MRO Magazine

EMCOR Group, Inc. Reports Second Quarter 2015 Results


July 30, 2015
By Business Wire News

NORWALK, Conn.

EMCOR Group, Inc. (NYSE:EME) today reported results for the second quarter ended June 30, 2015.

Net income from continuing operations attributable to EMCOR was $47.0 million in the second quarter, or $0.74 per diluted share, compared to net income from continuing operations of $41.3 million, or $0.61 per diluted share, in the second quarter of 2014. Revenues in the second quarter of 2015 were $1.65 billion, an increase of 6.4% from revenues of $1.55 billion in the second quarter of 2014.

Operating income for the second quarter of 2015 was $77.7 million, or 4.7% of revenues, compared to operating income of $69.7 million, or 4.5% of revenues, in the second quarter of 2014. Selling, general and administrative expenses for the second quarter of 2015 were $161.4 million, or 9.8% of revenues, compared to $150.4 million, or 9.7% of revenues, in the year ago period.

The Company’s income tax rate in the 2015 second quarter was 38.0%, compared to an income tax rate of 37.7% in the year ago period.

Backlog as of June 30, 2015 was $3.62 billion compared to $3.63 billion at the end of the second quarter of 2014 and $3.74 billion as of March 31, 2015. Domestic backlog was essentially flat on a year-over-year basis in the second quarter of 2015, reflecting backlog growth in the U.S. Electrical and Mechanical Construction segments, offset by declines in backlog in the U.S. Building Services and U.S. Industrial Services segments. Backlog growth in the commercial, water/wastewater and hospitality/gaming sectors was offset by declines in backlog in the healthcare, transportation, industrial and institutional sectors.

Tony Guzzi, President and Chief Executive Officer of EMCOR Group, commented, “A healthy return to organic growth in the second quarter, combined with solid execution, resulted in record second quarter revenue, operating income, and diluted earnings per share and put us back on track for the year. We achieved some recovery from the first quarter’s adverse impact of weather and experienced a slight improvement from refinery turnaround project deferrals related to the first quarter refinery strike. We are very pleased with the mix of projects we are working on and the consistent strength of our backlog going forward.”

Mr. Guzzi added, “Our U.S. Electrical Construction segment continues to produce strong operating margins, and, as the year progresses, we expect continued strong performance within this segment. Our U.S. Mechanical Construction segment generated improved operating margins and returned to organic growth. Our U.S. Building Services segment demonstrated improved performance at our commercial site-based services operations and continued strong performance from our mobile mechanical services operations. Finally, our U.S. Industrial Services segment showed significant improvement in terms of both revenue and operating margins from the year ago quarter.”

Mr. Guzzi concluded, “We are pleased with our performance thus far in 2015 and particularly with the organic growth achieved in the second quarter after a challenging first quarter of the year. With a diverse backlog that we expect to grow in the back half of the year and a non-residential market that continues to improve, we are confident in our ability to meet our 2015 objectives. We also remain focused on maintaining a strong and liquid balance sheet, pursuing opportunities to invest in our future growth, and delivering value to shareholders through share repurchases and dividends.”

Revenues for the first six months of 2015 totaled $3.24 billion, an increase of 3.1% compared to $3.14 billion for the first six months of 2014. Net income from continuing operations attributable to EMCOR for the first six months of 2015 was $80.2 million, or $1.26 per diluted share, compared to net income from continuing operations of $84.7 million, or $1.24 per diluted share, for the first six months of 2014.

Operating income for the first six months of 2015 was $133.0 million, or 4.1% of revenues. For the first six months of 2015, SG&A totaled $323.0 million, or 10.0% of revenues, compared to $294.3 million, or 9.4% of revenues, in the first six months of 2014.

EMCOR continues to expect full year 2015 revenues to be approximately $6.6 billion based on the current size and mix of its backlog and assuming continued improvement in current market conditions. The Company narrowed its full year 2015 guidance for diluted earnings per share from continuing operations to between $2.65 and $2.85 per share.

EMCOR Group, Inc. is a Fortune 500 leader in mechanical and electrical construction services, industrial and energy infrastructure and building services. This press release and other press releases may be viewed at the Company’s Web site at www.emcorgroup.com.

EMCOR Group’s second quarter conference call will be available live via internet broadcast today, Thursday, July 30, at 10:30 AM Eastern Daylight Time. You can access the live call through the Home Page of the Company’s Web site at www.emcorgroup.com.

This release may contain certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995. Any such comments are based upon information available to EMCOR management and its perception thereof, as of this date, and EMCOR assumes no obligation to update any such forward-looking statements. These forward-looking statements may include statements regarding market opportunities, market share growth, gross profit, backlog mix, projects with varying profit margins, and selling, general and administrative expenses. 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 risk 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, availability of adequate levels of surety bonding, increased competition, unfavorable labor productivity and mix of business. 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. All these risks and factors should be taken into account in evaluating any forward-looking statements.

     

EMCOR GROUP, INC.

FINANCIAL HIGHLIGHTS

(In thousands, except share and per share information)

(Unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
For the three months ended June 30,For the six months ended June 30,
2015  20142015  2014
Revenues $ 1,652,585 $ 1,552,918 $ 3,241,772 $ 3,143,457
Cost of sales 1,413,058   1,332,677   2,785,316   2,707,013  
Gross profit 239,527 220,241 456,456 436,444
Selling, general and administrative expenses 161,391 150,406 322,982 294,260
Restructuring expenses 433   176   441   401  
Operating income 77,703 69,659 133,033 141,783
Interest expense (2,208 ) (2,242 ) (4,424 ) (4,490 )
Interest income 182   221   358   455  
Income from continuing operations before income taxes 75,677 67,638 128,967 137,748
Income tax provision 28,727   25,203   48,952   51,430  
Income from continuing operations 46,950 42,435 80,015 86,318
Loss from discontinued operation, net of income taxes (114 ) (1,435 ) (469 ) (3,476 )
Net income including noncontrolling interests 46,836 41,000 79,546 82,842
Less: Net loss (income) attributable to noncontrolling interests 13   (1,087 ) 152   (1,668 )
Net income attributable to EMCOR Group, Inc. $ 46,849   $ 39,913   $ 79,698   $ 81,174  
 
Basic earnings (loss) per common share:
From continuing operations $ 0.75   $ 0.61   $ 1.27   $ 1.26  
From discontinued operation $ (0.00 ) $ (0.02 ) $ (0.01 ) $ (0.05 )
 
Diluted earnings (loss) per common share:
From continuing operations $ 0.74   $ 0.61   $ 1.26   $ 1.24  
From discontinued operation $ (0.00 ) $ (0.02 ) $ (0.01 ) $ (0.05 )
 
Amounts attributable to EMCOR Group, Inc. common stockholders:
Net income from continuing operations attributable to EMCOR Group, Inc. $ 46,963 $ 41,348 $ 80,167 $ 84,650
Loss from discontinued operation, net of income taxes (114 ) (1,435 ) (469 ) (3,476 )
Net income attributable to EMCOR Group, Inc. $ 46,849   $ 39,913   $ 79,698   $ 81,174  
 
Weighted average shares of common stock outstanding:
Basic 62,809,699 67,294,498 62,932,295 67,242,392
Diluted 63,330,253 68,000,361 63,468,622 68,000,750
 
Dividends declared per common share $ 0.08   $ 0.08   $ 0.16   $ 0.16  
 
     

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 
June 30, 2015

(Unaudited)

December 31,

2014

ASSETS
Current assets:
Cash and cash equivalents $ 360,849 $ 432,056
Accounts receivable, net 1,309,095 1,234,187
Costs and estimated earnings in excess of billings on uncompleted contracts 135,939 103,201
Inventories 65,123 46,854
Prepaid expenses and other 66,728   70,305
Total current assets 1,937,734 1,886,603
Investments, notes and other long-term receivables 6,570 9,122
Property, plant & equipment, net 118,529 122,178
Goodwill 834,628 834,102
Identifiable intangible assets, net 483,680 502,060
Other assets 36,645   34,902
Total assets $ 3,417,786   $ 3,388,967
LIABILITIES AND EQUITY
Current liabilities:
Borrowings under revolving credit facility $ $
Current maturities of long-term debt and capital lease obligations 18,814 19,041
Accounts payable 428,424 460,478
Billings in excess of costs and estimated earnings on uncompleted contracts 384,989 368,555
Accrued payroll and benefits 229,900 245,854
Other accrued expenses and liabilities 211,838   189,489
Total current liabilities 1,273,965 1,283,417
Long-term debt and capital lease obligations 307,523 316,399
Other long-term obligations 362,011   359,764
Total liabilities 1,943,499   1,959,580
Equity:
Total EMCOR Group, Inc. stockholders’ equity 1,470,815 1,416,013
Noncontrolling interests 3,472   13,374
Total equity 1,474,287   1,429,387
Total liabilities and equity $ 3,417,786   $ 3,388,967
 
     

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2015 and 2014

(In thousands) (Unaudited)

 
20152014
Cash flows – operating activities:
Net income including noncontrolling interests $ 79,546 $ 82,842
Depreciation and amortization 17,942 17,956
Amortization of identifiable intangible assets 18,951 19,005
Deferred income taxes 1,406 4,648
Loss on sale of subsidiary 608
Excess tax benefits from share-based compensation (1,038 ) (5,627 )
Equity income from unconsolidated entities (1,034 ) (836 )
Other non-cash items 5,703 3,185
Distributions from unconsolidated entities 3,316 572
Changes in operating assets and liabilities (130,858 ) (82,713 )
Net cash (used in) provided by operating activities (6,066 ) 39,640  
Cash flows – investing activities:
Payments for acquisitions of businesses, net of cash acquired (1,176 )
Proceeds from sale of subsidiary 1,108
Proceeds from sale of property, plant and equipment 2,569 2,630
Purchase of property, plant and equipment (15,793 ) (16,579 )
Investments in and advances to unconsolidated entities and joint ventures   (1,590 )
Net cash used in investing activities (14,400 ) (14,431 )
Cash flows – financing activities:
Repayments of long-term debt (8,758 ) (8,756 )
Repayments of capital lease obligations (1,330 ) (840 )
Dividends paid to stockholders (10,054 ) (10,743 )
Repurchase of common stock (21,148 ) (18,332 )
Proceeds from exercise of stock options 1,368 4,533
Payments to satisfy minimum tax withholding (3,790 ) (1,481 )
Issuance of common stock under employee stock purchase plan 2,051 1,753
Payments for contingent consideration arrangements (403 )
Distributions to noncontrolling interests (9,750 ) (1,400 )
Excess tax benefits from share-based compensation 1,038   5,627  
Net cash used in financing activities (50,776 ) (29,639 )
Effect of exchange rate changes on cash and cash equivalents 35   1,736  
Decrease in cash and cash equivalents (71,207 ) (2,694 )
Cash and cash equivalents at beginning of year 432,056   439,813  
Cash and cash equivalents at end of period $ 360,849   $ 437,119  
 
   

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands) (Unaudited)

 
For the three months ended June 30,
2015  2014
Revenues from unrelated entities:
United States electrical construction and facilities services $ 346,202 $ 335,492
United States mechanical construction and facilities services 554,003 538,556
United States building services 435,627 418,142
United States industrial services 225,168   177,232
Total United States operations 1,561,000 1,469,422
United Kingdom building services 91,585   83,496
Total worldwide operations $ 1,652,585   $ 1,552,918
 

For the six months ended June 30,

2015

2014

Revenues from unrelated entities:

United States electrical construction and facilities services

$

665,196

$

643,628

United States mechanical construction and facilities services

1,065,029

1,051,567

United States building services

875,119

866,186

United States industrial services

457,893

409,190

Total United States operations

3,063,237

2,970,571

United Kingdom building services

178,535

172,886

Total worldwide operations

$

3,241,772

$

3,143,457

 
   

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands) (Unaudited)

 
For the three months ended June 30,
2015  2014
Operating income (loss):
United States electrical construction and facilities services $ 25,277 $ 24,841
United States mechanical construction and facilities services 32,364 28,740
United States building services 17,939 13,920
United States industrial services 17,415   12,376  
Total United States operations 92,995 79,877
United Kingdom building services 2,834 6,202
Corporate administration (17,693 ) (16,244 )
Restructuring expenses (433 ) (176 )
Total worldwide operations 77,703 69,659
Other corporate items:
Interest expense (2,208 ) (2,242 )
Interest income 182   221  
Income from continuing operations before income taxes $ 75,677   $ 67,638  
 

For the six months ended June 30,

2015

2014

Operating income (loss):

United States electrical construction and facilities services

$

41,951

$

46,496

United States mechanical construction and facilities services

53,265

47,846

United States building services

38,917

34,218

United States industrial services

 

30,248

   

35,770

 

Total United States operations

164,381

164,330

United Kingdom building services

5,212

9,565

Corporate administration

(36,119

)

(31,711

)

Restructuring expenses

 

(441

)

 

(401

)

Total worldwide operations

133,033

141,783

Other corporate items:

Interest expense

(4,424

)

(4,490

)

Interest income

 

358

   

455

 

Income from continuing operations before income taxes

$

128,967

 

$

137,748

 
 

EMCOR GROUP, INC.
Shared Services
R. Kevin Matz, 203-849-7938
Executive Vice President
or
Investors:
FTI Consulting, Inc.
Michelle Bitman, 212-850-5600
or
Media:
LAK Public Relations, Inc.
Lisa Linden / Mollie Fullington
212-575-4545 / 917-346-6123