EMCOR Group, Inc. Reports Second Quarter 2014 Results

EMCOR Group, Inc. (NYSE:EME) today reported results for the second quarter ended June 30, 2014.

For the second quarter of 2014, net income attributable to EMCOR was $39.9 million, or $0.59 per diluted share, compared to net income of $21.0 million, or $0.31 per diluted share, in the second quarter of 2013. Excluding one-time charges discussed below, non-GAAP net income for the quarter increased by 25.8% to $41.4 million, or $0.61 per diluted share, compared to non-GAAP net income of $32.9 million, or $0.48 per diluted share, in the second quarter of 2013. Revenues in the second quarter of 2014 totaled $1.56 billion, approximately the same as revenues in the year ago period.

Operating income for the second quarter of 2014 was $67.7 million, or 4.3% of revenues, which included UK operating losses and expenses aggregating approximately $1.9 million (including UK restructuring expenses of $0.3 million) relating to the Company's decision to withdraw from the UK construction market. Excluding those losses and expense items, the Company's non-GAAP operating income for the second quarter of 2014 increased by 35.8% to $69.7 million, or 4.5% of revenues, compared to non-GAAP operating income in the 2013 second quarter of $51.3 million, or 3.3% of revenues, which also excluded UK operating losses and expenses relating to the withdrawal from the UK construction market, as well as transaction costs associated with the 2013 acquisition of RepconStrickland, Inc.

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

Selling, general and administrative expenses for the 2014 second quarter were $151.5 million, or 9.7% of revenues, compared to $139.6 million, or 9.0% of revenues, in the year ago period.

The Company's income tax rate in the 2014 second quarter was 38.0%, compared to an income tax rate of 38.5% in the year ago period.

Backlog as of June 30, 2014 was $3.64 billion, an increase of 3.6% from $3.51 billion at the end of the 2013 second quarter and an increase of 8.2% from $3.36 billion as of December 31, 2013. Domestic backlog grew by $138 million, which included backlog growth in the U.S. Electrical and Mechanical Construction segments and in the U.S. Industrial Services segment, offset by expected declines in the U.S. Building Services segment due to our 2013 service contract portfolio reshaping. Backlog growth in the commercial, transportation, healthcare and water/wastewater sectors was offset by declines in the industrial, institutional and hospitality/gaming sectors.

Tony Guzzi, President and Chief Executive Officer of EMCOR Group commented, “Our performance for the second quarter highlights the diverse strength of our businesses and resulted in overall improved profitability in a choppy environment. We are pleased with the mix of projects we are working on today and the strength of our backlog, despite the pace of the non-residential construction recovery being somewhat slower than originally expected.”

Mr. Guzzi added, “We demonstrated consistent, excellent results in our U.S. Electrical Construction segment and, based on backlog trends, we are confident in the direction of this business. Our U.S. Mechanical Construction segment generated an improved operating margin, and while our U.S. Building Services segment had a lower operating margin than a year ago, it remains well-positioned to deliver long-term growth as its year to date profitability is on track. Our U.S. Industrial segment had strong organic growth and continued success in the integration of RepconStrickland, Inc.”

Mr. Guzzi concluded, “Our improved profitability was the result of solid performance across most segments as we remain disciplined in our bidding activities. During the quarter, we generated strong cash flow and continued to enhance shareholder value through our share repurchase program. Overall, we have had a strong first six months, and, while the challenging non-residential construction environment has constrained revenue growth so far this year, we expect this market to show sequential improvement in the third and fourth quarters.”

Revenues for the first six months totaled $3.16 billion, higher by 1.0% compared to $3.13 billion for the first six months of 2013.

Net income attributable to EMCOR for the first half of 2014 was $81.2 million, or $1.19 per diluted share. Excluding the loss associated with our withdrawal from the UK construction market and restructuring expenses, non-GAAP net income for the first half of 2014 was $84.8 million, or $1.25 per diluted share, compared to non-GAAP net income of $67.1 million, or $0.99 per diluted share, in the year ago period, as adjusted for similar losses and expenses, as well as transaction expenses associated with the 2013 acquisition of RepconStrickland, Inc.

Operating income in the first half of 2014 was $137.1 million, or 4.3% of revenues. Excluding the items mentioned in the immediately preceding paragraph, non-GAAP operating income for the 2014 six-month period was $141.8 million, or 4.5% of revenues, compared to non-GAAP operating income of $107.8 million, or 3.5% of revenues, in the prior year period.

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

For the first six months of 2014, SG&A totaled $296.4 million, 9.4% of revenues, compared to $278.1 million, or 8.9% of revenues, in the first half of 2013.

The Company stated that, based on the current size and mix of its backlog and assuming the continuation of current market conditions, it now expects 2014 revenues to be approximately $6.6 billion, compared to its previous guidance of approximately $6.8 billion. The Company also now expects diluted earnings per share to be between $2.50 to $2.70, up from its previous guidance of between $2.45 to $2.70, excluding restructuring and other costs associated with the withdrawal from the UK construction market and a gain of approximately $11.7 million on the sale of a building in July 2014.

EMCOR Group, Inc. is a Fortune 500 worldwide leader in mechanical and electrical construction services, energy infrastructure and facilities services. This press release and other press releases may be viewed at the Company's Web site at www.emcorgroup.com.

EMCOR Group's second quarter conference call will be available live via internet broadcast today, Tuesday, July 29, at 10:30 AM Eastern Daylight Time. You can access the live call through the Home Page of the Company's Web site at www.emcorgroup.com.

This release may contain certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995. Any such comments are based upon information available to EMCOR management and its perception thereof, as of this date, and EMCOR assumes no obligation to update any such forward-looking statements. These forward-looking statements may include statements regarding market opportunities, market share growth, gross profit, backlog mix, projects with varying profit margins, and selling, general and administrative expenses. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly these statements are no guarantee of future performance. Such risk 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 and mix of business. Certain of the risks and factors associated with EMCOR's business are also discussed in the Company's 2013 Form 10-K and in other reports filed from time to time with the Securities and Exchange Commission. All these risks and factors should be taken into account in evaluating any forward-looking statements.

EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 OPERATING INCOME
(In thousands) (Unaudited)

In our press release, we provide actual 2014 and 2013 second quarter and year-to-date June 30, 2014 and 2013 operating income. The following table provides a reconciliation between 2014 and 2013 operating income based on non-GAAP measures to the most direct comparable GAAP measures.

EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 NET INCOME
(In thousands) (Unaudited)

In our press release, we provide actual 2014 and 2013 second quarter and year-to-date June 30, 2014 and 2013 net income attributable to EMCOR Group, Inc. The following table provides a reconciliation between 2014 and 2013 net income attributable to EMCOR Group, Inc. based on non-GAAP measures to the most direct comparable GAAP measures.

EMCOR GROUP, INC.
RECONCILIATION OF 2014 AND 2013 DILUTED EARNINGS PER SHARE FIGURES
(Unaudited)

In our press release, we provide actual 2014 and 2013 second quarter and year-to-date June 30, 2014 and 2013 diluted earnings per share. The following table provides a reconciliation between 2014 and 2013 diluted EPS based on non-GAAP measures to the most direct comparable GAAP measures.