EMCOR Group, Inc. Reports Third Quarter 2019 Results

– Record Third Quarter Revenues of $2.29 billion, 11.8% Increase Year-over-Year –

– Record Third Quarter Diluted EPS from Cont. Operations of $1.45, 6.6% Increase Year-over-Year –

– Year-To-Date Operating Cash Flow of $176.9 million, 168.5% Increase Year-over-Year –

– Total Remaining Performance Obligations of $4.04 billion, 1.6% Increase Year-over-Year –

– Increases 2019 Revenue Guidance to $9.0 billion from $8.8-$8.9 billion –

– Increases 2019 Diluted EPS Guidance Range to $5.65-$5.75 from $5.50-$5.75 –

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

For the third quarter of 2019, net income from continuing operations attributable to EMCOR was $81.8 million, or $1.45 per diluted share, compared to $79.9 million, or $1.36 per diluted share, for the third quarter of 2018. Revenues for the third quarter of 2019 totaled $2.29 billion, an increase of 11.8%, compared to $2.05 billion for the third quarter of 2018.

Operating income for the third quarter of 2019 was $115.7 million, or 5.1% of revenues. This compares to $111.8 million, or 5.5% of revenues, for the third quarter of 2018.

Selling, general and administrative expenses for the third quarter of 2019 totaled $220.1 million, or 9.6% of revenues, compared to $197.3 million, or 9.6% of revenues, for the third quarter of 2018.

The Company’s income tax rate for the third quarter of 2019 was 27.9%, compared to an income tax rate of 27.1% in the year ago period.

Remaining performance obligations as of September 30, 2019 were $4.04 billion compared to $3.97 billion at September 30, 2018. Total U.S. remaining performance obligations grew $71.3 million year-over-year.

Tony Guzzi, Chairman, President and Chief Executive Officer of EMCOR, commented, “The Company had another excellent quarter, achieving record third quarter revenues, operating income, net income attributable to EMCOR, and diluted earnings per share from continuing operations. These strong results were driven by solid project execution across our business. Year-over-year revenues increased 11.8% of which 8.1% was organic growth, driven by double-digit revenue growth in our U.S. Construction and U.S. Building Services segments. In addition to our strong revenue performance, we continued to capitalize on the sustained demand that we are seeing in the market, underscored by our year-over-year growth in remaining performance obligations. Additionally, we generated strong operating cash flow in the quarter, delivering $219.1 million, up 122.4% year-over-year.”

Mr. Guzzi added, “Our U.S. Construction segments continue to deliver robust revenue performance, posting a combined 14.3% increase year-over-year, with organic growth of 10.4%, despite our strong performance in the comparative period. Healthy operating margins of 6.1% in our U.S. Electrical Construction segment and 7.0% in our U.S. Mechanical Construction segment reflect solid execution across our portfolio of construction projects. Our U.S. Building Services segment posted its fourth consecutive quarter of double-digit revenue growth with operating margin expansion of 40 basis points as our mechanical services and commercial site-based divisions demonstrated exceptional performance. While we had a difficult comparison in our U.S. Industrial Services segment following the resumption of normalized demand in the third quarter of last year, we are well-positioned with our industrial customers and look to a normal fall turnaround season. Finally, our U.K. Building Services segment continues to take advantage of attractive project opportunities for both new and existing customers, despite facing significant macroeconomic uncertainties.”

Revenues for the first nine months of 2019 totaled $6.77 billion, an increase of 14.7% compared to $5.90 billion for the first nine months of 2018. Net income from continuing operations attributable to EMCOR for the first nine months of 2019 was $238.2 million, or $4.22 per diluted share, compared to $206.6 million, or $3.52 per diluted share, for the first nine months of 2018. Excluding an impairment charge of $0.9 million recorded in the second quarter of 2018, non-GAAP net income from continuing operations attributable to EMCOR for the first nine months of 2018 was $207.5 million, or $3.54 per diluted share.

Operating income for the first nine months of 2019 was $338.0 million, or 5.0% of revenues, compared to $289.4 million, or 4.9% of revenues, for the first nine months of 2018. Excluding the impairment charge referenced above, non-GAAP operating income for the first nine months of 2018 was $290.3 million, or 4.9% of revenues. SG&A totaled $652.5 million, or 9.6% of revenues, for the first nine months of 2019 compared to $578.3 million, or 9.8% of revenues, for the first nine 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 and favorable project mix, and assuming the continuation of current market conditions, EMCOR is raising its full-year 2019 revenue guidance to $9.0 billion, an increase from the prior guidance range of $8.8-$8.9 billion. The Company now also expects full-year 2019 diluted earnings per share from continuing operations to be in the range of $5.65-$5.75, an increase from the prior guidance range of $5.50-$5.75.

Mr. Guzzi concluded, “We are very pleased with our performance thus far in 2019 and are poised to close out another record year. For the third time this year, we are raising our guidance for both revenue and diluted earnings per share from continuing operations for the full year to reflect our exceptional results and the expectation of sustained strength across our segments. We remain committed to prudently deploying our capital, primarily through organic investments and strategic acquisitions. Our disciplined acquisition strategy was underscored by our recent announcement of an agreement to acquire Batchelor & Kimball, which we expect will close in the coming weeks. Looking ahead, we are pleased with the solid growth that we continue to see in both our business and the non-residential construction market and firmly believe we are well-positioned for a strong start to 2020.”

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 third quarter conference call will be available live via internet broadcast today, Tuesday, October 29, 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 on-going 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 September 30,

 

For the nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues

 

$

2,287,741

 

 

$

2,047,049

 

 

$

6,770,671

 

 

$

5,901,323

 

Cost of sales

 

1,951,754

 

 

1,737,710

 

 

5,779,550

 

 

5,032,021

 

Gross profit

 

335,987

 

 

309,339

 

 

991,121

 

 

869,302

 

Selling, general and administrative expenses

 

220,119

 

 

197,334

 

 

652,536

 

 

578,266

 

Restructuring expenses

 

119

 

 

229

 

 

567

 

 

693

 

Impairment loss on identifiable intangible assets

 

 

 

 

 

 

 

907

 

Operating income

 

115,749

 

 

111,776

 

 

338,018

 

 

289,436

 

Net periodic pension (cost) income

 

381

 

 

615

 

 

1,187

 

 

2,069

 

Interest expense, net

 

(2,678

)

 

(2,736

)

 

(8,732

)

 

(8,011

)

Income from continuing operations before income taxes

 

113,452

 

 

109,655

 

 

330,473

 

 

283,494

 

Income tax provision

 

31,618

 

 

29,711

 

 

92,257

 

 

76,873

 

Income from continuing operations

 

81,834

 

 

79,944

 

 

238,216

 

 

206,621

 

Loss from discontinued operation, net of income taxes

 

 

 

(523

)

 

 

 

(1,010

)

Net income including noncontrolling interests

 

81,834

 

 

79,421

 

 

238,216

 

 

205,611

 

Less: Net income attributable to noncontrolling interests

 

 

 

(48

)

 

 

 

(48

)

Net income attributable to EMCOR Group, Inc.

 

$

81,834

 

 

$

79,373

 

 

$

238,216

 

 

$

205,563

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share:

 

 

 

 

 

 

 

 

From continuing operations

 

$

1.46

 

 

$

1.37

 

 

$

4.24

 

 

$

3.54

 

From discontinued operation

 

$

 

 

$

(0.01

)

 

$

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share:

 

 

 

 

 

 

 

 

From continuing operations

 

$

1.45

 

 

$

1.36

 

 

$

4.22

 

 

$

3.52

 

From discontinued operation

 

$

 

 

$

(0.01

)

 

$

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

Basic

 

56,216,840

 

 

58,208,203

 

 

56,189,388

 

 

58,422,928

 

Diluted

 

56,558,450

 

 

58,541,310

 

 

56,494,430

 

 

58,754,867

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.08

 

 

$

0.08

 

 

$

0.24

 

 

$

0.24

 

 

 

 

 

 

 

 

 

 

 

 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

September 30, 2019

(Unaudited)

 

December 31,

2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

368,073

 

 

$

363,907

 

Accounts receivable, net

 

1,926,765

 

 

1,773,620

 

Contract assets

 

179,005

 

 

158,243

 

Inventories

 

38,721

 

 

42,321

 

Prepaid expenses and other

 

45,549

 

 

48,116

 

Total current assets

 

2,558,113

 

 

2,386,207

 

Investments, notes and other long-term receivables

 

1,478

 

 

2,899

 

Property, plant & equipment, net

 

149,023

 

 

134,351

 

Operating lease right-of-use assets

 

232,996

 

 

 

Goodwill

 

1,019,590

 

 

990,887

 

Identifiable intangible assets, net

 

482,785

 

 

488,286

 

Other assets

 

88,736

 

 

86,177

 

Total assets

 

$

4,532,721

 

 

$

4,088,807

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt and finance lease liabilities

 

$

18,196

 

 

$

16,013

 

Accounts payable

 

584,824

 

 

652,091

 

Contract liabilities

 

565,957

 

 

552,290

 

Accrued payroll and benefits

 

387,351

 

 

343,069

 

Other accrued expenses and liabilities

 

185,414

 

 

170,935

 

Operating lease liabilities, current

 

51,632

 

 

 

Total current liabilities

 

1,793,374

 

 

1,734,398

 

Borrowings under revolving credit facility

 

 

 

25,000

 

Long-term debt and finance lease liabilities

 

247,837

 

 

254,764

 

Operating lease liabilities, long-term

 

193,502

 

 

 

Other long-term obligations

 

322,197

 

 

333,204

 

Total liabilities

 

2,556,910

 

 

2,347,366

 

Equity:

 

 

 

 

Total EMCOR Group, Inc. stockholders’ equity

 

1,975,165

 

 

1,740,545

 

Noncontrolling interests

 

646

 

 

896

 

Total equity

 

1,975,811

 

 

1,741,441

 

Total liabilities and equity

 

$

4,532,721

 

 

$

4,088,807

 

 

 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2019 and 2018

(In thousands) (Unaudited)

 

 

2019

 

2018

Cash flows – operating activities:

 

 

 

 

Net income including noncontrolling interests

 

$

238,216

 

 

$

205,611

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

32,412

 

 

28,685

 

Amortization of identifiable intangible assets

 

34,500

 

 

31,482

 

Provision for doubtful accounts

 

1,621

 

 

261

 

Deferred income taxes

 

(913

)

 

4,685

 

Excess tax benefits from share-based compensation

 

(601

)

 

(1,065

)

Equity loss (income) from unconsolidated entities

 

1,213

 

 

(247

)

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

 

8,840

 

 

8,502

 

Distributions from unconsolidated entities

 

916

 

 

2,442

 

Other reconciling items

 

364

 

 

446

 

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

 

(140,850

)

 

(216,003

)

Net cash provided by operating activities

 

176,921

 

 

65,892

 

Cash flows – investing activities:

 

 

 

 

Payments for acquisitions of businesses, net of cash acquired

 

(79,984

)

 

(25,710

)

Proceeds from sale of property, plant and equipment

 

1,612

 

 

915

 

Purchase of property, plant and equipment

 

(35,829

)

 

(28,674

)

Investments in and advances to unconsolidated entities

 

(794

)

 

(3,484

)

Distributions from unconsolidated entities

 

38

 

 

82

 

Net cash used in investing activities

 

(114,957

)

 

(56,871

)

Cash flows – financing activities:

 

 

 

 

Repayments of revolving credit facility

 

(25,000

)

 

 

Repayments of long-term debt and debt issuance costs

 

(11,400

)

 

(11,434

)

Repayments of finance lease liabilities

 

(3,357

)

 

(1,050

)

Dividends paid to stockholders

 

(13,458

)

 

(14,036

)

Repurchase of common stock

 

 

 

(90,804

)

Taxes paid related to net share settlements of equity awards

 

(3,771

)

 

(3,745

)

Issuance of common stock under employee stock purchase plan

 

4,501

 

 

4,286

 

Payments for contingent consideration arrangements

 

(3,589

)

 

(3,300

)

Distributions to noncontrolling interests

 

(250

)

 

 

Net cash used in financing activities

 

(56,324

)

 

(120,083

)

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

 

(2,047

)

 

(1,985

)

Increase (decrease) in cash, cash equivalents and restricted cash

 

3,593

 

 

(113,047

)

Cash, cash equivalents and restricted cash at beginning of year (1)

 

366,214

 

 

469,388

 

Cash, cash equivalents and restricted cash at end of period (2)

 

$

369,807

 

 

$

356,341

 

(1) Includes $2.3 million and $2.0 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, 2018 and 2017, respectively.

(2) Includes $1.7 million and $2.4 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of September 30, 2019 and 2018, respectively.

 

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands) (Unaudited)

 

 

For the three months ended September 30,

 

 

2019

 

2018

Revenues from unrelated entities:

 

 

 

 

United States electrical construction and facilities services

 

$

554,637

 

 

$

485,974

 

United States mechanical construction and facilities services

 

869,188

 

 

759,495

 

United States building services

 

532,122

 

 

473,701

 

United States industrial services

 

234,166

 

 

227,313

 

Total United States operations

 

2,190,113

 

 

1,946,483

 

United Kingdom building services

 

97,628

 

 

100,566

 

Total worldwide operations

 

$

2,287,741

 

 

$

2,047,049

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2019

 

2018

Revenues from unrelated entities:

 

 

 

 

United States electrical construction and facilities services

 

$

1,652,109

 

 

$

1,420,268

 

United States mechanical construction and facilities services

 

2,444,683

 

 

2,168,127

 

United States building services

 

1,567,899

 

 

1,389,486

 

United States industrial services

 

788,271

 

 

610,479

 

Total United States operations

 

6,452,962

 

 

5,588,360

 

United Kingdom building services

 

317,709

 

 

312,963

 

Total worldwide operations

 

$

6,770,671

 

 

$

5,901,323

 

 

 

 

 

 

 

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands) (Unaudited)

 

 

For the three months ended September 30,

 

 

2019

 

2018

Operating income (loss):

 

 

 

 

United States electrical construction and facilities services

 

$

33,630

 

 

$

34,473

 

United States mechanical construction and facilities services

 

61,213

 

 

59,236

 

United States building services

 

35,051

 

 

29,315

 

United States industrial services

 

5,561

 

 

7,637

 

Total United States operations

 

135,455

 

 

130,661

 

United Kingdom building services

 

4,754

 

 

4,457

 

Corporate administration

 

(24,341

)

 

(23,113

)

Restructuring expenses

 

(119

)

 

(229

)

Total worldwide operations

 

115,749

 

 

111,776

 

Other corporate items:

 

 

 

 

Net periodic pension (cost) income

 

381

 

 

615

 

Interest expense, net

 

(2,678

)

 

(2,736

)

Income from continuing operations before income taxes

 

$

113,452

 

 

$

109,655

 

 

 

 

 

 

 

 

For the nine months ended September 30,

 

 

2019

 

2018

Operating income (loss):

 

 

 

 

United States electrical construction and facilities services

 

$

120,380

 

 

$

106,309

 

United States mechanical construction and facilities services

 

156,152

 

 

156,273

 

United States building services

 

90,535

 

 

68,822

 

United States industrial services

 

31,209

 

 

12,312

 

Total United States operations

 

398,276

 

 

343,716

 

United Kingdom building services

 

14,371

 

 

12,828

 

Corporate administration

 

(74,062

)

 

(65,508

)

Restructuring expenses

 

(567

)

 

(693

)

Impairment loss on identifiable intangible assets

 

 

 

(907

)

Total worldwide operations

 

338,018

 

 

289,436

 

Other corporate items:

 

 

 

 

Net periodic pension (cost) income

 

1,187

 

 

2,069

 

Interest expense, net

 

(8,732

)

 

(8,011

)

Income from continuing operations before income taxes

 

$

330,473

 

 

$

283,494

 

 

 

 

 

 

 

EMCOR GROUP, INC.

RECONCILIATION OF 2019 AND 2018 OPERATING INCOME

(In thousands) (Unaudited)

 

In our press release, we provide non-GAAP 2019 and 2018 third quarter and year-to-date September 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 September 30,

 

For the nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

GAAP operating income

 

$

115,749

 

 

$

111,776

 

 

$

338,018

 

 

$

289,436

 

Impairment loss on identifiable intangible assets

 

 

 

 

 

 

 

907

 

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

 

$

115,749

 

 

$

111,776

 

 

$

338,018

 

 

$

290,343

 

 

EMCOR GROUP, INC.

RECONCILIATION OF 2019 AND 2018 NET INCOME

(In thousands) (Unaudited)

 

In our press release, we provide non-GAAP 2019 and 2018 third quarter and year-to-date September 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 September 30,

 

For the nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

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

 

$

81,834

 

 

$

79,896

 

 

$

238,216

 

 

$

206,573

 

Impairment loss on identifiable intangible assets (2)

 

 

 

 

 

 

 

907

 

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

 

$

81,834

 

 

$

79,896

 

 

$

238,216

 

 

$

207,480

 

(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 third quarter and year-to-date September 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 September 30,

 

For the nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

GAAP diluted earnings per common share from continuing operations

 

$

1.45

 

 

$

1.36

 

 

$

4.22

 

 

$

3.52

 

Impairment loss on identifiable intangible assets (1)

 

 

 

 

 

 

 

0.02

 

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

 

$

1.45

 

 

$

1.36

 

 

$

4.22

 

 

$

3.54

 

(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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