01—Abstract
Summary
Summary of the 10-K filed February 25, 2010. Cited figures are marked; the original filing is the authoritative source.
EMCOR Group, Inc. reported revenues of $5.55 billiona for the year ended December 31, 2009, a decrease of 18.2% from $6.79 billion in 2008.
This decline was primarily attributed to the economic slowdown impacting construction project demand and tightening credit markets, which affected various segments of the business, including domestic commercial and hospitality projects, and international operations. The company also noted unfavorable exchange rate effects. Despite the revenue decrease, EMCOR managed to improve its gross profit margin to 14.9%b in 2009 from 13.1% in 2008, and its operating margin increased to 4.7% from 4.5%.
This improvement was driven by better performance in domestic construction segments, favorable project resolutions, and cost control measures. Net income attributable to EMCOR decreased to $160.8 millionc ($2.38 per diluted share) in 2009 from $182.2 million ($2.71 per diluted share) in 2008. The company incurred a $13.5 million non-cash impairment charge related to trade names and customer relationships.
EMCOR ended the year with a strong cash position and a reduced debt load, demonstrating a commitment to financial stability amidst economic challenges. The company's backlog also saw a reduction, signaling continued caution in the construction market.
02—Key points
Key Highlights
- Revenues declined by 18.2% to $5.55 billion in 2009 due to the economic slowdown and credit market tightness.
- Despite lower revenues, gross profit margin improved to 14.9% and operating margin increased to 4.7% in 2009.
- Net income attributable to EMCOR decreased to $160.8 million ($2.38 per diluted share) in 2009 from $182.2 million ($2.71 per diluted share) in 2008.
- The company incurred a $13.5 million non-cash impairment charge related to trade names and customer relationships.
- Backlog decreased to $3.15 billion at December 31, 2009, from $4.00 billion at December 31, 2008.
- EMCOR ended 2009 with a strong cash and cash equivalents balance of $727.0 million and reduced its long-term debt.
- The company's strategy to focus on facilities services provides a buffer against economic downturns due to the nature of its annual and multi-year contracts.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, EMCOR Group kept $0.03.
- Revenue$5.23B100.0%
- Cost of revenue−$4.44B85.0%
- Gross profit$784.2M15.0%
- Operating costs−$534.1M10.2%
- Operating income$250.1M4.8%
- Interest, other & tax−$89.4M1.7%
- Net income$160.8M3.1%
Where FY2009 revenue went
$5.23B- Cost of revenue: $4.44B, 85% of revenue
- Net income: $160.8M, 3.1% of revenue
- SG&A: $517.3M, 9.9% of revenue
- Interest, other & tax: $89.4M, 1.7% of revenue
Kept 3.1% as net incomeNet income $160.8M · 3.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 25, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $5.23B$6.79B | −23.0% |
| Cost of Revenue | $4.44B$5.90B | −24.7% |
| Gross Profit | $784.23M$886.65M | −11.6% |
| SG&A Expenses | $517.30M$582.32M | −11.2% |
| Operating Income | $250.12M$302.58M | −17.3% |
| Interest Expense | $7.87M$11.76M | −33.1% |
| Net Income | $160.76M$182.20M | −11.8% |
| EPS (Basic) | $2.44$2.79 | −12.5% |
| EPS (Diluted) | $2.38$2.71 | −12.2% |
| Shares Outstanding (Basic) | 65.91M— | — |
| Shares Outstanding (Diluted) | 67.45M— | — |
05—Questions
Frequently Asked Questions
What were the primary drivers of EMCOR's revenue decline in 2009?
EMCOR's revenue declined by 18.2% to $5.55 billion in 2009 compared to 2008. This was primarily driven by the broader economic slowdown and restrictive credit markets, which led to delays and cancellations of construction projects. Specific impacts were seen in domestic commercial and hospitality construction, as well as in the industrial services and mobile mechanical services within the United States facilities services segment. Unfavorable foreign currency exchange rates also contributed to the revenue decrease.
How did EMCOR manage its profitability despite the revenue decrease?
Despite the revenue decline, EMCOR improved its profitability metrics. The gross profit margin increased to 14.9% in 2009 from 13.1% in 2008, and the operating margin rose to 4.7% from 4.5%. This improvement was achieved through better margins in domestic construction segments, favorable resolutions on projects nearing completion, turnaround in performance at a previously loss-making operation, and reduced selling, general, and administrative expenses, including cost-saving measures like staff reductions and decreased discretionary spending.
What is the company's outlook and strategy given the economic conditions?
EMCOR acknowledges the challenges posed by the economic downturn and its impact on the construction market, as evidenced by the reduced backlog. However, the company's strategy includes a focus on its facilities services segment, which offers a more stable revenue stream through annual and multi-year contracts, acting as a buffer against economic volatility. The company ended 2009 with a strong cash position and reduced debt, indicating a focus on financial resilience and operational efficiency to navigate the challenging economic environment.
What significant non-recurring charges did EMCOR incur in 2009?
In 2009, EMCOR recorded a $13.5 million non-cash impairment charge due to a change in the fair value of trade names and customer relationships associated with certain prior acquisitions. This charge was primarily reflected in selling, general, and administrative expenses.
06—Continue