The Southeast’s Top Specialty Contractors

This year’s Top Specialty Contractors ranking was the biggest ever, but firms are facing highly competitive pressures in 2008.

By Scott Judy

Southeast Construction presents its eighth annual ranking of Top Specialty Contractors. Compared to last year’s list, the Top Specialty Contractors ranking listed here is deeper by about 45 firms. Whereas the ranking published last year included 155 contracting firms, this year’s includes 202. (There was a seven-way tie at the #196 position, thus the 202 figure.) The Top 200 ranking marks a milestone in the magazine’s history, making it the first time any of Southeast Construction’s rankings has reached this number. The collective revenue total for this year’s ranking represents yet another record, with the roughly $7.7 billion in 2007 revenues featured here the most ever.

As with previous contractor lists, this one is based on revenue generated during the preceding calendar year.

The format of our ranking is again based on regional revenue totals, meaning the volume of work collected in 2007 from projects located within the magazine’s four-state territory of Florida, Georgia, North Carolina and South Carolina.

Within this main, overall ranking, readers will find the most extensive information about the ranked firms, including the address for the companies’ main office locations; telephone and fax numbers; name of the principal or top regional officer; a percentage breakdown of the company’s activity by work category; and other information, such as the year a firm was founded.

We’ve also included some breakout rankings, where we list the top firms in different specialty categories.

The revenue figures reported in these breakout rankings reflect the amount of work the respective companies generated in that particular category. As a result, companies may be listed in multiple work categories, and figures listed here may not match the regional revenue total provided in the main ranking.

We also included breakout rankings based upon revenue generated from each of the four states.

All figures listed in both the main ranking and the breakout listings are based upon online surveys submitted by the listed company. As with all of Southeast Construction’s rankings, specialty contractors must submit a survey in order to be listed.

Analysis

Taking the top spot again this year was Miami-based telecommunications contractor MasTec Inc. The firm reported $560.9 million in four-state revenue for 2007, up from the $475.7 million the company reported for last year’s ranking.

EMCOR Group, the nationwide specialty contractor whose Southeast operations include Dynalectric, Poole & Kent and Mechanical Services of Central Florida, again placed second, this time with approximately $257.25 million.

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Miller Electric Co. of Jacksonville, Fla., again placed third. The company showed considerable growth, with 2007 regional revenue at $254.3 million, ahead of its ’06 revenue total of $206.3 million. Inglett & Stubbs of Mableton, Ga., another electrical contractor, took the fourth spot with its $214 million total, which also was well ahead of the $154.2 million it reported on last year’s ranking.

United Forming, the concrete forming company based in Austell, Ga., rounded out the top five, with $183 million in regional revenue reported for 2007.

Downturn Impacts

Despite the solid numbers, it’s obvious that the downturn of 2008 is definitely impacting the Southeast’s specialty contracting firms. Whereas just a few years ago, when demand was soaring sky-high, it seemed that specialty contractors could practically name their price as general contractors were begging for firms to man their jobs. Now, competition for jobs is red hot again and specialty firms – and generals, too – are battling each other and shaving their estimates as sharply as possible in order to win the next job.

In fact, Jeff Giglio, president and CEO of electrical contracting firm Inglett & Stubbs, cited “maintaining margins with competitors cutting prices to get back into the market” as his firm’s main challenge during 2008. During the present year, Giglio expects his firm’s market to decline by about 10-15% below 2007 – which is probably not as bad as some other specialty contractors will experience in their markets during 2008.

Denny Terrell, president with Mississippi-based mechanical contracting giant Ivey Mechanical, agrees. The main challenge for 2008, Terrell says via email, is “competition increases due to contractors moving into markets they are not usually in.”

Despite the decline, Terrell says Ivey is “still seeing a good many opportunities in 2008. [We’re] slightly ahead in acquisitions for 2008. The overall market is about where we anticipated; however, the small to mid-size projects seem to be decreasing.”

In Florida, where the residential market has been in “bust” mode for a couple of years now, specialty firms are increasingly finding themselves competing against firms that previously worked exclusively in the single-family sector.

Thomas Johnson Sr., president of Orlando-based drywall contractor Mader Southeast, sees this as a major factor for ‘08.

“An influx of residential contractors into the light commercial market has caused an erosion of fee and reduced market share,” Johnson said via an emailed response.

Additionally, he says, “Inflationary pressures are heavily weighing on material values with little to no opportunities to incorporate them into project costs. This mainly is being driven by less-educated competitors who simply will work for less fee with no understanding of what their overhead costs are worth.

“New competitors created through the last boom have recently started to hit the panic button and are bidding below the value of the market costs,” Johnson adds. “This market condition is consistent with the commercial market cycle experienced in Florida about every 10 years. The market has a natural purge mechanism that through the lean times has a way of cleaning itself up. The problem is the amount of work cannot support the (number) of subcontractors.”

Johnson is also highly negative about the future prospects of the condominium and hospitality markets, and says the pressures on drywall contractors have become enormous overall.

“’Florida’ and ‘condos’ are two words that we won't see together for a least 10 to 15 years,” he says. “The market is overbuilt and with valuations still dropping, we won’t see any new condos developed for a long time. Hotels in Orlando are a close second, with market saturation and fuel prices what they are, tourism cannot support all the new hotels brought on line in the last five years.”

Overall, Johnson says, “We see the next 24 months as the hardest the commercial drywall (market) has seen in 20 years. While the market is busy, the numbers that are being bid cannot support the amount of competitors. If you don’t know your costs, you simply will not make it through this downturn. We are very fortunate in that we have a strong backlog on the books that will get us through this tough time.”

We’ll see how firms fare in 2008 in next year’s Top Specialty Contractors ranking. For now, here’s how specialty contracting firms in the Southeast compare.