10-QPeriod: Q2 FY2009

EMCOR Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 30, 2009For Securities:EME

Summary

EMCOR Group, Inc.'s second quarter 2009 results show a decline in revenues but a notable improvement in profitability. Despite a 17.4% decrease in revenue for the quarter compared to the prior year, driven by economic slowdown impacting commercial and hospitality projects and unfavorable currency exchange rates, the company achieved record highs for any second quarter in gross margin, operating income, net income, and diluted earnings per share. This performance was attributed to improved operational efficiency, reduced selling, general, and administrative expenses, and favorable job close-outs in certain segments. The balance sheet as of June 30, 2009, indicates a strengthening cash position, with cash and cash equivalents increasing significantly from year-end 2008. Liabilities saw a reduction, particularly in accounts payable and accrued payroll, contributing to improved liquidity. The company's long-term debt remains manageable, and it has successfully renegotiated its interest rate through a swap agreement. Overall, EMCOR demonstrated resilience in a challenging economic environment, focusing on cost management and operational improvements to drive profitability.

Financial Highlights

24 data points
Beta

Revenue

$1.42B

15.1% Gross Margin

Net Income

$44.82M

3.2% Net Margin

EPS (Diluted)

$0.67

Cash & Equivalents

$521.47M

Free Cash Flow

$138.35M

Financial Statements
Beta
Revenue$1.42B
Cost of Revenue$1.21B
Gross Profit$214.88M
SG&A Expenses$136.97M
Operating Income$74.86M
Interest Expense$1.90M
Net Income$44.82M
EPS (Basic)$0.68
EPS (Diluted)$0.67

Key Highlights

  • 1Revenues decreased by 17.4% for the three months ended June 30, 2009, to $1.42 billion from $1.72 billion in the prior year, reflecting impacts from the economic slowdown.
  • 2Despite lower revenues, operating income increased to $74.9 million from $73.3 million, with operating margin improving to 5.3% from 4.3%.
  • 3Net income attributable to EMCOR Group, Inc. increased to $44.8 million ($0.67 per diluted share) from $44.0 million ($0.65 per diluted share) year-over-year.
  • 4Gross profit margin improved significantly to 15.1% for Q2 2009 from 13.1% in Q2 2008, driven by improved margins in construction segments and favorable job close-outs.
  • 5Selling, general, and administrative expenses decreased by $14.9 million year-over-year, reflecting cost management efforts including staff reductions and favorable currency impacts.
  • 6Cash and cash equivalents increased to $521.5 million as of June 30, 2009, from $405.9 million as of December 31, 2008, indicating a stronger liquidity position.
  • 7Backlog decreased to $3.40 billion at June 30, 2009, from $4.67 billion at June 30, 2008, signaling potential future revenue challenges due to reduced project awards in certain markets.

Frequently Asked Questions

EMCOR's revenues for the three months ended June 30, 2009, decreased by 17.4% to $1.42 billion, compared to $1.72 billion for the same period in 2008. This decline was primarily attributed to reduced work on commercial and hospitality projects due to the economic slowdown and unfavorable foreign exchange rates.

Profitability improved due to several factors. The company achieved record highs in gross margin, operating income, and net income for the second quarter. This was driven by better operational efficiencies, a significant reduction in selling, general, and administrative expenses, favorable job close-outs in certain segments, and improved performance in some of its previously underperforming operations.

EMCOR's financial position strengthened, with cash and cash equivalents increasing to $521.5 million as of June 30, 2009, up from $405.9 million at the end of 2008. Long-term debt remained manageable, with a $300 million Term Loan outstanding and an interest rate hedged via a swap agreement. The company also reported a healthy net over-billed position, indicating strong working capital management.

The company's backlog decreased to $3.40 billion at June 30, 2009, from $4.67 billion at June 30, 2008. This reduction, particularly in the hospitality, commercial, and industrial construction markets, suggests potential headwinds for future revenue growth, although awards in the institutional market provided some offset. Management will need to closely monitor new contract awards and market conditions.