10-QPeriod: Q3 FY2011

EMCOR Group, Inc. Quarterly Report for Q3 Ended Sep 30, 2011

Filed October 27, 2011For Securities:EME

Summary

EMCOR Group, Inc. reported a significant turnaround in its financial performance for the nine months ended September 30, 2011, compared to the same period in 2010. While the prior year was marked by a substantial net loss and an impairment charge, the current period shows a substantial net income. This improvement is driven by a notable increase in revenues, primarily from acquisitions and organic growth in key segments like United States mechanical construction and facilities services, and United States facilities services. The company has actively engaged in strategic acquisitions, notably the acquisition of USM Services Holdings, Inc., which strengthens its position in facilities maintenance. Concurrently, EMCOR divested its Canadian subsidiary, streamlining its operations. The company also announced a new share repurchase program and declared a dividend, signaling confidence in its financial health and commitment to shareholder returns. Investors should note the continued focus on integrating acquisitions and managing operational efficiency to sustain this positive momentum.

Financial Highlights

50 data points
Beta

Revenue

$1.48B

12.7% Gross Margin

Net Income

$40.76M

2.7% Net Margin

EPS (Diluted)

$0.60

Total Assets

$2.90B

Cash & Equivalents

$476.37M

Free Cash Flow

$52.39M

Financial Statements
Beta
Revenue$1.48B
Cost of Revenue$1.29B
Gross Profit$188.27M
SG&A Expenses$131.78M
Operating Income$56.49M
Interest Expense$2.82M
Net Income$40.76M
EPS (Basic)$0.61
EPS (Diluted)$0.60
Shares Outstanding (Basic)66.96M
Shares Outstanding (Diluted)68.42M

Key Highlights

  • 1Revenue increased by 21.5% to $1.48 billion for the three months ended September 30, 2011, compared to $1.22 billion in the prior year period, driven by acquisitions and organic growth.
  • 2Net income attributable to EMCOR Group, Inc. was $40.8 million ($0.60 per diluted share) for the third quarter of 2011, a significant improvement from a net loss of $175.6 million ($2.64 per diluted share) in the same period of 2010.
  • 3The company completed the acquisition of USM Services Holdings, Inc. on June 30, 2011, a key strategic move to enhance its facilities maintenance services.
  • 4EMCOR sold its Canadian subsidiary on August 2, 2011, and recognized a gain of $9.0 million on the sale.
  • 5Operating income for the third quarter of 2011 was $56.5 million, a substantial improvement from an operating loss of $168.2 million in the prior year, largely due to the absence of a significant impairment charge recorded in 2010.
  • 6Backlog increased to $3.54 billion at September 30, 2011, up from $2.88 billion at September 30, 2010 (excluding the Canadian subsidiary), indicating strong future revenue potential.
  • 7The company's Board of Directors authorized a $100 million share repurchase program and declared a $0.05 per share dividend.

Frequently Asked Questions

The primary drivers of EMCOR's improved financial performance were a significant increase in revenues, largely due to acquisitions such as USM Services Holdings, Inc., and organic growth in its key operating segments. The absence of a substantial $226.2 million impairment charge on goodwill and intangible assets recorded in the third quarter of 2010 also significantly boosted the current year's net income and operating income.

Acquisitions, particularly the acquisition of USM Services Holdings, Inc., have contributed significantly to revenue growth in the current period. These acquisitions are expanding EMCOR's service capabilities and market position, especially in facilities maintenance and mechanical construction services. The integration of these businesses is a key focus for management.

The divestiture of the Canadian subsidiary on August 2, 2011, represents a strategic decision to streamline operations and focus on core markets. The company recognized a gain on the sale of this subsidiary, which contributed positively to the net income from discontinued operations.

EMCOR's liquidity position appears stable, supported by cash generated from operations and a $550 million revolving credit facility. The company's cash balance decreased during the nine months, primarily due to significant acquisition spending. However, management believes its current cash, credit facility, and expected operating cash flow are sufficient to meet short-term and foreseeable long-term liquidity needs.