Good morning. My name is Janisha and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Third 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] Thank you Ms. Michelle Herman with FTI Consulting, you may begin.

Thank you, Janisha, and good morning, everyone. Welcome to the EMCOR Group conference call. We are here today to discuss the company's 2015 third 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 third quarter of 2015. 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 advance to Slide 2. Slide 2 depicts the folks that are with me today to discuss the quarter and nine months 2015 results. They are Tony Guzzi, our President and Chief Executive Officer; Mark Pompa, 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?

Thanks Kevin, I’m going to be on Pages 2 through 5 for the first part of this discussion. First of all, good morning and thanks for your interest in EMCOR. Look we had a very good third quarter here at EMCOR. My discussion I’m going to focus on the quarter, as Mark is going to cover both the quarter and year-to-date in detail. In my discussion I will be talking pro forma numbers, which excludes the sell of a building last year and the focus will be on continuing operations. We earned $0.66 per diluted share versus $0.57 in a year ago period. We had revenues of $1.7 billion with underlying organic growth of 8.3% that is our strongest revenue third quarter ever. We also had a book-to-bill of 1.1 and backlog grew despite this very strong organic growth. All of segments had organic revenue growth in the quarter. We had operating margin of 4.1% compared to 3.9% in the year ago period, and operating income grew 13.1%. Operating cash flow from continuing operations were strong in Q3 at $100 million versus $69 million in the year ago period, and that is in the face of very strong organic growth and also a great cash flow performance. I'm now going to cover some segment highlights. Our Construction segment revenues grew organically at 5.7% when you put the two together. Electrical grew at 9.4% organically and Mechanical at 3.6%. We expected this growth in Electrical as we had really good backlog build. Mechanical also continue to see growth as it backlog also has grown. We had good operating income growth in Electrical at 23%. We did have some contraction in mechanical versus the respective year ago period, whereas we have said many, many times these are not quarter to quarter businesses.…

Thank you, Tony, and good morning to everyone participating on the call today. For those participating via the webcast, we are now on Slide 6. As Tony just indicated in his opening commentary, I'll provide a detailed discussion of our third quarter 2015 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 get started with our third quarter performance. Obviously some of this will be redundant to what Tony just said and I want to make sure we wrap up all around it, so everybody knows what happened. Consolidated revenues of $1.70 billion in quarter three, are up $132.4 million or 8.5%. All reportable segments are reporting increased revenues quarter-over-quarter. Our third quarter revenues included $1.7 million of revenues attributable to an acquisition within our US Mechanical and Construction Services segment, and therefore our organic revenue growth for the quarter is 8.3%. US Electrical Construction revenues increased 9.4% to $344.4 million. Consistent with the revenue performance in the second quarter this segments growth is due to greater project activity within the commercial healthcare and transportation market sectors, as well as an increase in manufacturing market sector project activity. This strong quarterly revenue growth led to a slight decline in the segments backlog at September 30, 2015 when compared to the backlog as of December 31 of last year. US Mechanical and Construction third quarter revenues increased $22.3 million or 3.9%. This quarterly increase is due to higher revenues within the manufacturing and commercial market sectors. We anticipate this segment will continue to generate consistent revenue growth as it is experiencing the largest increase in contract backlog of all of our reportable segments. EMCOR's…

Thanks Mark. And I’m going to try real hard not to be redundant we have been working on that. Look, go to Page 11 and I’m going to talk about backlog by market sector. What you see on the page is 2015 quarter three is the high watermark on this page. In fact, you would have to go back into 2008, about halfway through the year to get to a similar period at almost $3.8 billion of backlog. At that point and you can see it on this page, hospitality was a big part of our backlog and almost $0.5 billion in most of that work with in Las Vegas. Today, that equivalent backlog is $60 million. So what you see over this long period of time is the diversity of EMCOR and our ability with our different subsidiaries to move between markets, and take advantage of good markets when they’re there. Now 2015 is a growth market for non-residential construction, an 8.55% revenue growth for the quarter, it’s a growth market for EMCOR with 8.3% of that in solid growth and both of our Construction segments, it’s a growth market for EMCOR also. Most of the indicators say that it’s a growth market and we would agree with that, and we think it’s going to be a growth market going into 2016. Now, let’s be fair. I’ve been critical of the growth trajectory of this nonresidential recovery, and quite frankly, a lot of the predictors have been ahead of what the market has. Have been on balance, it is growing now and the reality is we've been more right than wrong about the trajectory of this nonresidential recovery. We think it is strengthening right now, as it goes into 2016. Now, when you look at the building section, which…

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

Hey, good morning, guys, nice quarter.

Thank you.

Turning on the Industrial side, do you think the revenues will be down there in 2016? I’m just trying to figure out exactly what you’re trying to tell us.

In 2016?

In 2016, yes.

Don’t know yet, Adam. We want the balances – here is what we know today. We know that we have a decent fall turnaround season for the fourth quarter, probably not as strong as it was last year. Now, could it turn out stronger? If 400 men get deployed for another three weeks, we’ll have a pretty good fourth quarter, we won’t know that until the end of the fourth quarter. The first quarter turnaround season looks okay, it looks pretty good. We have a nice scheduled work lined up. We’re certainly not expecting another strike this first quarter. So we expect to have a pretty good first quarter. What we don’t know, what the back half of the year looks like, I mean, currently we’re scheduled to do a lot of work, back-in change and we usually bring that into more crystal view. And the real question is, we expect our – that 10% to 13% of revenues in that shop business to be down. We’ll be able to overwhelm that with better work out of some of our specialty lines of services. And our Industrial services business that lost work because the shop on a year-over-year basis be able to replace some of that gap, and then offset some of the capital work that we had done this year that was abnormally large. So put it all together, we’d know, but I guess, I’m sitting here today, we don’t give guidance on 2016. I can’t imagine we could grow to the kind of levels we have over the past five quarters.

Got it, okay. And then on the Mechanical side, it look like you had a couple of projects that brought down margins, maybe a touch in the quarter, are those done now, or is there may be a lingering effect there?

Well, part of it is – and I’ll market into it a little more, part of it is, we’ve learned from working in the government space to have a fairly negative view of how long it will take to negotiate things, and so we tend to be fairly conservative because of that. And Mark, I’ll let you take it from there.

Adam, in particular the largest project is scheduled to be completed in early 2016. The reason why a write down is necessary this quarter is that the completion date was extended, not due to our work, but because of work of others on the job. And at this point, we haven’t received a change order for extended overhead, so we had to recognize the cost of the extended overheads without any recovery. Obviously, we will continue to negotiate to try to get recovery, and unfortunately at this point, we’re not in a position to offset it.

And I think in general when we’ve been working with government entities on larger projects that’s been our mode because it’s so difficult. We usually get there, but we get there over a long period of time, on a change order. REA is a different discussion, it’s even more difficult. And that’s been pretty much true, really since about 2011 when [indiscernible] really started to come in, its got much more difficult to get money that you’re entitled to, and so we take a conservative view because it’s becoming unknown.

Okay. I’m sorry if I missed that, but how – how much was that right down.

It wasn’t significant enough to disclose discreetly, it’s – if we had recovery it may warrant some level of disclosure beyond what we’ve provided today.

Okay. Thanks guys.

It’s not a big execution issue here. It’s a timing issue with respect to like Mark said, something slip to the right it had nothing to do with us.

Got it.

Your next question comes from the line of Alex Rygiel of FBR Capital Market.

Thank you. Good morning guys.

Good morning, Alex.

Good morning, Alex.

Hey Tony, can you sorry or maybe you did and I just happened to miss it, but on one of the last slides you talked about how you expect positive backlog growth in the fourth quarter in 2016. Can you go into little bit more detail sort of in the end markets that you think are going to be some of the buyer catalysts?

Sure. I think industrial non – so industrial as a market sector, not industrial as a segment will have growth. I think water and wastewater could have growth, whether it happens in Q4 or Q1. I do expect Commercial to have some growth. And potentially we may see some signs of life and healthcare.

And when you look at that sort of end market mix, to me it looks like a favorable mix shift towards better margin business, especially healthcare, water wastewater, industrial as well generally speaking, but am I coming to the right conclusion on that?

Yeah. I think in general, Alex if you look at margins and mix overall, we’ve gravitated towards a better mix. The only caution that we have and as part of what you see as we do large work, is the large work, as you know, we are appropriately conservative through the first part of that work until we really size up our estimate versus what conditions we’re seeing, so some of the larger work may come with dampened margins as we roll into it. But in general, if you complete the jobs we are moving towards a more favorable mix.

So we got a more favorable mix, but we might have somewhat of a short-term negative mix associated with project size?

Yes.

Okay, very helpful. And then just to reconfirm on the buyback program, the previous 140 that remains is in addition to the 200 that’s new, correct so total authorization outstanding right now is 340.

You got it.

Great, thank you, nice quarter.

Thank you.

Your next question comes from the line of John Rogers of D.A. Davidson.

Good morning, John.

Hi, good morning. If we could just go back for a second to the Q4 implied guidance here. The mid-point of the revenue range suggests overall revenue, really no revenue growth. Is that all Industrial Services?

Yes.

I guess, Tony from your comments Construction market is getting better.

Yes, two things, John, on the Industrial Services and it would headwind from the government JVs. You’re not getting to see the underlying growth that we in Building Services because the year-over-year impact of those JVs.

Okay, and then is it relates to backlog, especially on the Construction side of the business, are margins getting better there?

Yes. A little bit.

Okay. Is that pricing or just better utilization?

Both.

Okay. And then, Tony, I know you won’t give us specifics, but that’s okay. But could you run through kind of your priorities for acquisitions, end markets, regions, whatever?

Yes, John, I think we would always buy a well performing electrical, mechanical, or industrial contractor to augment our construction operations. If it’s either a good tuck-in like the one we just did on the fire protection side, it opens up geography to us or customers to us, or give us a little more service in fire protection, that’s just an example, we would do that. Or if it establishes us in a new geography or new product line within the geography, we would do that. Likewise in Building Services, I think the thing we would be most interested in the Building Services space would be the expansion of our Mechanical Services footprint. We continue to have some white space on the board and we would be happy to fill that in, or within the market sometimes we can expand our services, sometimes we do these tiny asset purchases to bring controls line with it, and all of sudden we created $3 million, $4 million, $5 million business out of nothing, that’s more of us. That micro tuck-in I would call it. The likewise, we would also look for plat services type where we can service manufacturing plants from a O&M, MRO basis. We would look at that also in Building Services. I don’t think we would be looking to aggressively grow through acquisition at this point, either our government business or our site-based business, that’s best on organically. Now, someone had a unique capability that we could add to our services, a little – another small line of service, but I wouldn’t think in either case it would be a place for major acquisition. And then as you go to Industrial, we digested RepconStrickland very well. We would acquire there. Now there we’re looking for specialty services, or we’re looking for shop footprint, either or like we did with Redman. And then you think about things we can do outside of that, I think anything that has a technician based service to it where we could add to, we would do that. But we’re pretty happy with the segments we’re in. We think we have acquisition growth within them. Sometimes they just don’t work out and we get paid to do the right acquisitions and be disciplined when we’re doing them. And we’ll continue to do that.

And the ones that you missed on this past year that you weren’t able to come to terms on, where any of those large acquisitions?

All three of them would have been significant. They all would have had, they were in the hundreds of millions of dollar revenue wise, and they were in the hundreds of millions of dollars purchase price.

Okay. Thanks. That’s helpful.

Your next question comes from the line of Tahira Afzal of KeyBanc Capital Markets.

Hey guys. Good morning.

Good morning.

So I guess first question is, Tony in the past you’ve said that if you can grow revenue let’s say in the mid-single digits, you should be able to get some leverage on the margin line. I guess I’d love to get your thoughts in terms of how mix plays a role in that. You know, Industrial is getting a little more difficult to call on the visibility side, but obviously your non-res business outside of that is doing well. Do you still get leverage on the margin side or do you need to update, how do you think about that?

Well, I think we’re getting some leverage on the drop through side, right. If you grow revenues 8.3% organically and you grow operating profit 13.1%, you’ve got leverage. Now, did we get the margin expansion we would have liked to have gotten. The mix overwhelmed that this quarter, and maybe Mark can go into more detail. But we lose just big numbers, when we lose shop, good shop work, it takes quite a bit of the other revenue to make up for it. Mark?

Yes. And I think, Tahira, the phenomenon that we experienced in this quarter, in particular with Industrial and to a lesser extent, within Building Services is those revenues and associated operating margins that we were beneficiary of in the third quarter last year that did not replicate in the current period were double-digit margin revenues. And albeit from a volume perspective, not that significant, but when you’re getting that level of conversion, it clearly does have an impact on the overall margins on a segment basis, as well as the consolidated company just because of the overall margin profile.

Look, Tahira, it’s safe to say if we are replacing something that’s – as Mark just said twice the margin profile of EMCOR at least, with something that’s even, is still better than the margin profile of EMCOR that may have marked 400, 500 basis points difference. It’s hard for us to grow and expand margins. So, we didn’t expect to see this kind of mix shift to this rapidly within the quarter, and clearly it took some margin performance away from us, but again we are happy with the margin dollar growth.

Right. And I didn’t want, I mean, the improvements you’ve made on G&A out of restructuring you have done is very commendable, so I did want to convey that. And I guess – what I'm trying to ask is, as you look at the revenues on the non-res side, really pushing through and now showing visibly, would we still struggle to get out of the low 4% sort of below 4.5% operating margin range as you look forward.

I don’t think we are struggled. I don’t think third quarter 4.1% is the high water mark for them or by any stretch of the imagination. I think if get more construction revenues, we will continue to get better drop through in our Mechanical and Electrical segments. I think building services won’t be a drag – much of a drag, it will be sort of low for us, mid for us. I think corporate will sort of stay fairly level. And I think the headwind we have – and want to be a little cautious is, the shop work is really good work. And if we can get enough repair work to overwhelm that, then we will get back on par, but if we can’t get enough repair work to start filling the gaps around that OEM mark, we’ll take out the cost, which we’re pretty good at that, we will have some headwind.

The only other thing I would add, if you go back to when we acquired RepconStrickland, we were pretty clear that their margin profile relative to our legacy Industrial business was lower, and the other phenomena we have is that the majority of the revenue growth that we are experiencing in that segment is coming from the RepconStrickland portion of the business. So once again, higher margin profile than the most of the other EMCOR businesses, but a slightly a lower margin profile than the other businesses within the Industrial segment. So happy with the performance, they’re executing very, very well. It’s just the low of average and simple math.

Yes, and look, I know where you’re going with the question and it’s a good question, it’s the one we’ve been wrestling with quite frankly internally.

If the mix stayed favorable in Industrial and we had strengthening non-res, we would expect to be touching the high-4s and trying to make our way to 5%. If we have this headwind in Industrial and in shops, it’s going to damp us down to the mid-4s with really good execution in our Construction business.

Great. That was actually pretty helpful, Tony and Mark. Thanks a lot.

Okay. I think that’s it for questions. Look we had a good quarter, year-to-date, and Mark went through some of the records we’re at. I’ll leave you with three things. One, as we go to the end of year, our business is in really good shape. Two, we have confidence in that business and it really shows by what our Board authorized has to do with our meeting yesterday. Go by the best company you have, which is you if we can’t make the right deals and that’s what this management is dedicated to, is building value for our shareholders. And number three, we’ve got really terrific folks in the field executing very well right now. The headwind we have, we will get through. We’ll fight through that. We got a great team down there in Beaumont that will do that. And we wish you all great Thanksgiving. And as you move into the holidays, have a great holiday. And I guess we will see some of you out on the road, but for the most part I guess we’ll talk to you all on February. And we look to finish the year strong. Thank you all very much.

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