SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or
15(d) of the Securities Exchange Act of 1934
--------------------------------------------------------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
July 21, 2000: 10,433,357 shares.
<PAGE>
EMCOR GROUP, INC.
INDEX
Page No.
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
as of June 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations -
three months ended June 30, 2000 and 1999 3
Condensed Consolidated Statements of Operations -
six months ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows -
six months ended June 30, 2000 and 1999 5
Condensed Consolidated Statements of Stockholders'
Equity and Comprehensive Income -
six months ended June 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 19
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
--------------------------------------------------------------------------------
June 30, December 31,
2000 1999
(Unaudited)
--------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 62,429 $ 58,552
Accounts receivable, net 832,945 713,593
Costs and estimated earnings in excess
of billings on uncompleted contracts 152,493 137,048
Inventories 6,853 9,776
Prepaid expenses and other 10,562 9,018
---------- ----------
Total current assets 1,065,282 927,987
Investments, notes and other long-term
receivables 21,787 17,411
Property, plant and equipment, net 36,503 36,509
Goodwill 66,860 68,009
Other assets 7,047 6,573
---------- ----------
Total assets $1,197,479 $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)
--------------------------------------------------------------------------------
June 30, December 31,
2000 1999
(Unaudited
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under working capital credit lines $ 15,000 $ --
Current maturities of long-term debt and capital
lease obligations 2,656 2,235
Accounts payable 353,816 342,917
Billings in excess of costs and estimated
earnings on uncompleted contracts 303,825 216,152
Accrued payroll and benefits 84,486 84,496
Other accrued expenses and liabilities 74,075 71,782
---------- ----------
Total current liabilities 833,858 717,582
Long-term debt and capital lease obligations 115,928 116,003
Other long-term obligations 56,460 52,655
---------- ----------
Total liabilities 1,006,246 886,240
---------- ----------
Stockholders' equity:
Preferred stock, $0.10 par value, 1,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $0.01 par value, 13,700,000 shares
authorized, 10,430,690 and 10,427,690 shares
issued and outstanding, respectively 117 117
Capital surplus 151,293 142,894
Accumulated other comprehensive income (3,726) (2,223)
Retained earnings 60,385 46,297
Treasury stock, at cost, 1,132,000 shares (16,836) (16,836)
---------- ----------
Total stockholders' equity 191,233 170,249
---------- ----------
Total liabilities and stockholders' equity $1,197,479 $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 June 30, 2000 1999
--------------------------------------------------------------------------------
Revenues $866,850 $696,489
Costs and expenses:
Cost of sales 781,507 629,861
Selling, general and administrative 66,763 54,622
-------- --------
848,270 684,483
-------- --------
Operating income 18,580 12,006
Interest expense, net 2,226 2,462
-------- --------
Income before income taxes 16,354 9,544
Provision for income taxes 7,196 4,117
-------- --------
Net income $ 9,158 $ 5,427
======== ========
Basic earnings per share $ 0.88 $ 0.56
======== ========
Diluted earnings per share $ 0.68 $ 0.45
======== ========
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)
--------------------------------------------------------------------------------
Six months ended June 30, 2000 1999
--------------------------------------------------------------------------------
Revenues $1,608,372 $1,236,472
Costs and expenses:
Cost of sales 1,450,484 1,117,889
Selling, general and administrative 128,761 101,529
---------- ----------
1,579,245 1,219,418
---------- ----------
Operating income 29,127 17,054
Interest expense, net 3,970 3,935
---------- ----------
Income before income taxes 25,157 13,119
Provision for income taxes 11,069 5,641
---------- ----------
Net income $ 14,088 $ 7,478
========== ==========
Basic earnings per share $ 1.35 $ 0.77
========== ==========
Diluted earnings per share $ 1.08 $ 0.66
========== ==========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
--------------------------------------------------------------------------------
Six months ended June 30, 2000 1999
--------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $14,088 $ 7,478
Depreciation and amortization 5,024 5,233
Amortization of goodwill 2,251 1,419
Other non-cash expenses 11,448 4,730
Changes in operating assets and liabilities (33,845) (28,183)
------- --------
Net cash used in operating activities (1,034) (9,323)
------- --------
Cash flows from investing activities:
Purchase of Property, plant and equipment, net (5,018) (5,177)
Acquisition of businesses (1,102) (53,752)
(Increase) decrease in Investments, notes
and other long-term receivables (4,376) 2,205
Other, net 34 --
------- --------
Net cash used in investing activities (10,462) (56,724)
------- --------
Cash flows from financing activities:
Purchases of Treasury stock -- (2,868)
Borrowings under working capital credit lines, net 15,000 20,000
Proceeds (payments) of long-term debt and
capital lease obligations, net 346 (6,157)
Exercise of stock options 27 221
------- --------
Net cash provided by financing activities 15,373 11,196
------- --------
Increase (decrease) in cash and cash equivalents 3,877 (54,851)
Cash and cash equivalents at beginning of period 58,552 83,053
------- --------
Cash and cash equivalents at end of period $62,429 $28,202
======= ========
Supplemental cash flow information:
Cash paid for:
Interest $3,879 $3,325
Income taxes $2,383 $3,610
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) (1) earnings stock income
------------------------------------------------------------------------------------------------------------------------------------
<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 14,088 -- -- -- -- 14,088 -- $14,088
Foreign currency
translation adjustments (1,503) -- -- -- (1,503) -- -- (1,503)
-------
Comprehensive income -- -- -- -- -- -- -- $12,585
=======
Provision in lieu of
income taxes 8,338 -- -- 8,338 -- -- --
Common stock issued under
stock option plans 27 -- -- 27 -- -- --
Other, net 34 -- -- 34 -- -- --
-------- ---- ------ -------- ------- ------- --------
Balance, June 30, 2000 $191,233 $117 $ -- $151,293 $(3,726) $60,385 $(16,836)
======== ==== ====== ======== ======= ======= ========
Balance, January 1, 1999 $119,816 $109 $2,154 $114,867 $(1,822) $18,476 $(13,968)
Net income 7,478 -- -- -- -- 7,478 -- $ 7,478
Foreign currency
translation adjustments 1,476 -- -- -- 1,476 -- -- 1,476
--------
Comprehensive income -- -- -- -- -- -- -- $ 8,954
========
Provision in lieu of
income taxes 3,938 -- -- 3,938 -- -- --
Common stock issued under
stock option plans 221 -- -- 221 -- -- --
Treasury stock repurchased (2,868) -- -- -- -- -- (2,868)
--------- ---- ------- -------- ------- ------- --------
Balance, June 30, 1999 $130,061 $109 $2,154 $119,026 $ (346) $25,954 $(16,836)
======== ==== ====== ======== ======= ======= ========
</TABLE>
(1) Represents cumulative foreign currency translation adjustments.
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, 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
six month periods ended June 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 June 30, 2000, EMCOR had net operating loss carryforwards
("NOLs") for U.S. income tax purposes of approximately $101.0 million, which
expire in the years 2007 through 2012. 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 June 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 six month periods ended June 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 June 30, 2000 and 1999 of approximately $5.4 million
and $2.6 million have been added to capital surplus, respectively. EMCOR's
utilization of NOLs and other deferred tax assets for the six month periods
ended June 30, 2000 and 1999 of approximately $8.3 million and $3.9 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 for the three and six month periods ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three months ended
June 30, 2000
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $ 9,158,000 10,429,880 $0.88
Effect of Dilutive Securities: =====
Options -- 278,237
Convertible Subordinated Notes, including
assumed interest savings, net of tax 986,455 4,206,291
----------- ----------
Diluted EPS $10,144,455 14,914,408 $0.68
=========== ========== =====
Six months ended
June 30, 2000
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic EPS
Income available to common
stockholders $14,088,000 10,428,785 $1.35
Effect of Dilutive Securities: =====
Options -- 263,618
Convertible Subordinated Notes, including
assumed interest savings, net of tax 1,962,070 4,206,291
----------- ---------- -----
Diluted EPS $16,050,070 14,898,694 $1.08
=========== ========== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three months ended
June 30, 1999
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $5,427,000 9,672,355 $0.56
Effect of Dilutive Securities: =====
Options -- 196,057
Warrants -- 351,385
Convertible Subordinated Notes, including
assumed interest savings, net of tax 1,022,000 4,206,291
---------- ----------
Diluted EPS $6,449,000 14,426,088 $0.45
========== ========== =====
Six months ended
June 30, 1999
---------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic EPS
Income available to common
stockholders $7,478,000 9,697,473 $0.77
Effect of Dilutive Securities: =====
Options -- 249,340
Warrants -- 249,408
Convertible Subordinated Notes, including
assumed interest savings, net of tax 2,044,000 4,206,291
---------- ---------- -----
Diluted EPS $9,522,000 14,402,512 $0.66
========== ========== =====
</TABLE>
For the three month periods ended June 30, 2000 and 1999, 37,000 and zero
options, respectively, were excluded from the calculation of Diluted EPS as the
inclusion of the options would be antidilutive. For the six month periods ended
June 30, 2000 and 1999 37,193 and 305,000 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", 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 six months ended
------------------------------- -------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
United States electrical construction and facilities services $327,008 $231,946 $ 606,925 $ 451,492
United States mechanical construction and facilities services 315,562 275,580 585,990 420,164
United States other services 45,760 22,822 75,118 30,750
-------- -------- ---------- ----------
Total United States Operations 688,330 530,348 1,268,033 902,406
Canada construction and facilities services 67,908 41,579 127,411 74,762
United Kingdom construction and facilities services 110,612 124,447 212,594 258,782
Other International construction and facilities services -- 115 334 522
-------- -------- ---------- ----------
Total Worldwide Operations $866,850 $696,489 $1,608,372 $1,236,472
======== ======== ========== ==========
Operating income:
United States electrical construction and facilities services $11,662 $ 8,026 $21,645 $ 15,623
United States mechanical construction and facilities services 9,061 9,238 16,193 12,936
United States other services (717) (1,112) (1,658) (2,575)
-------- -------- ---------- ----------
Total United States Operations 20,006 16,152 36,180 25,984
Canada construction and facilities services 2,408 1,470 3,031 1,549
United Kingdom construction and facilities services 1,494 (876) (66) (1,537)
Other International construction and facilities services 191 (433) 205 (689)
Corporate Administration (5,519) (4,307) (10,223) (8,253)
-------- -------- ---------- ----------
Total Worldwide Operations 18,580 12,006 29,127 17,054
Other Corporate items:
Interest expense (2,643) (2,706) (4,912) (4,978)
Interest income 417 244 942 1,043
-------- ------- ---------- ----------
Income before income taxes $ 16,354 $ 9,544 $ 25,157 $ 13,119
======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Total assets:
United States electrical construction and facilities services $ 414,210 $ 343,309
United States mechanical construction andfacilities services 435,603 378,813
United States other services 83,195 58,950
---------- ----------
Total United States Operations 933,008 781,072
Canada construction and facilities services 68,375 62,141
United Kingdom construction and facilities services 136,824 151,414
Other International construction and facilities services 13,237 18,295
Corporate Administration 46,035 43,567
---------- ----------
Total Worldwide Operations $1,197,479 $1,056,489
========== ==========
</TABLE>
NOTE F Legal Proceedings
Refer to Part II, Item 1 - Legal Proceedings, of this quarterly report on Form
10-Q for the period ended June 30, 2000.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Unaudited)
Highlights
EMCOR Group Inc.'s revenues for the three months ended June 30, 2000 and 1999
were $866.9 million and $696.5 million, respectively. Net income for the three
months ended June 30, 2000 was $9.2 million compared to net income of $5.4
million for the three months ended June 30, 1999. Diluted earnings per share
("Diluted EPS") were $0.68 per share for the three months ended June 30, 2000
compared to Diluted EPS of $0.45 per share in the year earlier period.
Revenues for the six months ended June 30, 2000 and 1999 were $1,608.4 million
and $1,236.5 million, respectively. Net income for the six months ended June 30,
2000 was $14.1 million compared to net income of $7.5 million for the six months
ended June 30, 1999. Diluted EPS were $1.08 per share for the six months ended
June 30, 2000 compared to Diluted EPS of $0.66 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 the
percentage of total revenues (in thousands, except for percentages):
<TABLE>
<CAPTION>
For the three months ended June 30,
-----------------------------------
% of % of
2000 Total 1999 Total
---- ----- ---- -----
<S> <C> <C> <C> <C>
United States electrical construction and facilities services $327,008 38% $231,946 33%
United States mechanical construction and facilities services 315,562 36% 275,580 40%
United States other services 45,760 5% 22,822 3%
-------- --- -------- ---
Total United States Operations 688,330 79% 530,348 76%
Canada construction and facilities services 67,908 8% 41,579 6%
United Kingdom construction and facilities services 110,612 13% 124,447 18%
Other International construction and facilities services -- -- 115 --
-------- ---- -------- ----
Total Worldwide Operations $866,850 100% $696,489 100%
======== ==== ======== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
% of % of
2000 Total 1999 Total
---- ----- ---- -----
<S> <C> <C> <C> <C>
Revenues:
United States electrical construction and facilities services $ 606,925 38% $ 451,492 37%
United States mechanical construction and facilities services 585,990 36% 420,164 34%
United States other services 75,118 5% 30,750 2%
---------- ---- ---------- ---
Total United States Operations 1,268,033 79% 902,406 73%
Canada construction and facilities services 127,411 8% 74,762 6%
United Kingdom construction and facilities services 212,594 13% 258,782 21%
Other International construction and facilities services 334 -- 522 --
---------- ---- ---------- ----
Total Worldwide Operations ............................... $1,608,372 100% $1,236,472 100%
========== ==== ========== ====
</TABLE>
EMCOR had a $170.4 million or a 24.5% increase in revenues for the three months
ended June 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 and to 1999 acquisitions) of $150.7 million, or a
21.6% increase, and to the impact of BTENA and 1999 acquisitions which
contributed approximately $19.7 million of additional revenues during 2000. Many
of EMCOR's subsidiaries experienced a growth in revenues, particularly those
located in New York City, Houston, Washington, D.C., California, Connecticut,
Ohio and Canada, due to increased level of market activity. This increase in
revenues was offset partially by decreases in revenues from its United Kingdom
and Las Vegas based subsidiaries due to their completion of large projects.
EMCOR had a $371.9 million or a 30.1% increase in revenues for the six months
ended June 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 $256.2 million, or a 20.7%
increase, and to the impact of BTENA and 1999 acquisitions which contributed
approximately $115.7 million of additional revenues during 2000.
Revenues of electrical construction and facilities services business units for
the three months ended June 30, 2000 were $327.0 million compared to $231.9
million for the three months ended June 30, 1999. The $95.1 million or 41.0%
increase in the revenues for the three months ended June 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,
Washington, D.C. and Ohio. Revenues for the six months ended June 30, 2000 were
$606.9 million compared to $451.5 million for the six months ended June 30,
1999. The $155.4 million or 34.4% increase in revenues for the six months ended
June 30, 2000 compared to the same period in 1999 was attributable to the strong
market conditions previously identified, offset partially by the decrease in the
Las Vegas market.
Revenues of mechanical construction and facilities services business units for
the three months ended June 30, 2000 were $315.6 million compared to $275.6
million for the three months ended June 30, 1999. The $40.0 million or 14.5%
increase in revenues was attributable to favorable market conditions in New York
City, Houston, Connecticut and California offset by decreases in revenues in Las
Vegas due to completion of large projects. Revenues for the six months ended
June 30, 2000 were $586.0 million compared to $420.2 million for the six months
ended June 30, 1999. The $165.8 million or 39.5% increase in revenues was
attributable to revenue growth from EMCOR's operations (excluding 1999
acquisitions) of $88.4 million, or a 21.0% increase, and to the impact of 1999
acquisitions which contributed approximately $77.4 million of additional
revenues during 2000.
<PAGE>
Other United States services revenues of $45.8 million for the three months
ended June 30, 2000, which include those operations which principally provide
consulting and maintenance services, increased by $22.9 million compared to the
same three months in 1999. The increase in revenues was primarily attributable
to $19.7 million of revenues from BTENA and 1999 acquired companies and the
remaining increase was attributable to the balance of EMCOR's Other United
States operations. Other United States services revenues of $75.1 million for
the six months ended June 30, 2000 increased by $44.4 million compared to $30.8
million for the same six months in 1999. This increase was primarily
attributable to $38.3 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 June 30, 2000 were $67.9 million compared to $41.6 million for the three
months ended June 30, 1999. The $26.3 million increase in revenues in the
current period was primarily due to an increased level of activities in Western
Canada. Revenues for the six months ended June 30, 2000 were $127.4 million
compared to $74.8 million for the six months ended June 30, 1999; this increase
in revenues was also primarily attributable to the activities in Western Canada.
Revenues of United Kingdom construction and facilities services business units
for the three months ended June 30, 2000 were $110.6 million compared to $124.4
million for the three months ended June 30, 1999. Revenues for the six months
ended June 30, 2000 were $212.6 million compared to $258.8 million for the six
months ended June 30, 1999. The decreases were principally attributable to
revenues recorded in 1999 on the Jubilee Line project in London, which was
substantially completed in December 1999.
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 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 June 30,
2000 1999
---- ----
Cost of sales ................................ $781,507 $629,861
Gross profit.................................. $85,343 $66,628
Gross profit as a percentage of revenues...... 9.8% 9.6%
For the six months ended June 30,
2000 1999
---- ----
Cost of sales ................................ $1,450,484 $1,117,889
Gross profit.................................. $157,888 $118,583
Gross profit as a percentage of revenues...... 9.8% 9.6%
<PAGE>
Gross profit (revenues less cost of sales) increased $18.7 million for the three
months ended June 30, 2000 to $85.3 million compared to $66.6 million for the
three months ended June 30, 1999. As a percentage of revenues, gross profit
increased to 9.8% from 9.6% for the three months ended June 30, 2000 and 1999,
respectively. The dollar increase in gross profit was due to the increase in
revenues of EMCOR's operations (excluding BTENA and 1999 acquisitions) as well
as incremental gross profit from BTENA and 1999 acquisitions. 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.
Gross profit increased $39.3 million for the six months ended June 30, 2000 to
$157.9 million compared to $118.6 million for the six months ended June 30,
1999. As a percentage of revenues, gross profit increased to 9.8% from 9.6% for
the six months ended June 30, 2000 and 1999, respectively. The dollar increase
in gross profit was due to the increase in revenues of EMCOR's operations
(excluding BTENA and 1999 acquisitions) 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.
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 June 30,
2000 1999
---- ----
<S> <C> <C>
Selling, general and administrative expenses $ 66,763 $54,622
Selling, general and administrative expenses, as a percentage of revenues 7.7% 7.8%
Selling, general and administrative expenses, as a percentage of
revenues, excluding amortization of goodwill 7.6% 7.7%
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30,
2000 1999
---- ----
<S> <C> <C>
Selling, general and administrative expenses $128,761 $101,529
Selling, general and administrative expenses, as a percentage of revenues 8.0% 8.2%
Selling, general and administrative expenses, as a percentage of revenues,
excluding amortization of goodwill 7.9% 8.1%
</TABLE>
Selling, general and administrative expenses for the three months ended June 30,
2000 increased $12.1 million. Selling, general and administrative expenses as a
percentage of revenues was 7.7% for the three months ended June 30, 2000,
compared to 7.8% for the three months ended June 30, 1999. For the six months
ended June 30, 2000 selling, general and administrative expenses increased $27.2
million compared to the same period in the prior year. Selling, general and
administrative expenses as a percentage of revenues was 8.0% for the six months
ended June 30, 2000, compared to 8.2% for the six months ended June 30, 1999.
For both the three and six month periods ended June 30, 2000, the dollar
increase in selling, general and administrative expenses compared to the prior
year was attributable to the increase in revenues and corresponding increases in
variable selling, general and administrative expenses and 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 June 30,
-----------------------------------
% of % of
Segment Segment
2000 Revenues 1999 Revenues
---- -------- ---- --------
<S> <C> <C> <C> <C>
Operating income (loss):
United States electrical construction and facilities services $11,662 3.6% $ 8,026 3.5%
United States mechanical construction and facilities services 9,061 2.9% 9,238 3.4%
United States other services (717) -- (1,112) --
------- ---- ------- ----
Total United States Operations 20,006 2.9% 16,152 3.0%
Canada construction and facilities services 2,408 3.5% 1,470 3.5%
United Kingdom construction and facilities services 1,494 1.4% (876) --
Other International construction and facilities services 191 -- (433) --
Corporate Administration (5,519) -- (4,307) --
------- ---- ------- ----
Total Worldwide Operations 18,580 2.1% 12,006 1.7%
Other Corporate Items:
Interest expense (2,643) (2,706)
Interest income 417 244
------- -------
Income before income taxes $16,354 $ 9,544
======= =======
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
% of % of
Segment Segment
2000 Revenues 1999 Revenues
---- -------- ---- --------
<S> <C> <C> <C> <C>
Operating income (loss):
United States electrical construction and facilities services $21,645 3.6% $15,623 3.5%
United States mechanical construction and facilities services 16,193 2.8% 12,936 3.1%
United States other services (1,658) -- (2,575) --
------- ---- ------- ----
Total United States Operations 36,180 2.9% 25,984 2.9%
Canada construction and facilities services 3,031 2.4% 1,549 2.1%
United Kingdom construction and facilities services (66) -- (1,537) --
Other International construction and facilities services 205 61.4% (689) --
Corporate Administration (10,223) -- (8,253) --
------- ----- ------- ----
Total Worldwide Operations 29,127 1.8% 17,054 1.4%
Other Corporate Items:
Interest expense (4,912) (4,978)
Interest income 942 1,043
------- -------
Income before income taxes $25,157 $13,119
======= =======
</TABLE>
EMCOR had operating income of $18.6 million for the three months ended June 30,
2000 compared with operating income of $12.0 million for the three months ended
June 30, 1999. The increase of $6.6 million or 54.8% in operating income for the
three months ended June 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 revenue and incremental operating income
attributable to BTENA and 1999 acquired companies. Operating income for the six
months ended June 30, 2000 was $29.1 million compared to $17.1 million for the
same period in 1999. The increase of $12.1 million or 70.8% was due to increased
revenues and gross profits from EMCOR's operations excluding BTENA and 1999
acquired companies, as well as revenue 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 June 30, 2000 was $11.7 million or 3.6% of revenues,
compared to $8.0 million or 3.5% of revenues for the three months ended June 30,
1999. The $3.6 million increase in operating income for the three months ended
June 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 six
months ended June 30, 2000 was $21.6 million or 3.6% of revenues, compared to
$15.6 million or 3.5% of revenues for the six months ended June 30, 1999. The
increase in operating income, similar to the three months ended June 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 June 30, 2000 was $9.1 million or 2.9% of revenues,
compared to $9.2 million or 3.4% of revenues for the three months ended June 30,
1999. The $0.1 million decrease in operating income was primarily attributable
to decreases in Las Vegas due to completion of several large projects and in the
Carolinas due to closeouts of selected activities. Operating income for the six
months ended June 30, 2000 was $16.2 million or 2.8% of revenues, compared to
$12.9 million or 3.1% of revenues for the six months ended June 30, 1999. The
increase in operating income was primarily attributable to the favorable market
conditions in several markets including New York City, Houston, Connecticut and
California, partially offset by the lower operating income in the Las Vegas
market caused by the decrease in revenues versus the prior year and close-outs
of selected activities in the Carolinas.
Other United States services operating losses were $0.7 million and $1.1 million
for the three months ended June 30, 2000 and 1999, respectively. For the six
months ended June 30, 2000, operating losses were $1.7 million compared to $2.6
million for the six months ended June 30, 1999. 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 $2.4 million
compared to $1.5 million for the three months ended June 30, 2000 and 1999,
respectively. Operating income for the six months ended June 30, 2000 and 1999
was $3.0 million and $1.6 million, respectively. The increase in operating
income in the 2000 three and six 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 June 30, 2000 was $1.5 million compared to an operating loss
of $0.9 million for the three months ended June 30, 1999. Operating losses for
the six months ended June 30, 2000 and 1999 were $0.1 million and $1.5 million,
respectively. The improvement in operating income for the three months ended
June 30, 2000, was attributable to the commencement of new projects that have
higher gross profits as compared to 1999. The reduction of operating losses for
the six months ended June 30, 2000 as compared to the respective prior year
period, were primarily attributable to the commencement of new projects in 2000
that have higher gross profits than projects completed in the prior year.
Additionally, certain of the projects that recorded operating losses in 1999
have since been completed and have accordingly favorably impacted 2000 results
when compared to 1999.
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 June 30, 2000 were $5.5
million compared to $4.3 million for the three months ended June 30, 1999. For
the six months ended June 30, 2000 and 1999, general corporate expenses were
$10.2 million and $8.3 million, respectively. 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 June 30, 2000 and 1999 was $2.6
million and $2.7 million, respectively. For the six months ended June 30, 2000
and 1999, interest expense was $4.9 million and $5.0 million, respectively.
Interest income for the three months ended June 30, 2000 was $0.4 million
compared to $0.2 million for the three months ended June 30, 1999. For the six
months ended June 30, 2000, interest income was $0.9 million compared to $1.0
for the six months ended June 30, 1999.
The income tax provision increased by $3.1 million to $7.2 million for the three
months ended June 30, 2000, as compared to the same period in 1999. The income
tax provision increased by $5.4 million to $11.1 million for the six months
ended June 30, 2000. The increase in provision for both the three and six months
periods was primarily due to increased income before taxes plus an increase in
the effective income tax rate for the three and six months ended June 30, 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, $8.3 million at June 30, 2000 and $3.9 million at
June 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 $2.0 billion at June 30, 2000 and
approximately $1.8 billion at December 31, 1999. Between December 31, 1999 and
June 30, 2000, EMCOR's backlog in the United States increased by $299.3 million,
its backlog in the United Kingdom decreased by $59.9 million and its backlog in
Canada decreased by $31.3 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 offsetting new contract awards. The increase in the United States
backlog was due to continued favorable economic conditions and to $48.0 million
of backlog attributable to BTENA.
Backlog increased approximately $0.2 billion at June 30, 2000 compared to June
30, 1999. Excluding backlog attributable to BTENA of $48.0 million, backlog
increased $128.8 million in the last 12 months. The $128.8 million increase was
attributed to a United States backlog increase of $125.8 million, a United
Kingdom backlog increase of $16.1 million, and a Canada backlog decrease of
$13.1 million.
Liquidity and Capital Resources
The following table presents EMCOR's net cash used in operating activities, net
cash used in investing activities and net cash provided by financing activities
(in thousands):
For the six months ended June 30,
2000 1999
---- ----
Net cash used in operating activities......... $ (1,034) $ (9,323)
Net cash used in investing activities......... $(10,462) $(56,724)
Net cash provided by financing activities..... $ 15,373 $ 11,196
<PAGE>
EMCOR's consolidated cash balance increased by approximately $3.9 million from
$58.6 million at December 31, 1999 to $62.4 million at June 30, 2000. Net cash
used in operating activities for the six months ended June 30, 2000 of $1.0
million was an $8.3 million decrease from the net cash used in operating
activities of $9.3 million in the same period last year. The decrease in net
cash used in 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 in
investing activities of $10.5 million for the six months ended June 30, 2000
decreased by $46.3 million compared to the $56.7 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 six months ended June 30, 1999 which utilized $53.8 million in cash. Net
cash provided by financing activities of $15.4 million was an increase of $4.2
million from $11.2 million of net cash provided by financing activities for the
six months ended June 30, 1999. The increase in net cash provided by financing
activities was primarily attributable to higher net payments for long-term debt
and capital lease obligations in the six months ended June 30, 1999 of $6.2
million compared to net proceeds of $0.3 million in the six months ended June
30, 2000; and the purchases of treasury stock of $2.9 million in the six months
ended June 30, 1999 compared to no purchases of treasury stock in the six months
ended June 30, 2000.
As of June 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 $15.0 million of loans
outstanding as of June 30, 2000 and there were no revolving loans outstanding as
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>
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
None.
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 June 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: July 26, 2000 By: /s/FRANK T. MACINNIS
------------------------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
Date: July 26, 2000 By: /s/LEICLE E. CHESSER
------------------------------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer
