NORWALK, Conn.--(BUSINESS WIRE)--EMCOR Group, Inc. (NYSE:EME) today reported results for the third quarter ended September 30, 2016.
For the third quarter of 2016, net income from continuing operations attributable to EMCOR was $51.9 million, or $0.85 per diluted share, compared to $41.8 million, or $0.66 per diluted share, in the third quarter of 2015. Revenues for the third quarter of 2016 were $1.92 billion, an increase of 13.2% compared to revenues of $1.70 billion for the third quarter of 2015.
Operating income for the third quarter of 2016 was $86.1 million, or 4.5% of revenues, compared to operating income of $70.0 million, or 4.1% of revenues, for the third quarter of 2015.
Selling, general and administrative expenses for the third quarter of 2016 were $181.4 million, or 9.4% of revenues, compared to $165.1 million, or 9.7% of revenues, in the year ago period.
The Company's income tax rate in the third quarter of 2016 was 37.2%, compared to an income tax rate of 38.1% in the year ago period.
Backlog as of September 30, 2016 was $3.90 billion, a 3.7% increase compared to backlog of $3.77 billion at the end of the third quarter of 2015. Year-over-year domestic backlog grew $131.3 million and backlog in our UK Building Services segment increased $6.1 million. Year-over-year growth in backlog in our U.S. Mechanical Construction segment more than offset declines in our U.S. Building Services, U.S. Industrial Services and U.S. Electrical Construction segments. From an end market perspective, backlog growth in the commercial and healthcare markets was partially offset by declines in the industrial, water and wastewater, hospitality and transportation sectors, while backlog in the institutional sector was flat.
Tony Guzzi, President and Chief Executive Officer of EMCOR, commented, “We had another strong quarter with record third quarter revenues, operating income, and diluted earnings per share from continuing operations. Performance was broad-based across geographies and end markets, delivering a 23% increase in operating income on solid 13% revenue growth compared to the third quarter of 2015. This was largely driven by organic revenues, which increased 8% year-over-year, and was supported by another quarter of strong contribution from our recent acquisitions. Backlog saw sustained growth with a 3.7% increase year-over-year and a 2.4% increase from last quarter.”
Mr. Guzzi added, “Our strong profitability this quarter was led by our U.S. Construction business, which delivered a 34% increase in operating income on mid-teens organic revenue growth. This was driven by our U.S. Mechanical Construction segment, a standout in the quarter, delivering a 46.5% increase in operating income, with over one hundred basis points of operating margin expansion. This was followed by our U.S. Electrical Construction segment, which reported a solid 21% increase in operating income despite the impact of a write-down related to a transportation project that is nearing completion. Our U.S. Building Services segment also reported an exceptional quarter, increasing operating income by 41% on 130 basis points of margin expansion, driven by strong performance in our mobile mechanical services operations. Our U.S. Industrial Services revenue was essentially flat compared to the year ago period as we completed a significant project that drove exceptional performance in the first half of the year. Lastly, our UK business performed in line with our expectations while facing continued headwinds from foreign exchange rates.”
Revenues for the first nine months of 2016 totaled $5.6 billion, an increase of 13.4% compared to $4.94 billion for the first nine months of 2015. Net income from continuing operations attributable to EMCOR for the first nine months of 2016 was $142.8 million, or $2.33 per diluted share, compared to $122.0 million, or $1.92 per diluted share, for the first nine months of 2015. Included in net income from continuing operations attributable to EMCOR for the first nine months of 2016 were after-tax transaction expenses of $2.3 million, or $0.04 per diluted share, related to the acquisition of Ardent. Excluding these transaction expenses, non-GAAP net income from continuing operations attributable to EMCOR in the first nine months of 2016 was $145.2 million, or $2.37 per diluted share.
Operating income for the first nine months of 2016 was $234.0 million, or 4.2% of revenues, compared to $203.0 million, or 4.1% of revenues, in the first nine months of 2015. Included in operating income for the first nine months of 2016 were pre-tax transaction expenses of $3.8 million related to the acquisition of Ardent. Excluding these transaction expenses, non-GAAP operating income in the first nine months of 2016 was $237.8 million, or 4.2% of revenues. SG&A totaled $530.7 million, or 9.5% of revenues, compared to $488.1 million, or 9.9% of revenues, in the first nine months of 2015.
Mr. Guzzi concluded, “We are very pleased by our third quarter performance and encouraged by our growing and diverse backlog, which should support growth into the fourth quarter and 2017. For the third time this year, we are raising our full year 2016 guidance for revenue and non-GAAP diluted earnings per share from continuing operations to reflect better than expected third quarter performance in our U.S. Construction and U.S. Building Services segments. We will continue to seek out acquisition opportunities to enhance the breadth of our services and expand our geographic reach as we continue the integration of our recent acquisitions. We will also continue our focus on returning capital to shareholders, supported by our healthy balance sheet and strong cash flow.”
Based on the expected contributions from recent acquisitions, the current size and mix of backlog and assuming continued improvement in market conditions, EMCOR now expects full year 2016 revenues to be approximately $7.5 billion, an increase from the previous estimate of $7.4 billion, and full year 2016 diluted earnings per share from continuing operations, excluding transaction expenses related to the Ardent acquisition, to now be in the range of $3.10 to $3.20, up from a previous range of $2.90 to $3.10.
Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations attributable to EMCOR and non-GAAP diluted earnings per share from continuing operations to the comparable GAAP figures.
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 Group's third quarter conference call will be available live via internet broadcast today, Thursday, October 27, at 10:30 AM Eastern Daylight Time. The live call may be accessed through the Company's website 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 2015 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.
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EMCOR GROUP, INC. FINANCIAL HIGHLIGHTS (In thousands, except share and per share information) (Unaudited) |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
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For the three months ended |
For the nine months ended |
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| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
| Revenues | $ | 1,923,174 | $ | 1,699,128 | $ | 5,601,560 | $ | 4,940,900 | |||||||||||||
| Cost of sales | 1,655,130 | 1,463,726 | 4,835,667 | 4,249,042 | |||||||||||||||||
| Gross profit | 268,044 | 235,402 | 765,893 | 691,858 | |||||||||||||||||
| Selling, general and administrative expenses | 181,441 | 165,135 | 530,654 | 488,117 | |||||||||||||||||
| Restructuring expenses | 539 | 301 | 1,271 | 742 | |||||||||||||||||
| Operating income | 86,064 | 69,966 | 233,968 | 202,999 | |||||||||||||||||
| Interest expense | (3,479 | ) |
(2,226
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) | (8,973 | ) | (6,650 | ) | |||||||||||||
| Interest income | 161 | 157 | 518 | 515 | |||||||||||||||||
| Income from continuing operations before income taxes | 82,746 | 67,897 | 225,513 | 196,864 | |||||||||||||||||
| Income tax provision | 30,783 | 25,720 | 82,663 | 74,672 | |||||||||||||||||
| Income from continuing operations | 51,963 | 42,177 | 142,850 | 122,192 | |||||||||||||||||
| Loss from discontinued operation, net of income taxes | (406 | ) | (270 | ) | (1,584 | ) | (739 | ) | |||||||||||||
| Net income including noncontrolling interests | 51,557 | 41,907 | 141,266 | 121,453 | |||||||||||||||||
| Less: Net income attributable to noncontrolling interests | (26 | ) | (385 | ) | (7 | ) | (233 | ) | |||||||||||||
| Net income attributable to EMCOR Group, Inc. | $ | 51,531 | $ | 41,522 | $ | 141,259 | $ | 121,220 | |||||||||||||
| Basic earnings (loss) per common share: | |||||||||||||||||||||
| From continuing operations | $ | 0.85 | $ | 0.66 | $ | 2.35 | $ | 1.94 | |||||||||||||
| From discontinued operation | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.03 | ) | $ | (0.01 | ) | |||||||||
| Diluted earnings (loss) per common share: | |||||||||||||||||||||
| From continuing operations | $ | 0.85 | $ | 0.66 | $ | 2.33 | $ | 1.92 | |||||||||||||
| From discontinued operation | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.03 | ) | $ | (0.01 | ) | |||||||||
| Weighted average shares of common stock outstanding: | |||||||||||||||||||||
| Basic | 60,889,484 | 62,901,923 | 60,866,532 | 62,921,956 | |||||||||||||||||
| Diluted | 61,318,057 | 63,392,483 | 61,290,388 | 63,443,027 | |||||||||||||||||
| Dividends declared per common share | $ | 0.08 | $ | 0.08 | $ | 0.24 | $ | 0.24 | |||||||||||||
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EMCOR GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) |
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September 30, |
December 31, |
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| ASSETS | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 504,558 | $ | 486,831 | ||||||
| Accounts receivable, net | 1,495,566 | 1,359,862 | ||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 142,553 | 117,734 | ||||||||
| Inventories | 43,913 | 37,545 | ||||||||
| Prepaid expenses and other | 60,526 | 64,140 | ||||||||
| Total current assets | 2,247,116 | 2,066,112 | ||||||||
| Investments, notes and other long-term receivables | 8,227 | 8,359 | ||||||||
| Property, plant & equipment, net | 128,290 | 122,018 | ||||||||
| Goodwill | 979,339 | 843,170 | ||||||||
| Identifiable intangible assets, net | 500,056 | 472,834 | ||||||||
| Other assets | 31,925 | 30,164 | ||||||||
| Total assets | $ | 3,894,953 | $ | 3,542,657 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| Current liabilities: | ||||||||||
| Current maturities of long-term debt and capital lease obligations | $ | 19,889 | $ | 17,541 | ||||||
| Accounts payable | 465,362 | 488,251 | ||||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts | 467,077 | 429,235 | ||||||||
| Accrued payroll and benefits | 304,032 | 268,033 | ||||||||
| Other accrued expenses and liabilities | 190,476 | 209,361 | ||||||||
| Total current liabilities | 1,446,836 | 1,412,421 | ||||||||
| Borrowings under revolving credit facility | 125,000 | — | ||||||||
| Long-term debt and capital lease obligations | 378,388 | 297,559 | ||||||||
| Other long-term obligations | 360,837 | 352,621 | ||||||||
| Total liabilities | 2,311,061 | 2,062,601 | ||||||||
| Equity: | ||||||||||
| Total EMCOR Group, Inc. stockholders’ equity | 1,582,590 | 1,476,711 | ||||||||
| Noncontrolling interests | 1,302 | 3,345 | ||||||||
| Total equity | 1,583,892 | 1,480,056 | ||||||||
| Total liabilities and equity | $ | 3,894,953 | $ | 3,542,657 | ||||||
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EMCOR GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2016 and 2015 (In thousands) (Unaudited) |
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| 2016 | 2015 | ||||||||||
| Cash flows - operating activities: | |||||||||||
| Net income including noncontrolling interests | $ | 141,266 | $ | 121,453 | |||||||
| Depreciation and amortization | 29,117 | 26,806 | |||||||||
| Amortization of identifiable intangible assets | 30,678 | 28,391 | |||||||||
| Provision for doubtful accounts | 3,962 | 2,364 | |||||||||
| Deferred income taxes | (830 | ) | (3,598 | ) | |||||||
| Excess tax benefits from share-based compensation | (2,062 | ) | (1,306 | ) | |||||||
| Equity income from unconsolidated entities | (719 | ) | (1,634 | ) | |||||||
| Other non-cash items | 6,844 | 7,349 | |||||||||
| Distributions from unconsolidated entities | 863 | 3,316 | |||||||||
| Changes in operating assets and liabilities, excluding the effect of businesses acquired | (80,195 | ) | (87,560 | ) | |||||||
| Net cash provided by operating activities | 128,924 | 95,581 | |||||||||
| Cash flows - investing activities: | |||||||||||
| Payments for acquisitions of businesses, net of cash acquired | (232,883 | ) | (2,357 | ) | |||||||
| Proceeds from sale of property, plant and equipment | 1,850 | 2,921 | |||||||||
| Purchase of property, plant and equipment | (29,306 | ) | (22,862 | ) | |||||||
| Net cash used in investing activities | (260,339 | ) | (22,298 | ) | |||||||
| Cash flows - financing activities: | |||||||||||
| Proceeds from revolving credit facility | 220,000 | — | |||||||||
| Repayments of revolving credit facility | (95,000 | ) | — | ||||||||
| Borrowings from long-term debt | 400,000 | — | |||||||||
| Repayments of long-term debt and debt issuance costs | (317,987 | ) | (13,136 | ) | |||||||
| Repayments of capital lease obligations | (1,144 | ) | (2,190 | ) | |||||||
| Dividends paid to stockholders | (14,598 | ) | (15,078 | ) | |||||||
| Repurchase of common stock | (34,805 | ) | (21,148 | ) | |||||||
| Proceeds from exercise of stock options | 508 | 2,378 | |||||||||
| Payments to satisfy minimum tax withholding | (4,166 | ) | (3,866 | ) | |||||||
| Issuance of common stock under employee stock purchase plan | 3,583 | 3,147 | |||||||||
| Payments for contingent consideration arrangements | — | (403 | ) | ||||||||
| Distributions to noncontrolling interests | (2,050 | ) | (9,750 | ) | |||||||
| Excess tax benefits from share-based compensation | — | 1,306 | |||||||||
| Net cash provided by (used in) financing activities | 154,341 | (58,740 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | (5,199 | ) | (1,199 | ) | |||||||
| Increase in cash and cash equivalents | 17,727 | 13,344 | |||||||||
| Cash and cash equivalents at beginning of year | 486,831 | 432,056 | |||||||||
| Cash and cash equivalents at end of period | $ | 504,558 | $ | 445,400 | |||||||
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EMCOR GROUP, INC. SEGMENT INFORMATION (In thousands) (Unaudited) |
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For the three months ended |
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| 2016 | 2015 | |||||||||
| Revenues from unrelated entities: | ||||||||||
| United States electrical construction and facilities services | $ | 458,553 | $ | 344,389 | ||||||
| United States mechanical construction and facilities services | 697,733 | 587,522 | ||||||||
| United States building services | 454,800 | 428,270 | ||||||||
| United States industrial services | 239,052 | 241,946 | ||||||||
| Total United States operations | 1,850,138 | 1,602,127 | ||||||||
| United Kingdom building services | 73,036 | 97,001 | ||||||||
| Total worldwide operations | $ | 1,923,174 | $ | 1,699,128 | ||||||
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For the nine months ended |
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| 2016 | 2015 | |||||||||
| Revenues from unrelated entities: | ||||||||||
| United States electrical construction and facilities services | $ | 1,227,474 | $ | 1,009,585 | ||||||
| United States mechanical construction and facilities services | 1,939,518 | 1,652,551 | ||||||||
| United States building services | 1,353,248 | 1,303,389 | ||||||||
| United States industrial services | 830,064 | 699,839 | ||||||||
| Total United States operations | 5,350,304 | 4,665,364 | ||||||||
| United Kingdom building services | 251,256 | 275,536 | ||||||||
| Total worldwide operations | $ | 5,601,560 | $ | 4,940,900 | ||||||
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EMCOR GROUP, INC. SEGMENT INFORMATION (In thousands) (Unaudited) |
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For the three months ended |
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| 2016 | 2015 | ||||||||||
| Operating income (loss): | |||||||||||
| United States electrical construction and facilities services | $ | 30,927 | $ | 25,528 | |||||||
| United States mechanical construction and facilities services | 39,447 | 26,926 | |||||||||
| United States building services | 22,568 | 16,027 | |||||||||
| United States industrial services | 14,586 | 14,340 | |||||||||
| Total United States operations | 107,528 | 82,821 | |||||||||
| United Kingdom building services | 2,591 | 3,358 | |||||||||
| Corporate administration | (23,516 | ) | (15,912 | ) | |||||||
| Restructuring expenses | (539 | ) | (301 | ) | |||||||
| Total worldwide operations | 86,064 | 69,966 | |||||||||
| Other corporate items: | |||||||||||
| Interest expense | (3,479 | ) | (2,226 | ) | |||||||
| Interest income | 161 | 157 | |||||||||
| Income from continuing operations before income taxes | $ | 82,746 | $ | 67,897 | |||||||
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For the nine months ended |
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| 2016 | 2015 | ||||||||||
| Operating income (loss): | |||||||||||
| United States electrical construction and facilities services | $ | 70,645 | $ | 67,479 | |||||||
| United States mechanical construction and facilities services | 101,504 | 80,191 | |||||||||
| United States building services | 54,761 | 54,944 | |||||||||
| United States industrial services | 66,600 | 44,588 | |||||||||
| Total United States operations | 293,510 | 247,202 | |||||||||
| United Kingdom building services | 9,160 | 8,570 | |||||||||
| Corporate administration | (67,431 | ) | (52,031 | ) | |||||||
| Restructuring expenses | (1,271 | ) | (742 | ) | |||||||
| Total worldwide operations | 233,968 | 202,999 | |||||||||
| Other corporate items: | |||||||||||
| Interest expense | (8,973 | ) | (6,650 | ) | |||||||
| Interest income | 518 | 515 | |||||||||
| Income from continuing operations before income taxes | $ | 225,513 | $ | 196,864 | |||||||
EMCOR GROUP, INC.
RECONCILIATION OF 2016 AND 2015
OPERATING INCOME
(In thousands) (Unaudited)
In our press release, we provide actual 2016 and 2015 third quarter September 30, 2016 and 2015 operating income. The following table provides a reconciliation between 2016 and 2015 operating income based on non-GAAP measures to the most direct comparable GAAP measures.
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For the three months ended |
For the nine months ended |
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| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| GAAP operating income | $ | 86,064 | $ | 69,966 | $ | 233,968 | $ | 202,999 | ||||||||||||
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Transaction expenses related to the acquisition of |
— | — | 3,838 | — | ||||||||||||||||
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Non-GAAP operating income, excluding Ardent |
$ | 86,064 | $ | 69,966 | $ | 237,806 | $ | 202,999 | ||||||||||||
EMCOR GROUP, INC.
RECONCILIATION OF 2016 AND 2015 NET
INCOME
(In thousands) (Unaudited)
In our press release, we provide actual 2016 and 2015 third quarter September 30, 2016 and 2015 net income from continuing operations attributable to EMCOR Group, Inc. The following table provides a reconciliation between 2016 and 2015 net income from continuing operations attributable to EMCOR Group, Inc. based on non-GAAP measures to the most direct comparable GAAP measures.
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For the three months ended |
For the nine months ended |
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| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
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GAAP net income from continuing operations |
$ | 51,937 | $ | 41,792 | $ | 142,843 | $ | 121,959 | ||||||||||||
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Transaction expenses related to the acquisition of |
— | — | 2,328 | — | ||||||||||||||||
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Non-GAAP net income from continuing operations |
$ | 51,937 | $ | 41,792 | $ | 145,171 | $ | 121,959 | ||||||||||||
| (1) | Amount is income from continuing operations less net loss attributable to noncontrolling interest. | |
| (2) | Amount is net of tax effect of $1.5 million in the 2016 nine-month period. | |
EMCOR GROUP, INC.
RECONCILIATION OF 2016 AND 2015 DILUTED
EARNINGS PER SHARE FIGURES
(Unaudited)
In our press release, we provide actual 2016 and 2015 third quarter September 30, 2016 and 2015 diluted earnings per common share from continuing operations. The following table provides a reconciliation between 2016 and 2015 diluted earnings per common share based on non-GAAP measures to the most direct comparable GAAP measures.
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For the three months ended |
For the nine months ended |
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| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
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GAAP diluted earnings per common share from |
$ | 0.85 | $ | 0.66 | $ | 2.33 | $ | 1.92 | ||||||||||||
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Transaction expenses related to the acquisition of |
— | — | 0.04 | — | ||||||||||||||||
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Non-GAAP diluted earnings per common share from |
$ | 0.85 | $ | 0.66 | $ | 2.37 | $ | 1.92 | ||||||||||||
| (1) | Amount is net of tax effect of $1.5 million in the 2016 nine-month period. | |