10-QPeriod: Q2 FY2008

EMCOR Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2008

Filed July 29, 2008For Securities:EME

Summary

EMCOR Group, Inc. (EME) reported strong financial results for the second quarter and the first six months of 2008, exceeding previous records. Revenues surged by 25.6% year-over-year for the quarter and 27.3% for the six-month period, driven by robust performance across its United States operations, particularly in mechanical and electrical construction, and a significant contribution from recent acquisitions. The company demonstrated improved profitability, with operating income up 77% for the quarter and 109% for the six-month period. This growth is attributed to the successful integration of acquired businesses, improved project execution, and operational efficiencies. Diluted earnings per share also saw substantial growth, reflecting the company's enhanced financial performance. EMCOR maintained a strong backlog of $4.67 billion at the end of the second quarter, indicating continued demand for its services.

Key Highlights

  • 1Significant revenue growth: Q2 2008 revenues increased by 25.6% to $1.72 billion, and six-month revenues grew by 27.3% to $3.38 billion, compared to the prior year periods.
  • 2Improved profitability: Operating income rose by 77% to $73.3 million in Q2 2008 and by 109% to $123.0 million for the first six months, reflecting stronger margins and operational efficiencies.
  • 3Acquisition integration: Recent acquisitions contributed significantly to revenue and operating income growth, demonstrating successful integration and expansion of service offerings.
  • 4Strong backlog: The company reported a backlog of $4.67 billion as of June 30, 2008, up from $4.26 billion in the prior year, signaling continued demand.
  • 5Enhanced EPS: Diluted EPS from continuing operations increased to $0.65 for Q2 2008 and $1.09 for the first six months, demonstrating improved shareholder value.
  • 6Positive cash flow from operations: Net cash provided by operating activities increased by approximately 78% to $110.8 million for the first six months of 2008.
  • 7Legal contingency impact: A $7.9 million expense was recorded in Q2 2008 related to the UOSA legal action, partially impacting the otherwise strong profitability.

Frequently Asked Questions

The primary drivers of EMCOR's revenue growth were increased revenues from companies acquired during the last 12 months, alongside increased construction work in the United States for the hospitality and industrial markets, and expanded work by its United States facilities services operations.

EMCOR recorded a $7.9 million expense in the second quarter of 2008 due to a jury verdict in the UOSA legal action. This expense related to the unsuccessful collection of project costs and an award to UOSA for legal fees. The majority of this expense was non-cash.

EMCOR's backlog stood at $4.67 billion as of June 30, 2008, an increase from $4.26 billion a year prior. This robust backlog primarily reflects increased awards for industrial, transportation, and water/wastewater construction projects, suggesting sustained demand for EMCOR's services.

Companies acquired within the last 12 months significantly contributed to EMCOR's financial performance. For the second quarter, these acquisitions added $186.2 million to revenues and $24.9 million to operating income. This indicates successful integration and a positive impact on the company's top and bottom lines.