Record First Quarter Revenues at EMCOR
EMCOR Group has reported swelling order books (outside the UK) and record First Quarter revenues of US $1.74 billion driven by organic growth.
EMCOR Group, Inc. (NYSE: EME) today reported results for the first quarter ended March 31, 2016.
For the first quarter of 2016, net income from continuing operations attributable to EMCOR was $34.4 million, or $0.56 per diluted share, compared to $33.2 million, or $0.52 per diluted share, in the first quarter of 2015. Included in net income from continuing operations attributable to EMCOR for the first quarter of 2016 were transaction expenses of $0.7 million after tax, or $0.01 per diluted share, related to the Company’s acquisition of Ardent Services, L.L.C. and Rabalais Constructors, LLC (collectively, “Ardent”), which was completed on April 15, 2016. Excluding these expenses, non-GAAP net income from continuing operations attributable to EMCOR in the first quarter of 2016 was $35.1 million, or $0.57 per diluted share. Revenues for the first quarter of 2016 were $1.74 billion, an increase of 9.8% compared to revenues of $1.59 billion for the first quarter of 2015.
Operating income for the first quarter of 2016 was $55.6 million, or 3.2% of revenues, compared to operating income of $55.3 million, or 3.5% of revenues, for the first quarter of 2015. Included in operating income for the first quarter of 2016 were pre-tax transaction expenses of $1.1 million related to the Ardent acquisition. Excluding these expenses, non-GAAP operating income for the first quarter of 2016 was $56.7 million.
Selling, general and administrative expenses for the first quarter of 2016 were $167.4 million, or 9.6% of revenues, compared to $161.6 million, or 10.2% of revenues, in the year ago period.
The Company's income tax rate in the first quarter of 2016 was 35.5%, compared to an income tax rate of 37.9% in the year ago period.
Backlog as of March 31, 2016 was $3.85 billion, a 3.1% increase compared to $3.74 billion at the end of the first quarter of 2015. Domestic backlog grew $119 million year-over-year, while backlog in the UK Building Services segment decreased $3 million year-over-year primarily driven by the negative impact of foreign currency translation. Growth in backlog in the U.S. Mechanical Construction and U.S. Building Services segments more than offset declines in the U.S. Industrial Services and U.S. Electrical Construction segments. From an end market perspective, backlog growth in the water & wastewater, industrial, transportation and hospitality/gaming sectors was partially offset by declines in the healthcare, institutional and commercial sectors. On a sequential basis, backlog as of March 31, 2016 of $3.85 billion increased 2.1% as compared to backlog as of December 31, 2015 of $3.77 billion.
Tony Guzzi, President and Chief Executive Officer of EMCOR Group, commented, “The first quarter was a strong start to the year as we delivered record revenues driven by organic growth in each of our segments. While the majority of the 8.9% organic growth represents solid revenue conversion from prior backlog growth in our construction operations, a portion of the positive comparison benefits from the year-ago period being adversely impacted by difficult weather conditions for our construction operations, especially in the Northeast, and by a nationwide refinery operators strike in early 2015 that caused certain of our turnaround projects to be cancelled or deferred. In the quarter, we also experienced continued growth in our backlog, which now stands at its highest level since 2008, demonstrating our ability to capitalize on the ongoing recovery in non-residential construction.”
Mr. Guzzi added, “The strongest segment performance in the first quarter came from our U.S. Mechanical Construction segment, which delivered double-digit revenue and operating income growth, reflecting robust organic growth across several of our end markets. Our U.S. Electrical Construction segment experienced strong revenue growth with slightly lower operating margins due to write-downs on two transportation projects. Revenues in our U.S. Building Services segment were essentially flat largely due to an unseasonable winter, which negatively impacted our commercial site-based business. This segment’s operating income was also impacted by the comparison to the prior year period which included a one-time favorable legal settlement. In our Industrial Services segment, both revenue and operating income benefitted from increased demand in field specialty services, as the prior year was negatively impacted by the refinery operators strike in early 2015. In the UK, we delivered organic revenue growth and grew operating margins despite facing foreign exchange headwinds.”
Mr. Guzzi concluded, “We continue to be encouraged by our prospects for 2016, underscored by the growth and strength of our backlog. For the third consecutive quarter, our backlog grew when compared to backlog as of a year ago and the immediately preceding quarter. We are revising our full year revenue guidance upwards reflecting our continued optimism that the non-residential construction sector will improve for the remainder of 2016 and confidence in our ability to successfully integrate and position our recent acquisitions for solid growth. Additionally, our strong cash position and healthy balance sheet continue to provide us with the flexibility to pursue strategic acquisitions, drive solid organic growth, and return capital to shareholders through share repurchases and dividends.”
The Company noted that based on the expected accretion from its recent acquisitions, the current size and mix of its backlog and assuming continued improvement in market conditions, EMCOR expects full year 2016 revenues to now be approximately $7.2 billion, up from an initial range of $6.9 billion to $7.0 billion, and full year 2016 diluted earnings per share from continuing operations, excluding transaction expenses related to the Ardent acquisition, to now be in the range of $2.75 to $3.00, up from an initial range of $2.70 to $3.00.
Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations attributable to EMCOR and non-GAAPdiluted earnings per share from continuing operations to the comparable GAAP figures.
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 Group's first quarter conference call will be available live via internet broadcast today, Thursday, April 28, at 10:30 AM Eastern Daylight Time. You can access the live call through the Company's website 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 and failure to achieve expected accretion and other expected benefits of the transaction. Certain of the risks and factors associated with EMCOR's business are also discussed in the Company's 2015 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.