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Article by DailyStocks_admin    (04-24-08 05:42 AM)

The Daily Magic Formula Stock for 04/24/2008 is EMCOR Group Inc. According to the Magic Formula Investing Web Site, the ebit yield is 14% and the EBIT ROIC is 75-100 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

GENERAL

We are one of the largest electrical and mechanical construction and facilities services firms in the United States, Canada, the United Kingdom and in the world. In 2007, we had revenues of approximately $5.9 billion. We provide services to a broad range of commercial, industrial, utility and institutional customers through approximately 70 principal operating subsidiaries and joint venture entities. Our offices are located throughout the United States, in Canada and in the United Kingdom. In the Middle East, we carry on business through a joint venture. Our executive offices are located at 301 Merritt Seven, Norwalk, Connecticut 06851-1060, and our telephone number at those offices is
(203) 849-7800.

We specialize principally in providing construction services relating to electrical and mechanical systems in facilities of all types and in providing comprehensive services for the operation, maintenance and management of substantially all aspects of such facilities, commonly referred to as "facilities services."

We design, integrate, install, start-up, operate and maintain various electrical and mechanical systems, including:

o Electric power transmission and distribution systems;

o Premises electrical and lighting systems;

o Low-voltage systems, such as fire alarm, security and process control systems;

o Voice and data communications systems;

o Roadway and transit lighting and fiber optic lines;

o Heating, ventilation, air conditioning, refrigeration and clean-room process ventilation systems;

o Fire protection systems;

o Plumbing, process and high-purity piping systems;

o Water and wastewater treatment systems; and

o Central plant heating and cooling systems.

Our facilities services businesses, which support the operation of a customer's facilities, include:

o Industrial maintenance and services;

o Commercial and government site-based operations and maintenance;

o Military base operations support services;

o Mobile maintenance and services;

o Facilities management;

o Installation and support for building systems;

o Technical consulting and diagnostic services;

o Small modification and retrofit projects; and

o Program development, management and maintenance for energy systems.

These facilities services are provided to a wide range of commercial, industrial, utility and institutional facilities, including those to which we also provide construction services and others to which construction services are provided by others. Our varied facilities services are frequently combined to provide integrated service packages which include operations and maintenance, mobile services and facility improvement programs.

We provide construction services and facilities services directly to corporations, municipalities and other governmental entities, owners/developers and tenants of buildings. We also provide these services indirectly by acting as a subcontractor to general contractors, systems suppliers and other subcontractors. Worldwide, we have approximately 29,000 employees.

Our revenues are derived from many different customers in numerous industries which have operations in several different geographical areas. Of our 2007 revenues, approximately 81% were generated in the United States and approximately 19% were generated internationally. In 2007, approximately 50% of revenues were derived from new construction projects, 23% were derived from renovation and retrofit of customer's existing facilities and 27% were derived from facilities services operations.

The broad scope of our operations is more particularly described below. For information regarding the revenues, operating income and total assets of each of our segments with respect to each of the last three fiscal years, and our revenues and assets attributable to the United States, Canada, the United Kingdom and all other foreign countries, see Note N - Segment Information of the notes to consolidated financial statements included in this report.

OPERATIONS

The electrical and mechanical construction services industry has a high growth rate due principally to the ever increasing content and complexity of electrical and mechanical systems in all types of projects. This increasing content and complexity is, in part, a result of the expanded use of computers and more technologically advanced voice and data communications, lighting and environmental control systems in all types of facilities. For these reasons, buildings need extensive electrical distribution systems. In addition, advanced voice and data communication systems require more sophisticated power supplies and extensive low-voltage and fiber-optic communications cabling. Moreover, the need for substantial environmental controls within a building, due to the heightened need for climate control to maintain extensive computer systems at optimal temperatures, and the demand for energy savings and environmental control in individual spaces have created expanded opportunities for our electrical and mechanical services businesses. The demand for these services is typically driven by non-residential construction and renovation activity. Total spending in the United States for non-residential construction exceeded $630.0 billion in 2007, an increase of 15.6% from such spending in 2006, according to the United States Census Bureau. This increase in spending has been driven by, among other things, lower office and commercial vacancy rates, higher manufacturing utilization rates and institutional and governmental infrastructure spending.

Electrical and mechanical construction services primarily involve the design, integration, installation and start-up of: (a) electric power transmission and distribution systems, including power cables, conduits, distribution panels, transformers, generators, uninterruptible power supply systems and related switch gear and controls; (b) premises electrical and lighting systems, including fixtures and controls; (c) low-voltage systems, such as fire alarm, security and process control systems; (d) voice and data communications systems, including fiber-optic and low-voltage copper cabling;
(e) roadway and transit lighting and fiber-optic lines; (f) heating, ventilation, air conditioning, refrigeration and clean-room process ventilation systems; (g) fire protection systems; (h) plumbing, process and high-purity piping systems; (i) water and wastewater treatment systems; and (j) central plant heating and cooling systems.

Electrical and mechanical construction services generally fall into one of two categories: (a) large installation projects with contracts often in the multi-million dollar range that involve construction of industrial and commercial buildings and institutional and public works facilities or the fit-out of large blocks of space within commercial buildings and (b) smaller installation projects typically involving fit-out, renovation and retrofit work.

Our United States electrical and mechanical construction services operations accounted for about 60% of our 2007 revenues, of which revenues approximately 68% were related to new construction and approximately 32% were related to renovation and retrofit projects. Our United Kingdom and Canada electrical and mechanical construction services operations accounted for approximately 13% of our 2007 revenues, of which revenues approximately 73% were related to new construction and approximately 27% were related to renovation and retrofit projects. We provide electrical and mechanical construction services for both large and small installation and renovation projects. Our largest projects include those: (a) for institutional use (such as water and wastewater treatment facilities, hospitals, correctional facilities and research laboratories); (b) for industrial use (such as pharmaceutical plants, steel, pulp and paper mills, chemical, food, automotive and semiconductor manufacturing facilities and oil refineries); (c) for transportation projects (such as highways, airports and transit systems); (d) for commercial use (such as office buildings, data centers, hotels, casinos, convention centers, sports stadiums, shopping malls and resorts); and (e) for power generation and energy management projects. Our largest projects, which typically range in size from $10.0 million up to and occasionally exceeding $50.0 million and are frequently multi-year projects, represented about 35% of our construction services revenues in 2007.

Our projects of less than $10.0 million accounted for approximately 65% of our 2007 electrical and mechanical construction services revenues. These projects are typically completed in less than one year. They usually involve electrical and mechanical construction services when an end-user or owner undertakes construction or modification of a facility to accommodate a specific use. These projects frequently require electrical and mechanical systems to meet special needs such as critical systems power supply, fire protection systems, special environmental controls and high-purity air systems, sophisticated electrical and mechanical systems for data centers, trading floors in financial services businesses, new production lines in manufacturing plants and office arrangements in existing office buildings. They are not usually dependent upon the new construction market. Demand for these projects and types of services is often prompted by the expiration of leases, changes in technology or changes in the customer's plant or office layout in the normal course of a customer's business.

We have expanded our United States fire protection systems business through acquisitions in 2007 and 2006. In 2007, our fire protection systems business revenues were over $200.0 million, and these revenues are included in our United States mechanical construction and facilities services segment.

We have a broad customer base with many long-standing relationships. We perform services pursuant to contracts with owners, such as corporations, municipalities and other governmental entities, general contractors, systems suppliers, construction managers, developers, other subcontractors and tenants of commercial properties. Institutional and public works projects are frequently long-term complex projects that require significant technical and management skills and the financial strength to obtain bid and performance bonds, which are often a condition to bidding for and winning these projects.

We also install and maintain lighting for streets, highways, bridges and tunnels, traffic signals, computerized traffic control systems, and signal and communication systems for mass transit systems in several metropolitan areas. In addition, in the United States, we manufacture and install sheet metal air handling systems for both our own mechanical construction operations and for unrelated mechanical contractors. We also maintain welding and pipe fabrication shops in support of some of our mechanical operations.

Our United States facilities services segment, as well as our other segments, provide facilities services to a wide range of commercial, industrial and institutional facilities, including both those for which we have provided construction services and those for which construction services were provided by others. Facilities services are frequently bundled to provide integrated service packages and are provided on a mobile basis or by our employees based at customer sites.

These facilities services, which generated approximately 27% of our 2007 revenues, are provided to owners, operators, tenants and managers of all types of facilities both on a contract basis for a specified period of time and on an individual task order basis. Of our 2007 facilities services revenues, approximately 80% were generated in the United States and approximately 20% were generated internationally.

In 1997, we established a subsidiary to expand our facilities services operations in the United States. This division has built on our traditional electrical and mechanical services operations, facilities services activities at our electrical and mechanical contracting subsidiaries, and our client relationships, as well as acquisitions, to expand the scope of services being offered and to develop packages of services for customers on a regional, national and global basis.

Our United States facilities services division now offers a broad range of facilities services, including maintenance and service of electrical and mechanical systems, which we have historically provided to customers following completion of construction projects, and industrial maintenance and services, commercial and government site-based operations and maintenance, military base operations support services, mobile maintenance and services, facilities management, installation and support for building systems, technical consulting and diagnostic services, small modification and retrofit projects and program development, management and maintenance of energy systems.

We have experienced an expansion in the demand for our facilities services which we believe is driven by customers' decisions to focus on their own core competencies, customers' programs to reduce costs, the increasing technical complexity of their facilities and their mechanical, electrical, voice and data and other systems, and the need for increased reliability, especially in electrical and mechanical systems. These trends have led to outsourcing and privatization programs whereby customers in both the private and public sectors seek to contract out those activities that support, but are not directly associated with, the customer's core business. Our clients requiring facilities services include the federal government, utilities, refineries, and major corporations engaged in information technology, telecommunications, pharmaceuticals, petrochemicals, financial services, publishing and manufacturing.

In Washington D.C., we are the second largest facilities services provider to the federal government behind the General Services Administration and currently provide facilities services to such preeminent buildings as the Ronald Reagan Building, the second largest federal government facility after the Pentagon. We also provide facilities services to a number of military bases, including base operations support services to the Navy Capital Region, which, among other facilities, includes the Bethesda Naval Hospital, the Naval Research Laboratory and the Washington Navy Yard. We are also involved in joint ventures providing facilities services to the Navy, including one providing facilities services to the Naval Submarine Base in Bangor, Washington and the Naval Hospital in Bremerton, Washington. The agreements pursuant to which this division provides services to the federal government are subject to renegotiation of terms and prices, termination by the government prior to the expiration of the term and non-renewal.

In September 2007, we expanded our facilities services business in the industrial sector by acquiring FR X Ohmstede Acquisition Co. ("Ohmstede"). Headquartered in Beaumont, Texas, Ohmstede is the leading North American provider of aftermarket maintenance and repair services, replacement parts and fabrication services for highly engineered shell and tube heat exchangers for refineries and the petrochemical industry. Through Ohmstede, we provide in-shop repairs and customized design and manufacturing for heat exchangers as well as related equipment at five facilities on the U.S. Gulf Coast and at a facility in the Los Angeles, California area and provide cleaning services for heat exchangers at one of our Texas facilities. In addition, we provide aftermarket maintenance of shell and tube heat exchangers in the field. These services are tailored to meet customer needs for scheduled turnarounds or specialty callout service. We also have embedded multi-year contracts with refineries pursuant to which our crews and equipment are located at customers' plants, allowing our employees to perform specialty services for heat exchangers and related equipment on a daily basis.

We currently provide facilities services in a majority of states and as part of our operations are responsible for: (a) the oversight of all or most of a business' facilities operations, including operation and maintenance; (b) the oversight of logistical processes; (c) tenant services and management; (d) servicing, upgrade and retrofit of HVAC, electrical, plumbing and industrial piping and sheet metal systems in existing facilities; (e) diagnostic and solution engineering for building systems and their components; and (f) as a result of our Ohmstede acquisition, on-site field services for refineries.

Our United Kingdom subsidiary also has a division that focuses on facilities services. This division currently provides a full range of facilities services to public and private sector customers under multi-year agreements.

Our EMCOR Energy Services business designs, constructs and operates energy-related projects and facilities on a turn-key basis. Currently, we operate several central heating and cooling plants/power and cogeneration facilities and provide maintenance services for high-voltage and boiler systems under multi-year contracts. In addition, we provide consulting and national program energy management services under multi-year agreements and energy efficiency system retrofits. Our energy services business' recent projects include: (a) engineering, procurement and construction of two renewable energy facilities to process landfill gas into pipeline quality natural gas; (b) construction of several multi-megawatt cogeneration projects for Johnson & Johnson, the University of New Hampshire and Pluma Sierra Rural Electric Cooperative; and (c) provision of evaluation, engineering, project development, and construction management services for the San Francisco Public Utilities Commission, Pacific Gas & Electric Company and Southern California Edison for self generation and alternative generation projects and a wide range of conservation and efficiency projects. In addition, we have recently been selected to design, build and operate three multi-megawatt renewable energy projects in Connecticut - two for hospitals and one for a municipality. Over the past five years, we have also completed a number of energy-related projects ranging from basic life safety standby systems to complete utility grade peaking power plants and cogeneration/central utility plants supplying thermal and power requirements completely separated from utilities' electrical grids. This business is reported within our United States facilities services segment.

We believe that our electrical and mechanical construction services, facilities services and energy services activities are complementary, permitting us to offer customers a comprehensive package of services. The ability to offer construction services, facilities services and energy services enhances our competitive position with customers. Furthermore, our facilities services operations tend to be less cyclical than our construction operations because facilities services are more responsive to the needs of an industry's operational requirements rather than its construction requirements.

COMPETITION

We believe that the electrical and mechanical construction services business is highly fragmented and our competition includes thousands of small companies across the United States and around the world. We also compete with national, regional and local companies, many of which are small, owner-operated entities that operate in a limited geographic area. However, there are a few public companies focused on providing electrical and mechanical construction services, such as Integrated Electrical Services, Inc. and Comfort Systems USA, Inc. A majority of our revenues are derived from projects requiring competitive bids; however, an invitation to bid is often conditioned upon prior experience, technical capability and financial strength. Because we have total assets, annual revenues, net worth, access to bank credit and surety bonding and expertise significantly greater than most of our competitors, we believe we have a significant competitive advantage over our competitors in providing electrical and mechanical construction services. Competitive factors in the electrical and mechanical construction services business include: (a) the availability of qualified and/or licensed personnel; (b) reputation for integrity and quality;
(c) safety record; (d) cost structure; (e) relationships with customers; (f) geographic diversity; (g) the ability to control project costs; (h) experience in specialized markets; (i) the ability to obtain surety bonding; (j) adequate working capital; and (k) access to bank credit. However, there are relatively few significant barriers to entry to several types of our construction services business.

While the facilities services business is also highly fragmented with most competitors operating in a specific geographic region, a number of large corporations such as Johnson Controls, Inc., Fluor Corp., UNICCO Service Company, Washington Group International, CB Richard Ellis Group, Inc., Jones Lang LaSalle, ABM Facility Services and Linc Facility Services, LLC are engaged in this field, as are large original equipment manufacturers such as Carrier Corp. and Trane Air Conditioning. With respect to our Ohmstede industrial services operations, Ohmstede is the leading North American provider of aftermarket maintenance and repair services, replacement parts and fabrication services for highly engineered shell and tube heat exchangers. The key competitive factors in the facilities services business include price, service, quality, technical expertise, geographic scope and the availability of qualified personnel and managers. Due to our size, both financial and geographic, and our technical capability and management experience, we believe we are in a strong competitive position in the facilities services business.

EMPLOYEES

We presently employ approximately 29,000 people, approximately 73% of whom are represented by various unions pursuant to more than 400 collective bargaining agreements between our individual subsidiaries and local unions. We believe that our employee relations are generally good. Only one of these collective bargaining agreements is national or regional in scope.

BACKLOG

We had backlog as of December 31, 2007 of approximately $4.49 billion, compared with backlog of approximately $3.50 billion as of December 31, 2006. Backlog is not a term recognized under United States generally accepted accounting principles; however, it is a common measurement used in our industry. Backlog includes unrecognized revenues to be realized from uncompleted construction contracts plus unrecognized revenues expected to be realized over the remaining term of the facilities services contracts. However, if the remaining term of a facilities services contract exceeds 12 months, the unrecognized revenues attributable to such contract included in backlog are limited to only 12 months of revenues.

MANAGEMENT DISCUSSION FROM LATEST 10K

The results of operations for the year ended December 31, 2007 ("2007") reflect continuing improvement compared to our historical results. In 2007, we achieved record highs in revenues, operating income, operating margin (operating income as a percentage of revenues), net income and diluted earnings per share.

Revenues and operating income increased in 2007 compared to the year ended December 31, 2006 ("2006") primarily due to: (a) increased awards and improved performance of United States construction work in the hospitality, high-tech, healthcare, commercial, institutional, industrial and water/wastewater treatment markets as these markets have continued to grow, (b) the addition of revenues and operating income from companies acquired in 2007 and 2006 and (c) increased demand for maintenance/retrofit work of the type provided by our mobile services in our United States facilities services segment, in part due to increased demand for more efficient energy systems. Negatively impacting the 2007 results of operations was the performance of our United Kingdom construction and facilities services segment. This segment's operating loss of $12.9 million primarily reflected the negative results of its rail division.

While our selling, general and administrative expenses increased primarily due to: (a) companies acquired during 2007 and (b) an increase in incentive-based compensation as a result of improved profits in 2007 compared to 2006, selling, general and administrative expenses as a percentage of revenues declined to 8.5% for 2007 from 9.0% for 2006. This decrease as a percentage of revenues primarily related to our ability to increase revenues without having to substantially increase overhead costs. The increase in selling, general and administrative expenses for 2007 when compared to 2006 was partially offset by a reduction in certain staff and facilities, particularly those associated with our United States facilities services segment (as a result of restructuring activities during 2006), and a reduction in deferred compensation expense of $6.4 million compared to 2006 deferred compensation expense due to a decrease in our liability corresponding with a reduction in the market price of our common stock during 2007. For 2007, selling, general and administrative expenses included amortization expense of $9.2 million attributable to identifiable intangible assets associated with acquisitions compared to $4.3 million of amortization expense for 2006.

Our cash and cash equivalents were $251.6 million at December 31, 2007 compared to $273.7 million at December 31, 2006. The decrease in cash and cash equivalents during 2007 was primarily due to cash flows used for investing activities of $526.4 million primarily related to the acquisition of five businesses in 2007. Offsetting the cash used for investing activities was cash provided by operating activities of $259.0 million in 2007 and cash provided by financing activities of $243.7 million. Our reported interest income for 2007 was $13.2 million, a $7.0 million improvement over 2006 interest income of $6.2 million, which was mostly offset by $6.9 million of additional interest expense related to financing activities as noted below. On September 19, 2007, we financed the acquisition of FR X Ohmstede Acquisition Co. ("Ohmstede") with $300.0 million from newly incurred term loan debt and $155.4 million from our own funds. We repaid $75.0 million of the term loan debt on December 31, 2007 (prior to the first scheduled principal payment of $0.75 million due March 31, 2008) and, because of the prepayment, we recorded as interest expense additional amortization expense related to capitalized debt issuance costs of $0.9 million. We funded our other 2007 acquisitions with cash on hand.

The 2007 acquisitions increased the geographical markets and industries in which we offer our services and are a part of our strategic objective to further diversify our overall business to provide a balance to our typically cyclical construction services business. Ohmstede's, business, which is largely comprised of providing maintenance services, has been included in our United States facilities services segment and expands our industrial services to refineries and the petrochemical industry. Ohmstede's business primarily provides aftermarket maintenance and repair services, replacement parts and fabrication services for highly engineered shell and tube heat exchangers.

On August 6, 2007, we sold our majority ownership interest in a joint venture with CB Richard Ellis, Inc. ("CBRE") to CBRE for $8.0 million. This sale followed our purchase, for approximately $0.5 million, of certain of the joint venture's assets. Included in the results of discontinued operations for 2007 was a gain of $1.2 million (net of income tax benefit of $1.8 million) resulting from the sale of our joint venture interest. As of December 31, 2007, $5.5 million of purchase price had been received, and the balance is reflected as a current note receivable on our Consolidated Balance Sheet.

OPERATING SEGMENTS

We have the following reportable segments which provide services associated with the design, integration, installation, start-up, operation and maintenance of various systems: (a) United States electrical construction and facilities services (involving systems for electrical power transmission and distribution; premises electrical and lighting systems; low-voltage systems, such as fire alarm, security and process control; voice and data communication; roadway and transit lighting; and fiber optic lines); (b) United States mechanical construction and facilities services (involving systems for heating, ventilation, air conditioning, refrigeration and clean-room process ventilation; fire protection; plumbing, process and high-purity piping; water and wastewater treatment; and central plant heating and cooling); (c) United States facilities services; (d) Canada construction and facilities services; (e) United Kingdom construction and facilities services; and (f) Other international construction and facilities services. The segment "United States facilities services" principally consists of those operations which provide a portfolio of services needed to support the operation and maintenance of customers' facilities (industrial maintenance and services; commercial and government site-based operations and maintenance; military base operations support services; mobile maintenance and services; facilities management; installation and support for building systems; technical consulting and diagnostic services; small modification and retrofit projects; and program development, management and maintenance for energy systems), which services are not generally related to customers' construction programs, as well as industrial services operations, which primarily provide aftermarket maintenance and repair services, replacement parts and fabrication services for highly engineered shell and tube heat exchangers for refineries and the petrochemical industry. The Canada, United Kingdom and Other international segments perform electrical construction, mechanical construction and facilities services. Our "Other international construction and facilities services" segment, currently operating only in the Middle East, represents our operations outside of the United States, Canada and the United Kingdom.

DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

Our reportable segments reflect, for all years presented, discontinued operations accounting due to the sale of our CBRE joint venture interest and the sales of subsidiaries in each of 2006 and 2005, in addition to certain reclassifications of prior years amounts among the segments due to changes in our internal reporting structure.

REVENUES

As described in more detail below, revenues for 2007 were $5.9 billion compared to $4.9 billion for 2006 and $4.6 billion for 2005. Revenues increased in 2007 compared to 2006 primarily due to: (a) increased awards and performance of United States construction work in the hospitality, high-tech, healthcare, commercial, institutional, industrial and water/wastewater treatment markets as these markets have continued to grow, (b) the addition of revenues from companies acquired in 2007 and 2006 and (c) increased demand for mainte-nance/retrofit work of the type provided by our mobile services in our United States facilities services segment, in part due to increased demand for more efficient energy systems. The increased revenues for 2006 compared to the year ended December 31, 2005 ("2005") was primarily attributable to a strong commercial construction business cycle and to increased work for the hospitality, high-tech, food and pharmaceutical markets.

As of December 31, 2007, our backlog was $4.49 billion, and as of December 31, 2006, our backlog was $3.50 billion. This increase in backlog was primarily at the United States reporting segments and was due to increased demand for hospitality, healthcare, transportation and industrial construction projects, companies acquired during 2007 and increased awards due to our active pursuit of opportunities in these and other markets. Backlog is not a term recognized under United States generally accepted accounting principles; however, it is a common measurement used in our industry. Backlog includes unrecognized revenues to be realized from uncompleted construction contracts plus unrecognized revenues expected to be realized over the remaining term of facilities services contracts. However, if the remaining term of a facilities services contract exceeds 12 months, the unrecognized revenues attributable to such contract included in backlog are limited to only 12 months of revenues.

Revenues of our United States electrical construction and facilities services segment for 2007 increased $153.6 million compared to 2006. The revenues increase was generally due to increased high-tech, hospitality and commercial projects as a result of the strong high-tech, hospitality and commercial construction markets. Revenues for 2006 increased $55.6 million compared to 2005. This increase was primarily attributable to increased commercial work as a result of a stronger commercial construction market and greater availability of government project work.

Revenues of our United States mechanical construction and facilities services segment for 2007 increased $522.2 million compared to 2006. The revenues increase was primarily attributable to increased availability of hospitality, healthcare, commercial, water/waste-water treatment and high-tech construction projects due to growth in these markets and increased maintenance/retrofit spending in part as a consequence of the impact of higher energy costs, and the addition of $14.5 million and $132.5 million of revenues from companies acquired during 2007 and 2006. Revenues for 2006 increased $149.3 million compared to 2005. This increase was primarily attributable to increased commercial work as a result of an overall stronger commercial construction market and greater availability of work in the hospitality, high-tech, food and pharmaceutical markets.

United States facilities services revenues, which include those operations that principally provide maintenance and consulting services, increased $218.0 million in 2007 compared to 2006. Companies acquired during 2007 contributed $151.2 million to this increase in revenues. The increase in revenues was also primarily attributable to the increased demand for both site-based government facilities services and small projects and for maintenance/retrofit work of the type provided by our mobile services group in this segment, in part due to increased demand for more efficient energy systems. Revenues in this segment increased by $148.5 million in 2006 compared to 2005. This increase was primarily related to an increased number of site-based services contracts, the addition of a mobile services company acquired during 2005, that accounted for $64.3 million of this increase in revenues in 2006, and greater demand in 2006 for mobile services work. The increase in site-based contracts obtained in 2006 was related to an increase in the outsourcing of facilities services work, augmented by our increased efforts to pursue opportunities for facilities services work in the government and commercial sectors. The increase in demand for mobile services was primarily due to the strong commercial construction business cycle, which resulted in an increase in our small project work, and increased demand for maintenance caused by energy cost awareness.

Revenues of the Canada construction and facilities services segment increased $82.9 million in 2007 compared to 2006. The increase in revenues for 2007 compared to 2006 was primarily related to various large projects obtained in the industrial and power generation markets and $27.9 million of additional revenues related to changes in the rate of exchange of Canadian dollars for United States dollars due to strengthening of the Canadian dollar. Revenues decreased by $43.0 million for 2006 compared to 2005. This decrease in revenues primarily reflected a reduction in awards to us of oil and gas industry work and a more selective bidding process on our part, offset by $18.2 million of additional revenues related to changes in the rate of exchange of Canadian dollars for United States dollars due to strengthening of the Canadian dollar.

United Kingdom construction and facilities services revenues increased $48.7 million in 2007 compared to 2006, principally due to a $57.6 million increase relating to the rate of exchange for British pounds to United States dollars as a result of the strengthening of the British pound, additional facilities services and construction work, partially offset by less rail project work performed as certain of our rail projects were at or near completion as of December 31, 2007 and a decision not to pursue significant new projects in the rail sector. Revenues decreased $1.6 million for 2006 compared to 2005, principally due to a refocus of our facilities services strategy. However, 2006 revenues from our commercial and transportation infrastructure construction businesses increased over 2005 revenues due to an improvement in the commercial construction market and significant transportation projects awarded to us. The overall decrease in revenues in 2006 compared to 2005 would have been greater except for $9.5 million of additional revenues related to the strengthening of the British pound.

Other international construction and facilities services activities consist of operations currently operating only in the Middle East. During each of 2007, 2006 and 2005, all of the projects in these markets were performed by joint ventures that were accounted for under the equity method of accounting.

COST OF SALES AND GROSS PROFIT

The increase in gross profit (revenues less cost of sales) for 2007 when compared to 2006 was primarily due to: (a) increased awards leading to higher revenues and improved performance of United States construction work in the hospitality, high-tech, healthcare, commercial, institutional, industrial and water/wastewater treatment markets as these markets continued to grow and increased maintenance/retrofit spending in part as a consequence of the impact of higher energy costs, (b) the addition of gross profit from companies acquired in 2007 and 2006 which contributed gross profit of $59.3 million and (c) increased demand for the type of work provided by our mobile services in our United States facilities services segment. Negatively impacting gross profit was the performance of our United Kingdom construction and facilities services segment. This segment's loss primarily reflected the negative results of its rail division. Also, negatively impacting gross profit was a $5.5 million impairment charge related to an other-than-temporary decline in fair value of our investment in a joint venture in our United States facilities services segment. The increase in gross profit margin (gross profit as a percentage of revenues) for 2007 compared to 2006 primarily reflected the continuing trend in our construction project mix toward higher margin work that is typically associated with the types of projects referred to in the first sentence of this paragraph and reduced losses from one company in our United States electrical construction and facilities services segment. Gross profit margin was negatively impacted in 2007 compared to 2006 due to losses on the United Kingdom rail projects and $7.8 million of amortization expense recorded in cost of sales associated with the contract backlog of companies acquired in 2007.

Gross profit increased by $67.3 million for 2006 compared to 2005. Gross profit margin was 11.3% for 2006 compared to 10.6% for 2005. This increase in gross profit margin was primarily due to: (a) generally improved performance on United States mechanical construction and facilities services contracts for commercial, hospitality, high-tech, food and pharmaceutical sector work; (b) the increased availability of generally higher margin work in the United States; (c) increases in the number of site-based contracts in the United States facilities services segment; (d) increased demand for mobile services in the United States;
(e) the addition of a mobile services company acquired in November 2005; (f) improvements in Canada construction and facilities services profitability; and
(g) the absence of an $11.7 million non-cash expense recorded in 2005 in connection with a civil action between one of our subsidiaries and the Upper Occoquan Sewage Authority (the "UOSA Action"). These 2006 improvements were partially offset by the following items in the United States electrical construction and facilities services segment: (a) unusually large losses on certain 2006 contracts, (b) reduced profits from transportation infrastructure and financial services projects compared to 2005; and (c) the absence of $4.5 million from a favorable insurance settlement recorded in 2005.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

While our selling, general and administrative expenses increased for 2007 compared to 2006 primarily due to: (a) companies acquired during 2007 and (b) an increase in incentive-based compensation as a result of improved profits, selling, general and administrative expenses as a percentage of revenues declined to 8.5% for 2007 from 9.0% for 2006. This decrease as a percentage of revenues primarily related to our ability to increase revenues without having to substantially increase overhead costs. The increase in selling, general and administrative expenses for 2007 when compared to 2006 was partially offset by a reduction in certain staff and facilities, particularly those associated with our United States facilities services segment (as a result of restructuring activities during 2006), and a reduction in deferred compensation expense of $6.4 million compared to 2006 deferred compensation expense due to a decrease in our liability corresponding with a reduction in the market price of our common stock during 2007. For 2007, selling, general and administrative expenses included amortization expense of $9.2 million attributable to identifiable intangible assets associated with acquisitions compared to $4.3 million of amortization expense for 2006. Selling, general and administrative expenses (excluding amortization expense) were approximately $493.5 million (8.3% of revenues) for 2007 compared to $434.7 million (8.9% of revenues) for 2006. Our selling, general and administrative expenses for 2006 increased $30.3 million to $439.0 million compared to $408.7 million for 2005. Selling, general and administrative expenses as a percentage of revenues was 9.0% for 2006 compared to 8.9% for 2005. The increase in selling, general and administrative expenses for 2006 compared to 2005 was primarily related to: (a) increased administration and sales expenses required to support increased revenues; (b) increased compensation expense attributable to improved operating performance; (c) $4.0 million of compensation expense resulting from the adoption of Statement 123(R) on January 1, 2006; and (d) compensation awards for which the liabilities fluctuate with changes in the market price of our common stock, which increased compensation expense by $2.8 million for 2006 compared to 2005.

RESTRUCTURING EXPENSES

Restructuring expenses, primarily relating to employee severance obligations and reduction of leased facilities, were $0.3 million, $1.6 million and $1.8 million for 2007, 2006 and 2005, respectively. As of December 31, 2007 and 2006, the balance of these obligations was $0.2 million. The obligation outstanding as of December 31, 2006 was paid during 2007, and the obligation outstanding as of December 31, 2007 is expected to be paid in 2008.

OPERATING INCOME

As described in more detail below, our operating income was $199.8 million for 2007, $111.8 million for 2006, and $74.7 million for 2005.

The $41.4 million increase in United States electrical construction and facilities services operating income for 2007 compared to 2006 was primarily the result of increased revenues from higher margin work typically associated with high-tech, hospitality and commercial construction markets, the profitable performance of certain water/wastewater treatment construction projects and the completion of certain high-tech projects. Additionally, we had reduced losses from one company in this segment for 2007 when compared to 2006. Selling, general and administrative expenses increased for 2007 compared to 2006 principally due to increases in incentive compensation, partially offset by our continued focus on overhead cost control that resulted in cost reductions at certain subsidiaries and a reduction in deferred compensation expense for which our liability decreased corresponding with a reduction in the market price of our common stock during 2007. Operating income decreased by $33.0 million in 2006 compared to 2005. This decrease was primarily due to: (a) unusually large losses on certain contracts; (b) reduced profits due to a decrease in generally more profitable work related to transportation infrastructure and financial services projects; and (c) the absence of $4.5 million from a favorable insurance settlement recorded in 2005. This reduction in operating income was partially offset by profits earned on commercial, high-tech and hospitality projects.

Our United States mechanical construction and facilities services operating income for 2007 improved by $53.6 million compared to 2006. The improvement was primarily due to increased awards and improved performance of hospitality, water/wastewater treatment, commercial and institutional construction projects, generally improved performance of healthcare construction projects, the addition of companies acquired in 2006 and higher margin work typically associated with hospitality, water/wastewater treatment and commercial construction projects. The increase in selling, general and administrative expenses was primarily attributable to companies acquired during 2006 and 2007 and increases in incentive compensation for 2007 as a result of better operating results than in 2006, partially offset by a reduction in deferred compensation expense for which our liability decreased corresponding with a reduction in the market price of our common stock during 2007. Operating income for 2006 was $82.1 million, a $61.9 million improvement compared to operating income of $20.2 million for 2005. This improvement was primarily attributable to generally improved performance and an increase in the number of contracts for commercial, hospitality, high-tech, food and pharmaceutical sector work, the increased availability of generally higher margin work in the United States, and the absence of an $11.7 million non-cash expense recorded in 2005 related to the UOSA Action. The improvement was partially offset by the absence of a $1.1 million favorable insurance settlement recorded in 2005.

Our United States facilities services operating income for 2007 improved by $10.3 million compared to 2006. The increase in operating income was primarily due to more efficient performance on certain site-based contracts, increased revenues from site-based government facilities services contracts, a continuing shift toward new site-based contracts with higher margins than had been the case with some past contracts, increased income from small projects and maintenance/retrofit work of the type provided by our mobile services group in this segment and the reduction in staff and facilities effected primarily in the third and fourth quarters of 2006, offset by a $5.5 million impairment charge related to an other-than-temporary decline in fair value of our investment in a joint venture. Companies acquired during 2007 also contributed $21.6 million to the increase in operating income before amortization expense of $10.4 million. Operating income increased by $13.1 million for 2006 compared to 2005. This increase was primarily due to the increase in the number of site-based contracts, improved contract performance under existing contracts, increased demand for mobile services, the addition of a mobile services company purchased in November 2005 and the increased availability of generally higher margin work.

Our Canada construction and facilities services operating income improved by $6.4 million for 2007 compared to 2006. Included in the operating income for 2007 was a $1.4 million gain on sale of property. The improvement in operating income was primarily attributable to the increase in revenues and improved contract performance compared to 2006. The contract performance improvement was primarily related to availability of higher margin industrial and power generation work that was successfully performed. In addition, we continued our focus on overhead cost control, which kept selling, general and administrative expenses at approximately the same amount for 2007 as for 2006 despite the increase in revenues. Operating income was also favorably impacted by $1.0 million relating to the rate of exchange of Canadian dollars to the United States dollar as a result of the strengthening of the Canadian dollar. Operating income for 2006 was $0.4 million, an $8.3 million improvement when compared to an operating loss of $7.9 million for 2005. This improvement was attributable to our improved performance on hospital, mining and auto manufacturing construction contracts and the absence of a loss recorded in 2005 associated with a large power transmission project, partially offset by costs associated with investments in certain facilities and staff to support future business. The impact of the rate of exchange from Canadian dollars to United States dollars was not material to operating income reported for 2006 compared to 2005.

Our United Kingdom construction and facilities services operating loss for 2007 was $12.9 million compared to operating income of $6.8 million for 2006. The operating loss for 2007 compared to 2006 was primarily attributable to losses on certain rail projects which were at or near completion as of December 31, 2007 and an increase in actuarially determined pension costs associated with our United Kingdom defined benefit pension plan, partially offset by improved operating income from facilities services and construction work. These operating losses were unfavorably impacted by $0.4 million relating to the rate of exchange for British pounds to United States dollars as a result of the strengthening of the British pound during 2007. Our United Kingdom construction and facilities services segment operating income for 2006 was $6.8 million compared to $7.4 million for 2005. This decrease in operating income was primarily due to reduced income from rail projects as a result of lower gross profit than for 2005, partially offset by improvement in profits from facilities services and commercial construction work and $0.6 million of additional operating income related to the rate of exchange of British pounds for United States dollars, due to strengthening of the British pound as compared to the United States dollar.

Other international construction and facilities services operating loss was approximately $0.5 million for 2007, and breakeven for 2006 and 2005.

Our corporate administration expenses for 2007 increased by $4.9 million compared to 2006. The increase in the expenses was primarily due to increases of $1.9 million of compensation expense related to compensation awards based on achievement of earnings milestones under our long-term incentive plan, $1.4 million of expenses for recruiting programs, information technology support and marketing programs, $1.4 million of staffing expenses incurred in order to support our current and projected business growth and $1.2 million of expense related to share-based compensation awards under our long-term incentive plan, partially offset by a reduction in deferred compensation expense of $1.3 million compared to 2006 due to a decrease in our liability corresponding with a reduction in the market price of our common stock during 2007. Corporate administration expenses for 2006 were $55.9 million, a $12.7 million increase compared to 2005. The increase in these expenses was primarily due to $4.0 million of compensation expense as a result of the adoption of Statement 123(R) on January 1, 2006, $3.5 million of compensation expense related to increased compensation awards based on achievement of earnings milestones under our long-term incentive plan, $1.5 million of expense related to share-based compensation awards and increases in incentive-based compensation expense of $0.6 million due to deferred compensation awards for which the liabilities fluctuate with changes in the market price for our common stock.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations

The results presented reflect certain reclassifications of prior period amounts to conform to current year presentation.

Revenues

As described below in more detail, our revenues for the three months ended September 30, 2007 increased to $1.50 billion compared to $1.24 billion for the three months ended September 30, 2006. Revenues for the nine months ended September 30, 2007 increased to $4.16 billion compared to $3.55 billion for the nine months ended September 30, 2006. The increase in 2007 revenues was principally due to (a) increased availability in the United States of commercial, hospitality, high-tech and water/wastewater treatment construction projects as capital spending in these market sectors has continued to grow; (b) our acquisition of a United States mechanical construction company in October 2006; and (c) companies acquired since September 30, 2006.

Our backlog at September 30, 2007 was $4.48 billion compared to $3.40 billion at September 30, 2006. Our backlog was $3.50 billion at December 31, 2006. These increases in backlog were primarily at the United States reporting segments and were due to increased demand for hospitality, healthcare, high-tech and industrial construction projects, companies acquired during the third quarter of 2007 and increased awards due to our active pursuit of opportunities in these and other market sectors. Backlog is not a term recognized under United States generally accepted accounting principles; however, it is a common measurement used in our industry. Backlog includes unrecognized revenues to be realized from uncompleted construction contracts plus unrecognized revenues expected to be realized over the remaining term of facilities services contracts. However, if the remaining term of a facilities services contract exceeds 12 months, the unrecognized revenues attributable to such contract included in backlog are limited to only 12 months of revenues.

Revenues of our United States electrical construction and facilities services segment for the three months ended September 30, 2007 increased $37.6 million compared to the three months ended September 30, 2006. Revenues for the nine months ended September 30, 2007 increased $77.3 million compared to the nine months ended September 30, 2006. The revenues increase was generally due to increased commercial, high-tech and hospitality projects as a result of the strong commercial, high-tech and hospitality construction markets.

Revenues of our United States mechanical construction and facilities services segment for the three months ended September 30, 2007 increased $132.7 million compared to the three months ended September 30, 2006. Revenues for the nine months ended September 30, 2007 increased $414.0 million compared to the nine months ended September 30, 2006. The revenues increase was primarily attributable to increased availability of hospitality, healthcare, commercial, high-tech and water/wastewater treatment construction projects due to growth in these markets and the addition of $52.7 million and $134.7 million of revenues for the three and nine months ended September 30, 2007, respectively, from companies acquired since September 30, 2006.

Our United States facilities services revenues increased $53.6 million for the three months ended September 30, 2007 compared to the three months ended September 30, 2006. Revenues increased $106.1 million for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. Companies acquired during the third quarter of 2007 contributed $38.2 million of the increase in revenues for the three and nine months ended September 30, 2007. These increases in revenues for both the three and nine months ended September 30, 2007 were also primarily attributable to the increased demand for both government site-based facilities services and for small project and other services performed by our mobile services group in this segment.

Revenues of our Canada construction and facilities services segment increased by $45.6 million for the three months ended September 30, 2007 compared to the three months ended September 30, 2006. Revenues increased $9.5 million for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. The increase in revenues for the three months ended September 30, 2007 compared to the same period in 2006 was primarily related to the commencement of work on various large projects that had been delayed from earlier in 2007. The increases in revenues for the three and nine months ended September 30, 2007 were positively affected by $7.8 million and $9.3 million, respectively, relating to the rate of exchange for Canadian dollars to United States dollars as a result of the strengthening of the Canadian dollar.

United Kingdom construction and facilities services revenues decreased $8.1 million and $1.7 million for the three and nine months ended September 30, 2007, respectively, compared to the three and nine months ended September 30, 2006, principally due to less rail project work performed as certain of our rail contracts are nearing completion and a decision not to pursue significant new contacts in the rail sector, partially offset by a $14.3 million and $43.1 million increase, respectively, relating to the rate of exchange for British pounds to United States dollars as a result of the strengthening of the British pound.

Other international construction and facilities services activities consist of operations in the Middle East. All of the current projects in this market are being performed through a joint venture. The results of the joint venture were accounted for under the equity method.

Cost of sales and Gross profit

Our gross profit (revenues less cost of sales) increased $24.9 million for the three months ended September 30, 2007 compared to the three months ended September 30, 2006. Gross profit increased $77.1 million for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006. Gross profit as a percentage of revenues was 11.3% and 11.6% for the three months ended September 30, 2007 and 2006, respectively. Gross profit as a percentage of revenues was 11.1% and 10.8% for the nine months ended September 30, 2007 and 2006, respectively. The increase in gross profit for the 2007 periods compared to the 2006 periods was primarily attributable to: (a) increased awards to us of United States commercial, hospitality, high-tech and water/wastewater treatment construction projects; (b) improved performance on healthcare construction projects; (c) the addition of a United States mechanical construction company we acquired in October 2006; and (d) increased demand for small projects and other services performed by our mobile services group. The third quarter 2007 acquisitions contributed $7.4 million of gross profit for the three and nine months ended September 30, 2007. The increase in gross profit as a percentage of revenues for the nine month period primarily reflected the continuing trend in our construction project base toward higher margin work that is typically associated with the types of projects referred to in this paragraph and reduced losses from one company in our United States electrical construction and facilities services segment which had reported losses in the third quarter of 2006. However, gross profit improvement was partially offset by the losses recognized on certain United Kingdom rail contracts. Gross profit, as a percentage of revenues, decreased during the third quarter of 2007 compared to 2006 due to losses on the United Kingdom rail projects and less gross profit recognized due to amortization expense associated with the contract backlog of companies acquired in the third quarter of 2007.

Selling, general and administrative expenses

Our selling, general and administrative expenses for the three months ended September 30, 2007 increased $5.4 million to $114.0 million compared to $108.6 million for the three months ended September 30, 2006. Selling, general and administrative expenses as a percentage of revenues were 7.6% for the three months ended September 30, 2007 compared to 8.8% for the three months ended September 30, 2006. Selling, general and administrative expenses as a percentage of revenues were 8.4% for the nine months ended September 30, 2007 compared to 8.9% for the nine months ended September 30, 2006. For the three and nine month periods ended September 30, 2007, compared to the three and nine months ended September 30, 2006, selling, general and administrative expenses increased primarily due to an increase in accruals for incentive-based compensation as a result of improved profits and the addition of companies acquired since September 30, 2006. However, this decrease in selling, general and administrative expenses as a percentage of revenues was primarily due to our ability to increase revenues without having to substantially increase overhead costs, a reduction in staff and facilities, particularly those associated with our United States facilities services segment (as a result of restructuring activities during 2006) and a reduction in deferred compensation expense for which our liability decreased corresponding with a reduction in the market price of our common stock in the third quarter of 2007.

Restructuring expenses

Restructuring expenses, primarily related to employee severance obligations, were zero and $0.09 million for the three and nine months ended September 30, 2007, respectively. As of September 30, 2007, we had no unpaid severance obligations. Restructuring expenses were $0.6 million for the three and nine months ended September 30, 2006, respectively. As of September 30, 2006, there were $0.1 million of unpaid restructuring obligations.

As described below in more detail, our operating income increased by $20.1 million for the three months ended September 30, 2007 to $54.9 million compared to operating income of $34.8 million for the three months ended September 30, 2006. Operating income increased by $44.1 million for the nine months ended September 30, 2007 to $113.7 million compared to operating income of $69.6 million for the nine months ended September 30, 2006.

United States electrical construction and facilities services operating income of $21.3 million for the three months ended September 30, 2007 increased $9.7 million compared to operating income of $11.6 million for the three months ended September 30, 2006. Operating income of $53.4 million for the nine months ending September 30, 2007 increased $22.4 million compared to operating income of $31.0 million for the nine months ended September 30, 2006. This increase in operating income in the three and nine months ended September 30, 2007 was primarily the result of increased revenues from the strong commercial and hospitality construction markets, the performance of water/wastewater treatment construction projects and completion of certain high-tech projects, in addition to higher margin work typically associated with commercial, hospitality and high-tech construction projects. Additionally, we had reduced losses from one company in this segment for the three and nine months ended September 30, 2007 compared to the three and nine months ended September 30, 2006, respectively. Selling, general and administrative expenses increased for the three and nine months ended September 30, 2007 compared to the three and nine months ended September 30, 2006, respectively, principally due to increases in incentive compensation, partially offset by our continued focus on overhead cost control that resulted in cost reductions at certain subsidiaries and a reduction in deferred compensation expense for which our liability decreased corresponding with a reduction in the market price of our common stock in the third quarter of 2007.

United States mechanical construction and facilities services operating income for the three months ended September 30, 2007 was $33.4 million, an $11.6 million improvement compared to operating income of $21.8 million for the three months ended September 30, 2006. Operating income for the nine months ended September 30, 2007 was $75.3 million, a $35.0 million improvement compared to operating income of $40.3 million for the nine months ended September 30, 2006. These improvements were primarily due to increased hospitality, commercial, high-tech and water/wastewater treatment construction projects, improved performance of healthcare construction projects, the addition of a United States mechanical construction company we acquired in October 2006 and higher margin work typically associated with hospitality, commercial and high-tech construction projects. The increases in selling, general and administrative expenses were primarily attributable to companies acquired after September 30, 2006 and increases in incentive compensation for the three and nine months ended September 30, 2007 when compared to the same periods of 2006, partially offset by a reduction in deferred compensation expense for which our liability decreased corresponding with a reduction in the market price of our common stock in the third quarter of 2007.

United States facilities services operating income for the three months ended September 30, 2007 was $15.1 million compared to operating income of $12.7 million for the third quarter of 2006. Operating income for the nine months ended September 30, 2007 was $32.6 million compared to operating income of $24.8 million for the first nine months of 2006. This increase in operating income for the 2007 three and nine month periods was primarily due to more efficient performance on certain site-based contracts, increased revenues from site-based government facilities services contracts, a continuing shift toward new site-based contracts with higher margins than had been the case with some past contracts, increased income from small projects and other services by our mobile services group in this segment and the reduction in staff and facilities effected primarily in the third and fourth quarters of 2006. Companies acquired during the third quarter of 2007 contributed $3.8 million to the increase in operating income before amortization expense for the three and nine months ended September 30, 2007. Amortization expense related to identifiable intangible assets attributable to third quarter 2007 acquisitions was $2.3 million for the three and nine months ended September 30, 2007.

Our Canada construction and facilities services operating income was $3.0 million for the three months ended September 30, 2007 compared to operating income of $0.3 million for the three months ended September 30, 2006. This segment's operating income was $2.6 million for the nine months ended September 30, 2007 compared to operating income of $3.1 million for the nine months ended September 30, 2006. Included in the operating income for the nine months ended September 30, 2007 was a $1.4 million gain on sale of property. The improvement in third quarter operating income was primarily attributable to the increase in revenues and improved contract performance compared to the prior year's third quarter.

Our United Kingdom construction and facilities services operating loss for the three months ended September 30, 2007 was $3.2 million compared to operating income of $1.3 million for the three months ended September 30, 2006. Operating loss for the nine months ended September 30, 2007 was $5.0 million compared to operating income of $6.9 million for the nine months ended September 30, 2006. These operating losses in the 2007 three and nine months periods compared to the same 2006 periods were primarily attributable to losses on certain rail projects and an increase in pension costs associated with the United Kingdom defined benefit pension plan, partially offset by improved operating income from facilities services work. These operating losses were unfavorably impacted by $0.6 million for the three and nine months ended September 30, 2007 relating to the rate of exchange for British pounds to United States dollars as a result of the strengthening of the British pound.

Other international construction and facilities services operating loss was $0.2 million for the three months ended September 30, 2007 compared to operating loss of $0.3 million for the three months ended September 30, 2006. Operating loss was $0.4 million for the nine months ended September 30, 2007 compared to operating income of $0.3 million for the nine months ended September 30, 2006.

Our corporate administration expenses for the three months ended September 30, 2007 were $14.6 million compared to $12.0 million for the three months ended September 30, 2006. For the nine months ended September 30, 2007, corporate administration expenses were $44.7 million compared to $36.1 million for the nine months ended September 30, 2006. The increase in these expenses was primarily due to increased compensation accruals based on achievement of earnings for the three and nine months ended September 30, 2007. Additionally, compensation and related staffing expenses increased for the three and nine months ended September 30, 2007, compared to the same prior year periods, in order to support current and projected business growth.

Interest income for the three months ended September 30, 2007 was $3.6 million compared to $1.8 million for the three months ended September 30, 2006. Interest income for the nine months ended September 30, 2007 was $10.1 million compared to $3.9 million for the nine months ended September 30, 2006. The increases in interest income were primarily related to more cash available to invest combined with higher rates of return in the current year periods. Interest expense for the three months ended September 30, 2007 and 2006 was $1.4 million and $0.4 million, respectively. Interest expense for the nine months ended September 30, 2007 and 2006 was $2.5 million and $1.7 million, respectively. This increase in interest expense was primarily due to the $300.0 million of long-term debt incurred in September 2007 to finance part of the Ohmstede acquisition.

For the three months ended September 30, 2007 and 2006, our income tax provision was $19.1 million and $13.4 million, respectively. For the nine months ended September 30, 2007 and 2006, our income tax provision was $45.4 million and $25.8 million, respectively. The income tax provisions were recorded at effective income tax rates of 38% and 36%, before certain adjustments, for the nine months ended September 30, 2007 and 2006, respectively. Our effective income tax rate was 34% for the three months ended September 30, 2007 and was lower than the effective income tax rate for the nine months ended September 30, 2007 primarily due to a revised estimate of the United Kingdom income before income taxes for fiscal 2007. The income tax provision for the nine months ended September 30, 2006 includes an adjustment of certain compensation arrangements for income tax purposes.

Liquidity and Capital Resources

Our consolidated cash balance decreased by approximately $50.7 million from $273.7 million at December 31, 2006 to $223.1 million at September 30, 2007. The decrease in net cash provided by operating activities for the nine months ended September 30, 2007 compared to the nine months ended September 30, 2006 was primarily due to an increase in accounts receivable related to the growth in our revenues, particularly during the current quarter. Net cash used in investing activities of $500.8 million in the nine months ended September 30, 2007 increased $482.1 million compared to $18.6 million used in the nine months ended September 30, 2006 and was primarily due to a $487.5 million increase in payments for acquisitions of Ohmstede and other businesses, identifiable intangible assets and related earn-out agreements, partially offset by a $4.2 million increase in proceeds from the sale of discontinued operations, a $2.4 million increase in proceeds from sale of property, plant and equipment and a $2.0 million decrease in investment and advances to unconsolidated entities and joint ventures. Net cash used for financing activities of $314.3 million in the nine months ended September 30, 2007 compared to $10.6 million provided by financing activities for the nine months ended September 30, 2006 was primarily attributable to the $300.0 million of long-term debt incurred in September 2007 to finance part of the Ohmstede acquisition.

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