EMCOR Group, Inc. (EME) Q2 2015 Earnings Report, Transcript and Summary

Good morning. 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 2015 Earnings Call. All lines have been placed on mote to prevent any background noise. After the speakers' remarks, there will a question-and-answer session [Operator Instructions] Ms. Michelle Herman 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 2015 second quarter results, which were reported this morning. I'd 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, Michelle, and good morning, everyone. Welcome to EMCOR Group's earning conference call for the second quarter of 2015. For those of you, who are accessing the call via the internet and our website welcome to you as well and we hope you have arrived at the beginning of our slide presentation that will accompany our remarks today. We are on Slide 2. Slide 2 depicts the executives who are with me to discuss the quarter and six months results. They are Tony Guzzi, President and Chief Executive Officer; Mark Pompa, our Executive Vice President and Chief Financial Officer; Mava Heffler, Vice President of 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 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 risks and factors associated with EMCOR's business are also discussed in the company's 2014 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?

Hey, thanks Kevin, I’ll be on Pages 3 and 4. By any measure, we had a terrific second quarter. It was the best in our history. We had strong performance across all our major segments. At 6.4% organic growth, we recovered some of the loss revenues we had in our - from Q1 in our Electrical, Mechanical and Building Services segments. We talked about the weather and it’s affecting Q1. We recovered very little of the lost opportunity that reached refinery strike in Q1 in this quarter. However, it was not just catch up revenues, but we had strong underlying organic growth outside of the Q1 catch up. We are in $0.74 per diluted share in the quarter, which for us was a record Q2 performance for any year. And as we expected, put us back on track for 2015 after that weaker than expected first quarter. Operating margins were strong 4.7% with improvement in our Mechanical, Building Services and Industrial segments, with the Electrical segment essentially flat versus a year ago period. The UK performed as expected. We had good overall operating income growth at 11.5% led by Industrial with 40.7% growth and continued strong performance from Building Services at 28.9% operating income growth. And our Construction segments had good operating growth at almost 8%. Let me give you highlights from each of the segments before I turn the call over to Mark. Electrical, we continue to have strong margin performance. It’s a great business, we run it well. We had some organic growth. However, we do expect that growth to strengthen as the year progresses as we work on some large infrastructure projects. Mechanical, we had good margin rebound and we return to organic growth. Building Services, we continue to have improvements in commercial site base. We have continued strong performance in Mechanical Services. And our Government businesses holding its own, despite losing $15 million in revenue from the year ago period from those two large contracts we’ve talked over the last four or five quarters. We have had some IDIQ work filling the gaps there and we’ve had great cost discipline across our business but especially in our Government business. We’ve had a nice return to organic growth, despite the difficult comps from the two large base contracts now exiting our business. The organic growth in this business is being driven by our Mechanical Services business. Industrial, we’ve had excellent performance from RepconStrickland on several large timing material projects, especially on a large capital expansion and LP unit revamp. We had very little recovery from the refinery strike less than a third at this point with a balance likely first in the 2016. The UK, we have two large utility contracts we’ve started up and their startup is going well. The decline in the performance year-over-year with from a onetime adjustment in this quarter last year and Mark is going to cover that in detail like he did last and was about $4.8 million. Overall, we had solid excellent execution across all our segments. And it was nice to see, is actually to see organic growth return across the board. Backlog is essentially flat and our book to bill was about 0.94 for the quarter and other half is near one. To maintain historic high level of backlog which is where we are right now and had strong organic growth in the quarter 6.4% speaks to the strength of our business and also the underlying strength of the non-residential market. Our balance sheet is still liquid and strong, but with our strong organic growth, we did not generate as much operating cash flow as compared to this point last year, but we halfway invested that cash into working capital to fund our growth. Overall, a very strong quarter that provide a good foundation to achieve our objectives for the year. 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 5. As I typically do each quarter, I’ll provide a detail discussion of our most recent quarter results before moving to year-to-date key financial data derived from our consolidate financial statements included in both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earnings this morning. So let’s begin. Consolidate revenues of 1.65 billion in quarter two are up 6.4%. All reportable segments are reporting increased revenues quarter-over-quarter. Our second quarter revenues include a minimal amount of acquisition revenues within our U.S. Mechanical Construction Services segment. U.S. Electrical Construction revenue increased 3.2% to 346.2 million. The increased revenue is due to greater project activity with the transportation, healthcare and commercial market sectors and on a sequential basis, it’s fairly consistent with our quarter one 2015 revenue performance. U.S. Mechanical Construction second quarter revenues increased 15.4 million to 544 million or 2.9%. The quarterly increase is due to higher revenues from project activity with the commercial and institutional market sectors. For those of you who had participated on our quarter one, you may recollect that this particular segment experienced last work days within their North Eastern based operating companies due to extreme cold weather conditions. EMCOR’s total domestic construction business second quarter revenue increased 26.1 million or approximately 3%. U.S. Building Services revenues of 435.6 million increased 17.5 million or 4.2% quarter-over-quarter, despite the headwinds associated with the loss of two government contracts completed in 2014 that were not renewed pursuing to rebid due to pricing a non- EMCOR’s historical performance, which we have referenced in each of the last two earnings call’s commentaries. This is the first revenue growth quarter for this segment since the third quarter of 2013. The revenue gains experiences were primarily due to increased service volumes and small project activity within their mobile mechanical services division. U.S. Industrial Services revenues increased 27% to 225.2 million due to capital and maintenance project activity from our industrial field services operations. United Kingdom Building Services revenues of 91.6 million increased 8.1 million or 9.7%, despite a headwind of a weakening British pound resulting in a quarter-over-quarter unfavorable exchange rate impact of 9 million. The increase in UK revenues despite the unfavorable foreign exchange impact is due to both new multiyear contract awards as well as expansion of small project activity. Please turn to Slide 6. Selling, general and administrative expense of 161.4 million represent 9.8% of revenues in an increase of 11 million or 10 basis points from quarter two 2014. The majority of the increase is related to employment costs due to an increase in incentive compensation expense given the company’s expectations of higher earnings in 2015 versus 2014 at both the consolidate and reportable segment levels which necessitates both higher annual and long term incentive compensation accrual and associated expenses. Additionally with the increase in quarterly revenues, our non-union headcount is up 7.5% over the last year’s period. With respect to the slight increase in our quarterly SG&A percentage, the 10 basis point increase is due to a higher percentage of our second quarter 2015 revenues being generated by our Industrial Services segment as compared to 2014 second quarter. As I initially commented during our year-end 2014 earnings call, our Industrial Services segment has a higher fixed cost structure than EMCOR’s other businesses and as a results their commercial revenue growth has compensated revenue growth has resulted in a higher SG&A profile for EMCOR Group. Specifically within the second quarter, the revenues represent a 14% of consolidated revenues as compared to 11% in the corresponding 2014 period. Operating income of 77.7 million represents 4.7% of revenues and favorably compares to 69.7 million and 4.5% of revenues in 2014 second quarter. All reportable segments are reporting increases and operating income other than UK Building Services which had discreet favorable item impact last year’s second quarter. Our U.S. Electrical Construction Services segment operating income of 25.3 million or 7.3% of revenues represents a 1.8% increase over 2014 second quarter. The corresponding operating margin is down 10 basis points period-over-period but is up 210 basis points sequentially. U.S. Mechanical Construction Services quarterly operating income of 32.4 million represents a 3.6 million or 12.6% increase from last year’s quarter. This improvement is due to increased gross profit contributions from projects within the commercial, institutional and water and waste water market sectors, despite finding the headwind of $3 million favorable claim settlement that benefited 2014 second quarter. Our total U.S. Construction business is reporting a 6.4% operating margin for the quarter just reported as compared to 6.1% on last year’s second quarter. Operating income for U.S. Building Services increased 4 million or 28.9% over 2014 second quarter with an operating margin of 4.1%. And what is typically this segment’s weakest seasonal quarter, operating margin improved 80 basis points as a result of strong performance within their mobile mechanical services division, due to increased gross profit across all of their service lines as well as a quarter-over-quarter improvement in the performance of this segment’s commercial site based operations. Our Industrial segment is reporting a $5 million improved in operating income with a corresponding 70 basis point increase in operating margin, the quarter-over-quarter improvement is due to large capital and maintenance project activity performed within their field services operations that offset reduced operating income from the shop services business. UK Building Services operating income of 2.8 million represents 3.1% of revenues which is down from the corresponding quarter of 2014. Last year’s quarter included 4.8 million of income associated with the reduction of certain accrued contract costs that were no longer expected to be incurred. We disclose this amount during the last year’s earnings conference call as well as within our management’s discussion and analysis included in both our 2014 and 2015 Form 10-Qs. Cash provided by operations for the second quarter is 11.8 million which is reduced from 2014’s activity with a significant increase in revenues during the quarter there has been a commence rate growth in accounts receivable which obviously impacted negatively impacted cash flow in the current period showed another positive impact in the back half of the year. We are now on Slide 7. Additional fee financial date on this slide not addressed during my highlight summary as follows, quarter two gross profit of 239.5 million represents 14.5% of revenues which is improved from the comparable 2014 quarter by 19.3 million and 30 basis points of gross margin. Total restructuring costs were 433,000 as compared to 176,000 in 2014 second quarter. Diluted earnings per common share from continuing operation is $0.74 as compared to $0.61 for the quarters ending June 30th, 2015 and 2014 respectfully. Lastly as Tony has already mentioned, it is worth noting again that the results of our operations for the second quarter of 2015 set new company records for the second quarter and regards to consolidated revenues, operating income and diluted earnings per share from continuing operations. Please turn to Slide 8. Now let’s turn our attention to our results for the six months ended June 30, 2015. Revenues of 3.24 billion represent an increase of 98.3 million or 3.1% as compared to 3.14 billion in the prior year period. All reportable segments are reporting revenue growth year-over-year as our second quarter revenue performance overcame our slow start in quarter one. Year-to-date gross profit of 456.5 million is greater than the representative 2014 period by 20 million and is 20 basis points higher on a gross margin basis of 14.1% of revenues. Selling general and administrative expenses of 323 million represent 10% of revenue compared to 294.3 million or 9.4% of revenues in 2014. On a sequential, our SG&A as a percentage of revenues decreased from quarter one to quarter tow and we will continue to see this metric reduced as we advanced towards the end of the year. Restructuring activity is relatively flat between the tow six month periods as we continue to look for opportunities to streamline our processes and achieve further productivity and efficiency dense. Year-to-date operating income is 133 million or 4.1% of revenues and represents an 8.8 million reduction over 2014’s year-to-date performance. Although we’ve made significant progress in closing the year-over-year operating income generated in quarter one, both our U.S. Electrical Construction and U.S. Industrial Services segments are still lighting their year-to-date 2014 performance due to project mix as well as our industrial services segment experiencing the continued impact of the nationwide strike of refinery operators that we discussed in detail during our quarter one commentary. Diluted earnings per common share from continuing operations is $1.26 for the six months ended June 30th, 2015 compared to $1.24 in the corresponding 2014 period which represents a $0.02 or just under 2% increase. Lastly on this slide, as I previously benchmarked our second performance, I would also like to point out that the results our operations for the year-to-date period set new company records in regards to consolidated revenues in diluted earnings per share from continuing operations for the first six months of every year, a very strong performance. We’re now on Slide 9. Tony touched upon the strength and liquidity of EMCOR’s balance sheet during his commentary as our modest leverage continued to reduce and is approximately 80% at quarter-end. Consistent with last quarter’s commentary, our cash reduction is primarily due to cash used in financing activities which includes 21.1 million or share repurchases that occur during quarter one, 10 million of debt repayments, 10 million of dividends distributed and 9.8 million of cash distributions to our joint venture partners pertaining to the governments contracts completed in 2014 we previously referenced. Working capital levels have increased since the end of 2014 due to the increase in accounts receivable as a result of quarters two revenues increase an addition to a reduction in current liabilities as a result of reduced levels on accounts payable and accrued payroll and benefits due to the funding our prior year obligations. Changes in our goodwill and indentified intangible asset balances reflect the minor impact of the acquisition made the second quarter as well as 19 million of year-to-date intangible asset amortization expense. The change in our stockholders equity balance for the first six months of 2015 is not equivalent to our reported net income for the same period as it was partially offset by common stock repurchases and dividends as well as the cash distributions to our minority interest joint venture partners as previously referenced. We are happy with our balance sheet in light of the significant revenue growth during the quarter and remained well positioned to take advantage of our growth opportunities and they present themselves. With my portion of the commentary concluded, I will return the presentation to Tony. Tony?

Yeah, thanks Mark. I am going to be on Page 10 and 11 and I am going to talk about backlog. Right now backlog is essentially flat versus the year ago period and it’s slightly down from quarter one, which I guess we would expect with 6.4% organic revenue growth in the quarter. I think it’s indicative of strong performance and strong end markets that we were able to maintain backlog relatively flat. I think when you look at this page and I am on Page 10, I can give you some commentary about what’s going on in the markets and it’s over a number of quarters and number of years. What you seeing is the commercial market has come back strong and we’re at record levels at for commercial and we’re up again year-over-year. The commercial market is strong for a number of reasons. One, we are well positioned in the commercial markets and some markets that are doing well. Secondly, there is a good occupancy rates and there is a desire upgrade buildings and we will take advantage of that. As you move up the page, a hospitality, it is what it is, we worth a high end of hospitality, I’ve to have a right properties in the right place. And what we see something build there again sure and where we participate absolutely. Our hospitality when it was very strong if you had this extended back to 2007, it was gaming driven and was primarily Las Vegas driven. You mean what the Industrial, Industrial for us is a lot of things. Industrial we do in the shops, I’ll take about that more on the next page, but it’s also things like power plant, solar plants, manufacturing plants, food processing plants, it’s all those things. We think the industrial market will still be strong for us mainly centered on a couple of areas. It’s going to centered around food processing and power work, we’ll continue to flow through EMCOR. But as year-end, we would expect industrial outside just the shop work, it potentially grow in commercial and maintain its own. Institutional, what you see there is really for the exit of those two large operating agreements over the last couple of year. And you know Mark when we get to the question-and-answer he will spend some time hopefully for somebody going back through a backlog is for us. The backlog for us is committed work, it’s fixed price work on the construction side and service agreements one year of it and that’s about it. And we don’t take any time and material work and guess what is going to be. We don’t take the add-on effects of a government contract. We don’t took the five year value of a government contract to put in. The other thing folks might not realize is, as a contract expires before through signed, it goes out of backlog and as it reaches expiration as it goes from 12 months to 11 months to 10 months and 9 months, we’ve reduced the backlogs out now to a guest explanation renewed. And for those the one and all, our renewal rates on our contracts unless there’s been a major see of the property of closer of the property or sell or something like that are about 90%. So we do pretty well there. Moving up the Page, Transportation is going to continue to be a strong market for us and that’s all forms the Transportation from bus depots to tunnels to bridges to airports. We’re going to play in transportation and for EMCOR, it’s a little bit of a mechanical play, it’s primarily an electrical play. And Water and Waste Water that 90 million or so jog we announced in South Florida it’s not in backlog yet, it was signed I think around July 1st, so in the May this report for the year-end period. So what do we see, we see a relatively strong non-res market for us. We do expect backlog to be in a pretty good shape as the year progresses. But you know we’d like to see the strong organic growth too, so it’ll be a balancing act. But the non-res market in the sectors we play and are pretty good. I think it’s led by commercial then go to industrial and then to transportation. And we could book a couple of these in healthcare jobs by the end of the year. They will be nowhere strong it was in 2009 and 2910, well people still work through the effects of the affordable care acts and they might be doing that for quite some time. And as you go to Page 11, let’s talk about what’s our backlog driven business in EMCOR and what’s not. The most backlog driven businesses we have at EMCOR are Electrical and Mechanical Construction segments. They are backlog driven businesses. You would expect that because 80% of their work is fixed price. And we continue to see modest growth there and we expect growth to continue there. Industrial for us is a least backlog driven business. And most of that work is in the field or it’s in the shops for repair. We do have a portion of that business that’s the new OEM heat exchanger build. That part of the business is the part that we think right now is most effected by what’s going on in the oil and gas sector with the major integrated oil companies and others as they look to trim capital expenditures. We still have opportunities, there are still the replacements, these repaired refiners are operating flat out, but it may be more quite turn and some of that stuff will never make its way from a reporting period to another in backlog. We have opportunities with LNG export terminals and we have opportunities with midstream processing. But we think right now the most part of our business is most affected for backlog with the oil and gas is that on this page in industrial, it’s down about 16 million year-over-year, it’s a portion of what we do in that business and that’s where we’re seeing the most defects right now.

In turn to make sure everybody understand, this page is only referring to the industrial services segment, not our full participation in the industrial sector which obviously our construction subsidiaries do participate.

Quite a bit. It’s been a growth market for us. Now I’ll go to Page 12 and 13. So what we’re going to do is we’re going to leave revenue guidance where it was at 6.6 million. That basically implies the same growth for the back half of the year as the current half of the year net around 3%. And for we feel really good about how we did in second quarter, but we also we caught up from the performance in first quarter and we said we would and we did. We’re going to bring the top end of the range down a dime. We’re going to make the range now 2.65 to 2.85 per diluted share from continuing operations. So 6.6 billion revenue, 2.65 to 2.85 per diluted share from continuing operations. That EMCOR really tried to focus on how do we get to mid to high point of that range. While how do you do that? Well we need more revenue growth of 3% in the back half of the year and what we’ve achieved on a year-to-date basis then we got a pretty good short as a mid-point to the high point. We could see some acceleration our large infrastructure work we’re doing in electrical. We continue to see a strong pace of recovery across the non-res market to include our mechanical service business not just our construction businesses. As of today, we are still planning for a pretty good fall turnaround season. But to get to the top end of the range, we would need to see some scope increases from what we are expecting today or some of the delay strip work to come into 2015 versus 2016 where we expect most of it to land today. We have a pretty good non-res market at least better than we’ve seen in a while. And that could potentially accelerate which may lead more quick turn mid-sized projects that we can get to a reasonable level of completion as the year progresses. On the non-res market, we think it’s relatively strong and as such we do expect our backlog to more up or it won’t be a straight line as the year progresses. Our bidding pace is good, our win rates are good, they could accelerate some and we’re waiting for some several large projects that we are pretty sure we won to get the contract signing and just that contract signing. Again it doesn’t go into our backlog until we have a sign contract, not just a letter of intent or notice to proceed. We continue to see a strong private market. We continue to see some unique opportunities at water market and we continue to see strength in the transportation sector broadly define. Our main caution for the year is with respect to the oil and gas sector. I think most of you are on our call and invested as note that we’re primarily a downstream focus company. Now let’s be clear, everybody is still in the effects of rigs being laid down right because back into the industrial base, it goes into manufacturing plants and surely we service some of those customers. It goes into office buildings in Houston and surely we’re going to have a pretty good year on Houston, we’re going to have a fantastic year in our commercial business in Houston prior to the slow down. So we’re not immune from it nobody is but probably a little less affected than others. Our main caution for the year is what happens with capital spending. We expect maintenance spending to be good. This is a double wide store right now with refiners running it near record utilization or record utilization with very good crack spreads to including California. But the issue is going to be, when they come down, where is the scope going to be, how does that scope play out, what’s the timing going to be and our - as contractors we are all going to be able to marshal a resources if they come down at ones and we have big spring 2016, nobody is clear on that yet. There are caution is with respect to the capital spending and with the major oil integrated companies will do, we’ll see. We do see some slowing and that’s what you see in our industrial backlog as it pertains to our industrial services business and what’s going on in the shop business. That’s how narrow it is for us. So let’s talk about what we actually do control on capital, it’s our capital allocation. We are starting to see some action avoidance. There is a series of companies we watch for a long period of time. There are each one of our major segments and would invest in any one of them because we have big businesses, they continue to grow, we have consolidating acquisitions we can make and we have that capabilities we can add. Deals happen when they happen and there is a couple of variables that have to happen. Can you get the price right, is it executable which means that the sellers actually follow through, they don’t always follow through. And when all those variables wine up and the timing can we make it happen or we do ones that are successful. We’re also seeing more of the traditional private market deal what I can. When I mean by private market, you own the business, you are selling it after being in your family or you starting it over 40 or 50 years, we’re seeing some of that. We are committed to at least repurchasing our share dilution from our equity compensation programs. We largely accomplish that in Q1, but we still have a 145 million remaining in our authorization. We continue return in cash as Mark went through to our shareholder through dividend. And we’re very pleased in Q2 to have happily invested cash into working capital to fund organic growth and I think what all agree that’s the best kind of growth. So with that I am going to take your questions and I’ll turn over to Teresa and thank you all for your interest in EMCOR as well.

[Operator Instructions] And your first question comes from the line of Adam Thalhimer with BB&T Capital Markets.

Hey, good morning, guys. Nice quarter.

Good morning, Adam. Thank you.

Okay, turning on the non-res construction outlook particularly in the commercial side, you said you are more optimistic and you have been in a while in a better market then you have in a while. How, what kind of visibility do you have there? I mean how do you think that extends in 2016?

Yeah, Adam, sorry to run away from the facts right, the markets up or our backlogs up 2.5 times from where it was at the bottom. And so we’re operating over a $1 billion in backlog there now. And we continue to see very strong mechanical service small project activity which for us is a pretty good mark around what’s going on non-res. I mean the visibility we have into ‘16 is what we’re bidding and most of those projects will happen in the next six to nine months. And what’s on the engineers board, I would say through early ‘16 we are okay. I don’t think we have much visibility beyond that we never do, I mean unless it’s a really large project and that’s not what really drives the growth right, but that sets the growth and the growth is driven by the mid-size of small projects. So I would say through the end of the year, they are always 16, I think we are in pretty good shape on from part of non-res.

Okay. And then on the industrial side, I am a little bit confused because you actually had a good quarter there, I think maybe you referenced one large project, I am just curious, I mean you gave a lot of color on that segment, I am just - I am wonder if you give a little bit more color on how unlike trend as the year goes on?

I think it’s going to trend fine. I think if there is a caution in our numbers, it’s not that we won’t think we’re going to do okay, it’s more how do you get to the top end of the range, that firing even above vis-à-vis on also when there is much seven of eight. Most of that Adam, has to do with we’re not seeing the work from the refining strike coming back this year. So what you see for the most part in Q2 is work that has nothing to do with refining like as it do with excellence and execution in our build businesses and really good performance on some unit rebuilds. And we don’t see any reason. I think that’s not going to continue. But you have to have a little bit of caution when oil back goes to $50 and in another part of someone’s business is getting hit pretty hard and you wonder how that’s going to expand the capital part of the business which were mainly effect for us the OEM head exchanger build which in any given year can be 10% to 14% of that segment.

Okay, thanks a lot and I’ll turn it over.

And your next question comes from the line of John Rogers with D.A. Davidson.

Hi, good morning. Congratulations on the quarter.

Hi John.

In terms of the fall turnaround season, I mean you made the reference to it is solid but is it up or down from prior year levels from your perspective, is it - what I am seeing is could refinery margins but also reports that refiners want to keep running through that season maybe differ some of that work into ‘16?

Yeah, John, I think what we try to pay attention to is man hours, how many man hours do we expect to deploy. And right now I would say that’s flattish up a little bit, but you really don’t know that going in because if it’s extends a week or two it can substantially increase the scope on a turnaround. And some of the best work we do is once we get in there and we have to pick some more than we thought we are going to with the original scope. So it’s really hard for us to sit here and say, what we do know is we have a full schedule turnaround, we know we’re going to very busy, we’re going to busy across all of our companies and our customers are trying to make sure we get the right resources for them and the mix of resources that’s right for the job. What we don’t know today is you want a specific turnaround, what we think it might be six, it could end up being five, it could being ten, it could end up being 12. We’ll know sometime when we are get rolling here in September, October but as of now people are holding their schedule and going to execute. All that being said, all those turnarounds would have happened in the first quarter and would even be doing better in industrial, right, we would have - so you could have taken the catch up we had in Q2 and now we all flow through to increase performance year-over-year because we would had a very good. If you say we said it was $0.07 or $0.08 a share in the first quarter that was what we knew about, that’s not all these other things I was talking about the spillover impacts. So that would have happen regardless of high utilization, regardless of people wanting to run flat up, because they were scheduled and they were ready to go, our planners were in there, our crews were starting to do some of the work in some cases. So I think that is true to some extend but we’ve seen, I could be telling you something different on our third quarter call but I doubt it. But I think people going to follow through on their schedule for the fall season because everybody is now worried what manpower is going to look like in early spring and again that could push out and that’s too early for us to tell.

Okay. And then just in regard to your comments on acquisition opportunities in the market out there. But it sounds if you are sensing that there was likely to be more activity over the I don’t know next couple of quarters a year?

Yes.

I know it’s hard to read, but?

Yes, I believe that because we are seeing more companies that we’ve had long term interest in positioning themselves to be sold. We also note that is companies that we’ve likely for a very long period of time as there are in markets that we serve and maybe provide additional services than even what we are doing today. There are now near the end of the fun life of the people that have owned and they are going to have to do something and transact now, they can’t delay anymore. And we follow that closely.

And it’s more on the industrial side of the market, I would say?

Not necessarily, John. We’re still happy to expand not only the geography that we service our construction customers were, we’d like to do more for them. We’d like to expand the geography of our mechanical service business and we would always look to expand our capabilities to industrial business, any one of those business who are investable for us. You know if we go do EMCOR, what do we go there. We go to the application and technical labor, we’ll go managing distributed operations whether they be branch networks or companies or good at mobilizing for large complicated projects, are also good at mobilizing across many locations and so we can handle both variable. For us we would like to service more that goes on a construction side, we also wanted to that and maybe not necessarily just mechanical, electrical trade work, but we’ll see. Again we look at all these different things and if you look at most of what we do at EMCOR, we learned about it someway say perform before we started doing it. But the core of what we’re going to do remains the same as far as we are going to service the U.S. construction market, we’re going to service the U.S. building services market and we’re going to service the U.S. industrial downstream and petrochemical refining market. And the industrial market will broadly find as you get into even our other segments. And we’re going to do that with very good technical labor or we’re going to do that in distributed operations and we’ll look for opportunities where we can bring our excellence and branch operations, GPS technology and everything else to bear on that.

And John, this is Mark. The other think I would add to Toni’s commentary with a loss we’ll continue to service our customers in the UK building services market.

Yeah, that also right. The UK building services market is a place that we would look to grow too. We’re starting to get good traction there and these two large contracts wins we had at the beginning of the year is a pretty good well whether what can happen. We have a focus business and they don’t have to go through the restructuring if they gone through in the last two and a half, three years. Thanks Mark.

Okay. Sorry, one last thing and may for Mark that the decline in non-controlling interest that we are seeing through the financial, are there any of the big projects out there where you not in full control of them?

No, that line specifically John, is the two government contracts we keep in front to that, we’re not rebid, because of the geography whether that’s in the financial statements, we were the majority, so we were - we consolidated the results. Right now that’s the elimination of the piece that we did not own.

Okay and there is nothing in backlog that’s…

No, that’s gone.

Okay, perfect, thank you.

You’re welcome.

Thanks John.

[Operator Instructions] And your next question comes from the line of Tahira Afzal with KeyBanc Capital Markets.

Good morning, gentlemen. This is Shaun on for Tahira today. Congrats on a great quarter. I guess my first question is just when you are looking at the tighter EPS guidance range, you know it sort of implies a little bit of a lighter margin outlook in the second half of the year. And I would be great if you could just help us understand a little bit what’s happening on that side?

Well, if you go to - this is Mark. If you go to the low point of the range in the guidance the operating margin that’s implied would be greater than it was in the first six months roughly 4.4%. At the high end of the range, it would be roughly 5%.

But I just mean you know in terms of the way what you have moved around in guidance, so just of implies in the second half of the year, the margins are expected to be a little big lighter than there were before.

We can take that - Mark can take that offline, because he want to walk through, we can do it now, but actually we’re counting on better margins in the second half of the year then we are now and we are counting on better EPS from continued operations at second half of the year and revenue growth about the same as we had in the first half of the year.

We again, if there is a math that you hear called cabinet mark and maybe…

Yeah, this is accounted.

But our math says something different.

I’ll go through the math with you, so give me a call afterwards.

Alright, no problem, just kind of versus prior expectation rather than the first half versus second half, but anyway we’ll move on something little more. You know just on the civil infrastructure side, there is just two thing, that would be great to get some commentary on and the first being we recently saw they finalize and did it on [indiscernible] expansion. And I just love to get an idea of what the scope for EMCOR might be on that project. And secondly we just have seen a little bit of movement on the federal highway bill this week. So I just love to get a sense of what kind of national opportunity that might present for EMCOR if we did see a long term bill go through. Some color there would be really interesting?

Look, I’ll take the first one first, the New York infrastructure market, the New York metro infrastructure market is very strong and has been. And where we plan that is the electrical infrastructure side. More than likely if we were to participate in any substantial way here, it would be on the electrical infrastructure side, not necessarily on the commercial building side. As far as in a highway bill, I mean we’ll see the spillover if actually not where we would likely participate if it became three to five program or people could plan a little better. If there is going to be major road upgrades, we would do the lighting and driving information systems for those. Again it would be in electoral infrastructure play for EMCOR likely the only place we would play as it pertains to that.

Alright guys, alright thanks for the color.

Thank you.

There are no further questions, management do you have any closing remarks.

Look, we had a good quarter, we on track for the year. We expect to continue to perform pretty well. We look forward to talking to you here on October and thank you for your interest in EMCOR and hope everybody has a very safe remainder of the summer. Thank you very much, bye.