10-QPeriod: Q3 FY2012

EMCOR Group, Inc. Quarterly Report for Q3 Ended Sep 30, 2012

Filed October 25, 2012For Securities:EME

Summary

EMCOR Group, Inc. reported solid revenue growth for the third quarter and the first nine months of 2012, with revenues increasing by 8.4% and 19.0% respectively, compared to the prior year periods. This growth was driven by contributions from both organic operations and recent acquisitions, particularly in the United States mechanical and facilities services segments. The company also saw an improvement in operating income and operating margins for the third quarter, reflecting strong execution on large projects and increased demand in certain markets like industrial and oil and gas. Despite some headwinds in specific segments, such as a decrease in backlog for the UK and certain US segments, EMCOR's overall financial performance demonstrates resilience and operational effectiveness in a competitive landscape. The company also continued its share repurchase program and initiated a quarterly dividend, indicating a commitment to returning value to shareholders.

Financial Highlights

50 data points
Beta

Revenue

$1.61B

12.7% Gross Margin

Net Income

$39.58M

2.5% Net Margin

EPS (Diluted)

$0.59

Total Assets

$3.05B

Cash & Equivalents

$474.38M

Free Cash Flow

$53.59M

Financial Statements
Beta
Revenue$1.61B
Cost of Revenue$1.40B
Gross Profit$203.25M
SG&A Expenses$134.48M
Operating Income$68.63M
Interest Expense$1.81M
Net Income$39.58M
EPS (Basic)$0.59
EPS (Diluted)$0.59
Shares Outstanding (Basic)66.57M
Shares Outstanding (Diluted)67.51M

Key Highlights

  • 1Revenues increased by 8.4% to $1.61 billion for the three months ended September 30, 2012, and by 19.0% to $4.73 billion for the nine months ended September 30, 2012, compared to the prior year periods.
  • 2Operating income for the third quarter of 2012 rose to $68.6 million from $56.5 million in the prior year, with operating margin improving to 4.3% from 3.8%.
  • 3The company's United States Facilities Services segment showed strong revenue and operating income growth, driven by industrial and government site-based operations.
  • 4EMCOR generated $42.0 million in net cash from operating activities for the first nine months of 2012, although this was lower than the $58.7 million generated in the same period of 2011, primarily due to working capital changes.
  • 5The company's backlog stood at $3.38 billion as of September 30, 2012, a slight decrease from $3.54 billion in the prior year, impacted by contract awards in specific segments.
  • 6EMCOR repurchased approximately $23.9 million of its common stock during the nine months ended September 30, 2012, with $48.6 million remaining under its authorized repurchase program.
  • 7A quarterly dividend of $0.05 per common share was maintained, demonstrating a commitment to shareholder returns.

Frequently Asked Questions

EMCOR's revenues increased by 8.4% to $1.61 billion for the three months ended September 30, 2012, compared to $1.48 billion for the same period in 2011. This growth was driven by higher revenues across most business segments, including contributions from recent acquisitions.

As of September 30, 2012, EMCOR had $474.4 million in cash and cash equivalents. The company generated $42.0 million in operating cash flow for the first nine months of 2012 and has a $750 million revolving credit facility, of which $150 million was outstanding. Management believes these resources are sufficient for short-term and foreseeable long-term liquidity needs.

Profitability is influenced by strong execution on large projects, increased demand in sectors like industrial and oil and gas, and efficient management of selling, general, and administrative expenses. However, profitability can be impacted by decreases in gross profit margins in certain segments, such as mechanical construction and the UK operations, and by unseasonably warm weather affecting snow removal revenues. The company is focused on maintaining discipline in a competitive market by accepting only work that can be performed at a reasonable margin.

EMCOR completed an immaterial acquisition in January 2012 that provided mechanical construction services, integrated into the US mechanical construction and facilities services segment. Acquisitions made in 2011 and 2012 contributed to revenue growth and were primarily reported within the US mechanical construction and facilities services and US facilities services segments. While these acquisitions have contributed positively, they also added to selling, general, and administrative expenses, including amortization of intangible assets.