Good morning. My name is Tunisia, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Second Quarter 2013 Earnings Conference Call. [Operator Instructions] I will now turn today's conference over to Nathan Elwell of FTI Consulting. Mr. Elwell, you may begin your conference.

Thank you, Tunisia. Good morning, everyone, and welcome to the EMCOR Group Conference Call. We're here to discuss the company's 2013 second quarter results, which were reported this morning. I would now like to turn the call over to Kevin Matz, EVP of Shared Services, who will introduce management. Kevin, please go ahead.

Thank you, Nathan, and good morning, everybody. I have to report a first for us though after doing this about 60, 65 times. Right before we went live, our fire alarm just went off in our building. We believe it's a drill, so we're going to go forward. But to the extent that the fire marshal throws us out of the building, we'll stop at that time, and we'll reschedule. So hopefully, everything will go according to plan. Anyway, welcome to our conference call for the second quarter of 2013. For those of you who are accessing the call via the Internet, on our website, welcome. Hopefully, you're at the beginning of the slide presentation that will accompany our remarks today. Please move to Slide 2. With me today to discuss the quarter are Tony Guzzi, our President and Chief Executive Officer; Mark Pompa, our Executive Vice President and Chief Financial Officer; Mava Heffler, Vice President of Marketing & Communications; and our Executive Vice President and General Counsel, Sheldon Cammaker. For call participants not accessing the conference call via the Internet, this presentation including the slides will be archived in the Investor Relations section of our website under Presentation. You can find this at emcorgroup.com. Before we begin, I want to remind you that this discussion may contain certain forward-looking statements. Any such statements are based upon information available to EMCOR management's perception as of this date, and EMCOR assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. Such risks and uncertainties include, but are not limited to, adverse effects of general economic conditions, changes in the political environment, changes in the specific markets for EMCOR services, adverse business conditions, increased competition, mix of business and risks associated with foreign operations. Certain of the of risks and factors associated with EMCOR's business are also discussed in the company's 2012 Form 10-K and in other reports filed from time to time with the Securities and Exchange Commission. And With that said, please let me turn the call over to Tony. Tony?

Thanks, Kevin. And I'm going to be on Page 3, and I will be covering Pages 3, 4 and 5. As we operate in 2013, we are still in uncertain and choppy markets. And we are continuing to execute well and focus on the areas we have the greatest opportunity to grow the company and provide returns to our shareholders. I thought before we delve into the quarter and got specific about the numbers and we have some add backs with pro formas, I thought I would step back and talk about the important actions and some important trends as we seeing in the business. First, our domestic backlog is up 9.4%. With our construction operations up over 15% and EFS is down a little due to the portfolio reshaping we talked about in our first quarter call that we executed in Q4 2012. It makes sense for us to focus on the domestic backlog, as we are withdrawing from the U.K. construction market, and that withdraw distorts the overall number as far as backlog growth and composition. It's good for us to be shrinking in the U.K. right now as we withdraw from the construction market. What we did here through the first 6 months of this year and what we've been doing, really, a lot of action in this quarter, is we took important access to position our company for the long term. We take it as a given that the market is going to be choppy and uncertain. Until we get them, we have to take the actions that we can do to build value for the long term. First, we will be closing on the purchase of RepconStrickland in the next week. And with that transaction, we are really positioned to produce exceptional results for our…

Thank you, Tony, and good morning to everyone participating today. For those participating via the webcast, we are now on Slide 6. As with past quarters, I will begin with the discussion of our second quarter results before moving to year-to-date key financial data derived from our financial statements, included in both our earnings release announcement this morning and our Form 10-Q, which was filed with the Securities and Exchange Commission as well this morning. Consolidated revenues of $1.56 billion in the quarter are down 2.1% from 2012. While reporting segments other than U.S. Electrical Construction Services, reported revenue declines during the second quarter. Domestic electrical construction revenues increased 13.7%. Domestic mechanical construction quarterly revenues decreased 6.8%, facility services quarterly revenues were flat, and our U.K. segment revenues decreased 22%. Revenue growth within the domestic electrical construction segment can be attributed to increased project activity within the quarter, and the commercial industrial and institutional market sectors. Revenue declines within our domestic mechanical construction segment are due to reduced volumes within commercial and house care, as we were active on certain large projects during 2012 that were substantially complete prior to the start of the current year. Our facility services segment revenues were essentially unchanged between quarterly periods, as revenue increases within our mechanical and energy services divisions were offset by revenue declines in our commercial site and government service offerings. Reduced levels of indefinite duration and indefinite-quantity project opportunities within Government Services and a strategic reshaping of our commercial site business project portfolio offset revenue gains elsewhere within this segment. Industrial services revenues were flat between each second quarter period. Consistent with my last 2 quarterly commentaries, the decrease in revenues from our U.K. segment is the result of our continuing plan to deemphasize our engineering and construction operations, which…

Thanks, Mark. We're now on Page 12. I'll spend a little bit of time on backlog, and Page 12 -- this page is a little different than you're used to seeing. On the left-hand side of the chart you'll see total backlog. On the right, we're talking about domestic. If you look at total backlog, we're up 6.9% or $227 million. And all of the increase is organic. But really, what's going on in the U.K. and our complete withdrawal from the U.K. construction market, you can see that's down, and that will continue to drop until we just get to stasis on our facilities business. Let's go to the right-hand side and look at the domestic market. You look down at the blue, and what you'll see is EFS is down $40 million. We foreshadowed that in our earnings call, 2012 year-end earnings call, where we talked about what was going on with our portfolio reshaping of the site-based business. We had a large contract and a couple of smaller ones that weren't profitable. Went back to the customer that we need to do X to make this work for both of us. We decided to part ways. That's a good outcome for margins long term and allows us to focus in more positive directions as we discussed. The good news on this page, and it is good news, is we've had a sizable increase in our domestic construction backlog of 15.6%. And in the Q this quarter, you'll now see a more detailed disclosure on backlog and invite you to look at that. So backlog is up 9.4% domestically and you can see the components of it. Here in the states, U.S. construction base backlog increased $326 million, with both mechanical and electrical segments experiencing double-digit growth. That's…

[Operator Instructions] Your first question, from Rich Wesolowski. Richard Wesolowski - Sidoti & Company, LLC: $90 million U.K. backlog. Is that going to 0 or is there facilities in there as well?

No, we -- U.K. backlog is we have facility services contracts, so it won't go to 0. Richard Wesolowski - Sidoti & Company, LLC: Okay. In the facilities margin, from an outsider's perspective, there was a tale of 2 quarters within the half. I understand the project mix isn't the same every quarter, but I'm wondering if kind of look through that and comment on the performance of both the USM and the rest of your non-refinery facilities operations?

We've seeing very good improvement in our mechanical service business. We are seeing improvement in our site-based business, and we have a little bit of a headwind year-over-year in our government services business.

And, Rich, this Mark. Just to refresh everybody's memory. The USM business, seasonally, is weak in quarters 2 and quarters 3 because the focus really moves to the landscaping genre. And what happens there, obviously, is we incur a lot of cost in quarter 2, which we're billing for throughout the year. So quarter 2 tends to be penalized on a seasonal basis relative to the other 3 quarters of the year. Richard Wesolowski - Sidoti & Company, LLC: With RepconStrickland, I imagine the turnaround is going to play even a bigger part in the EFS, most of those type of companies operate on May fiscal year-end. So I'm wondering, which is going to be a strongest quarters here in the facilities, with Repcon in there?

I mean, first and fourth should be really good quarters. And the second and third are good for mechanical services, and the site-based and government really are sort of level through the year. Third quarter -- and a traditional year is really strong for government as they get to the end of the government fiscal year. But if you look at it, big picture, it should be first and fourth, and second and third, a little weaker. But again, we'll have profitability throughout the year. Richard Wesolowski - Sidoti & Company, LLC: Lastly, the construction backlog, you're up 16% from a year ago. It seems at odds with the lackluster industry numbers, your own comments that it's still difficult market, and I'm wondering whether you see this as the leading edge of something longer term?

All we can do is bid the work that's there and win it and win the right jobs. And it's still a big market. We built some nice capability in the transportation sector. We built some nice capability in industrial sector. I think we'd all agree here, if we didn't have the capability to do those kind of works, we wouldn't be able to do what we did here backlog lies in the quarter.

Your next question is from Alex Rygiel of FBR Capital Markets. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: Tony, you mentioned while you're talking about backlog being up real nicely, can you sort of comment on the competitive environment and where you think pricing is today versus maybe a year ago or 2 years ago?

I'm going ask Mark to help me with this because we have some underlying data that's decent. Look, it's clearly better than it was 3 years ago. It's better than it was 2 years ago. I think people are getting more rational, especially on bigger jobs. And they've been there for a while but it -- and I think everybody realizes, hey, this 5 years stroke we've been on is a little better. There's no big groundswell coming, so you better be careful what you bid because that's what's going to be in your numbers. There's not going to be anything coming behind it that's going to be able to mask that. Mark, you had some things we did on gross margin when you add back some of these things.

Yes, I mean, I think, Alex, in my commentary, if you look at our domestic and construction operations, clearly, electrical is easy to see because it's right there, still performing at a very high level. Mechanical but for the 2 projects we discussed, it's generating operating margins of around 5%. So we're pretty confident in what's in backlog as we go forward, as far as the profitability attributes. And personally, I think, as people have been reluctant to commit capital dollars. And after a long period of time, those who are making decisions really are evaluating the quality of the people that they're working with. And price is always important as we all know, but certainly quality I think is just ever much as important today as certainly as it it's ever been. So I think that's helpful from an EMCOR perspective. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: And, Tony, it seems like there's a lot more talk about some very large commercial projects, hospitality projects, whether or not it's in New York or Las Vegas, there's a lot of talk. And maybe it's the architects and the planners sort of starting to figure out financing and timing. Are you seeing that? And when could you anticipate seeing a surge in that activity translate into backlog growth in commercial and hospitality?

We're usually 9 to 12 months behind that, Alex. As you know, where we -- the job has to get designed, it's got to get budgeted, then they got to bid it through the general contractors and the construction managers, and then eventually, it ends up on our desk. So I'd say, we're probably 9 to 12 months out on that. I will tell you this. I don't want to say that small project work has grown substantially, but it's stabilized and it's gotten more rational. What happened there for a couple of years, and unfortunately, we had about 4 or 5 jobs we were guilty. Small contractors or service contractors -- small contractors stepped into work they shouldn't be doing. But more negatively, a larger contractor's came down into the small project work, and they really don't know what they're doing with it down there. And they pollute the market. What you are seeing is those guys get up because they know what they were doing. And you're seeing more rational pricing return to parts of the service market. And that's good underlying and that's part of which drove the performance improvement year-over-year in our mechanical services business which was quite substantial. Alexander J. Rygiel - FBR Capital Markets & Co., Research Division: And lastly, what segment is RSI going to be dropped into?

It will be in EFS.

Your next question from Adam Thalhimer of BB&T Capital Markets. Adam R. Thalhimer - BB&T Capital Markets, Research Division: I just want to make sure. So Repcon is not into guidance and is $0.10 still the right number for the back half of the year?

Repcon is in guidance. And what we said when we bought it was $0.10, and that's what would be in our guidance. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Okay. And then what are your thoughts on the margins in the electrical segment good performance in the first half of the year? Have you had any kind of project closeouts in there? Or do you think can kind of maintain this number?

It's pure operations right now. There was no significant closeouts. We're not finishing anything. The good news about us, Adam, is when we have those kind of things, seriously, we talked a lot about this loss today. You can tell we don't tend to make excuses. We just tell you what the impact was. We're going to deal with it, we'll deal with it. We're not happy about it. I'd say a portion of it's our fault, and a big portion of it isn't our fault. In the industrial project, we said we're doing the right thing by the customer. We could've grounded out and said, well, it was us. We're in this business for the long term. We jumped in and said this jobs getting finished. On the DOE side, you can say it's a very confused state of affairs and when this thing is designed. And hopefully, we're coming to the end of that now, and that's usually when the losses come, right, when you're coming to the end of it. We do the same thing on the upside. If you followed us over the last couple of years, as you have closely, when we closing off the hospitality work and other, we tried to tell you what we thought the outsize impact on our business was from those margins. So you can usually count on us to do that -- always count on us to do that when that happens. So when you look at the first half, along with the answers to where you're going, you look at the first half in electrical, it's sort running the West Coast office. There's nothing fancy going on here. We're just executing like crazy. And we've got a bunch of guys just grinding out labor productivity right now in a tough market. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Okay. And lastly, just what are your thoughts on -- I know you covered this in a previous call, the Repcon in 2014, is it just -- you just take whatever the impact expected to be in the back half of '13 and multiply that by 2? For '14, is there anything else you that should be happening?

We think it's a little more than multiply by 2, because again, first half has to be a little bit stronger than the second-half. Also we're not getting this until August really effectively. And so much depends on the customer mix that we'll have. What we like about the transaction and what we like about what we're seeing so far as we delve in, you hear a lot of people talk about refining space. First of all, you can't watch this sort of turnaround season to turnaround season. The fundamentals are there, good long-term trends. So much is dependent on what your customer's doing that quarter. The good news is, we've got broader coverage across customers now. And we're playing at more parts of it. We have at least 2 products now that feed not just the turnarounds we will be executing, they'd feed other people's turnaround. Is it augmented labor or specialized labor, which is Turnaround Welding Services, or cleaning in shop services and repair services which is [indiscernible] job services? Base tending are a better indication of what's happening broadly in the refining sector. When you look at those broadly, there's still a lot of maintenance work going on. In each one of us that are Turnaround contractors, then you get to the specifics of Altair or Repcon or OIS, you get into specifics, we're dependent on what customers would want to turnaround. Something those scopes expand, sometimes those scopes don't expect to, and sometimes those turnarounds got pushed by a month or 2, or sometimes even a little seasonal, you do a mini turnaround. So all those things come into play. Obviously, when we give guidance in '14, we'll know -- we'll have a pretty good idea of what we expect for the year.

Your next question from Steven Folse of Stifel. Steven Folse - Stifel, Nicolaus & Co., Inc., Research Division: First question. I guess I was just double checking that those mechanical -- troubled mechanical projects were completed. And then if not, is there any expected continued drag into the third quarter?

Let's go how we have to account for it and Mark will take it. Look, if we know the losses there and we estimate the cost to complete and get a sizable loss, it's reflected immediately in the P&L. Now it may depress margins a little bit going forward, because you would be taking revenue with no profit, but the losses you could argue to stop the minute you account for the losses.

The only drag that you have in the back half of year is now you're going to have some revenues flow through without any margin because of their loss contracts.

The industrial project should finish up here in the third quarter. The DOE project, we think we've got it captured. We're over 80% complete, and we have to keep grinding it out. Steven Folse - Stifel, Nicolaus & Co., Inc., Research Division: And then on EFS, you guys have talked a little bit about the portfolio reshaping going on there or downsizing some of the government side business. Is that segment still a little bit more disproportionately weighted towards the government than some of the other divisions? I know you guys have said 15 to 18 before but...

We've never talked about downsizing our government portfolio. What we said is, we reshaped our commercial portfolio with a couple of contracts. If you look at the weighting of the business, as far as the site-based business, we are larger commercially than we are in government.

Your next question from Nick Coppola of Thompson Research Group.

So looking at the strong domestic backlog growth, especially construction, are there more opportunities available in the marketplace at this point? I'm kind of wondering if you're viewing this as an inflection point where more work is recurring?

There is a little bit of growth, right? If you look at some of the census data, public stop, private stop. Reality is we want some work in transportation which is public, but it's long-term projects that needs to be done or we won't be driving here in the Metro New York area 5 years from now. So some of it is a mix of both. What really you need to see to improve and if you look at our backlog and you adjust for the service agreement we took -- a couple of service agreements we took out in Q4, you are seeing growth in commercial. So when we say more work is becoming available, what people really talk about that is in the commercial market. And I think it is up a little bit, at least that's what everybody intimating and the data supports that. Industrial is a little different. You can swing because of plants being built or it can swing because of power plants. There are good private opportunities on the industrial side right now, and really, it's being driven by what's going on in the energy sector here in the U.S. And we're participants in that, and we're bigger participants than we ever have been. So I think you've got to parse it. I want to go quit worrying about rising tide and let's all votes because there haven't been much of that in 5 years, and I think it's made us a better of company. And we'd like to have a little bit of variety. This made us a better company we've gotten very disciplined in how we approach work.

Nick, it's Kevin. What you need to also look at when you take a look at transport -- transportation and water & wastewater and go back over time, a lot of those projects are a little bit lumpy. And so you'll see that we've always participated, we work it down, then we win some projects, we work it back. So this is not uncommon for us to see some growth from time to time.

And it's usually very good work for us.

Right.

Yes, that's helpful. And then just to catch on about the summer season here, through July, is there any kind of benefit from hot weather?

Let's go to degree cooling days here in April, May and June. They're down. So there is a -- we've had substantial improvement in mechanical service business in that quarter with no help from the weather. Now was last week a glorious week to be in EMCOR company in the Northeast? Yes, absolutely. Would we like 3 more weeks of that? Sure. But the reality is, it's 70 degrees here in Connecticut. And with 42 degrees in Pittsburgh last night. So hope they gave our guidance a chance to recover this week a little bit. We're doing some project work. I do think people realize that they were very lucky to have an EMCOR service agreement last week. As we actually came out and met our customers, we were sold out. Call on work for the most part couldn't happen. We went and took care of our customers that have committed to us, and I'm sure this week we're getting to the ones that didn't commit to us and realize we're the best option in the market.

Your next question is from John Rogers of Davidson. John B. Rogers - D.A. Davidson & Co., Research Division: Just a little bit of follow-up. Tony, the difference in -- I understand the margin difference, but between electrical and mechanical growth, is that -- what is driving that? Is it just the mix of businesses series or is there something going on with the end market there exposure?

Mark talked about the commercial and Altair finishing up. But really part of it also is we have pretty good industrial performance this year. We had great industrial performance last year. We have a great industrial backlog. You know this, John. It's very difficult quarter-to-quarter to look at some of those things you would have to have. We had such a strong first half last year in mechanical that the compare is really tough.

And remember, electrical didn't quite have that kind of half last year. It was upside down from what it looks like this year. John B. Rogers - D.A. Davidson & Co., Research Division: Okay. Any in terms of where you're adding people, hiring people to prepare for this a little bit better backlog, any comments there?

We've always been fortunate to be able to find the skilled labor that we need. We tend to have the skill supervision. We tend to keep those folks busy. They may have to do things they don't necessarily like to do. When the economy is tougher, a lot of them will put tools back in their hands. And then they go back to being supervision, now that we have more work. But we've always been fortunate to be able to source it. I think there's a lot of reasons for that. One is, to start with, that's the skilled trade person, and they're terrific, they know they're going to get paid out of an EMCOR company every week. That's never a question. The second thing is, they know they're going to be working in a very safe environment. We're not only there trained to do things right and safely, but their supervision is trained on safety and believes in it wholeheartedly. They also know they're going to have the best PP&E to execute that task. And so they're not going to be working with shoddy equipment. They'll be working with the right equipment to get the task done. I think the reputation of our local leadership and our local CEOs and the care that they take for their people really allow us to keep our base workforce intact and really allow us to track the best workforce, when we need to top it off as we grow backlog. John B. Rogers - D.A. Davidson & Co., Research Division: And lastly, on Repcon, has the cost of this acquisition or the fees involved, have they grown since we talked a couple of weeks ago?

I think we said $6 million to $7 million. I think...

That's in our first press release that we issued on the 9th -- 17th, I think. John B. Rogers - D.A. Davidson & Co., Research Division: Okay, but previously, you hadn't talked about the cost you incurred in the 3 quarters.

No, no, we haven't talked about it.

There was nothing in quarter 1. So isolated the Q2 and, obviously, Q3.

John, as you know, for all you guys on the phone, if the financial sector would get a little more competitive, we would have bankers to help us. And the banks are getting more competitive when we need to borrow money. We could drop those fees. John B. Rogers - D.A. Davidson & Co., Research Division: And then lastly terms of additional acquisition opportunities, I mean, if the market's not growing quite as quickly as we had all hoped a year or so, I mean, are you seeing more opportunities out there?

We tend to look at opportunities -- we tend to know the sort of companies and actually the names of the companies would like to buy. A big chunk -- the private market deals we do, what I mean by that is someone who's taken a family business, who's been in their family for 80 years and they're selling it to EMCOR. That's something that sort of happens regardless of what's going on. It's a long-term, are we going to trust each other to make this work? Private equity is a different animal. Why did RepconStrickland become for sale now? I think it's pretty obvious. The outlook for the market's better, they've had a return to reasonable earnings, they've owned it for 6 or 7 years, they're going to sell it. There's probably a couple more properties like that out there right now. It would have to be, again, the right fit for us. We got get -- in our sector, we got to get through RepconStrickland first. And would we like to add little more shop capability? Probably. I mean there's other things we would like to be able to do than we are doing, and it's due [ph] today in the heat exchanger's site. And they maybe [indiscernible]. They'd be nothing like the size of RepconStrickland. My guess is, unless something compelling comes up, we're probably back to doing sort of the $30 million to $70 million deals for a while. And if the right one popped up larger, we would. We tend to be pretty conservative guys and we'd like to keep that balance sheet in great shape, so we've got to go generate some cash out there.

John, I would say that a year ago versus now, there's a little bit more churn now.

It has slowed down in the last couple -- last 3 weeks.

But there are a little bit more coming across our desk.

We don't even intend to look at it that way. I mean we're not really serial transactors. We're sort of it make sense for the market. If you look at what we've done over time, we have some nice business units underneath we've been able to build. We got electrical mechanical construction and service. We'll add there. We missed on one last year and electrical. Some knucklehead came down and paid way too much for it. That was too bad because it was a great fit for us. I've no idea what they bought. And EFS, we've been able to build 4 really nice businesses. And building services, mechanical services and site-based Government Services and then Industrial Services. So we're pretty judicious on that, and I think we'll stick to it.

[Operator Instructions] Your next question is from Saagar Parikh of KeyBanc Capital Markets.

So quick question for Mark. Do we know what the backlog contribution is going to be from Repcon once you guys close that?

We're not anticipating that there's going to be much backlog. We made that acquisition because the majority of the work is pursuant to time and material arrangement which we do not record in backlog.

Okay, great. And impact from the housing market, what kind of impact have you seen on your business? And have you seen any private residential contractors that might have creeped into your business during the downturn? Are you starting to see those as people leave? What else is there maybe from the housing impact?

That biggest impact is skilled tradesmen get absorbed, and that would be the lower end of what we do. They get absorbed. Anything that absorbs technical labor, electricians, plumbers, pipefitters, millwrights, welders is good. More of those guys are getting absorbed because of what's going on in housing and what's going on in every oil and gas business. Those 2 together should point in certain markets premium and technical labor, which is good for EMCOR.

Okay, and then last question. I know you talked quite a bit about the 2-project issues you had in your mechanical construction segment. What gives you confidence you have the right people in the segment, the right controls, the right checks and balances that these type portfolio issues won't happen again? Would that be the DOE or the GSA that those issues won't creep up?

Saagar, the way I look at it is we performed in an exceptional way through this entire downturn. We've operated a construction business at really high return on capital for a long time and industry-leading return on sales. There's no reason for me to believe that's not going to continue. None of the people [indiscernible]. That being said, on these particular instances, there has been changes that are made. We've injected a little more management talent to oversee it, and we will get to resolution. Our folks know how to do that. But the same guys that brought you 5.5% operating margins in mechanical plus are the same guys that will make sure that this gets corrected.

At this time, there are no further questions. I will now turn the call over to management for closing remarks.

Well, everybody, thank you very much for your interest in EMCOR. Let's all hope for a really hot August. Thank you.

This concludes today's conference. You may now disconnect.