EMCOR Group Inc (EME) 2005 Q2 法說會逐字稿

Good morning. My name Is crystal and I will be your conference facilitator today. At this time, I would like to welcome everyone to the EMCOR Group second-quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS).

I would now like to turn the call over to Mr. Eric Boyriven of Financial Dynamics. Sir, you may begin.

Thank you and good morning, everyone. I'd like to welcome you to the EMCOR Group conference call. We are here to discuss the Company's 2005 second-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 second 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 Frank MacInnis' remarks.

Currently, everyone accessing the slides should be on Slide 1, which is the EMCOR title slide. During the call, instructions would be given for you to advance to the next slide. This is one of those times. Please advance to Slide 2.

Slide 2 depicts the executives who are with me to discuss the quarter and the six-month results. They are Frank MacInnis, Chairman and Chief Executive Officer; Tony Guzzi, President and Chief Operating Officer; Leicle Chesser, Executive Vice President and Chief Financial Officer; Mark Pompa, Senior Vice President and Chief Accounting Officer and Treasurer; Mava Heffler, Vice President of Marketing and Communications; and Sheldon Cammaker, our 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 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 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 services, adverse business conditions, availability of adequate levels of surety bonding, increased competition, mix of business, and risk 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 second quarter ended June 30, 2005 and in other reports filed from time to time with the Securities and Exchange Commission.

With all that said, please let me turn the call over to Frank. Frank?

Thank you, Kevin. Those elocution lessons are really paying off.

Good morning, everyone, and welcome to our 42nd 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 a simultaneous webcast, and I will be referring from time to time to a slide number to identify the relevant slide for webcast participants. Right now, we are on Slide number 2.

The focus of today's call will be EMCOR's second-quarter 2005 earnings press release and Form 10-Q, which were issued and filed earlier this morning. We will conduct this call in our customary way -- first, a discussion of those second-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 best-managed and best-performing subsidiaries, our Dynalectric company in Washington, D.C. Finally, I will update our listeners and viewers on corporate and market trends that we think will define our performance for the remainder of this year and into 2006. Then, there will be an opportunity for you to make comments or to ask us questions.

In that regard, I'm pleased to advise that the group of senior EMCOR managers who frequently participate in the Q&A portion of these calls has been joined today by Tony Guzzi, who became EMCOR's President and Chief Operating Officer late last year. Tony will be available on this and future calls to provide his comments on operational and strategic matters. Welcome, Tony. I'm also ably assisted today by the remainder of EMCOR's senior officers, so let's begin.

I've been a CEO for about 25 years, and I understand clearly the benefits that can be derived from steady, profitable operations. These benefits accrue to all the corporation's important constituents, its employees, its lenders and sureties, its suppliers and customers, and most of all to its shareholders. However, wanting consistent profits and actually getting them are two very different things, especially for a company like EMCOR, starting from humble beginnings and working in a difficult and competitive segment of the market. So ,it is with great pride and appreciation for the support we have received over the years from all of those important friends of EMCOR that I announce that our second-quarter 2005 results mark the 40th consecutive quarter, 10 solid years of profitable operations for EMCOR. It's a record of consistency born of conservatism and attention to detail and to business fundamentals, which I believe is unmatched in our industry. Thank you all for the role you have played in helping us to achieve this success.

The second quarter of 2005 was a very good one for EMCOR, reflecting improvement in nearly all our business sectors. Our improved results are due to structural and managerial changes enacted and announced earlier, enhanced opportunities in many of our important markets, and effective execution of our operational tasks.

In the second quarter, net income was $7.9 million or $0.50 per diluted share, a significant improvement over the 1.9 million or $0.09 per share that we earned a year ago. Operating income in the quarter was $15.2 million, more than 200% higher than the second quarter of 2004, while SG&A was slightly higher than last year at 8.3% of revenues. We continue to target SG&A expense and expect a new central purchasing program to assist us in continuing to reduce costs in this area.

Restructuring costs during the quarter were $300,000, concentrated in our UK subsidiary. Revenues in the current quarter were essentially level with year-ago amounts, as we continue to carefully managed our order intake and to target improving margin opportunities. Contract backlog at quarter end was $2.72 billion, level with the preceding quarter but down about 10% from year-ago levels, reflecting the same portfolio-management efforts discussed earlier.

Gross margins, operating income and net income and earnings per share were all negatively affected during the recent quarter by a $3 million write-down of Accounts Receivable from the UOSA project litigation discussed in detail last quarter arising from additional details contained in the judge's written order.

Please move to Slide 4. Net income for the first half of 2005 rose 37.5% to $9.8 million or $0.62 a share, compared to 7.2 million or $0.46 in 2004, with revenues slightly lower than last year for the management reasons discussed earlier.

Operating results for the half year were much improved. A year ago, results were negatively affected by $5.3 million of restructuring charges but positively affected by $9.6 million of tax accrual reversals of reserves. It's notable that interest expense for the quarter and the half year were both lower this year than last despite higher interest rates, reflecting our enhanced cash flow from operations and continued careful contract administration, leading to significant net overbillings of $136.5 million. The strong and liquid balance sheet that is the result of this solid execution is shown on Slide 5.

Balance sheet cash rose $11.5 million and total debt fell $10 million during the first half of 2005, even though this is a period when EMCOR is typically a net investor of working capital in our portfolio of projects. Shareholders equity rose to $571 million while our leverage ratio of total debt to total capitalization fell to a modest 11.2%.

As I mentioned at the outset, all of our major operating segments showed marked improvement during the quarter and the half year with the exception of our Canadian operations. U.S. electrical and facility services' operating income rose from 8.8 million in 2004 to $12.1 million in the current quarter. U.S. mechanical and facility services rose from 2.9 million to 4.7 million. U.S. facility services increased from 4.4 million to 7.7 million, and our UK subsidiary earned $2.4 million compared to an operating loss of 1.3 million a year ago.

While our UK company has substantially completed a successful restructuring, our Canadian company is still in the midst of that process under the new management we installed last year. Canada lost $1.5 million in the second quarter and $2.3 million for the first half. We don't expect Canada to return to profitability during the second half, as restructuring and downsizing continues, but 2006 prospects look better. The pattern of sharply improved operating results was the same for our other divisions for the half year, notably in U.S. mechanical and facility services, which earned $1.9 million net of substantial UOSA write-downs, compared to a $4.7 million loss in 2004, U.S. facility services, which rose from 3.1 million to $12.1 million, and EMCOR UK, which made 1.9 million compared to a $2.6 million operating loss last year.

Please turn to Slide 6. Contract backlog at mid-2005 continued to reflect the efforts of EMCOR management to control order intake and to ensure ourselves of available capacity for higher-margin, private-sector commercial work. This slide illustrates a gradual but encouraging growth pattern in the commercial sector. Our commercial backlog is at its highest period-end level since 2000. Transportation backlog fell, reflecting the burn-off of several large projects in the U.S. and the UK, while healthcare awards rose.

Second-quarter revenues were also positively affected by strengthened demand for small-task discretionary work, especially in U.S. mechanical and U.S. facility services. These projects are frequently too fast-moving to be included in backlog reports.

On Slide 7, we list some notable project awards from the second quarter, all of which are in the backlog report and all of which illustrate the remarkable versatility and multisector market participation of EMCOR.

In Las Vegas, whose market continues to confound the pessimists, Hansen Mechanical is providing a broad scope of mechanical construction services for a pair of 428-foot residential towers at MGM Ground, together with Design Assist services for a 700,000 square foot public entertainment area and an 18-story residential tower for Red Rock Station.

The New York City commercial construction market is beginning to reflect the impact of the improved employment statistics, as office vacancy rates have fallen to their lowest level in three years. This always stimulates tenant fitout work, as new office space is added or existing space is upgraded. Forest Electric will be performing two such projects for BNP Paribas and Lehman Brothers, including hundreds of trading desks and telecom and data cabling.

In California, our Contra Costa subsidiary will provide electrical and instrumentation services for Laser Bay 1 (ph), a 600 foot long testing and diagnostic facility. Most of our activities will be conducted in a clean-room atmosphere at the Lawrence Livermore National Laboratory. Additionally, Contra Costa will install new fire alarm and paging speaker equipment throughout both the existing and expansion sections of Oakland International Airport.

Dynalectric Oregon will provide all electrical installations, lighting, fire alarm, nursing call and all telecom wiring, to a new biotech and healthcare building at Oregon Health Science University. This building is representative of a developing trend in favor of environmentally sensitive building design and construction. As part of OHSU's efforts to obtain gold lead certification for this building -- "lead" stands for leadership in energy and environmental design -- Dyn Oregon will also install a 352-panel photovoltaic system.

In La Verne, California, Mesa Energy Systems will provide upgrading and modernization services for our modular, centralized chiller plant for the University of La Verne, while Comstock Canada will provide both electrical and mechanical installation services in connection with a major new ultraviolet disinfection system for the city of Winnipeg.

In Washington D.C., our feature company, Dynalectric Washington, will exhibit its state-of-the-art technical installation skills in performing the electrical tenant fitout program for the 1.5 million square foot DOT headquarters. Their scope of work includes 24,000 lighting fixtures, 2 million feet of branch power wire, 34,000 feet of ceiling (ph) communications table tray, a networked fire system and a critical power support system. This project exemplifies what Dynalectric does best -- a complex, sophisticated project for a demanding customer requiring detailed planning and project management ability.

On Slide 8, we illustrate some of the salient features that make Dyn Washington, under the capable direction of Ken Hart, one of our best performing and most consistent companies. Dynalectric has served the Washington metropolitan area, including a cross-section of the nation's largest public institutions, for more than 40 years. With annual revenues of around $100 million, Dyn Washington is a large, diverse, full-service electrical service provider with expertise in every phase of project development, execution, and maintenance. Dynalectric is able to meet or exceed exacting customer expectations in areas like life safety systems, communications and cabling, traffic control, and mission-critical facilities. It has a service division than can ensure coverage of a facility's lifecycle from beginning to replacement.

With extensive in-house capabilities, including prefabrication, Dynalectric Washington is really EMCOR in a nutshell, providing state-of-the-art services to the best customers across a wide variety of business sectors on a relationship basis. That's why they do so well, and that's why we are so proud of their long-time membership in EMCOR Group.

Finally, a few words about our prospects for the remainder of 2005. Clearly, we're pleased with our second-quarter and first-half results and the improvement they represent over 2004 performance. We are equally pleased with the continuing improvements in terms of both demand and profit opportunities that we can see in many of our important geographic markets and lines of business. It is important to note that we were optimistic about market improvement when we initially established our 2005 revenue guidance range of 4.4 to $4.6 billion and our earnings guidance range of $2.00 to $2.40 per diluted share. We were pleased with both corporate and market performance when I reiterated that guidance in our first-quarter earnings call. In particular, our EPS range represents an overall improvement of between 45 and 75% over the $1.37 per share that EMCOR earned from operations before tax-related positive adjustments in 2004.

Things are going quite well but we expected them to go quite well when we established guidance. Accordingly, I am reiterating today the previously issued guidance ranges of 4.4 to 4.6 billion of revenue and $2.00 to $2.40 per share of earnings. Any possible revision or narrowing of guidance ranges will await the completion of our annual EMCOR midyear review, which begins next week and will be complete by the end of August. At that time, I expect to have a good understanding of the likely result of our 2005 activities and an early look at 2006. At present, 2006 looks like a very good year for EMCOR and indeed for our industry, but it's still early.

As always, thank you very much for your interest and support and in particular for the role that you may have played in EMCOR's long and singular record of success.

Now, it's time for your questions or comments, and Crystal is here to tell you how to queue.

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

Congratulations, Frank, on a pretty nice quarter.

One quick question -- I noticed, in your disclosure in your 10-Q, that discussed surety bonding. If you could expand upon that just a little bit, I would appreciate it.

Yes, there has been a fairly significant reduction in cumulative surety bond issuance capacity in that industry in the last few years arising from industry consolidations, losses associated with the recession with the telecom melt-downs and with Enron-related matters. That has resulted in fairly significant constraints on the availability of surety bonds, especially for some participants in our industry.

I'm happy to say that EMCOR has not been subject to such constraints, because of the conservatism of our management, our consistent record of profitable operations, and the strength of our balance sheet. However, several months ago, we learned of the decision by one of our surety graftors (ph) to leave the surety bond issuance business. We were faced with the necessity -- the reluctant necessity, may I say -- to replace that surety issuer as part of our bond portfolio. In the 10-Q, in the new disclosure, I express the expectation that we will succeed in replacing that surety bond issuer with a new one and we will retain our surety bond utilization capacity as before.

Great. Then with regards to -- you obviously had a very nice snap-back over the last year and a half. When we look out longer-term, I like to reflect back on history, and from '96 or '97 to 2002, it seems like your increasing your EBIT margins by something around 30 basis points a year. If we were to look out over the next couple of years, is that the likely pace of improvement you would anticipate?

I certainly think that, absent the unknowable -- that is to say, significant events that are outside anyone's control -- that an improving EBIT margin picture is an appropriate one for EMCOR.

EMCOR is a different company today and will be a different company in the future than the company that created that sterling growth record during the period that you refer to. Specifically, we will be much better balanced between our construction and facility-service sources of revenue. The performance of EMCOR facility services for this recent quarter and for the half-year suggests that facility services can play an extremely important part in contributing to the enhanced growth of our business. Facility services, during the quarter, earned an operating income of about 4.1% of revenues, which is excellent performance and which we look to have replicated in the future. So, I think that growth rates in EBIT, which by the way you know and I know is the right way to look at EMCOR, are certainly capable of being in the range that would match the historical growth rates.

Tony Guzzi, do you have any comments on that?

I'd don't see why we don't have significant margin runway in our business. (indiscernible) Frank said, if you look at facilities, I think the second quarter is indicative of what we can do. We need to do it on a sustained basis and even add to it. Electrical continues to perform well, and we have substantial margin runway in mechanical. So, if you took a picture of EMCOR overall, we have significant margin runway in front of us over the next few years.

With regards to those three business lines, first on mechanical, where can we see mechanical go over the next 6 to 12 months from an operating margin standpoint?

Well, I think that you're seeing the trajectory. When you add back UOSA, you are seeing an enhanced margin performance and we will continue that margin performance enhancement. We're getting much more selective about the kind of work we do and our bidding discipline remains.

On electrical, we continue to perform well and we expect to continue to do that.

In facility services, I think we can continue to mix up the business between our government sector and our mobile service sectors undergoing a nice rebound. We've installed some new financial and operating management there in the first quarter and it's starting to pay dividends for us, so I think you should continue to see good margin expansion in all of those business.

Frank, over the last maybe year and a half, two years, there obviously have been a number of what you might call one-time-like items. As we look forward, obviously I'm not going to suggest that you anticipate any because you probably don't anticipate any. But do you feel a lot more comfortable that we're closer to the end of one-time-like items?

Well, since the law requires that I reflect, in our 10-Q, any items that I anticipate, I'm confident and I want to be very clear in saying that everything that I do anticipate is in the 10-Q, but of course, Alex, you know I'm kidding.

The fact is that, when execution is strong and prospects are improving, the pattern changes and a lot more good things and bad things are happening, including nice surprises instead of negative ones. So yes, the tide has apparently turned and although we are not without problems and every company is in that position, I think that our positive prospects significantly outweigh any looming difficulties that might present themselves.

One last question -- obviously, margins can grow from being more selective and/or from an improvement in the macro picture such that labor becomes constrained and therefore, pricing in the overall industry improves. Are you seeing both? Are you seeing one, not the other? Any comment on those two?

Yes, I think you are quite right, that EMCOR profits from its dominance of local labor sources in many of our markets, and we profit the most when labor -- trained labor shortages are at their most severe. We have certainly seen the continuation of absorption of excess contract and capacity in many of our markets in the last half-year. We are at a point where shortages are -- spot shortages are beginning to occur here and there. I don't suggest that that's a general situation yet but it's a situation that will continue to develop, assuming the continued improvement in the performance of a number of our most important markets.

John Rogers with D.A. Davidson.

Just following up, Frank, can you talk a little bit about the mechanical side of the business? I mean, presumably, we have a lot more favorable seasonal conditions this summer for it, but is that business turning up significantly?

It really is, John. I'm just looking at the Q and specifically the operating income in the mechanical for the half-year to date, which is 1.7 million compared to a loss of $4.7 million in the year ago. It's very important to keep in mind that that 1.7 million is net of nearly $12 million in the UOSA-related write-downs in the first and second quarter. All of those went to cost of operations, so that the changeover in mechanical performance is even more pronounced then that reflected by the numbers net of UOSA, which we have published.

I attribute this to several reasons. First of all, you know that, in the beginning of 2004, we changed and reassigned the responsibility for the overall management of the mechanical operations in the U.S. and gave them to Mike Parry and John Warga, who had previously been in charge only of U.S. electrical and facility services and had compiled a stellar record of success in that area. The hand that Mike and John have placed on the mechanical operations, the enhanced control of bidding and estimating and the improved discipline on order intake is clear to us in mechanical's enhanced results.

Equally important have been increases in demand for mechanical services and performance thereof, notably in the small-task and discretionary work that we've been looking for for the last two years and which certainly began to materialize late in the second quarter and which we believe will continue into the third. This is driven both by economic recovery and decisions made by owners of mechanical systems, notably HVAC systems, to elect to perform preventive maintenance or upgrading where they might have elected not to do so in the past. It's also triggered by heat and the issuance of emergency requests for repair or upgrading by customers who can't stand the heat any more. So both of these factors have been positive for us this quarter.

But looking at mechanical in a macro sense, I think that the combination of generally improving demand for our services, together with very good execution under the organization headed by Tony Guzzi and with Mike and John as his primary administrators in that area, showed marked improvement during the quarter and half-year.

One other question if I could? In terms of your facility services business now, can you give us a sense of how big your portfolio is of buildings, compared to what it was a year ago or --?

I'm afraid I can't give you historical numbers, but I can tell you that, currently, our portfolio is above 1 billion square feet of predominantly commercial space in the UK and the U.S. Facility services was the single area of our business in which revenues grew fairly substantially, quarter-over-quarter. You know that we have been managing down revenues in some aspects of our mechanical business and indeed our electrical business in anticipation of backlog portfolio changes. We are employing about 9,000 personnel in our facility services business and last year, it achieved through critical mass with service revenues of about $1.3 billion or 30% of our overall revenue base. So, it's growing as we planned and hoped that it would, and I'm sorry I can't give you a comparative historical square footage number year-over-year, but I can assure you that, based upon the revenue increase, that the growth in square footage coverage was substantial. (multiple speakers).

I'm sorry. Is most of that driven by square footage growth, or is it more work with -- on the same buildings?

In this particular case, it's a combination of both square footage growth and also the enhancement of our mobile services capabilities. Tony, a comment?

Yes. We are continue to penetrate some of our existing customers further, which is really our priority. The second issue -- the second wave is to be able to find the smaller customers in some critical mass markets we have, like Boston and New York and Washington. The third growth goal is to find new accounts. So it's a combination of square footage that enabled enhancer (ph) services to those customers you have already, because that's obviously the best way to do it -- to enhance margins in the short run -- but then to also paw ground in the long run to have new customers. So it's a combination of both.

(OPERATOR INSTRUCTIONS). Sally Bilts (ph) with Stifel, Nicolaus.

Good morning. This is Noelle Dilts actually for Jeff Beech. I was hoping that you could expand a little bit on the where you see potential for the UK operations to go, possibly if you have a margin goal.

It's hard to state a margin goal because of the tripartite nature of the UK business. Just to recap, the UK business has, for years, been nicely balanced between construction services on the one hand and one of the world's longest established facility services businesses on the other. Its generally balanced performance is a result of that combination, which we have been trying with considerable success to replicate in EMCOR as a whole.

In the last year or so, the performance of the UK business has been substantially improved through the acquisition and good performance of several large transportation-sector projects, notably a project involving the reconstruction of St. Pancras Station in London and the modification of the high-speed rail line between London and the coast. Those projects have really hit their stride and are helping to enhance the UK operations, although an equally important part of the UK performance has been the excellent performance of our management team that we installed there in mid-2003. So, we're pleased with the UK and think that they can continue to perform better as old problem projects are flushed out the system and the management team continues to install better processes, better discipline with respect to order intake and the like.

With respect to specific margin goals, we frankly don't know how well the UK can perform because there have been problems there for a good long time, but we are as interested as you are in seeing how much more they can perform over what is already significantly improved performance.

Tony, do you have a comment about that?

Yes, I would agree. I mean, in the U.S. operations, we have a pretty good roadmap from history and a future of knowing that there's margin runway. I think, in the UK, we are just validating performance now and the performance continues to improve. You know, obviously, we push for margin upside every day in that business and will continue to do so. I think it would be sufficient to say we don't think we're there yet.

Okay, great. My second question was just I was hoping you could maybe give us a feel for, within the U.S. areas that you've seen geographic strength and specifically if you've seen any pickup in the Midwestern market.

Let me say a general word about it and then I will ask Tony to talk about any specific regional markets that he would like to mention.

In a macro sense, I always look at statistics like the employment figures, which have been relatively good in recent quarters, notably in the services industries. What that means to me is that those new service-sector employees will have to be housed in offices, in healthcare facilities, retail facilities and the like. That, in turn, means tenant fitout work for us, which is the meat and potatoes of our electrical construction and our facilities services business. So, that's why I pay some attention to those two Forest Electric tenant fitout projects that we were awarded during the second quarter, because those are typical of the kind of projects that we really do the best.

You also noticed that we highlighted a very large tenant fitout work on the part of Dyn Washington, our feature company, in that DOT headquarters -- very sophisticated construction techniques involved, very complicated -- everything that EMCOR does the best and earns good margins for.

So, when you see statistics for office vacancies in city centers around the U.S. that have fallen to 13.7%, a couple of percentage points over the last year, and see positive reports about rent increases in areas like New York City, Boston, Miami, Orange County, Los Angeles and even San Francisco -- and although the Midwest and Chicagoland in particular are lagging a little bit behind, all of the trends are positive. That really means good news for EMCOR and notably for that commercial sector, which has already picked up for us (indiscernible) with our portfolio of management goals and which we think will continue to improve.

Tony?

I would agree. If you look specifically around the country, we see tenant fitout work coming up across the board. Boston looks to be a pretty market right now in the Northeast, where Frank has talked at length about New York -- Washington, we have a nice position.

South Florida, both the residential construction and I mean multi-story, large, although not a core market, enables labor to get busy doing that while we have opportunities to do the things we like to do like water and wastewater and others in tenant fitout work.

Southern California is very strong; Northern California is still struggling.

If you go to the Midwest specifically, we have a couple of things that are unique to us I think in the Midwest. One is, we have a couple -- all of our companies are well-established, but you go to Chicagoland specific, Gibson Electric, in a lot of ways, does a very good job of picking the markets it can operate in effectively, and demand can only help us there. I think Chicago, with a couple of different buildings being built plus the availability of labor, we are in pretty good position there.

The rest of the Midwest, on the mechanical side, we have an opportunity because most of our mechanical companies in the Midwest benefit from a service base. With that service base this year the small (indiscernible) discretionary work is starting to come back. In what had been a very difficult market for us, although I wouldn't call it an avalanche, we are seen the light at the end of the tunnel. Then of course the Shambaugh company expands across more than the Midwest. So the Midwest is picking up a little bit, but it's coming from a pretty bad place, so I wouldn't call it robust demand but better demand.

Okay, great. Thanks.

There are no further questions at this time. Management, do you have any closing remarks?

I have my traditional closing remark, which is to thank everyone on the call for your interest and your support in EMCOR and to watch this space for future developments. Thanks again.

This includes today's EMCOR Group conference call. You may now disconnect.