SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (date of earliest event reported) May 10, 1996
EMCOR Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-2315 11-2125338
................................................................................
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
101 Merritt Seven Corporate Park, Norwalk, CT 06851
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 849-7800
N/A
..............................................................................
(Former name or former address, if changed since last report.)
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ITEM 5: OTHER EVENTS
Without acknowledging it is of importance to security holders, the following
financial statements of Dyn Specialty Contracting, Inc. ("Dyn") and its
subsidiaries are provided for informational purposes only (Dyn is a wholly owned
subsidiary of EMCOR Group, Inc.).
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DYN SPECIALTY CONTRACTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands. Except Share and Per Share Data)(Unaudited)
- ----------------------------------------------------------- -------------------
March 31, 1996
- ----------------------------------------------------------- -------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $22,523
Accounts receivable, net 72,884
Costs and estimated earnings in excess
of billings on uncompleted contract 17,596
Inventories 626
Prepaid expenses and other 163
-------------------
Total current assets 113,792
PROPERTY, PLANT, AND EQUIPMENT - Net 2,581
OTHER ASSETS 3,749
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TOTAL ASSETS $120,122
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term $1,033
debt and capital lease obligations
Accounts payable 26,618
Billings in excess of costs and estimated 32,096
earnings on uncompleted contracts
Accrued payroll and benefits 12,139
Other accrued expenses and liabilities 5,534
-------------------
Total current liabilities 77,420
LONG-TERM LIABILITIES 230
DUE TO PARENT COMPANY, NET 10,593
-------------------
Total liabilities 88,243
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $1 par value, 100 shares 1
authorized, issued and outstanding
Additional paid-in capital and
retained earnings 31,878
-------------------
Total stockholders' equity 31,879
-------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $120,122
===================
See notes to condensed consolidated financial statements.
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DYN SPECIALTY CONTRACTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands)(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended March 31, 1996
- --------------------------------------------------------------------------------
CONSTRUCTION REVENUES $83,235
COSTS AND EXPENSES:
Cost of construction 75,317
Selling, general and administrative 6,800
-------------------
82,117
OPERATING INCOME 1,118
OTHER EXPENSES:
Interest income, net 91
Management fee - related party (853)
-------------------
PRETAX INCOME 356
PROVISION FOR INCOME TAXES 153
-------------------
NET INCOME $203
===================
See notes to condensed consolidated financial statements.
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DYN SPECIALTY CONTRACTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands)(Unaudited)
- --------------------------------------------------------------------------------
Three Months Ended March 31, 1996
- --------------------------------------------------------------------------------
Additional
Paid-in
Capital and
Common Stock Retained Earnings Total
------------- ----------------- ------------
BALANCE, DECEMBER 31, 1995 $1 $31,675 $31,676
Net income - 203 203
------------- ----------------- ------------
BALANCE, MARCH 31, 1996 $1 $31,878 $31,879
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See notes to condensed consolidated financial statements.
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DYN SPECIALTY CONTRACTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)(Unaudited)
- ------------------------------------------------------------- ------------------
Three Months Ended March 31, 1996
- ------------------------------------------------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $203
Non-cash expenses 249
Changes in operating assets and liabilities 5,246
------------------
Net cash provided by operations 5,698
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment 1
Purchases of property, plant and equipment (185)
------------------
Net cash used in investing activities (184)
------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term liabilities
and capital lease obligations (22)
------------------
Net cash used in financing activities (22)
------------------
INCREASE IN CASH AND CASH EQUIVALENTS 5,492
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 17,031
------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $22,523
==================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $104
==================
See notes to condensed consolidated financial statements
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DYN SPECIALTY CONTRACTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Organization and Principles of Consolidation - Dyn Specialty Contracting, Inc.
(the "Company") is a wholly owned subsidiary of EMCOR
Group, Inc. ("EMCOR").
The Company and its subsidiaries specialize in the design, distribution,
integration, installation, and maintenance of complex electrical systems.
Services are provided to a broad range of commercial, industrial, and
institutional customers throughout the United States.
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. The Company's subsidiaries consist of the
following legal entities: Dynalectric Company; Dynalectric Company of Nevada;
Contra Costa Electric, Inc.; B&B Contracting and Supply Company; and KDC Inc.,
(formerly named JWP Systems/Kirkwood Electric Co., Inc.). Significant
intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION - Revenues on long-term contracts are recognized on the
percentage-of-completion method. Percentage of completion is measured
principally by the percentage of labor costs incurred and accrued to date for
each contract to the estimated total labor costs for such contract at
completion, while percentage of completion on other contracts is measured by the
percentage of costs incurred and accrued to date for each contract to the
estimated total cost of completion of such contract.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. In forecasting ultimate profitability on
certain contracts, estimated recoveries are included for work performed under
customer change orders to contracts for which firm prices have not yet been
negotiated. Due to uncertainties inherent in the estimation process, it is
reasonably possible that completion costs, including those arising from contract
penalty provisions and final contract settlements, will be revised in the
near-term. Such revision to costs and income are recognized in the period in
which the revisions are determined.
INVENTORIES - Inventories, which consist primarily of construction materials,
are stated at the lower of cost or market. Cost is determined principally by
using average costs.
PROPERTY, PLANT AND EQUIPMENT - Property, plant, and equipment is stated at
cost. Depreciation and amortization is recorded using accelerated and
straight-line methods over useful lives ranging from 5 to 31.5 years.
STATEMENT OF CASH FLOWS - For purposes of the condensed consolidated statement
of cash flows, the Company considers all highly liquid instruments with original
maturities of three months or less to be cash equivalents.
2. DEBT
CREDIT AGREEMENT - On December 14, 1994, EMCOR and the Company and its
subsidiaries entered into a credit agreement with a group of lenders. The credit
agreement provides the Company with a secured revolving loan facility in the
maximum aggregate principal amount of $10.0 million. Borrowings under the
agreement bear interest at the rate of 15% per annum. The agreement requires
quarterly commitment fee payments of $100,000. The agreement terminates on June
14, 1996. There were no borrowings outstanding under the agreement at March 31,
1996.
Borrowings under the agreement were secured by a lien upon and security interest
in all assets of the Company including a pledge of all of the stock of the
Company's subsidiaries, a pledge of all of EMCOR's stock of the Company, a
security interest in the contractual right to certain of the Company's bank
accounts and a lien upon and security interest in certain assets of EMCOR and
its other subsidiaries.
The agreement requires the Company to follow certain procedures with regard to
deposits in and transfers from its various bank accounts. The agreement also
contains certain covenants, including those requiring the Company to maintain
minimum levels of backlog during the term of the agreement and to limit
aggregate losses from operations.
EMCOR and the Company are actively seeking to replace or extend this credit
facility.
Current Maturities of Long-Term Debt - In connection with the purchase in 1988
by a subsidiary of the Company of certain assets, the subsidiary incurred a
non-interest bearing contingent obligation to a bank evidenced by a note (the
"Contingent Note") in a maximum amount of $988,112. No amounts have been
required to be paid in respect of the Contingent Note through March 31, 1996
based on the pre-tax earnings of the subsidiary, as defined. The Contingent Note
expires on April 1, 1996.
3. INCOME TAXES
EMCOR and its domestic subsidiaries, including the Company, file a consolidated
Federal income tax return. The provision for income taxes in the accompanying
condensed consolidated statement of operations includes Federal and state income
taxes that have been calculated by the Company as if it were a separate
taxpayer. Tax related balances are included as a component of due to parent
company, net in the accompanying condensed consolidated balance sheet.
4. RELATED PARTY TRANSACTIONS
The principal insurance coverage for the Company and its subsidiaries is
provided under plans administered by EMCOR. Additionally, EMCOR charges the
Company and its subsidiaries a management fee, and an allocation for income
taxes (see Note C). The balance due to EMCOR primarily represents the cumulative
unpaid amount of charges for insurance, interest (previously charged),
management fees, and taxes.
5. LEGAL PROCEEDINGS
The Company's subsidiary, Dynalectric Company, is a defendant in an action
entitled Computran v. Dynalectric, et al., pending in the Superior Court of New
Jersey, Bergen County, arising out of its participation in a joint venture. In
the action, which was instituted in 1988, the plaintiff, Computran, a
participant in and a subcontractor to the joint venture, alleges that the
Company wrongfully terminated it from the subcontract, fraudulently diverted
funds due to Computran, misappropriated its trade secrets and proprietary
information, fraudulently induced it to enter into the joint venture, and
conspired with other defendants to commit acts in violation of the New Jersey
Racketeering Influence and Corrupt Organization Act. The Company believes that
Computran's claims are without merit and intends to defend this matter
vigorously. The Company has filed counter claims against Computran. Discovery is
ongoing; no trial date has been scheduled.
The Company and its subsidiaries are also involved in other legal proceedings
and claims asserted by and against the Company which have arisen in the ordinary
course of business. The Company believes it has a number of valid defenses to
these actions and intends to vigorously defend or assert these claims and does
not believe that a significant liability will result. However, the Company
cannot predict the outcome of these actions or the impact, if any, that the
ultimate resolution of such matters will have upon the Company's financial
position or results of operations.
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Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EMCOR Group, Inc.
May 10, 1996 By: /s/ Frank T. MacInnis
------------------------------
Frank T. MacInnis, Chairman of the
Board, President and Chief Executive
Officer
