-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E0Z2m/0yX2Xrhiawdn33i8vQs17mwtzuRnYHkvhg2VIkHXQnbamnLp0Td/H8+3wA PmUVEQK8dgtEZoWR5DnBew== 0000105634-97-000006.txt : 19970808 0000105634-97-000006.hdr.sgml : 19970808 ACCESSION NUMBER: 0000105634-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970807 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMCOR GROUP INC CENTRAL INDEX KEY: 0000105634 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL WORK [1731] IRS NUMBER: 112125338 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02315 FILM NUMBER: 97652710 BUSINESS ADDRESS: STREET 1: 101 MERRITT SEVEN CORPORATE PK STREET 2: 7TH FLOOR CITY: NORWALK STATE: CT ZIP: 06851 BUSINESS PHONE: 2038497800 MAIL ADDRESS: STREET 1: 101 MERRITT SEVEN CORPORATE PARK STREET 2: 7TH FLOOR CITY: NORWALK STATE: CT ZIP: 06851 FORMER COMPANY: FORMER CONFORMED NAME: JWP INC/DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: JAMAICA WATER PROPERTIES INC DATE OF NAME CHANGE: 19860518 FORMER COMPANY: FORMER CONFORMED NAME: WELSBACH CORP DATE OF NAME CHANGE: 19761119 10-Q 1 EMCOR GROUP, INC. 2ND QUARTER FORM 10-Q 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 - ------------------------------------------------------------------------------ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from __________ to __________ - -------------------------------------------------------------------------- Commission file number 0-2315 EMCOR Group, Inc. ---------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 11-2125338 - ----------------------------------------- ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 101 Merritt Seven Corporate Park 06851-1060 ---------- Norwalk, Connecticut (Zip Code) - ----------------------------------------- (Address of principal executive offices) (203) 849-7800 - ----------------------------------------- (Registrant's telephone number) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No __ Applicable Only To Issuers Involved In Bankruptcy Proceedings During The Previous Five Years Indicate by check mark whether the registrant has filed all documents required to be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934, subsequent to the distribution of securities under a plan confirmed by a court. Yes X No __ Applicable Only To Corporate Issuers Number of shares of Common Stock outstanding as of the close of business on August 4,1997: 9,549,767 shares. EMCOR GROUP, INC. INDEX Page No. PART I - Financial Information Item 1 Financial Statements Condensed consolidated balance sheets - as of June 30, 1997 and December 31, 1996 1 Condensed consolidated statements of operations - three months ended June 30, 1997 and 1996 3 Condensed consolidated statements of operations - six months ended June 30, 1997 and 1996 4 Condensed consolidated statements of cash flows - six months ended June 30, 1997 and 1996 5 Condensed consolidated statement of stockholders' equity - six months ended June 30, 1997 6 Notes to condensed consolidated financial statements 7 Item 2 Management's discussion and analysis of financial condition and results of operations 11 PART II - Other Information Item 1 Legal Proceedings 13 Item 4 Submission of Matters to a Vote of Security Holders 13 Item 6 Exhibits and Reports on Form 8-K 13 2 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) - ---------------------------------------------------------------------- June 30, December 31, 1997 1996 (Unaudited) - ---------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $35,285 $50,705 Accounts receivable, net 461,029 442,930 Costs and estimated earnings in excess of billings on uncompleted contracts 70,867 67,765 Inventories 8,517 9,108 Prepaid expenses and other 11,478 8,143 ---------------------------------- Total Current Assets 587,176 578,651 ---------------------------------- Investments, Notes and Other Long-Term Receivables 4,062 5,737 Property, Plant and Equipment, Net 26,587 26,952 Other Assets 3,148 3,407 ---------------------------------- Total Assets $620,973 $614,747 ================================== See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share and Share Amounts) - ---------------------------------------------------------------------- June 30, December 1997 31, (Unaudited) 1996 - ---------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Borrowings under working capital credit lines $13,780 $14,200 Current maturities of long-term debt 319 361 Accounts payable 220,435 218,099 Billings in excess of costs and estimated earnings on uncompleted contracts 109,432 105,653 Accrued payroll and benefits 43,615 43,789 Other accrued expenses and liabilities 42,958 39,596 --------------------------- Total Current Liabilities 430,539 421,698 --------------------------- Long-Term Debt 62,989 73,051 Other Long-Term Obligations 42,543 36,115 Stockholders' Equity: Common Stock, $.01 par value, 13,700,000 shares authorized, 9,545,967 shares and 9,514,636 shares issued and outstanding or reserved for issuance at June 30, 1997 and December 31, 1996, respectively 95 95 Warrants 2,154 2,154 Capital surplus 82,506 81,672 Cumulative translation adjustment 414 1,378 Accumulated Deficit (267) (1,416) --------------------------- Total Stockholders' Equity 84,902 83,883 --------------------------- Total Liabilities and Stockholders' Equity $620,973 $614,747 =========================== See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited) - ---------------------------------------------------------------------- Three months ended June 30, 1997 1996 - ---------------------------------------------------------------------- Revenues $475,617 $387,657 Costs and Expenses: Cost of sales 432,118 349,843 Selling, general and administrative 37,232 33,790 ----------------------------- 469,350 383,633 ----------------------------- Operating Income 6,267 4,024 Other Income, Net -- 12,500 Interest Expense, Net 3,051 3,729 ----------------------------- Income Before Income Taxes 3,216 12,795 Provision For Income Taxes 1,319 3,588 ----------------------------- Income Before Extraordinary Item 1,897 9,207 Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes (1,004) -- ----------------------------- Net Income $893 $9,207 ============================= Per Share Information: Income Before Extraordinary Item $0.19 $0.93 Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes (0.10) -- ----------------------------- Net Income Per Common Share and Common Equivalent Share $0.09 $0.93 ============================= See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited) - ---------------------------------------------------------------------- Six months ended June 30, 1997 1996 - ---------------------------------------------------------------------- Revenues $909,387 $770,401 Costs and Expenses: Cost of sales 826,823 695,415 Selling, general and administrative 72,855 70,433 ----------------------------- 899,678 765,848 ----------------------------- Operating Income 9,709 4,553 Other Income, Net -- 12,500 Interest Expense, Net 6,059 7,490 ----------------------------- Income Before Income Taxes 3,650 9,563 Provision For Income Taxes 1,497 4,009 ----------------------------- Income Before Extraordinary Item 2,153 5,554 Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes (1,004) -- ----------------------------- Net Income $1,149 $5,554 ============================= Per Share Information: Income Before Extraordinary Item $0.21 $0.56 Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes (0.10) -- ----------------------------- Net Income Per Common Share and Common Equivalent Share: $0.11 $0.56 ============================= See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) - ------------------------------------------------------------------------- Six months ended June 30, 1997 1996 - ------------------------------------------------------------------------- CASH FLOWS FROM OPERATIONS: Net income $1,149 $5,554 Non-cash expenses 5,707 7,757 Changes in operating assets and liabilities (6,631) 6,977 ----------------------- NET CASH PROVIDED BY OPERATIONS 225 20,288 ----------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of working capital credit line (37,000) (35,000) Borrowings under working capital credit lines 36,580 20,125 Payments of 7% Senior Secured Notes (Series A) -- (66,424) Payments of 11% Series C Notes (11,920) -- Borrowings (payments) of long-term debt and capital lease obligation 31 (456) Change in notes payable, net -- 1,881 Exercise of stock options 171 476 ----------------------- NET CASH USED IN FINANCING ACTIVITIES (12,138) (79,398) ----------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment, net (5,201) (2,016) Proceeds from sale of businesses and other assets 19 288 Proceeds from sales of net assets held for sale -- 66,424 Decrease in investments, notes and other long-term receivables 1,675 453 ----------------------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (3,507) 65,149 ----------------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (15,420) 6,039 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 50,705 53,007 ----------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $35,285 $59,046 ======================= SUPPLEMENTAL CASH FLOW INFORMATION Cash Paid For: Interest $4,677 $2,876 Income Taxes $238 $224 See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (In Thousands) (Unaudited) - ------------------------------------------------------------------------------------------- Cumulative Common Capital Translation Accumulated Stock Warrants Surplus Adjustment Deficit Total - ------------------------------------------------------------------------------------------- Balance, January 1, 1997................ $ 95 $ 2,154 $ 81,672 $ 1,378 ($ 1,416) $ 83,883 Net income ........... -- -- -- -- 1,149 1,149 NOL Utilization ...... -- -- 663 -- -- 663 Common stock issued under stock option plans .............. -- -- 171 -- -- 171 Translation adjustments ........ -- -- -- (964) -- (964) --------- -------- -------- ---------- --------- --------- Balance, June 30, 1997 $ 95 $ 2,154 $ 82,506 $ 414 ($ 267) $ 84,902 ==================================================================
See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited) NOTE A Nature Of Operations EMCOR Group, Inc. ("EMCOR" or the "Company") is a multinational corporation involved in mechanical and electrical construction and facilities services. EMCOR, which conducts its business through subsidiaries, specializes in the design, integration, installation, start-up, testing, operation and maintenance of (i) distribution systems for electrical power (including power cables, conduits, distribution panels, transformers, generators, uninterruptible power supply systems and related switch gear and control); (ii) lighting systems, including fixtures and controls; (iii) low-voltage systems, including fire alarm, security, communications and process control systems; (iv) heating, ventilation, air conditioning, refrigeration and clean-room process ventilation systems; and (v) plumbing, process and high purity piping systems. EMCOR's subsidiaries provide mechanical and electrical construction services directly to end-users (including corporations, municipalities and other governmental entities, owners/developers, and tenants of buildings) and, indirectly, by acting as a subcontractor, to construction managers, general contractors and other subcontractors. Mechanical and electrical construction services are principally: large installation projects, with contracts generally in the multi-million dollar range; smaller system installation projects involving fit-out, renovation and retrofit work; and maintenance and service. In addition, certain EMCOR subsidiaries operate and maintain mechanical and/or electrical systems for customers under contracts and provide other services commonly referred to as facilities services including the management of facilities and the provision of support services to customers at the customer's facilities. Mechanical and electrical construction and facilities services are provided to a broad range of commercial, industrial and institutional customers through offices located in major markets throughout the United States, Canada, the United Kingdom, the Middle East and Hong Kong. NOTE B Basis of Presentation The accompanying condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Readers of this report should refer to the consolidated financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of a normal recurring nature) necessary to present fairly the financial position of the Company and the results of its operations. The results of operations for the three and six month periods ended June 30, 1997 are not necessarily indicative of the results to be expected for the year ending December 31, 1997. NOTE C Net Income Per Common Share and Common Equivalent Share Net income per common share and common equivalent share for the three and six month periods ended June 30, 1997 and 1996 have been calculated based on the weighted average number of shares of common stock outstanding and common stock equivalents relating to warrants and stock options outstanding when the effect of such common stock equivalents are dilutive. Weighted average number of shares outstanding as of June 30, 1997 and 1996 were 9,525,224 and 9,444,851, respectively. NOTE D Long-Term Debt Long-Term Debt in the accompanying condensed consolidated balance sheets consists of the following amounts at June 30, 1997 and December 31, 1996 (in thousands): June 30, December 31, 1997 1996 ------------- ------------- Series C Notes, outstanding face value of approximately $61.9 million and $73.8 million at June 30, 1997 and December 31, 1996, respectively, at 11.0%, discounted to a 14.0% effective rate, due 2001 $55,784 $66,039 Supplemental SellCo Note, outstanding face value of approximately $5.5 million at 8.0%, discounted to a 14.0% effective rate, due 2004 4,594 4,474 Capital Lease Obligations at weighted average interest rates from 7.25% to 11.0%, payable in varying amounts through 2004 1,249 1,007 Other, at weighted average interest rates of approximately 9.6%, payable in varying amounts through 2012 1,681 1,892 ----------- ------------- 63,308 73,412 Less current maturities (319) (361) ------------- ------------- $62,989 $73,051 ============= ============= On June 3, 1997, the Company purchased $1.0 million of Series C Notes and retired such notes. On June 27, 1997, the Company called for the partial redemption of approximately $10.9 million principal amount of Series C Notes. In accordance with the Indenture governing the Series C Notes, the redemption price of the Series C Notes was 105% of the principal amount redeemed. Accordingly, the Company recorded an extraordinary loss of approximately $1.0 million related to the early retirement of debt. The extraordinary loss consisted primarily of the write-off of the associated debt discount plus premiums and costs associated with the redemption, net of income tax benefits of approximately $0.7 million. NOTE E Income Taxes The Company files a consolidated federal income tax return including all U.S. subsidiaries. At June 30, 1997, the Company had net operating loss carryforwards ("NOLs") for U.S. income tax purposes of approximately $200.0 million, which expire in the years 2007 through 2011. The NOLs are subject to review by the Internal Revenue Service. Future changes in ownership of the Company, as defined by Section 382 of the Internal Revenue Code, could limit the amount of NOLs available for use in any one year. As a result of the adoption of Fresh-Start Accounting, the tax benefit of any net operating loss carryforwards or net deductible temporary differences which existed as of the date of the Company's emergence from Chapter 11 in December 1994 will result in a charge to the tax provision (provision in lieu of income taxes) and be allocated to reorganization value in excess of amounts allocable to identifiable assets established in connection with the Company's emergence from bankruptcy and to capital surplus. The Company has provided a valuation allowance as of June 30, 1997 for the full amount of the tax benefit of its remaining NOLs and other deferred tax assets. Income tax expense recorded for the three and six month periods ended June 30, 1997 and 1996 represent a provision primarily for federal, foreign and state and local income taxes. The Company's utilization of NOLs and other deferred tax assets for the three and six months ended June 30, 1997 of $0.6 million and $0.7 million, respectively, have been applied to capital surplus. For the three and six months ended June 30, 1996, the Company's utilization of NOL's and other deferred tax assets were allocated to reorganization value in excess of amounts allocable to identifiable assets. NOTE F Legal Proceedings The Dynalectric Company ("Dynalectric"), a subsidiary of the Company, is a defendant in an action entitled Computran v. Dynalectric, et. al., pending in Superior Court of New Jersey, Bergen County, arising out of its participation in a joint venture. In the action, which was instituted in 1988, the plaintiff, Computran, a participant in and a subcontractor to the joint venture, alleges that Dynalectric wrongfully terminated it from the subcontract, fraudulently diverted funds due it, misappropriated its trade secrets and proprietary information, fraudulently induced it to enter into the joint venture and conspired with other defendants to commit certain acts in violation of the New Jersey Racketeering Influence and Corrupt Organization Act. Dynalectric believes that Computran's claims are without merit and intends to defend this matter vigorously. Dynalectric has filed counterclaims against Computran. Discovery is ongoing and no trial date has been scheduled. In February 1995, as part of an investigation by the New York County District Attorney's office into the business affairs of Herbert Construction Company ("Herbert"), a general contractor that does business with the Company's subsidiary, Forest Electric Corporation ("Forest"), a search warrant was executed at Forest's executive offices. At that time, the Company was informed that Forest and certain of its officers are targets of the continuing investigation. Neither the Company nor Forest has been advised of the precise nature of any suspected violation of law by Forest or its officers. On July 11, 1995, Ted Kohl, a principal of Herbert, and DPL Interiors, Inc., a company allegedly owned by Mr. Kohl, were indicted by a New York County grand jury for grand larceny, fraud, repeated failure to file New York City Corporate Tax Returns and related money laundering charges. Mr. Kohl was also charged with filing false personal income and earnings tax returns, perjury and offering false instruments for filing with the New York City School Construction Authority. In a press release announcing the indictment, the Manhattan District Attorney said that the investigation disclosed that Mr. Kohl allegedly received more than $7.0 million in kickbacks from subcontractors through a scheme in which he allegedly inflated subcontracts on Herbert's construction contracts. At a July 11, 1995 press conference following the indictment, the District Attorney announced that the investigation was continuing and that he expected further indictments in the investigation. On April 7, 1997 Mr. Kohl pled guilty to one count of money laundering, one count of offering a false instrument for filing and one count of filing a false New York State Resident Income Tax Return. DPL Interiors, Inc. also pled guilty to one count of failing to file New York City General Income Tax Returns. Sentencing for Mr. Kohl and DPL Interiors, Inc. is scheduled for September 9, 1997. Forest performs electrical contracting services primarily in the New York City commercial market and is one of the Company's largest subsidiaries. In addition to the above, the Company is involved in other legal proceedings and claims asserted by and against the Company, which have arisen in the ordinary course of business. The Company believes it has a number of valid defenses to these actions and the Company intends to vigorously defend or assert these claims and does not believe that a significant liability will result. However, the Company cannot predict the outcome thereof or the impact that an adverse result of the matters discussed above will have upon the Company's financial position or results of operations. Note G New Accounting Pronouncement Statement of Financial Accounting Standards No. 128 ("SFAS No. 128" or the "Statement"), Earnings Per Share ("EPS"), which establishes standards for computing and presenting EPS, is effective for both interim and annual periods ending after December 15, 1997. The statement does not permit early application of its provisions. The statement replaces the presentation of primary EPS with a presentation of basic EPS, as defined. It also requires dual presentation of basic and diluted EPS on the face of the Statement of Operations for entities with a complex capital structure. Had EPS been determined in accordance with SFAS No. 128, the Company's basic EPS and diluted EPS for the three and six month periods ended June 30, 1997 and 1996 would have been the following pro forma amounts: Three Months Six Months 1997 1996 1997 1996 --------- --------- --------- --------- Pro Forma Basic EPS - Before Extraordinary Item $0.20 $0.98 $0.23 $0.59 Pro Forma Basic EPS - Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes (0.11) -- (0.11) -- --------- --------- --------- --------- Pro Forma Basic EPS - Net Income $0.09 $0.98 $0.12 $0.59 ========= ========= ========= ========= Pro Forma Diluted EPS - Before Extraordinary Item $0.19 $0.93 $0.21 $0.56 Pro Forma Diluted EPS - Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes (0.10) -- (0.10) -- --------- --------- --------- --------- Pro Forma Diluted EPS - Net Income $0.09 $0.93 $0.11 $0.56 ========= ========= ========= ========= ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Revenues for the second quarter of 1997 were $475.6 million compared to $387.7 million in the second quarter of 1996. In the second quarter of 1997, the Company generated net income of $0.9 million or $0.09 per share compared to net income of $9.2 million or $0.93 per share in the second quarter of 1996. Net income for the three and six month periods ended June 30, 1997 includes an after-tax charge of $1.0 million ($1.7 million pre-tax) associated with the early retirement of approximately $11.9 million of the Company's Series C Notes which is reflected in the accompanying condensed consolidated statements of operations for the three and six month periods ended June 30, 1997 under the caption "Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes". Net income in the second quarter of 1996 reflects a net after-tax gain of $8.1 million ($12.5 million pre-tax) on the sale of certain assets held for sale including the sale of substantially all of the assets of Jamaica Water Supply Company which is reflected in the accompanying condensed consolidated statements of operations for the three and six month periods ended June 30, 1996 under the caption "Other Income, Net". Revenues for the six months ended June 30, 1997 were $909.4 million compared to $770.4 million in the same period in the prior year. For the six months ended June 30, 1997, the Company generated net income of $1.1 million or $0.11 per share, inclusive of the $1.0 million extraordinary after-tax charge discussed above, compared to net income of $5.6 million, or $0.56 per share, for the six months ended June 30, 1996. Net income for the six months ended June 30, 1996 was favorably affected by an $8.1 million after-tax gain related to the sale of certain assets held for sale (see above), net of selling, general and administrative expenses ("SG&A") which included a $4.8 million charge related to an adverse arbitration award, which award was subsequently settled for $4.3 million in October 1996. The Company generated operating income of $6.3 million for the three months ended June 30, 1997 compared to operating income of $4.0 million in the same period of the prior year. For the six months ended June 30, 1997, the Company had operating income of $9.7 million compared to $4.6 million of operating income in the same period of the prior year. The improvement in operating income for the three months ended June 30, 1997 was principally attributable to an increase in operating volume. Operating income for the six months ended June 30, 1997 as compared to the same period of 1996 increased by $5.1 million due to increases in operating volume during 1997 and the negative impact during the first half of 1996 of the adverse arbitration award referred to above net of favorable closeout of certain contracts in the first quarter of 1996. The increase in revenues for the first half of 1997 as compared to the same period in the prior year was primarily attributable to the continued increase in commercial construction activity in the Western United States and to an increase in revenues in the Eastern United States, due principally to the previously announced acquisition of the businesses of two mechanical construction companies in late 1996 and early 1997. SG&A for the quarters ended June 30, 1997 and 1996 were $37.2 million, or 7.8% of revenues, and $33.8 million, or 8.7% of revenues, respectively. SG&A for the first half of 1997 was $72.9 million, or 8.0% of revenues, compared to $70.4 million, or 9.1% of revenues, for the first half of 1996. SG&A expenses for the first half of 1996, exclusive of the adverse arbitration award discussed above, were $65.6 million, or 8.5% of revenues. The increase in SG&A, in absolute dollars, for the three and six month periods ended June 30, 1997 compared to the same periods in the prior year, exclusive of the adverse arbitration award, is attributable to the increase in operations. On June 3, 1997, the Company purchased $1.0 million of Series C Notes and retired such notes. On June 27, 1997, the Company called for the partial redemption of approximately $10.9 million principal amount of Series C Notes. In accordance with the Indenture governing the Series C Notes, the redemption price of the Notes was 105% of the principal amount redeemed. Accordingly, the Company recorded an extraordinary loss of approximately $1.0 million related to the early retirement of debt. The extraordinary loss referred to above consisted primarily of the write-off of the associated debt discount plus premiums and costs associated with the retirement, net of income tax benefits of approximately $0.7 million. The Company's backlog was $1,020.9 million at June 30, 1997 and $1,043.7 million at December 31, 1996. Between December 31, 1996 and June 30, 1997, the Company's backlog in Canada increased by $27.7 million, its backlog in the United States decreased by $33.7 million and its backlog in the United Kingdom decreased by $16.8 million. The increase in the Company's Canadian backlog was primarily attributable to improved economic conditions in Western Canada. The decline in the domestic backlog is due to the continued progress towards completion of several large projects, primarily in the Western United States. The decline in the United Kingdom backlog is due to the continued progress towards completion of several large projects, exchange rate fluctuations and the continued weakness in the United Kingdom commercial construction market. Liquidity and Capital Resources The Company's consolidated cash balance decreased by $15.4 million from $50.7 million at December 31, 1996 to $35.3 million at June 30, 1997. The June 30, 1997 cash balance included approximately $8.1 million at foreign subsidiaries which is available only to support their respective operations. The Company generated positive operating cash flow for the six months ended June 30, 1997 due to improvements in working capital which were used, along with a portion of the Company's existing cash balances, to repay borrowings under the Company's revolving credit facility, fund capital expenditures, purchase $1.0 million of Series C Notes and redeem approximately $10.9 million of Series C Notes. As of June 30, 1997, the Company's total borrowing capacity under its revolving credit facility was $81.6 million, and the Company had approximately $34.1 million and $13.8 million of letters of credit and revolving loans, respectively, outstanding as of that date. The revolving loans are classified as Current Liabilities under the caption "Borrowings under working capital credit lines" in the accompanying condensed consolidated balance sheets. In September, 1996, the Company's Canadian subsidiary, Comstock Canada Ltd., renewed a credit agreement with a bank providing for an overdraft facility of up to Cdn. $2.0 million. The facility is secured by certain assets of Comstock Canada Ltd. and deposit instruments of another Canadian subsidiary of the Company. The facility provides for interest at the bank's prime rate (4.75% at June 30, 1997) plus 3/4% and the terms of such facility are currently being renegotiated. There were no borrowings outstanding under this credit agreement at June 30, 1997. The Canadian subsidiary will utilize the Company's revolving credit facility for future working capital requirements. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The information in Note H to the Company's June 30, 1997 Notes to Condensed Consolidated Financial Statements (unaudited) regarding legal proceedings is hereby incorporated herein by reference thereto. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) On June 20, 1997 the Company held an annual meeting of stockholders. (b) At the annual meeting all of the seven directors of the Company stood for re-election, and each of them was re-elected for the ensuing year. Each of Messrs. David A.B. Brown, Thomas D. Cunningham, Albert Fried, Jr., Malcolm T. Hopkins and Frank T. MacInnis received 8,872,956 votes and each of Messrs. Stephen W. Bershad and Kevin R. Toner received 8,873,056 votes. The votes withheld were 300 which did not vote for Messrs. Brown, Cunningham, Fried, Hopkins and MacInnis and 200 which did not vote for Messrs. Bershad and Toner. There were no broker non-votes. (c) The stockholders also voted upon a proposal to ratify the appointment by the Audit Committee of the Board of Directors of Arthur Andersen LLP, certified public accountants, as the Company's independent public accountants for 1997. 8,873,256 shares were voted in favor of ratification, none voted against ratification, and 700 shares abstained from voting thereon. There were no broker non-votes. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit No. 11. Computation of Earnings Per Common Share and Common Equivalent Share for the three and six month periods ended June 30, 1997. Exhibit No. 27. Financial Data Schedule. (b) No reports on Form 8-K were filed during the quarter ended June 30, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EMCOR GROUP, INC. --------------------------------- (Registrant) Date: August 7, 1997 By: /s/FRANK T. MacINNIS --------------------------------- Frank T. MacInnis Chairman of the Board of Directors and Chief Executive Officer Date: August 7, 1997 By: /s/LEICLE E. CHESSER --------------------------------- Leicle E. Chesser Executive Vice President and Chief Financial Officer EX-11 2 EARNINGS PER COMMON AND COMMON EQUIV. SHARE Exhibit 11 EMCOR Group, Inc. and Subsidiaries Computation of Earnings Per Common Share and Common Equivalent Share for the three and six month periods ended June 30, 1997. Three Months Six Months Ended PRIMARY Ended June 30, 1997 June 30, 1997 - ---------------------------------------- ------------------ ------------------ Net Income $893,000 $1,149,000 ================== ================== Weighted average number of common shares outstanding 9,535,697 9,525,224 Add - common equivalent shares using the treasury stock method 485,136 497,289 ------------------ ------------------ Weighted average number of shares used in calculation of primary income per common and common equivalent share 10,020,833 10,022,513 ================== ================== Primary net income per common and common equivalent share $0.09 $0.11 ================== ================== FULLY DILUTED - ---------------------------------------- Net Income $893,000 $1,149,000 ================== ================== Weighted average number of shares used in calculating primary income per share 10,020,833 10,022,513 Shares issuable upon exercise of stock options included in primary calculation above (485,136) (497,289) Shares issuable upon exercise of stock options at period end market price 540,485 540,485 ------------------ ------------------ Weighted average number of shares used in calculation of fully diluted income per common and common equivalent share 10,076,182 10,065,709 ================== ================== Fully diluted net income per common and common equivalent share $0.09 $0.11 ================== ================== EX-27 3 FDS --
5 This schedule contains summary financial information extracted from EMCOR's Condensed Consolidated Financial Statements for the six months ended June 30, 1997 and is qualified in its entirety by reference to such financial statements. 0000105634 EMCOR Group, Inc. 1000 U.S. 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 35285 0 479368 18339 8517 587176 44045 17458 620973 430539 62989 95 0 0 84807 620973 909387 909387 826823 899678 0 302 6059 3650 1497 2153 0 (1004) 0 1149 0.11 0.11
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