EMCOR Group, Inc. (EME) Q4 2013 Earnings Report, Transcript and Summary

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's Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions] Mr. Nathan Elwell, you may begin your conference.

Thank you, Tunisia, and good morning, everyone. Welcome to the EMCOR Group conference call. We are here today to discuss the company's 2013 fourth quarter and full year results, which were reported this morning. I would like to turn the call over to Kevin Matz, Executive Vice President of Shared Services, who will introduce management. Kevin, please go ahead.

Thank you, Nathan, and good morning, everyone. For those of you guys that listened last quarter, I believe we started the quarter with our fire alarm going off, and we were expecting the fire marshal to come in and probably tell us to muster somewhere else. Well, about less than an hour ago, 45 minutes ago, our power went down. A local substation blew up, and so we're on battery backup. We believe we have enough time to be able to finish the call, but we've assembled in the different areas, so everything's a little bit out of sorts. But if we do go down, Sheila Patten, my assistant, will come on the phone, and we will move to another area. So if we do go down, don't hang up, and we'll be able to get you back in about 15 seconds. So let's muscle on through this. For those of you who are accessing the call via the Internet and our website, welcome, and we hope you have arrived at the beginning of our slide presentation that will accompany our remarks today. Please go to Slide 2. On Slide 2, you'll see the executives with me to discuss the quarter and 12 months results. They 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 Presentations. You can find us 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's management's perception as of this date, and EMCOR assumes no obligation to update any such forward-looking statements. These forward-looking statements include 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's services, adverse business conditions, increased competition, mix of business and risks associated with foreign operations. Certain of the risks and factors associated with EMCOR's business are also discussed in the company's 2013 Form 10-K, which was issued this morning, and in other reports filed from time to time with the Securities and Exchange Commission. With that said, let me please turn the call over to Tony. Tony?

Thanks, Kevin, and good morning, and thanks for joining us. I'll first be covering Pages 3 to 5. To be clear, I'll be speaking to pro forma numbers, and to remind everyone, the pro forma adjustments are the add backs with respect to the closure of our U.K. construction business and a deal costs associated with our acquisition of RepconStrickland. What I'm going to do is I'm going to briefly discuss Q4 2013, and then I'm going to let Mark cover the details of our quarter and the year during his section of today's call. What I'm going to do then is focus the remaining of my introductory comments on full year 2013. At the end, after I do backlog, I'll give you a color on guidance for 2014, and that will follow Mark's detailed financial review and my discussion returning to backlog. For Q4 here, let me hit some high points so not to be redundant with Mark. We had very strong electrical growth in the quarter, and did okay for the year. We made very good operating margins for the quarter against a very tough compare. So we feel good about where the electrical business is coming out of the quarter. And we had good mechanical operating margins at 6.3%, and we showed the kind of sequential improvement that we told investors that we should see, as you look through the year after the write-downs on the DOE job and the manufacturing job that we've discussed throughout the year in the Southeast. Unfortunately, we did have another $1.9 million in Q4 write-downs on these jobs. The manufacturing job is finished, we're off the job. And the DOE job will have physical -- the installation will be physically complete, which means we'll have it installed here sometime in Q2 of 2014, and we'll turn over that job somewhere in Q3 2014 here. We believe, on that job, we will be owed significant money, and we've been very conservative in our estimate of recovery. If you look at the quarter, Building Services had good margin expansion of 130 basis points, and we had profits up 40% in Q4. Down revenues, up profits, never a bad thing, and it shows the portfolio reshaping we've done, and you're starting to see the results of that here in Q4. Industrial performed as expected, again coming off a very difficult compare last year as we talked about, and RepconStrickland contributed what we expected in the quarter at a little over $0.04 in the quarter. The U.K. construction withdrawal is nearing completion. In fact, we actually lost less there in that Construction business in Q4 this year than last year. We exited several of the long-term contracts, and we expect to have this completely behind us by the end of Q3 2014. Cash generation was strong in the quarter, the book to bill was at 1, and we leave the year with good backlog. Now I'm going to focus the rest of these introductory comments on the year. Turning to the year. We had a transformational year here at EMCOR. We got 5 segments of the business when you include the scaled-back U.K. 4 of those segments are scale businesses. Our Mechanical and Electrical Construction business have been market leaders, and we have market-leading franchises in our markets. And the result of that, we have market-leading performance with the folks we have. Our Building Service business is now at scale and has improved dramatically over the last 2 years. We expect that trajectory to continue. In Building Services, we have 3 market-leading businesses: Mechanical Service, Commercial site-based Services and Government Services. Now with the acquisition of RepconStrickland, we have a scale industrial business. And that segment is now focused on the refinery and petrochemical services. Our integration is on track at RepconStrickland, and we do know how to integrate and drive successful acquisition integration and long-term performance. Our performance in our Electrical segment for the year was a strong 7.3% operating margins, and we leave the year with good, growing and balanced backlog. We're winning here by just executing well, and we're executing well in a tough market. And you take these comments and put them both at the Mechanical and the Electrical business. Available margins are better than they were at the depths of the recession. But you have to remember that nonresidential construction was actually down almost 3% last year, and it still is down substantially, in excess of 25% from its peak in 2007. Mechanical had a "but for" year, and what "but for" means, but for the results of the much discussed DOE and manufacturing projects in the Southeast. At EMCOR, we don't like "but for" years. All those comments that held true for Electrical hold true for Mechanical on the market. However, on a pro forma basis, adding back those projects, we exited the year with over 5% operating margins, our Mechanical segment remains on track. And 9.8 or 9.9 out of 10 projects are performing well and as expected. Both our Mechanical and Electrical segments fought through the sequester also, with slow to no recognition of REAs, scheduled slowdowns and generally slow decision-making on new contract awards. Switching to the Building Services segment for the year. We fought headwinds of sequester, and we still improved operating profits 55% on essentially a flat volume. How do you improve? Well, Mechanical Services improved with better technician productivity, better mix and improved small project selection and execution. The government fought through the sequester. We still made decent returns, but we had reduced IQ awards -- IDIQ awards, slow to no REA, request for equitable adjustment approvals, and these are slam dunk-type things, we should be awarded these, and slow to no decision-making on new contract awards. Our site-based business is really starting to take hold, and the integration of USM on the cost side, for sure, is near completion. Our suite of services allow for improved cost leverage, and more importantly, we attract new customers, get leverage spend with our customers, which means we're selling them more, and we're able to add better talent to our team and provide promotion opportunities for that team, and it's really starting to take hold. Overall, in our Building Services segment, with maybe a caveat at government, although I do think it will also improve long term, the arrow was pointed up with more to do. In Industrial, we had a transitional -- a transformational year. The bottom line is we now have an Industrial segment with the acquisition of RSI. When combined with Ohmstede, we have a powerful offering to serve our customers. We have a first-class team, it's committed, and it's with us here for the long term. As we know, this business can be a bit lumpy depending on our specific turnaround schedule and scope. However, we see a good market over the next few years as utilization rates remain high, and U.S. crude production continues to grow from an already much-improved level. We performed well on our traditional Ohmstede, Redman business with especially strong performance in Q1 2013, and we continue to expand our suite of services with almost a full year of operation in our cleaning operation that we invested and built in La Porte. Margins were good. However, we did have some scope reduction in our Q4 work. With RSI, we believe we also have a market leader, much like Ohmstede. We performed to our revised expectation as I discussed with our Q4 outlook, and look for performance to gain strength through 2014. We believe that market conditions are set for success in '14, with high refinery utilization. But our ultimate success depends on the scope and timing of our turnarounds and ability to gain leverage work and increase our shop utilization also. Customers have reacted well to the purchase, and our key leadership is excited to be part of the team. Integration is on track. However, you need to go out and win new customers everyday, win new work and grow our share of this good market. The multi-generational suffering of our U.K. construction business for EMCOR is rapidly coming to a close. It's actually been well done. We saw the opportunity to accelerate this closure and not continue with the multi-year retrenchment. It closes a painful chapter in EMCOR's history of low returns, volatile earnings and painful losses. We had some really good people in that business trying to compete in a market that was not suitable to good returns, and we did not have scale. Our remaining services business, which makes up now the majority of what you see in the U.K. segment, continues to move forward. And you should expect a $300 million to $350 million revenue business with 3% to 4% operating margins. We leave the year with good backlog mix, and I'll cover that, and it grew in the right places. We have a stellar balance sheet. We returned over $38 million of cash to shareholders through dividends and stock buybacks in '13. I like where we are now. And with that, I'll turn it over to Mark.

Thank you, Tony, and good morning to everyone participating on the call today. For those accessing this presentation via the webcast, we are now on Slide 6. As Tony indicated, I will begin with a detailed discussion of our fourth quarter 2013 results before moving to our year-to-date financial results derived from our consolidated financial statements included in both our earnings release announcement and Form 10-K filed with the Securities and Exchange Commission earlier this morning. So let's get started. Consolidated revenues of $1.66 billion in the quarter are up 3.2% from 2012. Revenues attributable to businesses acquired of $90.4 million positively impacted our U.S. Industrial Services and U.S. Mechanical Construction Services segments during quarter 4. Excluding the impact of businesses acquired, fourth quarter revenues declined organically $39.3 million or 2.4%. Domestic Electrical Construction revenues increased 17.9%. Domestic Mechanical Construction revenues decreased less than 1%. U.S. Building Services revenues decreased 7%, and U.S. Industrial Services revenues increased 62.6%, while our U.K. segment revenues declined 28.7%. The substantial revenue growth within the domestic Electrical Construction segment can be attributed to increased project activity within the quarter in the commercial manufacturing, institutional health care and transportation market sectors, predominantly within Western, Northeastern and Mid-Atlantic geographies. The revenue decline within the U.S. Mechanical Construction segment can be attributed to decreased project activities within the institutional health care and transportation market sectors, predominantly in the same geographies that Electrical expanded. U.S. Building Services revenues declines within the quarter were due to revenue decreases within both government and commercial site-based services, as a result of reduced levels of indefinite duration, indefinite quantity project opportunities due to sequestration, as well as the strategic reshaping of our commercial site business project portfolio, which we have referenced in each of the last 3 quarters. The revenue growth within the Industrial Services segment is attributed to the addition of RepconStrickland, which added $84.4 million to the quarter. Excluding this incremental revenue, the organic decrease is approximately 12% due to 2012 fourth quarter revenues benefiting from large turnaround or repair activity that, unfortunately, did not replicate in 2013's quarter. Consistent with my last quarterly commentary, the decrease in revenues from our U.K. segment is the result of our continuing plan to withdraw from their engineering construction activities, in which we have made significant progress during 2013. Please turn to Slide 7. Selling, general and administrative expenses increased $13.6 million within the quarter, inclusive of $12.4 million of incremental SG&A, including a tangible asset amortization expense from those acquisitions completed during the year. Additionally, $2.5 million of the current quarter increase is due to the large earn-out liability reversals that occurred in 2012's fourth quarter, which is recorded as a reduction of SG&A expense, with such reduction in the current year quarter is significantly less. As a percentage of revenues, SG&A in quarter 4 is 9.8%, and excluding the impact of acquisitions within the quarter, our SG&A as a percentage of revenues would be 9.6%. Operating income of $68.8 million represents 4.1% of revenues and compares to $78.9 million of operating income, with 4.9% of revenues in 2012's fourth quarter. Our U.S. Building Services segment reported income growth, while U.S. Industrial Services, U.S. Mechanical Construction and U.S. Electrical Construction segments and, to a lesser extent, EMCOR U.K., are each reporting declines in operating income quarter-over-quarter. Total intangible asset amortization expense for the quarter is $9.7 million, which is greater than quarter 4 2012 by $2.3 million. Our U.S. Electrical Construction Services segment operating income decreased $2.7 million or 8.2% over quarter 4 2012, with an operating margin of 8.3% or 240 basis points less than last year's 10.7% operating margin. The decrease in operating income in absolute dollars and in margin percentage is due to the favorable settlement of a construction claim of $6.4 million during last year's fourth quarter. 2013's fourth quarter U.S. Mechanical Construction Services segment operating margin of 6.3% represents a $5.8 million decrease from last year's quarter as a result of an additional $1.9 million of losses attributable to the 2 projects in the Southeastern United States that we cited during our second and third quarter earnings calls, and Tony mentioned, obviously, just a few moments ago, as well as the impact of gross profit recognized in the fourth quarter of last year on substantial completion of a large manufacturing project. Although not as significant as the last 2 quarters, this quarter's negative impact from the referenced lost projects, nonetheless, mask that the Mechanical segment's Q4 operating margin is the highest level reported in 2013. Our U.S. Building Services segment operating income increased $4 million or 39 -- almost 39.5% over 2012's fourth quarter, with a quarterly operating margin of 3.3%. Their Mechanical Services and Commercial site-based Services operations were able to offset the headwinds experienced within our Government Services division, and comprised the remainder of this segment. U.S. Industrial Services is reporting a $2 million decrease in operating income quarter-over-quarter with a corresponding margin reduction of 590 basis points. The most significant factor behind this quarter's performance is the tough comparable to 2012's fourth quarter, which I also discussed during last quarter's call due to 3 large nonrecurring turnaround and repair projects not being replicated in 2013. RepconStrickland generated operating income of $4 million, which was approximately in line with the revised 2013 expectations communicated during the third quarter earnings conference call. Our U.K. segment reverted to a loss during the fourth quarter, which was a disappointment, with approximately $5 million of losses generated within their engineering construction division for the quarter. We have put a lot of contract risk behind us during 2013, and look forward to the completion of the strategic initiative during 2014. Our fourth quarter operating income included $2.1 million of restructuring expenses, all of which is U.K.-related. We are now on Slide 8. This table lays out those items impacting our fourth quarter results, which we believe should be excluded from EMCOR's reported operating income to provide better comparability. Each of these items have been addressed in today's earlier commentaries and are consistent with last quarter's discussion, and for the sake of completeness are as follows: trailing transaction expenses related to the acquisition of RepconStrickland of $90,000, losses generated by EMCOR U.K.'s engineering construction operations of approximately $5,034,000, and restructuring expenses of $2,066,000 pertaining to reductions in workforce as a result of our strategic change in the U.K. The effect of the aforementioned adjustments announced were adjusted operating income of approximately $76 million or 4.6% of revenues for the quarter ended December 31, 2013, as compared to $84.4 million or 5.3% of revenues for the corresponding 2012 period. Our income tax provision for the quarter is reflected at a tax rate of 30.4%, which includes discrete items that positively impacted the rate by approximately 10% within the quarter. The most significant discrete tax item is the impact of the reduction in unrecognized income tax benefits, which resulted in an income tax benefit of $6.6 million. This is due to the resolution of certain tax exposures that occurred during the quarter. Cash provided by operations for the fourth quarter was $82 million, which represents a reduction of our cash provided by operations during 2012's fourth quarter. And for the year ended, cash provided by operations is just over $150 million compared to $184.4 million of cash provided by operating activities for the year-to-date 2012 period. Both fourth quarter and annual 2012 reporting periods benefited from the government's deferral of fourth quarter estimated tax payments until February of 2013 of approximately $25 million due to Superstorm Sandy. Please turn to Slide 9. Additional key financial data on this slide not addressed during my highlight summary are as follows: quarter 4 gross profit of $234.1 million represents 14.1% of revenues, which has improved from the comparable 2012 quarter despite the impact of those losses disclosed within both our EMCOR U.K. and U.S. Mechanical segments. Our fourth quarter gross margin represents 140 basis-point improvement over quarter 3. Total restructuring costs were $2.1 million, and as previously discussed, the entirety of this amount pertains to our United Kingdom operations. Diluted earnings per common share of $0.68 for both 2013 and 2012 quarters, on an adjusted basis, reflect any add back of transaction costs, the losses incurred within our U.K. construction engineering operations and associated restructuring costs. Diluted earnings per share would be $0.76 for the quarter as compared to $0.75 per diluted share in 2012's fourth quarter. The U.K. engineering and construction losses in last year's fourth quarter were approximately $700,000 greater than the current quarter. We are now on Slide 10. I will now discuss the results for the annual period beginning with some highlights. Revenues were slightly increased to $6.4 billion from $6.3 billion for 2012. Strong revenue growth within our domestic Electrical and Construction segment and Industrial Services segment being muted by revenue declines within our domestic Mechanical Construction, Building Services and EMCOR U.K. segments. Revenues attributable to businesses acquired of $133.4 million positively impacted our U.S. Industrial Services and U.S. Mechanical Construction Services segments for the year-to-date period. Excluding the aforementioned acquisition revenues, year-to-date revenues are down 1% organically. Domestic Electrical Construction revenues increased $134.1 million or 11.1%. Domestic Mechanical Construction revenues decreased $56.7 million or 2.4%. U.S. Building Services annual revenues decreased by less than 1%. U.S. Industrial Services 2013 revenues increased $117.6 million, of which the addition of RepconStrickland added $123.6 million, resulting in an organic revenue decline of $6 million or 1.5%. Our U.K. segment revenues declined $111.6 million or 21% due to our strategic shift, as well as a reduction of small project activity within their Building Services division year-over-year. Please turn to Slide 11. SG&A expenses of $591.1 million represent 9.2% of revenues compared to 8.8% of revenues for the corresponding 2012 period. Approximately $6.1 million of transaction expenses and $21 million of incremental SG&A, inclusive of identifiable intangible asset amortization for businesses acquired, are included in EMCOR's 2013 year-to-date results. As a percentage of revenues, SG&A for 2013 is 9.2%. Excluding the impact of acquisitions in 2013 and transaction expenses just mentioned, our SG&A as a percentage of revenues would be 9% for 2013. Year-to-date operating income is $210.3 million or 3.3% of revenues, which represents a $39.7 million decrease over 2012's annual performance. Our U.S. Electrical Construction Services and U.S. Mechanical Construction Services segments' operating income decreased $2.6 million and $31.5 million, respectively, over 2012 income levels. The year-over-year change in domestic Electrical Construction is due to a reduction in gross profit from water & wastewater construction projects, while the decrease within domestic Mechanical Construction is due to the aggregate losses of approximately $24.5 million attributable to the 2 projects in the Southeastern United States that we have cited both within this call, as well as in each of the last 2 quarters' commentary. Additionally, the Mechanical segment's 2012 operating income was favorably impacted by the substantial completion of a large manufacturing project. U.S. Building Services' 2013 operating income increased $23.9 million over 2012 or 55.3% due to improved performance within their Commercial site-based and Mechanical Services divisions. Our U.S. Industrial Services operating income increased for 2013 by 4.1%, inclusive of RepconStrickland's contribution. Excluding the impact of the acquisition, organic operating income within this segment is down approximately $1.5 million due to the overall annual revenue decline as a result of the nonrecurring nature of certain work completed in 2012. EMCOR U.K. lost $6 million for 2013, with their engineering construction operations generating an operating loss of $19 million for the year. This represents a degradation of $13 million from 2012's operating income of $7.1 million. Our 2013 annual results also include $11.7 million of restructuring expenses, the majority of which pertains to our United Kingdom activities. And lastly, on this slide, is the aggregate transaction expenses of $6.1 million related to the acquisition of RepconStrickland that were incurred during 2013. We are now on Slide 12. As previously disclosed on Slide 8, this slide reflects the operating income reconciliation for the year from GAAP to non-GAAP earnings. Adjusted operating income reflecting the add back of transaction costs, the losses incurred within our U.K. construction and engineering operations and associated restructuring costs for both year-to-date periods would be $246.5 million for 2013 as compared to $260.3 million for 2012, which represents a 5.3% decrease year-over-year. The actual tax rate for 2013 is 37.8% as compared to 39.4% for the 12-month 2012 period. And as everyone who participates on this call knows, there had been several discrete tax events during the last 2 quarters, which as a result, has significantly impacted the tax rate both positively and negatively. And for purposes of 2014 planning, I anticipate a normalized income tax rate of approximately 39%. Please turn to Slide 13. Additional financial data on this slide not discussed during the previous slides are as follows: year-to-date gross profit of $813.1 million is higher than the representative 2012 period by $6.7 million and flat on a gross margin basis at 12.7% of revenues despite negative project activity within EMCOR's U.K. construction operations and the U.S. Mechanical Construction segment; diluted earnings per common share were $1.82 for the 2013 year ended compared to $2.16 per common share in the corresponding 2012 period; on an adjusted basis, reflecting the add back of transaction expenses, losses incurred by EMCOR's U.K. engineering and construction operations, as well as the restructuring expenses, annual diluted earnings per share for 2013 would be $2.22 as compared to $2.28 per share in 2012. We are now on Slide 14. EMCOR's balance sheet remains sufficiently liquid as represented by cash in excess of $400 million, which is available to meet current working capital requirements as well as for organic and strategic investment opportunities. The reduction in working capital from year end 2012 levels is driven by our lower cash balances as a result of money used to fund our acquisition of RepconStrickland in late July, as well as higher income tax payments made during the year. Additionally, we utilized $50 million of cash on hand to repay outstanding borrowings under our revolving -- under our predecessor revolving credit agreement, simultaneously with the execution of our $350 million term loan, and amendment and extension of the revolving credit facility until November of 2018. As Tony previously mentioned, the company also utilized approximately $30 million -- $38 million of cash to fund dividends and share repurchases under our share repurchase program during 2013. Changes in goodwill and identifiable intangible assets between periods are due to the purchase price allocation of the aforementioned acquisitions, with identifiable intangible assets also impacted by the amortization expense reported in 2013. Total debt has increased from December of 2012 due to the borrowings to facilitate the RepconStrickland closing. However, our debt-to-capitalization remains -- ratio remains modest at approximately 19%. I'm sure you're thankful that I'm almost done. So with that, I'll return the presentation over to Tony. Tony?

Thanks, Mark, and now you can see why I didn't go to the Q4 numbers in detail. And it can be great to get this pro forma behind us, but the pro forma activity we undertook of closing that U.K. construction business were seemingly one of the best things we've done at EMCOR. And those that have been with us a long time understand that, and so it is worth the 8 pages you had to go through. I'm on Page 15 now, and, really, what I want to do is point out the highlights. You'll see this is a new slide, and it really corresponds with what you'll see in the 10-K for '13 and '12. It does it by the segment. So what's the highlight here? Well, highlight is up for a little bit, up a little bit backlog for the year. We were really up a little better than that because our U.K. backlog's down about $58 million, which when you add that to the $45 million, we're up about $100 million. We expected the U.K. to be down. In fact, if that wasn't down, you'd be a little worried about how successful we've been at the exit of the operations. Here's the key point on this slide. The Electrical, Mechanical segment, the Electrical segment's up $160 million. The Mechanical segment's down $30 million. That's just 1 or 2 projects. Electrical being up and being our most successful business over a long period of time is a good thing, right? The Mechanical's basically flat, call it, especially considering the 2 problem projects, we're probably well in excess of that $30 million. Together, these 2 domestic construction segments make up 69% of our total backlog of $2.3 billion. And they're good performers and scaled businesses with long-term records of success. I just like to note, since 2008, this is the highest level we've been at. We're not back to 2008 levels yet, but it's the highest level we've been at since 2008. And that's without much of a recovery yet in the nonresidential construction market especially in '13. If you go into the Building Services segment, it's exactly where we thought it would be. I think most people like revenues flat to down and profit up, a better base to build from, so when revenues start growing, you're bringing in your better mix of work. That's what this slide really is about. It's about backlog being down $79 million. So what makes that up? Well, we told you we were going through a reshaping of our site-based portfolio. That, in fact, happened. It was really 2 to 3 large contracts. One was not profitable. The other one was marginally profitable. And we said enough. Too many resource, not focused on the right thing. We served our customers great. We saluted and said, we'd love serving you, let's go serve people, to have a better profile for us. And the Government business is down also, but it's a little different story. We have a couple large contracts that we may or may not win, and we talked about the slow decision-making. The way we do backlog, unless we have the signed agreement on a go-forward basis, we don't put that 1 year of base service agreement in there. That's all we ever put in anyway. So now that we're month-to-month, because they haven't done a new award or haven't told us we don't have it, we're month-to-month, so all the time. That's basically a $30 million or $40 million contract we're waiting to hear on. And then we're waiting for new awards that we are in very good position to win, and they haven't been awarded. And then, of course, any significant IDIQ work would go in there, but most of it doesn't, and that's been slowed down. So again, Building Service is where we thought, and the good news is the small project work is up, and it's a better mix of work. If you go to Industrial, that's basically our shop work, and that's the newbuild in the shop work, very little of repair work. I would call that essentially flat. That's basically the difference in an order and a difference of timing. We feel good about where that business is, and we think it will be busy through the year. And like I said before, that's more a function of what's coming in on the front end there that's more of a capital play in this kind of backlog. So I like to go by market sector on Page 16. A real simple slide here, and this is the one you've seen from us forever. The positive on this slide is $110 million up in Commercial, and that's up to its highest level since Q2 2008, and that seems like ancient history, almost 6 years later now. That's really when the business started to turn down in a significant way. Now most third-party prognosticators think that nonres construction will be up. Some have low single-digits, some have mid single-digits, and some are even higher. We're sort of in the 3% to 5% bandwagon, I'll talk about that later. But again, it's still below the 2007 peak. So what this says is less backlog that we have overall, reporting on numbers, and then we've made some acquisitions, and we backlogged in the right places, and we feel good about that. And we withstood, really, the federal government screeching to a halt on new awards as far as the kind of things we do whether it be maintenance or a construction. So it's well positioned. We think we have a very good mix right now, and we feel good about where we're going for '14 and forward. Now let's go to Page 17 and 18, and probably the only reason most of you called into the call. Let's talk about '14. We expect to earn $2.40 to $2.70 a share, exclusive of this costs associated with the withdrawal for the U.K. construction market. Right now, if we had to put a number on this cost, we'd peg it at about $5 million. We expect to do at about $6.8 billion in revenue. Again, I just said the nonresidential market that we're planning, it is expected to grow 3% to 5%. I happen to think it will be a fairly slow growth environment here in the first half of the year, and that it may pick up from there. I do believe we will have opportunities in our Electrical and Mechanical Construction businesses. And of course, we don't expect the uncharacteristic losses we had on those 2 projects in 2013. I'd always cautioned that opportunities in construction are binary. You either win them or you lose them. We usually win our share, and we actually have great success in winning our targeted projects. You go to the Industrial segment, and we should have growth beyond our RSI acquisition, and we feel good about where we are and expect a tough compare on an organic basis in Q1. Bottom line is we blew it out in Q1 of '13 on our -- in our Ohmstede business. We expect to do well, but again, it's scope and timing. It's a decent turnaround season, so we'll see. We are definitely winning our share of the market, but a lot of this depends on scope, expansion and timing. Industrial, we believe it should be a decent year. Here's what we've learned though in the refinery and petrochemical space. We have learned to be as flexible as a gymnast as our customers are constantly adjusting scope and timing. Sometimes that creates more opportunity, as what happened in Q3 and Q4 2012 and what happened in Q1 of 2013. Other times, it causes a little bit of short-term pain because you may have more resources than you need to serve. But here's what's certain. If you have the right manpower, if you have the right technical supervision, you have the right engineers and you have the right capacity in your shops and your cleaning stands and everything else, you can really do a great job for your customers. And you can do well for your shareholders. We happen to believe we're set up to do all of the above, and we think utilization should remain high in these refineries. Why? Because domestic crude production's high, and there's nowhere else for it to go. In Building Services, we expect to continue to expand margins, and certainly, the weather has helped us here in the first quarter. We continue to increase our customer penetration, but let's be clear. We need to add some quality new customers this year. We do not expect more headwinds from our government. However, I think our government is incapable of creating any tailwind either. The U.K. closure is essentially complete. I talked about the additional $5 million in expenses for the year, and I think Mark's hoping, so he doesn't have to go through that soliloquy again, that this will largely be behind us in Q3. All in all, we do see earnings growth. And if the market recovers faster than we see right now, we have a decent chance of achieving the midpoint or higher in our guidance range. And really, what drives us to the lower end is mostly macro-related. The market slows down. There's a big disruption. The refinery guys get jumpy in the fourth quarter turnaround schedule. Things slide out into '15. Unseasonably cold, unseasonably warm next December. It takes all those things or a combination of those things to get us to the low end, most of which aren't in our control. What gets you to the midpoint or the higher end of the range? Well, winning some quick term work, a sizable quick term work, and we've done that before many times. Not having limited schedule slippage -- or having limited schedule slippage within the Industrial business, basically doing the scope we expect to do on the turnarounds. Having seasonal temperatures, having everything just to be the way it's supposed to be would be fine with us. And winning new customers and expanding scope with them when we win them. We need to keep our costs in line. We're really good at that, and we'll continue to be good at that. And of course, we will be as opportunistic as ever in the pursuit of new organic growth. As far as acquisitions, I think I sound like a broken record when I say this. Deals happen when they happen. We don't set that agenda. We talk to people. To me, right now, I know that the headlines are that the M&A market's back. I think that's a high end of the market. I think that's the megadeals. The part of the market we're in, which is the mids market, to us seems slow right now, which is all right by us, as we digest RepconStrickland. We like to grow by acquisition. We think we're pretty good at it over the long term. We think any one of our segments have attractive opportunities, both to add niche services, expand our geography and continue to do consolidating acquisitions. That's in Construction, Mechanical Services, site-based, Government Services and Industrial Services. Like RepconStrickland and USM, we watched it for a while, and we'll be opportunistic when we can. And with that, I'll take your questions and turn it back over to Tunisia.

[Operator Instructions] Your first question comes from the line of Cory Mitchell of D.A. Davidson. Cory Mitchell - D.A. Davidson & Co., Research Division: My first question relates to the current quarter. I was just curious to hear your thoughts on the weather benefits in the Building Services.

Well, Building Services is a plus. I mean, we're not going to pretend, it's not. But to make it a plus, though, let's be clear. It's not just, say, let it snow and let it be cold, and things happen. First of all, you have to be operationally set up to do very complex tasks on the snow side, which is manage thousands of sites. Then you have to have sold the right kinds of contracts. And then you have to have the right performance metrics and validation metrics for the customers. It's actually a high-end service because it's mission-critical. On the -- on our Mechanical Service part, which is the other part that benefits from the weather, again, you have to have the technicians that are trained, ready to go, can work in this kind of weather. Now we do have an offset to the plus and, look, the weather has been a net plus for us here in the first quarter, is in the Construction business, it works the other way. People can't get to work. There's productivity declines. We expect to make most of it up. Most of that eats into the contingency we have on the job, and we'll see how that turns out. We don't expect to have big difficulties. But on the balance, we did better in the quarter. We think we will do better in the quarter because of the weather. Cory Mitchell - D.A. Davidson & Co., Research Division: And then on the spring turnaround, how's that shaping out compared to the last season and last year?

Yes. I'm always cautious to do -- to talk about this because I don't prognosticate the market. I mean, some of our competitors like to speak about the whole market. I'm not sure they actually know the whole market because none of us do. Here's what I know. We're busy. We're in the middle of it right now. We have lots of guys working in the field. We have lots of guys in the field working safely, thank God. What I don't know is how scope will move over the next 5 weeks up or down. 200 or 300 guys, a week longer on a job, or not a week longer on a job can take it, okay turnaround season, turn it into a great turnaround season. The market, overall, is in pretty good shape. Sure, things slip, they come forward, they do all that. We had some particularly large turnarounds in the first quarter of last year. We have some this year. But again, it's a balancing act across it all. We do know this. We think the next couple of years are pretty strong in the refinery and petrochemical space. And the work, you have to be prepared to do it. Like I said, you have to be flexible to be able to serve the customers. Small turnarounds can turn into large turnarounds. Large turnarounds can become medium turnarounds. And it all depends on your customer mix. Cory Mitchell - D.A. Davidson & Co., Research Division: Okay. And then one last one, some housekeeping questions. I'm just curious if this current quarter's interest rate is a good run rate for 2014. And then also, if you could talk a little bit more on your expectations for intangibles in 2014.

Yes, sure. With regards to the interest rate, the interest expense in the fourth quarter is a little higher than a typical because when we did a refinancing transaction, we did have 1 lender exit the syndicate. So we had to accelerate the write-off of debt issuance costs, and that's disclosed in the 10-K. With regards to the borrowing rate, we're at an all-in rate right now, I think of -- I think it's 1 42 is what we disclosed. I would be very happy if that rate held for the entirety of '12 -- I'm sorry, '14. But for purposes of planning, we're presuming we're going to see a little bit of climb in that rate in the back half of the year. And with regards to the intangible amortization amounts, those amounts are also disclosed in the K. So for 2014, we're looking at around $38 million of amortization expense of intangibles as compared to the amount that we reported this year, which I think was just over $31 million or so.

Your next question comes from the line of Saagar Parikh with KeyBanc.

First off, on your nonres commentary, 3% to 5% growth on the nonresidential market for 2014. That seems like it's a little bit better than maybe what you guys were indicating in the last 6 months in your, I hope, the comments. Can you just give us a more color on what's maybe made you guys a little bit more positive on nonres and when you expect to see that?

Well, a couple of things. One is that the increase in our U.S. construction backlog and the increase in the commercial side of our construction backlog, those 2 things together make us a little more positive than we might have been 6 -- past 6 months ago. I think, look, I mean, we look at least 8 or 10 different sources of data. Those 8 or 10 sources of data are all over the place. We look at enough of them, though some of them we trust, some of them are a little suspect sometimes. They tend to be all more positive than we are at the low end there. And so eventually, I think you have to look at some of the trends in your own business, but also couple with outside people we're seeing, and put the 2 together and try to make sense of it.

Okay. And then the second question, I know you said a couple of times on the call that in your Industrial segment, you might have some year-over-year comp issues from larger projects last year. Is there anything else that we should keep in mind in terms of large year-over-year comps, just as we forecast them?

No.

Yes. I think 4 -- Saagar, 4 -- as we go through '14, the comps back to '13...

Are better.

Are better, I'll go say, what Tony had mentioned earlier about the turnaround activity in Q1 of '13. But as far as the Mechanical and Electrical Construction business, there should be nothing unusual other than obviously the losses that we discussed with regards to the Mechanical Construction segment.

And you guys, obviously, to get to the guidance, you -- the projection you have, you already corrected for that. I would just say that we've talked about this industrial thing. And one is we're pretty happy with where we are. We learned our business can be lumpy. We had about a 5-month run from the back half of '12 into '13, and it shows you what the power of that business can be. We fully expect a repeat that run in the future. It's a onetime event in any given period, but we're certainly set up to be able to do that for customers. And now we have more customers to be able to do that with the acquisition of RepconStrickland. But we also know the business can be a bit lumpy, and it works well for us because we have the underlying business across the rest of EMCOR to be able to handle that working capital need and to handle the ups and downs of that business, which can be our most profitable business at EMCOR.

[Operator Instructions] Your next question comes from the line of Charles Redding of BB&T Capital Markets. Charles E. Redding - BB&T Capital Markets, Research Division: Just a little bit of a follow-up on snow. I know you kind of mentioned that. Can you give us just a little more color on the business for the first quarter and any way kind of determine or quantify the impact from snow on Q1?

Well, we're not going to do that. We don't give quarterly guidance. Clearly, we expect to do better. And so we don't give quarterly guidance and the tale [ph] it takes are going to be in about 8 weeks anyway. Charles E. Redding - BB&T Capital Markets, Research Division: That's fair. And then I guess on sequestration, I appreciate the color there as well. In terms of the outlook, is it safe to assume there is no negative impact in guidance?

Well, we don't think it's going to get any worse. We don't have as many outstanding issues with the government as far as request for equitable adjustments. So we think we'll grind through those this year. And who knows, they may go into '15. They're not in a hurry to settle things that they directed us to do. With that being said, the DOE projects are coming to a close, the big one that we had issues with, and some other ones are doing quite well. So I mean, you put it all together. Like I said in my comments, we don't expect a whole lot more headwind from the government. We could win some new awards, but the start-up cost could be there, but then we'll get the benefit maybe later in the year or to '15. But it's sort of status quo, I think, there is where we're at other than new awards.

And there are no further questions. I will now turn the call back over to management for closing remarks.

Okay. Everybody. Thanks for your interest in EMCOR. We appreciate being able to serve you, and we look to go back out and do it all over again here in '14, and continue to try to do well by our customers, our share-owners and our employees. Again, thanks for your time this morning and everybody, be safe.

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