EME EMCOR Group Inc

- Fourth Quarter and Full-Year Revenues of $2.28 billion and $8.80 billion, respectively - - Fourth Quarter Diluted EPS of $1.45, Non-GAAP Diluted EPS of $1.86 - - Full-Year Diluted EPS of $2.40, Non-GAAP Diluted EPS of $6.40 - - Full-Year Operating Cash Flow of $806.4 million, 126.7% Increase Year-over-Year - - Record Remaining Performance Obligations of $4.59 billion, 13.8% Increase Year-over-Year - - Announces 2021 Revenues and Diluted EPS Guidance -

EMCOR Group, Inc. (NYSE: EME) today reported results for the fourth quarter and year ended December 31, 2020.

For the fourth quarter of 2020, net income was $79.8 million, or $1.45 per diluted share, compared to $86.9 million, or $1.54 per diluted share, for the fourth quarter of 2019. Net income for the fourth quarter of 2020 was negatively impacted by the tax effect of the goodwill, identifiable intangible asset, and other long-lived asset impairment charges recorded in the second quarter of 2020, primarily related to our U.S. Industrial Services segment. Excluding this tax effect, non-GAAP net income for the fourth quarter of 2020 was $102.8 million, or $1.86 per diluted share. Revenues for the fourth quarter of 2020 totaled $2.28 billion, a decrease of 5.1%, compared to $2.40 billion for the fourth quarter of 2019.

Please see the attached tables for a reconciliation of non-GAAP net income and non-GAAP diluted earnings per share to the comparable GAAP measures.

Operating income for the fourth quarter of 2020 was $137.6 million, or 6.0% of revenues. This compared to $122.9 million, or 5.1% of revenues, for the fourth quarter of 2019.

Selling, general and administrative expenses for the fourth quarter of 2020 totaled $244.6 million, or 10.7% of revenues, compared to $240.9 million, or 10.0% of revenues, for the fourth quarter of 2019.

The Company's income tax rate for the fourth quarter of 2020 was 41.8%, compared to an income tax rate of 27.8% for the fourth quarter of 2019. The Company’s tax rate for the fourth quarter of 2020 was impacted by the previously referenced tax effect of the impairment charges recorded in the second quarter of 2020.

Remaining performance obligations as of December 31, 2020 were $4.59 billion compared to $4.04 billion as of December 31, 2019. Total remaining performance obligations grew approximately $558.3 million year-over-year.

Tony Guzzi, Chairman, President and Chief Executive Officer of EMCOR, commented, “The Company delivered another strong year in 2020 with record full year non-GAAP operating income, non-GAAP operating margin and non-GAAP diluted earnings per share despite the challenging operating environment. These results were driven by exceptional execution for our customers, disciplined cost control, and innovative solutions that drove increased productivity across the business. Additionally, our remaining performance obligations increased 13.8% year-over-year to a record $4.59 billion, demonstrating the resilient demand for our services across our geographies and end markets. Finally, our strong operating leverage and flexibility during the pandemic allowed us to generate record operating cash flow of $806.4 million, an increase of $450.7 million year-over-year.”

Mr. Guzzi added, “Our robust profitability in the fourth quarter was anchored by our U.S. Construction segments, posting combined operating income growth of 30.4% year-over-year. In particular, our U.S. Mechanical Construction segment delivered exceptional operating income growth of 45.7% and an operating margin of 10.4%, up 270 basis points year-over-year, driven by strong performance across key market sectors including commercial, healthcare, and institutional. Our U.S. Building Services segment has rebounded well since the onset of the pandemic and generated revenue and operating income growth of 5.4% and 15.7%, respectively, in the fourth quarter, as we partnered closely with our customers to optimize their systems and improve the safety of their facilities. While our U.S. Industrial Services segment continues to be impacted by the effects of the pandemic, we are positioned as a leading service provider in the industry and we expect to be ready and able to execute when demand returns, which we anticipate in late 2021. We are pleased by the strength in our U.K. Building Services segment, which continues to win in the market despite restrictive lockdowns, delivering fourth quarter revenue and operating income growth of 8.9% and 6.7%, respectively.”

Revenues for the 2020 full-year period totaled $8.80 billion, a decrease of 4.1%, compared to $9.17 billion for the 2019 full-year period. Net income for the 2020 full-year period was $132.9 million, or $2.40 per diluted share, compared to $325.1 million, or $5.75 per diluted share, for the 2019 full-year period. Excluding the previously referenced impairment charges recorded in the second quarter of 2020 and the related tax effect, non-GAAP net income for the 2020 full-year period was $354.6 million, or $6.40 per diluted share.

Operating income for the 2020 full-year period was $256.8 million, or 2.9% of revenues, compared to $460.9 million, or 5.0% of revenues, for the 2019 full-year period. Excluding the $232.8 million of non-cash impairment charges recorded in the second quarter of 2020, non-GAAP operating income for the 2020 full-year period was $489.6 million, or 5.6% of revenues. SG&A totaled $903.6 million, or 10.3% of revenues, for the 2020 full-year period, compared to $893.5 million, or 9.7% of revenues, for the 2019 full-year period.

Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP diluted earnings per share to the comparable GAAP measures.

Based on project mix, visibility into the coming year, and assuming a gradual improvement of current market conditions as the year progresses, EMCOR expects full-year 2021 revenues to be between $9.2 billion and $9.4 billion, and full-year 2021 diluted earnings per share in the range of $6.20 to $6.70.

Mr. Guzzi concluded, “Coming off a year where we successfully navigated unprecedented operating conditions and delivered outstanding service for our customers, our performance is a testament to the incredible team we have at EMCOR. I’d like to extend a sincere thank you to all of our employees and leaders. We have demonstrated that we can execute for our customers under difficult circumstances, and the momentum we’re seeing in some key market sectors, underscored by our robust remaining performance obligations, makes us optimistic for our prospects in 2021 and beyond. Moving forward, with our strong balance sheet and substantial cash on hand, we will continue to execute on our balanced capital allocation strategy, pursuing both organic growth investments and strategic acquisition opportunities, while also returning capital to shareholders through share repurchases and dividends.”

EMCOR Group, Inc. is a Fortune 500 leader in mechanical and electrical construction services, industrial and energy infrastructure and building services. This press release and other press releases may be viewed at the Company’s website at www.emcorgroup.com. EMCOR routinely posts information that may be important to investors in the “Investor Relations” section of our website at www.emcorgroup.com. Investors and potential investors are encouraged to consult the EMCOR website regularly for important information about EMCOR.

EMCOR Group's fourth quarter conference call will be available live via internet broadcast today, Thursday, February 25, at 10:30 AM Eastern Standard Time. The live call may be accessed through the Company's website at www.emcorgroup.com.

Forward Looking Statements:

This release contains certain forward-looking statements. Any such comments speak only as of February 25, 2021 and EMCOR assumes no obligation to update any such forward-looking statements, unless required by law. These forward-looking statements may include statements regarding anticipated future operating and financial performance, the nature and impact of our remaining performance obligations, our ability to pursue acquisitions, our ability to return capital to shareholders, market opportunities, market growth and customer trends. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated (whether expressly or implied) by the forward-looking statements. Accordingly, these statements are no guarantee of future performance. Such risks and uncertainties include, but are not limited to, adverse effects of general economic conditions, changes in the political environment, changes in the specific markets for EMCOR’s services, adverse business conditions, availability of adequate levels of surety bonding, increased competition, unfavorable labor productivity, mix of business, and the impact of the COVID-19 pandemic on our revenue and operations, including employees, construction activity, and facilities utilization, and certain of the risk factors associated with EMCOR’s business discussed in Part I, Item 1A “Risk Factors,” of the Company’s 2020 Form 10-K, and in other reports filed from time to time with the Securities and Exchange Commission and available at www.sec.gov and www.emcorgroup.com. Such risk factors should be taken into account in evaluating any forward-looking statements.

Non-GAAP Measures:

This release also includes certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles (GAAP). Reconciliations of those non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this release. The Company uses these non-GAAP measures as key performance indicators for the purpose of evaluating performance internally. We also believe that these non-GAAP measures provide investors with useful information with respect to our ongoing operations. Any non-GAAP financial measures presented are not, and should not be viewed as, substitutes for financial measures required by GAAP, have no standardized meaning prescribed by GAAP and may not be comparable to the calculation of similar measures of other companies.

EMCOR GROUP, INC.

FINANCIAL HIGHLIGHTS

(In thousands, except share and per share information)

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

(Unaudited)

 

 

 

 

 

 

For the three months ended December 31,

 

For the twelve months ended December 31,

 

 

2020

 

2019

 

2020

 

2019

Revenues

 

$

2,281,494

 

 

$

2,403,940

 

 

$

8,797,061

 

 

$

9,174,611

 

Cost of sales

 

1,897,643

 

 

2,039,193

 

 

7,401,679

 

 

7,818,743

 

Gross profit

 

383,851

 

 

364,747

 

 

1,395,382

 

 

1,355,868

 

Selling, general and administrative expenses

 

244,620

 

 

240,917

 

 

903,584

 

 

893,453

 

Restructuring expenses

 

1,609

 

 

956

 

 

2,214

 

 

1,523

 

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

 

—

 

 

—

 

 

232,750

 

 

—

 

Operating income

 

137,622

 

 

122,874

 

 

256,834

 

 

460,892

 

Net periodic pension (cost) income

 

769

 

 

366

 

 

2,980

 

 

1,553

 

Interest expense, net

 

(1,406)

 

 

(2,824)

 

 

(7,488)

 

 

(11,556)

 

Income before income taxes

 

136,985

 

 

120,416

 

 

252,326

 

 

450,889

 

Income tax provision

 

57,204

 

 

33,492

 

 

119,383

 

 

125,749

 

Net income

 

$

79,781

 

 

$

86,924

 

 

$

132,943

 

 

$

325,140

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share:

 

$

1.45

 

 

$

1.54

 

 

$

2.41

 

 

$

5.78

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share:

 

$

1.45

 

 

$

1.54

 

 

$

2.40

 

 

$

5.75

 

 

 

 

 

 

 

 

 

 

Weighted average shares of common stock outstanding:

 

 

 

 

 

 

 

 

Basic

 

54,882,514

 

 

56,263,774

 

 

55,196,173

 

 

56,208,280

 

Diluted

 

55,160,893

 

 

56,592,654

 

 

55,421,271

 

 

56,519,281

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.08

 

 

$

0.08

 

 

$

0.32

 

 

$

0.32

 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

December 31, 2020

 

December 31, 2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

902,867

 

 

$

358,818

 

Accounts receivable, net

 

1,922,096

 

 

2,030,813

 

Contract assets

 

171,956

 

 

177,830

 

Inventories

 

53,338

 

 

40,446

 

Prepaid expenses and other

 

70,679

 

 

51,976

 

Total current assets

 

3,120,936

 

 

2,659,883

 

Property, plant & equipment, net

 

158,427

 

 

156,187

 

Operating lease right-of-use assets

 

242,155

 

 

245,471

 

Goodwill

 

851,783

 

 

1,063,911

 

Identifiable intangible assets, net

 

582,893

 

 

611,444

 

Other assets

 

107,646

 

 

93,462

 

Total assets

 

$

5,063,840

 

 

$

4,830,358

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Current maturities of long-term debt and finance lease liabilities

 

$

16,910

 

 

$

18,092

 

Accounts payable

 

671,886

 

 

665,402

 

Contract liabilities

 

722,252

 

 

623,642

 

Accrued payroll and benefits

 

450,955

 

 

382,573

 

Other accrued expenses and liabilities

 

247,597

 

 

195,757

 

Operating lease liabilities, current

 

53,632

 

 

53,144

 

Total current liabilities

 

2,163,232

 

 

1,938,610

 

Borrowings under revolving credit facility

 

—

 

 

50,000

 

Long-term debt and finance lease liabilities

 

259,619

 

 

244,139

 

Operating lease liabilities, long-term

 

205,362

 

 

204,950

 

Other long-term obligations

 

382,383

 

 

334,879

 

Total liabilities

 

3,010,596

 

 

2,772,578

 

Equity:

 

 

 

 

Total EMCOR Group, Inc. stockholders’ equity

 

2,052,668

 

 

2,057,134

 

Noncontrolling interests

 

576

 

 

646

 

Total equity

 

2,053,244

 

 

2,057,780

 

Total liabilities and equity

 

$

5,063,840

 

 

$

4,830,358

 

EMCOR GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Twelve Months Ended December 31, 2020 and 2019

(In thousands)

 

 

 

2020

 

2019

Cash flows - operating activities:

 

 

 

 

Net income

 

$

132,943

 

 

$

325,140

 

Depreciation and amortization

 

46,721

 

 

43,945

 

Amortization of identifiable intangible assets

 

59,950

 

 

48,142

 

Deferred income taxes

 

(36,354)

 

 

1,701

 

Non-cash expense for impairment of goodwill, identifiable intangible assets, and other long-lived assets

 

232,750

 

 

—

 

Non-cash share-based compensation expense

 

11,151

 

 

11,386

 

Other reconciling items

 

4,589

 

 

4,286

 

Changes in operating assets and liabilities, excluding the effect of businesses acquired

 

354,616

 

 

(78,900)

 

Net cash provided by operating activities

 

806,366

 

 

355,700

 

Cash flows - investing activities:

 

 

 

 

Payments for acquisitions of businesses, net of cash acquired

 

(50,357)

 

 

(300,980)

 

Proceeds from sale or disposal of property, plant and equipment

 

3,463

 

 

5,487

 

Purchases of property, plant and equipment

 

(47,969)

 

 

(48,432)

 

Investments in and advances to unconsolidated entities

 

—

 

 

(2,252)

 

Distributions from unconsolidated entities

 

—

 

 

838

 

Net cash used in investing activities

 

(94,863)

 

 

(345,339)

 

Cash flows - financing activities:

 

 

 

 

Proceeds from revolving credit facility

 

200,000

 

 

50,000

 

Repayments of revolving credit facility

 

(250,000)

 

 

(25,000)

 

Proceeds from long-term debt

 

300,000

 

 

—

 

Repayments of long-term debt and debt issuance costs

 

(286,987)

 

 

(15,198)

 

Repayments of finance lease liabilities

 

(4,470)

 

 

(4,571)

 

Dividends paid to stockholders

 

(17,674)

 

 

(17,950)

 

Repurchases of common stock

 

(112,553)

 

 

—

 

Taxes paid related to net share settlements of equity awards

 

(2,640)

 

 

(6,451)

 

Issuances of common stock under employee stock purchase plan

 

6,557

 

 

6,090

 

Payments for contingent consideration arrangements

 

(4,070)

 

 

(5,917)

 

Distributions to noncontrolling interests

 

(70)

 

 

(250)

 

Net cash used in financing activities

 

(171,907)

 

 

(19,247)

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

4,046

 

 

2,592

 

Increase (decrease) in cash, cash equivalents, and restricted cash

 

543,642

 

 

(6,294)

 

Cash, cash equivalents, and restricted cash at beginning of year (1)

 

359,920

 

 

366,214

 

Cash, cash equivalents, and restricted cash at end of period (1)

 

$

903,562

 

 

$

359,920

 

(1)

  Includes $0.7 million, $1.1 million, and $2.3 million of restricted cash classified as “Prepaid expenses and other” in the Consolidated Balance Sheets as of December 31, 2020, 2019, and 2018, respectively.

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands)

 

 

 

(Unaudited)

 

 

For the three months ended December 31,

 

 

2020

 

2019

Revenues from unrelated entities:

 

 

 

 

United States electrical construction and facilities services

 

$

493,454

 

 

$

564,491

 

United States mechanical construction and facilities services

 

969,433

 

 

895,654

 

United States building services

 

568,075

 

 

538,973

 

United States industrial services

 

135,538

 

 

299,272

 

Total United States operations

 

2,166,500

 

 

2,298,390

 

United Kingdom building services

 

114,994

 

 

105,550

 

Total operations

 

$

2,281,494

 

 

$

2,403,940

 

 

 

 

 

 

 

 

For the twelve months ended December 31,

 

 

2020

 

2019

Revenues from unrelated entities:

 

 

 

 

United States electrical construction and facilities services

 

$

1,973,427

 

 

$

2,216,600

 

United States mechanical construction and facilities services

 

3,485,495

 

 

3,340,337

 

United States building services

 

2,110,129

 

 

2,106,872

 

United States industrial services

 

797,447

 

 

1,087,543

 

Total United States operations

 

8,366,498

 

 

8,751,352

 

United Kingdom building services

 

430,563

 

 

423,259

 

Total operations

 

$

8,797,061

 

 

$

9,174,611

 

EMCOR GROUP, INC.

SEGMENT INFORMATION

(In thousands)

 

 

 

(Unaudited)

 

 

For the three months ended December 31,

 

 

2020

 

2019

Operating income (loss):

 

 

 

 

United States electrical construction and facilities services

 

$

43,355

 

 

$

41,304

 

United States mechanical construction and facilities services

 

100,380

 

 

68,888

 

United States building services

 

28,010

 

 

24,219

 

United States industrial services

 

(8,212)

 

 

13,131

 

Total United States operations

 

163,533

 

 

147,542

 

United Kingdom building services

 

4,218

 

 

3,952

 

Corporate administration

 

(28,520)

 

 

(27,664)

 

Restructuring expenses

 

(1,609)

 

 

(956)

 

Total operations

 

137,622

 

 

122,874

 

Other corporate items:

 

 

 

 

Net periodic pension (cost) income

 

769

 

 

366

 

Interest expense, net

 

(1,406)

 

 

(2,824)

 

Income before income taxes

 

$

136,985

 

 

$

120,416

 

 

 

 

 

 

 

 

For the twelve months ended December 31,

 

 

2020

 

2019

Operating income (loss):

 

 

 

 

United States electrical construction and facilities services

 

$

166,501

 

 

$

161,684

 

United States mechanical construction and facilities services

 

292,536

 

 

225,040

 

United States building services

 

113,431

 

 

114,754

 

United States industrial services

 

(2,788)

 

 

44,340

 

Total United States operations

 

569,680

 

 

545,818

 

United Kingdom building services

 

20,660

 

 

18,323

 

Corporate administration

 

(98,542)

 

 

(101,726)

 

Restructuring expenses

 

(2,214)

 

 

(1,523)

 

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

 

(232,750)

 

 

—

 

Total operations

 

256,834

 

 

460,892

 

Other corporate items:

 

 

 

 

Net periodic pension (cost) income

 

2,980

 

 

1,553

 

Interest expense, net

 

(7,488)

 

 

(11,556)

 

Income before income taxes

 

$

252,326

 

 

$

450,889

 

EMCOR GROUP, INC. RECONCILIATION OF 2020 AND 2019 NON-GAAP OPERATING INCOME AND NON-GAAP OPERATING MARGIN (In thousands) (Unaudited)

In our press release, we provide non-GAAP operating income and non-GAAP operating margin for the three and twelve months ended December 31, 2020 and 2019. The following tables provide a reconciliation between operating income and operating margin determined on a non-GAAP basis to the most directly comparable GAAP measures for such periods.

 

 

For the three months ended December 31,

 

For the twelve months ended December 31,

 

 

2020

 

2019

 

2020

 

2019

GAAP operating income

 

$

137,622

 

 

$

122,874

 

 

$

256,834

 

 

$

460,892

 

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

 

—

 

 

—

 

 

232,750

 

 

—

 

Non-GAAP operating income

 

$

137,622

 

 

$

122,874

 

 

$

489,584

 

 

$

460,892

 

 

 

For the three months ended December 31,

 

For the twelve months ended December 31,

 

 

2020

 

2019

 

2020

 

2019

GAAP operating margin

 

6.0

%

 

5.1

%

 

2.9

%

 

5.0

%

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

 

—

%

 

—

%

 

2.6

%

 

—

%

Non-GAAP operating margin

 

6.0

%

 

5.1

%

 

5.6

%

 

5.0

%

EMCOR GROUP, INC. RECONCILIATION OF 2020 AND 2019 NON-GAAP NET INCOME (In thousands) (Unaudited)

In our press release, we provide non-GAAP net income for the three and twelve months ended December 31, 2020 and 2019. The following table provides a reconciliation between net income determined on a non-GAAP basis to the most directly comparable GAAP measure for such periods.

 

 

For the three months ended December 31,

 

For the twelve months ended December 31,

 

 

2020

 

2019

 

2020

 

2019

GAAP net income

 

$

79,781

 

 

$

86,924

 

 

$

132,943

 

 

$

325,140

 

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

 

—

 

 

—

 

 

232,750

 

 

—

 

Tax effect of impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

 

22,984

 

 

—

 

 

(11,105)

 

 

—

 

Non-GAAP net income

 

$

102,765

 

 

$

86,924

 

 

$

354,588

 

 

$

325,140

 

EMCOR GROUP, INC. RECONCILIATION OF 2020 AND 2019 NON-GAAP DILUTED EARNINGS PER SHARE (Unaudited)

In our press release, we provide non-GAAP diluted earnings per common share for the three and twelve months ended December 31, 2020 and 2019. The following table provides a reconciliation between diluted earnings per common share determined on a non-GAAP basis to the most directly comparable GAAP measure for such periods.

 

 

For the three months ended December 31,

 

For the twelve months ended December 31,

 

 

2020

 

2019

 

2020

 

2019

GAAP diluted earnings per common share

 

$

1.45

 

 

$

1.54

 

 

$

2.40

 

 

$

5.75

 

Impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

 

—

 

 

—

 

 

4.20

 

 

—

 

Tax effect of impairment loss on goodwill, identifiable intangible assets, and other long-lived assets

 

0.42

 

 

—

 

 

(0.20)

 

 

—

 

Non-GAAP diluted earnings per common share

 

$

1.86

 

 

$

1.54

 

 

$

6.40

 

 

$

5.75

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210225005206/en/

R. Kevin Matz Executive Vice President Shared Services (203) 849-7938 FTI Consulting, Inc. Investors: Jamie Baird (212) 850-5659