10-QPeriod: Q3 FY2009

EMCOR Group, Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 29, 2009For Securities:EME

Summary

EMCOR Group, Inc. (EME) reported its third-quarter and year-to-date results for the period ending September 30, 2009. The company experienced a decline in revenues compared to the prior year, primarily driven by the economic slowdown impacting construction projects and lower demand in certain service areas. Despite the revenue decrease, EMCOR demonstrated improved profitability margins due to cost controls and operational efficiencies. Operationally, EMCOR managed its expenses effectively, with selling, general, and administrative costs decreasing year-over-year due to lower incentive compensation and reduced staffing levels. The company also saw an improvement in its gross profit margin, benefiting from the resolution of project uncertainties and better productivity. While net income and diluted earnings per share declined compared to the same period in 2008, the underlying operational improvements suggest a strategic focus on efficiency in a challenging economic environment. EMCOR maintained a strong liquidity position with an increased cash balance.

Financial Highlights

24 data points
Beta

Revenue

$1.37B

15.0% Gross Margin

Net Income

$39.99M

2.9% Net Margin

EPS (Diluted)

$0.59

Cash & Equivalents

$648.23M

Free Cash Flow

$133.85M

Financial Statements
Beta
Revenue$1.37B
Cost of Revenue$1.17B
Gross Profit$205.25M
SG&A Expenses$137.90M
Operating Income$67.26M
Interest Expense$1.95M
Net Income$39.99M
EPS (Basic)$0.61
EPS (Diluted)$0.59

Key Highlights

  • 1Revenues for the three months ended September 30, 2009, decreased by 20.2% to $1.37 billion compared to $1.72 billion in the prior year's quarter.
  • 2Net income attributable to EMCOR Group, Inc. decreased to $39.99 million for the three months ended September 30, 2009, from $48.64 million in the same period of 2008.
  • 3Diluted earnings per common share fell to $0.59 for the third quarter of 2009, down from $0.72 in the third quarter of 2008.
  • 4Gross profit margin improved to 15.0% for the third quarter of 2009, up from 13.0% in the prior year's quarter, indicating better cost management and project execution.
  • 5Selling, general, and administrative expenses decreased by $7.8 million for the quarter due to lower incentive compensation and staff reductions.
  • 6The company ended the quarter with a strong cash and cash equivalents balance of $648.2 million, an increase from $405.9 million at the beginning of the year.
  • 7Backlog at September 30, 2009, was $3.39 billion, down from $4.42 billion at September 30, 2008, reflecting a slower award of new contracts in a challenging market.

Frequently Asked Questions

The primary drivers for the revenue decline were a slowdown in domestic commercial and hospitality construction projects due to the economic downturn, reduced revenues from the mobile mechanical services group within the United States facilities services segment, and unfavorable foreign currency exchange rate effects.

EMCOR effectively managed its expenses by reducing selling, general, and administrative costs, which included lower incentive compensation accruals, reduced staffing levels, and decreased discretionary spending. The company also improved its gross profit margin through operational efficiencies and the resolution of uncertainties on projects nearing completion.

EMCOR maintained a strong liquidity position, with cash and cash equivalents increasing to $648.2 million as of September 30, 2009. The company also has a $375 million revolving credit facility and believes its current cash and borrowing capacity, combined with expected operating cash flow, will be sufficient to meet its short-term and foreseeable long-term liquidity needs. However, the company notes potential risks from lawsuits and ongoing challenges in the surety bond market.

Revenues declined across most segments, with notable decreases in United States electrical and mechanical construction and facilities services, and Canada and United Kingdom operations. However, operating margins improved in several segments, including United States electrical and mechanical construction, and Canada construction, driven by cost management and improved performance in certain areas. The United States facilities services segment saw a decrease in operating income primarily due to lower demand in industrial services and mobile mechanical operations.