Emcor group, inc. reports third quarter 2019 results
Norwalk, conn.--(business wire)--emcor group, inc. (nyse: eme) today reported results for the third quarter ended september 30, 2019. for the third quarter of 2019, net income from continuing operations attributable to emcor was $81.8 million, or $1.45 per diluted share, compared to $79.9 million, or $1.36 per diluted share, for the third quarter of 2018. revenues for the third quarter of 2019 totaled $2.29 billion, an increase of 11.8%, compared to $2.05 billion for the third quarter of 2018. operating income for the third quarter of 2019 was $115.7 million, or 5.1% of revenues. this compares to $111.8 million, or 5.5% of revenues, for the third quarter of 2018. selling, general and administrative expenses for the third quarter of 2019 totaled $220.1 million, or 9.6% of revenues, compared to $197.3 million, or 9.6% of revenues, for the third quarter of 2018. the company's income tax rate for the third quarter of 2019 was 27.9%, compared to an income tax rate of 27.1% in the year ago period. remaining performance obligations as of september 30, 2019 were $4.04 billion compared to $3.97 billion at september 30, 2018. total u.s. remaining performance obligations grew $71.3 million year-over-year. tony guzzi, chairman, president and chief executive officer of emcor, commented, “the company had another excellent quarter, achieving record third quarter revenues, operating income, net income attributable to emcor, and diluted earnings per share from continuing operations. these strong results were driven by solid project execution across our business. year-over-year revenues increased 11.8% of which 8.1% was organic growth, driven by double-digit revenue growth in our u.s. construction and u.s. building services segments. in addition to our strong revenue performance, we continued to capitalize on the sustained demand that we are seeing in the market, underscored by our year-over-year growth in remaining performance obligations. additionally, we generated strong operating cash flow in the quarter, delivering $219.1 million, up 122.4% year-over-year.” mr. guzzi added, “our u.s. construction segments continue to deliver robust revenue performance, posting a combined 14.3% increase year-over-year, with organic growth of 10.4%, despite our strong performance in the comparative period. healthy operating margins of 6.1% in our u.s. electrical construction segment and 7.0% in our u.s. mechanical construction segment reflect solid execution across our portfolio of construction projects. our u.s. building services segment posted its fourth consecutive quarter of double-digit revenue growth with operating margin expansion of 40 basis points as our mechanical services and commercial site-based divisions demonstrated exceptional performance. while we had a difficult comparison in our u.s. industrial services segment following the resumption of normalized demand in the third quarter of last year, we are well-positioned with our industrial customers and look to a normal fall turnaround season. finally, our u.k. building services segment continues to take advantage of attractive project opportunities for both new and existing customers, despite facing significant macroeconomic uncertainties.” revenues for the first nine months of 2019 totaled $6.77 billion, an increase of 14.7% compared to $5.90 billion for the first nine months of 2018. net income from continuing operations attributable to emcor for the first nine months of 2019 was $238.2 million, or $4.22 per diluted share, compared to $206.6 million, or $3.52 per diluted share, for the first nine months of 2018. excluding an impairment charge of $0.9 million recorded in the second quarter of 2018, non-gaap net income from continuing operations attributable to emcor for the first nine months of 2018 was $207.5 million, or $3.54 per diluted share. operating income for the first nine months of 2019 was $338.0 million, or 5.0% of revenues, compared to $289.4 million, or 4.9% of revenues, for the first nine months of 2018. excluding the impairment charge referenced above, non-gaap operating income for the first nine months of 2018 was $290.3 million, or 4.9% of revenues. sg&a totaled $652.5 million, or 9.6% of revenues, for the first nine months of 2019 compared to $578.3 million, or 9.8% of revenues, for the first nine months of 2018. please see the attached tables for a reconciliation of non-gaap operating income, non-gaap net income from continuing operations and non-gaap diluted earnings per share from continuing operations to the comparable gaap figures. based on year-to-date performance and favorable project mix, and assuming the continuation of current market conditions, emcor is raising its full-year 2019 revenue guidance to $9.0 billion, an increase from the prior guidance range of $8.8-$8.9 billion. the company now also expects full-year 2019 diluted earnings per share from continuing operations to be in the range of $5.65-$5.75, an increase from the prior guidance range of $5.50-$5.75. mr. guzzi concluded, “we are very pleased with our performance thus far in 2019 and are poised to close out another record year. for the third time this year, we are raising our guidance for both revenue and diluted earnings per share from continuing operations for the full year to reflect our exceptional results and the expectation of sustained strength across our segments. we remain committed to prudently deploying our capital, primarily through organic investments and strategic acquisitions. our disciplined acquisition strategy was underscored by our recent announcement of an agreement to acquire batchelor & kimball, which we expect will close in the coming weeks. looking ahead, we are pleased with the solid growth that we continue to see in both our business and the non-residential construction market and firmly believe we are well-positioned for a strong start to 2020.” 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 third quarter conference call will be available live via internet broadcast today, tuesday, october 29, 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 this date 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 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 and mix of business. certain of the risk factors associated with emcor’s business are also discussed in part i, item 1a “risk factors,” of the company’s 2018 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 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 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 september 30, for the nine months ended september 30, 2019 2018 2019 2018 revenues $ 2,287,741 $ 2,047,049 $ 6,770,671 $ 5,901,323 cost of sales 1,951,754 1,737,710 5,779,550 5,032,021 gross profit 335,987 309,339 991,121 869,302 selling, general and administrative expenses 220,119 197,334 652,536 578,266 restructuring expenses 119 229 567 693 impairment loss on identifiable intangible assets — — — 907 operating income 115,749 111,776 338,018 289,436 net periodic pension (cost) income 381 615 1,187 2,069 interest expense, net (2,678 ) (2,736 ) (8,732 ) (8,011 ) income from continuing operations before income taxes 113,452 109,655 330,473 283,494 income tax provision 31,618 29,711 92,257 76,873 income from continuing operations 81,834 79,944 238,216 206,621 loss from discontinued operation, net of income taxes — (523 ) — (1,010 ) net income including noncontrolling interests 81,834 79,421 238,216 205,611 less: net income attributable to noncontrolling interests — (48 ) — (48 ) net income attributable to emcor group, inc. $ 81,834 $ 79,373 $ 238,216 $ 205,563 basic earnings (loss) per common share: from continuing operations $ 1.46 $ 1.37 $ 4.24 $ 3.54 from discontinued operation $ — $ (0.01 ) $ — $ (0.02 ) diluted earnings (loss) per common share: from continuing operations $ 1.45 $ 1.36 $ 4.22 $ 3.52 from discontinued operation $ — $ (0.01 ) $ — $ (0.02 ) weighted average shares of common stock outstanding: basic 56,216,840 58,208,203 56,189,388 58,422,928 diluted 56,558,450 58,541,310 56,494,430 58,754,867 dividends declared per common share $ 0.08 $ 0.08 $ 0.24 $ 0.24 emcor group, inc. condensed consolidated balance sheets (in thousands) september 30, 2019 (unaudited) december 31, 2018 assets current assets: cash and cash equivalents $ 368,073 $ 363,907 accounts receivable, net 1,926,765 1,773,620 contract assets 179,005 158,243 inventories 38,721 42,321 prepaid expenses and other 45,549 48,116 total current assets 2,558,113 2,386,207 investments, notes and other long-term receivables 1,478 2,899 property, plant & equipment, net 149,023 134,351 operating lease right-of-use assets 232,996 — goodwill 1,019,590 990,887 identifiable intangible assets, net 482,785 488,286 other assets 88,736 86,177 total assets $ 4,532,721 $ 4,088,807 liabilities and equity current liabilities: current maturities of long-term debt and finance lease liabilities $ 18,196 $ 16,013 accounts payable 584,824 652,091 contract liabilities 565,957 552,290 accrued payroll and benefits 387,351 343,069 other accrued expenses and liabilities 185,414 170,935 operating lease liabilities, current 51,632 — total current liabilities 1,793,374 1,734,398 borrowings under revolving credit facility — 25,000 long-term debt and finance lease liabilities 247,837 254,764 operating lease liabilities, long-term 193,502 — other long-term obligations 322,197 333,204 total liabilities 2,556,910 2,347,366 equity: total emcor group, inc. stockholders’ equity 1,975,165 1,740,545 noncontrolling interests 646 896 total equity 1,975,811 1,741,441 total liabilities and equity $ 4,532,721 $ 4,088,807 emcor group, inc. condensed consolidated statements of cash flows for the nine months ended september 30, 2019 and 2018 (in thousands) (unaudited) 2019 2018 cash flows - operating activities: net income including noncontrolling interests $ 238,216 $ 205,611 adjustments to reconcile net income to net cash provided by operating activities: depreciation and amortization 32,412 28,685 amortization of identifiable intangible assets 34,500 31,482 provision for doubtful accounts 1,621 261 deferred income taxes (913 ) 4,685 excess tax benefits from share-based compensation (601 ) (1,065 ) equity loss (income) from unconsolidated entities 1,213 (247 ) non-cash expense from contingent consideration arrangements 1,203 186 non-cash expense for impairment of identifiable intangible assets — 907 non-cash share-based compensation expense 8,840 8,502 distributions from unconsolidated entities 916 2,442 other reconciling items 364 446 changes in operating assets and liabilities, excluding the effect of businesses acquired (140,850 ) (216,003 ) net cash provided by operating activities 176,921 65,892 cash flows - investing activities: payments for acquisitions of businesses, net of cash acquired (79,984 ) (25,710 ) proceeds from sale of property, plant and equipment 1,612 915 purchase of property, plant and equipment (35,829 ) (28,674 ) investments in and advances to unconsolidated entities (794 ) (3,484 ) distributions from unconsolidated entities 38 82 net cash used in investing activities (114,957 ) (56,871 ) cash flows - financing activities: repayments of revolving credit facility (25,000 ) — repayments of long-term debt and debt issuance costs (11,400 ) (11,434 ) repayments of finance lease liabilities (3,357 ) (1,050 ) dividends paid to stockholders (13,458 ) (14,036 ) repurchase of common stock — (90,804 ) taxes paid related to net share settlements of equity awards (3,771 ) (3,745 ) issuance of common stock under employee stock purchase plan 4,501 4,286 payments for contingent consideration arrangements (3,589 ) (3,300 ) distributions to noncontrolling interests (250 ) — net cash used in financing activities (56,324 ) (120,083 ) effect of exchange rate changes on cash, cash equivalents and restricted cash (2,047 ) (1,985 ) increase (decrease) in cash, cash equivalents and restricted cash 3,593 (113,047 ) cash, cash equivalents and restricted cash at beginning of year (1) 366,214 469,388 cash, cash equivalents and restricted cash at end of period (2) $ 369,807 $ 356,341 (1) includes $2.3 million and $2.0 million of restricted cash classified as “prepaid expenses and other” in the consolidated balance sheets as of december 31, 2018 and 2017, respectively. (2) includes $1.7 million and $2.4 million of restricted cash classified as “prepaid expenses and other” in the consolidated balance sheets as of september 30, 2019 and 2018, respectively. emcor group, inc. segment information (in thousands) (unaudited) for the three months ended september 30, 2019 2018 revenues from unrelated entities: united states electrical construction and facilities services $ 554,637 $ 485,974 united states mechanical construction and facilities services 869,188 759,495 united states building services 532,122 473,701 united states industrial services 234,166 227,313 total united states operations 2,190,113 1,946,483 united kingdom building services 97,628 100,566 total worldwide operations $ 2,287,741 $ 2,047,049 for the nine months ended september 30, 2019 2018 revenues from unrelated entities: united states electrical construction and facilities services $ 1,652,109 $ 1,420,268 united states mechanical construction and facilities services 2,444,683 2,168,127 united states building services 1,567,899 1,389,486 united states industrial services 788,271 610,479 total united states operations 6,452,962 5,588,360 united kingdom building services 317,709 312,963 total worldwide operations $ 6,770,671 $ 5,901,323 emcor group, inc. segment information (in thousands) (unaudited) for the three months ended september 30, 2019 2018 operating income (loss): united states electrical construction and facilities services $ 33,630 $ 34,473 united states mechanical construction and facilities services 61,213 59,236 united states building services 35,051 29,315 united states industrial services 5,561 7,637 total united states operations 135,455 130,661 united kingdom building services 4,754 4,457 corporate administration (24,341 ) (23,113 ) restructuring expenses (119 ) (229 ) total worldwide operations 115,749 111,776 other corporate items: net periodic pension (cost) income 381 615 interest expense, net (2,678 ) (2,736 ) income from continuing operations before income taxes $ 113,452 $ 109,655 for the nine months ended september 30, 2019 2018 operating income (loss): united states electrical construction and facilities services $ 120,380 $ 106,309 united states mechanical construction and facilities services 156,152 156,273 united states building services 90,535 68,822 united states industrial services 31,209 12,312 total united states operations 398,276 343,716 united kingdom building services 14,371 12,828 corporate administration (74,062 ) (65,508 ) restructuring expenses (567 ) (693 ) impairment loss on identifiable intangible assets — (907 ) total worldwide operations 338,018 289,436 other corporate items: net periodic pension (cost) income 1,187 2,069 interest expense, net (8,732 ) (8,011 ) income from continuing operations before income taxes $ 330,473 $ 283,494 emcor group, inc. reconciliation of 2019 and 2018 operating income (in thousands) (unaudited) in our press release, we provide non-gaap 2019 and 2018 third quarter and year-to-date september 30, 2019 and 2018 operating income. the following table provides a reconciliation between 2019 and 2018 operating income based on non-gaap measures to the most directly comparable gaap measures. for the three months ended september 30, for the nine months ended september 30, 2019 2018 2019 2018 gaap operating income $ 115,749 $ 111,776 $ 338,018 $ 289,436 impairment loss on identifiable intangible assets — — — 907 non-gaap operating income, excluding impairment loss on identifiable intangible assets $ 115,749 $ 111,776 $ 338,018 $ 290,343 emcor group, inc. reconciliation of 2019 and 2018 net income (in thousands) (unaudited) in our press release, we provide non-gaap 2019 and 2018 third quarter and year-to-date september 30, 2019 and 2018 net income from continuing operations attributable to emcor group, inc. the following table provides a reconciliation between 2019 and 2018 net income from continuing operations attributable to emcor group, inc. based on non-gaap measures to the most directly comparable gaap measures. for the three months ended september 30, for the nine months ended september 30, 2019 2018 2019 2018 gaap net income from continuing operations attributable to emcor group, inc. (1) $ 81,834 $ 79,896 $ 238,216 $ 206,573 impairment loss on identifiable intangible assets (2) — — — 907 non-gaap net income from continuing operations attributable to emcor group, inc., excluding impairment loss on identifiable intangible assets $ 81,834 $ 79,896 $ 238,216 $ 207,480 (1) amount is income from continuing operations less net income attributable to noncontrolling interest. (2) amount excludes de minimis income tax benefit. emcor group, inc. reconciliation of 2019 and 2018 diluted earnings per share figures (unaudited) in our press release, we provide non-gaap 2019 and 2018 third quarter and year-to-date september 30, 2019 and 2018 diluted earnings per common share from continuing operations. the following table provides a reconciliation between 2019 and 2018 diluted earnings per common share based on non-gaap measures to the most directly comparable gaap measures. for the three months ended september 30, for the nine months ended september 30, 2019 2018 2019 2018 gaap diluted earnings per common share from continuing operations $ 1.45 $ 1.36 $ 4.22 $ 3.52 impairment loss on identifiable intangible assets (1) — — — 0.02 non-gaap diluted earnings per common share from continuing operations, excluding impairment loss on identifiable intangible assets $ 1.45 $ 1.36 $ 4.22 $ 3.54 (1) amount excludes de minimis income tax benefit.
