EMCOR Group, Inc. Reports Second Quarter 2019 Results

– Record Quarterly Revenues of $2.32 billion, 19.0% Increase Year-over-Year –

– Record Quarterly Diluted EPS from Cont. Operations of $1.49, 23.1% Increase Year-over-Year –

– Total Remaining Performance Obligations of $4.23
billion, 15.1% Increase Year-over-Year –

– Increases 2019 Revenue Guidance Range to $8.8-$8.9
billion from $8.5-$8.6 billion –

– Increases 2019 Diluted EPS Guidance Range to $5.50-$5.75 from $5.00-$5.50 –

NORWALK, Conn.–(BUSINESS WIRE)–EMCOR Group, Inc. (NYSE: EME) today reported results for the second quarter ended June 30, 2019.

For the second quarter of 2019, net income from continuing operations attributable to EMCOR was $84.0 million, or $1.49 per diluted share, compared to $71.0 million, or $1.21 per diluted share, for the second quarter of 2018. Excluding an impairment charge in the prior year, non-GAAP net income from continuing operations attributable to EMCOR was $71.9 million, or $1.23 per diluted share, for the second quarter of 2018. Revenues for the second quarter of 2019 totaled $2.32 billion, an increase of 19.0%, compared to $1.95 billion for the second quarter of 2018.

Operating income for the second quarter of 2019 was $120.0 million, or 5.2% of revenues. This compares to $99.7 million, or 5.1% of revenues, for the second quarter of 2018. Included in operating income for the second quarter of 2018 was an impairment charge of $0.9 million. Excluding this charge, non-GAAP operating income for the second quarter of 2018 was $100.6 million or 5.1% of revenues.

Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations and non-GAAP diluted earnings per share from continuing operations to the comparable GAAP figures.

Selling, general and administrative expenses for the second quarter of 2019 totaled $226.2 million, or 9.7% of revenues, compared to $189.9 million, or 9.7% of revenues, for the second quarter of 2018.

The Company’s income tax rate for the second quarter of 2019 was 28.3%, compared to an income tax rate of 27.2% in the year ago period.

Remaining performance obligations as of June 30, 2019 were $4.23 billion compared to $3.67 billion at June 30, 2018. Total U.S. remaining performance obligations grew $558.0 million year-over-year.

Tony Guzzi, Chairman, President and Chief Executive Officer of EMCOR, commented, “The Company reported another record quarter, delivering record quarterly revenues, operating income, net income attributable to EMCOR and diluted earnings per share from continuing operations. We achieved exceptional revenue growth of 19.0% year-over-year, of which 15.2% was organic, driven by excellent results across the business, including double-digit revenue growth in each of our domestic segments. This strong revenue performance coupled with our disciplined project execution drove operating income growth of 20.4% year-over-year. The demand that we are experiencing is broad-based across geographies and end-markets, and we continue to see significant opportunities in the market, as evidenced by growth in our remaining performance obligations of 15.1% year-over-year.”

Mr. Guzzi added, “Our U.S. Construction segments continue to deliver outstanding results, generating combined revenue growth of 15.7% year-over-year and operating income growth of 4.7% year-over-year. U.S. Mechanical Construction delivered revenue growth of 13.7%, all of which was organic, and U.S. Electrical Construction posted organic growth of 9.4%, with the companies we recently acquired contributing to overall growth of 18.7%. Our U.S. Building Services segment performed exceptionally well, posting a third consecutive quarter of double-digit revenue growth and a sixth consecutive quarter of double-digit operating income growth, driven by strong demand in our mechanical services and energy services businesses and supported by continued execution on several large contracts within our commercial site-based business. We continue to see improved performance in our U.S. Industrial Services segment, which posted revenue growth of 60.6% year-over-year, driven by our field services operations, where we completed several large, complex turnarounds, and sustained strength in our shop services business. Finally, our U.K. Building Services segment reported revenue and operating income growth of 6.7% and 19.0%, respectively, as we continue to see strong demand for our services.”

Revenues for the first six months of 2019 totaled $4.48 billion, an increase of 16.3% compared to $3.85 billion for the first six months of 2018. Net income from continuing operations attributable to EMCOR for the first six months of 2019 was $156.4 million, or $2.77 per diluted share, compared to $126.7 million, or $2.15 per diluted share, for the first six months of 2018. Excluding the impairment charge recorded in the second quarter of 2018, non-GAAP net income from continuing operations attributable to EMCOR for the first six months of 2018 was $127.6 million, or $2.17 per diluted share.

Operating income for the first six months of 2019 was $222.3 million, or 5.0% of revenues, compared to $177.7 million, or 4.6% of revenues, for the first six months of 2018. Included in operating income for the first six months of 2018 was an impairment charge of $0.9 million. Excluding this impairment charge, non-GAAP operating income for the first six months of 2018 was $178.6 million, or 4.6% of revenues. SG&A totaled $432.4 million, or 9.6% of revenues, for the first six months of 2019 compared to $380.9 million, or 9.9% of revenues, for the first six months of 2018.

Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations and non-GAAP diluted earnings per share from continuing operations to the comparable GAAP figures.

Based on year-to-date performance, favorable project mix, and assuming the continuation of current market conditions, EMCOR is raising its full-year 2019 revenue guidance range to $8.8-$8.9 billion, an increase from the prior guidance range of $8.5-$8.6 billion. The Company now also expects full-year 2019 diluted earnings per share from continuing operations to be in the range of $5.50-$5.75, an increase from the prior guidance range of $5.00-$5.50.

Mr. Guzzi concluded, “We delivered a record first half of the year and are optimistic about our additional opportunities for growth in the second half of 2019. Our updated guidance reflects our exceptional performance year-to-date, as well as our expectation for continued strong project execution and cost discipline throughout the remainder of the year. As we look ahead, we will use our healthy balance sheet to invest in our business organically and pursue our robust pipeline of strategic acquisition opportunities, balanced with a return of capital to shareholders through share repurchases and dividends.”

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 website at www.emcorgroup.com. EMCOR routinely posts information that may be important to investors in the “Investor Relations” section of our website at www.emcorgroup.com. Investors and potential investors are encouraged to consult the EMCOR website regularly for important information about EMCOR.

EMCOR Group’s second quarter conference call will be available live via internet broadcast today, Tuesday, July 30, at 10:30 AM Eastern Daylight Time. The live call may be accessed through the Company’s website at www.emcorgroup.com.

Forward Looking Statements:

This release contains certain forward-looking statements. Any such comments speak only as of this date and EMCOR assumes no obligation to update any such forward-looking statements, unless required by law. These forward-looking statements may include statements regarding anticipated future operating and financial performance, the nature and impact of our remaining performance obligations, our ability to pursue acquisitions, our ability to return capital to shareholders, market opportunities, market growth and customer trends. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. Such risks and uncertainties include, but are not limited to, adverse effects of general economic conditions, changes in the political environment, changes in the specific markets for EMCOR’s services, adverse business conditions, availability of adequate levels of surety bonding, increased competition, unfavorable labor productivity and mix of business. Certain of the risk factors associated with EMCOR’s business are also discussed in Part I, Item 1A “Risk Factors,” of the Company’s 2018 Form 10-K and in other reports filed from time to time with the Securities and Exchange Commission and available at www.sec.gov and www.emcorgroup.com. Such risk factors should be taken into account in evaluating any forward-looking statements.

Non-GAAP Measures:

This release includes certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles (GAAP). Reconciliations of those non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this release. The Company uses these non-GAAP measures as key performance indicators for the purpose of evaluating performance internally. We also believe that these non-GAAP measures provide investors with useful information with respect to our historical operations. Any non-GAAP financial measures presented are not, and should not be viewed as, substitutes for financial measures required by GAAP, have no standardized meaning prescribed by GAAP and may not be comparable to the calculation of similar measures of other companies.

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,

 

 

2019

 

2018

 

2019

 

2018

Revenues

 

$

2,324,202

 

 

$

1,953,886

 

 

$

4,482,930

 

 

$

3,854,274

 

Cost of sales

 

1,977,822

 

 

1,663,042

 

 

3,827,796

 

 

3,294,311

 

Gross profit

 

346,380

 

 

290,844

 

 

655,134

 

 

559,963

 

Selling, general and administrative expenses

 

226,248

 

 

189,907

 

 

432,417

 

 

380,932

 

Restructuring expenses

 

173

 

 

374

 

 

448

 

 

464

 

Impairment loss on identifiable intangible assets

 

 

 

907

 

 

 

 

907

 

Operating income

 

119,959

 

 

99,656

 

 

222,269

 

 

177,660

 

Net periodic pension (cost) income

 

400

 

 

717

 

 

806

 

 

1,454

 

Interest expense, net

 

(3,231

)

 

(2,823

)

 

(6,054

)

 

(5,275

)

Income from continuing operations before income taxes

 

117,128

 

 

97,550

 

 

217,021

 

 

173,839

 

Income tax provision

 

33,156

 

 

26,529

 

 

60,639

 

 

47,162

 

Income from continuing operations

 

83,972

 

 

71,021

 

 

156,382

 

 

126,677

 

Loss from discontinued operation, net of income taxes

 

 

 

(205

)

 

 

 

(487

)

Net income including noncontrolling interests

 

83,972

 

 

70,816

 

 

156,382

 

 

126,190

 

Less: Net income attributable to noncontrolling interests

 

 

 

 

 

 

 

 

Net income attributable to EMCOR Group, Inc.

 

$

83,972

 

 

$

70,816

 

 

$

156,382

 

 

$

126,190

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

From continuing operations

 

$

1.49

 

 

$

1.22

 

 

$

2.78

 

 

$

2.16

 

From discontinued operation

 

$

 

 

$

(0.00

)

 

$

 

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

From continuing operations

 

$

1.49

 

 

$

1.21

 

 

$

2.77

 

 

$

2.15

 

From discontinued operation

 

$

 

 

$

(0.00

)

 

$

 

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

Basic

 

56,181,864

 

 

58,332,934

 

 

56,175,219

 

 

58,531,150

 

Diluted

 

56,499,514

 

 

58,670,595

 

 

56,461,977

 

 

58,862,505

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.08

 

 

$

0.08

 

 

$

0.16

 

 

$

0.16

 

 

 

 

 

 

 

 

 

 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

June 30, 2019

(Unaudited)

 

December 31,

2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

213,374

 

 

$

363,907

 

Accounts receivable, net

 

1,946,811

 

 

1,773,620

 

Contract assets

 

179,439

 

 

158,243

 

Inventories

 

39,180

 

 

42,321

 

Prepaid expenses and other

 

41,831

 

 

48,116

 

Total current assets

 

2,420,635

 

 

2,386,207

 

Investments, notes and other long-term receivables

 

1,904

 

 

2,899

 

Property, plant & equipment, net

 

145,638

 

 

134,351

 

Operating lease right-of-use assets

 

233,173

 

 

 

Goodwill

 

1,013,822

 

 

990,887

 

Identifiable intangible assets, net

 

488,017

 

 

488,286

 

Other assets

 

90,389

 

 

86,177

 

Total assets

 

$

4,393,578

 

 

$

4,088,807

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt and finance lease liabilities

 

$

18,385

 

 

$

16,013

 

Accounts payable

 

579,461

 

 

652,091

 

Contract liabilities

 

544,346

 

 

552,290

 

Accrued payroll and benefits

 

327,006

 

 

343,069

 

Other accrued expenses and liabilities

 

185,398

 

 

170,935

 

Operating lease liabilities, current

 

49,970

 

 

 

Total current liabilities

 

1,704,566

 

 

1,734,398

 

Borrowings under revolving credit facility

 

25,000

 

 

25,000

 

Long-term debt and finance lease liabilities

 

251,448

 

 

254,764

 

Operating lease liabilities, long-term

 

195,149

 

 

 

Other long-term obligations

 

322,584

 

 

333,204

 

Total liabilities

 

2,498,747

 

 

2,347,366

 

Equity:

 

 

 

 

Total EMCOR Group, Inc. stockholders’ equity

 

1,894,185

 

 

1,740,545

 

Noncontrolling interests

 

646

 

 

896

 

Total equity

 

1,894,831

 

 

1,741,441

 

Total liabilities and equity

 

$

4,393,578

 

 

$

4,088,807

 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2019 and 2018

(In thousands) (Unaudited)

 

 

2019

 

2018

Cash flows – operating activities:

 

 

 

 

Net income including noncontrolling interests

 

$

156,382

 

 

$

126,190

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

21,391

 

 

19,233

 

Amortization of identifiable intangible assets

 

23,169

 

 

21,352

 

Provision for doubtful accounts

 

851

 

 

7

 

Deferred income taxes

 

(920

)

 

4,855

 

Excess tax benefits from share-based compensation

 

(593

)

 

(1,065

)

Equity loss (income) from unconsolidated entities

 

835

 

 

(290

)

Non-cash expense from contingent consideration arrangements

 

1,203

 

 

186

 

Non-cash expense for impairment of identifiable intangible assets

 

 

 

907

 

Non-cash share-based compensation expense

 

6,225

 

 

5,956

 

Distributions from unconsolidated entities

 

871

 

 

1,847

 

Other reconciling items

 

111

 

 

389

 

Changes in operating assets and liabilities, excluding the effect of businesses acquired

 

(251,723

)

 

(212,217

)

Net cash used in operating activities

 

(42,198

)

 

(32,650

)

Cash flows – investing activities:

 

 

 

 

Payments for acquisitions of businesses, net of cash acquired

 

(63,991

)

 

(25,207

)

Proceeds from sale of property, plant and equipment

 

1,326

 

 

605

 

Purchase of property, plant and equipment

 

(22,455

)

 

(15,914

)

Investments in and advances to unconsolidated entities

 

(794

)

 

(3,484

)

Distributions from unconsolidated entities

 

84

 

 

83

 

Net cash used in investing activities

 

(85,830

)

 

(43,917

)

Cash flows – financing activities:

 

 

 

 

Repayments of long-term debt and debt issuance costs

 

(7,601

)

 

(7,634

)

Repayments of finance lease liabilities

 

(2,151

)

 

(696

)

Dividends paid to stockholders

 

(8,967

)

 

(9,381

)

Repurchase of common stock

 

 

 

(60,508

)

Taxes paid related to net share settlements of equity awards

 

(3,735

)

 

(3,745

)

Issuance of common stock under employee stock purchase plan

 

2,969

 

 

2,758

 

Payments for contingent consideration arrangements

 

(2,508

)

 

(3,298

)

Distributions to noncontrolling interests

 

(250

)

 

 

Net cash used in financing activities

 

(22,243

)

 

(82,504

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(175

)

 

(1,121

)

Decrease in cash, cash equivalents and restricted cash

 

(150,446

)

 

(160,192

)

Cash, cash equivalents and restricted cash at beginning of year

 

366,214

 

 

469,388

 

Cash, cash equivalents and restricted cash at end of period

 

$

215,768

 

 

$

309,196

 

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands) (Unaudited)

 

 

For the three months ended

June 30,

 

 

2019

 

2018

Revenues from unrelated entities:

 

 

 

 

United States electrical construction and facilities services

 

$

569,402

 

 

$

479,542

 

United States mechanical construction and facilities services

 

823,086

 

 

723,882

 

United States building services

 

523,698

 

 

461,033

 

United States industrial services

 

295,460

 

 

183,922

 

Total United States operations

 

2,211,646

 

 

1,848,379

 

United Kingdom building services

 

112,556

 

 

105,507

 

Total worldwide operations

 

$

2,324,202

 

 

$

1,953,886

 

 

 

 

 

 

 

 

For the six months ended

June 30,

 

 

2019

 

2018

Revenues from unrelated entities:

 

 

 

 

United States electrical construction and facilities services

 

$

1,097,472

 

 

$

934,294

 

United States mechanical construction and facilities services

 

1,575,495

 

 

1,408,632

 

United States building services

 

1,035,777

 

 

915,785

 

United States industrial services

 

554,105

 

 

383,166

 

Total United States operations

 

4,262,849

 

 

3,641,877

 

United Kingdom building services

 

220,081

 

 

212,397

 

Total worldwide operations

 

$

4,482,930

 

 

$

3,854,274

 

 

 

 

 

 

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands) (Unaudited)

 

 

For the three months ended

June 30,

 

 

 

2019

 

2018

Operating income (loss):

 

 

 

 

United States electrical construction and facilities services

 

$

43,799

 

 

$

35,985

 

United States mechanical construction and facilities services

 

53,954

 

 

57,417

 

United States building services

 

28,001

 

 

22,430

 

United States industrial services

 

16,012

 

 

1,234

 

Total United States operations

 

141,766

 

 

117,066

 

United Kingdom building services

 

5,476

 

 

4,601

 

Corporate administration

 

(27,110

)

 

(20,730

)

Restructuring expenses

 

(173

)

 

(374

)

Impairment loss on identifiable intangible assets

 

 

 

(907

)

Total worldwide operations

 

119,959

 

 

99,656

 

Other corporate items:

 

 

 

 

Net periodic pension (cost) income

 

400

 

 

717

 

Interest expense, net

 

(3,231

)

 

(2,823

)

Income from continuing operations before income taxes

 

$

117,128

 

 

$

97,550

 

 

 

 

 

 

 

 

For the six months ended

June 30,

 

 

2019

 

2018

Operating income (loss):

 

 

 

 

United States electrical construction and facilities services

 

$

86,750

 

 

$

71,836

 

United States mechanical construction and facilities services

 

94,939

 

 

97,037

 

United States building services

 

55,484

 

 

39,507

 

United States industrial services

 

25,648

 

 

4,675

 

Total United States operations

 

262,821

 

 

213,055

 

United Kingdom building services

 

9,617

 

 

8,371

 

Corporate administration

 

(49,721

)

 

(42,395

)

Restructuring expenses

 

(448

)

 

(464

)

Impairment loss on identifiable intangible assets

 

 

 

(907

)

Total worldwide operations

 

222,269

 

 

177,660

 

Other corporate items:

 

 

 

 

Net periodic pension (cost) income

 

806

 

 

1,454

 

Interest expense, net

 

(6,054

)

 

(5,275

)

Income from continuing operations before income taxes

 

$

217,021

 

 

$

173,839

 

 

 

 

 

 

EMCOR GROUP, INC.

RECONCILIATION OF 2019 AND 2018 OPERATING INCOME

(In thousands) (Unaudited)

In our press release, we provide non-GAAP 2019 and 2018 second quarter and year-to-date June 30, 2019 and 2018 operating income. The following table provides a reconciliation between 2019 and 2018 operating income based on non-GAAP measures to the most directly comparable GAAP measures.

 

 

For the three months ended

June 30,

 

For the six months ended

June 30,

 

 

2019

 

2018

 

2019

 

2018

GAAP operating income

 

$

119,959

 

 

$

99,656

 

 

$

222,269

 

 

$

177,660

 

Impairment loss on identifiable intangible assets

 

 

 

907

 

 

 

 

907

 

Non-GAAP operating income, excluding impairment loss on identifiable intangible assets

 

$

119,959

 

 

$

100,563

 

 

$

222,269

 

 

$

178,567

 

EMCOR GROUP, INC.

RECONCILIATION OF 2019 AND 2018 NET INCOME

(In thousands) (Unaudited)

In our press release, we provide non-GAAP 2019 and 2018 second quarter and year-to-date June 30, 2019 and 2018 net income from continuing operations attributable to EMCOR Group, Inc. The following table provides a reconciliation between 2019 and 2018 net income from continuing operations attributable to EMCOR Group, Inc. based on non-GAAP measures to the most directly comparable GAAP measures.

 

 

For the three months ended

June 30,

 

For the six months ended

June 30,

 

 

2019

 

2018

 

2019

 

2018

GAAP net income from continuing operations attributable to EMCOR Group, Inc. (1)

 

$

83,972

 

 

$

71,021

 

 

$

156,382

 

 

$

126,677

 

Impairment loss on identifiable intangible assets (2)

 

 

 

907

 

 

 

 

907

 

Non-GAAP net income from continuing operations attributable to EMCOR Group, Inc., excluding impairment loss on identifiable intangible assets

 

$

83,972

 

 

$

71,928

 

 

$

156,382

 

 

$

127,584

 

(1) Amount is income from continuing operations less net income attributable to noncontrolling interest.

(2) Amount excludes de minimis income tax benefit.

EMCOR GROUP, INC.

RECONCILIATION OF 2019 AND 2018 DILUTED EARNINGS PER SHARE FIGURES

(Unaudited)

In our press release, we provide non-GAAP 2019 and 2018 second quarter and year-to-date June 30, 2019 and 2018 diluted earnings per common share from continuing operations. The following table provides a reconciliation between 2019 and 2018 diluted earnings per common share based on non-GAAP measures to the most directly comparable GAAP measures.

 

 

For the three months ended

June 30,

 

For the six months ended

June 30,

 

 

2019

 

2018

 

2019

 

2018

GAAP diluted earnings per common share from continuing operations

 

$

1.49

 

 

$

1.21

 

 

$

2.77

 

 

$

2.15

 

Impairment loss on identifiable intangible assets (1)

 

 

 

0.02

 

 

 

 

0.02

 

Non-GAAP diluted earnings per common share from continuing operations, excluding impairment loss on identifiable intangible assets

 

$

1.49

 

 

$

1.23

 

 

$

2.77

 

 

$

2.17

 

(1) Amount excludes de minimis income tax benefit.

Contacts

R. Kevin Matz

Executive Vice President

Shared Services

(203) 849-7938

FTI Consulting, Inc.

Investors: Jamie Baird

(212) 850-5659

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