has learned from that experience and try to figure out ways to protect itself better in the future. But I think we've had a great track record of, over time, delivering on projects and overcoming the weather issues. As it relates to the midsized projects in Transmission, it's both an opportunity for both MasTec's Transmission business, historical legacy business, as well as EC Source. We've obviously had phenomenal growth rates in our Transmission business. We've had over 60% organic growth in both the quarter and for the year. We expect EC Source to have considerable growth in 2012. That's not all coming from major projects. There are a number of mid- to small-sized projects that we continue to win. It's an improving market, it's getting healthier and we're having success in that market. We've just taken the approach that we don't think we need to announce every project and we're going to announce the big projects but we are absolutely engaged and winning small to midsized projects across all of our Transmission businesses.

[Operator:]

[Operator Instructions] And we'll move onto our next question from Peter Chang, Credit Suisse.

[Peter Chang:]

José, could you comment on how your pipeline backlog stands right now compared to last year, I mean without Ruby? I just want to see what kind of visibility you guys have. And then also talk about your bids outstanding. And then also, you talked about the interstate pipeline opportunities later in the year in 2012. If you could talk to that and how that will be bid if it's going to be bid differently than how you bid the Ruby pipeline if it’s different, if it's a fixed-price contract versus maybe cost-plus.

[Jose Ramon Mas:]

All right, so we can start there. We've done a lot of interstate pipeline jobs over the years, both as we purchased the different pipeline assets that we bought as well as the legacy of those business that perform pipeline jobs for an extended period of time. Obviously, Ruby was a cost-plus job. Obviously, a large one that we did and we performed under MasTec. Aside from Ruby, in the first year or so that we bought Precision, they did a lot of interstate pipeline jobs fixed-price. So we have a lot of experience doing those jobs, both from a fixed-price perspective and a cost-plus perspective. There's no question that the industry moved more to fixed-price over the last couple of years, and we expect it to stay there. Other than obviously, there will be a few customers that want to do cost-plus but for the most part we expect it to be up fixed-price business. And we think we are well equipped and that the margin profile in those businesses aren't very different. So we're not worried about our ability to compete at a risk profile. We have to take on those jobs. It's a market that, over the last couple of years, has been depressed. There's been a smaller number of projects with, obviously, the same competitors, so it's been a challenged market. And really, what was carrying our business and the growth of our business, again, which we had substantial growth in 2011, was being driven by shales. The good news is that shales continues to be an expanding opportunity, we're seeing greater levels of activities on the shales than we've ever seen before and at the same time we're going to start to see greater levels of interstate work. Combining the 2 is going to make a healthier market for all participants and we're going to get our share of that and hopefully continue to grow the business. As it relates to our backlog on the shales, again, an enormous amount of activity on the shales, all geographies, we've done extremely well here at the beginning of the year, in building our backlog. Our backlog is obviously down in that business because we don't have the Ruby project on a comparison basis year-over-year. But I think that -- so, basically, back into our guidance numbers and what we're planning for the year, we're in good shape.

[Peter Chang:]

Do you still expect flat revenues in the Pipeline business? Is that something we should be modeling in?

[Jose Ramon Mas:]

That's what we are guiding to, yes.

[Operator:]

Moving on, we'll take our next question from Alex Rygiel from FDR.

[Alexander J. Rygiel:]

José, what is your expected cash inflow from the sale of DirectStar?

[Jose Ramon Mas:]

Alex, I don't that we've publicly given a number. We've said that the sale is going to be somewhere -- the purchase price and it's formula driven but it's somewhere around that $100 million to $110 million range.

[Alexander J. Rygiel:]

And is that in all cash?

[Jose Ramon Mas:]

Mostly cash. I think there's a small financing contingency on there for a small piece of it, it's almost all cash.

[Alexander J. Rygiel:]

And what was that EBITDA contribution from DirectStar in 2011? I know you give us the revenue in your K, but what was the EBITDA contribution?

[Jose Ramon Mas:]

I think what we've said is that it's slightly above company averages.

[Alexander J. Rygiel:]

And what was the total commission paid to Red ventures in 2011?

[Jose Ramon Mas:]

I don't have that number, Alex.

[Alexander J. Rygiel:]

Fair enough. And, Bob, you mentioned that DSOs would level out in 2012. But why wouldn't they improve? Because I thought the payment terms, as it relates to AT&T, get better under the new contract?

[C. Robert Campbell:]

Well, I mean they are going to improve, but I think they're going to improve and more likely stay in the 70s than get back into the 60s. And I haven't totally given up on the 60s but the conservative and right thing to say on this call is we, for everyone's models, is better than the 79-days we closed out last year but in the 70s. I'm not prepared, at this point, to forecast. Look, as I look at our mix of sort of customers and contracts and payment arrangements, I think we're more likely in the 70s than the 60s.

[Alexander J. Rygiel:]

And what's your -- José, what's your revenue growth assumption for the Wireless segment in 2012?

[Jose Ramon Mas:]

Around 10%, probably a little bit south of 10% depending on the back end of the year.

[Alexander J. Rygiel:]

And lastly, any chance you could disclose revenue by segment? I know you gave the year-over-year growth dollars and what not, but could you kind run through 2011, what the revenue contribution from end market was?

[Jose Ramon Mas:]

Alex, I think we give a lot of color on our script in terms of -- obviously, you have the revenue contributions from AT&T and DIRECTV. The balance of our Communications business is really Wireline. From a utility perspective, we haven't done that, we'll look at doing that in the future but I don't know that we're in a position to be able to do that now.

[Operator:]

Moving on, we'll take our next question from William Bremer, Maxim Group.

[William D. Bremer:]

Adding on to Alex's question. How about can you sort of give us a breakdown of the backlog at this point?

[Jose Ramon Mas:]

Again, Bill, we don't break out our backlog by our different groups. It's something that we've considered and we'll consider doing in the future but not something that we've done to date.

[William D. Bremer:]

Okay. Can we at least talk on the current bookings and the pricing of those bookings in the current market? First on the transmission side and maybe blend that into pipeline?

[Jose Ramon Mas:]

Sure. So I think, from a transmission perspective, what you're hearing from the industry is that there's absolutely been a pricing improvement, almost across the board especially in the smaller to midsized projects. I think that started in 2011 in a meaningful way. So I think that a lot of the work that we're either winning or starting today is priced better than where it was historically priced. I think we saw some of that already impact the second half of 2011. As it comes to the larger projects, there's obviously a number that have been awarded and at some point here, hopefully in the very near future, the demand outstrips the supply and pricing really begins to improve in a meaningful way on the larger project which we think will happen as well. So it's a very pricing environment as it relates to that industry. In Pipeline, I think you've got much more geographic discussions because of the delay of the Keystone project. So a lot of the Union area work that was tied to Keystone, obviously, was looking for ways to fill up and improve utilization. I think that had a negative impact on pricing in those markets late in 2011 and I think since then it's really improved. So we also see that as an improving pricing environment as we look out for the rest of 2012.

[William D. Bremer:]

And then going to Wireless. You called out the operational issues. Where are you with that and what inning do you perceive that you are there, and can give us a little more color on the operational issues going through 2012?

[Jose Ramon Mas:]

Bill, we said all along was we had a big ramp, big growth year in 2011. We decided to bring some work in-house, retrospectively, a very bad decision. We pretty much closed that division down for the particular type of work, and that happened in the fourth quarter, so beginning in 2012 we've gone back to our normal operating model that we employed in 2010 relative to that work. So I'd say the ballgame's over and we're starting a new year in '12 and the issues we had in '11 are completely behind us in that business.

[Operator:]

Moving on we'll take our next question from John Rogers, Davidson.

[John Rogers:]

Just one follow-up. José, how much large pipeline project work are you anticipating in '12? Large diameter work?

[Jose Ramon Mas:]

So don't necessarily understand the question, John. We do a lot of large diameter work on the shales. So, really, all of our work is -- we don't really do much in the gathering system side of the business, so all of our work is midstream, so we're working on larger sized pipe almost exclusively.

[John Rogers:]

Okay, but the acquired business, not Pumpco but the other one...

[Jose Ramon Mas:]

Precision?

[John Rogers:]

Is their business growing in '12? I mean beyond Ruby and...

[Jose Ramon Mas:]

Again, so we've got multiple business, as we -- our Pipeline business, right? We've got the shale businesses, we've got Interstate business. Obviously, all of the Ruby works sat within that acquisition, it sat within the Precision acquisition. So what we said about 2012 was we expect the year to be flat with 2011. Obviously, Precision will see a slight downtick, with the other portions of our pipeline business seeing an uptick. So will Precision make up its entire $300 million worth of Ruby work as we look from '12 to '11? That's not what we're guiding to. They very well may do it, but that's not what we're guiding to.

[Operator:]

Moving on, we'll take our next question from Liam Burke with Janie Capital Markets.

[Liam D. Burke:]

José, in terms of -- you've got growth in pipelines and/or the end markets pipeline, transmission and wireless. Do you anticipate any capacity issues in terms of attracting personnel or resources to get this work done?

[Jose Ramon Mas:]

Well, we're not where we were in the mid-2000s where a number of these businesses -- labor was really tight. We're absolutely not there today. Do we end up going there over time again? We very well may. That's a positive in our industry, the tighter the capacity gets, ultimately, the better the pricing is across the industry. We're not there yet. There's plenty of availability of manpower to execute on the work and the plans that we have for 2012.

[Liam D. Burke:]

Okay. You talked about Wireline, you've got a firming housing market as a positive, you've got stimulus related funds sort of as a negative in the sense that those will run their course. How do you look at the Wireline business generally? Do you see that as a liability with the dependence on stimulus?

[Jose Ramon Mas:]

No, I think stimulus has, obviously, been good for that business at the right time because we we're not in a housing correction. No question the housing markets may not be getting worse but it's not getting significantly better. I believe that it will over time, so in a couple of years from now I think that the housing market will be a lot more active than it is today. That will be an extremely positive event for that industry in particular and I think that's going to kind of happen when stimulus starts tapering down over the next 2 years. So I actually think that could fit in real well with the business as stimulus starts to go away, housing really rebounds and helps offset some of the broadband stimulus issues. So we're still very bullish long-term in that industry, a lot of requirements. The more data that gets consumed on wireless network the more backbone that's required to move that data. That business isn't going anywhere and we think it's got a great future.

[Operator:]

Moving on, we'll take our next question from Adam Thalhimer, BB&T Capital Markets.

[Adam R. Thalhimer:]

First, José, you said that you feel like the environment, as a whole, is clearly improving. So where are you seeing the most improvement, which end markets?

[Jose Ramon Mas:]

Across all end markets. Last couple of years -- there's, obviously, been some end markets that have been doing okay in the last couple of years, irrespective of the overall economy. But today, we're seeing our customers a lot more confident. We're seeing them plan out, even beyond '12, just their outlook for '13 is improving. So I think, just in general, our customers outlooks on their own business is improving, which will ultimately have a very positive impact on us. We're just seeing a lot of activity across a number of our different end markets, which I think is extremely positive.

[Adam R. Thalhimer:]

And when does the Utah transmission project -- when does that complete for EC Source?

[Jose Ramon Mas:]

Sometime in 2013.

[Adam R. Thalhimer:]

2013. And I still don't have -- you've probably given us enough data to figure this out, but versus your forecasts, what drove the revenue upside in the quarter?

[Jose Ramon Mas:]

In the quarter -- of the fourth quarter?

[Adam R. Thalhimer:]

Fourth quarter, yes.

[Jose Ramon Mas:]

From where we expected to be?

[Adam R. Thalhimer:]

Yes.

[Jose Ramon Mas:]

I think it was the strength of our Transmission business was better than we expected across all of our Transmission groups. The strength of our Pipeline business outside of Marcellus was better than what we expected. I think that our DIRECTV business was slightly better than where we expect it to be and our Communications business was better than where we anticipated it to be in the fourth quarter. Almost an across-the-board improvement with the exception of kind of Marcellus and Wireless was where we thought it was. And even though we had a tough quarter in renewables, it still probably did a little bit better than what we had expected when he originally gave guidance.

[Adam R. Thalhimer:]

And the AT&T contract, the new 3-year contract that started in '12. Seemed like when that first hit there's a lot of uncertainty about primary, secondary contract or I think they did some changes to the pricing, in the contract. And now that you're 2 months into it, do you feel like we have a better sense for how some of those things are going to shake out?

[Jose Ramon Mas:]

I think we, we maybe not at the investment community at large, but I think we always had a good sense of how that would shape up. And I think it's going to shape up as we expected.

[Adam R. Thalhimer:]

And then, lastly for me. Just going forward, how do you think about use of cash, buy backs versus maybe paying down some debt?

[Jose Ramon Mas:]

Well, it's a good question. We really don't have many sources of debt to pay off in the short-term. The majority of our debt is tied into long-term notes and our converts. The earliest maturity is on our converts in 2014. Those are, obviously, instruments to trade in the open market. We don't think it's worth buying those back, so there's really -- we really don't have many opportunities for debt repayment. When you look at our line -- we obviously have a $600 million credit line that Bob spoke about in a lot of detail. When you look at where we were on that credit line at the end of the third quarter, we repurchased $75 million worth of shares and if you would -- if you kind of look at it today, where we're at, we think that a lot of that $75 million is going to be made back up through cash generation of the business between the fourth quarter and Q1. We've got the sale of DirectStar, which is going to infuse a lot of cash into the business, so we expect to be another healthy cash position outside of our structured debt in the second quarter, and have full access to our line, which means we're in a really good spot. And we've got a lot of availability of cash to do anything that we need to do for the business, in our opinion. So we still feel that the value of our stock isn't where we think it'll ultimately be. So we'll still be active in the market supporting our stock at certain levels. Today, the M&A market is surprisingly strong and improving. So there are a number of opportunities that we're intrigued by and following up with. And I think that with where we're at, with where our cash position will be over the first half of the year and where we're at from a line of credit perspective, we've got a lot of opportunities to do just about anything we think is right for the business.

[Operator:]

Moving on, we'll take our next question from William Bremer, Maxim Group.

[William D. Bremer:]

José, just a follow-up. Two things. Number one, can you comment on inspection? There seems to be a lot of regulatory environment and whether or not your pipeline services will possibly go into any more inspection-type services. And second, can you comment on the Sandhills pipeline, it looks like as though that Pumpco received some type of award here, it's a 720-mile line. Can you give us some color of the magnitude of that contract?

[Jose Ramon Mas:]

So a couple of things, on the inspection side of the business, inspection is not a big part of our business or the overall business. Obviously, inspection leads to finding issues in the pipe that they need to be replaced. So that remedial work, we believe, is going to be a huge opportunity in the industry because publishers, commissions and utilities all across the country are going to have to deal with it. We think it's a growing market. We think it's a fairly new market that will grow substantially over time. We do participate in that market today for certain customers where we're actively fixing lines, and we think that'll be a growing part of our pipeline business overtime and one that we're looking to continue to invest in. So it's absolutely on our radar screen, it's something that we think has great opportunities in both organically and even acquisitively. We'll look at that market expand in. From an individual project perspective, again, we don't like to talk about individual projects. So I think we gave some clarity on our backlog and feel-good where we are from our pipeline business and really don't want to, specifically, talk about any particular project.

[Operator:]

And at this time that will conclude today's question-and-answer session. I would like to turn the conference back over to our speakers for any additional or closing remarks.

[Jose Ramon Mas:]

All right. Once again, I'd like thank everybody for participating on today's call. We look forward to updating everybody on our first quarter call. So thank you, and have a great day.

[Operator:]

Thank you, that will conclude today's conference. We thank you, for your participation.