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 September 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.
---------------------------------------
(Exact name of registrant as
specified in its charter)
Delaware 11-2125338
- ------------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
101 Merritt Seven Corporate Park 06851-1060
----------------------
Norwalk, Connecticut (Zip Code)
- ------------------------------------
(Address of principal executive
offices)
(203) 849-7800
- ------------------------------------
(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
October 28,1997: 9,576,567 shares.
<PAGE>
EMCOR GROUP, INC.
INDEX
Page No.
PART I - Financial Information
Item 1 Financial Statements
Condensed consolidated balance sheets -
as of September 30, 1997 and December 31, 1996 1
Condensed consolidated statements of operations -
three months ended September 30, 1997 and 1996 3
Condensed consolidated statements of operations -
nine months ended September 30, 1997 and 1996 4
Condensed consolidated statements of cash flows -
nine months ended September 30, 1997 and 1996 5
Condensed consolidated statement of stockholders'
equity - nine months ended September 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 6 Exhibits and Reports on Form 8-K 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
- ----------------------------------------------------------------------
September 30, December 31,
1997 1996
(Unaudited)
- ----------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $43,955 $50,705
Accounts receivable, net 500,515 442,930
Costs and estimated earnings in
excess of billings on
uncompleted contracts 70,512 67,765
Inventories 8,171 9,108
Prepaid expenses and other 10,127 8,143
-------------------------------
Total Current Assets 633,280 578,651
-------------------------------
Investments, Notes and Other
Long-Term Receivables 5,106 5,737
Property, Plant and Equipment, Net 26,468 26,952
Other Assets 3,085 3,407
-------------------------------
Total Assets $667,939 $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)
- ---------------------------------------------------------------------
September 30, December 31,
1997 1996
(Unaudited)
- ---------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Borrowings under working capital
credit lines $17,596 $14,200
Current maturities of long-term
debt 305 361
Accounts payable 235,100 218,099
Billings in excess of costs and
estimated earnings on
uncompleted contracts 122,612 105,653
Accrued payroll and benefits 49,207 43,789
Other accrued expenses and
liabilities 42,531 39,596
----------------------------
Total Current Liabilities 467,351 421,698
----------------------------
Long-Term Debt 63,238 73,051
Other Long-Term Obligations 46,974 36,115
Stockholders' Equity:
Common stock, $.01 par value,
13,700,000 shares authorized,
9,574,567 shares and 9,514,636
shares issued and outstanding
or issuable at September 30,
1997 and December 31, 1996,
respectively 96 95
Warrants 2,154 2,154
Capital surplus 84,543 81,672
Cumulative translation adjustment 614 1,378
Retained earnings (accumulated
deficit) 2,969 (1,416)
----------------------------
Total Stockholders' Equity 90,376 83,883
----------------------------
Total Liabilities and Stockholders' $667,939 $614,747
Equity
============================
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)
- ------------------------------------------------------------
Three months ended September 30, 1997 1996
- ------------------------------------------------------------
Revenues $521,975 $432,452
Costs and Expenses:
Cost of sales 473,445 390,903
Selling, general and
administrative 39,940 35,566
-------------------------
513,385 426,469
-------------------------
Operating Income 8,590 5,983
Interest Expense, Net 3,106 2,425
-------------------------
Income Before Income Taxes 5,484 3,558
Provision For Income Taxes 2,248 1,627
-------------------------
Net Income $3,236 $1,931
=========================
Per Share Information:
- ----------------------
Net Income Per Common Share and
Common Equivalent Share $0.32 $0.19
=========================
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)
- ------------------------------------------------------------
Nine months ended September 30, 1997 1996
- ------------------------------------------------------------
Revenues $1,431,362 $1,202,853
Costs and Expenses:
Cost of sales 1,300,268 1,086,318
Selling, general and
administrative 112,795 105,999
-------------------------
1,413,063 1,192,317
-------------------------
Operating Income 18,299 10,536
Other Income, Net -- 12,500
Interest Expense, Net 9,165 9,915
-------------------------
Income Before Income Taxes 9,134 13,121
Provision For Income Taxes 3,745 5,636
-------------------------
Income Before Extraordinary Item 5,389 7,485
Extraordinary Item - Loss on
Early Extinguishment of Debt,
Net of Income Taxes (1,004) --
-------------------------
Net Income $4,385 $7,485
=========================
Per Share Information:
- ----------------------
Income Before Extraordinary Item $0.54 $0.75
Extraordinary Item - Loss on
Early Extinguishment of Debt,
Net of Income Taxes (0.10) --
-------------------------
Net Income Per Common Share and
Common Equivalent Share: $0.44 $0.75
=========================
See notes to condensed consolidated financial statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands) (Unaudited)
- ---------------------------------------------------------------
Nine months ended September 30, 1997 1996
- ---------------------------------------------------------------
CASH FLOWS FROM OPERATIONS:
Net income $4,385 $7,485
Non-cash expenses 11,171 10,129
Changes in operating assets and
liabilities (7,485) 7,692
--------------------
NET CASH PROVIDED BY OPERATIONS 8,071 25,306
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of working capital credit
lines (102,512) (45,125)
Borrowings under working capital
credit lines 105,908 20,125
Payments of 7% Senior Secured Notes
(Series A) -- (66,424)
Payments of 11% Series C Notes (11,920) --
Borrowings of long-term debt and
capital lease obligation 58 (643)
Change in notes payable, net -- (3,896)
Exercise of stock options 344 487
--------------------
NET CASH USED IN FINANCING ACTIVITIES (8,122) (95,476)
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment, net (7,471) (4,480)
Proceeds from sale of businesses and
other assets 141 314
Proceeds from sales of net assets
held for sale -- 66,424
Decrease in investments, notes and
other long-term receivables 631 399
--------------------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (6,699) 62,657
--------------------
DECREASE IN CASH AND CASH
EQUIVALENTS (6,750) (7,513)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 50,705 53,007
--------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $43,955 $45,494
====================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Paid For:
Interest $6,997 $5,311
Income Taxes $361 $239
See notes to condensed consolidated financial statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In Thousands) (Unaudited)
<TABLE>
- -------------------------- --------- --------- ---------- ------------ ------------- ---------
Retained
Cumulative Earnings
Common Capital Translation (Accumulated
Stock Warrants Surplus Adjustment Deficit) Total
- -------------------------- --------- --------- ---------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1997 $95 $2,154 $81,672 $1,378 ($1,416) $83,883
Net income - - - - 4,385 4,385
NOL Utilization - - 2,528 - - 2,528
Common stock issued
under stock option plans 1 - 343 - - 344
Translation
adjustments - - - (764) - (764)
--------- --------- ---------- ------------ ------------- ---------
Balance, September 30,
1997 $96 $2,154 $84,543 $614 $2,969 $90,376
========= ========= ========== ============ ============= =========
See notes to condensed consolidated financial statements.
</TABLE>
<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 and the
United Kingdom and in 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 nine month periods ended September 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 nine
month periods ended September 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 September 30, 1997 and 1996 were 9,535,467 and
9,468,083, respectively (see Note G).
<PAGE>
NOTE D Long-Term Debt
Long-Term Debt in the accompanying condensed consolidated balance sheets
consists of the following amounts at September 30, 1997 and December 31, 1996
(in thousands):
September December
30, 31,
1997 1996
------------ ------------
Series C Notes, outstanding face value of
approximately $61.9 million and $73.8 million
at September 30, 1997 and December 31, 1996,
respectively, at 11.0%, discounted
to a 14.0% effective rate, due 2001 $56,030 $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 4,663 4,474
Capital Lease Obligations at weighted average
interest rates from 7.25% to 11.0%, payable
in varying amounts through 2004 1,197 1,007
Other, at weighted average interest rates of
approximately 9.6%, payable in varying amounts
through 2012 1,653 1,892
------------ ------------
63,543 73,412
Less current maturities (305) (361)
------------ ------------
$63,238 $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 September 30, 1997, the Company had net operating loss
carryforwards ("NOLs") for U.S. income tax purposes of approximately $180.0
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 September 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 nine month periods ended
September 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 nine months ended September 30, 1997 of
approximately $1.8 million and approximately $2.5 million, respectively, have
been applied to capital surplus. For the three and nine months ended September
30, 1996, the Company's utilization of NOLs 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. Mr.
Kohl and DPL Interiors, Inc. have not yet been sentenced.
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 nine
month periods ended September 30, 1997 and 1996 would have been the following
pro forma amounts:
Three Months Nine Months
1997 1996 1997 1996
-------- -------- -------- --------
Pro Forma Basic EPS -
Before Extraordinary Item $0.34 $0.20 $0.57 $0.79
Pro Forma Basic EPS -
Extraordinary Item - Loss
on Early Extinguishment of
Debt, Net of Income Taxes -- -- (0.11) --
-------- -------- -------- --------
Pro Forma Basic EPS - Net
Income $0.34 $0.20 $0.46 $0.79
======== ======== ======== ========
Pro Forma Diluted EPS -
Before Extraordinary Item $0.32 $0.19 $0.54 $0.75
Pro Forma Diluted EPS -
Extraordinary Item - Loss
on Early Extinguishment of
Debt, Net of Income Taxes -- -- (0.10) --
-------- -------- -------- --------
Pro Forma Diluted EPS - Net
Income $0.32 $0.19 $0.44 $0.75
======== ======== ======== ========
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Revenues for the third quarter of 1997 were $522.0 million compared to $432.5
million in the third quarter of 1996. In the third quarter of 1997, the Company
generated net income of $3.2 million or $0.32 per share compared to net income
of $1.9 million or $0.19 per share in the third quarter of 1996.
Revenues for the nine months ended September 30, 1997 were $1,431.4 million
compared to $1,202.9 million in the same period in the prior year. For the nine
months ended September 30, 1997, the Company generated net income of $4.4
million, or $0.44 per share, inclusive of the $1.0 million extraordinary
after-tax charge discussed hereafter, compared to net income of $7.5 million, or
$0.75 per share, for the nine months ended September 30, 1996. Net income for
the nine month period ended September 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 nine
month period ended September 30, 1997 under the caption "Extraordinary Item -
Loss on Early Extinguishment of Debt, Net of Income Taxes". Net income for the
nine months ended September 30, 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 nine month period ended September 30, 1996 under the
caption "Other Income, Net". Net income for the first three quarters of 1996
also reflects a $4.8 million charge included in selling, general and
administrative expenses ("SG&A") related to an adverse arbitration award, which
award was subsequently settled for $4.3 million in October 1996.
The Company generated operating income of $8.6 million for the three months
ended September 30, 1997 compared to operating income of $6.0 million in the
same period of the prior year. For the nine months ended September 30, 1997, the
Company had operating income of $18.3 million compared to $10.5 million of
operating income in the same period of the prior year. The $2.6 million
improvement in operating income for the three months ended September 30, 1997
was principally attributable to an increase in operating volume and a reduction
in SG&A as a percentage of revenues as compared to the three months ended
September 30, 1996. Operating income for the nine months ended September 30,
1997 as compared to the same period of 1996 increased by $7.8 million due to
increases in operating volume during 1997 and the negative impact during the
first nine months of 1996 of the adverse arbitration award referred to above net
of favorable closeouts of certain contracts in the first quarter of 1996.
The increase in revenues for the first nine months 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, 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, and in Canada due to a
general increase in industrial construction activity.
SG&A for the quarters ended September 30, 1997 and 1996 were $39.9 million, or
7.7% of revenues, and $35.6 million, or 8.2% of revenues, respectively. SG&A for
the first nine months of 1997 was $112.8 million, or 7.9% of revenues, compared
to $106.0 million, or 8.8% of revenues, for the first nine months of 1996. SG&A
expenses for the first three quarters of 1996, exclusive of the adverse
arbitration award discussed above, were $101.2 million, or 8.4% of revenues. The
increase in SG&A, in absolute dollars, for the three and nine month periods
ended September 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 $1,067.7 million at September 30, 1997 and $1,043.7
million at December 31, 1996. Between December 31, 1996 and September 30, 1997,
the Company's backlog in Canada increased by $17.4 million, its backlog in the
United Kingdom increased by $18.3 million and its backlog in the United States
decreased by $11.7 million. The increase in the Company's Canadian backlog was
primarily attributable to improved economic conditions in Western Canada. The
increase in the United Kingdom backlog is due to the award of several large
projects and the expansion of selected existing projects offset partially by
exchange rate fluctuations. The decline in the domestic backlog is due to the
continued progress towards completion of several large projects, primarily in
the Western United States.
Liquidity and Capital Resources
The Company's consolidated cash balance decreased by $6.7 million from $50.7
million at December 31, 1996 to $44.0 million at September 30, 1997. The
September 30, 1997 cash balance included approximately $9.0 million at foreign
subsidiaries which is available only to support their respective operations. The
Company generated positive operating cash flow for the nine months ended
September 30, 1997 due to improvements in working capital which were used, along
with a portion of the Company's existing cash balances, to fund capital
expenditures, purchase $1.0 million of Series C Notes and redeem approximately
$10.9 million of Series C Notes.
As of September 30, 1997 the Company's total borrowing capacity under its
revolving credit facility was $81.6 million. The Company had approximately $35.6
million and $17.6 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 October, 1997, the Company's Canadian subsidiary, Comstock Canada Ltd.,
renewed a credit agreement with a bank providing for an overdraft facility of up
to Cdn. $0.5 million. The facility is secured by a standby letter of credit. The
facility provides for interest at the bank's prime rate (4.75% at September 30,
1997). There are no current borrowings outstanding under this credit agreement.
The Canadian subsidiary will principally 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 F to the Company's September 30, 1997 Notes to Condensed
Consolidated Financial Statements (unaudited) regarding legal proceedings is
hereby incorporated herein by reference thereto.
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 nine month periods
ended September 30, 1997.
Exhibit No. 27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended September 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: October 31, 1997 By: /s/FRANK T. MacINNIS
----------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
Date: October 31, 1997 By: /s/LEICLE E. CHESSER
----------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer
<PAGE>
Exhibit 11
EMCOR Group, Inc. and Subsidiaries
Computation of Earnings Per Common Share and Common Equivalent Share for the
three and nine month periods ended September 30, 1997.
<TABLE>
Three Months Ended Nine Months Ended
PRIMARY September 30, 1997 September 30, 1997
- ------------------------------------------------ -------------------- --------------------
<S> <C> <C>
Net Income $3,236,000 $4,385,000
==================== ====================
Weighted average number of common shares
outstanding 9,555,619 9,535,467
Add - common equivalent shares using the
treasury stock method 542,121 503,316
-------------------- --------------------
Weighted average number of shares used in
calculation of primary income per common
and common equivalent share 10,097,740 10,038,783
==================== ====================
Primary net income per common and common
equivalent share $0.32 $0.44
==================== ====================
FULLY DILUTED
- ------------------------------------------------
Net Income $3,236,000 $4,385,000
==================== ====================
Weighted average number of shares used in
calculating primary income per share 10,097,740 10,038,783
Shares issuable upon exercise of stock options
included in primary calculation above (542,121) (503,316)
Shares issuable upon exercise of stock options
at period end market price 738,800 738,800
-------------------- --------------------
Weighted average number of shares used in
calculation of fully diluted income per
common and common equivalent share 10,294,419 10,274,267
==================== ====================
Fully diluted net income per common and common
equivalent share $0.31 $0.43
==================== ====================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
EMCOR's Condensed Consolidated Financial Statements for the nine months
ended September 30, 1997 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000105634
<NAME> EMCOR Group, Inc.
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 43955
<SECURITIES> 0
<RECEIVABLES> 518204
<ALLOWANCES> 17689
<INVENTORY> 8171
<CURRENT-ASSETS> 633280
<PP&E> 46024
<DEPRECIATION> 19556
<TOTAL-ASSETS> 667939
<CURRENT-LIABILITIES> 467351
<BONDS> 63238
<COMMON> 96
0
0
<OTHER-SE> 90280
<TOTAL-LIABILITY-AND-EQUITY> 667939
<SALES> 1431362
<TOTAL-REVENUES> 1431362
<CGS> 1300268
<TOTAL-COSTS> 1413063
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 398
<INTEREST-EXPENSE> 9165
<INCOME-PRETAX> 9134
<INCOME-TAX> 3745
<INCOME-CONTINUING> 5389
<DISCONTINUED> 0
<EXTRAORDINARY> (1004)
<CHANGES> 0
<NET-INCOME> 4385
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.43
</TABLE>
