FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or
15(d) of the Securities Exchange Act of 1934
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission file number 0-2315
EMCOR Group, Inc.
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(Exact name of registrant as specified in
its charter)
Delaware 11-2125338
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 Merritt Seven Corporate Park 06851-1060
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Norwalk, Connecticut (Zip Code)
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(Address of principal executive offices)
(203) 849-7800
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(Registrant's telephone number)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days. Yes X No __
Applicable Only To Issuers Involved In Bankruptcy Proceedings During The
Previous Five Years Indicate by check mark whether the registrant has filed all
documents required to be filed by Section 12, 13 or 15(d) of the Securities and
Exchange Act of 1934, subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No __
Applicable Only To Corporate Issuers
Number of shares of Common Stock outstanding as of the close of business on
August 4,1997: 9,549,767 shares.
<PAGE>
EMCOR GROUP, INC.
INDEX
Page No.
PART I - Financial Information
Item 1 Financial Statements
Condensed consolidated balance sheets -
as of June 30, 1997 and December 31, 1996 1
Condensed consolidated statements of operations -
three months ended June 30, 1997 and 1996 3
Condensed consolidated statements of operations -
six months ended June 30, 1997 and 1996 4
Condensed consolidated statements of cash flows -
six months ended June 30, 1997 and 1996 5
Condensed consolidated statement of stockholders'
equity - six months ended June 30, 1997 6
Notes to condensed consolidated financial statements 7
Item 2 Management's discussion and analysis of financial condition and
results of operations 11
PART II - Other Information
Item 1 Legal Proceedings 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 6 Exhibits and Reports on Form 8-K 13
<PAGE>
2
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
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June 30, December 31,
1997 1996
(Unaudited)
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ASSETS
Current Assets:
Cash and cash equivalents $35,285 $50,705
Accounts receivable, net 461,029 442,930
Costs and estimated earnings in
excess of billings on
uncompleted contracts 70,867 67,765
Inventories 8,517 9,108
Prepaid expenses and other 11,478 8,143
----------------------------------
Total Current Assets 587,176 578,651
----------------------------------
Investments, Notes and Other Long-Term
Receivables 4,062 5,737
Property, Plant and Equipment, Net 26,587 26,952
Other Assets 3,148 3,407
----------------------------------
Total Assets $620,973 $614,747
==================================
See notes to condensed consolidated financial statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share and Share Amounts)
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June 30, December
1997 31,
(Unaudited) 1996
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Borrowings under working capital
credit lines $13,780 $14,200
Current maturities of long-term debt 319 361
Accounts payable 220,435 218,099
Billings in excess of costs and
estimated earnings on uncompleted
contracts 109,432 105,653
Accrued payroll and benefits 43,615 43,789
Other accrued expenses and liabilities 42,958 39,596
---------------------------
Total Current Liabilities 430,539 421,698
---------------------------
Long-Term Debt 62,989 73,051
Other Long-Term Obligations 42,543 36,115
Stockholders' Equity:
Common Stock, $.01 par value,
13,700,000 shares authorized,
9,545,967 shares and 9,514,636
shares issued and outstanding or
reserved for issuance at
June 30, 1997 and December 31, 1996,
respectively 95 95
Warrants 2,154 2,154
Capital surplus 82,506 81,672
Cumulative translation adjustment 414 1,378
Accumulated Deficit (267) (1,416)
---------------------------
Total Stockholders' Equity 84,902 83,883
---------------------------
Total Liabilities and Stockholders' Equity $620,973 $614,747
===========================
See notes to condensed consolidated financial statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts) (Unaudited)
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Three months ended June 30, 1997 1996
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Revenues $475,617 $387,657
Costs and Expenses:
Cost of sales 432,118 349,843
Selling, general and administrative 37,232 33,790
-----------------------------
469,350 383,633
-----------------------------
Operating Income 6,267 4,024
Other Income, Net -- 12,500
Interest Expense, Net 3,051 3,729
-----------------------------
Income Before Income Taxes 3,216 12,795
Provision For Income Taxes 1,319 3,588
-----------------------------
Income Before Extraordinary Item 1,897 9,207
Extraordinary Item - Loss on Early
Extinguishment of Debt, Net of
Income Taxes (1,004) --
-----------------------------
Net Income $893 $9,207
=============================
Per Share Information:
Income Before Extraordinary Item $0.19 $0.93
Extraordinary Item - Loss on Early
Extinguishment of Debt, Net of
Income Taxes (0.10) --
-----------------------------
Net Income Per Common Share and Common
Equivalent Share $0.09 $0.93
=============================
See notes to condensed consolidated financial statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts) (Unaudited)
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Six months ended June 30, 1997 1996
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Revenues $909,387 $770,401
Costs and Expenses:
Cost of sales 826,823 695,415
Selling, general and administrative 72,855 70,433
-----------------------------
899,678 765,848
-----------------------------
Operating Income 9,709 4,553
Other Income, Net -- 12,500
Interest Expense, Net 6,059 7,490
-----------------------------
Income Before Income Taxes 3,650 9,563
Provision For Income Taxes 1,497 4,009
-----------------------------
Income Before Extraordinary Item 2,153 5,554
Extraordinary Item - Loss on Early
Extinguishment of Debt, Net of
Income Taxes (1,004) --
-----------------------------
Net Income $1,149 $5,554
=============================
Per Share Information:
Income Before Extraordinary Item $0.21 $0.56
Extraordinary Item - Loss on Early
Extinguishment of Debt, Net of
Income Taxes (0.10) --
-----------------------------
Net Income Per Common Share and Common
Equivalent Share: $0.11 $0.56
=============================
See notes to condensed consolidated financial statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands) (Unaudited)
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Six months ended June 30, 1997 1996
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CASH FLOWS FROM OPERATIONS:
Net income $1,149 $5,554
Non-cash expenses 5,707 7,757
Changes in operating assets and liabilities (6,631) 6,977
-----------------------
NET CASH PROVIDED BY OPERATIONS 225 20,288
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of working capital credit line (37,000) (35,000)
Borrowings under working capital credit lines 36,580 20,125
Payments of 7% Senior Secured Notes (Series A) -- (66,424)
Payments of 11% Series C Notes (11,920) --
Borrowings (payments) of long-term debt and
capital lease obligation 31 (456)
Change in notes payable, net -- 1,881
Exercise of stock options 171 476
-----------------------
NET CASH USED IN FINANCING ACTIVITIES (12,138) (79,398)
-----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment,
net (5,201) (2,016)
Proceeds from sale of businesses and other
assets 19 288
Proceeds from sales of net assets held for
sale -- 66,424
Decrease in investments, notes and other
long-term receivables 1,675 453
-----------------------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (3,507) 65,149
-----------------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (15,420) 6,039
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 50,705 53,007
-----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $35,285 $59,046
=======================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Paid For:
Interest $4,677 $2,876
Income Taxes $238 $224
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
EMCOR Group, Inc. and Subsidiaries
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands) (Unaudited)
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Cumulative
Common Capital Translation Accumulated
Stock Warrants Surplus Adjustment Deficit Total
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<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1997................ $ 95 $ 2,154 $ 81,672 $ 1,378 ($ 1,416) $ 83,883
Net income ........... -- -- -- -- 1,149 1,149
NOL Utilization ...... -- -- 663 -- -- 663
Common stock issued
under stock option
plans .............. -- -- 171 -- -- 171
Translation
adjustments ........ -- -- -- (964) -- (964)
--------- -------- -------- ---------- --------- ---------
Balance, June 30, 1997 $ 95 $ 2,154 $ 82,506 $ 414 ($ 267) $ 84,902
==================================================================
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE A Nature Of Operations
EMCOR Group, Inc. ("EMCOR" or the "Company") is a multinational corporation
involved in mechanical and electrical construction and facilities services.
EMCOR, which conducts its business through subsidiaries, specializes in the
design, integration, installation, start-up, testing, operation and maintenance
of (i) distribution systems for electrical power (including power cables,
conduits, distribution panels, transformers, generators, uninterruptible power
supply systems and related switch gear and control); (ii) lighting systems,
including fixtures and controls; (iii) low-voltage systems, including fire
alarm, security, communications and process control systems; (iv) heating,
ventilation, air conditioning, refrigeration and clean-room process ventilation
systems; and (v) plumbing, process and high purity piping systems. EMCOR's
subsidiaries provide mechanical and electrical construction services directly to
end-users (including corporations, municipalities and other governmental
entities, owners/developers, and tenants of buildings) and, indirectly, by
acting as a subcontractor, to construction managers, general contractors and
other subcontractors. Mechanical and electrical construction services are
principally: large installation projects, with contracts generally in the
multi-million dollar range; smaller system installation projects involving
fit-out, renovation and retrofit work; and maintenance and service. In addition,
certain EMCOR subsidiaries operate and maintain mechanical and/or electrical
systems for customers under contracts and provide other services commonly
referred to as facilities services including the management of facilities and
the provision of support services to customers at the customer's facilities.
Mechanical and electrical construction and facilities services are provided to a
broad range of commercial, industrial and institutional customers through
offices located in major markets throughout the United States, Canada, the
United Kingdom, the Middle East and Hong Kong.
NOTE B Basis of Presentation
The accompanying condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant to the interim
period reporting requirements of Form 10-Q. Consequently, certain information
and note disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. Readers of this report should refer to the consolidated financial
statements and the notes thereto included in the Company's latest Annual Report
on Form 10-K filed with the Securities and Exchange Commission.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only of a
normal recurring nature) necessary to present fairly the financial position of
the Company and the results of its operations. The results of operations for the
three and six month periods ended June 30, 1997 are not necessarily indicative
of the results to be expected for the year ending December 31, 1997.
NOTE C Net Income Per Common Share and Common Equivalent Share
Net income per common share and common equivalent share for the three and
six month periods ended June 30, 1997 and 1996 have been calculated based on the
weighted average number of shares of common stock outstanding and common stock
equivalents relating to warrants and stock options outstanding when the effect
of such common stock equivalents are dilutive. Weighted average number of shares
outstanding as of June 30, 1997 and 1996 were 9,525,224 and 9,444,851,
respectively.
<PAGE>
NOTE D Long-Term Debt
Long-Term Debt in the accompanying condensed consolidated balance sheets
consists of the following amounts at June 30, 1997 and December 31, 1996 (in
thousands):
June 30, December 31,
1997 1996
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Series C Notes, outstanding face value of
approximately $61.9 million and $73.8
million at June 30, 1997 and December 31, 1996,
respectively, at 11.0%, discounted to a 14.0%
effective rate, due 2001 $55,784 $66,039
Supplemental SellCo Note, outstanding face value of
approximately $5.5 million at 8.0%, discounted
to a 14.0% effective rate, due 2004 4,594 4,474
Capital Lease Obligations at weighted average
interest rates from 7.25% to 11.0%,
payable in varying amounts through 2004 1,249 1,007
Other, at weighted average interest rates of
approximately 9.6%, payable in varying amounts
through 2012 1,681 1,892
----------- -------------
63,308 73,412
Less current maturities (319) (361)
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$62,989 $73,051
============= =============
On June 3, 1997, the Company purchased $1.0 million of Series C Notes and
retired such notes. On June 27, 1997, the Company called for the partial
redemption of approximately $10.9 million principal amount of Series C Notes. In
accordance with the Indenture governing the Series C Notes, the redemption price
of the Series C Notes was 105% of the principal amount redeemed. Accordingly,
the Company recorded an extraordinary loss of approximately $1.0 million related
to the early retirement of debt. The extraordinary loss consisted primarily of
the write-off of the associated debt discount plus premiums and costs associated
with the redemption, net of income tax benefits of approximately $0.7 million.
NOTE E Income Taxes
The Company files a consolidated federal income tax return including all
U.S. subsidiaries. At June 30, 1997, the Company had net operating loss
carryforwards ("NOLs") for U.S. income tax purposes of approximately $200.0
million, which expire in the years 2007 through 2011. The NOLs are subject to
review by the Internal Revenue Service. Future changes in ownership of the
Company, as defined by Section 382 of the Internal Revenue Code, could limit the
amount of NOLs available for use in any one year.
As a result of the adoption of Fresh-Start Accounting, the tax benefit of
any net operating loss carryforwards or net deductible temporary differences
which existed as of the date of the Company's emergence from Chapter 11 in
December 1994 will result in a charge to the tax provision (provision in lieu of
income taxes) and be allocated to reorganization value in excess of amounts
allocable to identifiable assets established in connection with the Company's
emergence from bankruptcy and to capital surplus.
The Company has provided a valuation allowance as of June 30, 1997 for the
full amount of the tax benefit of its remaining NOLs and other deferred tax
assets. Income tax expense recorded for the three and six month periods ended
June 30, 1997 and 1996 represent a provision primarily for federal, foreign and
state and local income taxes. The Company's utilization of NOLs and other
deferred tax assets for the three and six months ended June 30, 1997 of $0.6
million and $0.7 million, respectively, have been applied to capital surplus.
For the three and six months ended June 30, 1996, the Company's utilization of
NOL's and other deferred tax assets were allocated to reorganization value in
excess of amounts allocable to identifiable assets.
<PAGE>
NOTE F Legal Proceedings
The Dynalectric Company ("Dynalectric"), a subsidiary of the Company, is a
defendant in an action entitled Computran v. Dynalectric, et. al., pending in
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 Dynalectric wrongfully terminated it from the subcontract, fraudulently
diverted funds due it, misappropriated its trade secrets and proprietary
information, fraudulently induced it to enter into the joint venture and
conspired with other defendants to commit certain acts in violation of the New
Jersey Racketeering Influence and Corrupt Organization Act. Dynalectric believes
that Computran's claims are without merit and intends to defend this matter
vigorously. Dynalectric has filed counterclaims against Computran. Discovery is
ongoing and no trial date has been scheduled.
In February 1995, as part of an investigation by the New York County
District Attorney's office into the business affairs of Herbert Construction
Company ("Herbert"), a general contractor that does business with the Company's
subsidiary, Forest Electric Corporation ("Forest"), a search warrant was
executed at Forest's executive offices. At that time, the Company was informed
that Forest and certain of its officers are targets of the continuing
investigation. Neither the Company nor Forest has been advised of the precise
nature of any suspected violation of law by Forest or its officers. On July 11,
1995, Ted Kohl, a principal of Herbert, and DPL Interiors, Inc., a company
allegedly owned by Mr. Kohl, were indicted by a New York County grand jury for
grand larceny, fraud, repeated failure to file New York City Corporate Tax
Returns and related money laundering charges. Mr. Kohl was also charged with
filing false personal income and earnings tax returns, perjury and offering
false instruments for filing with the New York City School Construction
Authority. In a press release announcing the indictment, the Manhattan District
Attorney said that the investigation disclosed that Mr. Kohl allegedly received
more than $7.0 million in kickbacks from subcontractors through a scheme in
which he allegedly inflated subcontracts on Herbert's construction contracts. At
a July 11, 1995 press conference following the indictment, the District Attorney
announced that the investigation was continuing and that he expected further
indictments in the investigation.
On April 7, 1997 Mr. Kohl pled guilty to one count of money laundering, one
count of offering a false instrument for filing and one count of filing a false
New York State Resident Income Tax Return. DPL Interiors, Inc. also pled guilty
to one count of failing to file New York City General Income Tax Returns.
Sentencing for Mr. Kohl and DPL Interiors, Inc. is scheduled for September 9,
1997.
Forest performs electrical contracting services primarily in the New York
City commercial market and is one of the Company's largest subsidiaries.
In addition to the above, the Company is 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
the Company 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 thereof or the impact that an adverse result of the matters
discussed above will have upon the Company's financial position or results of
operations.
<PAGE>
Note G New Accounting Pronouncement
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128" or the
"Statement"), Earnings Per Share ("EPS"), which establishes standards for
computing and presenting EPS, is effective for both interim and annual periods
ending after December 15, 1997. The statement does not permit early application
of its provisions. The statement replaces the presentation of primary EPS with a
presentation of basic EPS, as defined. It also requires dual presentation of
basic and diluted EPS on the face of the Statement of Operations for entities
with a complex capital structure. Had EPS been determined in accordance with
SFAS No. 128, the Company's basic EPS and diluted EPS for the three and six
month periods ended June 30, 1997 and 1996 would have been the following pro
forma amounts:
Three Months Six Months
1997 1996 1997 1996
--------- --------- --------- ---------
Pro Forma Basic EPS - Before
Extraordinary Item $0.20 $0.98 $0.23 $0.59
Pro Forma Basic EPS -
Extraordinary Item -
Loss on Early Extinguishment
of Debt, Net of Income Taxes (0.11) -- (0.11) --
--------- --------- --------- ---------
Pro Forma Basic EPS - Net Income $0.09 $0.98 $0.12 $0.59
========= ========= ========= =========
Pro Forma Diluted EPS - Before
Extraordinary Item $0.19 $0.93 $0.21 $0.56
Pro Forma Diluted EPS -
Extraordinary Item -
Loss on Early Extinguishment
of Debt, Net of Income Taxes (0.10) -- (0.10) --
--------- --------- --------- ---------
Pro Forma Diluted EPS - Net
Income $0.09 $0.93 $0.11 $0.56
========= ========= ========= =========
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Revenues for the second quarter of 1997 were $475.6 million compared to
$387.7 million in the second quarter of 1996. In the second quarter of 1997, the
Company generated net income of $0.9 million or $0.09 per share compared to net
income of $9.2 million or $0.93 per share in the second quarter of 1996. Net
income for the three and six month periods ended June 30, 1997 includes an
after-tax charge of $1.0 million ($1.7 million pre-tax) associated with the
early retirement of approximately $11.9 million of the Company's Series C Notes
which is reflected in the accompanying condensed consolidated statements of
operations for the three and six month periods ended June 30, 1997 under the
caption "Extraordinary Item - Loss on Early Extinguishment of Debt, Net of
Income Taxes". Net income in the second quarter of 1996 reflects a net after-tax
gain of $8.1 million ($12.5 million pre-tax) on the sale of certain assets held
for sale including the sale of substantially all of the assets of Jamaica Water
Supply Company which is reflected in the accompanying condensed consolidated
statements of operations for the three and six month periods ended June 30, 1996
under the caption "Other Income, Net".
Revenues for the six months ended June 30, 1997 were $909.4 million
compared to $770.4 million in the same period in the prior year. For the six
months ended June 30, 1997, the Company generated net income of $1.1 million or
$0.11 per share, inclusive of the $1.0 million extraordinary after-tax charge
discussed above, compared to net income of $5.6 million, or $0.56 per share, for
the six months ended June 30, 1996. Net income for the six months ended June 30,
1996 was favorably affected by an $8.1 million after-tax gain related to the
sale of certain assets held for sale (see above), net of selling, general and
administrative expenses ("SG&A") which included a $4.8 million charge related to
an adverse arbitration award, which award was subsequently settled for $4.3
million in October 1996.
The Company generated operating income of $6.3 million for the three months
ended June 30, 1997 compared to operating income of $4.0 million in the same
period of the prior year. For the six months ended June 30, 1997, the Company
had operating income of $9.7 million compared to $4.6 million of operating
income in the same period of the prior year. The improvement in operating income
for the three months ended June 30, 1997 was principally attributable to an
increase in operating volume. Operating income for the six months ended June 30,
1997 as compared to the same period of 1996 increased by $5.1 million due to
increases in operating volume during 1997 and the negative impact during the
first half of 1996 of the adverse arbitration award referred to above net of
favorable closeout of certain contracts in the first quarter of 1996.
The increase in revenues for the first half of 1997 as compared to the same
period in the prior year was primarily attributable to the continued increase in
commercial construction activity in the Western United States and to an increase
in revenues in the Eastern United States, due principally to the previously
announced acquisition of the businesses of two mechanical construction companies
in late 1996 and early 1997.
SG&A for the quarters ended June 30, 1997 and 1996 were $37.2 million, or
7.8% of revenues, and $33.8 million, or 8.7% of revenues, respectively. SG&A for
the first half of 1997 was $72.9 million, or 8.0% of revenues, compared to $70.4
million, or 9.1% of revenues, for the first half of 1996. SG&A expenses for the
first half of 1996, exclusive of the adverse arbitration award discussed above,
were $65.6 million, or 8.5% of revenues. The increase in SG&A, in absolute
dollars, for the three and six month periods ended June 30, 1997 compared to the
same periods in the prior year, exclusive of the adverse arbitration award, is
attributable to the increase in operations.
<PAGE>
On June 3, 1997, the Company purchased $1.0 million of Series C Notes and
retired such notes. On June 27, 1997, the Company called for the partial
redemption of approximately $10.9 million principal amount of Series C Notes. In
accordance with the Indenture governing the Series C Notes, the redemption price
of the Notes was 105% of the principal amount redeemed. Accordingly, the Company
recorded an extraordinary loss of approximately $1.0 million related to the
early retirement of debt. The extraordinary loss referred to above consisted
primarily of the write-off of the associated debt discount plus premiums and
costs associated with the retirement, net of income tax benefits of
approximately $0.7 million.
The Company's backlog was $1,020.9 million at June 30, 1997 and $1,043.7
million at December 31, 1996. Between December 31, 1996 and June 30, 1997, the
Company's backlog in Canada increased by $27.7 million, its backlog in the
United States decreased by $33.7 million and its backlog in the United Kingdom
decreased by $16.8 million. The increase in the Company's Canadian backlog was
primarily attributable to improved economic conditions in Western Canada. The
decline in the domestic backlog is due to the continued progress towards
completion of several large projects, primarily in the Western United States.
The decline in the United Kingdom backlog is due to the continued progress
towards completion of several large projects, exchange rate fluctuations and the
continued weakness in the United Kingdom commercial construction market.
Liquidity and Capital Resources
The Company's consolidated cash balance decreased by $15.4 million from
$50.7 million at December 31, 1996 to $35.3 million at June 30, 1997. The June
30, 1997 cash balance included approximately $8.1 million at foreign
subsidiaries which is available only to support their respective operations. The
Company generated positive operating cash flow for the six months ended June 30,
1997 due to improvements in working capital which were used, along with a
portion of the Company's existing cash balances, to repay borrowings under the
Company's revolving credit facility, fund capital expenditures, purchase $1.0
million of Series C Notes and redeem approximately $10.9 million of Series C
Notes.
As of June 30, 1997, the Company's total borrowing capacity under its
revolving credit facility was $81.6 million, and the Company had approximately
$34.1 million and $13.8 million of letters of credit and revolving loans,
respectively, outstanding as of that date. The revolving loans are classified as
Current Liabilities under the caption "Borrowings under working capital credit
lines" in the accompanying condensed consolidated balance sheets.
In September, 1996, the Company's Canadian subsidiary, Comstock Canada
Ltd., renewed a credit agreement with a bank providing for an overdraft facility
of up to Cdn. $2.0 million. The facility is secured by certain assets of
Comstock Canada Ltd. and deposit instruments of another Canadian subsidiary of
the Company. The facility provides for interest at the bank's prime rate (4.75%
at June 30, 1997) plus 3/4% and the terms of such facility are currently being
renegotiated. There were no borrowings outstanding under this credit agreement
at June 30, 1997. The Canadian subsidiary will utilize the Company's revolving
credit facility for future working capital requirements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The information in Note H to the Company's June 30, 1997 Notes to Condensed
Consolidated Financial Statements (unaudited) regarding legal proceedings is
hereby incorporated herein by reference thereto.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On June 20, 1997 the Company held an annual meeting of stockholders.
(b) At the annual meeting all of the seven directors of the Company stood for
re-election, and each of them was re-elected for the ensuing year. Each of
Messrs. David A.B. Brown, Thomas D. Cunningham, Albert Fried, Jr., Malcolm
T. Hopkins and Frank T. MacInnis received 8,872,956 votes and each of
Messrs. Stephen W. Bershad and Kevin R. Toner received 8,873,056 votes. The
votes withheld were 300 which did not vote for Messrs. Brown, Cunningham,
Fried, Hopkins and MacInnis and 200 which did not vote for Messrs. Bershad
and Toner. There were no broker non-votes.
(c) The stockholders also voted upon a proposal to ratify the appointment by
the Audit Committee of the Board of Directors of Arthur Andersen LLP,
certified public accountants, as the Company's independent public
accountants for 1997. 8,873,256 shares were voted in favor of ratification,
none voted against ratification, and 700 shares abstained from voting
thereon. There were no broker non-votes.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. 11. Computation of Earnings Per Common Share and Common
Equivalent Share for the three and six month periods ended June 30, 1997.
Exhibit No. 27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMCOR GROUP, INC.
---------------------------------
(Registrant)
Date: August 7, 1997 By: /s/FRANK T. MacINNIS
---------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
Date: August 7, 1997 By: /s/LEICLE E. CHESSER
---------------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer
Exhibit 11
EMCOR Group, Inc. and Subsidiaries
Computation of Earnings Per Common Share and Common Equivalent Share for the
three and six month periods ended June 30, 1997.
Three Months Six Months Ended
PRIMARY Ended June 30, 1997 June 30, 1997
- ---------------------------------------- ------------------ ------------------
Net Income $893,000 $1,149,000
================== ==================
Weighted average number of common
shares outstanding 9,535,697 9,525,224
Add - common equivalent shares using
the treasury stock method 485,136 497,289
------------------ ------------------
Weighted average number of shares used
in calculation of primary
income per common and
common equivalent share 10,020,833 10,022,513
================== ==================
Primary net income per common and
common equivalent share $0.09 $0.11
================== ==================
FULLY DILUTED
- ----------------------------------------
Net Income $893,000 $1,149,000
================== ==================
Weighted average number of shares used
in calculating primary income
per share 10,020,833 10,022,513
Shares issuable upon exercise of stock
options included in primary
calculation above (485,136) (497,289)
Shares issuable upon exercise of stock
options at period end market price 540,485 540,485
------------------ ------------------
Weighted average number of shares used
in calculation of fully diluted
income per common and common
equivalent share 10,076,182 10,065,709
================== ==================
Fully diluted net income per common
and common equivalent share $0.09 $0.11
================== ==================
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
EMCOR's Condensed Consolidated Financial Statements for the six months
ended June 30, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000105634
<NAME> EMCOR Group, Inc.
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