EMCOR Group, Inc. Reports 2006 Third Quarter Results
- Operating Income Surges 24.7% Over Previous Year-
- Contract Backlog Increases 23.6% to a New Record $3.40 Billion -
- 2006 Full Year Guidance Raised -
NORWALK, CONNECTICUT, October 26, 2006 – EMCOR Group, Inc. (NYSE: EME) today reported results for the third quarter and nine months ended September 30, 2006. The Company’s financial results for the prior year periods have been adjusted to reflect its 2-for-1 stock split, effective February 10, 2006.
Revenues in the 2006 third quarter were $1.27 billion, an increase of 4.9% over revenues of $1.21 billion in the third quarter of 2005. Operating income for the third quarter of 2006 was $36.6 million, versus operating income of $29.3 million in the third quarter of last year, an increase of 24.7%. As a percentage of revenues, operating income rose to 2.9% in the third quarter of 2006 from 2.4% in the same quarter last year. For the third quarter of 2006, selling, general and administrative expenses totaled $110.7 million, or 8.7% of revenues, versus $101.5 million, or 8.4% of revenues in the third quarter of 2005.
Net income in the third quarter of 2006 was $22.6 million, or $0.69 per diluted share. Included in the Company’s results for the third quarter of 2006 are restructuring expenses of $0.6 million, or $0.01 per diluted share after tax, and an after-tax expense related to the adoption of FAS 123(R) (Accounting for Stock-Based Compensation) of $0.4 million, or $0.01 per diluted share, which was not present in the year-ago period.
Including an income tax benefit of $17.5 million, or $0.55 per diluted share, for income tax reserve adjustments, a loss from discontinued operations of $1.2 million, or $0.03 per diluted share after-tax, and restructuring expenses of $0.3 million, or $0.00 per diluted share after tax, the Company reported net income for the 2005 third quarter of $30.9 million, or $0.97 per diluted share.
Contract backlog as of September 30, 2006 reached a record level of $3.40 billion, an increase of 23.6% over the backlog level of $2.75 billion at September 30, 2005, and an increase over the Company’s previous record backlog level of $3.22 billion on June 30, 2006. Private sector commercial and hospitality backlog represented 54% of total backlog at September 30, 2006, versus 40% at September 30, 2005.
For the first nine months of 2006, revenues totaled $3.64 billion, compared with revenues of $3.46 billion for the first nine months of 2005, an increase of 5.1%. Operating income for the period increased 49.3% to $74.2 million, or 2.0% of revenues, from $49.7 million, or 1.4% of revenues, in the year-ago period.
For the first nine months of 2006, the Company reported net income of $46.4 million, or $1.42 per diluted share. The Company’s results for the period included restructuring expenses of $0.6 million, or $0.01 per diluted share after tax, a loss from discontinued operations of $0.6 million, or $0.02 per diluted share after tax, and after-tax expenses related to the Company’s adoption of FAS 123(R) of $2.1 million, or $0.06 per diluted share. Cash flow from operations for the period was $148.7 million, a 59.5% increase over cash flow of $93.3 million in the previous year.
Net income for the 2005 nine months was $40.7 million, or $1.28 per diluted share, and included an income tax benefit of $17.5 million, or $0.55 per diluted share, for income tax reserve adjustments, restructuring expenses of $1.7 million, or $0.03 per diluted share after tax, and a loss from discontinued operations of $1.0 million, or $0.03 per diluted share after tax.
Frank T. MacInnis, Chairman and CEO of EMCOR Group, commented, “The third quarter marks another quarter of strong performance by EMCOR Group, as conditions remained robust across the markets in which we participate. We saw good operational results in most of our businesses, with particularly strong performance from our U.S. mechanical segment, which demonstrated significant improvement in profitability as a result of the strategic steps we’ve taken. We also experienced continued excellent growth within our facilities services segment, with 2006 third quarter revenues and operating profits growing more than 20% and 79%, respectively, from the comparable 2005 quarter. For years, EMCOR Group has emphasized the opportunity represented by the facilities services marketplace and the importance of these services to our customers. We continue to win new business and gain market share in this growing sector, and we remain very positive regarding future growth opportunities for our facilities services business.”
Mr. MacInnis concluded, “Looking forward, we continue to be optimistic about the prospects for our business in total. Our expanded and diversified contract backlog is a positive indicator for the future, and is indicative of our ability to adapt to changing conditions in the marketplace and to focus our efforts on those areas of the economy showing the best prospects for growth. Demand for our services remains strong, and we believe we are in an excellent position for a good fourth quarter. Based on current market conditions, we now expect revenues for 2006 of between $5.0 billion and $5.2 billion, resulting in diluted earnings per share for the year of between $2.05 and $2.15, which includes approximately $0.07 per diluted share after tax in expenses related to the Company’s adoption of FAS 123(R).”
EMCOR Group, Inc. is a Fortune 500® worldwide leader in mechanical and electrical construction services, energy infrastructure and facilities services.
EMCOR Group’s third quarter conference call will be available live via Internet broadcast today, Thursday, October 26, at 10:30 AM Eastern Daylight 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’s 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, project 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, mix of business, and risks associated with foreign operations. Certain of the risks and factors associated with EMCOR’s business are also discussed in the Company’s 2005 Form 10-K, its Form 10-Q for the third quarter ended September 30, 2006, 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)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Revenues $1,269,634 $1,210,354 $3,641,132 $3,462,941
Cost of sales 1,121,762 1,079,271 3,244,902 3,120,685
Gross profit 147,872 131,083 396,230 342,256
Selling, general and
administrative expenses 110,714 101,521 321,411 290,823
Restructuring expenses 604 256 604 1,727
Operating income 36,554 29,306 74,215 49,706
Interest income (expense), net 1,463 (1,358) 2,193 (4,635)
Minority interest (1,699) (1,514) (2,628) (3,366)
Income from continuing
operations before income taxes 36,318 26,434 73,780 41,705
Income tax provision (benefit) 13,765 (5,580) 26,733 18
Income from continuing
operations 22,553 32,014 47,047 41,687
Loss from discontinued
operations, net of income taxes -- (1,150) (620) (977)
Net income $ 22,553 $ 30,864 $ 46,427 $ 40,710
Basic income per share -
continuing operations $ 0.71 $ 1.02 $ 1.49 $ 1.34
Basic loss per share -
discontinued operations -- (0.03) (0.02) (0.03)
$ 0.71 $ 0.99 $ 1.47 $ 1.31
Diluted income per share -
continuing operations $ 0.69 $ 1.00 $ 1.44 $ 1.31
Diluted loss per share -
discontinued operations -- (0.03 ) (0.02) (0.03)
$ 0.69 $ 0.97 $ 1.42 $ 1.28
Weighted average shares of
Common stock outstanding:
Basic 31,701,882 31,325,170 31,529,641 31,107,896
Diluted 32,891,509 31,977,194 32,626,044 31,721,232
EMCOR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
September 30, 2006 (Unaudited) |
|
December 31, 2005 |
|
|
ASSETS |
|
|||
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ 244,522 |
|
$ 103,785 |
|
|
Accounts receivable, net |
1,110,934 |
|
1,046,380 |
|
|
Costs and estimated earnings in excess of billings |
|
|
|
|
|
on uncompleted contracts |
163,060 |
|
185,634 |
|
|
Inventories |
14,582 |
|
10,175 |
|
|
Prepaid expenses and other |
37,673 |
|
43,829 |
|
|
Total current assets
|
1,570,771 |
|
1,389,803 |
|
|
Investments, notes, and other long-term receivables |
27,838 |
|
28,659 |
|
|
Property, plant & equipment, net |
46,437 |
|
46,443 |
|
|
Goodwill |
285,234 |
|
283,412 |
|
|
Identifiable intangible assets, net |
16,111 |
|
16,990 |
|
|
Other assets |
10,202 |
|
13,634 |
|
|
Total assets
|
$1,956,593 |
|
$1,778,941 |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Borrowings under working capital credit line |
$ - |
|
$ - |
|
|
Current maturities of long-term debt and capital lease obligations |
654 |
|
551 |
|
|
Accounts payable |
461,676 |
|
452,709 |
|
|
Billings in excess of costs and estimated earnings |
|
|
|
|
|
on uncompleted contracts |
411,710 |
|
330,235 |
|
|
Accrued payroll and benefits |
144,503 |
|
154,276 |
|
|
Other accrued expenses and liabilities |
108,455 |
|
107,545 |
|
|
Total current liabilities
|
1,126,998 |
|
1,045,316 |
|
|
Long-term debt and capital lease obligations |
1,288 |
|
1,406 |
|
|
Other long-term obligations |
143,008 |
|
116,783 |
|
|
Total stockholders’ equity |
685,299 |
|
615,436 |
|
|
Total liabilities and stockholders' equity |
$1,956,593 |
|
$1,778,941 |
|
|
|
|
|
|
|
# # #
Contacts:
R. Kevin Matz
Senior VP, Shared Services
(203) 849-7938
Financial Dynamics
Investors: Eric Boyriven
(212) 850-5600
Linden Alschuler & Kaplan, Inc.
Media: Hannah Arnold
(212) 575-4545
