10-KPeriod: FY2007

EMCOR Group, Inc. Annual Report, Year Ended Dec 31, 2007

Filed February 21, 2008For Securities:EME

Summary

EMCOR Group, Inc. reported strong financial performance in 2007, with record highs in revenues, operating income, and net income. The company, a leading provider of electrical and mechanical construction and facilities services, saw a significant increase in revenue driven by growth in various US construction markets, strategic acquisitions, and increased demand for maintenance and retrofit work. The company's diversification into facilities services, which are generally less cyclical than construction, contributed to stability. While the company experienced an operational loss in its UK segment, overall profitability improved substantially. EMCOR's backlog also saw a healthy increase, indicating positive future demand. The company's financial position was strengthened by significant investments in acquisitions, financed partially through new term loan debt. Investors should note the company's ongoing focus on expanding its facilities services and the impact of acquisitions on its goodwill and intangible assets.

Key Highlights

  • 1EMCOR achieved record revenues of $5.9 billion in 2007, a 20.9% increase year-over-year.
  • 2Operating income grew to $199.8 million, with an operating margin of 3.4%, up from 2.3% in 2006.
  • 3Net income increased significantly to $126.8 million, resulting in diluted EPS of $1.90.
  • 4The company's backlog increased to $4.49 billion as of December 31, 2007, up from $3.50 billion at the end of 2006.
  • 5EMCOR completed several acquisitions in 2007, including the significant acquisition of Ohmstede, to expand its service offerings and geographic reach.
  • 6The company's facilities services segment continues to grow, contributing 27% of total revenues and offering a less cyclical revenue stream.
  • 7Despite strong performance, the UK construction and facilities services segment reported an operating loss, primarily due to its rail division.

Frequently Asked Questions

EMCOR's revenue growth in 2007 was driven by increased demand in US construction markets (hospitality, high-tech, healthcare, commercial, institutional, industrial, and water/wastewater treatment), the inclusion of revenues from acquired companies, and a rise in demand for maintenance and retrofit services through its facilities services segment.

Acquisitions, notably the purchase of Ohmstede, significantly contributed to revenue and operating income growth. However, these acquisitions also led to an increase in goodwill and identifiable intangible assets on the balance sheet.

EMCOR's backlog increased to $4.49 billion by the end of 2007, up from $3.50 billion in the prior year. This indicates a positive outlook for future revenue and continued demand for its services across various markets.

No, EMCOR did not pay dividends on its common stock in 2007 or 2006 and does not anticipate paying them in the foreseeable future, partly due to limitations in its working capital credit facility.

Key risks include economic downturns impacting construction demand, fluctuations in material and fuel prices, intense competition, reliance on fixed-price contracts, potential issues with unionized workforces, and risks associated with integrating future acquisitions. The company also faces potential liabilities from litigation and environmental regulations.