Emcor group, inc. reports first quarter 2020 results
Norwalk, conn.--(business wire)--emcor group, inc. (nyse: eme) today reported results for the first quarter ended march 31, 2020. for the first quarter of 2020, net income was $75.7 million, or $1.35 per diluted share, compared to $72.4 million, or $1.28 per diluted share, for the first quarter of 2019. revenues for the first quarter of 2020 totaled $2.30 billion, an increase of 6.5%, compared to $2.16 billion for the first quarter of 2019. operating income for the first quarter of 2020 was $106.0 million, or 4.6% of revenues. this compares to $102.3 million, or 4.7% of revenues, for the first quarter of 2019. selling, general and administrative expenses for the first quarter of 2020 totaled $227.0 million, or 9.9% of revenues, compared to $206.2 million, or 9.6% of revenues, for the first quarter of 2019. the company's income tax rate for the first quarter of 2020 was 27.4%, compared to an income tax rate of 27.5% for the first quarter of 2019. remaining performance obligations at march 31, 2020 were $4.42 billion, compared to $4.16 billion at march 31, 2019. total u.s. remaining performance obligations grew approximately $284 million year-over-year. tony guzzi, chairman, president and chief executive officer of emcor, commented, “the company achieved record first quarter revenues, operating income, net income, and diluted earnings per share. we delivered revenue growth of 6.5% during the quarter, 2.7% of which was organic, led by double-digit growth in our u.s. mechanical construction and u.s. industrial services segments. our steadfast commitment to excellent project execution delivered operating income growth of 3.6% year-over-year. despite the uncertainty surrounding the covid-19 pandemic, we have record remaining performance obligations, up 6.4% year-over-year, underscoring the resiliency of our business and the underlying demand in the marketplace.” mr. guzzi added, “our u.s. construction segments delivered solid results, posting combined revenue and operating income growth of 6.2% and 6.1% year-over-year, respectively, led by strength in the healthcare and manufacturing market sectors. u.s. building services, which saw revenue growth of 1.2% year-over-year, faced the most disruption from the covid-19 pandemic as the quarter progressed, primarily due to the closure or partial closure of customer facilities. u.s. industrial services, on the other hand, performed very well in a difficult environment, delivering revenue and operating income growth of 19.9% and 27.2% year-over-year, respectively, driven by strength in our field services operations, as a result of strong execution on several large turnarounds. finally, we are pleased by the sustained strength in our u.k. building services segment, which generated revenue growth of 4.5% year-over-year and operating income growth of 39.2% year-over-year, resulting in 120 basis points of operating margin expansion.” mr. guzzi concluded, “in response to the abrupt drop in activity due to the covid-19 pandemic, we are focusing on the elements of our business within our control and reacting to the macroeconomic disruptions in a disciplined and process-oriented manner. our robust contingency plans are serving us well as the situation evolves daily. we have implemented strict safety protocols for our employees and are reducing costs where appropriate. we continue to perform work for our customers where we are able to operate and are prepared to execute on our existing remaining performance obligations and support our customers as they restart their operations. overall, we are in a strong financial position, with a solid and liquid balance sheet and access to additional capital through our recently amended and extended credit facility. we also have solid remaining performance obligations and a healthy project pipeline. we did, however, begin to experience certain disruptions caused by the pandemic and the associated containment and mitigation measures late in the first quarter and expect continued headwinds going into the second quarter and possibly into the third quarter. looking forward, we are well-positioned to continue to serve our customers during this crisis and when the environment normalizes.” 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 first quarter conference call will be available live via internet broadcast today, thursday, april 30, at 10:30 am eastern daylight 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 april 30, 2020 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, the impact of the 2020 ransomware attack, and the impact of the covid-19 pandemic on our revenue and operations, including employees, construction activity, and facilities utilization, and the risk factors associated with emcor’s business discussed in part i, item 1a “risk factors,” of the company’s 2019 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. non-gaap measures: this release may include certain financial measures that were not prepared in accordance with u.s. generally accepted accounting principles (gaap). 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 on-going 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) (unaudited) condensed consolidated statements of operations for the three months ended march 31, 2020 2019 revenues $ 2,299,832 $ 2,158,728 cost of sales 1,966,771 1,849,974 gross profit 333,061 308,754 selling, general and administrative expenses 226,997 206,169 restructuring expenses 69 275 operating income 105,995 102,310 net periodic pension (cost) income 742 406 interest expense, net (2,488 ) (2,823 ) income before income taxes 104,249 99,893 income tax provision 28,584 27,483 net income $ 75,665 $ 72,410 basic earnings per common share $ 1.35 $ 1.29 diluted earnings per common share $ 1.35 $ 1.28 weighted average shares of common stock outstanding: basic 56,007,122 56,168,356 diluted 56,210,728 56,424,222 dividends declared per common share $ 0.08 $ 0.08 emcor group, inc. condensed consolidated balance sheets (in thousands) march 31, 2020 (unaudited) december 31, 2019 assets current assets: cash and cash equivalents $ 347,092 $ 358,818 accounts receivable, net 2,055,483 2,030,813 contract assets 195,265 177,830 inventories 35,387 40,446 prepaid expenses and other 52,161 51,976 total current assets 2,685,388 2,659,883 property, plant & equipment, net 157,848 156,187 operating lease right-of-use assets 237,796 245,471 goodwill 1,064,853 1,063,911 identifiable intangible assets, net 597,897 611,444 other assets 91,765 93,462 total assets $ 4,835,547 $ 4,830,358 liabilities and equity current liabilities: current maturities of long-term debt and finance lease liabilities $ 10,360 $ 18,092 accounts payable 592,576 665,402 contract liabilities 590,873 623,642 accrued payroll and benefits 301,878 382,573 other accrued expenses and liabilities 237,973 195,757 operating lease liabilities, current 52,722 53,144 total current liabilities 1,786,382 1,938,610 borrowings under revolving credit facility 200,000 50,000 long-term debt and finance lease liabilities 294,181 244,139 operating lease liabilities, long-term 198,492 204,950 other long-term obligations 328,898 334,879 total liabilities 2,807,953 2,772,578 equity: total emcor group, inc. stockholders’ equity 2,026,948 2,057,134 noncontrolling interests 646 646 total equity 2,027,594 2,057,780 total liabilities and equity $ 4,835,547 $ 4,830,358 emcor group, inc. condensed consolidated statements of cash flows for the three months ended march 31, 2020 and 2019 (in thousands) (unaudited) 2020 2019 cash flows - operating activities: net income $ 75,665 $ 72,410 adjustments to reconcile net income to net cash used in operating activities: depreciation and amortization 11,767 10,585 amortization of identifiable intangible assets 14,747 11,610 provision for (recovery of) credit losses 2,614 (673 ) deferred income taxes 4,375 2,496 excess tax benefits from share-based compensation (157 ) (499 ) non-cash share-based compensation expense 3,291 3,557 other reconciling items 199 467 changes in operating assets and liabilities, excluding the effect of businesses acquired (191,314 ) (157,388 ) net cash used in operating activities (78,813 ) (57,435 ) cash flows - investing activities: payments for acquisitions of businesses, net of cash acquired (2,582 ) (31,124 ) proceeds from sale or disposal of property, plant and equipment 196 1,023 purchase of property, plant and equipment (12,035 ) (13,113 ) investments in and advances to unconsolidated entities — (794 ) net cash used in investing activities (14,421 ) (44,008 ) cash flows - financing activities: proceeds from revolving credit facility 200,000 — repayments of revolving credit facility (50,000 ) — proceeds from long-term debt 300,000 — repayments of long-term debt and debt issuance costs (257,549 ) (3,800 ) repayments of finance lease liabilities (1,277 ) (1,053 ) dividends paid to stockholders (4,500 ) (4,480 ) repurchase of common stock (99,048 ) — taxes paid related to net share settlements of equity awards (2,492 ) (3,735 ) issuance of common stock under employee stock purchase plan 1,638 1,323 payments for contingent consideration arrangements (653 ) (23 ) distributions to noncontrolling interests — (40 ) net cash provided by (used in) financing activities 86,119 (11,808 ) effect of exchange rate changes on cash, cash equivalents, and restricted cash (4,678 ) 1,298 decrease in cash, cash equivalents, and restricted cash (11,793 ) (111,953 ) 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 (2) $ 348,127 $ 254,261 (1) includes $1.1 million and $2.3 million of restricted cash classified as “prepaid expenses and other” in the consolidated balance sheets as of december 31, 2019 and 2018, respectively. (2) includes $1.0 million and $2.2 million of restricted cash classified as “prepaid expenses and other” in the consolidated balance sheets as of march 31, 2020 and 2019, respectively. emcor group, inc. segment information (in thousands) (unaudited) for the three months ended march 31, 2020 2019 revenues from unrelated entities: united states electrical construction and facilities services $ 525,229 $ 528,070 united states mechanical construction and facilities services 834,112 752,409 united states building services 518,083 512,079 united states industrial services 310,031 258,645 total united states operations 2,187,455 2,051,203 united kingdom building services 112,377 107,525 total worldwide operations $ 2,299,832 $ 2,158,728 for the three months ended march 31, 2020 2019 operating income (loss): united states electrical construction and facilities services $ 43,903 $ 42,951 united states mechanical construction and facilities services 45,171 40,985 united states building services 20,838 27,483 united states industrial services 12,257 9,636 total united states operations 122,169 121,055 united kingdom building services 5,764 4,141 corporate administration (21,869 ) (22,611 ) restructuring expenses (69 ) (275 ) total worldwide operations 105,995 102,310 other corporate items: net periodic pension (cost) income 742 406 interest expense, net (2,488 ) (2,823 ) income before income taxes $ 104,249 $ 99,893
