EMCOR Group, Inc. Reports Fourth Quarter and Full Year 2013 Results

  EMCOR Group, Inc. Reports Fourth Quarter and Full Year 2013 Results                 - 2013 Revenue Growth of 1.1% to $6.42 billion -               - Quarter Four Operating Cash Flow - $82.0 million -               - Announces 2014 Revenue and Diluted EPS Guidance -  Business Wire  NORWALK, Conn. -- February 25, 2014  EMCOR Group, Inc. (NYSE:EME) today reported results for the fourth quarter and the year ended December 31, 2013.  For the fourth quarter of 2013, net income attributable to EMCOR was $45.9 million, or $0.68 per diluted share. Excluding several one-time charges discussed below, non-GAAP net income was $51.5 million, or $0.76 per diluted share, compared to non-GAAP net income of $50.6 million, or $0.75 per diluted share in the fourth quarter of 2012. Revenues in the fourth quarter of 2013 totaled $1.66 billion, compared to revenues of $1.61 billion in the year ago period.  Operating income for the fourth quarter of 2013 was $68.8 million, or 4.1% of revenues, which included operating losses and expenses aggregating approximately $7.2 million (including restructuring expenses of $2.1 million) primarily relating to the Company's decision to withdraw from the UK construction market. Excluding these losses and expense items, the Company's non-GAAP operating income for the fourth quarter of 2013 was $76.0 million, or 4.6% of revenues, compared to non-GAAP operating income in the 2012 fourth quarter of $84.4 million, or 5.3% of revenues, as adjusted to exclude 2012 UK construction operating losses.  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 2013 fourth quarter were $163.2 million, or 9.8% of revenues, compared to $149.6 million, or 9.3% of revenues, in the year ago period.  The Company's income tax rate in the 2013 fourth quarter was 30.4%, compared to an income tax rate of 39.8% in the year ago period.  Backlog as of December 31, 2013 was $3.36 billion, a decrease of 0.4% from $3.37 billion at the end of the 2012 fourth quarter. Fourth quarter backlog growth of $45 million in the Company's domestic operations nearly offset a backlog decline of $58 million related to the Company's decision to withdraw from the UK construction market. Backlog growth in the transportation, healthcare, water/wastewater and commercial sectors was more than offset by declines in the institutional and industrial sectors. Total backlog of $3.36 billion was a decrease of 0.9% from $3.39 billion compared to September 30, 2013.  Tony Guzzi, President and Chief Executive Officer of EMCOR Group commented, “Our performance in 2013 highlights the strength from the diversity of our business which insulates us from weakness in any one sector of the economy. Growth in the non-residential construction market remained sluggish, and we continue to contend with a slowdown in government spending. In spite of this, our U.S. electrical construction segment performed well, and we saw marked improvement in our building services segment. Although results in our U.S. mechanical construction segment were hindered by challenges related to two project write-downs in the year, we are confident that this segment will rebound in 2014.  Mr. Guzzi continued, “During 2013, we made several key strategic moves to position the Company for long-term success, most notably our mid-year acquisition of RepconStrickland and our second quarter decision to exit from the UK construction business. We are pleased with the progress made on the integration and performance of RepconStrickland to date which has been teamed with our Ohmstede subsidiary. We now have a market-leading industrial services business focused on refineries and petrochemical facilities. As we continue to focus on producing sustainable long-term growth, our new $1.1 billion credit agreement, announced in December, provides us with the financial flexibility needed to pursue strategic growth opportunities. Finally, by returning $38.2 million to our shareholders through our share repurchase program and dividends during 2013, we demonstrated our commitment to enhancing shareholder value.”  Mr. Guzzi concluded, “We are optimistic about our prospects for 2014, despite ongoing challenges in some markets. We anticipate that improvements in the non-residential construction cycle will lead to greater opportunities resulting in increased revenue growth. We continue to operate from a position of financial strength with a robust balance sheet and strong cash generation. Overall, we are now in a better position financially and operationally than we were at the same point last year and believe 2014 has the potential to be a strong year for EMCOR.”  Revenues for the 2013 full-year period increased 1.1% to $6.42 billion compared to $6.35 billion for the 2012 full-year period.  Net income attributable to EMCOR for the 2013 full-year period was $123.8 million, or $1.82 per diluted share. Excluding losses associated with the withdrawal from the UK construction market, transaction expenses associated with the acquisition of RepconStrickland, and UK restructuring expenses, non-GAAP net income was $151.2 million, or $2.22 per diluted share, compared to non-GAAP net income of $154.4 million, or $2.28 per diluted share, in the year ago period, excluding 2012 UK construction losses.  Operating income in the 2013 full-year period was $210.3 million, or 3.3% of revenues. Excluding the items mentioned in the immediately preceding paragraph, non-GAAP operating income for the 2013 full-year period was $246.5 million, or 3.9% of revenues, compared to non-GAAP operating income of $260.3 million, or 4.2% of revenues, in 2012.  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 2013 full-year period, SG&A totaled $591.1 million, or 9.2% of revenues, compared to $556.2 million, or 8.8% of revenues, in 2012.  The Company noted that, based on the current size and mix of its backlog and assuming the continuation of current market conditions, it expects in 2014 revenues to be approximately $6.8 billion and diluted earnings per share to be between $2.40 to $2.70 excluding restructuring and other costs associated with the withdrawal from the UK construction market.  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 fourth quarter conference call will be available live via internet broadcast today, Tuesday, February 25, at 10:30 AM Eastern Standard 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. FINANCIAL HIGHLIGHTS (In thousands, except share and per share information)                                                                                                                     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                                   (Unaudited)                        For the three months ended                      For the twelve months ended                         December 31,                                    December 31,                        2013                2012                    2013                    2012 Revenues               $  1,662,937           $  1,611,881           $  6,417,158           $  6,346,679 Cost of sales          1,428,862              1,383,432              5,604,100              5,540,325      Gross profit           234,075                 228,449                 813,058                 806,354 Selling, general and            163,208                 149,586                 591,063                 556,242 administrative expenses Restructuring          2,061                  —                      11,703                 145            expenses Operating              68,806                  78,863                  210,292                 249,967 income Interest               (2,791        )         (1,815        )         (8,769        )         (7,275        ) expense Interest               266                    391                    1,128                  1,556          income Income before          66,281                  77,439                  202,651                 244,248 income taxes Income tax             20,012                 30,651                 75,297                 95,362         provision Net income including              46,269                  46,788                  127,354                 148,886 noncontrolling interests Less: Net income attributable           (348          )         (378          )         (3,562        )         (2,302        ) to noncontrolling interests Net income attributable           $  45,921             $  46,410             $  123,792            $  146,584    to EMCOR Group, Inc.                                                                                                                     Basic earnings per common             $  0.69               $  0.69               $  1.85               $  2.20       share Diluted earnings per           $  0.68               $  0.68               $  1.82               $  2.16       common share                                                                                                                     Weighted average shares of common stock outstanding: Basic                  66,966,303              66,805,577              67,086,299              66,701,869 Diluted                67,950,697              67,801,701              68,076,841              67,738,418                                                                                                                     Dividends declared per           $  —                  $  0.36               $  0.18               $  0.51       common share                                                                                                                                                                                                EMCOR GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)                                                                                                                                                            December 31,             December 31,                                2013                     2012 ASSETS Current assets: Cash and cash                 $   439,813            $   605,303 equivalents Accounts receivable,          1,268,226                1,221,956 net Costs and estimated earnings in excess of         90,727                   93,061 billings on uncompleted contracts Inventories                   52,123                   50,512 Prepaid expenses and          79,216                   73,621 other Total current assets          1,930,105                2,044,453 Investments, notes and other long-term           6,799                    4,959 receivables Property, plant &             123,414                  116,631 equipment, net Goodwill                      834,825                  566,588 Identifiable intangible assets,            541,497                  343,748 net Other assets                  29,275                   30,691 Total assets                  $   3,465,915          $   3,107,070 LIABILITIES AND EQUITY Current liabilities: Borrowings under revolving credit              $     —                  $     — facility Current maturities of long-term debt and            19,332                   1,787 capital lease obligations Accounts payable              487,738                  490,621 Billings in excess of costs and estimated           381,295                  383,527 earnings on uncompleted contracts Accrued payroll and           237,779                  224,555 benefits Other accrued expenses and                  172,599                  194,029 liabilities Total current                 1,298,743                1,294,519 liabilities Borrowings under revolving credit              —                        150,000 facility Long-term debt and capital lease                 335,331                  4,112 obligations Other long-term               352,215                  301,260 obligations Total liabilities             1,986,289                1,749,891 Equity: Total EMCOR Group, Inc. stockholders’            1,466,265                1,346,080 equity Noncontrolling                13,361                   11,099 interests Total equity                  1,479,626                1,357,179 Total liabilities and         $   3,465,915          $   3,107,070 equity                                                                                EMCOR GROUP, INC.                                                         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Twelve Months Ended December 31, 2013 and 2012 (In thousands)                                                                                                                                                         2013                    2012 Cash flows - operating activities: Net income including                      $   127,354           $   148,886 noncontrolling interests Depreciation and                            36,310                  31,204 amortization Amortization of identifiable                   31,028                  29,762 intangible assets Deferred                       11,857                  6,626 income taxes Excess tax benefits from                  (4,624        )         (7,083        ) share-based compensation Equity income from                           (1,048        )         (930          ) unconsolidated entities Other non-cash                 (6,262        )         8,978 items Distributions from                           679                     887 unconsolidated entities Changes in operating assets and liabilities,                   (45,225       )         (33,922       ) excluding the effect of businesses acquired Net cash provided by                    150,069                184,408        operating activities Cash flows - investing activities: Payments for acquisitions of businesses, net of cash acquired, and                  (454,671      )         (20,613       ) related contingent  consideration agreement Proceeds from sale of property,                      2,930                   3,070 plant and equipment Purchase of property,                      (35,497       )         (37,875       ) plant and equipment Investments in and advances to                             (800          )         — unconsolidated entities and joint ventures Purchase of short-term                     —                       (22,433       ) investments Maturity of short-term                     4,616                  35,305         investments Net cash used in investing                   (483,422      )         (42,546       ) activities Cash flows - financing activities: Proceeds from revolving                      250,000                 — credit facility Repayments of revolving                      (400,000      )         — credit facility Borrowings from long-term                 350,000                 — debt Repayments of                  (3,013        )         (40           ) long-term debt Repayments of capital lease                  (1,692        )         (1,978        ) obligations Dividends paid to                             (12,080       )         (34,073       ) stockholders Repurchase of                  (26,070       )         (23,912       ) common stock Proceeds from exercise of                    5,172                   8,786 stock options Payments to satisfy                        (927          )         (1,654        ) minimum tax withholding Issuance of common stock under employee                 2,854                   2,549 stock purchase plan Payments for contingent                     (537          )         (5,748        ) consideration arrangements Distributions to                             (1,300        )         (1,600        ) noncontrolling interests Excess tax benefits from                  4,624                  7,083          share-based compensation Net cash provided by (used in)                      167,031                (50,587       ) financing activities Effect of exchange rate changes on                     832                    2,706          cash and cash equivalents (Decrease) increase in                    (165,490      )         93,981 cash and cash equivalents Cash and cash equivalents at                 605,303                511,322        beginning of year Cash and cash equivalents at                 $   439,813          $   605,303  end of period                                                                                                                                                          EMCOR GROUP, INC. SEGMENT INFORMATION (In thousands)                                                                                                                                  (Unaudited)                              For the three months ended                               December 31,                                                                                 2013                      2012 Revenues from unrelated entities: United States electrical construction                 $   361,307             $   306,349 and facilities services United States mechanical construction                 588,351                   592,230 and facilities services United States building                     433,586                   465,977 services United States industrial                   184,055                  113,188 services Total United States                       1,567,299                 1,477,744 operations United Kingdom construction                 95,638                   134,137 and building services Total worldwide                    $   1,662,937          $   1,611,881 operations                                                                                                                                                                                          For the twelve months ended                               December 31,                              2013                      2012 Revenues from unrelated entities: United States electrical construction                 $     1,345,750           $     1,211,692 and facilities services United States mechanical construction                 2,329,834                 2,386,498 and facilities services United States building                     1,794,978                 1,807,917 services United States industrial                   519,413                  401,793 services Total United States                       5,989,975                 5,807,900 operations United Kingdom construction                 427,183                  538,779 and building services Total worldwide                    $   6,417,158          $   6,346,679 operations                                                                                EMCOR GROUP, INC.                                                          SEGMENT INFORMATION (In thousands)                                                                                                                                  (Unaudited)                              For the three months ended                               December 31,                              2013                  2012 Operating income (loss): United States electrical construction                 $   29,967                $   32,615 and facilities services United States mechanical construction                 36,956                      42,573 and facilities services United States building                     14,297                      9,637 services United States industrial                   12,444                     14,624         services Total United States                       93,664                      99,449 operations United Kingdom construction                 (3,859        )             (2,038        ) and building services Corporate                    (18,938       )             (18,548       ) administration Restructuring                (2,061        )             —              expenses Total worldwide                    68,806                      78,863 operations Other corporate items: Interest                     (2,791        )             (1,815        ) expense Interest                     266                        391            income Income before                $   66,281               $   77,439   income taxes                                                                                                                                                                                          For the twelve months ended                               December 31,                              2013                        2012 Operating income (loss): United States electrical construction                 $     98,114                $     100,736 and facilities services United States mechanical construction                 93,765                      125,261 and facilities services United States building                     67,225                      43,290 services United States industrial                   38,763                     37,241         services Total United States                       297,867                     306,528 operations United Kingdom construction                 (5,981        )             7,052 and building services Corporate                    (69,891       )             (63,468       ) administration Restructuring                (11,703       )             (145          ) expenses Total worldwide                    210,292                     249,967 operations Other corporate items: Interest                     (8,769        )             (7,275        ) expense Interest                     1,128                      1,556          income Income before                $   202,651              $   244,248  income taxes                                                                                 EMCOR GROUP, INC. RECONCILIATION OF 2013 AND 2012 OPERATING INCOME (In thousands) (Unaudited)  In our press release, we provide actual 2013 and 2012 fourth quarter and year-to-date December 31, 2013 and 2012 operating income. The following table provides a reconciliation between 2013 and 2012 operating income based on non-GAAP measures to the most direct comparable GAAP measures.                                                                                                                                     For the three months ended                  For the twelve months ended                            December 31,                                December 31,                           2013               2012                 2013                2012 GAAP operating            $   68,806           $   78,863         $   210,292           $   249,967 income Transaction expenses related to the                    90                     —                    6,140                   — acquisition of RepconStrickland, Inc. EMCOR UK construction              5,034                  5,572                19,002                  10,337 losses EMCOR UK restructuring             2,066                 —                   11,056                 — expenses Non-GAAP operating income, excluding RepconStrickland transaction expenses, UK losses and UK restructuring             $   75,996          $   84,435        $   246,490          $   260,304 expenses                                                                                                                                                                                                                                         EMCOR GROUP, INC. RECONCILIATION OF 2013 AND 2012 NET INCOME  (In thousands) (Unaudited)  In our press release, we provide actual 2013 and 2012 fourth quarter and year-to-date December 31, 2013 and 2012 net income attributable to EMCOR Group, Inc. The following table provides a reconciliation between 2013 and 2012 net income attributable to EMCOR Group, Inc. based on non-GAAP measures to the most direct comparable GAAP measures.                                                                                                                                                                                                                                                             For the three months ended                    For the twelve months ended                                                                                            December 31,                                  December 31,                           2013                2012                 2013                 2012 GAAP net income attributable to           $   45,921             $   46,410         $   123,792             $   146,584 EMCOR Group, Inc. Transaction expenses related to the                    107                      —                    4,363                     — acquisition of RepconStrickland, Inc. ^(1) EMCOR UK construction              3,863                    4,206                14,584                    7,804 losses ^(2) EMCOR UK restructuring             1,585                   —                   8,485                    — expenses ^(3) Non-GAAP net income attributable to EMCOR Group, Inc., excluding RepconStrickland transaction expenses, UK losses and UK             $   51,476            $   50,616        $   151,224            $   154,388 restructuring expenses                                                                                                                                                                                                                                            (1)  Amount is net of tax effect of $0.0 million in the quarter and $1.8       million in the twelve-month period. (2)   Amount is net of tax effect of $1.2 million in the 2013 quarter and $4.4       million in the 2013 twelve-month period.       Amount is net of tax effect of $1.4 million in the 2012 quarter and $2.5       million in the 2012 twelve-month period. (3)   Amount is net of tax effect of $0.5 million in the quarter and $2.6       million in the twelve-month period.          EMCOR GROUP, INC. RECONCILIATION OF 2013 AND 2012 DILUTED EARNINGS PER SHARE FIGURES  (Unaudited)  In our press release, we provide actual 2013 and 2012 fourth quarter and year-to-date December 31, 2013 and 2012 diluted earnings per share. The following table provides a reconciliation between 2013 and 2012 EPS based on non-GAAP measures to the most direct comparable GAAP measures.                                     For the three months ended                   For the twelve months ended                                                                                                    December 31,                                 December 31,                                   2013            2012                    2013            2012 GAAP diluted earnings per                      $   0.68          $   0.68              $   1.82          $   2.16 common share Transaction expenses related to the acquisition of                    0.00                 —                       0.06                —  RepconStrickland, Inc. ^(1) EMCOR UK construction                      0.06                 0.06                    0.21                0.12 losses ^(2) EMCOR UK restructuring                     0.02                 —                       0.12                — expenses ^(3) Non-GAAP diluted earnings per common share, excluding RepconStrickland transaction expenses, UK losses and UK restructuring                     $     0.76           $     0.75              $     2.22          $     2.28 expenses                                                                                                                                                                                                                      (1)  Amount is net of tax effect of $0.0 million in the quarter and $1.8       million in the twelve-month period. (2)   Amount is net of tax effect of $1.2 million in the 2013 quarter and $4.4       million in the 2013 twelve-month period.       Amount is net of tax effect of $1.4 million in the 2012 quarter and $2.5       million in the 2012 twelve-month period. (3)   Amount is net of tax effect of $0.5 million in the quarter and $2.6       million in the twelve-month period.  Contact:  FOREMCOR GROUP, INC. R. Kevin Matz, 203-849-7938 Executive Vice President Shared Services or FTI Consulting, Inc. Investors: Nathan Elwell / Matt Steinberg 212-850-5600 or LAK Public Relations, Inc. Media: Lisa Linden / Mollie Fullington 212-575-4545 / 917-346-6123  
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