EMCOR Group Inc (EME) 2015 Q2 法說會逐字稿

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. (Operator Instructions) Ms. Michelle Bitman 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 would 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 earnings 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, 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 us 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'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 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 will 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 lost revenues we had in our -- from Q1 in our electrical, mechanical and building service segments. We talked about the weather and its effect in Q1. We recovered very little of the lost opportunity of the refining 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 earned $0.74 per diluted share in the quarter, which for us was a record Q2 performance for any year and, as we expected, puts us back on track for 2015 after that weaker-than-expected first quarter.

Operating margins were a strong 4.7%, with improvement in our mechanical, building services and industrial segments, with the electrical segment essentially flat versus the 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 income growth at almost 8%.

Let me give you some highlights for 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 returned 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 business is holding its own, despite losing $15 million in revenue from the year-ago period from those two large contracts we've talked about over the last four or five quarters. We have had some ID/IQ work fill in 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 time and material projects, especially on a large capital expansion and healthy unit rebound. We had very little recovery from the refining strike, less than a third at this point, with the balance now likely pushed into 2016.

The UK: We have two large utility contracts we've started up, and the startup is going well. The decline in the performance year over year was from a one-time adjustment in this quarter last year. And Mark is going to cover that in detail, like he did last year, and it was about $4.8 million.

Overall, we had solid, excellent execution across all our segments. And it was nice to see -- it was actually good 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 at the half is near 1. To maintain historic high levels of backlog, which is where we are right now, and have strong organic growth for the quarter of 6.4%, speaks to the strength of our business and also the underlying strength of the nonresidential 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 happily invested that cash into working capital to fund our growth.

Overall, a very strong quarter that provides 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 will provide a detailed discussion of our most recent quarter results before moving to year-to-date key financial data derived from our consolidated financial statements included in both our earnings release announcement and Form 10-Q filed with the Securities and Exchange Commission earlier this morning. So let's begin.

Consolidated revenues of $1.65 billion in quarter 2 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 US mechanical construction services segment.

US electrical construction revenues increased 3.2% to $346.2 million. The increased revenue is due to crater project activity within the transportation, healthcare and commercial market sectors, and on a sequential basis is fairly consistent with our quarter 1 2015 revenue performance.

US mechanical construction's second-quarter revenues increased $15.4 million to $554 million, or 2.9%. The quarterly increase is due to higher revenues from project activity within the commercial and institutional market sectors. For those of you who participated on our quarter 1 call, you may recollect that this particular segment experienced lost workdays within their Northeastern-based operating companies due to extreme cold weather conditions.

EMCOR'S total domestic construction business second-quarter revenues increased $26.1 million or approximately 3%. US 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 pursuant to rebid due to pricing and not EMCOR's historical performance, which we have referenced in each of the last two earnings calls' commentaries.

This is the first revenue growth quarter for this segment since the third quarter of 2013. The revenue gains experienced were primarily due to increased service volumes and small project activity within their mobile mechanical services division.

US 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 the 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 expenses of $161.4 million represent 9.8% of revenues and an increase of $11 million or 10 basis points from quarter 2 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 consolidated and reportable segment levels, which necessitates both higher annual and long-term incentive compensation accruals and associated expenses. Additionally, with the increase in quarterly revenues, our nonunion headcount is up 7.5% over 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's 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 result, their commensurate revenue growth has resulted in a higher SG&A profile for EMCOR Group. Specifically within the second quarter, their revenues represented 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's second quarter. All reportable segments are reporting increases in operating income, other than UK building services, which had a discrete favorable item impact last year's second quarter.

Our US electrical construction services segment operating income of $25.3 million or 7.3% of revenues represents a 1.8% increase over 2014's second quarter. Their corresponding operating margin is down 10 basis points period over period, but is up 210 basis points sequentially.

US 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 wastewater market sectors, despite fighting the headwind of a $3 million favorable claims settlement that benefited 2014's second quarter.

Our total US construction business is reporting a 6.4% operating margin for the quarter just reported as compared to 6.1% in last year's second quarter.

Operating income for US building services increased $4 million or 28.9% over 2014's second quarter, with an operating margin of 4.1%. In 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 improvement 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 their 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 a reduction of certain accrued contract costs that were no longer expected to be incurred. We disclosed this amount during 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 the significant increase in revenues during the quarter, there has been a commensurate growth in accounts receivable, which obviously impacted -- negatively impacted cash flow in the current period, but should have a positive impact in the back half the year.

We are now on slide 7. Additional key financial data on this slide not address during my highlights summary are as follows. Quarter 2 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's second quarter. Diluted earnings per common share from continuing operations is $0.74 as compared to $0.61 for the quarters ending June 30, 2015 and 2014, respectively.

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 a second quarter in 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 organic revenue growth year over year as our second-quarter revenue performance overcame our slow start in quarter 1.

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 at 14.1% of revenues.

Selling, general, and administrative expenses of $323 million represent 10% of revenues compared to $294.3 million or 9.4% of revenues in 2014. On a sequential basis, our SG&A as a percentage of revenues decreased from quarter 1 to quarter 2, and we will continue to see this metric reduce as we advance towards the end of the year. Restructuring activity is relatively flat between the two six-month periods as we continue to look for opportunities to streamline our processes and achieve further productivity and efficiency gains.

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 variance generated in quarter 1, both our US electrical construction and US industrial services segments are still lagging their year-to-date 2014 performance due to project mix, as well as our industrial services segment experiencing the continuing impact of the nationwide strike of refinery operators that we discussed in detail during our quarter 1 commentary.

Diluted earnings per common share from continuing operations is $1.26 for the six months ended June 30, 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 had previously benchmarked our second-quarter performance, I would also like to point out that the results of our operations for the year-to-date period set new Company records in regards to consolidated revenues and diluted earnings per share from continuing operations for the first six months of every year, a very strong performance.

We are 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 of share repurchases that occurred during quarter 1, $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 two government 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 2's revenue increase, in addition to a reduction in current liabilities as a result of reduced levels of accounts payable and accrued payroll and benefits due to the funding of prior-year obligations.

Changes in our goodwill and identifiable intangible asset balances reflect the minor impact of the acquisition made during 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 remain well positioned to take advantage of all growth opportunities that may present themselves.

With my portion of the commentary concluded, I would like to return the presentation to Tony. Tony?

Thanks, Mark. I'm going to be on page 10 and 11, and I'm going to talk about backlog.

Right now, backlog is essentially flat versus the year-ago period and is slightly down from quarter 1, which I guess we would expect, with 6.4% organic revenue growth in the quarter. I think it's indicative of a strong performance and strong end markets that we were able to maintain backlog relatively flat.

I think, though, when you look at this page, and I'm on page 10 now, I can give you some commentary about what's going on in the markets, and it's over a number of quarters, number of years. What you're seeing is the commercial market has come back strong. We are at record levels yet for commercial, and we're up again year over year.

The commercial market is strong for a number of reasons. One, we're well positioned in the commercial market, in some markets that are doing well. Secondly, there's good occupancy rates, and there's a desire to upgrade buildings. We will take advantage of that.

As you move up the page, the hospitality -- it is what it is. We are at the high end of hospitality. You have to have the right properties in the right place. And will we see something build there again? Sure. And will we participate? Absolutely. Our hospitality, when it was very strong, if you'd have had this extended back to 2007, it was gaming driven and it was primarily Las Vegas driven.

You move up to industrial, industrial for us is a lot of things. It's industrial work we do in the shops at Ohmstede, and I will talk about that more on the next page, but it's also things like power plants, 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 around a couple areas. It's going to be centered around food processing. And power work will continue to flow through EMCOR. But as you look towards year-end, we would expect industrial outside of just the shop work to potentially grow. And commercial will maintain its own.

Institutional, what you see there is really for us the exit of those two large-basin operating agreements over the last couple of years. And Mark, when we get to the question-and-answer, will spend some time hopefully for some of you going back through a backlog -- the backlog for us is committed work. It's fixed-price work on the construction side and the service agreements, one year of it, and that's about it.

And we don't take any time and material work and guess what it's going to be. We don't take the add-on effects of a government contract. We don't take the five-year value of a government contract to put in. The other thing folks might not realize is as a contract expires, before it's re-signed, it goes out of backlog. And is it reaches expiration, as it goes from 12 months to 11 months to 10 months to nine months, we reduce the backlog that amount until it gets to expiration and renewed. And for those that want to know, our renewal rates on our contracts, unless there's been a major sell of the property, a closure of the property, or a sale 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 of 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.

In water and wastewater, that $90 million or so job we announced in South Florida, it's not in backlog yet. It was signed I think around July 1. So it wouldn't have made this report for the year-end period.

So, what do we see? We see a relatively strong nonres market for us. We do expect backlog to be in pretty good shape as the year progresses, but we would like to see the strong organic growth, too. So it will be a balancing act. But the nonres market in the sectors we play in are pretty good. I think it's led by commercial, then go to industrial, and then to transportation. And we could book a couple decent healthcare jobs by the end of the year. But it will be nowhere as strong as it was in 2009 and 2010, though people still work through the effects of the Affordable Care Act, and they might be doing that for quite some time.

As you go to page 11, let's talk about what's a backlog-driven business in EMCOR and what's not. The most backlog-driven businesses we have at EMCOR are our electrical and mechanical construction segments. They are backlog-driven businesses. You wouldn't 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 the 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 the most affected 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 will still be replacements, as refiners are operating flat-out, but it may be more quick-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 important part of our business that's 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 are seeing the most effects right now.

And, Tony, just to make sure everybody understands, 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, to 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 billion. That basically implies the same growth for the back half of the year as the front half of the year, net around 3%. And for us, we feel really good about how we did in second quarter, but we also know 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 $0.10. We're going to make the range now $2.65 to $2.85 per diluted share from continuing operations. So that's $6.6 billion of revenue, $2.65 to $2.85 per diluted share from continuing operations.

At EMCOR, we always try to focus on how do we get to the mid- to high point of that range. Well, how do you do that? Well, we need more revenue growth than 3% in the back half of the year and what we've achieved on a year-to-date basis; then we've got a pretty good shot to get into the midpoint to the high point. We could see some acceleration on our large infrastructure work we are doing in electrical. We continue to see a strong pace of recovery across the nonres 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're expecting today or some of the delayed strike work to come into 2015 versus 2016, where we expect most of it to land today.

We have a pretty good nonres market, at least better than we've seen in a while. And that could potentially accelerate, which may lead to quick -- more quick-turn midsize projects that we can get to a reasonable level of completion as the year progresses.

On the nonres market, we think it's relatively strong. And as such, we do expect our backlog to move upward -- 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 are waiting for several large projects that we are pretty sure we won to get to contract signing and to secure that contract signing. Again, it doesn't go into our backlog until we have a signed contract, not just a letter of intent or a notice to proceed.

We continue to see a strong private market. We continue to see some unique opportunities in the water market. And we continue to see strength in the transportation sector, broadly defined.

Our main caution for the year is with respect to the oil and gas sector. I think most of you on the call and that invest in us know that we are primarily a downstream-focused company. Now, let's be clear: Everybody is feeling the effects of rigs being laid down. It goes back into the industrial base. It goes back 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 in Houston. We were going to have a fantastic year in our commercial business in Houston prior to the slowdown. So we're not immune from it; nobody is. We're 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-edged sword right now, with refiners running at near-record utilization or record utilization, with very good crack spreads, too, including California. But the issue is going to be when they come down, what's the scope going to be, how does that scope play out, what's the timing going to be. And we as contractors, are we all going to be able to marshal the resources if they come down at once and we have a big spring 2016? Nobody is clear on that yet. But our caution is with respect to the capital spending and what the major oil integrated companies will do. We will 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 actionable items. And look, there's a series of companies we've watched for a long period of time. They are in each one of our major segments, and we would invest in any one of them because we have good businesses that continue to grow. We have consolidating acquisitions we can make. And we have capabilities we can add.

But deals happen when they happen, and there's a couple 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 line up and the timing -- can we make it happen? Are we the ones that are successful?

We are also seeing more of the traditional private-market deal, what I call -- what I mean by private market, you own the business; you're selling it to us after it being in your family or you starting it over 40 or 50 years. We are seeing some of that.

We are committed to at least repurchasing our share dilution from our equity compensation programs. We largely accomplished that in Q1. But we still have $145 million remaining in our authorization. We continue returning cash, as Mark went through, to our shareholders through a dividend. And we were very pleased in Q2 to have happily invested cash into working capital to fund organic growth. And I think we would all agree that's the best kind of growth.

So with that, I'm going to take your questions. And I'll turn the call over to Teresa. And thank you all for your interest in EMCOR this morning.

(Operator Instructions) Adam Thalhimer, BB&T Capital Markets.

Hey, good morning, guys. Nice quarter. Tony, on the nonres construction outlook, particularly on the commercial side, you said you're more optimistic than you have been in a while. You're seeing a better market than you have in a while. What kind of visibility do you have there? How do you think that extends into 2016?

Yes, Adam, it's hard to run away from the facts, right? The market is up -- our backlog is up 2.5 times from where it was at the bottom. And so we are operating over $1 billion of backlog there now. And we continue to see very strong mechanical service small project activity, which for us is a pretty good marker on what's going on in nonres.

The visibility we have into 2016 is what we are 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 2016, we're okay. I don't think we have much visibility beyond that, but we never do, unless it's a really large project. And that's not what really drives the growth. That sets the growth, and the growth is driven by the midsize and small projects.

So I would say through the end of the year and into early 2016, I think we're in pretty good shape on the commercial part of nonres.

Okay. And then on the industrial side, I'm a little confused, because you actually had a good quarter there. I think maybe you referenced one large project. I'm just curious; you gave a lot of color on that segment. I'm hoping you can give a little bit more color on how that might trend as the year goes on.

I think it's going to trend fine. I think if there's a caution in our numbers, it's not that we don't think we're going to do okay. It's more how do you get to the top end of the range? And you need that firing even above -- it needs to be on all cylinders, not just 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 the refining strike; it has to do with excellence and execution in our field businesses and really good performance on some unit rebuilds. And we don't see any reason to think that's not going to continue.

But you have to have a little bit of caution when oil back -- goes to $50 and another part of someone's business is getting hit pretty hard, and you wonder how that's going to expand to the capital part of the business, which would mainly affect for us the OEM heat exchanger build, which in any given year can be 10% to 14% of that segment.

Okay, thanks a lot. I'll turn it over.

John Rogers, DA Davidson.

Congratulations on the quarter. Tony, in terms of the fall turnaround season -- you made reference to it as solid. But is it up or down from prior-year levels, from your perspective? Because what I'm seeing is good refinery margins, but also reports that refiners want to keep running through that season, maybe defer some of that work into 2016?

Yes, 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 to up a little bit. But you really don't know that going in, because if it 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 fix more than we thought we were 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 of turnarounds. We know we're going to be very busy. We're going to be 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, we think it might be six. It could end up being five, it could end up being 10, it could end up being 12. We will know that sometime when we 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 we'd even be doing better in industrial, right? So you could've taken the catch-up we had in Q2, and that would have all flown through to increased performance year over year, because we would've 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 know about. That's not all these other things I was talking about, the spillover impacts.

So that would have happened regardless of high utilization, regardless of people wanting to run flat-out, 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 extent. But we've seen -- I could be telling you something different on our third-quarter call, but I doubt it, but I think people are 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 is too early for us to tell.

Okay. And then just in regard to your comments on acquisition opportunities in the market out there, it sounds as if you are sensing that there is likely to be more activity over the, I don't know, next couple of quarters or 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 know there's companies that we've liked for a very long period of time that are in markets that we serve and maybe provide additional services than even what we're doing today that are now near the end of the fund life of the people that have owned them, and they are going to have to do something to transact now. They can't delay it anymore. And we follow that closely.

And it's more on the industrial side of the market, I assume?

Not necessarily, John. We're still happy to expand not only the geography that we service our construction customers; we would like to do more for them. We would like to expand the geography of our mechanical service business. And we would always look to expand our capabilities in the industrial business. Any one of those businesses are investable for us.

If you go to EMCOR, what are we good at? We're good at the application of technical labor. We're good at managing distributed operations, whether they be branch networks or companies. We're good at mobilizing for large, complicated projects. And we're also good at mobilizing across many locations. And so we can handle both variables.

For us, we would like to service more that goes on at a construction site. We've always wanted to do 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've learned about it some way, shape, or form before we start doing it.

But the core of what we're going to do remains the same, as far as we're going to service the US construction Market, we're going to service the US building services market, and we're going to service the US industrial, downstream, and petrochemical refining market and the industrial market more broadly defined as you get into even our other segments. And we're going to do that with very good technical labor, and we're going to do that in distributed operations. And we're going to look for opportunities where we can bring out excellence in branch operations, GPS technology, and everything else to bear on that.

And John, this is Mark. The only thing I would add to Tony's commentary, we will also continue to service our customers in the UK building services market.

Absolutely. Yes, that also, right? The UK building services market is a place that we would look to grow, too. We are starting to get good traction there. And these two large contract wins we had at the beginning of the year is a pretty good bellwether of what can happen when you have a focused business, and they don't have to go to the restructuring that they've gone through in the last two-and-a-half, three years. Thanks, Mark.

Okay. Sorry, one last thing, and maybe for Mark, but the decline in noncontrolling interests that we are seeing run through the financials, are there any of the big projects out there where you are not in full control of them?

No, no. So that line specifically, John, is the two government contracts we keep referring to that were not rebid. And because of geography with that and the financial statements, we were the majority, so we consolidated the results. That's the elimination of the piece that we did not own.

Okay, and there's nothing in backlog that is significant?

No. It's gone.

Okay, perfect. Thank you.

(Operator Instructions) Tahira Afzal, KeyBanc Capital Markets.

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

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 in terms of the way -- what you've moved around in guidance, it just sort of implies that in the second half of the year, the margins are expected to be a bit lighter than they were before.

Mark can take that offline with you and walk through it. We can do it now. But actually, we are counting on better margins in the second half of the year than we are now, and we're counting on better EPS from continuing operations in the second half the year and revenue growth about the same as we had in the first half of the year. So again, if there's a math issue here, call Kevin and Mark, and maybe you can go through it.

Yes, give me -- this is Kevin.

But our math says something different there.

I will go through the math with you, so give me a call afterward.

All right, no problem. Yes, I just kind of meant versus prior expectations rather than the first half versus second half. But anyway, we will move on to something a little more fun.

Just on the civil infrastructure side, there are just two things that would be great to get some commentary on, and the first being we recently saw they finalized the design on the LaGuardia Airport expansion. And I would just love to get an idea of what the scope for EMCOR might be on that project. And secondly, we've seen a little bit of movement on the federal highway bill this week, so we'd 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 play on that is on the electrical infrastructure side. More than likely, if we were to participate in any substantial way in LaGuardia, it would be on the electrical infrastructure side, not necessarily on the commercial building side.

As far as the highway bill, we will see the spillover effect from that, where we would likely participate if it became a three- to five-year program where people could plan a little better. If there's going to be major road upgrades, we would do the lighting and driver information systems for those. Again, it would be an electrical infrastructure play for EMCOR, likely the only place we would play as it pertains to that.

All right, guys. All right, thanks for the color.

You have no further questions. Management, do you have any closing remarks?

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

Thank you, ladies and gentlemen, for your participation. You may now disconnect.