May 15, 2012
Operator
Welcome, and thank you for standing by. [Operator Instructions] Today's conference is being recorded.
If you have any objections, you may disconnect at this time. I would now like to turn the call over to Richard Roman.
Sir, you may begin.
Richard Roman
Thank you, Danielle. Good morning, and welcome to Northwest Pipe's conference call.
My name is Rich Roman. I am President and CEO of the company.
I am joined by Robin Gantt, our CFO.
Richard Roman
As we begin, I would like to remind everyone that the statements we make in this call about our expectations for the future are forward-looking statements, and actual results could differ materially. Please refer to our most recent SEC filing on Form 10-K for a discussion of risk factors that could cause actual results to differ materially from expectations.
In addition, as previously disclosed, a shareholder class-action lawsuit and a shareholder derivative action have been filed against the company, and the SEC has undertaken an investigation. While these matters are outstanding, we do not intend to comment on specific-related issues beyond the disclosure provided in our SEC filings.
Richard Roman
I will now turn to Robin for a discussion of our first quarter results.
Robin Gantt
Thank you, Rich. Our net income was $4.7 million or $0.50 per diluted share in the first quarter of 2012 compared to $2.9 million, or $0.31 per diluted share in the first quarter of 2011.
Water Transmission sales decreased slightly to $58 million in the first quarter of 2012 from $59 million in the first quarter of 2011.
Robin Gantt
Water Transmission gross profit decreased to 16.6% in the first quarter from 16.9% in the first quarter of last year. The decrease in sales in the first quarter of 2012 compared to first quarter of 2011 was due to an 11% decrease from tons produced, partially offset by a 12% increase in selling prices per ton.
The decrease in gross profit was driven by higher steel prices of 19% per ton compared to the first quarter of 2011. And lower volumes, which had a negative impact on the fixed portion of our cost of goods sold.
Robin Gantt
Tubular Products product sales increased 59% to $84 million in the first quarter of 2012 from $53 million in the first quarter of 2011. Volume increased 40%, and selling prices increased 17%.
We sold 66,600 tons in the first quarter of 2012 as compared to 47,500 tons in the first quarter of 2011. Tubular Products gross profit was 8.1% in the current quarter, compared to 9.2% in the first quarter of last year.
The margin was negatively impacted by higher inventory costs flowing through from the fourth quarter of 2011. These higher inventory costs resulted from planned downtime, particularly at our Atchison, Kansas facility in December of 2011 to install equipment related to our capacity expansion project.
In addition, margins were negatively impacted by higher material cost per ton of 15% in the first quarter of 2012 compared to the first quarter of 2011.
Robin Gantt
As we have noticed during recent quarters, energy products comprise an increasing portion of our Tubular Products business. Our energy products comprised approximately 77% of Tubular Product sales in the first quarter of 2012 compared to 68% in the first quarter of 2011.
Robin Gantt
Selling, general and administrative costs were essentially the same with $7.3 million in both the first quarter of 2012 and 2011. While our professional fees increased in the first quarter of 2012 for accounting restatement-related work, we had similar cost in the first quarter of 2011 related to our accounting investigation.
Robin Gantt
Interest expense was $1.6 million in the first quarter of 2012 and $2.6 million in the first quarter of 2011. The decrease was the result of lower average borrowings and lower average interest rates.
In the first quarter of 2012, the company generated $17.7 million in cash from operations to support the growth of the business, mainly through our net income and depreciation and decreases in our receivable and inventory accounts. This was partially offset by an increase in our costs and estimated earnings from excess in billings account.
Robin Gantt
Capital expenditures were $4.4 million, primarily for environmental upgrade at our Portland, Oregon facility and plant capacity expansion in our Tubular Products plant. The remainder was for ongoing maintenance capital expenditures.
Robin Gantt
Now, I'll turn it over to Rich for an update on our business.
Richard Roman
Thanks, Robin. As we reported in our call a couple of weeks ago, as of March 31, 2012, our backlog was approximately $198 million with Water Transmission at $161 million and Tubular Products at $37 million.
As of March 30, 2011, our backlog was approximately $258 million, with Water Transmission at $194 million and Tubular Products at $64 million.
Richard Roman
As we've previously discussed, the backlog in Water Transmission has decreased. While we will not hit the lows of 2009, we are currently projecting lower sales in gross margin for Water Transmission in 2012 as compared to 2011.
Richard Roman
In Tubular Products, we expect that we will start seeing improved margins in the second half of 2012 as compared to 2011 as we progress the expansion project in our Atchison, Kansas facility this month and continue the cost improvement program in place throughout our Tubular Products facilities.
Richard Roman
In conclusion, while the first quarter of 2012 had higher sales and income than the first quarter of 2011, our overall margin measured as a percentage of sales decreased. The Tubular Products margin, however, has increased from the second half of 2011.
With the downtime in Tubular Products in our production schedule in Water Transmission, we believe the second quarter of 2012 will have lower margins in the first quarter, but we expect some recovery margins in the second half of the year.
Richard Roman
At this time, we will be happy to answer your questions.
Operator
[Operator Instructions] The first question comes from Scott Graham with Jefferies.
R. Scott Graham
So on the volume decline in water, how much -- is there a way to kind of bucket that, the impact it have on gross margin in the quarter in that business?
Robin Gantt
Don't know if we really have a way to bucket it beyond what we've done in terms of what we wish to talk about. We definitely had the volume decline, but we had the selling prices go up.
R. Scott Graham
Right. That's kind of like the essence of my question is that your gross margin in that business, if my calculations are right here, declined 30 basis points year-over-year.
And your pricing was so much better. It suggests that there was a pretty hard fixed cost hit there.
I guess maybe the best way to ask this is kind of where I'm going with this is, do you expect pricing to kind of maintain at the current levels and you kind of expect this to a relative mix to continue, or I assume it'll soften as the year goes on, on the volume side? The volume decline will be less as we get on to easier comparisons.
Will at that point later in the year, will the pricing be still this favorable, do you think?
Robin Gantt
We do not think it will be as favorable. However, it is still dependent on project by project, what's included, what are the sizes.
But we did note that we are expecting decrease in the sales. We do expect that some of these margin decrease that we're expecting will come on the sales side as well.
R. Scott Graham
Right, right. And further on the water side, is there any news about any new projects?
I know that you're involved in 1 or 2 large ones out there is there any indication as far as how that is going, award dates, what have you?
Richard Roman
I think it's fair to say Scott, that we -- I mentioned the last time that we spoke that we had some upcoming projects in Texas that were really -- it really came up because of the drought situation there. And the fear with that kind of the project is that it will get pushed back as the region see some rain, which happened a little bit, but not enough to push back the projects.
So we are, relative to where we were a couple of weeks ago, we continue to be on schedule with the bidding of those projects, which is coming up later this year. In fact, well, the first really large one next month.
And so the good news is that we haven't seen the delay in any of those projects that are being done on an accelerated basis, shall we say.
R. Scott Graham
Okay, okay. Let me just switch over to Tubular because that was obviously a really good number there.
How much was your productive capacity up year-over-year, would you estimate?
Robin Gantt
Yes, that's actually kind of a tough question because we're in the middle of our capacity projects. And we installed some in December.
Certainly had some positive impact in the quarter, there's no doubt about that. And we are selling some more this month, current month of May that will add some more.
So as to what our current theoretical was in the first quarter, that's actually a question that we don't know, and we think it's irrelevant since we're adding some more right now. But we are moving to that 400,000 in theory annually that we talked about last time.
R. Scott Graham
So would you say -- so it sounds to me, Robin, that you're intimating here that it's just a really good market. It's -- your capacity is up for sure, but the 40% volume increase was also significantly market driven.
And if I'm right on maybe what you're implying there and your outlook being favorable on Tubular for the rest of the year as well on the sales side, is this a situation where your distributors tell you that this gas to liquid switch in the market is really a good thing for them, a good thing for you, because there's been seemingly no interruption in your sales. And there's been a big change in kind of where the rigs are operational, if you know what I mean.
Could you maybe -- maybe this is more of a question for you, Rich. Can you characterize kind of how this gas to liquids is impacting conversations with customers, what have you?
It doesn't look like it's impacting the top line at all, in fact, only in a good way.
Richard Roman
Yes, and that is true. It has, clearly, a positive impact on what we've been able to do.
We're clearly increasing our productive capacity, and that's being called for in the marketplace. Now, with regard to this focus on oil prices as opposed to gas prices, we do have to remember and looking forward that the gas price is still pretty depressed, and so that eventually, even long term, has an impact.
But thus far, we are seeing a pipeline that for orders, that's really more impacted by near-term price of steel than it is the price of oil. Because what's happened now is people are being very cautious about the inventory that they're building because there's a general perception that the price of steel will fall.
And so we're seeing some, as I explained the last time we were together. Some choppiness in the orders, more choppiness now as we get in further into 2012 than we saw earlier in 2012.
R. Scott Graham
So there might have been in the second quarter a little bit of pull forward volume?
Richard Roman
Well, I don't know if there's -- the second quarter of this year, you mean?
R. Scott Graham
I apologize. I meant the first quarter of this year.
In this 40% number, that might have been a little bit of pull forward for the rest of the year?
Richard Roman
No, I don't have the impression that there's much pull forward there, Scott. I do -- I think that the increasing demand is genuine.
And so I think that we're just seeing some -- our ability to produce it and the fact that the orders continue to come in, the order -- the demand continues to be strong although somewhat choppy.
R. Scott Graham
My associate is tapping me here. He said that you said that your customers are expecting sales -- steel to decrease in price.
I'm sorry, I thought you said to increase in price, which is why I asked the pull-forward question. That would not be relevant, okay.
So thank you for that...
Richard Roman
Something that we hadn't talked about, but that was more relevant to the first quarter of 2011 which is what we only saw then.
R. Scott Graham
That's very helpful.
Operator
Our next question comes from Brent Thielman with D.A. Davidson.
Brent Thielman
Rich, you guys talked about some expected downtime sort of disruptions in Q2 associated with bringing this capacity online in Tubular. And I'm wondering, do you expect it to be the same degree as you saw in Q3 and Q4 in terms of the impact?
Richard Roman
No. This is a smaller project that we undertook in Q4, and so it should have a lesser impact.
Brent Thielman
And that should all be complete by the end of Q2?
Richard Roman
Yes. It should be complete by the end of this month.
Brent Thielman
Okay.
Richard Roman
There's another project going into Atchison in the fourth quarter, late in the fourth quarter, which will increase productive capacity again. But between the end of this month and the fourth quarter, we don't have anything planned there.
Brent Thielman
Okay. And then on the water side, and I understand it's obviously very lumpy quarter-to-quarter.
Do you look at the sort of one quarter uptick in backlog here as an anomaly? Was there a large project there?
Maybe a little more color on that side?
Richard Roman
I don't know that it's an anomaly. There are large projects that come along from time to time, and there certainly was in the first quarter of 2012.
But we have some large projects coming up too, Brent. And some of these Texas projects are pretty big, and so they'll be that kind of big addition that occurs as we go through this year.
Brent Thielman
Okay, Rich. And I'm sorry because I missed those comments.
I know you indicated that those were going to be up for bid. Did you give a timeline on those again?
Richard Roman
Yes. The first -- well, there's already been one in Texas that we won an award for.
But there's another large one coming up, which is actually in the bid next month.
Brent Thielman
Any sense on the side to that?
Richard Roman
Well, it's a very large project, but it's being bid in sections. There are 4 sections to it.
But it's a project that's, in total, as big as the project that we built in Utah.
Brent Thielman
Got you, that's helpful. And then Robin, on the corporate line, I understand there's some unusual stuff there.
Would you expect that to kind of return to sort of Q2 through Q4 levels, kind of that $3 million to $4 million?
Robin Gantt
I do expect that it will decrease. I don't know if it will get back to $3 million or $4 million?
It could get down to $6.5 million, $6 million, but probably not until Q3. We still have some overhang in the second quarter that are statement related to the 4th week.
We didn't file the audit until the end of April. So we will have some overhang there.
Brent Thielman
Okay. And then just one last one, when do you guys expect to file 10-Q?
Robin Gantt
We expect to file that today.
Operator
Our next question comes from Barry Vogel with Barry Vogel & Associates.
Barry Vogel
You made a comment, Rich, in the press release that we will start to see improved margins in Tubular in the second half of 2012 as we complete the expansion in Atchison, Kansas -- in the Atchison, Kansas facility in May. You had an operating margin for Tubular in the first quarter of 7.4%.
Could you give us your goal for Tubular operating margins in the second half of '12? And what would be your long-term margin goal as tonnage and utilization of your new capacity continues to help the company financially?
Richard Roman
Yes, for the second -- you're right. We're in that 7% range, 7% going up to 8%.
And for the second half, I would look for 9% going up to 10%, Barry. And then longer term, something in the very low double digits.
And so I don't, we commented -- it might have been, you asked this question before about the 15% margin that some other companies have achieved within the energy sector. And I explained that we don't have a full complement of products.
We don't make seamless, for example. That tends to be a harder margin product.
And so, I think that we're headed for something that's low double digits, but I -- but my target for the second half of the year is 9% to 10%.
Barry Vogel
That will be pretty good, actually.
Richard Roman
Yes, we are working towards getting there.
Barry Vogel
Now, would you think that if everything comes as planned in terms of the expansion and you can do the business, that, that low double-digit margin is a reasonable goal for 2013?
Richard Roman
Yes. Well, in terms of our operation, I think it's reasonable.
In 2013 and well in for the second half of 2012, we need to keep our eye on what's going on in the marketplace, not only with regards to demand, but the supply of pipe. We're seeing, still seeing a lot of import.
And so the pricing of the imports is going to impact the margins that we make, both in the second half of '12 and '13.
Barry Vogel
Now, but that is happening as we speak so...
Richard Roman
That's right. So we're talking about increasing the margin in the face of that.
But it is a factor.
Barry Vogel
Okay. No, I understand that.
And as far as going back to someone else's question about what's your capacity today, would you have some idea, relative to that 400,000 ton number that you've used a couple of conference calls before, where you are right now? Roughly, where you are right now?
Richard Roman
I think on the last call, we said at the end of 2011, we were at roughly 275,000 or 280,000. And you can see by the -- if you just multiply the first quarter by 4, that you're at 260,000 to 270,000.
And so we are some place between that 275,000, 280,000 going up to 400,000 at the end of this year. And at the moment, I mean we're literally doing the, just finishing the -- I don't know if finishing's the right word.
But coming back up from the work that we've been doing in Atchison, and so that's going to have additional impact. How much, how -- are we at 325,000 now, are we at 350,000?
I really don't have a feel for that, yet, but I think we're -- it's safe to say we're above 300,000 now.
Barry Vogel
All right. Now, I have one more question on the Saginaw, Texas facility.
You talked about on your press release very large projects. You just said that you got an award already, then you just said -- what with the prior questionnaire -- questioner that, that large project where you got an award comes in 4 sections.
Does that mean you got an award for one of the sections?
Richard Roman
Yes, there's actually 2 different projects that have 4 sections. One that's coming up for bid, and one that recently bid.
And the one that recently bid, we did get an award for the section, yes.
Barry Vogel
So that's the one section or all 4?
Richard Roman
Just for 1 section.
Barry Vogel
And is that in your backlog figures?
Richard Roman
Let's see, I think -- I have to look Barry, but I -- because I don't remember whether that came up in April or it came in March? I don't remember off the top of my head, to tell you the truth.
It's either in March or April. If it's in March, obviously, it's in the backlog numbers.
If it's in April, it's not.
Barry Vogel
So, when would we have more of an understanding of what -- how successful you would be in these 2 large projects? I mean, what's the earliest date we'd see that increase, your backlog dramatically?
Richard Roman
You'll see -- when we report the backlog for the second quarter, you'll see how we compared on those projects.
Robin Gantt
Assuming that they aren't delayed in bidding.
Richard Roman
Right, well, we can explain that too...
Barry Vogel
Excuse me?
Robin Gantt
No, Barry, these projects, neither one of them are the Tarrant County integrated pipeline that we've been talking about. These are other emergency work.
So that really, really, really big Texas job is not what we're talking about here.
Operator
[Operator Instructions] Our next question comes from Matt Sherwood with Cooper Creek Partners.
Matt Sherwood
Just on the -- just had a quick question on the Tubular and the capacity-constraint questions that you've been asked. Were you capacity constrained in the first quarter?
In other words, if you had the full 400,000 tons of capacity, would you have been able to -- did you have orders available to ship more product?
Richard Roman
Well, the issue would have been for us, the ability to make it. We're not running any of our plants on round-the-clock shifts.
So we run 2 shifts. And so the issue about going out and seeking more orders and being able to make them would have really need to have been addressed previously in order to bring on the crews and train them and get to round-the-clock operation.
That story is more complicated by the capacity expansion that we're undertaking in Atchison, which would have been -- the first plant would have expanded to round-the-clock operation. So we are looking at that coming up, but we were not -- it was not as if we were going out in trying to get orders to get to around-the-clock operation.
Matt Sherwood
And that would be -- an around-the-clock operation, what level of capacity utilization would that sort of correlate to versus 2 shifts?
Richard Roman
Well, the round-the-clock operation will bring us to the full amount of what we're talking about. The 400,000 tons, when we eventually get there, we still have a capital project to go and get there.
Matt Sherwood
I know. And then the capital project in the fourth quarter at Atchison, what's the nature of that project?
Richard Roman
Put an accumulator on the big mill. There are 2 Mills there.
And on the larger mill, we're going to put an accumulator. We put an accumulator on the smaller mill in this most recent -- this May project that we're doing.
Matt Sherwood
Will that increase the capacity or sort of improve the efficiency at the operations?
Richard Roman
It will increase -- it will do both. It will get you more throughput and a better yield.
And what the accumulator does is allow you to process the coils of the front end of the mill continuously rather than stopping the mill and putting a new coil on and when that one runs out, stopping the mill, putting another a new coil on. The accumulator just allows that to be a continuous process.
Operator
Our next question comes from David Fondrie of Heartland Funds.
David C. Fondrie
I guess we focused in again on Atchison, can you tell me...
Richard Roman
Dave, you need to get closer to the phone or -- we're not getting -- hearing you clearly.
David C. Fondrie
Secondly on Atchison, when did you take that down? Was it before the second quarter started?
Richard Roman
No, we took it down in May.
David C. Fondrie
You took it down in May, so it's only going to be down for approximately a month?
Richard Roman
Not even, yes.
David C. Fondrie
Okay. And then inventories in total were down from year end, which I kind of thought you're going to try to build some inventory for the Atchison improvements.
Was it just demand? Was most of that decrease in inventory coming on the Tubular side or they come on the Water Transmission side?
Robin Gantt
The decrease came in on the Tubular side, and that was pretty much all the raw material. And that we had a buildup in Atchison, the coil to get ahead of the increased production we knew we were going to have beginning in January.
So we had that little buildup, especially while they were down. That went, that decreased, so that inventory decreased -- the finished goods is about the same.
David C. Fondrie
Okay. And I think you said that some of the steel, particularly back in the first quarter was probably bought at somewhat higher prices.
Are steel prices -- Can you give us a trend of steel prices, I guess that's what I'm asking?
Robin Gantt
Steel prices have been holding pretty steady for a couple...
Robin Gantt
[Technical Difficulty]
Operator
Please stand by.
Robin Gantt
Okay, sorry about that. We think we've gotten disconnected from everybody.
Dave Fondrie was asking about the steel cost? So Dave, are you still on?
Richard Roman
This is Rich Roman.
Robin Gantt
So I'm not quite sure exactly when it cut off. We were talking about steel prices.
David C. Fondrie
It kind of cut off, I think, right at the beginning.
Robin Gantt
What we're seeing is that the steel prices have been a little bit up, a little bit down for a couple of months now. There are -- there is a belief that they're going to decrease, which has let us led to some of the uncertainty in the tight markets.
People believe steel prices are going to go down, therefore, pipe prices will go down, so they haven't been buying pipe as much ahead as they do when you have the opposite happening. If they think steel prices are going up, they, of course, try to get their orders in, which is what we saw a year ago.
David C. Fondrie
What's the lag in time in time between -- I mean, obviously, if steel prices start going down and people are looking for lower pipe prices, the inventory of older, higher price steel, obviously, flows through, what's the lag time between the repricing of Tubular pipe due to lower steel prices and timing it through the production process?
Robin Gantt
It's kind of -- I've seen a really, a narrow band. I've seen wider band.
I think it kind of depends on how high it goes up. Steel prices a few years ago were real, real hot.
The pipe prices were really flying up right behind them pretty closely. And other times, it will be narrower, but I think it's probably a good month, 1 1/2 months.
David C. Fondrie
Okay, so you could -- so if we had a period of downward projected steel prices, you probably have some margin pressure in the Tubular side, is that a fair statement?
Robin Gantt
Yes, as we start working through orders, yes.
David C. Fondrie
Okay. And then the last question I have, if you could -- you mentioned that imports were still pretty prevalent.
Maybe give a little more color about that? And I think on the last call, you talked about some potential of some tariffs on some of the imported pipe?
And if you could in that analysis, kind of talk about the -- I mean clearly, there's a huge cost to ship, heavy pipe from overseas into the U.S. markets.
What perhaps that, that cost is versus -- or what cost advantage you have just of the freight side?
Richard Roman
Yes. I talked a little bit the last time about the import situation.
The imports are still running very, very high. And they were high in, let's say, late 2008, early 2009, with the imports that came from China.
And following that experience, there was a trade case brought against China and some countervailing duties put on Chinese pipe. And so on that pipe no longer came to the United States or at least no longer came directly from China to the United States.
But the role of supplying that pipe has really shifted to other countries now, in supplying imported pipe. And Korea is really the principal exporter of pipe -- energy pipe to the U.S.
now, but it's also coming a little bit from India, a little bit from Turkey. It's coming from a lot of different spots -- a little from Vietnam.
One of things the Chinese manufacturers did was simply shift their meals to Vietnam so they could export Vietnamese pipe instead of Chinese pipe. So the role of imports continues to be a very important one.
It's about half the supply of Supplier certain kinds of energy pipe. And it really is one that is starting to build in terms of inventory carry in the U.S.
from places like Korea. So that's why I say that we really have to have one eye on what's going on with regard to imports, as well as the other eye on what's really happening with demand because demand is pretty good.
Rates continues to be relatively high, and that is -- had been a strong draw for demand. Now, with regard to any countervailing duty case we might have, against let's say, Korea, I explained said last time, I didn't think much was happening and I still don't think much is happening.
So that although the Chinese case sort of proceeded directly and was dealt with, I thought clearly expeditiously by the U.S. government, there is nothing of a similar yield going on with regard to the Koreans or the Indians or anything like that right now.
So we will still be subject very much to the price you put on by the pricing of this imported good.
David C. Fondrie
And what's their cost disadvantage or their freight disadvantage, Rich, coming from those overseas locations?
Richard Roman
Well, I don't relative to the -- I don't know what their freight is across the ocean. I know that ocean freight, in general, is very inexpensive.
And since the cost of this deal, pretending on -- it depends on the price of steel at the moment. But at current, at prices of steal, the cost of the steel really is 70% or 80% of the cost of the product, so that really is the cost of the steel is really what's driving cost of your product not the cost of the freight to get there.
We've seen a lot of imports from all over, not just from Asia. And so that leads me to believe, Dave, that whatever the prices they're paying for that kind of transformation, it's not significant to the total price of the product.
David C. Fondrie
So the U.S. market is fundamentally under-supplied.
We do need foreign pipe, I guess, to meet the demands of the market but there is concern about supply long term or too much supply long term, is that a fair assessment?
Richard Roman
That's right. If you just look at OCTG, so the oil country, part of the -- what we refer to as energy pipe is line pipe in oil countries, OCTG stuff.
The OCTG pipe market had been supplied roughly half from overseas historically.
Operator
Our next question comes from Diane Daggatt with McAdams Wright Ragen.
Diane Daggatt
Just a couple of questions here. You mentioned you're bidding on a second Texas project next month.
That's large 4 sections similar to your Utah project, which I think was around $61 million. So are you bidding on all 4 sections, so it potentially could be around $60 million backlog project down the road?
Richard Roman
It's unlikely we will bid on all 4 sections.
Diane Daggatt
Okay. And then any color on the size of the first Texas project?
I may have missed it on the call.
Richard Roman
Well, there are a couple of projects going in Texas now. But I don't think that we talked about the specific size of our projects.
So we don't associate for us a specific revenue amount with a project unless you have something like the Provo project, which was a pretty unique situation for us because it was so large. But -- so these projects that we're talking about in Texas are large projects, but they are -- there are other projects that we have that from time to time, that are similar size.
So we don't try to break them out and tell you specifically what's in the backlog and what portion of the revenue we have that relates to a specific project, in part for competitive reasons.
Diane Daggatt
Okay. And then on the energy products side, the 77% of your Tubular sales were energy this quarter.
Those margins, are they higher than the construction side and should we see that percentage even go higher?
Richard Roman
Well, in general, the -- especially right now, the margins on the energy side are better than the standard and structural margins. But you have to remember that the standard and structural end of the business is a very depressed end of the business.
And so there isn't really much demand going on at all for commercial construction, so it's kind of an unfair comparison at the moment to say that energy margins are better. They are, but commercial constructions were really suffering.
Operator
And our final question comes from Brent Thielman with D.A. Davidson.
Brent Thielman
Sorry, one more. But -- and again, sorry to beat on this Texas projects.
But if you are successful in winning more sections here, would that change your outlook for Water Transmission with the timing of delivery for these projects beyond 2012?
Richard Roman
It would -- some of these projects will deliver -- will certainly deliver into 2013. And so if we are successful on these projects, it will certainly project us or allow us to project sales beyond what we're describing to you here today.
But, Brent, I don't think that even if we were to be as successful as we can be with regard to these projects that we can get enough work into 2012 to make 2012 reach the 2011 revenue number. I still think we're going to be below 2011 revenue.
And you can see that we work fast enough now and get it to the plants.
Operator
And at this time, there are no further questions.
Richard Roman
All right. Thank you, everybody.
And we will see you on the next quarterly call.
Robin Gantt
Thank you.
Operator
Thank you for participating in today's conference. You may disconnect at this time.