Add
EME to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| EME > SEC Filings for EME > Form 10-Q on 30-Jul-2009 | All Recent SEC Filings |
30-Jul-2009
Quarterly Report
We are one of the largest electrical and mechanical construction and facilities services firms in the United States, Canada, and the United Kingdom and in the world. We provide services to a broad range of commercial, industrial, utility and institutional customers through approximately 75 operating subsidiaries and joint venture entities. Our offices are located in the United States, Canada and the United Kingdom. In the Middle East, we carry on business through a joint venture.
Overview
The following table presents selected financial data for the three months ended
June 30, 2009 and 2008 (in thousands, except percentages and per share data):
For the three months ended June 30,
-----------------------------------
2009 2008
---------- ----------
Revenues $1,422,670 $1,722,972
Revenues (decrease) increase from prior year (17.4)% 25.6%
Operating income $ 74,860 $ 73,330
Operating income as a percentage of revenues 5.3% 4.3%
Net income attributable to EMCOR Group, Inc. $ 44,819 $ 43,954
Diluted earnings per common share $ 0.67 $ 0.65
|
The results of our operations for the second quarter of 2009 reflected record highs for any EMCOR second quarter in terms of gross margin (gross profit as a percentage of revenues), operating income, operating margin (operating income as a percentage of revenues), net income and diluted earnings per common share; however, revenues decreased compared to the year ago quarter. The improvement in operating income was primarily attributable to: (a) reduced selling, general and administrative expenses, (b) the turnaround in the performance of one of our operations within our United States mechanical construction and facilities services segment, which operation had experienced large operating losses in the second quarter of 2008, (c) a favorable job close-out within our United States electrical construction and facilities services segment and (d) a charge to expense in 2008 of $7.9 million in connection with an adverse ruling in a lawsuit (the "UOSA Action") within our United States mechanical construction and facilities services segment. The operating income of our Canada construction and facilities services segment also improved for the 2009 second quarter compared to the year ago quarter. These increases were partially offset by lower operating income from our United States facilities services segment and an increase in restructuring expenses.
The decrease in revenues for the 2009 second quarter when compared to the prior year's second quarter was primarily attributable to: (a) a decrease in work performed on commercial and hospitality projects as a result of the economic slowdown and (b) the unfavorable exchange rate effects of the weakening British pound and Canadian dollar against the United States dollar. During the second quarter of 2009, companies we acquired within the prior 12 months, reported within our United States facilities services segment, contributed $27.3 million to revenues and $0.8 million to operating income (net of $1.1 million of amortization expense attributable to identifiable intangible assets recorded to cost of sales and selling, general and administrative expenses).
Cash provided by operating activities increased by $27.6 million for the first six months of 2009, compared to the first six months of 2008, primarily due to an increase in net income and changes in our working capital. Cash used for investing activities decreased by $26.8 million for the first six months of 2009, compared to the first six months of 2008, primarily due to a $30.6 million decrease in payments for acquisitions of businesses, identifiable intangible assets and payments pursuant to related earn-out agreements. Cash used in financing activities decreased by $24.9 million during the 2009 first six months, compared to the prior year's first six months, primarily due to repayment of a portion of our long-term indebtedness in the first six months of 2008. Interest expense for the first six months of 2009 was $3.7 million, a $2.9 million decrease compared to the first six months of 2008. The decrease in interest expense was related to a reduction in our long-term indebtedness and lower interest rates as compared to 2008. Interest income for the first six months of 2009 was $2.6 million, a $2.6 million decrease compared to the first six months of 2008. The decrease in interest income was primarily related to lower interest rates received on our invested cash balances. We completed one acquisition during the first six months of 2009 for an immaterial amount. The acquired company, which provides mobile mechanical services, has been included in our United States facilities services segment and expands our service capabilities in a geographical area in which we had been already operating. The acquisition is not material to our results of operations for the periods presented.
Operating Segments
We have the following reportable segments which provide services associated with
the design, integration, installation, start-up, operation and maintenance of
various systems: (a) United States electrical construction and facilities
services (involving systems for electrical power transmission and distribution;
premises electrical and lighting systems; low-voltage systems, such as fire
alarm, security and process control; voice and data communication; roadway and
transit lighting; and fiber optic lines); (b) United States mechanical
construction and facilities services (involving systems for heating,
ventilation, air conditioning, refrigeration and clean-room process ventilation;
fire protection; plumbing, process and high-purity piping; water and wastewater
treatment and central plant heating and cooling); (c) United States facilities
services; (d) Canada construction and facilities services; (e) United Kingdom
construction and facilities services; and (f) Other international construction
and facilities services. The segment "United States facilities services"
principally consists of those operations which provide a portfolio of services
needed to support the operation and maintenance of customers' facilities
(industrial maintenance and services; outage services to utilities and
industrial plants; commercial and government site-based operations and
maintenance; military base operations support services; mobile maintenance and
services; facilities management; installation and support for building systems;
technical consulting and diagnostic services; small modification and retrofit
projects; retrofit projects to comply with clean air laws; and program
development, management and maintenance for energy systems), which services are
not generally related to customers' construction programs, as well as industrial
services operations, which primarily provide aftermarket maintenance and repair
services, replacement parts and fabrication services for highly engineered shell
and tube heat exchangers for refineries and the petrochemical industry. The
Canada, United Kingdom and Other international segments perform electrical
construction, mechanical construction and facilities services. Our "Other
international construction and facilities services" segment, currently operating
only in the Middle East, represents our operations outside of the United States,
Canada and the United Kingdom.
Results of Operations
Revenues
The following tables present our operating segment revenues from unrelated
entities and their respective percentages of total revenues (in thousands,
except for percentages):
For the three months ended June 30,
-----------------------------------------------
% of % of
2009 Total 2008 Total
---------- ----- ---------- -----
Revenues:
United States electrical construction and facilities services $ 329,861 23% $ 429,915 25%
United States mechanical construction and facilities services 534,322 38% 626,725 36%
United States facilities services 365,724 26% 403,218 23%
---------- ----------
Total United States operations 1,229,907 86% 1,459,858 85%
Canada construction and facilities services 72,037 5% 96,496 6%
United Kingdom construction and facilities services 120,726 8% 166,618 10%
Other international construction and facilities services -- -- -- --
---------- ----------
Total worldwide operations $1,422,670 100% $1,722,972 100%
========== ==========
|
For the six months ended June 30,
-----------------------------------------------
% of % of
2009 Total 2008 Total
---------- ----- ---------- -----
Revenues:
United States electrical construction and facilities services $ 646,542 23% $ 831,193 25%
United States mechanical construction and facilities services 1,054,608 37% 1,228,899 36%
United States facilities services 729,443 26% 756,662 22%
---------- ----------
Total United States operations 2,430,593 86% 2,816,754 83%
Canada construction and facilities services 150,217 5% 202,200 6%
United Kingdom construction and facilities services 236,496 8% 365,421 11%
Other international construction and facilities services -- -- -- --
---------- ----------
Total worldwide operations $2,817,306 100% $3,384,375 100%
========== ==========
|
As described below in more detail, our revenues for the three months ended June 30, 2009 decreased to $1.4 billion compared to $1.7 billion of revenues for the three months ended June 30, 2008, and our revenues for the six months ended June 30, 2009 decreased to $2.8 billion compared to $3.4 billion for the six months ended June 30, 2008. The decrease in revenues for the three and six month periods ended June 30, 2009, compared to the same periods in 2008, extended across all of our business segments and was primarily attributable to: (a) lower levels of work in our United States electrical construction and facilities services and mechanical construction and facilities services segments, most notably on hospitality and commercial projects and (b) the unfavorable exchange rate effects of the weakening British pound and Canadian dollar against the United States dollar. This decrease was partially offset by an increase in revenues for the three and six months ended June 30, 2009 of $27.3 million and $64.7 million, respectively, attributable to companies acquired within the past 12 months, which are reported within our United States facilities services and United States mechanical construction and facilities services segments.
Our backlog at June 30, 2009 was $3.40 billion compared to $4.67 billion of
backlog at June 30, 2008. Our backlog was $4.00 billion at December 31, 2008.
Backlog decreases as we perform work on existing contracts and increases with
awards of new contracts. The decrease in our United States electrical
construction and facilities services and our United States mechanical
construction and facilities services segments' backlog at June 30, 2009,
compared to such backlog at June 30, 2008, was primarily due to a decrease in
awards within the hospitality, commercial and industrial construction markets,
partially offset by an increase in awards in the institutional construction
market. Backlog is not a term recognized under United States generally accepted
accounting principles; however, it is a common measurement used in our industry.
Backlog includes unrecognized revenues to be realized from uncompleted
construction contracts plus unrecognized revenues expected to be realized over
the remaining term of facilities services contracts. However, if the remaining
term of a facilities services contract exceeds 12 months, the unrecognized
revenues attributable to such contract included in backlog are limited to only
the next 12 months of revenues.
Revenues of our United States electrical construction and facilities services
segment for the three months ended June 30, 2009 decreased $100.1 million
compared to the three months ended June 30, 2008. Revenues of this segment for
the six months ended June 30, 2009 decreased $184.7 million compared to the six
months ended June 30, 2008. The decrease in revenues for both periods was
primarily attributable to lower levels of work on commercial and hospitality
projects, most notably in the Chicago, Las Vegas, New York City and Washington
D.C. markets, as a result of the recession and tight credit markets.
Revenues of our United States mechanical construction and facilities services segment for the three months ended June 30, 2009 decreased $92.4 million compared to the three months ended June 30, 2008. Revenues of this segment for the six months ended June 30, 2009 decreased $174.3 million compared to the six months ended June 30, 2008. The decrease in revenues for both periods was primarily attributable to a decrease in work on hospitality projects, most notably in the Las Vegas market, and commercial projects. These decreases in revenues for both periods were offset by an increase in revenues from work performed on industrial and healthcare projects. Additionally, the decrease in revenues for the six months ended June 30, 2009 was offset by revenues of $2.2 million from a company acquired during the prior 12 months.
Our United States facilities services revenues decreased $37.5 million for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 and $27.2 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. The decreases in revenues during the three and six months ended June 30, 2009 were primarily attributable to lower revenues from (a) our industrial services operations, (i) which benefited in 2008 from a significant turnaround/expansion contract at a refinery and (ii) which experienced adverse industry conditions that led to lower demand for our shop and field refinery and petrochemical services in 2009 and (b) our mobile mechanical services group as a result of lower revenues from discretionary project and controls work. These decreases in revenues for the three and six month periods ended June 30, 2009 were offset by: (a) revenues of $27.3 million and $62.5 million, respectively, from companies acquired during the prior 12 months, which perform maintenance services for utility and industrial plants and perform mobile mechanical services and (b) increases in site-based government facilities services revenues.
Revenues of our Canada construction and facilities services segment decreased by $24.5 million for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Revenues of this segment decreased $52.0 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. $11.2 million and $29.5 million of the decrease in revenues for the three and six months ended June 30, 2009, respectively, was a result of the weakening of the Canadian dollar against the United States dollar. The balance of the decrease in revenues was primarily attributable to fewer contracts for automotive and energy projects. This decrease in revenues was partially offset by more work on healthcare related projects.
United Kingdom construction and facilities services revenues decreased $45.9 million for the three months ended June 30, 2009, compared to the three months ended June 30, 2008. Approximately $32.8 million of this decrease was a result of the weakening of the British pound against the United States dollar. Revenues of this segment decreased $128.9 million for the six months ended June 30, 2009, compared to the six months ended June 30, 2008. Approximately $76.3 million of this decrease was a result of the weakening of the British pound against the United States dollar. In addition, the decrease in revenues was partially attributable to a decrease in revenues relating to rail contracts and lower revenues from the United Kingdom's construction business.
Other international construction and facilities services activities consist of operations currently operating only in the Middle East. All of the current projects in this market are being performed through a joint venture. The results of the joint venture were accounted for under the equity method. Cost of sales and Gross profit
The following tables present our cost of sales, gross profit (revenues less cost
of sales) and gross profit margin (gross profit as a percentage of revenues) (in
thousands, except for percentages):
For the three months ended June 30, For the six months ended June 30,
------------------------------------ ---------------------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Cost of sales $1,207,786 $1,497,761 $2,409,263 $2,969,239
Gross profit $ 214,884 $ 225,211 $ 408,043 $ 415,136
Gross profit, as a percentage of revenues 15.1% 13.1% 14.5% 12.3%
|
Our gross profit decreased $10.3 million for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Gross profit decreased $7.1 million for the six months ended June 30, 2009 compared to the six months ended June 30, 2008. Gross profit margin was 15.1% and 13.1% for the three months ended June 30, 2009 and 2008, respectively. Gross profit margin was 14.5% and 12.3% for the six months ended June 30, 2009 and 2008, respectively. The decrease in gross profit for the 2009 periods compared to the 2008 periods was primarily attributable to lower gross profit from our industrial services and mobile mechanical operations within our United States facilities services segment due to lower levels of work and from our international operations due to the unfavorable exchange rate effects of the weakening British pound and Canadian dollar against the United States dollar. The decrease in gross profit was offset by increases in the gross profit contributed by our United States electrical construction and facilities services and mechanical construction and facilities services segments and by companies acquired during the prior 12 months. Companies acquired during the prior 12 months contributed $2.7 million and $6.2 million to gross profit, net of amortization expense of $0.7 million and $1.9 million, for the three and six months ended June 30, 2009, respectively. The increase in the gross profit margin for the three and six months ended June 30, 2009 was primarily the result of (a) improved margins within our United States electrical construction and facilities services segment as a result of favorable job close-outs and (b) a charge to expense in 2008 of $7.9 million in connection with the UOSA Action within our United States mechanical construction and facilities services segment.
Selling, general and administrative expenses
The following tables present our selling, general and administrative expenses
and selling, general and administrative expenses as a percentage of revenues (in
thousands, except for percentages):
For the three months ended June 30, For the six months ended June 30,
----------------------------------- ---------------------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Selling, general and administrative expenses $ 136,974 $ 151,824 $ 264,769 $ 292,066
Selling, general and administrative expenses,
as a percentage of revenues 9.6% 8.8% 9.4% 8.6%
|
Our selling, general and administrative expenses for the three months ended June
30, 2009 decreased $14.9 million to $137.0 million compared to $151.8 million
for the three months ended June 30, 2008. Selling, general and administrative
expenses as a percentage of revenues were 9.6% and 9.4% for the three and six
months ended June 30, 2009, compared to 8.8% and 8.6% for the three and six
months ended June 30, 2008, respectively. The decrease in selling, general and
administrative expenses for the three and six months ended June 30, 2009
compared to the three and six months ended June 30, 2008 was primarily due to:
(a) lower incentive compensation accruals as a result of reduced forecasted
earnings in 2009 compared to 2008, (b) lower employee costs, such as salaries
and employee benefits, as a result of downsizing of staff at numerous locations,
(c) a $8.2 million decrease as a result of changes in the rates of exchange of
British pounds and Canadian dollars for United States dollars due to the
weakening of the British pound and Canadian dollar and (d) favorable effects
attributable to changes during the three and six month periods ended June 30,
2009 in the valuation of our phantom stock units, whose value is tied to the
value of our common stock. Certain of the phantom stock units referred to above
were settled in cash during the first quarters of 2009 and 2008. These decreases
in selling, general and administrative expenses were partially offset by (a) a
$4.8 million increase in such expenses for the first six months of 2009 directly
related to companies acquired within the prior 12 months, including amortization
expense of $0.9 million and (b) a $3.8 million increase in our provision for
doubtful accounts.
Restructuring expenses
Restructuring expenses, primarily related to employee severance obligations, were $3.0 million and $4.1 million for the three and six months ended June 30, 2009, respectively. Restructuring expenses were $0.06 million and $0.07 million for the three and six months ended June 30, 2008. Restructuring expenses for the first half of 2009 were primarily related to our international operations, our United States mechanical construction and facilities services segment and our United States facilities services segment. As of June 30, 2009, the balance of our severance obligations was $1.2 million and is expected to be paid in 2009.
Operating income
The following tables present our operating income (loss) and operating income
(loss) as a percentage of segment revenues from unrelated entities (in
thousands, except for percentages):
For the three months ended June 30,
----------------------------------------------
% of % of
Segment Segment
2009 Revenues 2008 Revenues
-------- -------- -------- --------
Operating income (loss):
United States electrical construction and facilities services $ 31,721 9.6% $ 24,869 5.8%
United States mechanical construction and facilities services 29,390 5.5% 25,298 4.0%
United States facilities services 24,326 6.7% 35,080 8.7%
-------- --------
Total United States operations 85,437 6.9% 85,247 5.8%
Canada construction and facilities services 4,104 5.7% 3,155 3.3%
United Kingdom construction and facilities services 3,550 2.9% 3,913 2.3%
Other international construction and facilities services -- -- -- --
Corporate administration (15,181) -- (18,928) --
Restructuring expenses (3,050) -- (57) --
-------- --------
Total worldwide operations 74,860 5.3% 73,330 4.3%
Other corporate items:
Interest expense (1,900) (2,638)
Interest income 1,086 2,059
-------- --------
Income before income taxes $ 74,046 $ 72,751
======== ========
|
. . . |
|
|