Matrix Service Company (MTRX) Q2 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Matrix Service Company Conference Call to discuss results for the second quarter ended December 31. [Operator Instructions] As a reminder today's conference call is being recorded. I would now like to turn the conference over to Kevin Cavanah, Vice President and CFO of Matrix Service Company. Sir, you may begin.

Good morning, and thank you. I would like to now take a moment to read the following: Various remarks that the company may make about future expectations, plans and prospects for Matrix Service Company constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those discussed in our annual report on Form 10-K for our fiscal year ended June 30, 2014, and in subsequent filings made by the company with the SEC. To the extent the company utilizes non-GAAP measures, reconciliations will be provided in various press releases and on the company's website. I will now turn the call over to John Hewitt, President and CEO of Matrix Service Company.

Thank you, Kevin, and good morning, everyone. We've had a practice of starting our earnings calls with a discussion on safety, and our journey to zero-incident has many ups and downs. But nothing is more important to us than the safety and well-being of our employees. Unfortunately, during the month of January, we suffered a loss of an employee to a job site incident. While the investigation of the root cause of this incident is ongoing, this tragedy serves to further strengthen our resolve, expectations and leadership as we move forward on this journey. Our thoughts and prayers go out to his family -- to this employee's family and friends. While this tragedy is at the forefront of our minds as we continue our relentless focus on safety, it is also important to recognize positive achievements our employees are making across the company. Collectively, through the first 6 months of this year, our recordable incident rate is 0.59, improved from 0.85 at the end of fiscal 2014. We also received several important safety awards, including a significant milestone at the BP Cherry Point Refinery in Washington State, where our team surpassed 5 million hours without a lost-time injury and 1.1 million hours without an OSHA recordable. Our Site Manager, Frank Capristo, was also chosen by BP Cherry Point Refinery from over 2,000 contractors as their 2014 Contractor Safety Person of the Year for his commitment to safety and to ensuring a safe work environment for all personnel at the refinery. This is the second consecutive year this award has been given to a Matrix employee, with Alec Brooks, Site Foreman, having received it in 2013. Additionally, the National Maintenance Agreements Policy Committee also recognized Matrix with 8 separate ZISA, or Zero Injury Safety Awards commendations for a combined 1.1 million work hours without injury. ZISA is the union construction industry's premiere safety recognition, honoring efforts of owners, clients, contractors and union workers to achieve what we know is possible: 0 injuries on the job site. In spite of the tragedy we talked about earlier, given our overall safety performance and culture, we expect our clients to continue their trust in Matrix's ability to provide a safe work environment on our project sites. I'd like to thank all Matrix employees for their dedication to a zero-incident mindset and fostering safe environments at work and at home. Before I discuss our segments in a little more detail, I want to pick up where we left off on our last call, specifically as it relates to the market and regulatory environment. In the second quarter, we reached out to over 30 of our largest customers to discuss commodity prices and the impact lower oil prices have on their business and capital spending plans. Across the board, our customers have indicated that material impacts to their long-term strategies are unlikely. In upstream, which represents a small portion of our consolidated revenue, our upstream customers will delay some projects but other approved or planned projects will continue. In the midstream space, which we generally equate to our Storage Solutions segment, our customers noted that logistic issues continue to persist. Solving these issues is key to closing the cost gap between rail and pipeline shipping as well as dealing with continued production growth. Specifically, our key midstream clients, such as TransCanada and Enbridge, have a long-term view on their capital infrastructure investments and are more concerned with the resolution of regulatory issues than short-term market pressure. Regarding natural gas and gas liquids, also part of our Storage Solutions segment, our clients see their NGL projects as critical infrastructure elements. These projects remain viable in the current price atmosphere and from a long-term prospective. Domestic LNG projects may be delayed as existing global contracts are typically indexed to crude prices. However, we continue to see several viable project opportunities throughout North America. Downstream, turnarounds, maintenance and repair, as well as environmental and regulatory projects will continue for our refinery and petrochemical customers. Historically, low natural gas prices and other feedstocks create greater opportunity in our Electrical Infrastructure and Industrial segments. New power generation projects continue to move forward as well as power delivery projects critical to updating the North American electrical grid. In our discussions, one of the consistent points our clients shared with us is that permitting and federal regulations are of much greater concern to them than the fluctuation of oil and gas prices. In summary, as we discussed on our last call, our clients generally take a longer-term view to making project decisions. Long-term pricing over multiple years is what will determine any significant impact to our business. Moving on into our segments. For Electrical Infrastructure segment, the quarter was negatively impacted by a charge on an acquired EPC joint venture project, which Matrix is providing construction services. The charge is primarily a result of engineering and client-supplied equipment issues, which created a significant amount of rework and schedule compression in order for us to meet our delivery obligations by the end of this fiscal year. Exclusive of this project issue, this segment continues to perform well and our view of the significant opportunities ahead remains unchanged. On that note, following the completion of the second quarter, we were awarded the construction work on a new 900-megawatt combined cycle power generation station for TransCanada Energy. The facility, to be constructed in Napanee, Ontario, builds on a long history of constructing these type of facilities in North America and will be the second major gas-fired power generation project with TransCanada for Matrix North America Construction in the past 5 years. We look forward to working with TransCanada Energy on this important project to support Ontario's electricity demand. Performance in our Oil, Gas & Chemical segment remains robust as strong proposal and bidding activity translated into solid revenue growth both quarter-over-quarter and versus the prior year. Strong bookings have also lifted backlog for this segment to an all-time high of $148 million. While backlog is not necessarily a perfect indicator for the strength of this segment, it does demonstrate the demand for our services in the current market environment. In the Storage Solutions segment, backlog of $447 million, while up 27% year-over-year, is down from an all-time high set last quarter. In the current oil price environment, we continue to see significant opportunities for new storage tanks and terminals throughout our service territory. The contango oil market may be creating additional storage opportunities in many of the traditional storage geographies, such as Cushing, Oklahoma. In our tank maintenance and repair business, opportunities have been strong. And we believe that growth in this business line will continue. Matrix PDM Engineering is creating cryogenic EPC opportunities in LNG and NGL projects. This is starting to create backlog enhancement and visibility for future project awards. Overall, we remain very bullish on the direction of our Storage Solutions segment and foresee long-term growth. Lastly, performance in our Industrial segment was solid this quarter due to strong project execution, including positive project closeouts. This helped lift gross margins to 13.2% for the quarter, an all-time high for the segment. This segment is currently made up of, made up by 3 key markets, which I would like to address individually. First, we are continuing to successfully execute our fertilizer work with Orascom in Southeast Ohio -- Southeast Iowa. Due to our high-quality execution on this project, we have received a number of additional awards with this client, nearly doubling our initial contract value. As we complete the work at this facility, we are actively bidding additional fertilizer plant-related projects. This market is maturing. And while the number of potential projects is diminishing, those that are left provide better opportunities for our business. In the mining and minerals sector, low copper prices are reducing the capital spending of our clients. However, Matrix's market focus is principally on small cap and maintenance work, which we will continue to find, win and execute. Finally, the iron & steel sector has produced very strong results the first 6 months of this fiscal year, and we believe this strength will continue. The strong U.S. economy with cheap feedstocks, low energy prices and import price protection is creating capital project and maintenance opportunities for our business. As always, in all of our segments, we continue to look for acquisition opportunities that bring added bench strength, market penetration or a unique specialty component to complement our existing services. In closing, we are disappointed in the negative impact of the quarter and full year that the previously mentioned project has had on the business financial results. However, the performance in the balance of the business is on track with our expectations, and we remain excited about our position in the marketplace. I'll now turn the call back to Kevin to discuss details of our financial performance. Kevin?

Thanks, John. So let's start with the second quarter results. The revenue for the quarter were $342.9 million, which is up $31.9 million or 10.3% from the revenue of $311 million earned in the second quarter of fiscal 2014. Consolidated gross profit was $16 million as the company recognized a loss of $22.9 million on the acquired power generation joint venture project. Consolidated gross profit in the 3 months ended December 31, 2013, was $34.2 million. Consolidated gross profit percentage was 11.4% without the project loss as compared to 11% in the second quarter of last year. As we discussed last quarter, we did not fully utilize our overhead cost structure as a result of lower revenue. Our revenue volume increase in the second quarter has resulted in improved utilization. As the volumes continue to increase through the last half of the year, we expect to fully utilize the construction overhead cost structure. SG&A expenses were $19.6 million in the 3 months ended December 31, 2014, as compared to $19.3 million in the same period last year. SG&A expense as a percentage of revenue decreased to 5.7% in the quarter as compared to 6.2% for the 3 months ended December 31, 2013. Our effective tax rate in the quarter was 26% as a result of the retroactive tax legislation that was approved in December. This legislation extended certain tax items, including the R&D tax credit through December 31, 2014. Because the legislation did not cover calendar 2015, we expect our effective tax rate to return to approximately 38% for the remainder of the year. In order to calculate our true effective tax rate, the net income or loss attributable to the noncontrolling interest should be excluded from income before income tax expense. Our share of the acquired EPC joint venture project reduced net income for the second quarter of fiscal 2015 by $7.9 million to $3.3 million and reduced fully diluted earnings per share by $0.29 to $0.12 per share. In the same period a year earlier, the company earned $10.3 million or $0.38 per fully diluted share. Moving onto the segment results. Revenue for the Electrical and Infrastructure segment increased $21.3 million to $58.5 million in the 3 months ended December 31, 2014, compared to $37.2 million last year. The increased revenue volume in the 3 months ended December 31, 2014, was due to the inclusion of a full quarter of Matrix NAC activity and favorable volumes in our legacy transmission and distribution business. Excluding the project charge, Electrical Infrastructure gross margins were 11.9% in the quarter as compared to gross margins of 10.4% in the same period last year. The project will be completed in fiscal 2015 with all future revenues associated with this project recognized with 0 profit. Accordingly, gross margins in this segment will be negatively impacted for the remainder of fiscal 2015. Revenue for the Oil, Gas & Chemical segment increased to $75.5 million in the 3 months ended December 31, 2014, compared to $62.1 million in the same period last year. The increase of $13.4 million or 21.6% was primarily due to higher levels of maintenance projects. Gross margins decreased 10 -- to 9.7% in fiscal 2015 from 10.8% in the 3 months ended December 31, 2013. Project execution remains strong in the second quarter of fiscal 2015, although the under-recovery of construction overhead cost structure continues to negatively impact margins in this segment by over 200 basis points. We expect higher margins for the remainder of fiscal 2015 as work volumes increase on higher turnaround work, leading to a more efficient utilization of construction overhead costs. Revenues for the Storage Solutions segment decreased to $129.8 million in the 3 months ended December 31, 2014, as compared to $180.6 million in the same period a year earlier. As a reminder, the prior year included a significant crude oil storage terminal balance of plant project valued at nearly $150 million, the majority of which flowed through our books in the second and third quarters. We currently do not have a similar project in our Storage Solutions project portfolio. The revenue attributable to aboveground storage tank work is consistent with prior year volumes, as were our gross margins, which were 11% in both periods. Project execution improved in the quarter. However, under-recovery of construction overhead cost structure negatively impacted margins in this segment by over 100 basis points. We are continuing to focus on process improvements and infrastructure enhancements to further progress as we are making to -- excuse me, enhancements are continuing -- excuse me. As we make our enhancements in our infrastructure, we expect to fully utilize our construction overhead cost structure in the future. Revenue for the Industrial segment increased to $79.1 million in the 3 months ended December 31, 2014, compared to $31.1 million in the same period a year earlier. The increase of $48 million was primarily due to the inclusion of a full quarter of Matrix NAC activity. Gross margins were 13.2% in the 3 months ended December 31, 2014, compared to 12.3% in the same period a year earlier. Fiscal 2015 gross margins were positively impacted by a favorable settlement with a customer. Now I will briefly discuss the 6-month results. Revenues for the 6 months ended December 31, 2014, were $664.6 million compared to $537.2 million in the same period a year earlier, an increase of $127.4 million or 23.7%. On a segment basis, revenue increased in the Industrial segment by $104.7 million to $158.5 million. And Electrical Infrastructure revenue increased $44.1 million to $114.2 million. The Oil, Gas & Chemical revenues were relatively flat with an increase of $4.2 million to $128.8 million. These results were partially offset by a decrease in the Storage Solutions segment of $25.6 million to $263.1 million. We expect to see the revenue volume for Electrical Infrastructure, Oil, Gas & Chemical and Storage Solutions to continue to increase for the remainder of the year, while the Industrial segment will decrease without the award of additional projects. Consolidated gross profit was $44.3 million in the 6 months ended December 31, 2014, compared to $59.6 million in the 6 months ended December 31, 2013. Fiscal 2015 gross margins were reduced by 4.4% to 6.7% as a result of the $26.2 million charge on the acquired EPC joint venture power generation project discussed earlier. Fiscal 2014 gross margins were 11.1%. Consolidated SG&A expenses were $39.5 million in the 6 months ended December 31, 2014, compared to $34 million in the same period a year earlier. The increase of $5.5 million or 16.2% is primarily attributable to inclusion of Matrix NAC expenses. SG&A expense as a percentage of revenue was 5.9% in the 6 months ended December 31, 2014, compared to 6.3% last year. Our share of the acquired EPC joint venture project charge reduced net income for the 6 months ended December 31, 2014, by $9 million to $9.2 million and reduced fully diluted earnings per share by $0.33 to $0.34. In the same period a year earlier, the company earned $16.9 million or $0.63 per fully diluted share. As John mentioned earlier, last night we announced the award for the construction of a 900-megawatt combined cycle power generation station, which will increase our Electrical Infrastructure backlog and consolidated backlog by over $450 million, which adds to our second quarter closing backlog of $839 million. This award, recorded in January, creates a record high in backlog for Matrix. As we have stated previously, the timing of awards can significantly alter backlog at the end of a period and it's important to view longer-term backlog trends. In the second quarter, we experienced a decline in our consolidated backlog from $985 million to $839 million. The largest decline was in our Storage Solutions segment, which decreased from $538 million to $447 million. However, we continue to see long-term growth opportunity in this segment as exhibited in our backlog growth over the last few years. For example, backlog stood at $240 million at December 31, 2011, for the Storage Solutions segment. Since then, it has increased each year, reaching $337 million at December 31, 2012, it stood at $353 million at December 31, 2013, and now stands at $447 million at December 31, 2014. That represents an increase of 86% over the last 3 years and an increase of almost 20% -- 27% over the last year. While the decline in oil prices is a cause for concern, our prospects for storage remain strong, and we expect continued long-term growth in the segment. Moving onto our financial position. At December 31, 2014, we have $68.6 million of cash and availability under our credit facility of $145.9 million, which provides us total liquidity of $214.5 million. We expect our business volumes to increase throughout the remainder of the year, which will require some infusion of working capital. In addition, we continue to pursue strategic bolt-on acquisitions. Our balance sheet and liquidity position allow us to pursue these opportunities, as well as other business needs. We are maintaining our fiscal 2015 revenue guidance of between $1.425 billion and $1.525 billion. But as a result of the project charge, we are lowering guidance for earnings per fully diluted share to between $1.10 and $1.25. So with that, I'm going to turn the call back over to John.

Thanks, Kevin. So we've completed our prepared remarks. And before we open the call up to general questions, we wanted to deal specifically with 3 key topics that we know that each of you will have questions on. So we're going to try something a little different here today. Those 3 key topics are the acquired joint venture project which has created the project charge, we want to talk a little bit about the new award with TransCanada and Napanee Generating Station, and then we would like to talk specifically about concerns over Storage Solutions segment and impacts from the oil markets. So in each of those 3 topics, myself and Kevin will want to give these guys some -- a little deeper dive by each topic. So after we do that deeper dive on the topic, then we're going to want to open up for questions on that topic alone. We'd appreciate if you have questions Please get in the queue. If you don't have questions, drop out. And then we'll address the next question, the next topic, and do the same thing for those questions. Once we've completed the discussion on these 3 key topics, then we'll reopen the queue -- the call for just general questions that you may have on other topics. But our goal here is to make sure -- because we understand that these 3 issues are probably some of the bigger topics in each of your minds, and we want to make sure that we have clarity between management and our analysts on each of these topics. So if I can, I would like to first open with some remarks on the acquired joint venture project. So I can't and won't get into a lot of details on our partners or the client and those types of things. Obviously, it's not fair to them or not fair to the -- as the project is continuing to go on. But definitely this project, as we stated in our press release, was an acquired joint venture EPC project As part of the Kvaerner acquisition. It's a 300 -- approximately 309-megawatt combined cycle gas-fired power station in a one-on-one mode. And there's really no unique technology associated with this. There is -- it's not anything that's foreign to our team, and that team is our combined team with the [indiscernible] acquisition and Matrix -- our legacy Matrix union business and inclusive of our Executive team here in -- at Matrix Service Company. Between just -- in our union side of our business, they have approximately 40-related combined cycle and other power-related projects that they brought that experience to bear. So during the acquisition, we certainly did our diligence throughly of the whole organization and all of the projects that we were bringing with the acquisition, including this one, which will be no different. We reviewed the estimate. We did site visits. We reviewed the schedule. We analyzed who our joint venture partners were going to be and the client. So we were, at that time, fairly comfortable with the project. It was only -- the project at the time of the diligence was approximately 17% complete,. The construction being less than that and the other portions of the project being more. But on an average, it was only 17% complete. Frankly, we thought that the estimate was, while it was aggressive, was doable. But the other members of the joint venture, the owner, because they were providing some key pieces of equipment, they all had to do their jobs, as we know we would do ours. And so in an EPC arrangement, in this case, for this project, which is -- EPC, for those who don't know that, that's engineering, procurement and construction. Matrix is providing the construction services and between our partners and our client are providing engineering and procurement services. So when pieces of those engineering and procurement break down, as they have on this project, it makes the construction piece of the job that much more difficult. So anyway, so we -- there was a full diligence on the project. We appreciated the risk associated with it as well as the rest of the organization. And the acquisition of the company took into account those associated risks and benefits obviously that we saw in this acquisition. So again, this is, like I said, is a lump-sum project. We are today approximately 89% complete. We are beginning commissioning and startup of the project. We've got a commercial completion date and obligation to the owner by the end of our fiscal year of 2015. And sometimes when you get into the commissioning and turnover of these projects is when some of the issues related to the technical aspects of the job begin to raise their head and create complexities for the contractor to pull all the pieces together. And so that's kind of where we are related to this project. I think Kevin has a couple comments here on the joint venture accounting. And then we'll open up this specific issue for any questions. Kevin?

Thanks, John. I just want to quickly review the accounting just so we're clear on how this impacts our income statement. This is a, as John mentioned, a joint venture. We have a 65% controlling interest in that joint venture. And as a result, we consolidate 100% of the joint venture in our financial statements. So 100% of the revenue of the joint venture, 100% of the costs are hitting up in revenues and cost of revenues. The portion of the loss that belongs to our partners is then deducted out down in minority interest or noncontrolling interest to get to our true, our true earnings. So everybody needs to keep that in mind as we're reviewing our financial statements. So when we talk about the fact that we had a quarterly project loss of $22.9 million, our portion of the loss, our 65%, is $14.9 million. And when we talked about the year-to-date joint venture loss of $26.2 million, our share of the loss is $17 million. And then when you look at a couple of other line items like operating income or pretax income or loss, right now, if you just look at the financial statements, it looks like we've got a loss in the quarter. To get our true operating income or our true pretax income, you need to add back that noncontrolling interest. For the quarter, that's a little over $8 million that needs to be added back to those lines. So I just wanted to point that out. You have to do a similar type of add-back when you're looking at trying to calculate our effective tax rate. So just wanted to make sure everybody understood how we're accounting for this project. So with that, let's open it up.

Yes, so we'd like to open it up for questions specifically on the -- on this joint venture project charge. And then we'll -- then from that, then we'll move on to a couple of statements on the Napanee project award.

[Operator Instructions] And our first question comes from the line of Mike Shlisky of Global Hunter Securities.

I just have 1 or 2 really quick ones on this. I guess first off, is there any legal recourse you have on this charge from either the folks who you bought this business from or from the customer or from the JV partner? Or is this pretty much set that this is the charge as of today?

So, I will say that, as it relates to the acquisition, yes, there is no legal recourse. So we understood the risk going in. And I think we priced the acquisition according to the risk profile of what we saw in the acquisition. Frankly, a lot of the things that we have found in the acquisition have probably been more positive than what we anticipated. And frankly, this singular project, while it obviously is very material, is the one thing that did not go the way we had anticipated. But overall, everything else with the acquisition, what we're finding, the integration with our business, the potential to open up more opportunities for other segments of our company, the things we wanted to do and anticipated to grow our business, those things are all coming to pass as we integrate the company. As it relates to the project and joint venture itself, I think at this time it would not be fair for me to comment on what commercial track that, that project -- that we're going to take going forward.

Okay. I think my other question on this is basically, when you took the charge, were you forced to or did you actually voluntarily go back and check on all the other projects that you might have acquired here to see if any of those functions have to be changed, either past results or your expectations on what might come out of these projects in the future?

All the other projects that we took on as part of the acquisition have already been completed. And a number of them, frankly, were better -- turned out better than what we thought. So this is the only project that's crossing over that is still in progress from the acquisition.

And our next question comes from the line of Tahira Afzal of KeyBanc.

So I guess the first question is do you know how much revenue do you still have left from this project that you're burning over the next -- through the end of the fiscal year?

I think it's approximately, it's $45 million to $50 million.

Got it, okay. And are you folks on the hook for liquidated damages if you do not deliver this project by the end of your fiscal year?

Yes, well, I would say, and so we're being a little coy on the actual -- our completion date obligations. Those obligations are within the fiscal year. And we are were taking steps on the project within the joint venture to do the best job we can to assure ourselves we don't get into liquidated damages. We feel fairly -- pretty strong that in our contractual position that we have excused delays in the project. So it will be a discussion at the end. We've tried to account for the likelihood of having to pay liquidated damages in our outcome of the project. That's probably the best I can tell you right now.

Got it. But then, John, it seems like some of that is included in the charge you've taken?

Well, I mean, certainly in the outcome and the forecast of the job we forecasted of the known, this current known situation on the job, we've included contingency in that forecast to cover those potential elements and others. And so we've -- this obviously has gotten attention throughout our entire organization up to and including my level looking at the -- where we think the project is going. And we've done our best job today to where we think it will come out in the end, including the sort of complicated commercial arrangements between all the parties.

And our next question comes from the line of Matt Duncan of Stephens.

So my recollection is we took a charge on this project last quarter, too. I'm just curious sort of when it became clear that things were much worse off than maybe we thought then. And how confident are you that this is, this charge we're taking here is going to cover the completion of the job?

So without getting into detailed timelines here, as we move through the -- moved into this, our second quarter of the job, we were closing out more systems, starting to create more turnover packages, doing more line testing. And as that moved on through the quarter, we started to see more issues coming up of a technical nature. We -- so I think it's probably important to understand, too, that the charge we're taking is not a charge that occurred over the last couple of months. This is a forecasted outcome. And so as we look out into the future, based on the technical issues that we've been incurring and seeing over the last 3 months, has put us into a position where we think the, that it's going to change the final outcome of the project. So I'd say that some of these charges haven't happened yet. But we anticipate that they will based on what we know today.

Okay. And I understand you probably have to be a little bit careful with how you answer this question, but to hear you talk, it sounds like the mistakes here were probably more in the engineering side than they were in the construction side, if we're talking about sort of technical issues with the job. Maybe it wasn't engineered correctly. I don't know if there's any way to get into sort of where the mistake was really made? Was it in the bid? Was it in the execution of the project? But I guess really the reason I'm asking this, John, is I think we all want to get some comfort that, given that you just won another very large contract to build a similar type, similar type facility, just bigger, that the mistakes weren't really made on the Matrix side here.

Okay. So you're right, the beginning of your question is right: I don't want to answer the question. But so I'd just give you a general comment, is that every project has got its issues on it. And even the projects that we do very, very well on and improve our margin, we're not perfect, right? So but I would say the preponderance of the issues here that are driving our problems on the project are not necessarily of our making.

Okay. And then last thing, Kevin, just on the accounting side. I'm assuming, since you've taken a charge and you're now basically going to record this project, that revenue equals cost the rest of the way, the minority interest line should be 0 for the balance of the year if you've estimated the cost to complete correctly?

That's correct. If we hit it on the nose, our estimate, it would be 0 in minority interest the next couple quarters.

Matt, in your final question related to Napanee, we're going to deal with that in the next round of questions.

And our next question comes from the line of Robert Connors of Stifel. Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: I was just wondering, if I add back the charge in the project, you did about 11.7% gross margin in the EI segment, but I'm trying to just figure out what was the revenue in the quarter on that project to get to really sort of the core margin when we're looking into back half '15 and, more important, 2016?

So if you look at the way that this -- the way this impacts our financial statements, when you record a loss it's really primarily a reduction in revenues. So the amount of revenue in the quarter related to the joint venture was relatively small. There's only around $12 million. So we had $46 million, $47 million of work in our standard -- or all the rest of the electrical business that wasn't related to this project. Does that help? Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: Yes, that helps a lot. So basically the revenue ramp is going to pick up from about $12 million this quarter to like $27 million or $25 million and then the final 2, roughly?

Yes. Really, so if we had not recorded a loss in the quarter, if we had stayed on our forecasted cost, our revenues would have been probably around $20 million higher in the quarter. But because you had to record that loss, it reduces the amount of revenue earned. Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then could you say like 100% of the guidance cut is related to this project? Or is there a safety buffer sort of built in there if something else happens during commissioning?

I think you can say the majority of the decrease in the EPS guidance is definitely related to this project. The year-to-date charge is, I think, $0.33, the impact is. So that's definitely the impact that has taken that guidance down to the $1.10 to $1.25. Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: And then just one more, would you say this customer, this client is one of your sort of "30 strategic clients" that you are in talk with every day?

I'd said this client is someone we would like to maintain friendship -- relationship with. And we think that they, over time, over the next 10 years, have got a fairly active capital spending program to increase their power-generating assets And that -- so they're not, in our view, they're not a one-off. They're not someone that we don't care about. So we're going to do our best to resolve our issues and work to maintain that relationship.

And our next question comes from the line of Mike Harrison of First Analysis.

Just a quick one on this. Is the roughly $23 million charge, is it all-cash charge? Or is there some noncash element to it as well?

Yes, I consider it an all-cash charge.

Okay, thanks.

Thanks, everybody. So we're going to move on to the next topic. That topic is going to be the talk about the recent project award. If there's something that comes up, when you get back in the queue for those questions, if there's something that comes up related to the project with the charge, certainly we'll reanswer that question. So we, as we put the announcement out, we won the construction, which is an -- this is an important difference between the project we just talked about. So we are the contractor. We are the construction contractor for a 900-megawatt combined cycle gas-fired power plant in Ontario. The nuances here are, is that we're doing the construction only. The engineering and all of the engineered procurement is being provided by the owner or the owner's subcontractors. So we have what we think is a very strong market-based contract and commercial arrangement with our client. The inability of its -- on its side of its engineer and/or its general organization to provide the parts and pieces of the technical information that we need to construct a plant is 100% their responsibility, and the contract reflects that. Two is, which is a good standpoint, even beyond the fact that the engineering is by others, and I will tell you that engineering is by a reputable company, that the engineering is nearly 100% complete. So when you go into a project like this generally, and like the project we just talked about where the charge was, the engineering is not 100% complete, it maybe 5% or 10% complete. So there's a tense amount of coordination and logistics that have to go on between the engineer and the constructor to build the plant in the sequence and to receive the engineering and all the parts in a sequence that supports that construction. So this is a much better situation for Matrix in this case. So we're able to actually, in the middle of this month, mobilize on the site and immediately begin construction work as opposed to waiting for documents to be able to do our job. So I think that's very, very important and a strong difference between these 2 jobs. Two is, is that this -- the Matrix North American Construction team 5 years ago, under an EPC joint venture arrangement, successfully constructed a very similar project for TransCanada Energy, what was called the Halton Hills Energy Center. And that was in Ontario, basically on the flip side of Toronto, where this is. So that job went very well. Client was very happy, and I think that went a long way from a client standpoint of being comfortable with Matrix to be able to provide the construction services for the Napanee Generating Station. So again, it's construction only. We've got a very good contract that backs up that responsibility. And the last thing, and I think someone asked Kevin this question yesterday, the project was competitively bid. There were 2 bidders, of which Matrix was one of them. So this is not -- this project is not under our alliance arrangement with TransCanada on the storage side. This is with a separate TransCanada organization. But the management team that is in TransCanada Energy Company, for which this contract has win, which was awarded, are -- it's a management team that we know very well. And at a point at the top of the TransCanada organization, all roads lead eventually to the same guy, and so we know that guy. So we're very comfortable with this project. We're very comfortable with the schedule. We're very comfortable with the pricing structure. The pricing structure was vetted throughout our organization, including up to myself and our COO. Both of us, on top of the 40 related projects that the M-NAC management team has constructed, both our COO and myself have been involved in at least that many individually, collectively on combined cycle generating stations. So the full organization is involved. And the other thing I would mention is that part of our strategic plan was to bring in large capital projects as part of our portfolio. We're a portfolio-approach company on our strategy. We wanted to add larger capital projects into our portfolio. It is not our intention in 6 months to announce to you that we have another fire-generating project in another part of the country. So it's our intention to execute these projects in a successful fashion. And as they begin to roll off, then we will add another one. So that's sort of my comments on the Napanee Generating Station. And so at this time, I'd like to open it up for questions on Napanee, or if you have a question specific to -- that ties in between this and the project we just talked about. But before I open up to the queue, Kevin has one other comment. Go ahead, Kevin.

Yes, so this is a great example, we've talked about this on a number of calls on the timing of project awards and how it can impact our core period in backlog. This project was awarded in the middle of January, but we actually expected it to be awarded earlier in December. So it fell into the next quarter. And so we've -- as we've looked at backlog, we try to look at it as what's the trend in backlog and where is it going. And we try not to get too tied up in just one period's impact, upward or downward. Because it's -- the trend is more important than that short-term activity.

One other comment on the backlog as Kevin said, before I open up for questions, I think this is a great example here on sort of the extremes, but it relates to a lot of our other segments, too, is that so we've added $450 million of backlog into our electric infrastructure. I just told you we're not going to add another one maybe for 2 years, 18 months or 2 years. So that backlog, obviously you guys can do the math and divide 3 years into $450 million, and you can see a big chunk of that's going to roll off year-over-year. We're not going to replace that, that rapidly. So we'll be adding other electrical infrastructure projects and substations and transmission and distribution that aren't going to add up probably to the amount that's going to roll off for this Napanee Generating Station. So it's going to look as though the backlog's decreasing, but that's not really a fair representation of the strength in that segment. So you've got to keep that in mind as we, in any one of our segments, add largest chunks of backlog into the segment and how it rolls off. So with that, I would open the call to questions on topic 2 and 1.

[Operator Instructions] And our first question comes from the line of Martin Malloy of Johnson Rice. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Kevin, could you talk maybe a little bit more about the project management people that you've got in place to handle a project like this, their experienced with this. And is this a totally fixed price contract, or are there some hybrid components of it that maybe you could tell us about?

So this is John. So I can't -- it's not -- I shouldn't say it's not fair, we're not authorized by our client to talk about the commercial arrangement, okay. So all I can tell you is it's not part of our alliance arrangement with TransCanada, all right? So the commercial arrangement with TransCanada is market for this kind of -- is market for this kind of work. And we're comfortable with that arrangement. As it relates to the management team, we've taken our legacy union business, we've taken the Kvaerner business, we have merged together or in the process of integrating those 2 businesses. The combination of those 2 management teams provides us the bench strength and depth we need at a variety of levels within the organization and within the project organization to staff that project. We have an operating unit up in Canada, in Ontario, which is probably a couple hour drive from where this project is. So we're comfortable with the management organization that we're going to staff the project with and that they -- that management organization has -- I'm not going to say the number of projects related to this, but have got experience under their belt sufficient to build this project. And again, I would say from an oversight view, our COO has got a long legacy background with power-generating projects of a variety of types all over North America. And so he is bringing his extensive background to bear on this project, and frankly, on any project that we do. But this one specifically. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Okay. And then last question, is this a primarily union workforce that's going to be working on the project? And are your relationships with the unions, is that a competitive advantage in terms of winning this?

So -- yes, this is a union, all-union project. We'll be recruiting union tradesmen throughout Ontario, probably even an opportunity to bring some union tradesmen potentially out of the U.S. We're pretty -- we feel pretty good about where we are from our union relationship. We would put it at -- for all of North America, we would put it at the top of the market against any of our competitors. We've got extremely strong union relationships. We've got strong union relationships on a national level and that we, as I said, we've got ongoing work that we do in Ontario. We've got opportunities for additional work. We have -- so we can present a future to our tradesmen for not only work associated with this project but with infrastructure work that we are anticipating and that we're going to be doing for TransCanada, all across the eastern part of Canada related to their Energy East development. So from a union level, we think that we've got a very high-level position, comfort level and relationship with the trade unions all across North America.

And our next question comes from that line of Tahira Afzal with KeyBanc.

So I guess my first question is, we've talked about large power plant projects in the past, John, it seems that there's an opportunity to address underutilization. And hence, if you look at your average margins in the segment outside of this work, and obviously the problem project, there's potential for margin expansion. So could you comment on the trajectory given it's a long-term project, how you're going to be thinking and how you're going to be building in contingencies and how we should really think about how this project's margins really compare to your sort of mix in general on the Electrical Infrastructure side?

So I would say the margins associated with this project fit on a range that we've been talking about. So our expectations for the outcome, the estimate, the gross margins on this project are within or at least at the upper end of the ranges that we've talked about for the Electrical Infrastructure business. Certainly, a project of this size will require a lot of construction overhead support to bring it through the completion, through the life cycle of the job. So that will have -- obviously have a potential for -- at least to absorb a lot of our overhead structure. Kevin, do you want to add anything?

Yes, when you think about contingency, obviously we would have built in contingency in the estimate on this type of project. And just in general, our approach on contingency is we will save that and not start -- if we think we're going to be under -- we're not going to start recognizing any benefits from costs coming over -- under and not utilize contingency until later on in the job because the risk is higher, then you'll need that contingency later on. So if we estimated every line perfectly on this project, you would expect to see the margin on it increase toward the tail end.

Got it, okay. And second question, when you were putting the bid or bids together, can you give me an indication of any -- whether the bid team included any of these folks from the problem project?

It's -- I'm sorry, Tahira, did the estimating team or does the management team?

Yes, the estimate team.

Yes, so I mean, the estimating on these projects is a centralized estimating pool. Those individuals are involved with that estimating pool on the combined organization. So we have these 2 organizations now that are combined, so that combined organization is involved with that estimating. And so past performance on similar projects. The project that I mentioned to you from 5 years ago that we executed successfully with TransCanada would have been one of the data points that we would use to pull that estimate together. That because of the size of the project, that estimate ran up through different levels of the organization, through the senior management and the M-NAC organization, through our COO, to myself included, to bring our experience to bear on the construction of these types of projects. And, of course, this project has to be approved by our Board of Directors. So there was a tremendous amount of oversight and introspection that went into this project as it was finally awarded.

And our next question comes from the line of Matt Duncan of Stephens.

So are you at liberty to say how large this contract is, and it sounds like it's somewhere between 2 and 3 years? How long does it take to complete?

It's going to be in the 31-month range.

Yes, we've disclosed, and it will be in our 10-Q, but it's in excess of $450 million.

U.S. dollars.

U.S. dollars.

Okay. And Kevin, that raises an interesting question. Is this contract is going to be paid in U.S. dollars or are we exposed to currency movements?

It will be paid in Canadian dollars. So yes, we've got FX exposure that we will be managing. And so that's been a significant topic of conversation with our management team and with the board as we've gone through this.

Okay. And then obviously the tax rate is a lot lower up in Canada. So I assume that with it being domiciled there, it will be taxed in Canada, not here?

We've also had some tax credits that we want to utilize in Canada. So we are -- as part of our strategy on getting the most out of this project, we're going to try to utilize tax credits to the extent we can. And then, you're right, we want to take advantage of the lower tax rate up in Canada.

And Matt, we're going to be, as we've said in the past, we are closely in line with TransCanada pipelines on their Energy East project, plus work with some of our other midstream clients that we know is going to continue up there. So we expect, not just on this specific project that we're talking about, but on a significant amount of this midstream infrastructure over the next 4 or 5 years is going to be going on up there, so we're going to have a lot of use for Canadian dollars over the next 5 years in Canada.

Yes. And I guess, Kevin, on the tax side, is this going to lower the cor -- you said you're going to be at 38% the rest of this year. But as we look outside this year, I would assume that the mix is shifting towards Canada, where the Federal tax rate is much lower. Is this going to lower the corporate tax rate? Just to help us sort of think through the cash contribution from this job.

Yes, it won't immediately because, like I said, we'll be utilizing some tax credits here in the U.S. from some previous startups in Canada. But in the future I would expect that, yes, as we continue to grow in Canada that, that should help us decrease our overall effective tax rate. We're not ready at this point to say, okay, it's going to go down to a combined 37% or 36%. But hopefully, if we do this right and it all works out like we expect, we will be able to announce that at some point here in the future.

And our next question comes from the line of Mike Shlisky of Global Hunter Securities.

My first question -- yes, that question was actually my main question. Just one quick follow-up on that. When you first bid the project, the dollar was at x, and now, when it's awarded, you said in mid-January, it was probably I would assume somewhere cheaper. So I just wanted to see, is the profit that you expect from the contract today any different than when you bid in dollars? Is it any different than when you first heard of or began to bid on the contract?

No. And if you look at the timeline, I'm not going to go into details of the timeline, but we updated our project forecast on this thing, our estimate on it up through close to the day it was actually awarded in January. And the other thing is, we're going to -- we do have growth plans in Canada. We've got a lot of opportunities with our customers and the majority of the -- while this is paid in Canadian dollars, the majority of the outflows are also in Canadian dollars.

We have an actual very small piece of the overall contract that's got U.S. content to it, subject to what we do with the profits of the job, but the actual cost of the job is a very small portion, which we have -- we, as part of the estimate, as Kevin said, was updated, as part of the estimate we included an estimate of where we thought the currency was going. And so we're pretty comfortable where we are there.

And our next question comes from the line of Robert Connors of Stifel. Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: Just sort of being around this industry for about 10 years, I tend to find that some of the biggest risks when you're talking project executions tends to be when projects are being executed in a new region and under a fixed price basis. And that labor is always the biggest risk and in particular labor productivity. So I'm just trying to get a sense of how well you guys are protected against future labor productivity fluctuations on this particular project.

So we estimated into the project the labor productivity that we were expecting. We used a benchmark against other projects, similar projects in the region. And, as I said, we used as one of those benchmarks a similar project we have built 5 years ago for TransCanada. We include in our estimates traction pay and, to go with that, we have an understanding of what the escalation of those union agreements are going to be. And so for me, I would tell you that our biggest risk is, on these types of projects, is the delivery of the engineering and the engineered equipment in a timely fashion in a sequence that supports the construction. So any of these projects, for me, that we have had that you have stress on, it's usually around the piping and the boilermaker work [ph] and the piping and the boilermaker work associated with the high energy pipe. So as soon as that -- and that's probably some of the more difficult parts on these projects to engineer. As soon as you have late engineering and late deliverables on the engineered hangers and other elements of that piece of the work, it starts to drive up the labor, the cash flow productivity in the piping and the boilermaker work. So I just think that we're in a very good situation here because of the completeness of the engineering, the type of the contract and who's responsible for the engineering that we're going to be -- that, that specific risk has been minimized.

Okay. So the last topic, then we'll open up for questions. If you guys have some other things that you want to talk about, we're ready to do that. So last topic. Storage. So I know you guys have some concerns around the reduction of the backlog in our Storage Solutions segment. So I want to talk a little, give some color around that. So first thing I think that's important to make sure everybody appreciates is that our Storage Solutions segment is just not about oil storage facilities, okay? So first of all, our Storage Solutions segment includes the maintenance and repair on oil storage tanks. But frankly, a variety of storage tanks, whether they're oil or whether they're refined products or whether they're in a cryogenic-related service. That, for us, our maintenance and repair work is actually up. So we are busier today and where we see going into the future than we have been in the past couple of years. And we think some of that is driven by this sort of contango market that we -- potentially we have going on in oil storage, where people are looking at their current storage facilities and they want to bring their tanks up to code or they want to make some improvements in them so they can take advantage of this lower oil and arbitrage some of the oil. Two is that, that Storage Solutions segment contains new tank work. So we would continue to say that we are the premiere contractor in new tank, above-ground, flat bottom oil storage tanks and refined products. Now the positive thing there is that, so that business continues to be strong. It continues to see strong bid flow. But also, with the integration and the combination of Kvaerner and our legacy union business and a reemphasis of focus on our union elements of our storage business, which frankly, over the past few years has been fairly flat and has been very one-client focused. We have, over the past 4 months, we have advanced that management team. We have increased the focus related to the union execution of the storage facilities. And so we are expecting to get a bigger part of the union piece of storage elements out into the future. So that's not only in the U.S., but also up into Canada as we talked about as relates to the Energy East Project. LNG. So part of Storage Solutions is LNG work. So we are already providing feedwork for a variety of LNG-related facilities, not only the export of LNG, but also LNG as transportation fuels. And so I think we've heard a lot about the LNG market potentially softening, but I think that from a U.S. perspective or a North American perspective, the LNG export terminals still have some pretty good financial legs. And we have in-house at least 2 LNG export facilities that are in late stages of their permitting. They're great opportunities for us. Now we have to be bid and win the work, so it's not going to hand it to us, but there are just another example of the opportunities there. Also in this segment is the natural gas liquids. So propane terminals for instance. We are looking at a variety of those types of terminals and storage opportunities as well. And again, our Matrix PDM Engineering brand, which brings together the cryogenic capabilities from feed through EPC contract creates a tremendous amount of opportunities for our business. And lastly, we've talked a lot over the last 18 months, 2 years about how we've been leveraging our core capabilities and brand name in storage to provide more terminal solutions. And so those terminal solutions, we're getting more opportunities there. We are -- have several of those in different sizes currently in our backlog. Many of them are in our proposal crosshairs. And again, this mix of work that I've talked to you guys about creates a different sort of roll-off of backlog that you have seen in the past from our business. So how our backlog used to roll off 5 years ago when we were principally an above-ground, flat bottom storage tank to what we're offering today changes that picture. The other thing I would like to say is that we've talked to you before about the timing of awards. So without getting into numbers, we had -- so we hit a record high backlog at the end of Q1. But some of the contribution of that were awards that happened in Q1 that we expected to happen in Q2. So while the backlog might have been down quarter-over-quarter, the gap in that decrease might not have been quite as big. And so again, the timings of award -- of awards create a different perspective, I think, for all -- everybody on that backlog. So the other positive thing from a storage perspective is that we're nearly 100% booked for the balance of this year in Storage. And going into next year, already within this quarter we expect to be 50% booked and with many significant opportunities on the horizon that we're going to be bidding and hopefully begin awarded this year. So we feel very, very comfortable where we are in our Storage Solutions business with all the different aspects that I've talked to you about. And so for the balance of 2015, it's about execution. By 2016, it's about not only execution but in bidding and winning work, which are things that we do every day. So we're very comfortable where we are in the Storage Solutions segment, about where the -- about the impact that the market has on our forward opportunities. And unless Kevin has something to add -- Kevin has something to add. Then we'll open up for questions and any final questions on anything else. Go ahead, Kevin.

Yes, so I mentioned the long-term trend of Storage Solutions backlog in my prepared comments. You know what, it increased each of the last 3 years. It's up 86% over the last 3 years. If you look at it on a quarter-by-quarter basis, over the last 12 quarters, it's decreased in 5 of the 12 quarters and increased in 7 of the 12. And as a result, the net of all that is the 86% increase. So that's why we -- there's another example of why we say looking at the long term trend is probably the best way to review backlog. So with that, let's open it up to questions.

Yes, we'll open up for questions on this topic or anything else anybody has to ask.

[Operator Instructions] And our first question comes from the line of Mike Shlisky of Global Hunter Securities.

So on the Storage Solutions, you said you are 100% booked you feel for '15. And I know I've asked this question in the past, but are your market expectations, then, for '15 kind of close to the best we can expect here? Or do you see up through '16, do you think that projects get a little bit more profitable until you are again fully booked there?

So I'll let Kevin comment on the exact numbers. But I mean, I think we're pretty happy with where we're performing in the quarter, where we see going forward with our Storage Solutions segment. I think, frankly, some of the opportunities we see out into the future that we will be booking are fairly large opportunities. And so obviously, again, we've got to bid them and win them, but our expectation is that the gross margins in that segment are going to continue to -- are going to continue at the current rate if not improve slightly.

Yes, so if you look at the backlog, I think it's as good a backlog today as it was 6 months ago. If you recall in the prepared comments, this quarter and last quarter we've, in that segment, we've had a little bit of under-recovery on some lower volumes. We do expect the volumes for Storage to improve, to increase here in the third and fourth quarter and so I think we'll have better recovery of our overhead cost structure, and that should result in moving that gross margin up from the 11% we are in this quarter. So I think it will move it closer to the middle point of our range there. So I think we can see a little bit better margins with a little bit more volume.

Okay. I have other questions, but they're more general in nature. Is this the right time for those?

Yes, bring it on.

Okay, sure. I wanted to touch back on the currency issue more broadly. Because you do have some work up in Canada, was there any effect on your backlog due to currency fluctuations over the prior year based on the Canadian dollar?

No, I don't think it's -- I'm sorry?

Yes, overall, not just for one segment. Just the overall growth.

Yes, I don't think it's had a significant impact on us over the past year because of the nature of the work being done up there. Plus, our Canadian work has been about 10% of our revenue. And so maybe we would have recognized $5 million to $10 million more revenue over that time. But then with that translation, our cost on those projects are also a little lower. So I don't think it's had a significant impact on -- I don't think it's had a material impact on operating income there. So I don't -- at this point it's not significant, but it is a topic that we are spending some more time on, making sure we address going forward just because it's going to get more significant.

Okay. Another question here is on the M&A environment. With the lower price of oil, do you find that it's getting a little bit cheaper here, that you're looking to acquire -- are you finding some assets that may not have been available in the past and then perhaps are a little bit more available today?

Yes, I'd say our M&A strategy is not changing. We're still -- if we find a larger opportunity, we would certainly look at that, something that made strategic sense. But a lot of things we're focused on are smaller bolt-on companies. I don't know whether the oil price environment -- from what we're looking at, whether the oil price environment is having a big impact on -- is having a big impact on what we're going to -- what we think we're going to pay. It maybe have an actual impact on people's decision-making of whether they're going to bring their business to market or not, whether they -- they're either concerned that the business looks as good as it's going to look for the next couple of years, or that they got themselves into a situation where they may be too leveraged out because of the price of oil that they're worried about their future. Which we haven't seen any of that. I mean, that's speculation on my part. So we have -- continue to have probably 3 to 5 M&A opportunities that we're considering today that we're looking at. And like I said, I always tell you guys, we're trying M&A opportunities every month. So it's -- for us I think it's, because of the size of what we're doing and the kind of businesses we're looking at, I don't know that it's going to drive a cheaper price.

And our next question comes from that line of Matt Duncan of Stephens.

So let's start with the Storage topic, John, and maybe this is more for Kevin, when you say the storage is 100% booked for the rest of the year, what does that translate to in quarterly revenues?

So I said nearly booked.

That was just one small word, but...

Yes, nearly.

So I think that we're going to come close to returning to levels we've seen in prior years, or last year. I think it could go up 10% to 15% from the volumes we're at now.

Okay. All right, that helps. And then, more directly just on oil storage, what are you guys hearing from the big customers there? Obviously TransCanada and Enbridge are probably the 2 biggest, and I know that you've had really good bookings with both of them over the past couple of quarters. Are any of those projects at risk? And when you talk to them about things that might be coming your way in the future, are they showing any concern that might cause them to push some stuff to the right until they get a better feel for where oil's headed, or are they full steam ahead?

No, I mean, we're -- they've been pretty clear that they're -- they've got a capital development plan over the next 3 to 5 years, and they're continuing down that path. So I'll give you some quotes, I'll give you some quotes from -- I won't tell you who said it, but one of our midstream clients that we do business with, he said - the CEO, I called him specifically asking that question. He says to me, "John, I'll tell you the same thing I tell my board. I don't care what the price of oil is for the next 12 months, I care what the price of oil is going to be for the next 15 years." He goes, "When we make our capital decision, that's what we're looking at." And then I've had other guys say that they're getting pushed harder by their clients because they're [indiscernible] oil that the -- when oil was $100 a barrel, it was okay to spend $15 a barrel to ship oil by rail. Now that it's $50 a barrel, they want to pay $5 and ship it by pipeline. So they're actually getting more pressure to get their pipelines in place, which includes ultimately terminals, than they're getting less. So for TransCanada specifically, their biggest issue is not the price of oil. It's regulatory issues in Washington and in Canada. So if they can get approval of the Energy East project tomorrow, they'd start work the day after. So it's -- it is not -- right now, what's going on and what they're telling us, it's not impacting their plans.

Okay. So then going on and just thinking through the bookings number from the quarter, then, again, you had really high level of bookings the last 2 quarters, and maybe this is just a function of timing. What can you tell us about the bid and quote activity that you're seeing there relative to what it was 6 months ago? Is it about the same? Is this really just a timing issue? Or are you concerned there's something else that might explain the low level of bookings in the quarter?

No, I would say it's a timing -- it's all timing and how things are rolling off of our clients' plans and -- but we are not seeing that -- I would say that either the number of proposals or the size of the proposals really hasn't significantly changed. It's the same old, same old. It's just a timing thing. I would say that in light of all of these comments about oil, so I don't want you guys to walk away saying the management team at Matrix is just totally risk -- or totally devoid of the potential risk here. So we're watching this on a weekly basis. I read all the same stuff you do. We're talking to our clients on a continual basis to make sure we've got the right litmus test on what's going on with oil and how it's going to affect our business. But our best litmus test is when our clients tell us, our key clients, and our key clients are -- and I've shared with you some of the thoughts, some of the things that they've said. So don't walk away from this call thinking that we're just like willy-nilly plowing ahead, great SG&A, everything's [indiscernible]. But from what we see today, what our clients are telling us, we're comfortable with being able to tell you guys that we see continued a lot of strength long-term in our Storage business.

Okay, 2 more things, and let's take this oil conversation over to the Oil, Gas & Chemical segment. Is it maybe helping there? I mean, you clearly had a healthy fall turnaround season. The bookings there had been very good the last couple of quarters, so I must assume that the spring is going to be pretty strong, too. And it sounds like from Kevin's margin comments the revenue dollars are going up from where they've been, you're going to better recover the construction cost there. Are you seeing your customers on the refinery side do more maintenance now that they're not making as much money with oil down, the spreads are little tighter. Are they getting caught up on maintenance they've deferred?

So I mean -- I think it's probably a 2-part question. One is that, again, while refinery clients are -- have basically said that turnaround maintenance activities, some small cap stuff, environmental and regulatory required projects are going to continue. The large cap stuff, the things they may do for expansion reasons may be delayed. But for the kind of services that we provide into the refinery space, we're not -- over the next 12 to 18 months, we're not anticipating any change in the amount of opportunities for us. So I think one of the big things for us is that we -- and we've talked about this before, we're continuing to do a better job of building our brand with our refinery clients and their comfort with us and our ability to deliver on a variety of different services. Two is that we're doing a much better job of bundling our services. We haven't talked a lot about that recently, but we're bundling our pad management, we're bundling our Industrial cleaning services with our mechanical trades. And that's really starting to gain a lot of traction with our clients. And so that's opening up more opportunities for us to continue to build our market share. And so I guess my question to you is, I think to be safe, the market's fairly flat, consistent, current for us we see over the next 12 to 18 months. We're just doing a better job of building our brand and our market share.

Okay. That's very helpful. And last thing, just a housekeeping item. Kevin, do you have the -- how much the revenue contribution was from Kvaerner in the quarter?

So as we talked earlier about the acquisition, we're integrating the businesses. Like we've done with other businesses in the past, it's getting more and more difficult for us to break out the revenue from this acquired company because we are blending these businesses together. And I think it's truly a sharing of resources, opportunities. So it's a difficult question to answer. I can give you -- in general terms, I can tell you that we had very little revenue in the second quarter of last year related to the acquisition because that was -- it was done in the middle of December and we only had like a little over $5 million of revenue. And so how much of our revenue in this year is related to purely the acquisition? I can't give you an exact number. I think it's $50 million to $60 million, but that's -- it's a guess and it's a number that's going to get more and more difficult for us to provide as we move forward because of the way we're managing and integrating these businesses.

I mean, we're cutting overheads there. We're pulling the management teams together. Like I said earlier on the call, we are enhancing the Storage piece of that business by adding overhead and adding additional management teams that we expect to be able to generate more revenue and more profits with. So this blending that's going on is going to continue, I would say, through the balance of this fiscal year. So we'll get to a point by the time we get to the end of this fiscal year where we're going to truly have one fully integrated, from a people standpoint, organization. And so we really want you guys to start thinking about that as one company.

And that is the way we think about it. We've got portions of our legacy business that are managed by management that came with the acquisition, so -- and vice versa. So there's -- it's a question we really won't be able to answer in the future.

And our next question comes from that line of Robert Connors of Stifel. Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: One thing that's not really talked about is, I think we could see a potential sort of pushback from the clients regarding rebidding and reappraisal work because on the craft labor side I would expect to see construction craft labor rates sort of come down in this environment. So are you starting to see that, where clients are pushing back and want lower prices for projects because the price of labor is coming down, or still too early?

I think it depends on the client. So you take some of our refinery -- some of our Oil, Gas & Chemical clients that have a heavy upstream piece of their business, there's a little bit of that. Our clients that are in a purely sort of the midstream or downstream we're not seeing that. I think probably from a -- as they start to pull back on some of the upstream spending, which again represents about 1% of our business, as they start to pull back, I think the thing we're going to see probably more of is some of those contractors that generally are upstream people are going to try and drop down into our midstream and downstream space and potentially increase the amount of competition there for us on a short-term basis. But I -- could that have some kind of a minute impact on our margins? Potentially, where we could -- when we go to bid a job. But I think our clients are pretty intuitive. They understand the quality of services that their normal group of competitors bring and that you get a guy that drops down from the upstream space into the midstream space and he's not going to think he's an expert in tanks and terminals. I think the majority of our clients see through that. So probably from a good thing, I think maybe this environment may create less pressure on wages and labor availability. But that just may -- potentially is going to take a pause in the inevitable. There's still a significant amount of large cap projects out there that clients are talking about. The development of a lot of these big petrochemical plants in the Gulf Coast. Some of these LNG facilities are still going to go forward. And that's going to continue to put more pressure on labor. Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then one of the stories behind Matrix is the ability to capture that sort of balance of plant work as some of the larger contractors got busy in other end markets. So I'm just trying to gauge if there is risk with seeing some of these larger contractors sort of gravitate back to the down and midstream end markets, considering that, as of right now, it's sort of one of the only shining lights of growth in the oil patch?

So there's always that risk. But I would say that the big EPC firms, if they feel a need because of work volumes to drop down to bid terminal projects, that they're going to have a difficult time being competitive to beat us. And so they can do that and maybe that can happen, but they're tooled for larger projects, as opposed to us. And when I say larger, they've tooled a $500 million projects and up, and it's potentially difficult for them to drop down into a $50 million to $100 million terminal project and be as competitive. Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And just for clarification on the Oil, Gas & Chemical segment. Can you give us some numbers around, like first half, what man hours were versus what you're expecting in the back half?

So I think that we've -- we really don't disclose man hours, but I'll just give you a general sense of what we expect on revenue volumes to do. We had a nice increase in this quarter in the Oil, Gas & Chemical segment. I think it'll go up further, maybe another 10% per quarter into the third and the fourth. Robert V. Connors - Stifel, Nicolaus & Company, Incorporated, Research Division: So 10% sort of sequentially each quarter?

I think third and fourth are usually now about equal quarters. So I think they'll be up 10% from where they are right now from the quarter we just reported.

And our next question comes from that line of Mike Harrison of First Analysis.

Maybe just a couple more here. In the E&I business, have you guys seen any winter storm-related work during the quarter? I know that the power outages didn't materialize with the blizzard out East like they expected. But did you still pick up some work that might be positive year-on-year?

So I would -- sorry, it wasn't enough that it made it to my desk. But we did have some people out, and we did have some people out in -- during those winter storms doing storm restoration.

And in terms of the Industrial segment, can you talk about how some of the lower-margin iron and steel projects are unfolding there? Have you done anything to improve the margin on that work? Or have we seen any lower mix of those? Or was it purely the good completions that drove gross margin higher in that segment?

It's -- Kevin can comment, too. But I think that we, as we integrate the businesses, we're going to find ways to drive some costs down. But I think a lot of it has to do with volumes and closeout of some of the smaller cap projects and turnarounds that are coming to bear, that really the iron and steel piece and the fertilizer piece of our Industrial segment is really the 2 parts that are driving those -- driving up those margins. And we're a little flat in our metals and mining business, mostly because of the price of copper, although we're busy, but it's just not the same volume as we experienced the year before. But that -- as we talked before, the iron and steel business is a mix of low margin maintenance work and then mixed in with turnarounds and small cap stuff, where you have an opportunity to drive the margins. And their utilization of construction overhead is usually pretty good.

Yes, so John, for the quarter, the majority of the project closeout improvements was in the steel sector. So they've done a good job of executing there and finding ways to improve the margins they're earning.

Our next question comes from the line of Martin Malloy of Johnson Rice. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Just 2 quick questions. Are you seeing some storage tank opportunities in the Cushing area because of the contango? I know you all had -- traditionally had a pretty high win rate there.

Yes, we are seeing some -- a couple projects there that we're -- we've bid or bidding, some expansion for some of the existing clients. So a lot of it is, you know, for a while there, I don't know, pick a time frame, 12 months, nobody was talking about storage in Cushing. Now we have some clients who're saying, "Hey, we may be coming to you pretty soon with some -- adding some storage capability." So I think it wouldn't be unreasonable to assume that, that opportunity may exist. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Okay. And then within the Industrial segment on the steel side, there's I know at least one sizable OCTG steel plant that shut down. Is there a risk at all that -- is that potentially going to be significant enough that it would put any of your revenues at risk?

The plants -- so our key clients there are the integrated guys, and that's U.S. Steel and ArcelorMittal, and we work in the majority of their facilities. But we're working in the majority of their larger integrated facilities. So for instance U.S. Steel announced some closures of a couple of plants. We do little -- we do or did little or no work in those facilities. And so that was not a big concern to us. Our guys that are managing the steel sector frankly have, in spite of what you can read in the paper, are expecting the next 12 months to actually be a pretty good year in our iron and steel sector. There's a lot of projects lined up. Our clients are talking to them about some efficiency improvement, some turnaround, some larger maintenance projects. So we're pretty comfortable, in spite of what you see out there and read in the paper for the steel environment, that we're going to be in a pretty good place there.

Thank you. And I'm showing no further questions at this time.

Okay, thank you, everybody for the call today. We appreciate you taking the time and having the patience with us to go through those 3 topics which we know were important to everybody to have a strong dialogue on. And we wish everybody the best in the next 3 months until we talk to you, and please be safe while you're at work and at home. Thank you very much.

Thank you.

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