Emcor group, inc. reports second quarter 2019 results
Norwalk, conn.--(business wire)--emcor group, inc. (nyse: eme) today reported results for the second quarter ended june 30, 2019. for the second quarter of 2019, net income from continuing operations attributable to emcor was $84.0 million, or $1.49 per diluted share, compared to $71.0 million, or $1.21 per diluted share, for the second quarter of 2018. excluding an impairment charge in the prior year, non-gaap net income from continuing operations attributable to emcor was $71.9 million, or $1.23 per diluted share, for the second quarter of 2018. revenues for the second quarter of 2019 totaled $2.32 billion, an increase of 19.0%, compared to $1.95 billion for the second quarter of 2018. operating income for the second quarter of 2019 was $120.0 million, or 5.2% of revenues. this compares to $99.7 million, or 5.1% of revenues, for the second quarter of 2018. included in operating income for the second quarter of 2018 was an impairment charge of $0.9 million. excluding this charge, non-gaap operating income for the second quarter of 2018 was $100.6 million or 5.1% of revenues. 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. selling, general and administrative expenses for the second quarter of 2019 totaled $226.2 million, or 9.7% of revenues, compared to $189.9 million, or 9.7% of revenues, for the second quarter of 2018. the company's income tax rate for the second quarter of 2019 was 28.3%, compared to an income tax rate of 27.2% in the year ago period. remaining performance obligations as of june 30, 2019 were $4.23 billion compared to $3.67 billion at june 30, 2018. total u.s. remaining performance obligations grew $558.0 million year-over-year. tony guzzi, chairman, president and chief executive officer of emcor, commented, “the company reported another record quarter, delivering record quarterly revenues, operating income, net income attributable to emcor and diluted earnings per share from continuing operations. we achieved exceptional revenue growth of 19.0% year-over-year, of which 15.2% was organic, driven by excellent results across the business, including double-digit revenue growth in each of our domestic segments. this strong revenue performance coupled with our disciplined project execution drove operating income growth of 20.4% year-over-year. the demand that we are experiencing is broad-based across geographies and end-markets, and we continue to see significant opportunities in the market, as evidenced by growth in our remaining performance obligations of 15.1% year-over-year.” mr. guzzi added, “our u.s. construction segments continue to deliver outstanding results, generating combined revenue growth of 15.7% year-over-year and operating income growth of 4.7% year-over-year. u.s. mechanical construction delivered revenue growth of 13.7%, all of which was organic, and u.s. electrical construction posted organic growth of 9.4%, with the companies we recently acquired contributing to overall growth of 18.7%. our u.s. building services segment performed exceptionally well, posting a third consecutive quarter of double-digit revenue growth and a sixth consecutive quarter of double-digit operating income growth, driven by strong demand in our mechanical services and energy services businesses and supported by continued execution on several large contracts within our commercial site-based business. we continue to see improved performance in our u.s. industrial services segment, which posted revenue growth of 60.6% year-over-year, driven by our field services operations, where we completed several large, complex turnarounds, and sustained strength in our shop services business. finally, our u.k. building services segment reported revenue and operating income growth of 6.7% and 19.0%, respectively, as we continue to see strong demand for our services.” revenues for the first six months of 2019 totaled $4.48 billion, an increase of 16.3% compared to $3.85 billion for the first six months of 2018. net income from continuing operations attributable to emcor for the first six months of 2019 was $156.4 million, or $2.77 per diluted share, compared to $126.7 million, or $2.15 per diluted share, for the first six months of 2018. excluding the impairment charge recorded in the second quarter of 2018, non-gaap net income from continuing operations attributable to emcor for the first six months of 2018 was $127.6 million, or $2.17 per diluted share. operating income for the first six months of 2019 was $222.3 million, or 5.0% of revenues, compared to $177.7 million, or 4.6% of revenues, for the first six months of 2018. included in operating income for the first six months of 2018 was an impairment charge of $0.9 million. excluding this impairment charge, non-gaap operating income for the first six months of 2018 was $178.6 million, or 4.6% of revenues. sg&a totaled $432.4 million, or 9.6% of revenues, for the first six months of 2019 compared to $380.9 million, or 9.9% of revenues, for the first six 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, favorable project mix, and assuming the continuation of current market conditions, emcor is raising its full-year 2019 revenue guidance range to $8.8-$8.9 billion, an increase from the prior guidance range of $8.5-$8.6 billion. the company now also expects full-year 2019 diluted earnings per share from continuing operations to be in the range of $5.50-$5.75, an increase from the prior guidance range of $5.00-$5.50. mr. guzzi concluded, “we delivered a record first half of the year and are optimistic about our additional opportunities for growth in the second half of 2019. our updated guidance reflects our exceptional performance year-to-date, as well as our expectation for continued strong project execution and cost discipline throughout the remainder of the year. as we look ahead, we will use our healthy balance sheet to invest in our business organically and pursue our robust pipeline of strategic acquisition opportunities, balanced with a return of 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 second quarter conference call will be available live via internet broadcast today, tuesday, july 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 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 historical 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 june 30, for the six months ended june 30, 2019 2018 2019 2018 revenues $ 2,324,202 $ 1,953,886 $ 4,482,930 $ 3,854,274 cost of sales 1,977,822 1,663,042 3,827,796 3,294,311 gross profit 346,380 290,844 655,134 559,963 selling, general and administrative expenses 226,248 189,907 432,417 380,932 restructuring expenses 173 374 448 464 impairment loss on identifiable intangible assets — 907 — 907 operating income 119,959 99,656 222,269 177,660 net periodic pension (cost) income 400 717 806 1,454 interest expense, net (3,231 ) (2,823 ) (6,054 ) (5,275 ) income from continuing operations before income taxes 117,128 97,550 217,021 173,839 income tax provision 33,156 26,529 60,639 47,162 income from continuing operations 83,972 71,021 156,382 126,677 loss from discontinued operation, net of income taxes — (205 ) — (487 ) net income including noncontrolling interests 83,972 70,816 156,382 126,190 less: net income attributable to noncontrolling interests — — — — net income attributable to emcor group, inc. $ 83,972 $ 70,816 $ 156,382 $ 126,190 basic earnings (loss) per common share: from continuing operations $ 1.49 $ 1.22 $ 2.78 $ 2.16 from discontinued operation $ — $ (0.00 ) $ — $ (0.01 ) diluted earnings (loss) per common share: from continuing operations $ 1.49 $ 1.21 $ 2.77 $ 2.15 from discontinued operation $ — $ (0.00 ) $ — $ (0.01 ) weighted average shares of common stock outstanding: basic 56,181,864 58,332,934 56,175,219 58,531,150 diluted 56,499,514 58,670,595 56,461,977 58,862,505 dividends declared per common share $ 0.08 $ 0.08 $ 0.16 $ 0.16 emcor group, inc. condensed consolidated balance sheets (in thousands) june 30, 2019 (unaudited) december 31, 2018 assets current assets: cash and cash equivalents $ 213,374 $ 363,907 accounts receivable, net 1,946,811 1,773,620 contract assets 179,439 158,243 inventories 39,180 42,321 prepaid expenses and other 41,831 48,116 total current assets 2,420,635 2,386,207 investments, notes and other long-term receivables 1,904 2,899 property, plant & equipment, net 145,638 134,351 operating lease right-of-use assets 233,173 — goodwill 1,013,822 990,887 identifiable intangible assets, net 488,017 488,286 other assets 90,389 86,177 total assets $ 4,393,578 $ 4,088,807 liabilities and equity current liabilities: current maturities of long-term debt and finance lease liabilities $ 18,385 $ 16,013 accounts payable 579,461 652,091 contract liabilities 544,346 552,290 accrued payroll and benefits 327,006 343,069 other accrued expenses and liabilities 185,398 170,935 operating lease liabilities, current 49,970 — total current liabilities 1,704,566 1,734,398 borrowings under revolving credit facility 25,000 25,000 long-term debt and finance lease liabilities 251,448 254,764 operating lease liabilities, long-term 195,149 — other long-term obligations 322,584 333,204 total liabilities 2,498,747 2,347,366 equity: total emcor group, inc. stockholders’ equity 1,894,185 1,740,545 noncontrolling interests 646 896 total equity 1,894,831 1,741,441 total liabilities and equity $ 4,393,578 $ 4,088,807 emcor group, inc. condensed consolidated statements of cash flows for the six months ended june 30, 2019 and 2018 (in thousands) (unaudited) 2019 2018 cash flows - operating activities: net income including noncontrolling interests $ 156,382 $ 126,190 adjustments to reconcile net income to net cash used in operating activities: depreciation and amortization 21,391 19,233 amortization of identifiable intangible assets 23,169 21,352 provision for doubtful accounts 851 7 deferred income taxes (920 ) 4,855 excess tax benefits from share-based compensation (593 ) (1,065 ) equity loss (income) from unconsolidated entities 835 (290 ) 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 6,225 5,956 distributions from unconsolidated entities 871 1,847 other reconciling items 111 389 changes in operating assets and liabilities, excluding the effect of businesses acquired (251,723 ) (212,217 ) net cash used in operating activities (42,198 ) (32,650 ) cash flows - investing activities: payments for acquisitions of businesses, net of cash acquired (63,991 ) (25,207 ) proceeds from sale of property, plant and equipment 1,326 605 purchase of property, plant and equipment (22,455 ) (15,914 ) investments in and advances to unconsolidated entities (794 ) (3,484 ) distributions from unconsolidated entities 84 83 net cash used in investing activities (85,830 ) (43,917 ) cash flows - financing activities: repayments of long-term debt and debt issuance costs (7,601 ) (7,634 ) repayments of finance lease liabilities (2,151 ) (696 ) dividends paid to stockholders (8,967 ) (9,381 ) repurchase of common stock — (60,508 ) taxes paid related to net share settlements of equity awards (3,735 ) (3,745 ) issuance of common stock under employee stock purchase plan 2,969 2,758 payments for contingent consideration arrangements (2,508 ) (3,298 ) distributions to noncontrolling interests (250 ) — net cash used in financing activities (22,243 ) (82,504 ) effect of exchange rate changes on cash, cash equivalents and restricted cash (175 ) (1,121 ) decrease in cash, cash equivalents and restricted cash (150,446 ) (160,192 ) cash, cash equivalents and restricted cash at beginning of year 366,214 469,388 cash, cash equivalents and restricted cash at end of period $ 215,768 $ 309,196 emcor group, inc. segment information (in thousands) (unaudited) for the three months ended june 30, 2019 2018 revenues from unrelated entities: united states electrical construction and facilities services $ 569,402 $ 479,542 united states mechanical construction and facilities services 823,086 723,882 united states building services 523,698 461,033 united states industrial services 295,460 183,922 total united states operations 2,211,646 1,848,379 united kingdom building services 112,556 105,507 total worldwide operations $ 2,324,202 $ 1,953,886 for the six months ended june 30, 2019 2018 revenues from unrelated entities: united states electrical construction and facilities services $ 1,097,472 $ 934,294 united states mechanical construction and facilities services 1,575,495 1,408,632 united states building services 1,035,777 915,785 united states industrial services 554,105 383,166 total united states operations 4,262,849 3,641,877 united kingdom building services 220,081 212,397 total worldwide operations $ 4,482,930 $ 3,854,274 emcor group, inc. segment information (in thousands) (unaudited) for the three months ended june 30, 2019 2018 operating income (loss): united states electrical construction and facilities services $ 43,799 $ 35,985 united states mechanical construction and facilities services 53,954 57,417 united states building services 28,001 22,430 united states industrial services 16,012 1,234 total united states operations 141,766 117,066 united kingdom building services 5,476 4,601 corporate administration (27,110 ) (20,730 ) restructuring expenses (173 ) (374 ) impairment loss on identifiable intangible assets — (907 ) total worldwide operations 119,959 99,656 other corporate items: net periodic pension (cost) income 400 717 interest expense, net (3,231 ) (2,823 ) income from continuing operations before income taxes $ 117,128 $ 97,550 for the six months ended june 30, 2019 2018 operating income (loss): united states electrical construction and facilities services $ 86,750 $ 71,836 united states mechanical construction and facilities services 94,939 97,037 united states building services 55,484 39,507 united states industrial services 25,648 4,675 total united states operations 262,821 213,055 united kingdom building services 9,617 8,371 corporate administration (49,721 ) (42,395 ) restructuring expenses (448 ) (464 ) impairment loss on identifiable intangible assets — (907 ) total worldwide operations 222,269 177,660 other corporate items: net periodic pension (cost) income 806 1,454 interest expense, net (6,054 ) (5,275 ) income from continuing operations before income taxes $ 217,021 $ 173,839 emcor group, inc. reconciliation of 2019 and 2018 operating income (in thousands) (unaudited) in our press release, we provide non-gaap 2019 and 2018 second quarter and year-to-date june 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 june 30, for the six months ended june 30, 2019 2018 2019 2018 gaap operating income $ 119,959 $ 99,656 $ 222,269 $ 177,660 impairment loss on identifiable intangible assets — 907 — 907 non-gaap operating income, excluding impairment loss on identifiable intangible assets $ 119,959 $ 100,563 $ 222,269 $ 178,567 emcor group, inc. reconciliation of 2019 and 2018 net income (in thousands) (unaudited) in our press release, we provide non-gaap 2019 and 2018 second quarter and year-to-date june 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 june 30, for the six months ended june 30, 2019 2018 2019 2018 gaap net income from continuing operations attributable to emcor group, inc. (1) $ 83,972 $ 71,021 $ 156,382 $ 126,677 impairment loss on identifiable intangible assets (2) — 907 — 907 non-gaap net income from continuing operations attributable to emcor group, inc., excluding impairment loss on identifiable intangible assets $ 83,972 $ 71,928 $ 156,382 $ 127,584 (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 second quarter and year-to-date june 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 june 30, for the six months ended june 30, 2019 2018 2019 2018 gaap diluted earnings per common share from continuing operations $ 1.49 $ 1.21 $ 2.77 $ 2.15 impairment loss on identifiable intangible assets (1) — 0.02 — 0.02 non-gaap diluted earnings per common share from continuing operations, excluding impairment loss on identifiable intangible assets $ 1.49 $ 1.23 $ 2.77 $ 2.17 (1) amount excludes de minimis income tax benefit.
