EX-99.1 2 eme-ex99_2014930xq3.htm THIRD QUARTER 2014 PRESS RELEASE EME-EX99_2014.9.30-Q3

 
EXHIBIT 99.1


FOR:
 
EMCOR GROUP, INC.
News Release
 
 
CONTACT:
 
R. Kevin Matz
Executive Vice President
Shared Services
(203) 849-7938
 
 
 
 
 
FTI Consulting, Inc.
Investors: Nathan Elwell / Daniel Haykin
(212) 850-5600
 
 
 
 
 
Linden Alschuler & Kaplan, Inc.
Media: Lisa Linden / Mollie Fullington
212-575-4545 / 917-346-6123
EMCOR GROUP, INC. REPORTS THIRD QUARTER 2014 RESULTS
 
 - GAAP Diluted EPS from Continuing Operations of $0.68 -
 - Total Backlog Increased 9.8% to $3.70 Billion -
 - Ceases UK Construction Operations -

NORWALK, CONNECTICUT, October 28, 2014 - EMCOR Group, Inc. (NYSE: EME) today reported results for the third quarter ended September 30, 2014.

For the third quarter of 2014, net income attributable to EMCOR was $45.0 million, or $0.68 per diluted share from continuing operations, compared to net income of $26.7 million, or $0.43 per diluted share from continuing operations, in the third quarter of 2013. Included in net income for the third quarter of 2014 was an after-tax gain of $7.1 million, or $0.11 per diluted share, associated with the sale of a building owned by one of our subsidiaries. Included in net income for the third quarter of 2013 are after-tax transaction expenses of $2.9 million, or $0.04 per diluted share, associated with the Company’s acquisition of RepconStrickland, Inc. Revenues in the third quarter of 2014 totaled $1.57 billion compared to revenues of $1.61 billion in the year ago period.

Operating income for the third quarter of 2014 was $73.6 million, or 4.7% of revenues. Included in operating income for the third quarter of 2014 was a pre-tax $11.7 million gain associated with the sale of the aforementioned building. Excluding this gain, non-GAAP operating income for the third quarter of 2014 was $61.8 million, or 3.9% of revenues. For the third quarter of 2013, operating income was $58.0 million, or 3.6% of revenues, which included $4.7 million of pre-tax transaction expenses associated with the RepconStrickland, Inc. acquisition. Excluding the aforementioned 2013 expenses, the Company’s non-GAAP operating income for the third quarter of 2013 was $62.7 million, or 3.9% of revenues.

Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share to the comparable GAAP figures.

Selling, general and administrative expenses were $160.0 million, or 10.2% of revenues, in the third quarter of 2014 compared to $147.9 million, or 9.2% of revenues, in the year ago period.


 – MORE –

EMCOR Reports Third Quarter Results
 Page 2

The Company's income tax rate for the 2014 third quarter was 34.5%, compared to an income tax rate of 44.7% in the year ago period.

Backlog as of September 30, 2014 was $3.70 billion, an increase of 9.8% from $3.36 billion at the end of the 2013 third quarter and an increase of 10.5% from $3.34 billion as of December 31, 2013. Compared to backlog as of September 30, 2013, domestic backlog grew by $331 million, fueled by backlog growth in our U.S. Electrical and Mechanical Construction segments, while our U.S. Building Services segment backlog decreased by $11 million. From a market sector perspective, commercial backlog increased $317 million to $1.3 billion and combined with an increase in transportation backlog more than offset declines in institutional and industrial backlog.

Tony Guzzi, President and Chief Executive Officer of EMCOR Group commented, “Our overall performance in the third quarter highlights our strong operational execution. While the pace of non-residential construction continues to be uneven, we are seeing an accelerating recovery evidenced by the growth of our backlog and the breadth of opportunities currently in our pipeline. We have maintained a disciplined and measured approach to winning new business that positions EMCOR for sustained success as the market continues to improve.”
 
Mr. Guzzi added, “Our U.S. Electrical Construction segment continued to perform at a high level while our U.S. Mechanical Construction segment improved as expected. Our U.S. Building Services segment, despite comparison to its exceptionally strong 2013 third quarter, performed very well led by mechanical services and improved business at our government services operations. Our U.S. Industrial Services segment showed substantial improvement from the year ago quarter in both revenue and operating margins, and we foresee a good fall turnaround season. In addition, during the third quarter we ceased construction operations in the UK; therefore, the results of the construction operations of our UK segment for all periods are now presented as a discontinued operation.”
 
Mr. Guzzi concluded, “We are pleased with our performance thus far in 2014, which has produced strong cash flow and has allowed us to maintain balance sheet flexibility. As we’ve stated in our previous communications, we believe in a balanced approach to capital allocation, which was highlighted by our recently announced $250 million share repurchase program. While we continue to operate in a choppy market environment, we are optimistic that the non-residential market will continue to improve and in turn will drive earnings growth and profitability in 2015 and beyond.”

Revenues for the first nine months of 2014 totaled $4.71 billion, slightly higher compared to $4.68 billion for the first nine months of 2013.

Net income attributable to EMCOR for the first nine months of 2014 was $126.2 million, or $1.92 per diluted share from continuing operations, compared to net income of $77.9 million, or $1.40 per diluted share from continuing operations, for the first nine months of 2013. Included in net income from continuing operations for the first nine months of 2014 was an after-tax gain of $7.1 million, or $0.11 per diluted share, associated with the sale of a building. Included in net income from continuing operations for the year ago period are after-tax transaction expenses of $4.3 million, or $0.06 per share, associated with the 2013 acquisition of RepconStrickland, Inc.



 – MORE –

EMCOR Reports Third Quarter Results
 Page 3
    
Operating income in the first nine months of 2014 was $215.4 million, or 4.6% of revenues. Included in operating income for the first nine months of 2014 was a pre-tax gain of $11.7 million from the building sale. Excluding this gain, non-GAAP operating income for the first nine months of 2014 was $203.6 million, or 4.3% of revenues. For the first nine months of 2013, operating income of $164.4 million, or 3.5% of revenues, which included pre-tax transaction expenses of $6.1 million associated with the Company’s acquisition of RepconStrickland, Inc. Excluding the aforementioned 2013 expenses, the Company’s non-GAAP operating income for the first nine months of 2013 was $170.5 million, or 3.6% of revenues.

Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share to the comparable GAAP figures.

For the first nine months of 2014, SG&A totaled $454.2 million, or 9.6% of revenues, compared to $419.7 million, or 9.0% of revenues, in the first nine months of 2013.

The Company noted that, based on the continuation of uncertain market conditions, it now expects to generate revenues in 2014 of approximately $6.4 billion, and continues to expect non-GAAP diluted earnings per share from continuing operations for 2014 of $2.50 to $2.70 excluding the pre-tax gain of $11.7 million on the building sale in July 2014.

EMCOR Group, Inc. is a Fortune 500 worldwide leader in mechanical and electrical construction services, energy infrastructure and facilities services. This press release and other press releases may be viewed at the Company's Web site at www.emcorgroup.com.

EMCOR Group's third quarter conference call will be available live via internet broadcast today, Tuesday, October 28, 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 and its 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, backlog 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 and mix of business. Certain of the risks and factors associated with EMCOR's business are also discussed in the Company's 2013 Form 10-K 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.

 – MORE –

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,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
$
1,566,711

 
$
1,605,315

 
$
4,710,169

 
$
4,684,248

Cost of sales
 
1,344,482

 
1,398,753

 
4,051,496

 
4,099,473

Gross profit
 
222,229

 
206,562

 
658,673

 
584,775

Selling, general and administrative expenses
 
159,983

 
147,917

 
454,243

 
419,679

Restructuring expenses
 
398

 
601

 
799

 
652

Gain on sale of building
 
11,749

 
—

 
11,749

 
—

Operating income
 
73,597

 
58,044

 
215,380

 
164,444

Interest expense
 
(2,397
)
 
(2,351
)
 
(6,887
)
 
(5,978
)
Interest income
 
186

 
234

 
641

 
862

Income from continuing operations before income taxes
 
71,386

 
55,927

 
209,134

 
159,328

Income tax provision
 
23,998

 
24,024

 
75,428

 
60,622

Income from continuing operations
 
47,388

 
31,903

 
133,706

 
98,706

Loss from discontinued operation, net of income taxes
 
(611
)
 
(3,010
)
 
(4,087
)
 
(17,621
)
Net income including noncontrolling interests
 
46,777

 
28,893

 
129,619

 
81,085

Less: Net income attributable to noncontrolling interests
 
(1,753
)
 
(2,203
)
 
(3,421
)
 
(3,214
)
Net income attributable to EMCOR Group, Inc.
 
$
45,024

 
$
26,690

 
$
126,198

 
$
77,871

 
 
 
 
 
 
 
 
 
Basic earnings (loss) per common share:
 
 
 
 
 
 
 
 
From continuing operations
 
$
0.68

 
$
0.44

 
$
1.94

 
$
1.42

From discontinued operation
 
$
(0.01
)
 
$
(0.04
)
 
$
(0.06
)
 
$
(0.26
)
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share:
 
 
 
 
 
 
 
 
From continuing operations
 
$
0.68

 
$
0.43

 
$
1.92

 
$
1.40

From discontinued operation
 
$
(0.01
)
 
$
(0.04
)
 
$
(0.06
)
 
$
(0.26
)
 
 
 
 
 
 
 
 
 
Weighted average shares of common stock outstanding:
 
 

 
 
 
 
 
 
   Basic
 
66,714,641

 
67,174,848

 
67,062,732

 
67,127,149

   Diluted
 
67,417,547

 
68,163,701

 
67,802,606

 
68,119,740

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.08

 
$
0.06

 
$
0.24

 
$
0.12










EMCOR GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 
 
September 30,
2014
(Unaudited)
 
December 31,
2013
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
437,446

 
$
439,813

Accounts receivable, net
 
1,233,916

 
1,268,226

Costs and estimated earnings in excess of billings on uncompleted contracts
 
121,577

 
90,727

Inventories
 
67,173

 
52,123

Prepaid expenses and other
 
66,558

 
79,216

Total current assets
 
1,926,670

 
1,930,105

Investments, notes and other long-term receivables
 
7,634

 
6,799

Property, plant & equipment, net
 
122,240

 
123,414

Goodwill
 
834,102

 
834,825

Identifiable intangible assets, net
 
513,001

 
541,497

Other assets
 
31,020

 
29,275

Total assets
 
$
3,434,667

 
$
3,465,915

LIABILITIES AND EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Borrowings under revolving credit facility
 
$
—

 
$
—

Current maturities of long-term debt and capital lease obligations
 
19,138

 
19,332

Accounts payable
 
404,094

 
487,738

Billings in excess of costs and estimated earnings on uncompleted contracts
 
384,782

 
381,295

Accrued payroll and benefits
 
247,151

 
237,779

Other accrued expenses and liabilities
 
191,965

 
172,599

Total current liabilities
 
1,247,130

 
1,298,743

Borrowings under revolving credit facility
 
—

 
—

Long-term debt and capital lease obligations
 
321,222

 
335,331

Other long-term obligations
 
340,592

 
352,215

Total liabilities
 
1,908,944

 
1,986,289

Equity:
 
 

 
 

Total EMCOR Group, Inc. stockholders’ equity
 
1,511,691

 
1,466,265

Noncontrolling interests
 
14,032

 
13,361

Total equity
 
1,525,723

 
1,479,626

Total liabilities and equity
 
$
3,434,667

 
$
3,465,915










EMCOR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(In thousands) (Unaudited)

 
 
2014
 
2013
Cash flows - operating activities:
 
 
 
 
Net income including noncontrolling interests
 
$
129,619

 
$
81,085

Depreciation and amortization
 
27,211

 
25,907

Amortization of identifiable intangible assets
 
28,497

 
21,317

Deferred income taxes
 
4,434

 
(666
)
Loss on sale of subsidiary
 
608

 
—

Gain on sale of building
 
(11,749
)
 
—

Excess tax benefits from share-based compensation
 
(5,886
)
 
(1,267
)
Equity income from unconsolidated entities
 
(1,349
)
 
(880
)
Other non-cash items
 
8,005

 
2,403

Distributions from unconsolidated entities
 
1,640

 
634

Changes in operating assets and liabilities, excluding the effect of businesses acquired
 
(72,036
)
 
(60,486
)
Net cash provided by operating activities
 
108,994

 
68,047

Cash flows - investing activities:
 
 

 
 

Payments for acquisitions of businesses, net of cash acquired
 
—

 
(448,943
)
Proceeds from sale of subsidiary
 
1,108

 
—

Proceeds from sale of building
 
11,885

 
—

Proceeds from sale of property, plant and equipment
 
3,138

 
1,171

Purchase of property, plant and equipment
 
(27,574
)
 
(24,006
)
Maturity of short-term investments
 
—

 
4,616

Investments in and advances to unconsolidated entities and joint ventures
 
(1,865
)
 
—

Net cash used in investing activities
 
(13,308
)
 
(467,162
)
Cash flows - financing activities:
 
 

 
 

Proceeds from revolving credit facility
 
—

 
250,000

Repayments of long-term debt
 
(13,074
)
 
(6
)
Repayments of capital lease obligations
 
(1,272
)
 
(1,256
)
Dividends paid to stockholders
 
(16,109
)
 
(8,052
)
Repurchase of common stock
 
(76,395
)
 
(4,998
)
Proceeds from exercise of stock options
 
5,044

 
2,320

Payments to satisfy minimum tax withholding
 
(1,481
)
 
(927
)
Issuance of common stock under employee stock purchase plan
 
2,677

 
2,088

Payments for contingent consideration arrangements
 
—

 
(537
)
Distributions to noncontrolling interests
 
(2,750
)
 
(1,300
)
Excess tax benefits from share-based compensation
 
5,886

 
1,267

Net cash (used in) provided by financing activities
 
(97,474
)
 
238,599

Effect of exchange rate changes on cash and cash equivalents
 
(579
)
 
(750
)
Decrease in cash and cash equivalents
 
(2,367
)
 
(161,266
)
Cash and cash equivalents at beginning of year
 
439,813

 
605,303

Cash and cash equivalents at end of period
 
$
437,446

 
$
444,037






EMCOR GROUP, INC.
SEGMENT INFORMATION
(In thousands) (Unaudited)

 
 
For the three months ended September 30,
 
 
2014
 
2013
Revenues from unrelated entities:
 
 
 
 
United States electrical construction and facilities services
 
$
314,666

 
$
340,529

United States mechanical construction and facilities services
 
565,227

 
616,403

United States building services
 
427,564

 
457,777

United States industrial services
 
172,452

 
110,879

Total United States operations
 
1,479,909

 
1,525,588

United Kingdom building services
 
86,802

 
79,727

Total worldwide operations
 
$
1,566,711

 
$
1,605,315

 
 
 
 
 

 
 
For the nine months ended September 30,
 
 
2014
 
2013
Revenues from unrelated entities:
 
 
 
 
United States electrical construction and facilities services
 
$
958,295

 
$
984,443

United States mechanical construction and facilities services
 
1,616,794

 
1,741,483

United States building services
 
1,293,750

 
1,361,392

United States industrial services
 
581,642

 
335,358

Total United States operations
 
4,450,481

 
4,422,676

United Kingdom building services
 
259,688

 
261,572

Total worldwide operations
 
$
4,710,169

 
$
4,684,248

 
 
 
 
 






















EMCOR GROUP, INC.
SEGMENT INFORMATION
(In thousands) (Unaudited)

 
 
For the three months ended September 30,
 
 
2014
 
2013
Operating income (loss):
 
 
 
 
United States electrical construction and facilities services
 
$
20,666

 
$
23,971

United States mechanical construction and facilities services
 
30,206

 
27,421

United States building services
 
19,388

 
23,285

United States industrial services
 
7,385

 
308

Total United States operations
 
77,645

 
74,985

United Kingdom building services
 
3,082

 
3,192

Corporate administration
 
(18,481
)
 
(19,532
)
Restructuring expenses
 
(398
)
 
(601
)
Gain on sale of building
 
11,749

 
—

Total worldwide operations
 
73,597

 
58,044

Other corporate items:
 
 

 
 
Interest expense
 
(2,397
)
 
(2,351
)
Interest income
 
186

 
234

Income from continuing operations before income taxes
 
$
71,386

 
$
55,927

 
 
 
 
 
 
 
For the nine months ended September 30,
 
 
2014
 
2013
Operating income (loss):
 
 
 
 
United States electrical construction and facilities services
 
$
67,162

 
$
68,147

United States mechanical construction and facilities services
 
78,052

 
56,809

United States building services
 
53,606

 
52,928

United States industrial services
 
43,155

 
26,320

Total United States operations
 
241,975

 
204,204

United Kingdom building services
 
12,647

 
11,845

Corporate administration
 
(50,192
)
 
(50,953
)
Restructuring expenses
 
(799
)
 
(652
)
Gain on sale of building
 
11,749

 
—

Total worldwide operations
 
215,380

 
164,444

Other corporate items:
 
 

 
 
Interest expense
 
(6,887
)
 
(5,978
)
Interest income
 
641

 
862

Income from continuing operations before income taxes
 
$
209,134

 
$
159,328

 
 
 
 
 





EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 OPERATING INCOME
(In thousands) (Unaudited)

In our press release, we provide actual 2014 and 2013 third quarter and year-to-date September 30, 2014 and 2013 operating income.  The following table provides a reconciliation between 2014 and 2013 operating income based on non-GAAP measures to the most direct comparable GAAP measures.

 
 
For the three months ended September 30,
 
For the nine months ended September 30,
 
 
2014
 
2013
 
2014
 
2013
GAAP operating income
 
$
73,597

 
$
58,044

 
$
215,380

 
$
164,444

Transaction expenses related to the acquisition of RepconStrickland, Inc.
 
—

 
4,689

 
—

 
6,050

Gain on sale of building
 
(11,749
)
 
—

 
(11,749
)
 
—

Non-GAAP operating income, excluding RepconStrickland transaction expenses and gain on sale of building
 
$
61,848

 
$
62,733

 
$
203,631

 
$
170,494







































EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 NET INCOME
(In thousands) (Unaudited)

In our press release, we provide actual 2014 and 2013 third quarter and year-to-date September 30, 2014 and 2013 net income attributable to EMCOR Group, Inc.  The following table provides a reconciliation between 2014 and 2013 net income attributable to EMCOR Group, Inc. based on non-GAAP measures to the most direct comparable GAAP measures.

 
 
For the three months ended September 30,
 
For the nine months ended September 30,
 
 
2014
 
2013
 
2014
 
2013
GAAP net income attributable to EMCOR Group, Inc.
 
$
45,024

 
$
26,690

 
$
126,198

 
$
77,871

Transaction expenses related to the acquisition of RepconStrickland, Inc. (1)
 
—

 
2,898

 
—

 
4,256

Gain on sale of building (2)
 
(7,126
)
 
—

 
(7,126
)
 
—

Non-GAAP net income attributable to EMCOR Group, Inc., excluding RepconStrickland transaction expenses and gain on sale of building
 
$
37,898

 
$
29,588

 
$
119,072

 
$
82,127


(1) Amount is net of tax effect of $1.8 million in the 2013 quarter and in the 2013 nine-month period.
(2)  Amount is net of tax effect of $4.6 million in the 2014 quarter and in the 2014 nine-month period.

































EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 DILUTED EARNINGS PER SHARE FIGURES
(Unaudited)

In our press release, we provide actual 2014 and 2013 third quarter and year-to-date September 30, 2014 and 2013 diluted earnings per share.  The following table provides a reconciliation between 2014 and 2013 diluted EPS based on non-GAAP measures to the most direct comparable GAAP measures.

 
 
For the three months ended September 30,
 
For the nine months ended September 30,
 
 
2014
 
2013
 
2014
 
2013
GAAP diluted EPS from continuing operations
 
$
0.68

 
$
0.43

 
$
1.92

 
$
1.40

Transaction expenses related to the acquisition of RepconStrickland, Inc. (1)
 
—

 
0.04

 
—

 
0.06

Gain on sale of building (2)
 
(0.11
)
 
—

 
(0.11
)
 
—

Non-GAAP diluted earnings per common share, excluding RepconStrickland transaction expenses and gain on sale of building
 
$
0.57

 
$
0.48

 
$
1.82

 
$
1.46


(1) Amount is net of tax effect of $1.8 million in the 2013 quarter and in the 2013 nine-month period.
(2)  Amount is net of tax effect of $4.6 million in the 2014 quarter and in the 2014 nine-month period.








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