EMCOR Group Inc (EME) 2005 Q1 法說會逐字稿

Good morning. My name is Kate and I will be your conference facilitator. At this time, I would like to welcome everyone to the EMCOR Group 2005 first-quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, will be a question-and-answer period. (OPERATOR INSTRUCTIONS). Thank you. Mr. Eric Boyriven of Financial Dynamics, you may now begin your conference.

Thank you and good morning, everyone. Once again, this is Eric Boyriven of Financial Dynamics, and I'd like to welcome you to the EMCOR Group conference call. We are here to discuss the Company's 2005 first-quarter results, which were reported this morning. I'd now like to turn the call over to Mr. Kevin Matz, Senior Vice President of Shared Services, who will introduce management. Kevin, please go ahead.

Thank you, Eric, and good morning, everyone. Welcome to EMCOR Group's earnings conference call for the first quarter of 2005. For those of you who are accessing the call via the Internet and our Web site, welcome, and we hope you have arrived at the beginning of the slide presentation that will accompany our remarks.

Currently, everyone accessing the slides should be on slide 1, which is the EMCOR title slide. During the call, instructions will be given for you to advance to the next slide. Please advance to slide 2.

Slide 2 depicts the executives who are with me to discuss this quarter's results. They are Frank MacInnis, Chairman and Chief Executive Officer; Leicle Chesser, Executive Vice President and Chief Financial Officer; Mark Pompa, Senior Vice President, Chief Accounting Officer and Treasurer; Mava Heffler, Vice President Marketing and Communications; and Sheldon Cammaker, Executive Vice President and General Counsel.

For call participants who are not accessing the conference call via the Internet, this presentation, including the slides, will be archived in the Investor Relations section of our Web site under "Presentations". You can find us at our Web site 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 statement. 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's services, adverse business conditions, increased competition, mix of business and risks associated with foreign operations. Certain of the risks and factors associated with EMCOR's business are also discussed in the Company's 2004 Form 10-K and 10-Q for the first quarter ended March 31, 2005 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 Frank. Frank?

Good morning, everyone, and thank you, Kevin. Those (indiscernible) lessons are really paying off! Welcome to our 41st regular quarterly conference call for investors, analysts and other friends of EMCOR Group. Today's call is being conducted, as usual, by telephone and by simultaneous webcast. I will be referring from time to time to a slide number to identify the relevant slide for webcast participants. Right now, we're still on slide 2.

The focus of today's call is the EMCOR Group first-quarter 2005 earnings press release, which we issued earlier this morning. We will conduct this call in our customary way -- first, a discussion of those first-quarter financial results, followed by a review of the evolution of our contract backlog and special mention of some notable contract awards from the recent quarter. Then, we will spend a few minutes profiling one of our most interesting subsidiaries and most consistent performers, our Trautman & Shreve subsidiary in Denver, Colorado. Finally, I will update our listeners and viewers on our progress towards the achievement of the goals we've set for ourselves this year, the major factors that we think will affect our performance, and our current expectations for full-year financial results. At that point, there will be an opportunity for you to make comments or to ask us questions. As you can see from slide 2, I am ably assisted here today by a number of EMCOR Group's senior managers.

So let's begin. Please move to slide 3. This morning, we announced our first-quarter operating results and commented on the salient factors that influenced earnings during the period. We simultaneously filed our first-quarter Form 10-Q and the following comments are drawn from both of the documents that we released.

In management view, the major development in first quarter 2005 was the expected and significant improvement in operating performance, as our company profited from the restructuring activities, management changes and institution of bidding and estimating discipline that were our focus during most of 2004 and indeed the last half of 2003. Although we remained profitable throughout that period, the macroeconomic challenges associated with the recession, together with management shortcomings at various levels and locations within the Company, combined to monopolize senior management's attention as we worked to reposition and restructure our company for the future.

In the first quarter, these changes brought us significant benefits, including an increase of EMCOR's operating income to $5.5 million, net of the restructuring charge of 1.2 million, compared to an operating loss of 4.5 million net of the $5.2 million restructuring charge in the year-ago period. This year-over-year improvement was achieved despite an $8.7 million non-cash charge recorded during the first quarter associated with a jury's decision in the civil action filed by EMCOR and our JV partner against a customer in Virginia. We and our partner were successful during the liability phase of the trial, but the jury's finding concerning the damages to which we were entitled was less than our expectations. Pending our appeal of the jury's damages award, we recorded a non-cash charge reflecting the proportion of our contract costs that we deemed to be non-recoverable. As I said to our senior management group in discussing the first-quarter results, our performance includes (indiscernible) litigation related charge was very good. Without the charge, it would have been exceptional.

There were several individual bright spots in our operational performance this quarter. U.S. electrical, construction and facility services operating income was down slightly to $16 million, compared to 17.3 million in 2004, but continued to reflect very good performance at 5.8% of revenues. U.S. mechanical and facility services recorded an operating loss of $3.1 million after the $8.7 million non-cash charge just discussed but still showed significant improvement compared to a year-ago operating loss of $7.6 million.

U.S. facility services had a strong first-quarter operating profit of 4.4 million, compared to a $1.3 million loss a year ago, reflecting improved gross margins, especially on mobile services work. Results in the earlier period had also been depressed by two specific construction projects.

Canadian operations produced a small operating loss in the period, compared to breakeven in 2004, and our UK operations also produced a small operating loss but reflect better performance than a year ago and in line with our budget expectations.

Another positive aspect of our first-quarter operations was our continued success in reducing our general and administrative costs, both in financial terms and as a percentage of revenues. SG&A charges for the first quarter were $93.4 million, or 8.5% of revenues, a reduction of 7.1% compared to costs of 100.5 million, or 9.1% of revenues, in the first quarter of 2004. We are extremely pleased with these operating results and believe that they reflect fundamental improvements in our operational controls that will continue to benefit us in future periods.

Notable areas of geographic improvement in operating profit during the quarter included Midwestern and Western mechanical, including an operating profit at our Marelich operation in California, our mobile services division of EFS, our Western Canadian construction projects and the construction on rail divisions of our UK company.

2005 first-quarter revenues were nearly identical to the year-earlier period, reflecting previously planned reductions in market participation in certain segments of the public sector, specifically institutional work, and downsizing of certain mechanical construction companies. These reductions were offset by revenue growth in our U.S. electrical, U.S. facility services and our UK operations, as we continued to guide our subsidiaries towards more probable segments of their markets.

Gross margins from operations were 9.2% of revenues for the quarter. The year-ago margins were 9.1%. Restructuring expenses associated with additional management changes in Canada and the UK declined to $1.2 million this quarter, compared to 5.2 million last year.

Net income was 1.9 million or $0.12 per diluted share, compared to 5.7 million or $0.37 per share a year ago, when earnings were substantially enhanced by the reversal of a tax accrual.

Please move to slide 4. EMCOR's balance sheet remained strong and liquid during the first quarter, during a season when we are typically a net investor of working capital in our portfolio of projects. Total debt rose very slightly during the period, compared to the last quarter of 2004, but the ratio of debt-to-total capitalization remained at a very low 13%, very similar to the 2004 year-end.

Please move to slide 5. EMCOR's contract backlog held steady at $2.7 billion at quarter end, essentially equal to the previous quarter end. Those of you who are looking at slide 5 can see that our management of our backlog portfolio since the end of 2003 has resulted in major reductions in our exposure to public-sector institutional work, notably the K through 12 educational market, where we have had very little operational success. The reduction in transportation sector backlog in the current period reflects burn-off of some major project revenues, while our commercial sector backlog was flat with the previous year-end.

One area of notable backlog growth was in the healthcare sector, which we highlighted in a trade press release issued earlier this week. Sophisticated, systems-rich facilities, like hospitals, clinics, laboratories and other treatment facilities, are an area where we have had great success in the past and we expect solid growth in this sector due to demographic and other trends.

Overall, our operations managers saw improved project bidding and proposal opportunities during the first quarter, as macroeconomic indicators, like employment statistics and commercial real estate absorption rates, turned positive in a number of our markets.

On slide 6, we discuss some noteworthy recent contract awards reflecting these positive market trends. In San Diego, our Dynalectric company is providing electrical services to a multi-building addition to QUALCOMM's corporate campus, including a data center, offices, laboratories, a parking structure and the central plant providing 12 kv of normal or emergency power to the campus.

At the University of Alberta Heart Institute, my Alma Mater by the way, in Edmonton, Canada, Comstock Canada was awarded a major electrical and mechanical project for five clinical levels, including a cardiovascular and cardiac care unit and tie-ins and extensions to existing facilities.

In Boston, BALCO will repipe the chilled and hot water system for 22 rooms occupied by the priests at the Paulist Fathers' rectory. BALCO developed the construction plan for this historical building by consulting old blueprints at the Boston Public Library. We hope that white smoke will issue from the chimney when our project is complete and successful.

Down the road in Hartford, Connecticut, New England Mechanical renewed a three-year, 16-building contract to provide general operational and maintenance services to the Hartford. The Venetian meeting rooms are a 300,000 square foot buildout of an existing structure, including the power, lighting and distribution backbone to be performed by Dynalectric Nevada.

At the Intel fabrication facility in Arizona, University Mechanical will be involved in the complete retooling of the manufacturing building, including waste stream management abatement systems, 24 new air handling units, and new redundant processed cooling water systems for critical pieces of process equipment.

(indiscernible) Florida is working with the city of North Miami Beach to expand a water treatment plant to increase its capacity and ultimately render it independent of the Miami Dade water and sewer systems. The current system improvements are concentrating on water appearance, color and organics levels.

Finally, this quarter's showcase company, Trautman & Shreve in Denver, was awarded two major projects in this quarter's showcase business sector, healthcare. At the Centers for Disease Control, Trautman will perform the complete HVAC and mechanical systems along with computer-aided design coordination for the entire electrical, mechanical and fire protection systems for a four-story, 260,000 square foot laboratory facility. While at Porter Adventist Hospital, they will perform a major addition and renovation for a new, two-story, 36-bed ICU building and a three-story surgical building totaling nearly 500,000 square feet. Included are 13 operating rooms, an auditorium, food servery and a central sterile facility. This large, complex and sophisticated healthcare development epitomizes the kind of project at which EMCOR companies excel and illustrates the major role that Trautman & Shreve plays in the Denver area mechanical construction market.

On slide 7, we illustrate some of the keys to this company's long history of excellence. Founded in Denver in 1937, Trautman & Shreve specializes in complete mechanical contracting services, including engineering, design, installation and servicing of all kinds of air handling, piping, refrigeration and building automation systems. Averaging annual revenues of around $85 million, they service all of Denver's major market segments, commercial, transportation, biotech and healthcare, high-tech, manufacturing and financial services. They are an innovative company, deriving more than 70% of their revenues from projects utilizing a design-build-assist delivery model and they are an aggressive leader in their utilization of best-in-class technology in computer-aided design and 3-D modeling in their 4,000 square foot fabrication facility. It's no wonder that they've been Colorado's top specialty contractors since 2001 and the recipient of many ACE awards for construction excellence. Throughout their history, Trautman & Shreve have had an unmatched reputation for quality, integrity and customer service. We are proud of them and of the way that they reflect EMCOR's own corporate values.

We think that the projects we've just been discussing, drawn from a much longer list of new awards, support an optimistic view of market developments as we progress through 2005 and into 2006.

On slide 8, we discuss the market drivers that we identified at the beginning of this year and their influence on our currently expected results. Backlog mix is often a useful indicator of long-term trends, although it's not always congruent with current revenue trends because of different burn rates between different types of contracts and also because at least 25% of our revenues never see a backlog report because of the small size of their individual contract. Still, it's quite clear, from our backlog report, that we've made good progress towards the required rebalancing of our backlog away from excessive reliance upon public-sector work, particularly institutional projects, and that we have plenty of capacity available from our profitable short and long-term projects as our private sector markets improve.

We've also made good progress in the right-sizing of certain of our companies that had reported losses or problems as a result of management control issues. A good example of this is our Marelich operation, which reported an operating profit this quarter after serious problems last year prompted a thorough restructuring.

April is the beginning of the time each year when we look to the private sector and particularly the owners of commercial facilities with HVAC systems for four or five months of fast-paced, high-margin discretionary work associated with the service, repair or upgrading of such systems as the warm season approaches. This sector has disappointed us for the last two years, for weather and economic reasons, and it's a little too early to say how spring 2005 will turn out but early indications are good.

We want to grow facility services faster. They have a very good first quarter and they are an important contributor to our profitability and our stability. I'm going to ask them to be more aggressive in their organic revenue growth targets as the year goes along. We have shown remarkable success in the last 15 months in materially reducing our cost of doing business. Our strict control of SG&A has brought these costs as a percentage of revenues down to 8.5%. I've said before that 8% or thereabouts is probably optimal for our business, and I think that we will inevitably spend the incremental dollars as bidding, estimating and proposal writing increases with market improvements. But I think we have a good handle on these costs and the ability to enhance our margins by continuing to aggressively control them.

Overall, I think that the major factors that will determine our 2005 operating results are beginning to line up, largely as anticipated for EMCOR this year. Accordingly, I am today reiterating previously issued guidance for 2005 -- earnings per share on a diluted basis of $2 to $2.40, based on revenues of 4.4 to 4.6 billion, and gradual continuous improvements throughout the year and into 2006.

That's it for now. We are ready for your comments or questions, and Kate is here to tell you how to queue. Thanks very much.

(OPERATOR INSTRUCTIONS). Alex Rygiel from Friedman, Billings, Ramsey.

Thank you very much. Good morning, gentlemen. A couple of questions with the guards to the Virginia wastewater jury verdict -- first can you give us a little history about the project, when it started, when it was completed, how the project flowed through your P&L and then, help us to understand the difference between your 10-K filing of the dollar value that you had claimed of 75 million versus 18 million, and then the 8.7 million charge here, if you could just kind of provide some more color on all of that, I think it would be helpful.

Okay, Alex. Let me see if I can explain the claim and the jury verdict, but I'll try to do so briefly. As you mentioned a number of numbers, and if they complicate a matter -- but let me see if I can give a quick overview.

This is a large construction project performed by an EMCOR subsidiary in joint venture with another construction company for a sewage authority in Virginia. The project involved the development and construction of the entire facility and was a lengthy project starting in 1997. The project was, I should say, troubled throughout its history, marked by numerous change orders and delays occasioned by the customer, and I say so confidently because a jury also said so. We were successful in suing the customer, alleging that their changes of mind and change of heart have led to numerous delays and resulting costs to EMCOR. The jury found that we had succeeded on, if memory serves, 19 of 21 counts relating to these changes and the costs associated with them.

However, the jury's opinion of the damages to which we were entitled by the customer varied from ours to the tune of $8.7 million, so while we have correctly assumed that we would be successful in proving that the customer was liable for these additional costs, the jury disagreed with us as to the total quantum. We therefore took a charge in the first quarter of $8.7 million representing the difference between our assumptions concerning our entitlements and the jury's. We can, of course, appeal that verdict and will, but in the meantime, we've taken that as a direct charge against our Mechanical division's operations for the first quarter.

Okay. Was that project bid on before or after you acquired (indiscernible)?

It was bid -- estimated, bid and acquired before we acquired the company. It was an inherited project.

(indiscernible) there's no cash impact with regards to your balance sheet? Is that correct?

There is no cash impact associated with the charge.

Very helpful. I am going to get back in the queue.

Jamie Cook from CSFB.

My first question, Frank, if you could talk a little bit about what you're seeing or expand a little more about what you're seeing in the market and your expectations for '05 in terms of commercial construction -- just because, you know, in 2005, most people expected that we would see a pick-up. Yet, if you look at some of the data from Dodge, which shows construction starts and it breaks it down by commercial and public, whatever, but it was essentially negative for the first three months of March, which was surprising to me. So I guess if you could just add any other anecdotal evidence of what you're seeing in the market, that would be helpful.

Sure, I will do that first and I sense that you have another question, so I will do that first.

My view is similar to what I said last time I characterized our commercial market, which is that it seems to be strong in places and very flat in others. I will go through the geographic areas very quickly. California is a mixed bag, Southern very strong, Northern very weak; the Midwest continues to be a very flat market for us, no real signs of growth in Chicagoland or anywhere in the Midwest. On the other hand, Las Vegas looks good; Miami is a real boom town with labor shortages beginning to emerge here and there. I think that the Eastern Seaboard, Boston in particular and New York, look good. Washington D.C. is a real good market for us.

The statistics that I've been looking at, Jamie, and that I think represent the most reliable ones for long-term market planning for EMCOR are the employment statistics, together with the Class A real estate absorption statistics. Both of those are positive for us and have been positive for the last six months. The absorption statistics are particularly telling in that that's the end of the market that we want to work in. The gains in the employment that we've seen in the last few months, while disappointing to some economists, have of course been concentrated in the service industries. Those service employees have to be housed in the kind of commercial facilities that we like to work in. So, it's a mixed bag for us but it's a strong enough improvement in a number of our most important markets to make me generally positive and optimistic, although not across the board.

Okay. Then my next question, you know, relates to your appetite for acquisitions. You have a strong balance sheet. It seems like you've absorbed -- you know, I was just wondering if you're still actively looking for things or do you think that you would have enough on your plate, assuming we do see a recovery in the second half of '05?

Jamie, in a macro sense, we've accomplished about a year and a half of a very difficult and sometimes unpleasant restructuring process. We spent about I guess 8 or $8.5 million on it last year. We are going to spend a total of maybe 2 million maybe this year on restructuring. But that process is substantially complete, and I think you must have caught from the tenor of my remarks earlier that I'm quite pleased with the indications of improvement in formerly troubled operations and the benefits from the more rigid cost controls that we've inserted that have resulted, for example, in significant reductions in SG&A. These are real accomplishments.

Those kind of activities were pretty much monopolizing our senior management's attention over the last 18 months. Even though we remained profitable, this is our 39th consecutive profitable quarter that we just announced, we remained profitable that entire period. We didn't think that we were strong enough during that period to really aggressively look for acquisitions at that time, even though we probably had the economic ability if something compelling arose.

Today, I think we are in good shape, as far as our management is concerned. Our core markets are, by and large, increasing, as just discussed, and I think we are ready to look for ways of expanding our operations. I'm not necessarily, however, interested in the rough-and-tumble of the outside acquisition market, because I think they're some crazy money being spent just now by financial buyers. I'm interested in the possibility of investing on the inside in strategic relationships with some of our customers, some of our co-service providers. These might be the functional equivalents of acquisitions but on a much less risky basis. I've talked from time to time in the past about the theory and principle behind this, that being that I don't understand, for example, why a major OEM would want to be in the installation and maintenance business if they could have a dedicated partner like EMCOR capitalized for the long-term, looking like them, ready to act like them in partnership and uninterested in competing with them in their core business.

So that's where I think we might be going. You are quite right that we have a strong balance sheet, we have lots of credit. This should be another good cash year, so I really to have a deluxe problem on my place as to what to do with the money.

Noelle Diltis (ph) from Stifel, Nicolaus.

I'm calling for Jeff Beach. My first question -- I was wondering if you could review what is driving the weakness in the Canadian market. Obviously, it's improved a lot since last quarter but also maybe give some insight into where you stand in improving these operations and maybe even a timeframe for when you see it going profitable.

Sure. The Canadian market is a very unusual and difficult one. It is marked by a small number of locations where business of the type that we do can be done. Our Canadian company is essentially in the industrial market; it does very little commercial work and as a consequence is limited in its opportunities to essentially southern Ontario, a couple of mid-Canadian locations and then Alberta, which is the site of the largest construction project in the world; that is the Athabasca tar sands development. The task facing our Canadian operators always has been the conduct of a cross-country business that is at eight or ten isolated locations that have to be operated very independently of one another with really no opportunity for economies of scale. This requires an extreme level of empowerment of one's local managers. Occasionally one makes mistakes, and we made some mistakes a couple years ago that we paid dearly for. We have new management in place in Canada, including a recently named CFO, a new CEO two years ago who had done a terrific job for us, but it remains a difficult market. I don't think that Canada -- although I do expect it to improve this year, I don't think that Canada will contribute materially, positively or negatively, to our results in the course 2005.

Okay, great. Thanks.

(OPERATOR INSTRUCTIONS). Rich Wesolowski from Sidoti & Company.

Frank, I would just like to get some specifics on how you plan to grow facility services faster than it has grown in the past.

Facility services are a marketed-and-sold business. What it means is putting feet on the street to get out in front of the fee suite (ph) of major potential customers. We have a pipeline of customers -- of customer proposals that are in place, that are on the table and that are in discussion, but it's just like the business development's function of any large product company; you've got to develop that pipeline and then keep feeding raw material into one end in the hope of having contracts emerge on the other.

We have those activities underway but I want more salesmen; I want more marketing; I want more aggressive approaches made to companies of the type that I described earlier, OEMs that could profit from the opportunity to focus on their core businesses and leave the operation of their increasingly complex and extensive facilities to experts like us.

It's really a matter of marketing, communications and sales activities at that divisional level, frankly, together with the dedication of more of my time towards direct, high-level discussions with some of these major customers for whom a relationship with EMCOR is really more of a partnership than a subcontract. A good example of that would be our twelve-year relationship with British Airways at Heathrow Airport, which has become very much a partnership over that period of time. It a mutually pleasant and profitable one in which they count on us and we count on them. We've taken over and fulfilled very well a very important management function for them that they can now trust us with and they can concentrate on their core business of transportation services. But that's the way.

From an organic standpoint, Rich, I think that we're going to grow facilities services. But I think that there are significant opportunities for us to make capital investments of the type that I was describing to Jamie earlier in a way that will provide us with large quantities of dedicated customer work associated with the acquisition of the installation/maintenance capacity of one or more of our partners.

So does that imply that the majority of these potential customers are going to be making their first decision to outsource this work and that you're not going to be taking them from other facility-service providers?

Yes, very frequently -- and the reason why you've got to talk to the fee suite (ph) when you're selling this work is because, if you are trying to sell change to the people whose jobs you're going to change, you're going to have very little success. In many cases, our competition, in connection with these proposals, is the asset management division of the customer. That's why we have to communicate directly with the fee suite (ph) and make our pitch that the companies -- the customers' interests are best served by leaving the management and operation of these assets to the experts like EMCOR.

Alex Rygiel from Friedman, Billings, Ramsey.

As a follow-up to sort of that last conversation, you know, your SG&A came down very nicely and is at a level that it hasn't been at since mid-2002. At about that time is when you started to spend a lot of money on your facilities services, advertising and marketing campaign, TV, prints, journals and so on and so forth. You had just commented that you might be kind of reaccelerating your marketing initiative. Can you just sort of talk about the timeline of those expenses for advertising, how they were added into your P&L and maybe how they came out of your P&L to help you bring that SG&A line item back down and whether or not you expect increases in advertising and marketing expenses going forward?

I do not expect proportionate increases in advertising and marketing expenses going forward. Mava Heffler is -- our Communications Director -- is sitting here at the table with me with a very downcast look on her face. But let me first say that we have come a tremendous distance in the last couple of years under Mava's guidance from the largest company that nobody ever heard of to a company that is becoming known in our sector for the quantity and quality and breadth and scope of services that we want customers to think of when they think of EMCOR. So, we're very pleased with the progress that we've made in that area.

But when I say marketing and sales, I want you to think about sales; I want you to think about the direct, face-to-face sales process with customers that will be performed by people like -- oh, I don't know, me, for example -- in direct contact with a high-level representative of customers, which are where you make the big deals in the facilities services area. That's frankly what I've got to do. It goes from my office down through the Company to the marketing and communications operations of EMCOR facilities services and other parts of our operation where we have individuals who interact with customers every day. But I don't see this and I'm not trying to signal the start of a major new advertising campaign or new television spots to make me more of a media monster or anything like that. It really has to do with the kind of face-to-face contact that would characterize the establishment and continuation of a partnership relationship rather than a sold service.

Great. Then also, just to follow-up on that, with regards to the incurred expenses for advertising and marketing materials over the last couple of years, was that a number that was in easily well into the millions that was easy to cut out over the last six months to get your SG&A back to a more attractive level?

No, no, no! Our savings in SG&A did not -- were not based on cutbacks in advertising. They were based on cutbacks in administrative personnel, including bidding and estimating people, right across the board. We took a slice out of the entire company in order to render -- based upon corresponding improvements in our systems and in our methods of managing operations for the purpose of just removing some deadwood and making ourselves more efficient and more direct in our control. We did not target marketing or communications in any way.

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

Thank you all very much for your interest in EMCOR Group. We are delighted with our progress that we're making on the operating side of our business, and we think that there's more good news to come as the year goes along. We will talk to you soon.

This concludes today's EMCOR Group 2005 first-quarter earnings conference call. You may now disconnect.