EMCOR Nails High-Profile Jobs but Says Construction Sector Recovering Slowly

April 5, 2012
As the largest electrical contractor in the United States, EMCOR Group Inc., Norwalk, Conn., has a broad view of the current economic conditions in the electrical market.

As the largest electrical contractor in the United States, EMCOR Group Inc., Norwalk, Conn., has a broad view of the current economic conditions in the electrical market. While the company has announced several large projects over the past month, growth in the private construction market is still spotty, according to information that the company’s executive team released during its fourth-quarter earnings call in late February.

EMCOR, which has 170 locations and approximately 26,000 employees, recently announced that its subsidiaries had won a facility management contract with Ruby Tuesdays; a major equipment installation for the Bay Area Rapid Transit (BART) in Oakland, Calif.; and the installation of new electrical systems in the press box of the Rose Bowl Stadium in Pasadena, Calif.

EMCOR’s Norristown, Pa.-based USM Services Holdings Inc. subsidiary, which it acquired last year, won a three-year contract for integrated facilities management at 742 Ruby Tuesday owned restaurants throughout the United States. The scope of work includes full electrical, HVAC, fire protection and plumbing services, as well as all landscaping and snow and ice management services. Additionally, USM’s scope of work includes repairs and maintenance on all kitchen equipment, food service equipment, refrigeration, ceilings, fixtures, floors, sidewalks, windows, cabinets and doors, as well as support and maintenance of lighting, material handling equipment and parking lot repair and painting.

In the BART mass-transit contract, the company’s Contra Costa Electric subsidiary has been awarded a contract for all aspects of the installation of the electrical systems for two new transit stations and a new maintenance facility for BART’s automated people-mover (APM) system at the BART Coliseum/Oakland Airport Station for the Oakland International Airport in Oakland, Calif. This includes installation of station power, switchgear, lighting and voice-data-video (VDV) systems.

Dynalectric Los Angeles will install new electrical systems for the press box at the Rose Bowl Stadium, which includes new luxury suites. Dynalectric’s scope of work will include installation of the electrical distribution, video surveillance, audio and communication systems, as well as the Satellite Master Antenna TeleVision (SMATV), broadcast cabling, and digital addressable fire alarm systems.

Despite the slow recovery in the private construction market, EMCOR enjoyed a nice boost in total company revenues last year. For 2011, its revenues increased 15.7% to $5.61 billion, compared to $4.85 billion for the 2010 full-year period. Organic revenue growth for the 2011 full-year period was 7.3%. Revenues from electrical construction and facilities services, which account for 21% of all revenues, declined slightly in 2011 from $1.158 to $1.155 billion. However, the company’s total project backlog, a good measure of future revenues and work to be completed, increased 7.1% over 2010 to $3.3 billion, and the company had $511 million cash on its balance sheet at year-end. EMCOR’s full-year industrial backlog was up 31%.

Electrical and HVAC facilities services for existing buildings are a major focus for the company, and it has many contracts in this niche with Fortune 500 companies and government entities. EMCOR has a big presence in the Washington, D.C. metropolitan area and it provides these facility services to large customers such as Secret Service, Federal Deposit Insurance Corp., World Bank and Department of Health and Human Services. According to the company’s 2011 10-K, last year approximately 44% of total revenues were derived from facilities services operations; 36% came from new construction projects; and 20% were derived from renovation and retrofit of customers’ existing facilities.

In reporting the company’s full-year 2011 and 4Q 2011 results, Tony Guzzi, president and CEO, EMCOR Group, said in a press release, “We are pleased with our results for the 2011 fourth quarter and full-year periods, which continued to reflect strong execution in a challenging market environment. During the quarter, we delivered solid organic growth, particularly in our facilities services segment, and profitability continued to meaningfully benefit from the successful completion of several large projects and continued strong performance from our companies that perform industrial work. We remain steadfast in our commitment to cost control, as SG&A margins for both the three- and twelve-month periods declined relative to the year ago periods despite the increase in revenues.”