10-QPeriod: Q1 FY2015

EMCOR Group, Inc. Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 30, 2015For Securities:EME

Summary

EMCOR Group, Inc.'s first quarter 2015 performance showed a slight decrease in revenues compared to the prior year, with total revenues at $1.59 billion, down 0.1%. This was primarily driven by declines in the United States building services and mechanical construction segments, partially offset by growth in electrical construction and industrial services. Despite stable gross profit margins, operating income saw a notable decrease of 23.3% to $55.3 million, and the operating margin compressed to 3.5% from 4.5% year-over-year. This compression was largely attributed to an increase in selling, general, and administrative (SG&A) expenses, particularly higher employee-related costs like benefits and incentive compensation. The company continues to manage its discontinued operations in the UK, which contributed a loss of $0.36 million in the quarter. EMCOR's backlog remained strong, increasing to $3.74 billion at the end of the quarter, up from $3.63 billion at year-end 2014, indicating future revenue potential. The company also actively repurchased shares, utilizing $21.1 million for buybacks in the quarter, and maintained its quarterly dividend payment of $0.08 per share.

Financial Highlights

50 data points
Beta

Revenue

$1.59B

13.7% Gross Margin

Net Income

$32.85M

2.1% Net Margin

EPS (Diluted)

$0.52

Total Assets

$3.32B

Cash & Equivalents

$368.89M

Free Cash Flow

-$17.82M

Financial Statements
Beta
Revenue$1.59B
Cost of Revenue$1.37B
Gross Profit$216.93M
SG&A Expenses$161.59M
Operating Income$55.33M
Interest Expense$2.22M
Net Income$32.85M
EPS (Basic)$0.52
EPS (Diluted)$0.52
Shares Outstanding (Basic)63.06M
Shares Outstanding (Diluted)63.61M

Key Highlights

  • 1Revenues slightly decreased by 0.1% to $1.59 billion in Q1 2015 compared to Q1 2014.
  • 2Operating income declined significantly by 23.3% to $55.3 million, with operating margin contracting to 3.5% from 4.5%.
  • 3Selling, General, and Administrative (SG&A) expenses increased by 12.3% to $161.6 million, primarily due to higher employee-related costs.
  • 4Gross profit margin remained relatively stable at 13.7% compared to 13.6% in the prior year.
  • 5The company's backlog increased to $3.74 billion as of March 31, 2015, up from $3.63 billion at year-end 2014.
  • 6EMCOR repurchased approximately $21.1 million of its common stock during the quarter.
  • 7Loss from discontinued operations (UK construction) was $0.36 million for the quarter.

Frequently Asked Questions

The decrease in operating income and margin is primarily attributed to an increase in selling, general, and administrative (SG&A) expenses. These increases were driven by higher employee-related costs, including benefits (due to unfavorable claims experience compared to the prior year), incentive compensation (higher accruals based on projected operating results), and salaries (due to increased headcount and cost of living adjustments). Additionally, lower gross profit and margins in the United States industrial services and electrical construction segments also contributed to the decline.

EMCOR is continuing to wind down its construction operations in the United Kingdom, which are presented as discontinued operations. For the three months ended March 31, 2015, these operations resulted in a loss of $0.36 million, net of taxes. The assets and liabilities related to this discontinued operation are being managed, with expected fulfillment of obligations in the ordinary course of business.

EMCOR's backlog increased to $3.74 billion as of March 31, 2015, up from $3.63 billion at December 31, 2014, and $3.37 billion at March 31, 2014. This increase, driven by new contract awards across most segments, indicates a positive outlook for future revenue generation. The backlog includes unrecognized revenues from uncompleted construction and services contracts.

During the first quarter of 2015, EMCOR repurchased approximately 0.5 million shares of its common stock for approximately $21.1 million. As of March 31, 2015, the company had approximately $145.3 million remaining under its authorized share repurchase programs.