10-QPeriod: Q3 FY2013

EMCOR Group, Inc. Quarterly Report for Q3 Ended Sep 30, 2013

Filed October 24, 2013For Securities:EME

Summary

EMCOR Group, Inc. (EME) reported mixed financial results for the nine months ended September 30, 2013, with revenues showing a slight increase year-over-year to $4.75 billion, driven by acquisitions and growth in certain US segments. However, operating income and margins declined, primarily due to the absence of large non-recurring projects in the prior year's industrial services segment and ongoing restructuring efforts in the UK. The company completed a significant acquisition of Repcon Strickland, Inc. (RSI) for $460.7 million, which substantially increased goodwill and identifiable intangible assets on the balance sheet. This strategic move is expected to bolster EMCOR's position in the refinery and petrochemical services market. While overall revenues saw modest growth, the company incurred restructuring expenses related to its withdrawal from the UK construction market and experienced increased selling, general, and administrative expenses, partly due to acquisition-related costs.

Financial Highlights

50 data points
Beta

Revenue

$1.61B

12.9% Gross Margin

Net Income

$26.69M

1.7% Net Margin

EPS (Diluted)

$0.39

Total Assets

$3.51B

Cash & Equivalents

$444.04M

Free Cash Flow

$120.26M

Financial Statements
Beta
Revenue$1.61B
Cost of Revenue$1.40B
Gross Profit$206.56M
SG&A Expenses$147.92M
Operating Income$58.04M
Interest Expense$2.35M
Net Income$26.69M
EPS (Basic)$0.40
EPS (Diluted)$0.39
Shares Outstanding (Basic)67.17M
Shares Outstanding (Diluted)68.16M

Key Highlights

  • 1Revenues increased slightly to $4.75 billion for the nine months ended September 30, 2013, up from $4.73 billion in the prior year.
  • 2Operating income decreased to $141.5 million for the nine months ended September 30, 2013, down from $171.1 million in the prior year, indicating margin pressure.
  • 3The company completed a substantial acquisition of Repcon Strickland, Inc. (RSI) for $460.7 million, funded by cash and debt, significantly increasing goodwill and intangible assets.
  • 4Significant restructuring expenses of $9.6 million were incurred, primarily related to the company's withdrawal from the UK construction market.
  • 5Selling, general, and administrative expenses increased due to acquisition-related costs and employee expenses.
  • 6The company's backlog remained stable at approximately $3.39 billion as of September 30, 2013.
  • 7Borrowings under the revolving credit facility increased significantly to $400 million from $150 million at the end of the prior year, largely to fund acquisitions.

Frequently Asked Questions

The primary driver for the increase in total assets from $3.11 billion at December 31, 2012, to $3.51 billion at September 30, 2013, was the significant increase in goodwill ($829.3 million from $566.6 million) and identifiable intangible assets ($550.8 million from $343.7 million), largely resulting from the acquisition of Repcon Strickland, Inc. (RSI).

The acquisition of RSI for $460.7 million was funded through a combination of cash on hand and $250.0 million in borrowings under the company's revolving credit facility.

The company incurred $9.6 million in restructuring expenses for the nine months ended September 30, 2013, related to employee severance and facility terminations due to the decision to withdraw from the UK construction market. This withdrawal also contributed to a decrease in revenues from the United Kingdom construction and facilities services segment.

As of September 30, 2013, EMCOR had $400 million drawn under its $750 million revolving credit facility, a significant increase from $150 million at the end of 2012. This facility expires in November 2016 and contains various financial covenants. The company's total debt, including the revolving credit facility and capital lease obligations, stood at approximately $405.1 million.