Emcor group, inc. reports fourth quarter and full-year 2020 results
Norwalk, conn.--(business wire)--emcor group, inc. (nyse: eme) today reported results for the fourth quarter and year ended december 31, 2020. for the fourth quarter of 2020, net income was $79.8 million, or $1.45 per diluted share, compared to $86.9 million, or $1.54 per diluted share, for the fourth quarter of 2019. net income for the fourth quarter of 2020 was negatively impacted by the tax effect of the goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded in the second quarter of 2020, primarily related to our u.s. industrial services segment. excluding this tax effect, non-gaap net income for the fourth quarter of 2020 was $102.8 million, or $1.86 per diluted share. revenues for the fourth quarter of 2020 totaled $2.28 billion, a decrease of 5.1%, compared to $2.40 billion for the fourth quarter of 2019. please see the attached tables for a reconciliation of non-gaap net income and non-gaap diluted earnings per share to the comparable gaap measures. operating income for the fourth quarter of 2020 was $137.6 million, or 6.0% of revenues. this compared to $122.9 million, or 5.1% of revenues, for the fourth quarter of 2019. selling, general and administrative expenses for the fourth quarter of 2020 totaled $244.6 million, or 10.7% of revenues, compared to $240.9 million, or 10.0% of revenues, for the fourth quarter of 2019. the company's income tax rate for the fourth quarter of 2020 was 41.8%, compared to an income tax rate of 27.8% for the fourth quarter of 2019. the company’s tax rate for the fourth quarter of 2020 was impacted by the previously referenced tax effect of the impairment charges recorded in the second quarter of 2020. remaining performance obligations as of december 31, 2020 were $4.59 billion compared to $4.04 billion as of december 31, 2019. total remaining performance obligations grew approximately $558.3 million year-over-year. tony guzzi, chairman, president and chief executive officer of emcor, commented, “the company delivered another strong year in 2020 with record full year non-gaap operating income, non-gaap operating margin and non-gaap diluted earnings per share despite the challenging operating environment. these results were driven by exceptional execution for our customers, disciplined cost control, and innovative solutions that drove increased productivity across the business. additionally, our remaining performance obligations increased 13.8% year-over-year to a record $4.59 billion, demonstrating the resilient demand for our services across our geographies and end markets. finally, our strong operating leverage and flexibility during the pandemic allowed us to generate record operating cash flow of $806.4 million, an increase of $450.7 million year-over-year.” mr. guzzi added, “our robust profitability in the fourth quarter was anchored by our u.s. construction segments, posting combined operating income growth of 30.4% year-over-year. in particular, our u.s. mechanical construction segment delivered exceptional operating income growth of 45.7% and an operating margin of 10.4%, up 270 basis points year-over-year, driven by strong performance across key market sectors including commercial, healthcare, and institutional. our u.s. building services segment has rebounded well since the onset of the pandemic and generated revenue and operating income growth of 5.4% and 15.7%, respectively, in the fourth quarter, as we partnered closely with our customers to optimize their systems and improve the safety of their facilities. while our u.s. industrial services segment continues to be impacted by the effects of the pandemic, we are positioned as a leading service provider in the industry and we expect to be ready and able to execute when demand returns, which we anticipate in late 2021. we are pleased by the strength in our u.k. building services segment, which continues to win in the market despite restrictive lockdowns, delivering fourth quarter revenue and operating income growth of 8.9% and 6.7%, respectively.” revenues for the 2020 full-year period totaled $8.80 billion, a decrease of 4.1%, compared to $9.17 billion for the 2019 full-year period. net income for the 2020 full-year period was $132.9 million, or $2.40 per diluted share, compared to $325.1 million, or $5.75 per diluted share, for the 2019 full-year period. excluding the previously referenced impairment charges recorded in the second quarter of 2020 and the related tax effect, non-gaap net income for the 2020 full-year period was $354.6 million, or $6.40 per diluted share. operating income for the 2020 full-year period was $256.8 million, or 2.9% of revenues, compared to $460.9 million, or 5.0% of revenues, for the 2019 full-year period. excluding the $232.8 million of non-cash impairment charges recorded in the second quarter of 2020, non-gaap operating income for the 2020 full-year period was $489.6 million, or 5.6% of revenues. sg&a totaled $903.6 million, or 10.3% of revenues, for the 2020 full-year period, compared to $893.5 million, or 9.7% of revenues, for the 2019 full-year period. please see the attached tables for a reconciliation of non-gaap operating income, non-gaap operating margin, non-gaap net income, and non-gaap diluted earnings per share to the comparable gaap measures. based on project mix, visibility into the coming year, and assuming a gradual improvement of current market conditions as the year progresses, emcor expects full-year 2021 revenues to be between $9.2 billion and $9.4 billion, and full-year 2021 diluted earnings per share in the range of $6.20 to $6.70. mr. guzzi concluded, “coming off a year where we successfully navigated unprecedented operating conditions and delivered outstanding service for our customers, our performance is a testament to the incredible team we have at emcor. i’d like to extend a sincere thank you to all of our employees and leaders. we have demonstrated that we can execute for our customers under difficult circumstances, and the momentum we’re seeing in some key market sectors, underscored by our robust remaining performance obligations, makes us optimistic for our prospects in 2021 and beyond. moving forward, with our strong balance sheet and substantial cash on hand, we will continue to execute on our balanced capital allocation strategy, pursuing both organic growth investments and strategic acquisition opportunities, while also returning capital to shareholders through share repurchases and dividends.” 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 fourth quarter conference call will be available live via internet broadcast today, thursday, february 25, at 10:30 am eastern standard 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 february 25, 2021 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 those anticipated (whether expressly or implied) by 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, mix of business, and the impact of the covid-19 pandemic on our revenue and operations, including employees, construction activity, and facilities utilization, and certain of the risk factors associated with emcor’s business discussed in part i, item 1a “risk factors,” of the company’s 2020 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 also 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 ongoing 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) condensed consolidated statements of operations (unaudited) for the three months ended december 31, for the twelve months ended december 31, 2020 2019 2020 2019 revenues $ 2,281,494 $ 2,403,940 $ 8,797,061 $ 9,174,611 cost of sales 1,897,643 2,039,193 7,401,679 7,818,743 gross profit 383,851 364,747 1,395,382 1,355,868 selling, general and administrative expenses 244,620 240,917 903,584 893,453 restructuring expenses 1,609 956 2,214 1,523 impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — — 232,750 — operating income 137,622 122,874 256,834 460,892 net periodic pension (cost) income 769 366 2,980 1,553 interest expense, net (1,406) (2,824) (7,488) (11,556) income before income taxes 136,985 120,416 252,326 450,889 income tax provision 57,204 33,492 119,383 125,749 net income $ 79,781 $ 86,924 $ 132,943 $ 325,140 basic earnings per common share: $ 1.45 $ 1.54 $ 2.41 $ 5.78 diluted earnings per common share: $ 1.45 $ 1.54 $ 2.40 $ 5.75 weighted average shares of common stock outstanding: basic 54,882,514 56,263,774 55,196,173 56,208,280 diluted 55,160,893 56,592,654 55,421,271 56,519,281 dividends declared per common share $ 0.08 $ 0.08 $ 0.32 $ 0.32 emcor group, inc. condensed consolidated balance sheets (in thousands) december 31, 2020 december 31, 2019 assets current assets: cash and cash equivalents $ 902,867 $ 358,818 accounts receivable, net 1,922,096 2,030,813 contract assets 171,956 177,830 inventories 53,338 40,446 prepaid expenses and other 70,679 51,976 total current assets 3,120,936 2,659,883 property, plant & equipment, net 158,427 156,187 operating lease right-of-use assets 242,155 245,471 goodwill 851,783 1,063,911 identifiable intangible assets, net 582,893 611,444 other assets 107,646 93,462 total assets $ 5,063,840 $ 4,830,358 liabilities and equity current liabilities: current maturities of long-term debt and finance lease liabilities $ 16,910 $ 18,092 accounts payable 671,886 665,402 contract liabilities 722,252 623,642 accrued payroll and benefits 450,955 382,573 other accrued expenses and liabilities 247,597 195,757 operating lease liabilities, current 53,632 53,144 total current liabilities 2,163,232 1,938,610 borrowings under revolving credit facility — 50,000 long-term debt and finance lease liabilities 259,619 244,139 operating lease liabilities, long-term 205,362 204,950 other long-term obligations 382,383 334,879 total liabilities 3,010,596 2,772,578 equity: total emcor group, inc. stockholders’ equity 2,052,668 2,057,134 noncontrolling interests 576 646 total equity 2,053,244 2,057,780 total liabilities and equity $ 5,063,840 $ 4,830,358 emcor group, inc. condensed consolidated statements of cash flows for the twelve months ended december 31, 2020 and 2019 (in thousands) 2020 2019 cash flows - operating activities: net income $ 132,943 $ 325,140 depreciation and amortization 46,721 43,945 amortization of identifiable intangible assets 59,950 48,142 deferred income taxes (36,354) 1,701 non-cash expense for impairment of goodwill, identifiable intangible assets, and other long-lived assets 232,750 — non-cash share-based compensation expense 11,151 11,386 other reconciling items 4,589 4,286 changes in operating assets and liabilities, excluding the effect of businesses acquired 354,616 (78,900) net cash provided by operating activities 806,366 355,700 cash flows - investing activities: payments for acquisitions of businesses, net of cash acquired (50,357) (300,980) proceeds from sale or disposal of property, plant and equipment 3,463 5,487 purchases of property, plant and equipment (47,969) (48,432) investments in and advances to unconsolidated entities — (2,252) distributions from unconsolidated entities — 838 net cash used in investing activities (94,863) (345,339) cash flows - financing activities: proceeds from revolving credit facility 200,000 50,000 repayments of revolving credit facility (250,000) (25,000) proceeds from long-term debt 300,000 — repayments of long-term debt and debt issuance costs (286,987) (15,198) repayments of finance lease liabilities (4,470) (4,571) dividends paid to stockholders (17,674) (17,950) repurchases of common stock (112,553) — taxes paid related to net share settlements of equity awards (2,640) (6,451) issuances of common stock under employee stock purchase plan 6,557 6,090 payments for contingent consideration arrangements (4,070) (5,917) distributions to noncontrolling interests (70) (250) net cash used in financing activities (171,907) (19,247) effect of exchange rate changes on cash, cash equivalents, and restricted cash 4,046 2,592 increase (decrease) in cash, cash equivalents, and restricted cash 543,642 (6,294) cash, cash equivalents, and restricted cash at beginning of year (1) 359,920 366,214 cash, cash equivalents, and restricted cash at end of period (1) $ 903,562 $ 359,920 (1) emcor group, inc. segment information (in thousands) (unaudited) for the three months ended december 31, 2020 2019 revenues from unrelated entities: united states electrical construction and facilities services $ 493,454 $ 564,491 united states mechanical construction and facilities services 969,433 895,654 united states building services 568,075 538,973 united states industrial services 135,538 299,272 total united states operations 2,166,500 2,298,390 united kingdom building services 114,994 105,550 total operations $ 2,281,494 $ 2,403,940 for the twelve months ended december 31, 2020 2019 revenues from unrelated entities: united states electrical construction and facilities services $ 1,973,427 $ 2,216,600 united states mechanical construction and facilities services 3,485,495 3,340,337 united states building services 2,110,129 2,106,872 united states industrial services 797,447 1,087,543 total united states operations 8,366,498 8,751,352 united kingdom building services 430,563 423,259 total operations $ 8,797,061 $ 9,174,611 emcor group, inc. segment information (in thousands) (unaudited) for the three months ended december 31, 2020 2019 operating income (loss): united states electrical construction and facilities services $ 43,355 $ 41,304 united states mechanical construction and facilities services 100,380 68,888 united states building services 28,010 24,219 united states industrial services (8,212) 13,131 total united states operations 163,533 147,542 united kingdom building services 4,218 3,952 corporate administration (28,520) (27,664) restructuring expenses (1,609) (956) total operations 137,622 122,874 other corporate items: net periodic pension (cost) income 769 366 interest expense, net (1,406) (2,824) income before income taxes $ 136,985 $ 120,416 for the twelve months ended december 31, 2020 2019 operating income (loss): united states electrical construction and facilities services $ 166,501 $ 161,684 united states mechanical construction and facilities services 292,536 225,040 united states building services 113,431 114,754 united states industrial services (2,788) 44,340 total united states operations 569,680 545,818 united kingdom building services 20,660 18,323 corporate administration (98,542) (101,726) restructuring expenses (2,214) (1,523) impairment loss on goodwill, identifiable intangible assets, and other long-lived assets (232,750) — total operations 256,834 460,892 other corporate items: net periodic pension (cost) income 2,980 1,553 interest expense, net (7,488) (11,556) income before income taxes $ 252,326 $ 450,889 emcor group, inc. reconciliation of 2020 and 2019 non-gaap operating income and non-gaap operating margin (in thousands) (unaudited) in our press release, we provide non-gaap operating income and non-gaap operating margin for the three and twelve months ended december 31, 2020 and 2019. the following tables provide a reconciliation between operating income and operating margin determined on a non-gaap basis to the most directly comparable gaap measures for such periods. for the three months ended december 31, for the twelve months ended december 31, 2020 2019 2020 2019 gaap operating income $ 137,622 $ 122,874 $ 256,834 $ 460,892 impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — — 232,750 — non-gaap operating income $ 137,622 $ 122,874 $ 489,584 $ 460,892 for the three months ended december 31, for the twelve months ended december 31, 2020 2019 2020 2019 gaap operating margin 6.0 % 5.1 % 2.9 % 5.0 % impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — % — % 2.6 % — % non-gaap operating margin 6.0 % 5.1 % 5.6 % 5.0 % emcor group, inc. reconciliation of 2020 and 2019 non-gaap net income (in thousands) (unaudited) in our press release, we provide non-gaap net income for the three and twelve months ended december 31, 2020 and 2019. the following table provides a reconciliation between net income determined on a non-gaap basis to the most directly comparable gaap measure for such periods. for the three months ended december 31, for the twelve months ended december 31, 2020 2019 2020 2019 gaap net income $ 79,781 $ 86,924 $ 132,943 $ 325,140 impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — — 232,750 — tax effect of impairment loss on goodwill, identifiable intangible assets, and other long-lived assets 22,984 — (11,105) — non-gaap net income $ 102,765 $ 86,924 $ 354,588 $ 325,140 emcor group, inc. reconciliation of 2020 and 2019 non-gaap diluted earnings per share (unaudited) in our press release, we provide non-gaap diluted earnings per common share for the three and twelve months ended december 31, 2020 and 2019. the following table provides a reconciliation between diluted earnings per common share determined on a non-gaap basis to the most directly comparable gaap measure for such periods. for the three months ended december 31, for the twelve months ended december 31, 2020 2019 2020 2019 gaap diluted earnings per common share $ 1.45 $ 1.54 $ 2.40 $ 5.75 impairment loss on goodwill, identifiable intangible assets, and other long-lived assets — — 4.20 — tax effect of impairment loss on goodwill, identifiable intangible assets, and other long-lived assets 0.42 — (0.20) — non-gaap diluted earnings per common share $ 1.86 $ 1.54 $ 6.40 $ 5.75
