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EMCOR Group Inc.$84.99$.36.43%

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 EMCOR Group, Inc. Reports Fourth Quarter and Full-Year 2018 Results
   Thursday, February 21, 2019 7:30:00 AM ET

- Record Quarterly and Full-Year Revenues of $2.23 billion and $8.13 billion, respectively -

- Record Quarterly Diluted EPS from Cont. Operations of $1.38, 53.3% Increase Year-over-Year -

- Record Full-Year Diluted EPS from Cont. Operations of $4.89, 27.7% Increase Year-over-Year -

- Announces 2019 Revenues and Diluted EPS Guidance -

NORWALK, Conn.--(BUSINESS WIRE)-- EMCOR Group, Inc. (NYSE: EME) today reported results for the fourth quarter ended December 31, 2018.

For the fourth quarter of 2018, net income from continuing operations attributable to EMCOR was $79.3 million, or $1.38 per diluted share, compared to $53.3 million, or $0.90 per diluted share, for the fourth quarter of 2017. Net income from continuing operations attributable to EMCOR for the fourth quarter of 2017 included after-tax goodwill and identifiable intangible asset impairment charges, primarily related to the U.S. Industrial Services segment, partially offset by a tax benefit resulting from the revaluation of the Company’s U.S. net deferred tax liabilities due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”). Excluding these items, non-GAAP net income from continuing operations attributable to EMCOR for the fourth quarter of 2017 was $67.0 million or $1.13 per diluted share. Revenues for the fourth quarter of 2018 totaled $2.23 billion, an increase of 10.8%, compared to $2.01 billion for the fourth quarter of 2017.

Operating income for the fourth quarter of 2018 was $113.6 million or 5.1% of revenues. This compares to $48.1 million, or 2.4% of revenues, for the fourth quarter of 2017, which included pre-tax impairment charges of $57.8 million. Excluding such pre-tax impairment charges, non-GAAP operating income for the fourth quarter of 2017 was $105.9 million or 5.3% 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 fourth quarter of 2018 totaled $220.9 million, or 9.9% of revenues, compared to $204.6 million, or 10.2% of revenues, for the fourth quarter of 2017.

The Company's income tax rate in the fourth quarter of 2018 was 28.9%. This compares to an income tax benefit of 17.1% in the year ago period, which included a non-cash tax benefit of $39.3 million, or $0.66 per diluted share, resulting from the revaluation of the Company’s U.S. net deferred tax liabilities due to the enactment of the Tax Act.

Remaining performance obligations as of December 31, 2018 were $3.96 billion compared to $3.60 billion as of March 31, 2018. Domestic remaining performance obligations increased $388.9 million from the first quarter of 2018, while remaining performance obligations of our U.K. Building Services segment fell $28.4 million.

Tony Guzzi, Chairman, President and Chief Executive Officer of EMCOR, commented, “The Company closed out another terrific year achieving record quarterly revenues, operating income, net income and diluted earnings per share from continuing operations. We delivered a 10.8% increase in revenues during the fourth quarter and a 5.8% increase for the year, the majority of which was organic, underscored by broad-based strength across our segments. Our exceptional execution coupled with disciplined cost control drove strong operating margins of 5.1% and 5.0% for the fourth quarter and full year, respectively. Despite posting impressive revenue growth, our remaining performance obligations continue to be solid and diverse across end market sectors, and we remain well-positioned to capitalize on the sustained non-residential construction growth expected throughout 2019.”

Mr. Guzzi added, “Our U.S. Construction segments continue to deliver robust revenue performance, with combined revenue growth of 5.7% and 3.8% for the fourth quarter and full year, respectively, reflecting sustained market demand for our services. Solid operating margins of 7.1% in our U.S. Electrical Construction segment and 7.3% in our U.S. Mechanical Construction segment for the full-year period reflect strong execution across our portfolio of construction projects. Our U.S. Building Services segment continued its strong operational performance, posting double-digit revenue and operating income growth for the fourth quarter, primarily driven by our mechanical, energy and commercial site-based services operations. As expected, we saw a recovery in demand in our U.S. Industrial Services segment during the fourth quarter, with improvement in both our shop and field services operations, including turnaround project activity. Finally, our U.K. Building Services segment had a strong 2018, delivering revenue and operating income growth of 21.8% and 23.4%, respectively, for the full-year period, as we continue to execute on specialty project opportunities and new service contract awards.”

Revenues for the 2018 full-year period increased 5.8% to $8.13 billion compared to $7.69 billion for the 2017 full-year period. Net income from continuing operations attributable to EMCOR for the 2018 full-year period was $285.9 million, or $4.89 per diluted share, compared to $228.1 million, or $3.83 per diluted share, for the 2017 full-year period. Excluding a $0.9 million impairment charge recorded in the second quarter of 2018, non-GAAP net income from continuing operations attributable to EMCOR for the 2018 full-year period was $286.8 million or $4.91 per diluted share. This compares to non-GAAP net income from continuing operations attributable to EMCOR for the 2017 full-year period of $241.8 million, or $4.06 per diluted share, excluding the previously referenced after-tax impairment charges and the tax benefit resulting from the revaluation of the Company’s U.S. net deferred tax liabilities in 2017.

Operating income for the 2018 full-year period was $403.1 million, or 5.0% of revenues, compared to $328.9 million, or 4.3% of revenues, for the 2017 full-year period. Excluding the $0.9 million impairment charge in 2018, non-GAAP operating income for the 2018 full-year period was $404.0 million or 5.0% of revenues. This compares to non-GAAP operating income for the 2017 full-year period of $386.7 million, or 5.0% of revenues, excluding the $57.8 million pre-tax impairment charges recorded in 2017.

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.

For the 2018 full-year period, selling, general and administrative expenses totaled $799.2 million, or 9.8% of revenues, compared to $758.7 million, or 9.9% of revenues, for the 2017 full-year period.

Based on favorable project mix and assuming the continuation of current market conditions, EMCOR expects full-year 2019 revenues to be between $8.3 billion and $8.4 billion, and full-year 2019 diluted earnings per share from continuing operations to be in the range of $4.70 to $5.40.

Mr. Guzzi concluded, “Following a record year, we are optimistic about our opportunities to drive sustained growth across our business. Our guidance for 2019 reflects our expanding customer base and diverse pipeline of project activity, while also considering the limited visibility we have into the second half of the year. Looking ahead, we will continue to leverage our flexible balance sheet to invest in our business, consistent with our strategy, and return capital to shareholders through share buybacks 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 .

EMCOR Group's fourth quarter conference call will be available live via internet broadcast today, Thursday, February 21, at 10:30 AM Eastern Standard Time. The live call may be accessed through the Company's website at .

Forward Looking Statements:

This release contains certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995. Any such comments speak only as of this date and EMCOR assumes no obligation to update any such forward-looking statements. 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 and . 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 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)

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

       
(Unaudited)

For the three months ended
December 31,

For the twelve months ended
December 31,

2018   2017 2018 2017
Revenues $ 2,229,308 $ 2,012,639 $ 8,130,631 $ 7,686,999
Cost of sales 1,893,157   1,701,538   6,925,178   6,539,987  
Gross profit 336,151 311,101 1,205,453 1,147,012
Selling, general and administrative expenses 220,891 204,602 799,157 758,714
Restructuring expenses 1,613 623 2,306 1,577
Impairment loss on goodwill and identifiable intangible assets   57,819   907   57,819  
Operating income 113,647 48,057 403,083 328,902
Net periodic pension (cost) income 674 443 2,743 1,652
Interest expense, net (2,787 ) (2,948 ) (10,798 ) (11,805 )
Income from continuing operations before income taxes 111,534 45,552 395,028 318,749
Income tax provision (benefit) 32,233   (7,774 ) 109,106   90,699  
Income from continuing operations 79,301 53,326 285,922 228,050
Loss from discontinued operation, net of income taxes (1,335 ) (128 ) (2,345 ) (857 )
Net income including noncontrolling interests 77,966 53,198 283,577 227,193
Less: Net loss (income) attributable to noncontrolling interests 2   3   (46 ) 3  
Net income attributable to EMCOR Group, Inc. $ 77,968   $ 53,201   $ 283,531   $ 227,196  
 
Basic earnings (loss) per common share:
From continuing operations $ 1.39   $ 0.91   $ 4.92   $ 3.85  
From discontinued operation $ (0.02 ) $ (0.00 ) $ (0.04 ) $ (0.01 )
 
Diluted earnings (loss) per common share:
From continuing operations $ 1.38   $ 0.90   $ 4.89   $ 3.83  
From discontinued operation $ (0.02 ) $ (0.00 ) $ (0.04 ) $ (0.01 )
 
Weighted average shares of common stock outstanding:
Basic 57,187,490 58,903,875 58,112,838 59,254,256
Diluted 57,514,189 59,314,187 58,443,467 59,618,969
 
Dividends declared per common share $ 0.08   $ 0.08   $ 0.32   $ 0.32  
 
 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

       
December 31,

2018

December 31,

2017

ASSETS
Current assets:
Cash and cash equivalents $ 363,907 $ 467,430
Accounts receivable, net 1,773,620 1,607,922
Contract assets 158,243 122,621
Inventories 42,321 42,724
Prepaid expenses and other 48,116   43,812
Total current assets 2,386,207 2,284,509
Investments, notes and other long-term receivables 2,899 2,309
Property, plant & equipment, net 134,351 127,156
Goodwill 990,887 964,893
Identifiable intangible assets, net 488,286 495,036
Other assets 86,177   92,001
Total assets $ 4,088,807   $ 3,965,904
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt and capital lease obligations $ 16,013 $ 15,364
Accounts payable 652,091 567,840
Contract liabilities 552,290 524,156
Accrued payroll and benefits 343,069 322,865
Other accrued expenses and liabilities 170,935   220,727
Total current liabilities 1,734,398 1,650,952
Borrowings under revolving credit facility 25,000 25,000
Long-term debt and capital lease obligations 254,764 269,786
Other long-term obligations 333,204   346,049
Total liabilities 2,347,366   2,291,787
Equity:
Total EMCOR Group, Inc. stockholders’ equity 1,740,545 1,673,267
Noncontrolling interests 896   850
Total equity 1,741,441   1,674,117
Total liabilities and equity $ 4,088,807   $ 3,965,904
 
 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Twelve Months Ended December 31, 2018 and 2017

(In thousands)

     
2018 2017
Cash flows - operating activities:
Net income including noncontrolling interests $ 283,577 $ 227,193
Depreciation and amortization 38,472 39,915
Amortization of identifiable intangible assets 42,443 48,594
Deferred income taxes 4,249 (53,358 )
Excess tax benefits from share-based compensation (1,646 ) (1,616 )
Equity income from unconsolidated entities (347 ) (864 )
Non-cash expense for impairment of goodwill and identifiable intangible assets 907 57,819
Non-cash share-based compensation expense 11,030 9,939
Distributions from unconsolidated entities 3,110 5,506
Other reconciling items 2,906 1,280
Changes in operating assets and liabilities, excluding the effect of businesses acquired (113,690 ) 31,641  
Net cash provided by operating activities 271,011   366,049  
Cash flows - investing activities:
Payments for acquisitions of businesses, net of cash acquired (72,080 ) (107,223 )
Proceeds from sale of property, plant and equipment 1,237 4,014
Purchase of property, plant and equipment (43,479 ) (34,684 )
Investments in and advances to unconsolidated entities (3,484 ) (675 )
Distributions from unconsolidated entities 84   475  
Net cash used in investing activities (117,722 ) (138,093 )
Cash flows - financing activities:
Repayments of revolving credit facility (100,000 )
Repayments of long-term debt and debt issuance costs (15,235 ) (15,202 )
Repayments of capital lease obligations (1,501 ) (1,445 )
Dividends paid to stockholders (18,640 ) (18,971 )
Repurchase of common stock (216,244 ) (93,166 )
Taxes paid related to net share settlements of equity awards (3,848 ) (3,462 )
Issuance of common stock under employee stock purchase plan 5,765 4,793
Payments for contingent consideration arrangements (3,339 ) (1,017 )
Net cash used in financing activities (253,042 ) (228,470 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash (3,421 ) 3,242  
(Decrease) increase in cash, cash equivalents and restricted cash (103,174 ) 2,728
Cash, cash equivalents and restricted cash at beginning of year 469,388   466,660  
Cash, cash equivalents and restricted cash at end of period $ 366,214   $ 469,388  
 
 

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands)

     
(Unaudited)

For the three months ended
December 31,

2018   2017
Revenues from unrelated entities:
United States electrical construction and facilities services $ 534,055 $ 479,410
United States mechanical construction and facilities services 808,471 790,785
United States building services 485,999 438,302
United States industrial services 298,875   207,475
Total United States operations 2,127,400 1,915,972
United Kingdom building services 101,908   96,667
Total worldwide operations $ 2,229,308   $ 2,012,639
 

For the twelve months ended
December 31,

2018 2017
Revenues from unrelated entities:
United States electrical construction and facilities services $ 1,954,323 $ 1,829,567
United States mechanical construction and facilities services 3,020,307 2,963,815
United States building services 1,875,485 1,753,703
United States industrial services 865,645   799,169
Total United States operations 7,715,760 7,346,254
United Kingdom building services 414,871   340,745
Total worldwide operations $ 8,130,631   $ 7,686,999
 
 

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands)

     
(Unaudited)

For the three months ended
December 31,

2018   2017
Operating income (loss):
United States electrical construction and facilities services $ 33,121 $ 40,266
United States mechanical construction and facilities services 63,488 61,368
United States building services 25,005 21,183
United States industrial services 15,451   2,511  
Total United States operations 137,065 125,328
United Kingdom building services 3,102 5,224
Corporate administration (24,907 ) (24,053 )
Restructuring expenses (1,613 ) (623 )
Impairment loss on goodwill and identifiable intangible assets   (57,819 )
Total worldwide operations 113,647 48,057
Other corporate items:
Net periodic pension (cost) income 674 443
Interest expense (3,503 ) (3,306 )
Interest income 716   358  
Income from continuing operations before income taxes $ 111,534   $ 45,552  
 

For the twelve months ended
December 31,

2018 2017
Operating income (loss):
United States electrical construction and facilities services $ 139,430 $ 150,001
United States mechanical construction and facilities services 219,352 212,396
United States building services 93,827 81,720
United States industrial services 28,172   19,084  
Total United States operations 480,781 463,201
United Kingdom building services 15,930 12,905
Corporate administration (90,415 ) (87,808 )
Restructuring expenses (2,306 ) (1,577 )
Impairment loss on goodwill and identifiable intangible assets (907 ) (57,819 )
Total worldwide operations 403,083 328,902
Other corporate items:
Net periodic pension (cost) income 2,743 1,652
Interest expense (13,544 ) (12,770 )
Interest income 2,746   965  
Income from continuing operations before income taxes $ 395,028   $ 318,749  
 
 

EMCOR GROUP, INC.

RECONCILIATION OF 2018 AND 2017 OPERATING INCOME

(In thousands) (Unaudited)
 

In our press release, we provide non-GAAP 2018 and 2017 fourth quarter and year-to-date December 31, 2018 and 2017 operating income. The following table provides a reconciliation between 2018 and 2017 operating income based on non-GAAP measures to the most directly comparable GAAP measures.

   

For the three months ended
December 31,

For the twelve months ended
December 31,

2018   2017 2018   2017
GAAP operating income $ 113,647 $ 48,057 $ 403,083 $ 328,902
Impairment loss on goodwill and identifiable intangible assets   57,819   907   57,819
Non-GAAP operating income, excluding the impairment loss on goodwill and identifiable intangible assets $ 113,647   $ 105,876   $ 403,990   $ 386,721
 
 

EMCOR GROUP, INC.

RECONCILIATION OF 2018 AND 2017 NET INCOME

(In thousands) (Unaudited)
 

In our press release, we provide non-GAAP 2018 and 2017 fourth quarter and year-to-date December 31, 2018 and 2017 net income from continuing operations attributable to EMCOR Group, Inc. The following table provides a reconciliation between 2018 and 2017 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
December 31,

For the twelve months ended
December 31,

2018   2017 2018   2017
GAAP net income from continuing operations attributable to EMCOR Group, Inc. (1) $ 79,303 $ 53,329 $ 285,876 $ 228,053
Impairment loss on goodwill and identifiable intangible assets (2) 53,054 907 53,054
Impact of change in tax rate on net deferred tax liability balance   (39,343 )   (39,343 )
Non-GAAP net income from continuing operations attributable to EMCOR Group, Inc., excluding the impairment loss on goodwill and identifiable intangible assets and impact of change in tax rate on net deferred tax liability balance $ 79,303   $ 67,040   $ 286,783   $ 241,764  
 
(1)   Amount is income from continuing operations less net income attributable to noncontrolling interest.
(2) Amount is net of tax effect of $4.8 million in the 2017 quarter and year-to-date periods. Amount excludes de minimus income tax benefit in the 2018 year-to-date period.
 
 

EMCOR GROUP, INC.

RECONCILIATION OF 2018 AND 2017 DILUTED EARNINGS PER SHARE FIGURES

(Unaudited)
 

In our press release, we provide non-GAAP 2018 and 2017 fourth quarter and year-to-date December 31, 2018 and 2017 diluted earnings per share from continuing operations. The following table provides a reconciliation between 2018 and 2017 EPS based on non-GAAP measures to the most directly comparable GAAP measures.

   

For the three months ended
December 31,

For the twelve months ended
December 31,

2018

  2017 2018   2017
GAAP diluted earnings per common share from continuing operations $ 1.38 $ 0.90 $ 4.89 $ 3.83
Impairment loss on goodwill and identifiable intangible assets (1) 0.89 0.02 0.89
Impact of change in tax rate on net deferred tax liability balance   (0.66 )   (0.66 )
Non-GAAP diluted earnings per common share from continuing operations, excluding the impairment loss on goodwill and identifiable intangible assets and impact of change in tax rate on net deferred tax liability balance $ 1.38   $ 1.13   $ 4.91   $ 4.06  
 
(1)   Amount is net of tax effect of $4.8 million in the 2017 quarter and year-to-date periods. Amount excludes de minimus income tax benefit in the 2018 year-to-date period.

R. Kevin Matz
Executive Vice President
Shared Services
(203) 849-7938

FTI Consulting, Inc.
Investors: Jamie Baird
(212) 850-5600

LAK Public Relations, Inc.
Media: Lisa Linden / David Simpson
(212) 575-4545

Source: EMCOR Group, Inc.



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