EMCOR Group, Inc. (EME)

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EMCOR Group, Inc. (EME)

Q2 2008 Earnings Call Transcript

July 29, 2008 10:30 am ET


Eric Boyriven - FD

Kevin Matz - EVP Shared Services

Frank MacInnis - Chairman and CEO

Tony Guzzi - President and COO

Mark Pompa - EVP and CFO


Alex Rygiel - FBR

Rich Wesolowski - Sidoti & Company

John Rogers - D.A. Davidson

Jeff Beach - Stifel Nicolaus

Tahira Afzal - KeyBanc

Chris Hussey - Goldman Sachs

Avi Fisher - BMO Capital Markets



Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group 2008 Second Quarter 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 session. (Operator Instructions).

I will now turn the call over to Mr. Eric Boyriven of FD. Please go ahead, sir.

Eric Boyriven

Thank you, and good morning, everyone. I’d like to welcome you to the EMCOR Group conference call. We’re here to discuss the company’s 2008 second quarter results which were reported this morning.

I’d now like to turn the call over to Kevin Matz; Executive Vice President, Shared Services, who will introduce management. Please go ahead Kevin.

Kevin Matz

Thank you, Eric, and good morning, everyone. Welcome to EMCOR Group’s earnings conference call for the second quarter of 2008. For those of you who are accessing call via the Internet at our website, welcome, and we hope you have arrived at the beginning of the slide presentation that will accompany our remarks today. And during the call instructions will be given to you to advance to the next slide. This is one of those times. Please advance to slide 2.

With me today to discuss the quarter and six month results are Frank MacInnis, Chairman and Chief Executive Officer; Tony Guzzi, President and Chief Operating Officer; Mark Pompa, our Executive Vice President and Chief Financial Officer; Mava Heffler, Vice President of Marketing and Communications; and our Executive Vice President and General Counsel, Sheldon Cammaker.

For call participants who are not accessing the conference call via the Internet, this presentation 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 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 2007 Form 10-K, 10-Q for the second quarter ended June 30, 2008, which was filed earlier this morning, 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?

Frank MacInnis

Thank you, Kevin. I know you sometimes find those announcements humorous, but I like it better when you play it straight. Good morning, everyone, and welcome to our 54th 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. And I’ll 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 will be on the 2008 second quarter and year-to-date earnings press release and Form 10-Q that we issued and filed earlier this morning. We will conduct this call in our customary way. First, a discussion of those operating results including highlights of segment performance and my comments on our quarter-end balance sheet and liquidity. Then I will discuss the recent evolution and current status of our contract backlog portfolio with special emphasis on industry sectors that will be important to EMCOR’s future performance.

Then I will turn the call over to Tony Guzzi, our President and COO for his comments on some notable recent contract awards from around our broad and diverse group of operating subsidiaries, followed by an additional slide illustrating the scope and the importance of our energy management services to facility owners. Finally, I will review our mid-year position and the prospects for second half growth and momentum into 2009, including modified earnings guidance for full year 2008.

At that point, there will be an opportunity for our listeners to make comments or to ask us questions. And you can see from slide 2 that a number of our senior officers are on hand to help with the answers.

So let’s begin. Please move to slide 3. 13 years ago EMCOR began a record of consistent profitable operations that remains unbroken today; 52 consecutive profitable quarters later. Recent events have shown how hard it is for even well-capitalized, well-managed companies to achieve such a record of consistent performance. We are proud of and grateful for the dedication, discipline and strict adherence to our business model that have enabled our talented employees to create this sustained performance.

Slide 3 reflects the best second quarter in our history by a substantial margin in all relevant measures of financial and operational performance; revenues, profits, operating income, and earnings, while general and administrative spending remained under control.

Slide 4, depicts a similar pattern of performance improvement for the year-to-date period, during which revenues increased 27%, operating income more than doubled to $123 million and earnings per share of $1.09 was nearly double the level in the year ago period.

On slide 5, we identify some of the performance highlights from our excellent second quarter. Revenues increased 26% including strong 12% organic growth to a new record $1.72 billion. Strong demand for our broad array of services resulted in revenue growth in every operating segment, except the U.K., which reflected the cessation of its rail construction activities and other right sizing efforts.

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