10-QPeriod: Q2 FY2007

EMCOR Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2007

Filed July 26, 2007For Securities:EME

Summary

EMCOR Group, Inc. reported a strong second quarter in 2007, demonstrating robust financial performance driven by favorable market conditions in the United States non-residential construction sector. Revenues saw a significant increase of 15.2% year-over-year for the three months ended June 30, 2007, reaching $1.41 billion. This growth was propelled by increased capital spending in commercial, hospitality, and high-tech projects, coupled with contributions from a recently acquired mechanical construction company and expanded facilities services contracts. The company also experienced substantial improvement in profitability, with operating income rising to $44.2 million from $25.3 million in the prior year period. This was supported by a widening gross profit margin to 12.1% from 10.9%, reflecting a strategic shift towards higher-margin projects. Diluted earnings per share also saw a notable increase to $0.39 from $0.26. EMCOR's financial position remains solid, with cash and cash equivalents growing to $336.3 million by June 30, 2007.

Key Highlights

  • 1Revenues for the second quarter of 2007 increased by 15.2% to $1.41 billion compared to $1.22 billion in the same period of 2006.
  • 2Operating income significantly improved, growing to $44.2 million from $25.3 million year-over-year, with operating margin expanding to 3.1% from 2.1%.
  • 3Gross profit margin improved to 12.1% for the quarter, up from 10.9% in the prior year, indicating better pricing and project selection.
  • 4Diluted earnings per share (EPS) increased to $0.39 in Q2 2007, a substantial rise from $0.26 in Q2 2006.
  • 5The United States mechanical and electrical construction and facilities services segments showed strong revenue and operating income growth.
  • 6Backlog increased significantly to $4.26 billion as of June 30, 2007, up from $3.22 billion a year prior, signaling strong future revenue potential.
  • 7Cash and cash equivalents increased to $336.3 million at the end of the second quarter of 2007.

Frequently Asked Questions

EMCOR's revenue growth was primarily driven by a strong United States non-residential construction market, particularly in commercial, hospitality, and high-tech sectors. The acquisition of a mechanical construction company in October 2006 and increased awards for United States facilities services contracts also contributed significantly to the revenue increase.

EMCOR experienced a significant improvement in profitability. Operating income more than doubled to $44.2 million from $25.3 million in the second quarter of 2007, and gross profit margin expanded from 10.9% to 12.1%. This reflects a successful strategy to focus on higher-margin projects and efficient cost management.

EMCOR's backlog stood at $4.26 billion as of June 30, 2007, a substantial increase from $3.22 billion in the prior year. This robust backlog suggests strong visibility for future revenue and continued growth, particularly driven by increased capital spending in key market sectors and successful pursuit of new contracts.

EMCOR's liquidity remains strong. Cash and cash equivalents increased to $336.3 million as of June 30, 2007. The company generated positive cash flow from operations and has a revolving credit facility of $375 million available, indicating sufficient financial resources to manage its operations and pursue growth opportunities.