EMCOR Group, Inc. Reports Fourth Quarter and Full-Year 2017 Results
February 22, 2018 07:30 AM Eastern Standard Time
NORWALK, Conn.--(BUSINESS WIRE)--EMCOR Group, Inc. (NYSE:EME) today reported results for the fourth quarter and fiscal year ended December 31, 2017.
For the fourth quarter of 2017, net income from continuing operations attributable to EMCOR was $53.3 million, or $0.90 per diluted share, compared to $42.2 million, or $0.69 per diluted share, for the fourth quarter of 2016. Net income from continuing operations attributable to EMCOR for the fourth quarter of 2017 included after-tax goodwill and identifiable intangible asset impairment charges, primarily related to the U.S Industrial Services segment, partially offset by a tax benefit resulting from the revaluation of the Company’s U.S. net deferred tax liabilities due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) detailed below. Excluding these items, non-GAAP net income from continuing operations attributable to EMCOR for the fourth quarter of 2017 was $67.0 million, or $1.13 per diluted share. This compares to non-GAAP net income from continuing operations attributable to EMCOR of $43.7 million, or $0.72 per diluted share, in the prior year period, which excluded an after-tax intangible asset impairment charge. Revenues for the fourth quarter of 2017 totaled $2.01 billion, an increase of 3.2% over the fourth quarter of 2016.
Operating income for the fourth quarter of 2017 was $48.5 million, or 2.4% of revenues, which included pre-tax impairment charges of $57.8 million, compared to operating income of $74.5 million, or 3.8% of revenues, for the fourth quarter of 2016. Excluding such pre-tax impairment charges, non-GAAP operating income for the fourth quarter of 2017 was $106.3 million, or 5.3% of revenues. This compares to non-GAAP operating income for the fourth quarter of 2016 of $76.9 million, or 3.9% of revenues, which excluded a pre-tax impairment charge of $2.4 million.
Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations and non-GAAP diluted earnings per share from continuing operations to the comparable GAAP figures.
Selling, general and administrative expenses for the fourth quarter of 2017 were $204.2 million, or 10.1% of revenues, compared to $194.9 million, or 10.0% of revenues, for the fourth quarter of 2016.
The Company’s income tax rate in the fourth quarter of 2017 was a benefit of 17.1%, which included a non-cash, tax benefit of $39.3 million, or $0.66 per diluted share, resulting from the revaluation of the Company’s U.S. net deferred tax liabilities due to the enactment of the Tax Act. This compares to an income tax provision rate of 40.3% in the fourth quarter of 2016.
Backlog as of December 31, 2017 was $3.79 billion, compared to $3.90 billion at the end of 2016. Domestic backlog fell $142.5 million year-over-year, while backlog in our U.K. Building Services segment increased $29.6 million, partially as a result of changes in the foreign exchange rate. Backlog growth in our U.S. Building Services segment, our U.K. Building Services segment and our U.S. Industrial Services segment was more than offset by declines in our U.S. Mechanical Construction segment and our U.S. Electrical Construction segment. From an end-market perspective, backlog growth in the commercial, hospitality and institutional sectors was more than offset by declines in the industrial, transportation, water and wastewater, and healthcare sectors.
Tony Guzzi, President and Chief Executive Officer of EMCOR, commented, “The Company had a strong finish to a fantastic year with record annual revenues and diluted earnings per share from continuing operations driven by exceptional project execution and strong demand across multiple end markets. This was underscored by growth in non-GAAP operating income of over 38% in the fourth quarter and over 23% for the full year, representing operating margin expansion of 140 basis points and 90 basis points, respectively. This solid performance extended to our operating cash flow, which was a record $366 million in 2017, an increase of 38% year-over-year.”
Mr. Guzzi added, “Our U.S. Construction segments were standouts, delivering 6% revenue growth for the quarter and double-digit revenue growth for the year, the majority of which was organic. Strong top-line growth in our U.S. Construction segments converted to robust profit growth of over 60% in the fourth quarter and over 54% for the year. We are also pleased with the performance in our U.S. Building Services segment, as strong operational execution drove a 6% increase in its annual operating income. As we expected, our U.S. Industrial services segment returned to profitability in the fourth quarter. However, the segment remained pressured by weak capital spending and the lingering impact of Hurricane Harvey, which further delayed turnaround work. Finally, our U.K. Building Services segment continued to see top-line momentum, with nearly a 30% increase in fourth quarter revenues resulting in strong operating income performance.”
Revenues for the 2017 full-year period increased 1.8% to $7.69 billion, compared to $7.55 billion for the 2016 full-year period. Net income from continuing operations attributable to EMCOR for the 2017 full-year period was $228.1 million, or $3.83 per diluted share, compared to $185.1 million, or $3.02 per diluted share, for the 2016 full-year period. Excluding the previously discussed after-tax impairment charges and the tax benefit related to the revaluation of the Company’s U.S. net deferred tax liabilities, both incurred in the fourth quarter, non-GAAP net income from continuing operations attributable to EMCOR for the 2017 full-year period was $241.8 million, or $4.06 per diluted share. This compares to non-GAAP net income from continuing operations attributable to EMCOR for the 2016 full-year period of $188.9 million, or $3.09 per diluted share, which excluded after-tax transaction expenses related to the acquisition of Ardent Services, L.L.C. and Rabalais Constructors, LLC (collectively, “Ardent”) and an after-tax impairment charge.
Operating income for the 2017 full-year period was $330.6 million, or 4.3% of revenues, compared to $308.5 million, or 4.1% of revenues, for the 2016 full-year period. Excluding pre-tax impairment charges incurred in the fourth quarter, non-GAAP operating income for the 2017 full-year period was $388.4 million, or 5.1% of revenues. This compares to non-GAAP operating income for the 2016 full-year period of $314.7 million, or 4.2% of revenues, which excluded the pre-tax transaction expenses and impairment charge.
Please see the attached tables for a reconciliation of non-GAAP operating income, non-GAAP net income from continuing operations and non-GAAP diluted earnings per share from continuing operations to the comparable GAAP figures.
For the 2017 full-year period, selling, general and administrative expenses were $757.1 million, or 9.8% of revenues, compared to $725.5 million, or 9.6% of revenues, for the 2016 full-year period.
Based on the current size and mix of backlog and assuming the continuation of current market conditions, EMCOR expects full-year 2018 revenues to be between $7.6 billion and $7.7 billion, and full-year 2018 diluted earnings per share from continuing operations to be in the range of $4.10 to $4.70, assuming an annual effective tax rate of approximately 28%.
Mr. Guzzi concluded, “Coming off a successful year, we believe that our solid and diverse backlog will drive continued strength in our business. The robust operational platform that we have built puts us in an excellent position to further capitalize on the ongoing strength that we expect in the non-residential market in 2018. Additionally, our healthy balance sheet will allow us to continue to pursue strategic acquisitions, while maintaining our commitment to returning capital to our shareholders.”
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
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www.emcorgroup.com.EMCOR Groups fourth quarter conference call will be available live via internet broadcast today, Thursday, February 22, at 10:30 AM Eastern Standard Time. The live call may be accessed through the Company's website at
www.emcorgroup.com." title="" target="_blank">
www.emcorgroup.com. EMCOR Group, Inc. Reports Fourth Quarter and Full-Year 2017 Results | Business Wire
