EMCOR Group, Inc. Reports Fourth Quarter And Full Year 2013 Results

EMCOR Group, Inc. (NYSE:EME) today reported results for the fourth quarter and the year ended December 31, 2013.

For the fourth quarter of 2013, net income attributable to EMCOR was $45.9 million, or $0.68 per diluted share. Excluding several one-time charges discussed below, non-GAAP net income was $51.5 million, or $0.76 per diluted share, compared to non-GAAP net income of $50.6 million, or $0.75 per diluted share in the fourth quarter of 2012. Revenues in the fourth quarter of 2013 totaled $1.66 billion, compared to revenues of $1.61 billion in the year ago period.

Operating income for the fourth quarter of 2013 was $68.8 million, or 4.1% of revenues, which included operating losses and expenses aggregating approximately $7.2 million (including restructuring expenses of $2.1 million) primarily relating to the Company's decision to withdraw from the UK construction market. Excluding these losses and expense items, the Company's non-GAAP operating income for the fourth quarter of 2013 was $76.0 million, or 4.6% of revenues, compared to non-GAAP operating income in the 2012 fourth quarter of $84.4 million, or 5.3% of revenues, as adjusted to exclude 2012 UK construction operating losses.

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

Selling, general and administrative expenses for the 2013 fourth quarter were $163.2 million, or 9.8% of revenues, compared to $149.6 million, or 9.3% of revenues, in the year ago period.

The Company's income tax rate in the 2013 fourth quarter was 30.4%, compared to an income tax rate of 39.8% in the year ago period.

Backlog as of December 31, 2013 was $3.36 billion, a decrease of 0.4% from $3.37 billion at the end of the 2012 fourth quarter. Fourth quarter backlog growth of $45 million in the Company's domestic operations nearly offset a backlog decline of $58 million related to the Company's decision to withdraw from the UK construction market. Backlog growth in the transportation, healthcare, water/wastewater and commercial sectors was more than offset by declines in the institutional and industrial sectors. Total backlog of $3.36 billion was a decrease of 0.9% from $3.39 billion compared to September 30, 2013.

Tony Guzzi, President and Chief Executive Officer of EMCOR Group commented, “Our performance in 2013 highlights the strength from the diversity of our business which insulates us from weakness in any one sector of the economy. Growth in the non-residential construction market remained sluggish, and we continue to contend with a slowdown in government spending. In spite of this, our U.S. electrical construction segment performed well, and we saw marked improvement in our building services segment. Although results in our U.S. mechanical construction segment were hindered by challenges related to two project write-downs in the year, we are confident that this segment will rebound in 2014.

Mr. Guzzi continued, “During 2013, we made several key strategic moves to position the Company for long-term success, most notably our mid-year acquisition of RepconStrickland and our second quarter decision to exit from the UK construction business. We are pleased with the progress made on the integration and performance of RepconStrickland to date which has been teamed with our Ohmstede subsidiary. We now have a market-leading industrial services business focused on refineries and petrochemical facilities. As we continue to focus on producing sustainable long-term growth, our new $1.1 billion credit agreement, announced in December, provides us with the financial flexibility needed to pursue strategic growth opportunities. Finally, by returning $38.2 million to our shareholders through our share repurchase program and dividends during 2013, we demonstrated our commitment to enhancing shareholder value.”

Mr. Guzzi concluded, “We are optimistic about our prospects for 2014, despite ongoing challenges in some markets. We anticipate that improvements in the non-residential construction cycle will lead to greater opportunities resulting in increased revenue growth. We continue to operate from a position of financial strength with a robust balance sheet and strong cash generation. Overall, we are now in a better position financially and operationally than we were at the same point last year and believe 2014 has the potential to be a strong year for EMCOR.”

Revenues for the 2013 full-year period increased 1.1% to $6.42 billion compared to $6.35 billion for the 2012 full-year period.

Net income attributable to EMCOR for the 2013 full-year period was $123.8 million, or $1.82 per diluted share. Excluding losses associated with the withdrawal from the UK construction market, transaction expenses associated with the acquisition of RepconStrickland, and UK restructuring expenses, non-GAAP net income was $151.2 million, or $2.22 per diluted share, compared to non-GAAP net income of $154.4 million, or $2.28 per diluted share, in the year ago period, excluding 2012 UK construction losses.

Operating income in the 2013 full-year period was $210.3 million, or 3.3% of revenues. Excluding the items mentioned in the immediately preceding paragraph, non-GAAP operating income for the 2013 full-year period was $246.5 million, or 3.9% of revenues, compared to non-GAAP operating income of $260.3 million, or 4.2% of revenues, in 2012.

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

For the 2013 full-year period, SG&A totaled $591.1 million, or 9.2% of revenues, compared to $556.2 million, or 8.8% of revenues, in 2012.

The Company noted that, based on the current size and mix of its backlog and assuming the continuation of current market conditions, it expects in 2014 revenues to be approximately $6.8 billion and diluted earnings per share to be between $2.40 to $2.70 excluding restructuring and other costs associated with the withdrawal from the UK construction market.

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

EMCOR Group's fourth quarter conference call will be available live via internet broadcast today, Tuesday, February 25, at 10:30 AM Eastern Standard 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 2013 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)
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                       

 
(Unaudited)

For the three months ended

December 31,

For the twelve months ended

December 31,
2013         2012 2013 2012
Revenues $   1,662,937 $   1,611,881 $   6,417,158 $   6,346,679
Cost of sales 1,428,862   1,383,432   5,604,100   5,540,325  
Gross profit 234,075 228,449 813,058 806,354
Selling, general and administrative expenses 163,208 149,586 591,063 556,242
Restructuring expenses 2,061     11,703   145  
Operating income 68,806 78,863 210,292 249,967
Interest expense (2,791 ) (1,815 ) (8,769 ) (7,275 )
Interest income 266   391   1,128   1,556  
Income before income taxes 66,281 77,439 202,651 244,248
Income tax provision 20,012   30,651   75,297   95,362  
Net income including noncontrolling interests 46,269 46,788 127,354 148,886
Less: Net income attributable to noncontrolling interests (348 ) (378 ) (3,562 ) (2,302 )
Net income attributable to EMCOR Group, Inc. $   45,921   $   46,410   $   123,792   $   146,584  
 
Basic earnings per common share $   0.69   $   0.69   $   1.85   $   2.20  
Diluted earnings per common share $   0.68   $   0.68   $   1.82   $   2.16  
 
Weighted average shares of common stock outstanding:
Basic 66,966,303 66,805,577 67,086,299 66,701,869
Diluted 67,950,697 67,801,701 68,076,841 67,738,418
 
Dividends declared per common share $     $   0.36   $   0.18   $   0.51  
 
     
EMCOR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
               
 
December 31,

2013
December 31,

2012
ASSETS
Current assets:
Cash and cash equivalents $     439,813 $     605,303
Accounts receivable, net 1,268,226 1,221,956
Costs and estimated earnings in excess of billings on uncompleted contracts 90,727 93,061
Inventories 52,123 50,512
Prepaid expenses and other 79,216 73,621
Total current assets 1,930,105 2,044,453
Investments, notes and other long-term receivables 6,799 4,959
Property, plant & equipment, net 123,414 116,631
Goodwill 834,825 566,588
Identifiable intangible assets, net 541,497 343,748
Other assets 29,275 30,691
Total assets $     3,465,915 $     3,107,070
LIABILITIES AND EQUITY
Current liabilities:
Borrowings under revolving credit facility $ $
Current maturities of long-term debt and capital lease obligations 19,332 1,787
Accounts payable 487,738 490,621
Billings in excess of costs and estimated earnings on uncompleted contracts 381,295 383,527
Accrued payroll and benefits 237,779 224,555
Other accrued expenses and liabilities 172,599 194,029
Total current liabilities 1,298,743 1,294,519
Borrowings under revolving credit facility 150,000
Long-term debt and capital lease obligations 335,331 4,112
Other long-term obligations 352,215 301,260
Total liabilities 1,986,289 1,749,891
Equity:
Total EMCOR Group, Inc. stockholders’ equity 1,466,265 1,346,080
Noncontrolling interests 13,361 11,099
Total equity 1,479,626 1,357,179
Total liabilities and equity $     3,465,915 $     3,107,070
 
EMCOR GROUP, INC.      
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Twelve Months Ended December 31, 2013 and 2012

(In thousands)
                       
 
2013 2012
Cash flows - operating activities:
Net income including noncontrolling interests $     127,354 $     148,886
Depreciation and amortization 36,310 31,204
Amortization of identifiable intangible assets 31,028 29,762
Deferred income taxes 11,857 6,626
Excess tax benefits from share-based compensation (4,624 ) (7,083 )
Equity income from unconsolidated entities (1,048 ) (930 )
Other non-cash items (6,262 ) 8,978
Distributions from unconsolidated entities 679 887
Changes in operating assets and liabilities, excluding the effect of businesses acquired (45,225 ) (33,922 )
Net cash provided by operating activities 150,069   184,408  
Cash flows - investing activities:

Payments for acquisitions of businesses, net of cash acquired, and related contingent

consideration agreement
(454,671 ) (20,613 )
Proceeds from sale of property, plant and equipment 2,930 3,070
Purchase of property, plant and equipment (35,497 ) (37,875 )
Investments in and advances to unconsolidated entities and joint ventures (800 )
Purchase of short-term investments (22,433 )
Maturity of short-term investments 4,616   35,305  
Net cash used in investing activities (483,422 ) (42,546 )
Cash flows - financing activities:
Proceeds from revolving credit facility 250,000
Repayments of revolving credit facility (400,000 )
Borrowings from long-term debt 350,000
Repayments of long-term debt (3,013 ) (40 )
Repayments of capital lease obligations (1,692 ) (1,978 )
Dividends paid to stockholders (12,080 ) (34,073 )
Repurchase of common stock (26,070 ) (23,912 )
Proceeds from exercise of stock options 5,172 8,786
Payments to satisfy minimum tax withholding (927 ) (1,654 )
Issuance of common stock under employee stock purchase plan 2,854 2,549
Payments for contingent consideration arrangements (537 ) (5,748 )
Distributions to noncontrolling interests (1,300 ) (1,600 )
Excess tax benefits from share-based compensation 4,624   7,083  
Net cash provided by (used in) financing activities 167,031   (50,587 )
Effect of exchange rate changes on cash and cash equivalents 832   2,706  
(Decrease) increase in cash and cash equivalents (165,490 ) 93,981
Cash and cash equivalents at beginning of year 605,303   511,322  
Cash and cash equivalents at end of period $     439,813   $     605,303  
 
     
EMCOR GROUP, INC.
SEGMENT INFORMATION

(In thousands)
             
 
(Unaudited)

 

For the three months ended

December 31,
       
2013 2012
Revenues from unrelated entities:
United States electrical construction and facilities services $     361,307 $     306,349
United States mechanical construction and facilities services 588,351 592,230
United States building services 433,586 465,977
United States industrial services 184,055   113,188
Total United States operations 1,567,299 1,477,744
United Kingdom construction and building services 95,638   134,137
Total worldwide operations $     1,662,937   $     1,611,881
 
 

For the twelve months ended

December 31,
2013 2012
Revenues from unrelated entities:
United States electrical construction and facilities services $ 1,345,750 $ 1,211,692
United States mechanical construction and facilities services 2,329,834 2,386,498
United States building services 1,794,978 1,807,917
United States industrial services 519,413   401,793
Total United States operations 5,989,975 5,807,900
United Kingdom construction and building services 427,183   538,779
Total worldwide operations $     6,417,158   $     6,346,679
 
EMCOR GROUP, INC.    
SEGMENT INFORMATION

(In thousands)
             
 
(Unaudited)

For the three months ended

December 31,
2013             2012
Operating income (loss):
United States electrical construction and facilities services $     29,967 $     32,615
United States mechanical construction and facilities services 36,956 42,573
United States building services 14,297 9,637
United States industrial services 12,444   14,624  
Total United States operations 93,664 99,449
United Kingdom construction and building services (3,859 ) (2,038 )
Corporate administration (18,938 ) (18,548 )
Restructuring expenses (2,061 )  
Total worldwide operations 68,806 78,863
Other corporate items:
Interest expense (2,791 ) (1,815 )
Interest income 266   391  
Income before income taxes $     66,281   $     77,439  
 
 

For the twelve months ended

December 31,
2013 2012
Operating income (loss):
United States electrical construction and facilities services $ 98,114 $ 100,736
United States mechanical construction and facilities services 93,765 125,261
United States building services 67,225 43,290
United States industrial services 38,763   37,241  
Total United States operations 297,867 306,528
United Kingdom construction and building services (5,981 ) 7,052
Corporate administration (69,891 ) (63,468 )
Restructuring expenses (11,703 ) (145 )
Total worldwide operations 210,292 249,967
Other corporate items:
Interest expense (8,769 ) (7,275 )
Interest income 1,128   1,556  
Income before income taxes $     202,651   $     244,248  
 
 

EMCOR GROUP, INC.

RECONCILIATION OF 2013 AND 2012 OPERATING INCOME
(In thousands) (Unaudited)

In our press release, we provide actual 2013 and 2012 fourth quarter and year-to-date December 31, 2013 and 2012 operating income. The following table provides a reconciliation between 2013 and 2012 operating income based on non-GAAP measures to the most direct comparable GAAP measures.

 
                   

For the three months ended

December 31,

For the twelve months ended

December 31,
2013         2012 2013         2012
GAAP operating income $     68,806 $     78,863 $     210,292 $     249,967
Transaction expenses related to the acquisition of RepconStrickland, Inc. 90 6,140
EMCOR UK construction losses 5,034 5,572 19,002 10,337
EMCOR UK restructuring expenses 2,066     11,056  
Non-GAAP operating income, excluding

RepconStrickland transaction expenses, UK losses

and UK restructuring expenses
$     75,996   $     84,435   $     246,490   $     260,304
 
 
 

EMCOR GROUP, INC.

RECONCILIATION OF 2013 AND 2012 NET INCOME
 
(In thousands) (Unaudited)

In our press release, we provide actual 2013 and 2012 fourth quarter and year-to-date December 31, 2013 and 2012 net income attributable to EMCOR Group, Inc. The following table provides a reconciliation between 2013 and 2012 net income attributable to EMCOR Group, Inc. based on non-GAAP measures to the most direct comparable GAAP measures.

 

 

 
   
       

For the three months ended

December 31,
     

For the twelve months ended

December 31,
2013           2012 2013           2012
GAAP net income attributable to EMCOR Group, Inc. $     45,921 $     46,410 $     123,792 $     146,584
Transaction expenses related to the acquisition of RepconStrickland, Inc. (1) 107 4,363
EMCOR UK construction losses (2) 3,863 4,206 14,584 7,804
EMCOR UK restructuring expenses (3) 1,585     8,485  
Non-GAAP net income attributable to EMCOR Group,

Inc., excluding RepconStrickland transaction

expenses, UK losses and UK restructuring expenses
$     51,476   $     50,616   $     151,224   $     154,388
 
 
(1)   Amount is net of tax effect of $0.0 million in the quarter and $1.8 million in the twelve-month period.
(2) Amount is net of tax effect of $1.2 million in the 2013 quarter and $4.4 million in the 2013 twelve-month period.
Amount is net of tax effect of $1.4 million in the 2012 quarter and $2.5 million in the 2012 twelve-month period.
(3) Amount is net of tax effect of $0.5 million in the quarter and $2.6 million in the twelve-month period.
 
 

EMCOR GROUP, INC.

RECONCILIATION OF 2013 AND 2012 DILUTED EARNINGS PER SHARE FIGURES
 
(Unaudited)

In our press release, we provide actual 2013 and 2012 fourth quarter and year-to-date December 31, 2013 and 2012 diluted earnings per share. The following table provides a reconciliation between 2013 and 2012 EPS based on non-GAAP measures to the most direct comparable GAAP measures.

 
               

For the three months ended

December 31,
           

For the twelve months ended

December 31,
2013           2012 2013         2012
GAAP diluted earnings per common share $     0.68   $     0.68 $     1.82 $     2.16

Transaction expenses related to the acquisition of

RepconStrickland, Inc. (1)
0.00 0.06
EMCOR UK construction losses (2) 0.06 0.06 0.21 0.12
EMCOR UK restructuring expenses (3) 0.02 0.12
Non-GAAP diluted earnings per common
share, excluding RepconStrickland
transaction expenses, UK losses and UK
restructuring expenses $ 0.76 $ 0.75 $ 2.22 $ 2.28
 
 
(1)   Amount is net of tax effect of $0.0 million in the quarter and $1.8 million in the twelve-month period.
(2) Amount is net of tax effect of $1.2 million in the 2013 quarter and $4.4 million in the 2013 twelve-month period.
Amount is net of tax effect of $1.4 million in the 2012 quarter and $2.5 million in the 2012 twelve-month period.
(3) Amount is net of tax effect of $0.5 million in the quarter and $2.6 million in the twelve-month period.

Copyright Business Wire 2010

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