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, 2000
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 incorporation (I.R.S. Employer
or organization) Identification Number)
101 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
(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 Corporate Issuers
Number of shares of Common Stock outstanding as of the close of business on
October 24, 2000: 10,456,796 shares.
<PAGE>
EMCOR GROUP, INC.
INDEX
Page No.
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
as of September 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations -
three months ended September 30, 2000 and 1999 3
Condensed Consolidated Statements of Operations -
nine months ended September 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows -
nine months ended September 30, 2000 and 1999 5
Condensed Consolidated Statements of Stockholders'
Equity and Comprehensive Income -
nine months ended September 30, 2000 and 1999 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 19
Item 4 Submission of Matters to a Vote of Security Holders 19
Item 6 Exhibits and Reports on Form 8-K 20
<PAGE>
6
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
--------------------------------------------------------------------------------
September 30, December 31,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 79,904 $ 58,552
Accounts receivable, net 867,568 713,593
Costs and estimated earnings in excess
of billings on uncompleted contracts 156,223 137,048
Inventories 6,830 9,776
Prepaid expenses and other 10,212 9,018
---------- ----------
Total current assets 1,120,737 927,987
Investments, notes and other long-term
receivables 24,463 17,411
Property, plant and equipment, net 36,642 36,509
Goodwill 67,545 68,009
Other assets 6,633 6,573
---------- ----------
Total assets $1,256,020 $1,056,489
========== ==========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
--------------------------------------------------------------------------------
September 30, December 31,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under working capital credit lines $ -- $ --
Current maturities of long-term debt and capital
lease obligations 1,177 2,235
Accounts payable 358,036 342,917
Billings in excess of costs and estimated
earnings on uncompleted contracts 334,384 216,152
Accrued payroll and benefits 93,598 84,496
Other accrued expenses and liabilities 79,904 71,782
---------- -----------
Total current liabilities 867,099 717,582
Long-term debt and capital lease obligations 115,852 116,003
Other long-term obligations 63,915 52,655
---------- -----------
Total liabilities 1,046,866 886,240
---------- -----------
Stockholders' equity:
Preferred stock, $0.10 par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $0.01 par value, 30,000,000 shares
authorized, 10,450,129 and 10,427,690 shares
issued and outstanding, respectively 117 117
Capital surplus 158,474 142,894
Accumulated other comprehensive income (4,464) (2,223)
Retained earnings 71,863 46,297
Treasury stock, at cost, 1,131,990 shares (16,836) (16,836)
---------- -----------
Total stockholders' equity 209,154 170,249
---------- -----------
Total liabilities and stockholders' equity $1,256,020 $1,056,489
========== ===========
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, 2000 1999
--------------------------------------------------------------------------------
Revenues $921,568 $810,749
Costs and expenses:
Cost of sales 833,099 732,732
Selling, general and administrative 65,946 59,865
-------- --------
899,045 792,597
-------- --------
Operating income 22,523 18,152
Interest expense, net 2,026 2,378
-------- --------
Income before income taxes 20,497 15,774
Provision for income taxes 9,018 7,135
-------- --------
Net income $ 11,479 $ 8,639
======== ========
Basic earnings per share $ 1.10 $ 0.89
======== ========
Diluted earnings per share $ 0.83 $ 0.66
======== ========
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, 2000 1999
--------------------------------------------------------------------------------
Revenues $2,529,940 $2,047,221
Costs and expenses:
Cost of sales 2,283,583 1,850,621
Selling, general and administrative 194,708 161,394
---------- ----------
2,478,291 2,012,015
---------- ----------
Operating income 51,649 35,206
Interest expense, net 5,996 6,313
---------- ----------
Income before income taxes 45,653 28,893
Provision for income taxes 20,087 12,777
---------- ----------
Net income $ 25,566 $ 16,116
========== ==========
Basic earnings per share $ 2.45 $ 1.66
========== ==========
Diluted earnings per share $ 1.91 $ 1.33
========== ==========
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, 2000 1999
--------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $25,566 $16,116
Depreciation and amortization 8,045 7,901
Amortization of goodwill 3,360 2,437
Other non-cash expenses 19,124 11,445
Changes in operating assets and liabilities (14,598) (25,404)
------- -------
Net cash provided by operating activities 41,497 12,495
------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment, net (8,178) (7,910)
Payments for acquisition of businesses (2,896) (55,782)
(Increase) decrease in Investments, notes and
other long-term receivables (7,052) 5,473
Other, net 34 --
------- -------
Net cash used in investing activities (18,092) (58,219)
------- -------
Cash flows from financing activities:
Purchases of treasury stock -- (2,868)
Borrowings under working capital credit lines, net -- 10,000
Payments of long-term debt and
capital lease obligations, net (2,211) (6,821)
Exercise of stock options 158 221
------- -------
Net cash (used in) provided by financing activities (2,053) 532
------- -------
Increase (decrease) in cash and cash equivalents 21,352 (45,192)
Cash and cash equivalents at beginning of period 58,552 83,053
------- -------
Cash and cash equivalents at end of period $79,904 $37,861
======= =======
Supplemental cash flow information:
Cash paid for:
Interest $ 4,301 $ 3,879
Income taxes $ 3,552 $ 2,383
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(In thousands) (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------
Accumulated
other
Common Capital comprehensive Retained Treasury Comprehensive
Total stock Warrants surplus income (loss) earnings stock income
(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 $170,249 $117 $ -- $142,894 $(2,223) $46,297 $(16,836)
Net income 25,566 -- -- -- -- 25,566 -- $25,566
Foreign currency
translation adjustments (2,241) -- -- -- (2,241) -- -- (2,241)
-------
Comprehensive income -- -- -- -- -- -- -- $23,325
=======
Provision in lieu of
income taxes 15,388 -- -- 15,388 -- -- --
Common stock issued
under stock option plans 158 -- -- 158 -- -- --
Other, net 34 -- -- 34 -- -- --
-------- ---- ----- -------- ------- ------- --------
Balance, September 30, 2000 $209,154 $117 $ -- $158,474 $(4,464) $71,863 $(16,836)
======== ==== ===== ======== ======= ======= ========
Balance, January 1, 1999 $119,816 $109 $2,154 $114,867 $(1,822) $18,476 $(13,968)
Net income 16,116 -- -- -- -- 16,116 -- $16,116
Foreign currency
translation adjustments 1,713 -- -- -- 1,713 -- -- 1,713
-------
Comprehensive income -- -- -- -- -- -- -- $17,829
=======
Provision in lieu of
income taxes 10,255 -- -- 10,255 -- -- --
Common stock issued
under stock option plans 221 -- -- 221 -- -- --
Treasury stock
repurchased (2,868) -- -- -- -- -- (2,868)
-------- ---- ------ -------- ------- ------- --------
Balance, September 30, 1999 $145,253 $109 $2,154 $125,343 $ (109) $34,592 $(16,836)
======== ==== ====== ======== ======= ======= ========
(1) Represents cumulative foreign currency translation adjustments.
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE A Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared
by EMCOR Group, Inc. and Subsidiaries ("EMCOR"), 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 EMCOR's latest Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
In the opinion of EMCOR, 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 EMCOR
and the results of its operations. The results of operations for the three and
nine month periods ended September 30, 2000 are not necessarily indicative of
the results to be expected for the year ending December 31, 2000.
Certain reclassifications of prior year amounts have been made to conform to
current year presentation.
NOTE B Income Taxes
EMCOR files a consolidated federal income tax return including all its U.S.
subsidiaries. At September 30, 2000, EMCOR had net operating loss carryforwards
("NOLs") for U.S. income tax purposes of approximately $72.0 million. These
NOL's expire in the years 2007 through 2018. The NOLs are subject to review by
the Internal Revenue Service. Future changes in the ownership of EMCOR, as
defined by Section 382 of the Internal Revenue Code, could limit the amount of
EMCOR's 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 EMCOR'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 capital surplus.
EMCOR has provided a valuation allowance as of September 30, 2000 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, 2000 and 1999 represent a provision primarily for federal, foreign and state
and local income taxes. EMCOR's utilization of NOLs and other deferred tax
assets for the three month periods ended September 30, 2000 and 1999 of
approximately $7.1 million and $6.4 million have been added to capital surplus,
respectively. EMCOR's utilization of NOLs and other deferred tax assets for the
nine month periods ended September 30, 2000 and 1999 of approximately $15.4
million and $10.3 million has been added to capital surplus, respectively.
<PAGE>
NOTE C Earnings Per Share
The following tables summarize EMCOR's calculation of Basic and Diluted Earnings
per share for the three and nine month periods ended September 30, 2000 and
1999:
<TABLE>
<CAPTION>
Three months ended
September 30, 2000
-------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $11,479,000 10,437,521 $1.10
=====
Effect of Dilutive Securities:
Options -- 334,437
Convertible Subordinated Notes, including
assumed interest savings, net of tax 997,295 4,206,291
----------- ----------
Diluted EPS $12,476,295 14,978,249 $0.83
=========== ========== =====
</TABLE>
<TABLE>
<CAPTION>
Nine months ended
September 30, 2000
-------------------------------- ----------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $25,566,000 10,431,697 $2.45
=====
Effect of Dilutive Securities:
Options -- 287,224
Convertible Subordinated Notes, including
assumed interest savings, net of tax 2,970,205 4,206,291
----------- ----------
Diluted EPS $28,536,205 14,925,212 $1.91
=========== ========== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three months ended
September 30, 2000
-------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $8,639,000 9,685,048 $0.89
=====
Effect of Dilutive Securities:
Options -- 284,690
Warrants -- 378,098
Convertible Subordinated Notes, including
assumed interest savings, net of tax 1,033,362 4,206,291
---------- ----------
Diluted EPS $9,672,362 14,554,127 $0.66
========== ========== =====
</TABLE>
<TABLE>
<CAPTION>
Nine months ended
September 30, 2000
-------------------------------- ----------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $16,116,000 9,693,200 $1.66
=====
Effect of Dilutive Securities:
Options -- 253,812
Warrants -- 295,824
Convertible Subordinated Notes, including
assumed interest savings, net of tax 3,077,621 4,206,291
----------- ----------
Diluted EPS $19,193,621 14,449,127 $1.91
=========== ========== =====
</TABLE>
For the three month periods ended September 30, 2000 and 1999, 12,913 and 18,000
options, respectively, were excluded from the calculation of Diluted EPS as the
inclusion of these options would be antidilutive. For the nine month periods
ended September 30, 2000 and 1999 27,082 and 49,324 options, respectively, were
excluded from the calculation of Diluted EPS as the inclusion of these options
would be antidilutive.
NOTE D New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of SFAS No. 133", and
Statement of Financial Accounting Standards No. 138 "Accounting for Certain
Derivative Instruments and Hedging Activities" ("SFAS 138"), establishes for
fiscal quarters of fiscal years beginning after June 15, 2000 accounting and
reporting standards requiring derivative instruments, as defined, to be measured
in the financial statements at fair value. SFAS 133 also requires that changes
in the derivative instruments' fair value be recognized currently in earnings
unless certain accounting criteria are met. EMCOR does not expect the provisions
of SFAS 133 to have a significant effect on the financial condition or results
of operations of EMCOR.
<PAGE>
NOTE E Segment Information
EMCOR has the following reportable segments: United States electrical
construction and facilities services, United States mechanical construction and
facilities services, United States other services, Canada construction and
facilities services, United Kingdom construction and facilities services and
Other International construction and facilities services. United States other
services primarily represents those operations which principally provide
consulting and maintenance services. Other International construction and
facilities services represents EMCOR's operations outside of the United States,
Canada, and the United Kingdom, primarily in the Middle East performing
electrical construction, mechanical construction and facilities services.
Inter-segment sales are not material for any of the periods presented.
The following presents information about industry segments and geographic areas
(in thousands):
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
------------------------------------------------------------------
Sept. 30, 2000 Sept. 30, 1999 Sept. 30,2000 Sept. 30,1999
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
United States electrical construction and facilities services $380,837 $ 257,027 $ 987,762 $ 708,519
United States mechanical construction and facilities services 327,605 320,986 913,595 741,150
United States other services 47,383 32,443 122,501 63,193
-------- ---------- ---------- ----------
Total United States Operations 755,825 610,456 2,023,858 1,512,862
Canada construction and facilities services 56,400 57,832 183,811 132,593
United Kingdom construction and facilities services 109,343 142,259 321,937 401,041
Other International construction and facilities services -- 202 334 725
-------- ---------- ---------- ----------
Total Worldwide Operations $921,568 $ 810,749 $2,529,940 $2,047,221
======== ========== ========== ==========
Operating income:
United States electrical construction and facilities services $ 17,102 $ 10,659 $ 38,747 $ 25,419
United States mechanical construction and facilities services 7,741 11,624 23,933 25,423
United States other services (904) (595) (2,562) (3,170)
-------- ---------- ---------- ----------
Total United States Operations 23,939 21,688 60,118 47,672
Canada construction and facilities services 1,381 881 4,412 2,430
United Kingdom construction and facilities services 1,859 812 1,792 (725)
Other International construction and facilities services 356 (153) 562 (842)
Corporate Administration (5,012) (5,076) (15,235) (13,329)
--------- ---------- ---------- ----------
Total Worldwide Operations 22,523 18,152 51,649 35,206
Other Corporate items:
Interest expense (2,473) (2,638) (7,385) (7,616)
Interest income 447 260 1,389 1,303
-------- ---------- ---------- ----------
Income before income taxes $ 20,497 $ 15,774 $ 45,653 $ 28,893
======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Sept. 30, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
United States electrical construction and facilities services $ 453,922 $ 343,309
United States mechanical construction and facilities services 445,255 378,813
United States other services 88,992 58,950
---------- ----------
Total United States Operations 988,169 781,072
Canada construction and facilities services 61,560 62,141
United Kingdom construction and facilities services 137,160 151,414
Other International construction and facilities services 13,264 18,295
Corporate Administration 55,867 43,567
---------- ----------
Total Worldwide Operations $1,256,020 $1,056,489
========== ==========
</TABLE>
<PAGE>
NOTE F Legal Proceedings
Reference is made to Part II, Item 1 - Legal Proceeding, of this quarterly
report on Form 10-Q for the period ended September 30, 2000.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Unaudited)
Highlights
Revenues of EMCOR Group, Inc. and subsidiaries ("EMCOR") for the three months
ended September 30, 2000 and 1999 were $921.6 million and $810.7 million,
respectively. Net income for the three months ended September 30, 2000 was $11.5
million compared to net income of $8.6 million for the three months ended
September 30, 1999. Diluted earnings per share ("Diluted EPS") were $0.83 per
share for the three months ended September 30, 2000 compared to Diluted EPS of
$0.66 per share in the year earlier period.
Revenues for the nine months ended September 30, 2000 and 1999 were $2,529.9
million and $2,047.2 million, respectively. Net income for the nine months ended
September 30, 2000 was $25.6 million compared to net income of $16.1 million for
the nine months ended September 30, 1999. Diluted EPS were $1.91 per share for
the nine months ended September 30, 2000 compared to Diluted EPS of $1.33 per
share in the year earlier period.
Operating Segments
EMCOR has the following reportable segments: United States electrical
construction and facilities services, United States mechanical construction and
facilities services, United States other services, Canada construction and
facilities services, United Kingdom construction and facilities services and
Other International construction and facilities services. United States other
services primarily represents those operations which principally provide
consulting and maintenance services. Other International construction and
facilities services represents EMCOR's operations outside of the United States,
Canada, and the United Kingdom, primarily operations in the Middle East
performing electrical construction, mechanical construction and facilities
services.
Results of Operations
Revenues
The following table presents EMCOR's revenues by operating segment and
percentage of total revenues (in thousands, except for percentages):
<TABLE>
<CAPTION>
For the three months ended Sept. 30,
% of % of
2000 Total 1999 Total
---- ----- ---- -----
<S> <C> <C> <C> <C>
United States electrical construction and facilities services $380,837 41% $257,027 32%
United States mechanical construction and facilities services 327,605 36% 320,986 40%
United States other services 47,383 5% 32,443 4%
-------- ---- -------- ----
Total United States Operations 755,825 82% 610,456 76%
Canada construction and facilities services 56,400 6% 57,832 7%
United Kingdom construction and facilities services 109,343 12% 142,259 17%
Other International construction and facilities services -- -- 202 --
-------- ---- -------- ----
Total Worldwide Operations $921,568 100% $810,749 100%
======== ==== ======== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the nine months ended Sept. 30,
% of % of
2000 Total 1999 Total
---- ----- ---- -----
<S> <C> <C> <C> <C>
Revenues:
United States electrical construction and facilities services $ 987,762 39% $ 708,519 35%
United States mechanical construction and facilities services 913,595 36% 741,150 36%
United States other services 122,501 5% 63,193 3%
-------- --- ---------- ----
Total United States Operations 2,023,858 80% 1,512,862 74%
Canada construction and facilities services 183,811 7% 132,593 6%
United Kingdom construction and facilities services 321,937 13% 401,041 20%
Other International construction and facilities services 334 -- 725 --
---------- --- ---------- ----
Total Worldwide Operations $2,529,940 100% $2,047,221 100%
========== ==== ========== ====
</TABLE>
EMCOR had a $110.8 million or a 13.7% increase in revenues for the three months
ended September 30, 2000 compared to the same period in 1999. The increase over
the prior year period was primarily attributable to revenue growth from EMCOR's
operations (excluding revenues attributable to a majority owned facilities
services venture known as Building Technology Engineers of North America, LLC
("BTENA") organized this year) of $97.1 million, or a 12.0% increase. Many of
EMCOR's subsidiaries experienced a growth in revenues, particularly those
located in New York City, Houston, Washington, D.C., California, Denver and
Connecticut, due to an increased level of market activity. This increase in
revenues was offset partially by decreases in revenues from its United Kingdom
and Las Vegas markets and the Poole & Kent subsidiaries due primarily to their
completion of large projects.
EMCOR had a $482.7 million or a 23.6% increase in revenues for the nine months
ended September 30, 2000 compared to the same period in 1999. The increase over
the prior year period was primarily attributable to revenue growth from EMCOR's
operations (excluding BTENA and 1999 acquisitions) of $353.3 million, or a 17.3%
increase, and to the impact of BTENA and 1999 acquisitions which contributed
approximately an aggregate of $129.4 million of revenues during 2000.
Revenues of electrical construction and facilities services business units for
the three months ended September 30, 2000 were $380.8 million compared to $257.0
million for the three months ended September 30, 1999. The $123.8 million or
48.2% increase in the revenues for the three months ended September 30, 2000
compared to the same period in 1999 was attributable to continuing favorable
market conditions across the United States particularly in New York City,
California and Washington, D.C.. Revenues for the nine months ended September
30, 2000 were $987.8 million compared to $708.5 million for the nine months
ended September 30, 1999. The $279.2 million or 39.4% increase in revenues for
the nine months ended September 30, 2000 compared to the same period in 1999 was
attributable to the favorable market conditions previously identified, offset
partially by the decrease in construction activity in the Las Vegas market.
Revenues of mechanical construction and facilities services business units for
the three months ended September 30, 2000 were $327.6 million compared to $321.0
million for the three months ended September 30, 1999. The $6.6 million or 2.1%
increase in revenues was attributable to favorable market conditions in New York
City, Houston, Connecticut and California offset by decreases in revenues for
the Poole & Kent subsidiaries and in Las Vegas due to the recent completion of
large projects. Revenues for the nine months ended September 30, 2000 were
$913.6 million compared to $741.2 million for the nine months ended September
30, 1999. The $172.4 million or 23.3% increase in revenues was attributable to
revenue growth from EMCOR's operations (excluding 1999 acquisitions) of $94.9
million, or a 12.8% increase, and to the impact of 1999 acquisitions which
contributed approximately $77.5 million of additional revenues during 2000.
<PAGE>
Other United States services revenues of $47.4 million for the three months
ended September 30, 2000, which include those operations which principally
provide consulting and maintenance services, increased by $14.9 million compared
to the same three months in 1999. The increase in revenues was primarily
attributable to revenues from BTENA and 1999 acquired companies. Other United
States services revenues of $122.5 million for the nine months ended September
30, 2000 increased by $59.3 million compared to $63.2 million for the same nine
months in 1999. This increase was primarily attributable to an aggregate of
$51.9 million of revenues from BTENA and 1999 acquired companies, as well as
increases attributable to the balance of EMCOR's other United States operations.
Revenues of Canada construction and facilities services for the three months
ended September 30, 2000 were $56.4 million compared to $57.8 million for the
three months ended September 30, 1999. Revenues for the nine months ended
September 30, 2000 were $183.8 million compared to $132.6 million for the nine
months ended September 30, 1999; this $51.2 million increase in revenues for the
year to date period was primarily attributable to the increased level of
activities in Western Canada.
Revenues of United Kingdom construction and facilities services business units
for the three months ended September 30, 2000 were $109.3 million compared to
$142.3 million for the three months ended September 30, 1999. Revenues for the
nine months ended September 30, 2000 were $322.0 million compared to $401.0
million for the nine months ended September 30, 1999. The decreases were
principally attributable to the substantial completion in 1999 of the Jubilee
Line project in London.
Other International construction and facilities services primarily consist of
EMCOR's operations in the Middle East. Substantially all of the current projects
in this operating segment are being performed by joint ventures. The results of
these operations are accounted for under the equity method of accounting because
EMCOR has less than majority ownership in these joint ventures, and accordingly,
no revenue attributable to such joint ventures was recorded. In 1999, several
projects in which EMCOR had majority ownership were completed. EMCOR continues
to pursue new business selectively in these markets; however, the availability
of opportunities has been significantly reduced as a result of local economic
factors.
Cost of Sales and Gross Profit
The following table presents EMCOR's cost of sales, gross profit, and gross
profit as a percentage of revenues (in thousands, except for percentages):
For the three months ended Sept 30,
2000 1999
---- ----
Cost of sales ............................... $833,099 $732,732
Gross profit................................. $88,469 $78,017
Gross profit as a percentage of revenues..... 9.6% 9.6%
For the nine months ended Sept. 30,
2000 1999
---- ----
Cost of sales ............................... $2,283,583 $1,850,621
Gross profit................................. $246,357 $196,600
Gross profit as a percentage of revenues..... 9.7% 9.6%
<PAGE>
Gross profit (revenues less cost of sales) increased $10.5 million for the three
months ended September 30, 2000 to $88.5 million compared to $78.0 million for
the three months ended September 30, 1999. As a percentage of revenues, gross
profit was 9.6% for each of the three months ended September 30, 2000 and 1999.
The dollar increase in gross profit was due to an increase in revenues of
EMCOR's operations, as well as incremental gross profit from BTENA and 1999
acquisitions, partially offset by losses on jobs in the South and North Carolina
markets undertaken by its Poole & Kent subsidiaries prior to acquisition by
EMCOR.
Gross profit increased $49.8 million for the nine months ended September 30,
2000 to $246.4 million compared to $196.6 million for the nine months ended
September 30, 1999. As a percentage of revenues, gross profit increased to 9.7%
from 9.6% for the nine months ended September 30, 2000 and 1999, respectively.
The dollar increase in gross profit was due to the increase in revenues of
EMCOR's operations as well as incremental gross profit from BTENA and companies
acquired in 1999. The increase in gross profit as a percentage of revenues was
primarily a result of an increase in gross profits on projects due to overall
favorable market conditions, partially offset by losses on jobs in the South and
North Carolina markets undertaken by its Poole & Kent subsidiaries prior to
acquisition by EMCOR.
Selling, general and administrative expenses
The following table presents EMCOR's selling, general and administrative
expenses, and selling, general and administrative expenses as a percentage of
revenues (in thousands, except for percentages):
<TABLE>
<CAPTION>
For the three months ended Sept. 30,
2000 1999
---- ----
<S> <C> <C>
Selling, general and administrative expenses $65,946 $59,865
Selling, general and administrative expenses, as a percentage of revenues 7.2% 7.4%
Selling, general and administrative expenses, as a percentage of revenues,
excluding amortization of goodwill 7.1% 7.3%
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended Sept. 30,
2000 1999
---- ----
<S> <C> <C>
Selling, general and administrative expenses $194,708 $161,394
Selling, general and administrative expenses, as a percentage of revenues 7.7% 7.9%
Selling, general and administrative expenses, as a percentage of revenues,
excluding amortization of goodwill 7.6% 7.8%
</TABLE>
Selling, general and administrative expenses for the three months ended
September 30, 2000 increased $6.1 million. Selling, general and administrative
expenses as a percentage of revenues was 7.2% for the three months ended
September 30, 2000, compared to 7.4% for the three months ended September 30,
1999. For the nine months ended September 30, 2000 selling, general and
administrative expenses increased $33.3 million compared to the same period in
the prior year. Selling, general and administrative expenses as a percentage of
revenues was 7.7% for the nine months ended September 30, 2000, compared to 7.9%
for the nine months ended September 30, 1999. For both the three and nine month
periods ended September 30, 2000, the dollar increase in selling, general and
administrative expenses compared to the prior year comparable periods was
attributable to an increase in revenues and corresponding increases in variable
selling, general and administrative expenses required to support the increased
revenue base, incremental fixed costs to support the current growth in
operations, plus selling, general and administrative expenses associated with
BTENA and 1999 acquisitions. The decrease in selling, general and administrative
expenses as a percentage of revenues was primarily due to the leveraging of
fixed costs over increased revenues.
<PAGE>
Operating income
The following table presents EMCOR's operating income, and operating income as
percentage of segment revenues: (in thousands, except for percentages)
<TABLE>
<CAPTION>
For the three months ended Sept. 30,
% of % of
Segment Segment
2000 Revenues 1999 Revenues
---- -------- ---- --------
<S> <C> <C> <C> <C>
Operating income (loss):
United States electrical construction and facilities services $17,102 4.5% $10,659 4.1%
United States mechanical construction and facilities services 7,741 2.4% 11,624 3.6%
United States other services (904) -- (595) --
------- ---- ------- ----
Total United States Operations 23,939 3.2% 21,688 3.6%
Canada construction and facilities services 1,381 2.4% 881 1.5%
United Kingdom construction and facilities services 1,859 1.7% 812 0.6%
Other International construction and facilities services 356 -- (153) --
Corporate Administration (5,012) -- (5,076) --
------- ---- ------- ----
Total Worldwide Operations 22,523 2.4% 18,152 2.2%
Other Corporate Items:
Interest expense (2,473) (2,638)
Interest income 447 260
------- -------
Income before income taxes $20,497 $15,774
======= =======
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended Sept. 30,
% of % of
Segment Segment
2000 Revenues 1999 Revenues
---- -------- ---- --------
<S> <C> <C> <C> <C>
Operating income (loss):
United States electrical construction and facilities services $38,747 3.9% $25,419 3.6%
United States mechanical construction and facilities services 23,933 2.6% 25,423 3.4%
United States other services (2,562) -- (3,170) --
------- ---- ------- ----
Total United States Operations 60,118 2.9% 47,672 3.2%
Canada construction and facilities services 4,412 2.4% 2,430 1.8%
United Kingdom construction and facilities services 1,792 0.6% (725) --
Other International construction and facilities services 562 -- (842) --
Corporate Administration (15,235) -- (13,329) --
------- ---- ------- ----
Total Worldwide Operations 51,649 2.0% 35,206 1.7%
Other Corporate Items:
Interest expense (7,385) (7,616)
Interest income 1,389 1,303
------- -------
Income before income taxes $45,653 $28,893
======= =======
</TABLE>
EMCOR had operating income of $22.5 million for the three months ended September
30, 2000 compared with operating income of $18.2 million for the three months
ended September 30, 1999. The increase of $4.4 million or 24.1% in operating
income for the three months ended September 30, 2000 as compared to the same
period in 1999 was due to increased revenues and gross profits from EMCOR's
operations excluding BTENA and 1999 acquired companies, as well as revenues and
incremental operating income attributable to BTENA and 1999 acquired companies.
Operating income for the nine months ended September 30, 2000 was $51.6 million
compared to $35.2 million for the same period in 1999. The increase of $16.4
million or 46.7% was due to increased revenues and gross profits from EMCOR's
operations excluding BTENA and 1999 acquired companies, as well as revenues and
incremental operating income attributable to businesses acquired in 1999 and the
impact of BTENA.
<PAGE>
United States electrical construction and facilities services operating income
for the three months ended September 30, 2000 was $17.1 million or 4.5% of
revenues, compared to $10.7 million or 4.1% of revenues for the three months
ended September 30, 1999. The $6.4 million increase in operating income for the
three months ended September 30, 2000 compared to the same period in 1999 was
primarily attributable to the continuing favorable market conditions across the
United States, particularly in New York City, California and Washington, D.C.
Operating income for the nine months ended September 30, 2000 was $38.7 million
or 3.9% of revenues, compared to $25.4 million or 3.6% of revenues for the nine
months ended September 30, 1999. The increase in operating income, similar to
the three months ended September 30, 2000, was attributable to continuing
favorable market conditions, particularly in New York City, California and
Washington, D.C.
United States mechanical construction and facilities services operating income
for the three months ended September 30, 2000 was $7.7 million or 2.4% of
revenues, compared to $11.6 million or 3.6% of revenues for the three months
ended September 30, 1999. Operating income for the nine months ended September
30, 2000 was $23.9 million or 2.6% of revenues, compared to $25.4 million or
3.4% of revenues for the nine months ended September 30, 1999. The decrease in
operating income for both the three and nine month periods ended September 30,
2000 compared to the same periods in 1999 was primarily attributable to losses
on jobs in the South and North Carolina markets undertaken by its Poole & Kent
subsidiaries prior to acquisition by EMCOR.
Other United States services operating losses were $0.9 million and $0.6 million
for the three months ended September 30, 2000 and 1999, respectively. For the
nine months ended September 30, 2000, operating losses were $2.6 million
compared to $3.2 million for the nine months ended September 30, 1999. These
operating losses were primarily attributable to costs associated with the
continued development of EMCOR's consulting operations and maintenance services
activities.
Canada construction and facilities services operating income was $1.4 million
compared to $0.9 million for the three months ended September 30, 2000 and 1999,
respectively. Operating income for the nine months ended September 30, 2000 and
1999 was $4.4 million and $2.4 million, respectively. The increase in operating
income in the 2000 three and nine month periods was primarily due to an
increased level of activities in Western Canada.
United Kingdom construction and facilities services operating income for the
three months ended September 30, 2000 was $1.9 million compared to $0.8 million
for the three months ended September 30, 1999. Operating income for the nine
months ended September 30, 2000 was $1.8 million compared to an operating loss
of $0.7 million for the nine months ended September 30, 1999. The improvement in
operating income for the three and nine month periods ended September 30, 2000
compared to the same periods in 1999 was primarily attributable to the
commencement of new projects that have resulted in higher gross profits in the
2000 periods, as compared to projects that resulted in operating losses in 1999
that have since been completed.
Substantially all of the current projects in the Other International
construction and facilities services operating segment are being performed by
joint ventures. The operating income of these operations are accounted for under
the equity method of accounting because EMCOR has less than majority ownership
in these joint ventures. In 1999, several projects in which EMCOR had majority
ownership were completed. EMCOR continues to pursue new business selectively in
these markets; however, the availability of opportunities has been significantly
reduced as a result of local economic factors.
<PAGE>
General corporate expenses for the three months ended September 30, 2000 were
$5.0 million compared to $5.1 million for the three months ended September 30,
1999. For the nine months ended September 30, 2000 and 1999, general corporate
expenses were $15.2 million and $13.3 million, respectively. The increase in
general corporate expenses for the nine months ended September 30, 2000 was due
to increased variable overhead costs associated with EMCOR's increased revenues,
as well as incremental fixed costs to support current growth in operations.
Interest expense for the three months ended September 30, 2000 and 1999 was $2.5
million and $2.6 million, respectively. For the nine months ended September 30,
2000 and 1999, interest expense was $7.4 million and $7.6 million, respectively.
Interest income for the three months ended September 30, 2000 was $0.4 million
compared to $0.3 million for the three months ended September 30, 1999. For the
nine months ended September 30, 2000, interest income was $1.4 million compared
to $1.3 for the nine months ended September 30, 1999.
The income tax provision increased by $1.9 million to $9.0 million for the three
months ended September 30, 2000, as compared to the same period in 1999. The
income tax provision increased by $7.3 million to $20.1 million for the nine
months ended September 30, 2000 as compared to $12.8 million for the nine months
ended September 30, 1999. The increase in provision for both the three and nine
months periods was primarily due to increased income before taxes for the three
and nine months ended September 30, 2000 compared with the same periods in the
prior year. A portion of the liability for income taxes, $15.4 million at
September 30, 2000 and $10.3 million at September 30, 1999, was not payable due
to the utilization of NOL's and was recorded as an increase in capital surplus
for both years.
EMCOR's backlog was approximately $1.9 billion at September 30, 2000 and
approximately $1.8 billion at December 31, 1999. Between December 31, 1999 and
September 30, 2000, EMCOR's backlog in the United States increased by $0.2
billion, its backlog in the United Kingdom decreased by $0.06 billion and its
backlog in Canada decreased by $0.04 billion. The decrease in the Canada and
United Kingdom backlogs was due to work performed on projects awarded in the
fourth quarter of 1999 in Canada, and the completion of several large projects
in the United Kingdom offsetting new contract awards. The increase in the United
States backlog was due to continued favorable economic conditions and to $0.05
billion of backlog attributable to BTENA. The September 30, 1999 backlog was
$1.8 billion.
Liquidity and Capital Resources
The following table presents EMCOR's net cash provided by operating activities,
net cash used in investing activities and net cash (used in) provided by
financing activities (in thousands):
For the nine months ended Sept. 30,
2000 1999
---- ----
Net cash provided by operating activities $ 41,497 $ 12,495
Net cash used in investing activities $(18,092) $(58,219)
Net cash (used in) provided by financing activities $ (2,053) $ 532
<PAGE>
EMCOR's consolidated cash balance increased by approximately $21.4 million from
$58.6 million at December 31, 1999 to $79.9 million at September 30, 2000. Net
cash provided by operating activities for the nine months ended September 30,
2000 of $41.5 million was a $29.0 million increase from the same period last
year. The increase in net cash provided by operating activities was primarily
attributable to higher net income and non-cash expenses partially offset by
increased changes in operating assets and liabilities due to an increase in
business activity. Net cash used in investing activities of $18.1 million for
the nine months ended September 30, 2000 decreased by $40.1 million compared to
the $58.2 million of cash used in investing activities in the same period last
year. The decrease in net cash used in investing activities was due primarily to
the acquisition of businesses in the nine months ended September 30, 1999 which
utilized $55.8 million in cash. Net cash used in financing activities of $2.1
million was a decrease of $2.6 million from $0.5 million of net cash provided by
financing activities for the nine months ended September 30, 1999. The decrease
in net cash provided by financing activities was primarily attributable to no
borrowing under working capital credit lines outstanding at September 30, 2000
compared to $10.0 million of borrowings outstanding at September 30, 1999; to
lower net payments for long-term debt and capital lease obligations in the nine
months ended September 30, 2000 of $2.2 million compared to net payments of $6.8
million in the nine months ended September 30, 1999; and the purchases of
treasury stock of $2.9 million in the nine months ended September 30, 1999
compared to no purchases of treasury stock in the nine months ended September
30, 2000.
As of September 30, 2000, EMCOR's total borrowing capacity under its revolving
credit facility was $150.0 million. EMCOR had approximately $10.5 million of
letters of credit outstanding as of that date. There were no revolving loans
outstanding as of September 30, 2000 and December 31, 1999 under the revolving
credit facility.
EMCOR believes that current cash balances and borrowing capacity available under
lines of credit, combined with cash expected to be generated from operations,
will be sufficient to provide short-term and foreseeable long-term liquidity and
meet expected capital expenditure requirements.
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Reform Act of 1995, particularly
statements regarding market opportunities, market share growth, competitive
growth, gross profit, and selling, general and administrative expenses. These
forward-looking statements involved risks and uncertainties, that could cause
actual results to differ materially from those in any such forward-looking
statements. Such factors include, but are not limited to adverse changes in
general economic conditions, including changes in the specific markets for
EMCOR's services, adverse business conditions, decreased or lack of growth in
the mechanical and electrical construction and facilities services industries,
increased competition, pricing pressures, risks associated with foreign
operations and other factors.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In February 1995, as part of an investigation by the New York County
District Attorney's office into the business affairs of a general contractor
that did business with EMCOR's subsidiary, Forest Electric Corp. ("Forest"), a
search warrant was executed at Forest's executive offices. On July 12, 2000,
Forest was served with a Subpoena Duces Tecum to produce certain documents as
part of a broader investigation by the New York County District Attorney's
office into illegal business practices in the New York City construction
industry. Forest has been informed by the New York County District Attorney's
office that it and certain of its officers are targets of the investigation.
Forest intends to produce documents in response to the subpoena and to cooperate
fully with the District Attorney's office investigation as it proceeds.
On July 31, 1998, a former employee of a subsidiary of EMCOR filed a
class-action complaint on behalf of the participants in two employee benefit
plans sponsored by EMCOR against EMCOR and other defendants for breach of
fiduciary duty under the Employee Retirement Income Security Act. All of the
claims relate to alleged acts or omissions which occurred during the period May
1, 1991 to December 1994. The principal allegations of the complaint are that
the defendants breached their fiduciary duties by causing the plans to purchase
and hold stock of EMCOR when it was known as JWP INC. and when the defendants
knew or should have known it was imprudent to do so. The plaintiff has not made
claim for a specific dollar amount of damages but generally seeks to recover for
the benefit plans the loss in the value of JWP stock held by the plans. EMCOR
and the other defendants intend to vigorously defend the case. Insurance
coverage may be applicable under an EMCOR pension trust liability insurance
policy for EMCOR and those present and former employees of EMCOR who are
defendants in the action.
Substantial settlements or damage judgements against EMCOR arising out of
these matters could have a material adverse effect on EMCOR's business,
operating results and financial condition.
In addition to the above, EMCOR is involved in other legal proceedings and
claims, asserted by and against EMCOR, which have arisen in the ordinary course
of business. EMCOR believes it has a number of valid defenses to these actions
and EMCOR intends to vigorously defend or assert these claims and does not
believe that a significant liability will result. However, EMCOR cannot predict
the outcome thereof or the impact that an adverse result of the matters
discussed above will have upon EMCOR's financial position or results of
operations.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 27, 2000 the Company held its annual meeting of stockholders.
(a) Each of the seven individuals nominated for election as a director of the
Company for the ensuing year was elected. The seven directors constituted
all of the members of the Board of Directors of the Company.
Name Votes For Votes Withheld
Stephen W. Bershad 8,513,903 1,458,406
David A. B. Brown 8,510,303 1,462,006
Georges L. de Buffevent 8,503,703 1,468,606
Albert Fried, Jr. 8,486,103 1,486,206
Richard F. Hamm, Jr. 8,510,303 1,462,006
Frank T. MacInnis 9,515,548 456,761
Kevin C. Toner 8,511,703 1,460,606
There were no broker non-votes.
(b) The stockholders voted upon a stockholder proposed resolution requesting
the Company's Board of Directors to terminate its stockholder rights plan
and to refrain from adopting similar plans or a staggered board. 4,232,263
shares were voted for the resolution, 4,604,270 were voted against the
resolution, and 194,561 shares abstained from voting thereon. There were
941,215 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 2000, 9,965,242 shares voted in favor of ratification, 925
shares voted against ratification, and 6,142 shares abstained from voting
thereon. There were no broker non-votes.
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Incorporated by Reference to,
Exhibit No Description or Page Number
27 Financial Data Schedule Filed herewith.
(b) No reports on Form 8-K were filed during the quarter ended September 30,
2000.
<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 26, 2000
By: /s/FRANK T. MACINNIS
------------------------------------------
Frank T. MacInnis
Chairmn of the Board of
Directors and
Chief Executive Officer
Date: October 26, 2000 By: /s/LEICLE E. CHESSER
------------------------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer
