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EMCOR Group, Inc. Reports Fourth Quarter and Full-Year 2020 Results

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- 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/

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