EMCOR Group, Inc. Reports Record Fourth Quarter and Full Year 2008 Results
- Fourth Quarter Operating Income Increases 17.2% to $100.9 Million -
- Fourth Quarter Diluted EPS Increases 20.0% to $0.90 -
- Full Year Record $2.71 Diluted EPS from Continuing Operations, Up 45.7% over 2007 -
NORWALK, CONNECTICUT, February 26, 2009 – EMCOR Group, Inc. (NYSE: EME) today reported results for the fourth quarter and full year ended December 31, 2008.
For the 2008 fourth quarter, the Company reported net income of $60.3 million, or $0.90 per diluted share, an increase of 19.8% over net income of $50.3 million, or $0.75 per diluted share, in the fourth quarter of 2007. In the 2008 fourth quarter, revenues were $1.68 billion compared to $1.77 billion in the fourth quarter of 2007.
Operating income in the 2008 fourth quarter was $100.9 million, an increase of 17.2% from operating income of $86.1 million in the same quarter a year ago. As a percentage of revenues, operating income rose to a record 6.0% from 4.9% in the 2007 fourth quarter. Selling, general and administrative (SG&A) expenses were $144.5 million, or 8.6% of revenues, in the fourth quarter of 2008, compared to $153.9 million, or 8.7% of revenues, in the comparable prior year period. The Company’s income tax rate for the 2008 fourth quarter was 39.7%, compared with 39.2% in the fourth quarter of 2007.
Contract backlog as of December 31, 2008 was $4.00 billion, compared to backlog of $4.49 billion as of December 31, 2007 and $4.42 billion at the end of the 2008 third quarter. The decline in backlog was principally attributable to a decrease in the hospitality / gaming sector, particularly in the Las Vegas market, and the commercial sector mitigated by growth in the transportation, industrial, institutional and water and wastewater sectors.
For the 2008 full-year period, the Company reported net income of $182.2 million, or $2.71 per diluted share, an increase of 43.7% over net income of $126.8 million, or $1.90 per diluted share, in 2007. Revenues in the 2008 full-year period rose 14.5% to $6.79 billion from $5.93 billion in 2007. Organic revenue growth was 5.9% for the 2008 full-year period.
Operating income was $302.6 million, or 4.5% of revenues for the 2008 full-year period, an increase of 51.4% over operating income of $199.8 million, or 3.4% of revenues, in the same period last year. SG&A expenses were $582.3 million, or 8.6% of revenues, for the 2008 full-year period, versus $502.7 million, or 8.5% of revenues, in 2007.
The Company’s results for the 2008 full-year period include a previously announced one-time charge of $7.9 million, substantially all of which is non-cash, resulting from an adverse jury verdict and a $7.0 million non-cash charge with respect to the impairment of the value of our equity investment in a joint venture; the diluted EPS impact of these two charges was approximately ($0.14).
Frank T. MacInnis, Chairman and CEO of EMCOR Group, commented, “The 2008 fourth quarter marked the culmination of the most successful year in our Company’s history. We significantly outperformed expectations as we continued to benefit from the steps we have taken to diversify our business across markets, services and geographies. Operating margins in the quarter and full year were records for their respective periods, reflecting the size and profitability of our U.S. Facilities Services segment, as well as our ongoing focus on bidding discipline, which continue to have a positive impact on our revenue mix, margin characteristics and earnings power. We also continued to generate excellent liquidity, achieving a 29% year-over-year increase in operating cash flows to a level of $335 million.”
Mr. MacInnis continued, “This quarter marks nearly 14 years of consistent profitability at EMCOR, a timeframe that has included several significant market down-cycles, and our performance underscores the ability of our business model to adapt to all economic circumstances. During this timeframe, we have successfully executed our long-term strategy to diversify our business and end markets and improve our long-term profitability through strategic acquisitions, enhanced management of the bidding process and the targeted growth of our Facilities Services business. As a result, going into the current down-cycle we are a larger, more balanced and more profitable company than ever before with a greater proportion of our business driven less by cyclical factors. We are also supported by a strong balance sheet, with substantial cash and no net debt, which benefits us in a market where financial strength and liquidity are increasingly becoming competitive differentiators.”
Mr. MacInnis concluded, “While we are experiencing varying degrees of pressure on demand in most of our markets, we believe that EMCOR is better positioned to weather the current cycle than at any other time in its history. Our market diversification and disciplined management approach give us the flexibility to control our cost base and target sectors that are more likely to outperform, including those that may benefit from the economic stimulus package, as the current cycle evolves and ultimately improves. Although continued uncertainty in the credit markets may affect major capital projects, much of our business, including a substantial portion of our Facilities Services business, is derived from maintenance of existing facilities, the budgets for which are less likely to be the first to be cut in the current environment. While 2009 will be challenging, EMCOR has the market position, operational flexibility and financial strength and discipline necessary to adapt to these uncertain times and pursue its long-term growth strategy.”
The Company noted that, based on the current size and scope of its contract backlog and assuming a continuation of existing market conditions, it expects to generate “base line” revenues of between $6.0 billion and $6.3 billion and is highly confident of its ability to generate 2009 full year diluted “base line” EPS from continuing operations of $1.80. While a material deterioration of market conditions from current levels could cause the Company’s performance to fall, early benefits from the economic stimulus plan, accretive acquisitions, and/or improved credit markets could provide opportunities to exceed the “base line” estimates.
EMCOR Group, Inc. is a Fortune 500® worldwide leader in mechanical and electrical construction services, energy infrastructure and facilities services.
EMCOR Group’s fourth quarter conference call will be available live via internet broadcast today, Thursday, February 26, 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 2008 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.
- FINANCIAL TABLES FOLLOW -
EMCOR GROUP, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except share and per share information)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Revenues $1,680,518 $1,767,633 $6,785,242 $5,927,152
Cost of sales 1,433,349 1,527,334 5,898,591 5,224,330
Gross profit 247,169 240,299 886,651 702,822
Selling, general and
administrative expenses 144,543 153,943 582,317 502,654
Restructuring expenses 1,686 250 1,757 343
Operating income 100,940 86,106 302,577 199,825
Interest (expense) income, net (259) (3,681) (1,854) 3,975
Minority interest (673) (5) (1,931) (2,051)
Income from continuing
operations before income taxes 100,008 82,420 298,792 201,749
Income tax provision 39,721 32,336 116,588 77,706
Income from continuing
operations 60,287 50,084 182,204 124,043
Income from discontinued
operation, net of income taxes -- 246 -- 2,765
Net income $ 60,287 $ 50,330 $ 182,204 $ 126,808
Basic earnings per common share:
From continuing operations $ 0.92 $ 0.77 $ 2.79 $ 1.93
From discontinued operation -- 0.00 -- 0.04
$ 0.92 $ 0.77 $ 2.79 $ 1.97
Diluted earnings per common share:
From continuing operations $ 0.90 $ 0.75 $ 2.71 $ 1.86
From discontinued operation -- 0.00 -- 0.04
$ 0.90 $ 0.75 $ 2.71 $ 1.90
Weighted average shares of
common stock outstanding:
Basic 65,493,047 65,093,750 65,373,483 64,431,471
Diluted 66,852,379 67,051,600 67,117,261 66,731,936
EMCOR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
December 31, |
|
December 31, |
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ 405,869 |
|
$ 251,637 |
|
Accounts receivable, net |
1,390,973 |
|
1,435,268 |
|
Costs and estimated earnings in excess of billings |
|
|
|
|
on uncompleted contracts |
105,441 |
|
155,060 |
|
Inventories |
54,601 |
|
52,247 |
|
Prepaid expenses and other |
53,856 |
|
56,935 |
|
Total current assets
|
2,010,740 |
|
1,951,147 |
|
Investments, notes and other long-term receivables |
14,958 |
|
22,669 |
|
Property, plant & equipment, net |
96,716 |
|
83,963 |
|
Goodwill |
582,714 |
|
563,918 |
|
Identifiable intangible assets, net |
292,128 |
|
252,146 |
|
Other assets |
11,148 |
|
13,157 |
|
Total assets
|
$3,008,404 |
|
$2,887,000 |
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Borrowings under working capital credit line |
$ -- |
|
$ -- |
|
Current maturities of long-term debt and capital lease obligations |
3,886 |
|
3,791 |
|
Accounts payable |
500,881 |
|
537,314 |
|
Billings in excess of costs and estimated earnings |
|
|
|
|
on uncompleted contracts |
601,834 |
|
582,572 |
|
Accrued payroll and benefits |
221,564 |
|
215,554 |
|
Other accrued expenses and liabilities |
184,990 |
|
190,349 |
|
Total current liabilities
|
1,513,155 |
|
1,529,580 |
|
Long-term debt and capital lease obligations |
196,218 |
|
223,453 |
|
Other long-term obligations |
255,686 |
|
248,926 |
|
Total stockholders’ equity |
1,043,345 |
|
885,041 |
|
Total liabilities and stockholders' equity |
$3,008,404 |
|
$2,887,000 |
|
|
|
|
|
CONTACT:
R. Kevin Matz
Executive Vice President
Shared Services
(203) 849-7938
FD Investors: Eric Boyriven – (212) 850-5600
Linden Alsc huler & Kaplan, Inc.
Media: Suzanne Dawson / Cecile Fradkin
212-575-4545