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 March 31, 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
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EMCOR Group, Inc.
-------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2125338
- -------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) 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 Corporate Issuers
Number of shares of Common Stock outstanding as of the close of business on
April 25, 2000: 10,429,690 shares.
<PAGE>
EMCOR GROUP, INC.
INDEX
Page No.
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
as of March 31, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations -
three months ended March 31, 2000 and 1999 3
Condensed Consolidated Statements of Cash Flows -
three months ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Stockholders'
Equity and Comprehensive Income -
three months ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Results of Operations
and Financial Condition 9
PART II - Other Information
Item 1 Legal Proceedings 14
Item 4 Submission of Matters to a Vote of Security Holders 14
Item 6 Exhibits and Reports on Form 8-K 14
<PAGE>
2
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- --------------------------------------------------------------------------------
March 31, December 31,
2000 1999
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 58,114 $ 58,552
Accounts receivable, net 735,539 713,593
Costs and estimated earnings in excess
of billings on uncompleted contracts 150,296 137,048
Inventories 7,936 9,776
Prepaid expenses and other 8,535 9,018
---------- ----------
Total current assets 960,420 927,987
Investments, notes and other long-term
receivables 20,877 17,411
Property, plant and equipment, net 37,101 36,509
Goodwill 67,034 68,009
Other assets 6,283 6,573
---------- ----------
Total assets $1,091,715 $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)
- --------------------------------------------------------------------------------
March 31, December 31,
2000 1999
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital
lease obligations $ 2,069 $ 2,235
Accounts payable 337,107 342,917
Billings in excess of costs and estimated
earnings on uncompleted contracts 243,212 216,152
Accrued payroll and benefits 89,439 84,496
Other accrued expenses and liabilities 73,632 71,782
---------- ----------
Total current liabilities 745,459 717,582
Long-term debt and capital lease obligations 115,893 116,003
Other long-term obligations 52,335 52,655
---------- -----------
Total liabilities 913,687 886,240
---------- -----------
Stockholders' equity:
Preferred stock, $0.10 par value, 1,000,000 shares
authorized, zero issued and outstanding -- --
Common stock, $0.01 par value, 13,700,000 shares
authorized, 10,427,690 shares issued
and outstanding 117 117
Capital surplus 145,788 142,894
Accumulated other comprehensive income (2,268) (2,223)
Retained earnings 51,227 46,297
Treasury stock, at cost, 1,131,995 shares (16,836) (16,836)
---------- -----------
Total stockholders' equity 178,028 170,249
---------- -----------
Total liabilities and stockholders' equity $1,091,715 $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 March 31, 2000 1999
- --------------------------------------------------------------------------------
Revenues $741,522 $539,983
Costs and expenses:
Cost of sales 668,977 488,028
Selling, general and administrative 61,998 46,907
-------- --------
730,975 534,935
-------- --------
Operating income 10,547 5,048
Interest expense, net 1,744 1,473
------- --------
Income before income taxes 8,803 3,575
Provision for income taxes 3,873 1,524
-------- --------
Net income $ 4,930 $ 2,051
======== ========
Basic earnings per share $ 0.47 $ 0.21
======== ========
Diluted earnings per share $ 0.40 $ 0.20
======== ========
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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Three months ended March 31, 2000 1999
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 4,930 $ 2,051
Depreciation and amortization 2,525 2,413
Amortization of goodwill 924 446
Other non-cash expenses 4,276 1,673
Changes in operating assets and liabilities (6,234) 15,520
------- -------
Net cash provided by operating activities 6,421 22,103
------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment, net (3,117) (1,891)
(Increase) decrease in investments, notes and
other long-term receivables (3,466) 36
------- --------
Net cash used in investing activities (6,583) (1,855)
------- --------
Cash flows from financing activities:
Purchase of treasury stock -- (2,868)
Payment of long-term debt and capital lease obligations (276) (6,328)
Exercise of stock options -- 67
------- --------
Net cash used in financing activities (276) (9,129)
------- --------
(Decrease)increase in cash and cash equivalents (438) 11,119
Cash and cash equivalents at beginning of period 58,552 83,053
------- --------
Cash and cash equivalents at end of period $58,114 $94,172
======= ========
Supplemental cash flow information:
Cash paid for:
Interest $129 $130
Income Taxes $841 $582
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 loss (1) earnings stock income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 $119,816 $109 $2,154 $114,867 $(1,822) $18,476 $(13,968)
Net income 2,051 -- -- -- -- 2,051 -- $2,051
Foreign currency
translation adjustments (235) -- -- -- (235) -- -- (235)
------
Comprehensive income -- -- -- -- -- -- -- $1,816
======
Provision in lieu of
income taxes 1,318 -- -- 1,318 -- -- --
Common stock issued under
stock option plans 67 -- -- 67 -- -- --
Treasury stock repurchased (2,868) -- -- -- -- -- (2,868)
-------- ---- ------ -------- ------- ------- --------
Balance, March 31, 1999 $120,149 $109 $2,154 $116,252 $(2,057) $20,527 $(16,836)
======== ==== ====== ======== ======= ======= ========
Balance, January 1, 2000 $170,249 $117 $ -- $142,894 $(2,223) $46,297 $(16,836)
Net income 4,930 -- -- -- -- 4,930 -- $4,930
Foreign currency
translation adjustments (45) -- -- -- (45) -- -- (45)
-------
Comprehensive income -- -- -- -- -- -- -- $4,885
=======
Provision in lieu of
income taxes 2,894 -- -- 2,894 -- -- --
-------- ---- ------ -------- ------- ------- --------
Balance, March 31, 2000 $178,028 $117 $ -- $145,788 $(2,268) $51,227 $(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 month
period ended March 31, 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 U.S.
subsidiaries. At March 31, 2000, EMCOR had net operating loss carryforwards
("NOLs") for U.S. income tax purposes of approximately $105.0 million, which
expire in the years 2007 through 2012. The NOLs are subject to review by the
Internal Revenue Service. Future changes in 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 March 31, 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 month periods ended March 31, 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 period ended March 31, 2000 and 1999 of approximately $2.9 million
and $1.3 million have 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 ("EPS") for the three month periods ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three months ended
March 31, 2000
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $4,930,000 10,427,690 $0.47
Effect of Dilutive Securities: =====
Convertible Subordinated Notes, including
assumed interest savings, net of tax 1,019,000 4,206,291
Options -- 248,999
----------- ----------
Diluted EPS $5,949,000 14,882,980 $0.40
========== ========== =====
</TABLE>
<TABLE>
<CAPTION>
Three months ended
March 31, 1999
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $2,051,000 9,700,162 $0.21
Effect of Dilutive Securities: =====
Options -- 212,061
Warrants -- 148,493
---------- ----------
Diluted EPS -before extraordinary item $2,051,000 10,060,716 $0.20
========== ========== =====
</TABLE>
For the three month period ended March 31, 1999, the "if converted" amount of
Subordinated Notes was excluded from the calculation of Diluted EPS as the
effect would be antidilutive.
For the three month periods ended March 31, 2000 and 1999, 31,333 and 129,973
options, respectively, were excluded from the calculation of Diluted EPS as the
inclusion of the 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",
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 provision of SFAS 133 to have a significant effect on the financial
condition or results of operations of EMCOR.
NOTE E Segment Information
EMCOR has the following reportable segments: United States electrical
construction and facilities services, United States mechanical construction and
facilities services, Canada construction and facilities services and United
Kingdom 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.
<PAGE>
The following presents information about industry segments and geographic areas
(in thousands):
<TABLE>
<CAPTION>
For the three months ended
-------------------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Revenues:
United States electrical construction and facilities services $279,917 $219,546
United States mechanical construction and facilities services 270,429 144,583
United States other services 29,358 7,929
-------- --------
Total United States Operations 579,704 372,058
Canada construction and facilities services 59,503 33,182
United Kingdom construction and facilities services 101,982 134,336
Other International construction and facilities services 333 407
-------- --------
Total Worldwide Operations $741,522 $539,983
======== ========
Operating income:
United States electrical construction and facilities services $ 9,984 $ 7,597
United States mechanical construction and facilities services 7,132 3,698
United States other services (942) (1,463)
-------- --------
Total United States Operations 16,174 9,832
Canada construction and facilities services 623 79
United Kingdom construction and facilities services (1,560) (661)
Other International construction and facilities services 14 (256)
Corporate Administration (4,704) (3,946)
-------- ---------
Total Worldwide Operations 10,547 5,048
Other Corporate items:
Interest expense (2,269) (2,272)
Interest income 525 799
-------- --------
Income before income taxes $ 8,803 $ 3,575
======== ========
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
Total assets:
United States electrical construction and facilities services $ 358,423 $ 343,309
United States mechanical construction and facilities services 413,807 378,813
United States other services 57,727 58,950
---------- ----------
Total United States Operations 829,957 781,072
Canada construction and facilities services 62,015 62,141
United Kingdom construction and facilities services 137,073 151,414
Other International construction and facilities services 13,213 18,295
Corporate Administration 49,457 43,567
---------- ----------
Total Worldwide Operations $1,091,715 $1,056,489
========== ==========
</TABLE>
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Unaudited)
Highlights
EMCOR Group Inc.'s ("EMCOR") revenues for the three months ended March 31, 2000
and 1999 were $741.5 million and $540.0 million, respectively. Net income for
the three months ended March 31, 2000 was $4.9 million compared to net income of
$2.1 million for the three months ended March 31, 1999. Diluted Earnings Per
Share ("Diluted EPS") were $0.40 per share for the three months ended March 31,
2000 compared to Diluted EPS of $0.20 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, Canada construction and facilities services and United
Kingdom 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.
Results of Operations
Revenues
The following table presents EMCOR's revenues by operating segment and the
percentage of total revenues (in thousands, except for percentages):
<TABLE>
<CAPTION>
For the three months ended March 31,
------------------------------------
% of % of
2000 Total 1999 Total
Revenues: ---- ----- ---- -----
<S> <C> <C> <C> <C>
United States electrical construction and facilities services $279,917 38% $219,546 41%
United States mechanical construction and facilities services 270,429 36% 144,583 27%
United States other services ............................. 29,358 4% 7,929 1%
-------- ---- -------- ----
Total United States Operations ........................... 579,704 78% 372,058 69%
Canada construction and facilities services .............. 59,503 8% 33,182 6%
United Kingdom construction and facilities services ...... 101,982 14% 134,336 25%
Other International....................................... 333 -- 407 --
-------- ---- -------- ----
Total Worldwide Operations ............................... $741,522 100% $539,983 100%
======== ==== ======== ====
</TABLE>
EMCOR had a $201.5 million or 37.3% increase in revenues for the three months
ended March 31, 2000 compared to 1999. The increase over the prior year period
was primarily attributable to revenue growth from EMCOR's operations (excluding
1999 acquisitions) of $105.5 million, or a 19.5% increase, and to the impact of
1999 acquisitions which contributed approximately $96.0 million of additional
revenues during 2000. Many of the markets in which EMCOR operates recorded a
growth in revenues, particularly the New York City, Boston, Washington, D.C. and
Canada markets, offset partially by anticipated decreases in the United Kingdom
and Las Vegas markets due to the completion of large projects.
Revenues of electrical construction and facilities services business units for
the three months ended March 31, 2000 were $279.9 million compared to $219.5
million for the three months ended March 31, 1999. The $60.4 million increase in
the revenues for the three months ended March 31, 2000 compared to the same
period in 1999 was attributable to continuing favorable market conditions across
the United States particularly in New York City, Boston and Washington, D.C.
markets.
Revenues of mechanical construction and facilities services business units for
the three months ended March 31, 2000 were $270.4 million compared to $144.6
million for the three months ended March 31, 1999. The $125.8 million or 87.0%
increase in revenues was attributable to $77.5 million of revenues derived from
1999 acquired companies and the remaining increase was attributable to the
balance of EMCOR's operations.
Other United States services revenues of $29.4 million for the three months
ended March 31, 2000, which include those operations which principally provide
consulting and maintenance services, increased by $21.4 million compared to the
same three months in 1999. The increase in revenues was primarily attributable
to $18.9 million of revenues from 1999 acquired companies and the remaining
increase was attributable to the balance of EMCOR's operations.
Revenues of Canada construction and facilities services for the three months
ended March 31, 2000 were $59.5 million compared to $33.2 million for the three
months ended March 31, 1999. The increase in revenues in the current period was
primarily due to an increased level of activities in Western Canada and from
commencement of certain projects delayed from the initially planned fourth
quarter 1999 start dates.
Revenues of United Kingdom construction and facilities services business units
for the three months ended March 31, 2000 were $102.0 million compared to $134.3
million for the three months ended March 31, 1999. The $32.4 million decrease in
revenues was attributable to the substantial completion of the Jubilee Line
project in December of 1999 that had contributed revenues in the three months
ended March 31, 1999.
Other International construction and facilities services primarily consists of
EMCOR's operations in the Middle East. Revenues for the three months ended March
31, 2000 were $0.3 million compared to $0.4 million for the three months ended
March 31, 1999. The decline in revenues was due to the completion of projects in
the Middle East markets that were active last year. 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 March 31,
2000 1999
---- ----
Cost of sales ................................ $668,977 $488,028
Gross profit.................................. $72,545 $51,955
Gross profit as a percentage of revenues...... 9.8% 9.6%
Gross profit (revenues less cost of sales) increased $20.6 million for the three
months ended March 31, 2000 to $72.5 million compared to $52.0 million for the
three months ended March 31, 1999. As a percentage of revenues, gross profit
increased to 9.8% from 9.6% for the three months ended March 31, 2000 and 1999,
respectively. The dollar increase in gross profit was due to the increase in
revenues of EMCOR's operations (excluding 1999 acquired companies) and was due
to revenues from companies acquired in 1999. The increase in gross profit as a
percentage of revenues was primarily a result of an increase in gross profit in
the United Kingdom, in addition to an increase in gross profit for certain other
EMCOR subsidiaries.
<PAGE>
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 March 31,
2000 1999
---- ----
<S> <C> <C>
Selling, general and administrative expenses......................... $61,998 $46,907
Selling, general and administrative expenses, as a percentage of
revenues............................................................ 8.4% 8.7%
Selling, general and administrative expenses, as a percentage of
revenues, excluding amortization of goodwill........................ 8.2% 8.6%
</TABLE>
Selling, general and administrative expenses for the three months ended March
31, 2000 increased $15.1 million. Selling, general and administrative expenses
as a percentage of revenues was 8.4% for the three months ended March 31, 2000,
compared to 8.7% for the three months ended March 31, 1999. The dollar increase
in selling, general and administrative expenses for the three months ended March
31, 2000 compared to the prior year was attributable to the increase in revenues
and corresponding increases in variable selling, general and administrative
expenses. 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.
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 March 31,
------------------------------------
% of % of
Segment Segment
2000 Revenues 1999 Revenues
Operating income (loss):
<S> <C> <C> <C> <C>
United States electrical construction and facilities services ..... $ 9,984 3.6% $7,597 3.5%
United States mechanical construction and facilities services ..... 7,132 2.6% 3,698 2.6%
United States other services ...................................... (942) -- (1,463) --
------- ---- ------ ----
Total United States Operations .................................... 16,174 2.8% 9,832 2.6%
Canada construction and facilities services ....................... 623 1.0% 79 0.2%
United Kingdom construction and facilities services ............... (1,560) -- (661) --
Other International................................................ 14 -- (256) --
Corporate Administration........................................... (4,704) -- (3,946) --
------- ---- ------ ----
Total Worldwide Operations ........................................ 10,547 1.4% 5,048 0.9%
Other Corporate Items:
Interest expense ............................................... (2,269) (2,272)
Interest income ................................................ 525 799
------ ------
Income before income taxes ........................................ $8,803 $3,575
====== ======
</TABLE>
EMCOR had operating income of $10.6 million for the three months ended March 31,
2000 compared with operating income of $5.0 million for the three months ended
March 31, 1999. The increase of $5.6 million in operating income for the three
months ended March 31, 2000 as compared to the same period in 1999 was due to
increased revenues from EMCOR's operations excluding 1999 acquired companies, as
well as revenue and incremental operating income attributable to businesses
acquired in 1999.
United States electrical construction and facilities services operating income
(before deduction of general corporate and other expenses discussed below) for
the three months ended March 31, 2000 was $10.0 million or 3.6% of revenues,
compared to $7.6 million or 3.5% of revenues for the three months ended March
31, 1999. The $2.4 million increase in revenues for the three months ended March
31, 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, Boston and Washington, D.C.
United States mechanical construction and facilities services operating income
for the three months ended March 31, 2000 was $7.1 million or 2.6% of revenues,
compared to $3.7 million or 2.6% of revenues for the three months ended March
31, 1999. The $3.4 million increase in operating income was attributable to
growth from EMCOR's operations (excluding 1999 acquired companies) and operating
income from 1999 acquisitions.
Other United States services operating losses were $0.9 million and $1.5 million
for the three months ended March 31, 2000 and 1999, respectively. These
operating losses were primarily attributable to costs associated with the
continued development of the consulting operations and maintenance services
activities.
Canada construction and facilities services operating income was $0.6 million
compared to $0.1 million for the three months ended March 31, 2000 and 1999,
respectively. The increase in operating income in the current period was
primarily due to an increased level of activities in Western Canada.
United Kingdom construction and facilities services operating losses for the
three months ended March 31, 2000 and 1999 were $1.6 million and $0.7 million,
respectively. The activity in this segment continued to produce operating losses
in these periods.
Other International construction and facilities services operating income was
$0.01 million for the three months ended March 31, 2000 compared to an operating
loss of $0.3 million for three months ended March 31, 1999. Operating income in
2000 reflects the decline in revenues and business activity due to the
completion of projects in the Middle East markets that were active last year.
The operating losses in 1999 were due to costs associated with the
administration and completion of the activities in these regions. 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.
General corporate expenses for the three months ended March 31, 2000 were $4.7
million compared to $3.9 million for the three months ended March 31, 1999. The
increase in general corporate expenses 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 March 31, 2000 and 1999 was $2.3
million. The decrease in Interest income of $0.3 million for the three months
ended March 31, 2000 compared to the same three months in 1999 was attributable
to less cash available to invest in the three months ended March 31, 2000
compared to the same period in 1999.
The income tax provision increased by $2.3 million to $3.9 million for the three
months ended March 31, 2000, versus $1.5 million for the same period in 1999.
The increase in provision was primarily due to increased income before taxes
plus an increase in the effective income tax rate for the three months ended
March 31, 2000 to 44% from 43% for 1999. The increase in the effective income
tax rate was due to changes in the tax jurisdictions in which income was earned.
A portion of the liability for income taxes, $2.9 million for 2000 and $1.3
million for 1999, was not payable in cash due to the utilization of NOL's and
was recorded as an increase in capital surplus for both years.
EMCOR's backlog was $1.82 billion at March 31, 2000 and $1.77 billion at
December 31, 1999. Between December 31, 1999 and March 31, 2000, EMCOR's backlog
in Canada decreased by $8.5 million, its backlog in the United Kingdom decreased
by $15.7 million and its backlog in the United States increased by $74.5
million. 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. The increase in the
United States backlog was due to continued favorable economic conditions.
EMCOR's backlog at March 31, 2000 was $1.82 billion compared to $1.40 billion at
March 31, 1999. Excluding backlog from acquisitions of $340.0 million, backlog
increased $80.7 million in the last 12 months. The $80.7 million increase was
attributed to a United States backlog increase of $86.1 million, a Canada
backlog increase of $26.6 million, and a United Kingdom backlog decrease of
$32.1 million primarily due to the substantial completion of the Jubilee line
project in December 1999.
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 financing activities
(in thousands):
For the three months
ended March 31,
2000 1999
---- ----
Net cash provided by operating activities............. $ 6,421 $22,103
Net cash used in investing activities................. $(6,583) $(1,855)
Net cash used in financing activities................. $ (276) $(9,129)
EMCOR's consolidated cash balance decreased by approximately $0.5 million from
$58.6 million at December 31, 1999 to $58.1 million at March 31, 2000. Net cash
provided by operating activities for the three months ended March 31, 2000 of
$6.4 million was a $15.7 million decrease from the net cash provided by
operating activities of $22.1 million in the same period last year. The decrease
in net cash provided by operating activities was primarily attributable to
changes in operating assets and liabilities due to an increase in business
activity, partially offset by increased net income and non-cash expenses. Net
cash used for investing activities of $6.6 million for the three months ended
March 31, 2000 increased by $4.7 million compared to the $1.9 million of cash
used in investing activities in the same period last year. The increase in net
cash used in investing activities was due to increased spending on the purchase
of property, plant and equipment, in addition to an increase in EMCOR's
investments, notes and other long-term receivables. Net cash used in financing
activities of $0.3 million was a decrease of $8.8 million from $9.1 million of
net cash used in financing activities for the three months ended March 31, 1999.
The decrease in net cash used in financing activities was attributable to the
purchase of treasury stock in 1999 of $2.9 million compared to no purchases of
treasury stock in 2000, and payment of long-term debt and capital lease
obligations of $6.3 million in 1999 and compared to $0.3 million in 2000.
As of March 31, 2000 EMCOR's total borrowing capacity under its revolving credit
facility was $150.0 million. EMCOR had approximately $17.4 million of letters of
credit outstanding as of that date. There were no revolving loans outstanding as
of March 31, 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
The information on legal proceedings is hereby incorporated by reference to Note
P of EMCOR's Notes to Consolidated Financial Statements included in EMCOR's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 6 - Exhibits and Reports on Form 8-K
(a)Exhibits
Incorporated by Reference to,
Exhibit No Description or Page Number
4 Third Amendment to Amended and Page
Restated Credit Agreement
10 Amendment to 1994 Management Page
Stock Option Plan
11 Computation of Basic Note E of the Notes
EPS and Diluted EPS to the Condensed Consolidated
for the three months Financial Statements.
end March 31, 2000
and 1999
27 Financial Data Schedule Filed herewith.
(b)No reports on Form 8-K were filed during the quarter ended March 31, 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: April 26, 2000 By: /s/FRANK T. MACINNIS
------------------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
Date: April 26, 2000 By: /s/LEICLE E. CHESSER
------------------------------------------
------------------------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer
Exhibit 4
THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
Harris Trust and Savings Bank Union Bank of California, N.A.
Chicago, Illinois San Francisco, California
LaSalle National Bank Bank One, Arizona, N.A.
Chicago, Illinois Phoenix, Arizona
First Union National Bank BankBoston, N.A.
Philadelphia, Pennsylvania Stamford, Connecticut
Ladies and Gentlemen:
Reference is hereby made to that certain Amendment and Restatement of
Credit Agreement dated as of December 22, 1998, as amended (such Credit
Agreement as heretofore amended being referred to herein as the "Credit
Agreement") among the undersigned, EMCOR Group, Inc., a Delaware corporation,
Comstock Canada Ltd., A Canadian corporation, and Drake & Scull Group Ltd.
(formerly named Drake & Scull Engineering Ltd.), a United Kingdom corporation
(collectively, the "Borrowers" and individually, the "Borrower"), you (the
"Lenders") and Harris Trust and Savings Bank, as agent for the Lenders (the
"Agent"). All defined terms used herein shall have the same meaning as in the
Credit Agreement unless otherwise define herein.
The Borrowers, the Agent and the Lenders wish to modify certain terms
and conditions of the Credit Agreement, all on the terms and conditions set
forth in this Amendment.
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
Upon satisfaction of all of the conditions precedent set forth in
Section 3 hereof, the Credit Agreement shall be amended as follows:
1.1 The definition of "Borrowers" set forth in Section 9 of the Credit Agreement
shall be amended in its entirety and as so amended shall be restated to read as
follows:
"Borrowers" means (a) the U.S. Borrowers, (b) the Canadian
Borrowers and (c) the U.K. Borrowers, with (i) the term "Borrowers" to
mean the Borrowers, collectively, and, also each individually, and (ii)
all promises and covenants (including promises to pay) and
representations and warranties of and by the Borrowers made in the Loan
Documents or any instruments or documents delivered pursuant thereto to
be and constitute the joint and several promises, covenants,
representations and warranties of and by each and all of such
corporations, except to the extent explicitly otherwise provided. The
term "Borrower" appearing in such singular form shall be deemed a
reference to any of the Borrowers unless the context in which such term
is used shall otherwise require.
1.2 The definition of "Borrowing Base" set forth in Section 9 of the
Credit Agreement shall be amended by adding the following sentence thereto
immediately at the end thereof:
Anything contained in this Agreement notwithstanding (i) in
computing compliance by U.S. Borrowers with the Borrowing Base
requirements set forth in this Agreement, Eligible Accounts Receivable
shall only include those Eligible Accounts Receivable attributable to
the U.S. Borrowers and the U.S. Subsidiaries (exclusive of Eligible
Accounts Receivable of the Company used to support Credit Utilization
of the Canadian Borrowers and/or the U.K. Borrowers pursuant to clause
(ii) of this sentence) and (ii) for purposes of computing compliance by
the Canadian Borrowers and the U.K. Borrowers with the Borrowing Base
requirements set forth herein Eligible Accounts Receivable shall
include only those Eligible Accounts Receivable attributable to
Restricted Subsidiaries which are not U.S. Subsidiaries and Eligible
Accounts Receivable of the Company, to the extent that such Eligible
Accounts Receivable of the Company were not used to support Credit
Utilizations by the U.S. Borrowers. Deductions to be made in computing
the Borrowing Base in respect of amounts recorded for costs in excess
of billings representing certain disputed items shall be taken against
the allocated to the Eligible Accounts Receivable owing to the entity
which has recorded such costs.
1.3 Section 9 of the Credit Agreement shall be amended by adding
thereto the following new definitions in the appropriate alphabetical locations:
"Canadian Borrower" means and includes Comstock Canada and
such other Restricted Subsidiaries organized under the Federal laws of
Canada or the laws of a Province of Canada as may from time to time be
designated as such in writing by the Company and approved as such in
writing by all lenders (but subject to such conditions and limitations
as either the Company or the Lenders may impose).
"Canadian Subsidiaries" means and includes Comstock Canada and
such other Subsidiaries organized under the Federal laws of Canada or
the laws of a Province of Canada.
"U.K Borrowers" means and includes Drake & Scull and such
other Restricted Subsidiaries organized under the laws of the United
Kingdom as may from time to time be designated as such in writing by
the Company and approved as such in writing by all lenders (but subject
to such conditions and limitations as either the Company or the Lenders
may impose).
"U.K. Subsidiaries" means Drake & Scull and such other
Subsidiaries organized under the laws of the United Kingdom.
"U.S. Borrowers" mean the Company and such other Restricted
Subsidiaries organized under the laws of the United States of America
as may from time to time be designated as such in writing by the
Company and approved as such in writing by all Lenders (but subject to
such conditions and limitations as either the Company or Lenders may
impose).
"U.S. Subsidiaries" means the Subsidiaries of the Company
organized under the laws of the United States of America as may from
time to time be designated as such in writing by the Company and
approved as such in writing by all Lenders (but subject to such
conditions and limitations as either the Company or Lenders may
impose).
1.4 Section 4.1 of the Credit Agreement shall be amended by adding
thereto the following language immediately at the end thereof:
"Notwithstanding anything to the contrary contained herein or in
any other Loan Document, the Collateral (other than Collateral
constituting capital stock of the Guarantors) owned by the U.K.
Subsidiaries and the Canadian Subsidiaries shall secure solely the
indebtedness, liabilities and obligations of the U.K. Subsidiaries and
the Canadian Subsidiaries hereunder and under the other Loan Documents
and not the indebtedness, liabilities and obligations of the U.S.
Borrowers and the U.S. Subsidiaries hereunder and under the other Loan
Documents. The portion of the capital stock of each Guarantor which is
a U. K. Subsidiary or a Canadian Subsidiary constituting Collateral in
excess of 65% of the total issued and outstanding capital stock of
such Subsidiary (herein, the "Excess Stock Collateral") shall secure
only the indebtedness liabilities and obligations of the Canadian
Subsidiaries and/or U.K. Subsidiaries hereunder and under the other
Loan Documents. In no event shall the Excess Stock Collateral secure
the indebtedness, liabilities and obligations of the U.S. Borrowers or
the U.S. Subsidiaries hereunder or under the other Loan documents. It
is understood that, subject to compliance with the Borrowing Base
restrictions set forth above, the Company may borrow to fund loans to
Restricted Subsidiaries permitted by Section 7.12 hererof."
SECTION 2. RELEASE OF GUARANTEES
Notwithstanding anything contained in the Credit Agreement of the other
Loan Documents to the contrary, the Guarantees executed by the Guarantors which
are U.K. Subsidiaries or Canadian Subsidiaries shall in no event be deemed a
guaranty of the indebtedness, liabilities and obligations of the U. S. Borrowers
or the U.S. Subsidiaries under the Credit Agreement or the other Loan Documents
and such Guarantees shall be deemed released as to the indebtedness, liabilities
and obligations of the U.S. Borrowers of the U.S. Subsidiaries under the Credit
Agreement and the other Loan Documents, but not otherwise.
SECTION 3. WAIVER
Section 4.1 of the Credit Agreement to the contrary notwithstanding no
lien need be granted on the stock of the Canadian Subsidiaries, Drake & Scull
engineering Ltd. (formerly named Drake & Scull Engineering (north) Ltd. or Drake
& Scull Ltd. (formerly named Drake & Scull Engineering (South) Ltd.
(collectively, "New UK Companies") until July 31, 2000, (ii) the Canadian
Subsidiaries need not grant a lien on their assets unless and until the Canadian
Borrowers desire to include the assets of the Canadian Subsidiaries in the
Borrowing Base and (iii) the New UK Companies need not grant a lien on their
assets unless and until the UK Borrowers desire to include the assets of the New
UK Companies in the Borrowing Base.
SECTION 4. CONDITIONS PRECEDENT
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
4.1 The Borrowers, the Agent and the Required Lenders shall have
executed this Amendment (such execution may be in several counterparts and the
several parties hereto may execute on separate counterparts).
4.2 A Guarantor's Consent for the benefit of the Lenders shall have
been executed and delivered to the Agent, the form of which is attached hereto.
4.3 The Borrowers shall be in full compliance with all of the terms
and conditions of the Loan Documents and no Default or Event of Default
shall have occurred and be continuing thereunder or shall result after giving
effect to this Amendment.
4.4 Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to each of the Lenders and their legal counsel.
SECTION 5. MISCELLANEOUS
5.1 Each of the Borrowers has heretofore executed and delivered to the
Agent that certain Amended and Restated Security Agreement dated as of December
22, 1998 (the "Security Agreement") and each Borrower hereby agrees that
notwithstanding the execution and delivery hereof, such Security Agreement shall
be and remain in full force and effect and that any rights and remedies of the
Agent thereunder, obligations of the Borrowers thereunder and any liens or
security interests created or provided for thereunder shall be and remain in
full force and effect, shall not be affected, impaired or discharged thereby and
shall secure all of its indebtedness, obligations and liabilities to the Agent
and the Lenders under the Credit Agreement as amended hereby. Nothing herein
contained shall in any manner affect or impair the priority of the liens and
security interests created and provided for by the Security Agreement as to the
indebtedness which would be secured thereby prior to giving effect hereto.
5.2 Reference to this specific Amendment need not be made in any note,
document, letter, certificate, any security agreement, or any communication
issued or made pursuant to or with respect to the Credit Agreement, any
reference to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.
5.3 This Amendment may be executed in any number of counterparts, and
by the different parties on different counterparts, all of which taken together
shall constitute one and the same agreement. Any of the parties hereby may
execute this agreement by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This agreement
shall be governed by the internal laws of the State of Illinois.
5.4 Each of the Borrowers hereby agree to pay all reasonable costs and
expenses, including without limitation attorneys fees, incurred by the Agent and
each of the Lenders in connection with the preparation, negotiation, execution
and delivery of the Amendment and the other documents contemplated hereby.
(Signature pages to follow)
<PAGE>
Upon acceptance hereof by the Agent and the Lenders in the manner
hereinafter set forth, this Amendment shall be a contract between us for the
purposes hereinabove set forth.
Dated as of _____________, 2000
EMCOR Group, Inc.
By ___________________________
Its __________________________
COMSTOCK CANADA LTD.
By ___________________________
Its __________________________
DRAKE & SCULL GROUP LTD.
By ___________________________
Its __________________________
<PAGE>
Accepted and agreed to as of the day and year last above written.
HARRIS TRUST AND SAVINGS BANK
individually and as Agent
By ________________________________
Its Vice President
LASALLE NATIONAL BANK
By ________________________________
Its _______________________________
FIRST UNION NATIONAL BANK
By _______________________________
Its ______________________________
UNION BANK OF CALIFORNIA, N.A.
By _______________________________
Its ______________________________
BANK ONE, ARIZONA, N.A.
By _______________________________
Its ______________________________
BANKBOSTON, N.A.
By _______________________________
Its ______________________________
EXHIBIT 10
Section 13 of 1994 Management Stock Option Plan, as amended.
"13. Termination of Employment. Unless the Committee determines otherwise at the
time of grant of an Option or thereafter by amendment of an Option, all or any
part of any Option, to the extent unexercised, shall terminate immediately, upon
the cessation or termination for any reason of the holder's employment by the
Corporation or any Subsidiary, except that the holder shall have until the end
of the three-month period following the cessation of his employment with the
Corporation or its Subsidiaries, and no longer, to exercise any unexercised
Option that he could have exercised on the day on which such employment
terminated; provided, that such exercise must be accomplished prior to the
expiration of the term of such Option. Notwithstanding the foregoing, if the
cessation of employment is due to retirement on or after attaining the age of
sixty-five (65) years, or to disability (to an extent and in a manner as shall
be determined in each case by the Committee in its sole discretion) or to death,
the holder or the representative of the estate of a deceased holder shall have
the privilege of exercising the Option which is unexercised at the time of such
retirement, or of such disability or death; provided, however, that such
exercise must be accomplished prior to the expiration of the term of such Option
and (a) within three months of the holder's retirement or disability, or (b)
within six months of the holder's death, as the case may be, unless the
Committee at the time of grant of such Option or thereafter by amendment of such
Option permits its exercise for a longer period but in no event after the
expiration of the term of such Option."
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from EMCOR's
Condensed Consolidated Financial Statements fro the three months ended
March 31, 2000 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> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-1-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1
<CASH> 58114
<SECURITIES> 0
<RECEIVABLES> 767519
<ALLOWANCES> 31980
<INVENTORY> 7936
<CURRENT-ASSETS> 960420
<PP&E> 67537
<DEPRECIATION> 30436
<TOTAL-ASSETS> 1091715
<CURRENT-LIABILITIES> 745459
<BONDS> 115893
0
0
<COMMON> 117
<OTHER-SE> 177911
<TOTAL-LIABILITY-AND-EQUITY> 1091715
<SALES> 741522
<TOTAL-REVENUES> 741522
<CGS> 668977
<TOTAL-COSTS> 61998
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1073
<INTEREST-EXPENSE> 1744
<INCOME-PRETAX> 8803
<INCOME-TAX> 3873
<INCOME-CONTINUING> 4930
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4930
<EPS-BASIC> 0.47
<EPS-DILUTED> 0.40
</TABLE>
