Good afternoon. My name is Teresa, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Second Quarter 2014 Earnings Call. [Operator Instructions] Thank you. Mr. Nathan Elwell with FTI Consulting, you may begin.

Thank you, Teresa, and good morning, everyone. Welcome to the EMCOR Group Conference Call. We are here today to discuss the company's 2014 second quarter 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 the rest of the team. Kevin, please go ahead.

Thank you, Nathan, and good morning, everyone. Welcome to our earnings conference call for the second quarter of 2014. 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. If you are, please advance to Slide 2. Slide 2 depicts the executives who are with me to discuss the quarter and 6 month 2014 results. They are Tony Guzzi, President and Chief Executive Officer; Mark Pompa, our Executive Vice President and Chief Financial Officer; Mava Heffler, Vice President, Marketing and 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 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's 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 operation. Certain of the risks and factors associated with Emcor's business are also discussed in the company's 2013 Form 10-K and in other reports filed from time to time with the Securities and Exchange Commission. With that said, please let me turn the call over to Tony. Tony?

Thanks, Kevin. And for those on the call looking at the slides, I will be covering Pages 3 to 5 to start. First, good morning, and thanks for your interest in EMCOR. I want to speak to pro forma numbers that are adjusted for the continued costs for the closure of our U.K. Construction business. And in Q2 2013, it also includes some of our deal costs associated with the acquisition of RepconStrickland. We had a very good second quarter here at EMCOR, and it finished about where we expected. We expected to do well. We are off to a great start through the first half because we are at $0.61 per diluted share here in the quarter and are at $1.25 per diluted share at the halfway point here in 2014. We are at operating margins of 4.5% on a pro forma basis in Q2 on revenues of about $1.558 billion. However, we did have negative organic growth of 4.4% domestically, which is where we're focused because of the U.K. closure. And that really results from 2 -- 3 things. One is, nonres is not off to a great start this year as a market, the non-residential market. The second one is if you'll remember at Q2 last year, we had 2 significant projects, and they were problem projects, they had revenue associated with them that was quite substantial. We lost money on them, and they are no longer in our Mechanical segment. The work is done. And we did reload in those subsidiaries with that type of work. And we started reshaping our portfolio in the site-based business back in 2013, and we're still seeing the effects of that. And that's about a 12-day TEMA process as it goes through the numbers, and that's in our Building Services…

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. And as Tony indicated in his opening commentary, I will provide a detailed discussion for our second quarter 2014 results before moving to year-to-date key financial data derived from our consolidated financial statements, included in both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earlier this morning. So let's begin. Consolidated revenues of $1.56 billion in quarter 2 are essentially flat as compared to 2013. Revenues attributable to businesses acquired positively impacted both our U.S. Industrial Services and U.S. Mechanical Construction Services segments during the second quarter. Excluding the impact of businesses acquired, second quarter revenues declined organically $84.4 million or 5.4%. All reporting segments other than U.S. Industrial Services reported revenue declines during the most recent quarter. Domestic Electrical Construction revenues declined modestly quarter-over-quarter as evidenced by their 0.2% change. U.S. Mechanical Construction revenues decreased approximately $45 million or 7.8% from last year's second quarter as a result of a decline in revenues from manufacturing and institutional construction projects, some of which was attributable to a planned reduction in scope of activities for a subsidiary that reported significant project losses during 2013 in the southeastern United States. The majority of project volume declines were within the power generation and high-tech sub-industry sectors due to several large projects that were in process at this time last year. U.S. Building Services revenues of $418.1 million decreased $30.3 million quarter-over-quarter due to revenue declines within their commercial site-based services offerings due to our contract portfolio reshaping, as well as a reduction in the volume of energy-related services projects performed in 2014 as compared to this timeframe in 2013. Additionally,…

Thanks, Mark, and I'm on Page 12. I'm going to cover backlog by segment. Total backlog at the end of the second quarter is $3.64 billion, is up $125 million or 3.6% from June 2013. Additionally, a more recent comparison has total backlog growth for the first 6 months of year up $276 million or 8.2%. In summary, domestic backlog is up $196 million year-over-year and $284 million from December 31, 2013. Backlog in the U.K. has just about reached stasis from our withdrawal from the U.K. construction market. As we said, we have about $4 million left to go in the Construction business and was down minimally in the 2 mentioned periods. We continue to build backlog with a book-to-bill for the quarter at over 1, and even when accounting for a large infrastructure project that I'll talk about now. More specifically, as you get into our U.S. backlog within our construction operation, the lowest true section of the bar is up $196 million or 8.1% from June '13. And it does include a multi-year project award for the electrical work for the new Tappan Zee Bridge. It's an exciting project for EMCOR, and we do this kind of work very well, this infrastructure work. It will be done by our Welsbach Electric subsidiary, which has great execution capability. The field work for the replacement bridge will begin in early 2015. We will have a little bit of activity as we go through the end of this year. And the project is scheduled to run through mid-2018. Our scope is to install all electrical systems, including lighting, power, tollbooth, traffic-signaling and security systems. This is a complex project. And it took us over 3 years to bring into backlog. The project value is in excess of $150 million and…

[Operator Instructions] And your first question comes from the line of Adam Thalhimer with BB&T. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Tony, you brought up the positive nonres starts. I mean, what's your -- what's the general -- because they have been very positive in the last 3 or 4 months, what's the rule of thumb on how your business lags those?

Well, we're going to lag them by at least 3 to 6 months. But that being said, it's a big market, Adam, and we see opportunities out there. We do very well on the opportunities we target. And I do see probably for the first time that I have felt in 3 or 4 years, that there are a lot of fundamentals coming together on the private side. Commercial continues to grow, mainly driven by the renovation refit part of the commercial business, a substantial add-on, I would call it. And we are well-positioned to take advantage of that. It's one of the more profitable things we do as a commercial work. I think infrastructure, there are some good infrastructure projects out there. We just won one of them after a long negotiation and we expect to do well, we expect to support our customers very well on that project. So I think starts are coming. I think people are trying to be more positive if we would just let them. Adam R. Thalhimer - BB&T Capital Markets, Research Division: On Industrial Services, you put up a good margin there considering it's a seasonally off quarter, 7%. Could that be the -- but you said Q2 is the worst, and Repcon didn't contribute a lot in Q2, so is 7% kind of the low point for the year?

I would say somewhere around there right now, yes. Repcon contributed on an EBITDA basis, so you're right about the operating income. It did contribute. And what you're starting to see in that business is the effects of the combined business, and we're worried a whole lot less about who's doing the work than that we're getting the work. And you're also seeing the benefit in our business of really good shop execution and good repair capability that others in our space may not have. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Okay. Then last question for me. The commercial site-based business, what -- can you just talk about that? I mean, what is that exactly? And you talked about getting the win rate up, how do you do that?

Well, look, it's -- we reshaped the portfolio. We know how to sell. When we reshaped the portfolio, we tried to increase margins probably a little too aggressively for what the market would bear. We have an opportunity. What it does is it does everything from raw technicians, we put people in the buildings to run them, operating engineers. We manage subcontractors and do things like snow removal, like we were all very excited about the performance of what that could do in the first quarter. We manage janitorial subcontractors. So we do the full range of services. We self-perform as you get to more of the operating-engineer trade side. We subcontract as we get more to the soft services. It's a business that's profitability -- has improved dramatically over the last 2 or 3 years, but it's got a long way to go. How do you win more? You got to bid more competitively. And in our case, we got to do a little better job listening to what the customer is actually asking us to bid, instead of trying to convince the customer what they should bid. We tend to come at things at a very technical bend and we have to go back and relearn the lesson like we had sometimes in our Construction business, bid the specification and then work for the change order or you won't get even in the game.

And your next question comes from the line of Glenn Wortman with Sidoti & Company. Glenn Wortman - Sidoti & Company, LLC: Yes. So sticking with the Building Services, has your long-term margin outlook for that business changed at all, or do you think that 5% margin goal is still achievable over time?

Well, we got to get to 4% on a sustained basis and we're there year-to-date. I think we have -- we're going to have to mix more Mechanical Service and Government Services business in there. And we're going to have to really understand the effects of when we have a contract where we have pass-through revenues and we don't earn much of a markup on it where we may be doing -- managing someone's sub-contract capital work but we're not actually doing the work. I think we can get it to 4% to 4.5% here on a sustained basis in the near term, but it's going to take more mix in Mechanical Service and Government Services rebound to get us over -- closer to 5%. Glenn Wortman - Sidoti & Company, LLC: Okay. And then on the U.K. side, you guys went through that pretty quick. Can you just go over what pushed the margin in the quarter and then how we should be thinking about the top line and margins?

I'll turn it to Mark.

Yes. I think it's consistent with kind of what we said in the past. When we get to the other side of this restructuring of our Engineering and Construction business, we're looking at a Building Services business with annual revenues between $300 million and $350 million and operating margins between 3% and 3.5%. We're hopeful once we get to that point that we could see an uplift in overall operating margins, but it's going to require some fine-tuning of the cost structure there because that's the way it exists today, it's managing 2 different businesses, which are distinct. But well, I guess we need to get through all of our contractual obligations on the current restructuring before we can move on to the next look at the cost structure.

And your next question comes from the line of Noelle Dilts with Stifel. Noelle C. Dilts - Stifel, Nicolaus & Company, Incorporated, Research Division: So I know you don't give quarterly guidance, but just a couple of things. Looking out at the third quarter and fourth quarter, just to try and get a pace of -- or sense of the pace of how things will recover, but I think in the press release, you noted that you expect sequential increases in the non-res market in both the third quarter and the fourth quarter, so are you actually expecting the fourth quarter to be a little bit stronger than the third quarter on the non-res side? Am I reading that right?

Yes, I think you're reading that right. Noelle C. Dilts - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then just, okay, circling back to Adam's question on the Industrial Services margin, if you look back at last year, it was kind of a challenging margin performance for Ohmstede and Redman. Can you talk about some of the factors that you think will help to drive what would have to be a significantly higher margin this year just to get back to around that 7% margin in the third quarter?

I think -- we don't give quarterly guidance, but I think second quarter benefited from some spillover work from the first quarter, especially in our shops. Third quarter, it all has to do when the work starts up. If it starts up in the 2nd week of September, then the margin has a chance to be a little higher because we'll be billing. And we won't be, for lack of a better word, provisioning people to get ready for a late September, early October start. So the more the turnaround season moves into third, which is sort of like the inverse of what happens in the first quarter, if some bleeds into the second quarter, second quarter gets better, the opposite happens in the fourth quarter, the more we can start early. The other thing is you never know week-to-week in the Industrial business when your customers may need help. And so we have very good technical labor, and you saw that in the back half of 2012. We really benefited when we were able to really react to a customer situation. That can happen and that can drive the margins higher. I mean, our expectation in the third quarter is somewhere between high 5s would be the worst to 7. And then it picks up from there in the fourth quarter. I mean, Mark, that's basically what I think. And it all has to do with really the absorption of the overhead is what drives the differences. Noelle C. Dilts - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then one last quick question. What's your expected tax rate at this point for the year?

Obviously, we're trending a little bit lower than our initial expectations. If the U.K. continues to perform for the remainder of this year at a better level than last year, I think we're probably going to settle in somewhere around 30.5% to the 39% which we originally started.

And your next question comes from the line of Ally Himmons [ph] with D. A. Davidson.

I was wondering if you guys saw any additional acquisition opportunities for EMCOR in the future.

Oh, of course. I always had a belief that deals happen when they happen. We think it's a relatively slow market right now for our space, but that doesn't mean that they -- something couldn't come here in the next 6 weeks, at the least initial evaluation of it. Our company's been built through acquisition over a very long period of time. Right now, we have what I would say 4 to 5 really good areas to invest. We would still invest in our U.S. Electrical and Mechanical Construction businesses. We have pretty good footprint there. So we'd either need to bring in a niche capability like infrastructure or industrial or geography like the Southeast Mechanical or New England Electrical. That kind of thing. So it will be more a geography capability play in Construction. As you go to Building Services, we still have white space in our Mechanical Services business, places we would like to be where we don't have the capability we would like to have. You go to South Florida, and you go to parts of Texas, the Intermountain region, the Pacific Northwest, we would like to have more Mechanical Services capability there. On the Government side, it would have to be something that would allow us to add to our services more than anything else. We're not necessarily looking to buy contracts from people. We can always go bid those contracts, we have the capability. On the site-based services side, I think we'd rather grow organically, although there are areas we would like to self-perform more of the work that we do today. You go to Industrial Services, we like our offerings, everything from [indiscernible] to cat crackers,to heat exchangers, to heat exchanger build and repair, to welding services, high-premium welding services, one of the best companies out there is Turnaround Welding Services, to refectory services. So we like those businesses. There are some geography we'd like to expand into there, potentially up into the Mid-Continent area. And also, we think there are still 2 or 3 heat exchanger shops or custom manufacturing shops that we should own to help support our Service business. And then finally, in the U.K., which I would say is just a mirror image of the Building Services business. There are certainly some things we would like to think about on the property management side. Not do property management, but the support of the property managers with good O&M maintenance, and then we'll continue to grow that organically, mainly focused on the U.K. So yes, we look every day, and we're going to be disciplined in that process. And we're always going to be fighting in this low interest rate and easy money environment where private equity guys can borrow money and leverage 6x or 7x, that's really not good for anybody.

[Operator Instructions] Your next question comes from the line of Tahira Afzal with KeyBanc.

I guess first question is, in your press commentary, Tony, you noted that with the current cost structure, you could continue to accommodate growth. Your margins have come in pretty strong, execution is strong. So as we look out, directionally, even beyond this year, to the extent you can comment, can you talk a bit about where margins could go?

T, we peaked last time. I think it was 4.9%, 4% or something in 2009 as we were coming off. Volume was coming down, and we're now convinced we could finish some good work in the Construction business. And some of the risk of projects not completing during that period of time got behind us. So clearly, we are shooting to at least do that or better. So I think if you ask this team what its near-term goal is in a recovering -- a stronger recovering non-res market, we got to get to the high 4%s and then get to 5%. I mean, I think that's what we see as our first intermediate goal post. To get above that, a couple of things would have to happen. We need to mix the business better. So the acquisitions we make need to tend towards the industrial space or a niche contracting or Mechanical Service space for us to get those margins a little higher. And I think the more incremental revenues we can add -- the only issues we have right now are in some of our Services business, whether it'd be even the U.K. or the U.S. in the site-based business, we can add volume with very little incremental SG&A and we need to do that. I would say the same thing in the Construction business. There, the margins are pretty good, so I'm not expecting a big margin pickup from doing that, but we can do the work with little incremental investment. So I'd say 5% is our near-term goal, and we got to get there first.

Got it. Okay. And Tony, the second question from me. If you look at your bookings, clearly, some of the strongest bookings you've seen in a little while. Can you maintain this clip? It sounds like a lot of excitement about the commercial sector that might be the case. And if that's so, if I was to build a similar bond rate on the bookings you are getting and the backlog you have, it seems to indicate your growth on the organic side could pick up fairly nicely into next year. Is that the case or is there some change in the duration of your backlog [indiscernible] to be taken into...

I don't think our duration has really changed. We always somewhere have a project that looks a little bit like Tappan Zee in there. Maybe there'd be 2 of them that would be the same as the duration of Tappan Zee, or 3 of them. But it's the same kind of -- so that really is not going to change our burn. The commercial work does burn quicker, absolutely. And I think if we can get some industrial work in there, that tends to burn quicker than other large projects. You saw that with the work we did in the food processing side back in '12, which really caused organic growth. So I would look for that. We need to see some industrial backlog growth, not segment, but sector. I think my view on it has been for a while, that if nonres grows, and it really hasn't grown year-to-date and that's what we're seeing, if you think about last year, I think the numbers I look at tells me it shrunk last year 2% to 2.5%. We actually held serves, so that means we actually grew better than the market. That will be the same thing in '12. I think the same numbers would show in '11. So I think if we get a little bit of non-res growth, and if it starts to get to the 2% to 4% or 5%, yes, we should be at least to the non-res market growth and usually, we'll lag that by 1/4. And then we should be able to do a little better, 50 or 100 basis points better in the Construction business than what the nonres is growing. If you go to the Services side, the way I think about that, it's GDP and now, we've done the portfolio-reshaping, and that will flush its way out of the system here. Third quarter will be the last time you really see that impact in our numbers on a year-over-year basis in the Building Services segment. Once that flushes out, I think our Services business, if the economy's growing, too, we should grow 3.5% to 5%, 3% to 5%. Because we tend to be doing a little better. And I'm a little -- one of things that the got me a little energy right now is for the first time in 5 years, we're actually seeing strong sensible projects on the small projects side, which means owners potentially are starting to make more sense about their maintenance spending in their small projects side. And the other side of it is they come back to the contractors that do that work best, and that's companies like ours. So you put those things altogether, yes, if the economy can get a little bit moving in a positive direction, nonres gets there, then we should grow a little better than that.

Got it. Okay. And this is probably the most [indiscernible] I have heard you Tony in a while, and is this all just on the small activity bidding momentum you're seeing, or should I read into it you've seen some nice acquisitions there out there, too?

I don't know about the acquisitions. I think what you see us as a team most excited about is we like margin percentages and margin dollars than we like revenue. And that we were able to execute like we have year-to-date on the margins side, tells us that our folks are executing with discipline, productivity. And they are being very disciplined in their bidding. That tells me that as the market recovers, we're going to keep that same discipline, and there should be better opportunities out there. And also, unfortunately, I think some of our competitors loaded up with work that we didn't think was good, and so that should give us some capacity if the market does come back.

And your last question comes from the line of Min Cho with FBR Capital Markets. Min Cho - FBR Capital Markets & Co., Research Division: [indiscernible] the question. Hey, Tony, the -- obviously, given your guidance for revenue for the full year, that would suggest that at some point the second half of the year would see some organic revenue growth on the positive side. Now whether it happens in the third quarter or fourth quarter, does that really have to do with the timing of the turnarounds in the small business and the small projects? Or is there something else that could cause a shift in when we see that organic growth?

I think our compares get easier in the Building Services side because of the portfolio reshaping in the fourth quarter. But I think the other 2 things you mentioned are dead on, coupled with seasonal weather in the fourth quarter. Min Cho - FBR Capital Markets & Co., Research Division: Okay. And then also, you mentioned that Repcon added about $0.01 in the quarter. Are you still comfortable with your guidance for 2014?

Yes. Min Cho - FBR Capital Markets & Co., Research Division: All right. And you still feel that could be conservative given the -- kind of depending on the turnaround season?

I think we're comfortable with our guidance, and we like the impact that it's having on the other parts of our business and how the integration's going. Min Cho - FBR Capital Markets & Co., Research Division: Okay. And then just last one for Mark. I'm sorry. When you talked about the organic revenue growth in the second quarter, I wasn't sure if you had stated it was a negative 5.4% or negative 4.4%.

It's 5.4% overall. It's 4.4% domestically, which Tony cited in his notes.

And Mr. Elwell [ph], do you have any closing remarks?

Yes. Thanks, Teresa. Look, we've executed well through the half, and that's what we control, how we execute and the kind of projects we work on. I think I'll go back to the key points. We're going to keep control of our costs. We're going to continue to focus on productivity, disciplined bidding. We're going to be hard-nosed in our execution and decision-making kind of work we take. And we're going to try to look for smart organic growth and we will be good allocators of capital like we always have been on a go-forward basis. Thanks for your interest for EMCOR. And I hope everybody has a great remaining of the summer. We'll talk to you in the third quarter, and please be safe.

Thank you. That does conclude today's conference call. You may now disconnect.