-----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, B1CumN86pY+1Vou8/zGfIU6BDL4LeiRcAbldy1jKZ+APEHR8CxDlJuyA8nq8/BQs 18mfbi2yrzXK+A3tRk45LQ== 0000889812-99-003105.txt : 19991029 0000889812-99-003105.hdr.sgml : 19991029 ACCESSION NUMBER: 0000889812-99-003105 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991028 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: SEC FILE NUMBER: 000-02315 FILM NUMBER: 99735609 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 QUARTERLY REPORT =============================================================================== 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 September 30, 1999 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 incorporation or (I.R.S. Employer Identification organization) Number) 06851-1060 101 Merritt Seven Corporate Park ------------------------------------ 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 October 26, 1999: 9,685,143 shares. =============================================================================== EMCOR GROUP, INC. INDEX
Page No. -------- PART I - Financial Information Item 1 Financial Statements Condensed Consolidated Balance Sheets - as of September 30, 1999 and December 31, 1998 1 Condensed Consolidated Statements of Operations - three months ended September 30, 1999 and 1998 3 Condensed Consolidated Statements of Operations - nine months ended September 30, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows - nine months ended September 30, 1999 and 1998 5 Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income - nine months ended September 30, 1999 and 1998 6 Notes to Condensed Consolidated Financial Statements 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II - Other Information Item 1 Legal Proceedings 19 Item 4 Submission of Matters to a Vote of Security Holders 19 Item 6 Exhibits and Reports on Form 8-K 20
PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) - ----------------------------------------------------------------------------------- ------------------- September 30, December 31, 1999 1998 (Unaudited) - --------------------------------------------------------------- ------------------- ------------------- ASSETS Current assets: Cash and cash equivalents $ 37,861 $ 83,053 Accounts receivable, net 722,282 538,457 Costs and estimated earnings in excess of billings on uncompleted contracts 130,421 91,569 Inventories 7,522 7,188 Prepaid expenses and other 8,854 11,702 ------------------- ------------------- Total current assets 906,940 731,969 Investments, notes and other long-term receivables 17,635 6,974 Property, plant and equipment, net 37,178 32,098 Goodwill 60,019 22,745 Other assets 8,576 7,216 ------------------- ------------------- Total assets $1,030,348 $801,002 =================== ===================
See Notes to Condensed Consolidated Financial Statements. 1 EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) - ------------------------------------------------------------------------------------------------------- September 30, December 31, 1999 1998 (Unaudited) - --------------------------------------------------------------- -------------------- ------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Borrowings under working capital credit lines $ 10,000 $ -- Current maturities of long-term debt and capital lease obligations 2,373 7,963 Accounts payable 318,666 246,856 Billings in excess of costs and estimated earnings on uncompleted contracts 246,532 135,094 Accrued payroll and benefits 72,908 62,008 Other accrued expenses and liabilities 63,003 59,996 -------------------- ------------------ Total current liabilities 713,482 511,917 Long-term debt and capital lease obligations 116,056 117,274 Other long-term obligations 55,557 51,995 -------------------- ------------------ Total liabilities 885,095 681,186 -------------------- ------------------ 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, 9,685,143 and 9,830,603 shares issued and outstanding or issuable, respectively 109 109 Warrants 2,154 2,154 Capital surplus 125,343 114,867 Accumulated other comprehensive loss (109) (1,822) Retained earnings 34,592 18,476 Treasury stock, at cost, 1,132,000 shares and 957,900 shares, respectively (16,836) (13,968) -------------------- ------------------ Total stockholders' equity 145,253 119,816 -------------------- ------------------ Total liabilities and stockholders' equity $1,030,348 $801,002 ==================== ==================
See notes to Condensed Consolidated Financial Statements. 2 EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) - ------------------------------------------------------------- -------------------- -------------------- Three months ended September 30, 1999 1998 - ------------------------------------------------------------- -------------------- -------------------- Revenues $810,749 $565,964 Costs and expenses: Cost of sales 732,732 508,010 Selling, general and administrative 59,865 45,939 -------------------- -------------------- 792,597 553,949 -------------------- -------------------- Operating income 18,152 12,015 Interest expense, net 2,378 1,866 -------------------- -------------------- Income before income taxes 15,774 10,149 Provision for income taxes 7,135 4,389 -------------------- -------------------- Net income $8,639 $5,760 ==================== ==================== Basic earnings per share $0.89 $0.55 ==================== ==================== Diluted earnings per share $0.66 $0.45 ==================== ====================
See Notes to Condensed Consolidated Financial Statements. 3 EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) - ------------------------------------------------------------- -------------------- -------------------- Nine months ended September 30, 1999 1998 - ------------------------------------------------------------- -------------------- -------------------- Revenues $2,047,221 $1,605,434 Costs and expenses: Cost of sales 1,850,621 1,450,965 Selling, general and administrative 161,394 130,456 -------------------- -------------------- 2,012,015 1,581,421 -------------------- -------------------- Operating income 35,206 24,013 Interest expense, net 6,313 5,637 -------------------- -------------------- Income before income taxes and extraordinary item 28,893 18,376 Provision for income taxes 12,777 8,140 -------------------- -------------------- Income before extraordinary item 16,116 10,236 Extraordinary item - loss on early extinguishment of debt, net of income taxes -- (4,777) -------------------- -------------------- Net income $16,116 $5,459 ==================== ==================== Basic earnings per share: Income before extraordinary item $1.66 $0.99 Extraordinary item - loss on early extinguishment of debt, net of income taxes -- (0.46) ==================== ==================== Basic earnings per share $1.66 $0.53 ==================== ==================== Diluted earnings per share: Income before extraordinary item $1.33 $0.90 Extraordinary item - loss on early extinguishment of debt, net of income taxes -- (0.34) ==================== ==================== Diluted earnings per share $1.33 $0.56 ==================== ====================
See Notes to Condensed Consolidated Financial Statements. 4 EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) - ------------------------------------------------------------------------------------------------------------ Nine months ended September 30, 1999 1998 - ------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $16,116 $ 5,459 Extraordinary item - loss on early extinguishment of debt, net of income taxes -- 3,152 Depreciation and amortization 7,901 6,512 Amortization of goodwill 2,437 392 Other non-cash expenses 11,445 6,497 Changes in operating assets and liabilities (25,404) (11,475) ---------------- ---------------- Net cash provided by operating activities 12,495 10,537 ---------------- ---------------- Cash flows from financing activities: Issuance of Convertible subordinated notes -- 115,000 Net proceeds from sale of Common stock -- 22,485 Purchases of Treasury stock (2,868) (11,885) Debt issuance costs -- (4,074) Payment of Series C Notes -- (61,854) Premiums paid on early extinguishment of debt -- (2,437) Payment of Supplemental SellCo Note -- (5,464) Borrowings (payments) under working capital credit lines 10,000 (9,497) (Payments) issuance of long-term debt and capital lease obligations (6,821) 1,630 Exercise of stock options 221 517 ---------------- ---------------- Net cash provided by financing activities 532 44,421 ---------------- ---------------- Cash flows from investing activities: Purchase of Property, plant and equipment, net (7,910) (8,109) Payments for acquisitions of businesses (55,782) (26,987) Increase in Investments, notes and other long-term receivables 5,473 (930) ---------------- ---------------- Net cash used in investing activities (58,219) (36,026) ---------------- ---------------- (Decrease) increase in cash and cash equivalents (45,192) 18,932 Cash and cash equivalents at beginning of period 83,053 49,376 ---------------- ---------------- Cash and cash equivalents at end of period $37,861 $68,308 ================ ================ Supplemental cash flow information: Cash paid for: Interest $2,864 $2,493 Income taxes $4,453 $707
See Notes to Condensed Consolidated Financial Statements. 5
EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (In thousands) (Unaudited) - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated Retained other earnings Common Capital comprehensive (accumulated Treasury Comprehensive Total stock Warrants surplus income (loss)(1) deficit) stock income (loss) - ----------------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 1999 $119,816 $109 $ 2,154 $114,867 $ (1,822) $18,476 $(13,968) Net income 16,116 -- -- -- -- 16,116 -- $ 16,116 Foreign currency translation adjustments 1,713 -- -- -- 1,713 -- -- 1,713 ------------ Comprehensive income -- -- -- -- -- -- -- $ 17,829 ============ NOL utilization, net 10,255 -- -- 10,255 -- -- -- Common stock issued under stock option plans 221 -- -- 221 -- -- -- Treasury stock repurchased (2,868) -- -- -- -- -- (2,868) ----------- ----------- ----------- ------------ --------------- ------------- ---------- Balance, September 30, 1999 $145,253 $109 $ 2,154 $125,343 $ (109) $34,592 $(16,836) =========== =========== =========== ============================ ============= ========== Balance, January 1, 1998 $95,323 $ 96 $ 2,154 $87,107 $ (195) $6,161 -- Net income 5,459 -- -- -- -- 5,459 -- $ 5,459 Foreign currency translation adjustments (985) -- -- -- (985) -- -- (985) ------------ Comprehensive income -- -- -- -- -- -- -- $ 4,474 ============ NOL utilization, net 5,250 -- -- 5,250 -- -- -- Issuance of common stock 22,485 11 -- 22,474 -- -- -- Tax effect of extraordinary item (2,715) -- -- (2,715) -- -- -- Common stock issued under stock option plans plans 517 1 -- 516 -- -- -- Treasury stock repurchased (11,885) -- -- -- -- -- (11,885) ----------- ----------- ----------- ------------ --------------- ------------- ---------- Balance, September 30, 1998 $113,449 $108 $ 2,154 $112,632 $(1,180) $11,620 $(11,885) =========== =========== =========== ============ =============== ============= ==========
(1) Represents cumulative foreign currency translation adjustments. See Notes to Condensed Consolidated Financial Statements. 6 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 the Company, without audit, pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Readers of this report should refer to the consolidated financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of a normal recurring nature) necessary to present fairly the financial position of the Company and the results of its operations. The results of operations for the three and nine month periods ended September 30, 1999 are not necessarily indicative of the results to be expected for the year ending December 31, 1999. Certain reclassifications of prior year amounts have been made to conform to current year presentation. NOTE B Goodwill Goodwill at September 30, 1999 was approximately $60.0 million, which represents the excess of cost over fair market value of net identifiable assets of companies acquired in purchase transactions. The increase in Goodwill of $37.3 million, net of amortization of $2.4 million for the nine months ended September 30, 1999, was primarily attributable to two acquisitions. In April 1999, the Company acquired all of the capital stock of Monumental Investment Corporation which owns all of the capital stock of the Poole & Kent group of companies, providers of mechanical services to water and wastewater treatment facilities, government agencies, transportation authorities, and commercial and industrial clients in a variety of industries. The purchase price is subject to finalization based on certain contingencies provided for in the purchase agreement. In May 1999, the Company acquired all of the capital stock of Energy Systems Industries, Inc., a provider of operations, maintenance and consulting services for commercial, industrial and institutional clients. The accounting for these transactions is of a preliminary basis and are subject to certain purchase accounting adjustments. The goodwill associated with these transactions will be amortized on a straight-line basis over 20 year periods. The total purchase price paid in 1999 in connection with these two acquisitions, plus additional payments made in 1999 by reason of earn-out terms of acquisitions made prior to 1999, was $55.8 million. At the end of each quarter, the Company reviews events and changes in circumstances, if any, to determine whether the recoverability of the carrying value of Goodwill should be reassessed. Should events or circumstances indicate that the carrying value may not be recoverable based on undiscounted future cash flows, an impairment loss measured by the difference between the discounted future cash flows (or another acceptable method for determining fair value) and the carrying value of Goodwill would be recognized by the Company. 7 NOTE C Long-Term Debt Long-term debt in the accompanying Condensed Consolidated Balance Sheets consists of the following amounts at September 30, 1999 and December 31, 1998 (in thousands):
September 30, December 31, 1999 1998 ------------------ ------------------ Convertible subordinated notes, at 5.75% , due 2005 $115,000 $115,000 Note payable, due 1999 -- 6,164 Other 3,429 4,073 ------------------ --------------- 118,429 125,237 Less: current maturities (2,373) (7,963) ------------------- ---------------- $116,056 $117,274 ================== ===============
On March 18, 1998, the Company called for redemption approximately $61.9 million principal amount of Series C Notes and irrevocably funded such amounts, together with a redemption premium, with the trustee of the Indenture under which the Series C Notes were issued. In accordance with the Indenture governing the Series C Notes, the redemption price of the Series C Notes was 104% of the principal amount redeemed. The Company recorded an extraordinary loss related to the early retirement of debt amounting to approximately $4.8 million, net of income taxes. The extraordinary loss consisted primarily of the write-off of the associated debt discount plus the redemption premium and other costs associated with the redemption, net of income tax benefits. On March 18, 1998, the Company sold, pursuant to an underwritten public offering, $100.0 million principal amount of 5.75% Convertible Subordinated Notes ("Subordinated Notes"). On March 24, 1998, the underwriter of the Subordinated Notes offering exercised in full its over-allotment option to purchase an additional $15.0 million of Subordinated Notes, and accordingly, Subordinated Notes in the additional principal amount of $15.0 million were issued. The Subordinated Notes will mature in April 2005 and are general unsecured obligations of the Company, subordinated in right to all existing and future Senior Indebtedness (as defined in the indenture pursuant to which Subordinated Notes were issued (the "Subordinated Indenture")) of the Company. The Subordinated Indenture does not contain any financial covenants or any restrictions on the payment of dividends, the repurchase of securities of the Company or the incurrence of Indebtedness (as defined in the Subordinated Indenture) or Senior Indebtedness. Holders of the Subordinated Notes have the right at any time to convert the Subordinated Notes into Common Stock of the Company at a conversion price of $27.34 per share. NOTE D Income Taxes The Company files a consolidated federal income tax return including all U.S. subsidiaries. At September 30, 1999, the Company had net operating loss carryforwards ("NOLs") for U.S. income tax purposes of approximately $125.0 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 the Company, as defined by Section 382 of the Internal Revenue Code, could limit the amount of the Company's NOLs available for use in any one year. As a result of the adoption of Fresh-Start Accounting, the recognition of a 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 Capital surplus. The Company has provided a valuation allowance as of September 30, 1999 for the full amount of the tax benefit of its remaining NOLs and other deferred tax assets. Income tax expense recorded for the three and nine month 8 periods ended September 30, 1999 and 1998 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 nine month periods ended September 30, 1999 and 1998 of approximately $10.3 million and $5.3 million have been added to Capital surplus, respectively. NOTE E Earnings Per Share The following tables summarize the Company's calculation of Basic and Diluted Earnings per Share ("EPS") for the three and nine month periods ended September 30, 1999 and 1998:
Three months ended September 30, 1999 ----------------------------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount -------------------- ------------------- ------------------ Basic EPS Net income available to common stockholders $8,639,000 9,685,048 $0.89 ================== Effect of Dilutive Securities: Options -- 284,690 Warrants -- 378,098 Convertible Subordinated Notes 1,033,362 4,206,291 -------------------- ------------------- Diluted EPS $9,672,362 14,554,127 $0.66 ================= =================== ==================
T Nine months ended September 30, 1999 ----------------------------------------------------------- Income Shares Per Share (Numerator) (Denominator)) Amount ------------------ ------------------- ----------------- Basic EPS Income before extraordinary item available to common stockholders $16,116,000 9,693,200 $1.66 ================= Effect of Dilutive Securities: Options -- 253,812 Warrants -- 295,824 Convertible Subordinated Notes 3,077,621 4,206,291 ------------------ ------------------- Diluted EPS - before extraordinary item $19,193,621 14,449,127 $1.33 ================== =================== =================
9
Three months ended September 30, 1998 ----------------------------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount -------------------- ------------------- ------------------ Basic EPS Net income available to common stockholders $5,760,000 10,489,173 $0.55 ================== Effect of Dilutive Securities: Options -- 217,645 Warrants -- 158,531 Convertible Subordinated Notes 1,081,000 4,206,291 -------------------- ------------------- Diluted EPS $6,841,000 15,071,640 $0.45 ================= =================== ==================
Nine months ended September 30, 1998 ----------------------------------------------------------- Income Shares Per Share (Numerator) (Denominator)) Amount ------------------ ------------------- ----------------- Basic EPS Income before extraordinary item available to common stockholders $10,236,000 10,329,154 $0.99 ================= Effect of Dilutive Securities: Options -- 259,235 Warrants -- 279,291 Convertible Subordinated Notes 2,331,000 3,023,251 ------------------ ------------------- Diluted EPS - before extraordinary item $12,567,000 13,890,931 $0.90 ================== =================== =================
For the nine month period ended September 30, 1999, 18,000 options were excluded from the calculation of Diluted EPS as the inclusion of the options would be antidilutive. NOTE F Common Stock On March 18, 1998, the Company sold, pursuant to an underwritten public offering, 1,100,000 shares of its Common Stock at a price of $21.875 per share. The proceeds of the offering, together with the proceeds of the Subordinated Notes offering, were used to repay the Company's Series C Notes, the Company's Supplemental SellCo Note and the Company's working capital credit facility. The balance was used for general corporate purposes and acquisitions. As a part of a program previously authorized by the Board of Directors, the Company purchased 174,100 shares of its common stock during the nine months ended September 30, 1999 at an aggregate cost of approximately $2.9 million. This amount is classified as a component of "Treasury stock, at cost" in the accompanying Condensed Consolidated Balance Sheet. NOTE G New Accounting Pronouncements In September 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133" or "the Statement"). SFAS No. 133, as amended by SFAS No. 137, 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. The Statement also requires that changes in the derivatives' 10 fair value be recognized currently in earnings unless certain accounting criteria are met. The Company does not expect the provision of SFAS No. 133 to have a significant effect on the financial condition or results of operations of the Company. NOTE H Segment Information In 1998, the Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS No. 131") which changed the way the Company reports information about its operating segments. The Company evaluates financial performance based on the operating income of the reportable business units. The Company has the following reportable segments pursuant to SFAS No. 131: United States electrical construction and facilities services ("United States Electrical Business Units"), United States mechanical construction and facilities services ("United States Mechanical Business Units"), Canada construction and facilities services ("Canada Business Units") and United Kingdom construction and facilities services ("United Kingdom Business Units"). United States "Other" primarily represents those operations that principally provide consulting and maintenance services. "Other International Operations Business Units" represents the Company's operations outside of the United States, Canada, and the United Kingdom, primarily those in the Middle East and Asia performing electrical construction, mechanical construction and facilities services ("Other International Business Units"). Inter-segment sales are not material for any of the periods presented. The Extraordinary item - loss on early extinguishment of debt, net of income taxes, of $4.8 million for the nine months ended September 30, 1998 is related to corporate administration of the Company. The following presents information about industry segments and geographic areas (In thousands):
For the three months ended For the nine months ended ------------------------------------ ----------------------------------- September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ----------------- ----------------- ----------------- ---------------- Revenues: United States Electrical Business Units $ 257,027 $ 224,740 $ 708,519 $ 645,050 United States Mechanical Business Units 320,986 152,825 741,150 432,799 United States Other Business Units 32,443 3,550 63,193 7,935 -------------- -------------- -------------- -------------- Total United States Operations 610,456 381,115 1,512,862 1,085,784 Canada Operations Business Units 57,832 53,534 132,593 149,813 United Kingdom Operations Business Units 142,259 128,724 401,041 359,755 Other International Operations Business Units 202 2,591 725 10,082 -------------- -------------- -------------- -------------- Total Worldwide Operations $ 810,749 $ 565,964 $2,047,221 $1,605,434 ============== ============== ============== ==============
11
For the three months ended For the nine months ended ------------------------------------- ----------------------------------- September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ----------------- ------------------ ----------------- --------------- Operating income: United States Electrical Business Units $ 10,659 $ 11,807 $ 25,419 $ 23,996 United States Mechanical Business Units 11,624 5,523 25,423 13,706 United States Other Business Units (595) (1,073) (3,170) (3,229) --------------- -------------- -------------- -------------- Total United States Operations 21,688 15,537 47,672 34,473 Canada Operations Business Units 881 1,685 2,430 4,123 United Kingdom Operations Business Units 812 (314) (725) (738) Other International Operations Business Units (153) (233) (842) (928) Corporate Administration (5,076) (4,660) (13,329) (12,917) --------------- -------------- -------------- -------------- Total Worldwide Operations 18,152 12,015 35,206 24,013 Other Corporate items: Interest expense (2,638) (3,468) (7,616) (9,787) Interest income 260 1,602 1,303 4,150 --------------- -------------- -------------- -------------- Income before taxes and extraordinary item $ 15,774 $ 10,149 $ 28,893 $ 18,376 =============== ============== ============== ============== September 30, December 31, 1999 1998 ---------------- -------------- Total assets: United States Electrical Business Units $ 322,495 $282,580 United States Mechanical Business Units 403,135 204,469 United States Other Business Units 61,298 25,725 -------------- -------------- Total United States Operations 786,928 512,774 Canada Operations Business Units 56,886 49,463 United Kingdom Operations Business Units 146,664 156,693 Other International Operations Business Units 18,546 14,605 Corporate Administration 21,324 67,467 -------------- -------------- Total Worldwide Operations $1,030,348 $801,002 ============== ==============
12 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations EMCOR Group, Inc.'s ("EMCOR" or the "Company") Revenues for the three months ended September 30, 1999 and 1998 were $810.7 million and $566.0 million, respectively. Net income for the three months ended September 30, 1999 was $8.6 million, an improvement of $2.9 million over $5.8 million for the comparable period in 1998. Basic Earnings per Share ("Basic EPS") were $0.89 per share for the three months ended September 30, 1999, a 62% increase over Basic EPS of $0.55 per share for the same 1998 period. Diluted Earnings per Share ("Diluted EPS") were $0.66 per share for the three months ended September 30, 1999, a 47% increase over Diluted EPS of $0.45 per share for the same 1998 period. The increase in Revenues for 1999 compared to 1998 was attributable to $177.7 million of new Revenues from acquisitions (up to the first anniversary of the date of acquisition) and revenue growth from existing operations of $67.0 million. Revenues for the nine months ended September 30, 1999 and 1998 were $2,047.2 million and $1,605.4 million respectively. Net income for the nine months ended September 30, 1999 was $16.1 million compared to a net income of $5.5 million for the nine months ended September 30, 1998. Basic EPS were $1.66 per share for the nine months ended September 30, 1999 compared to Basic EPS of $0.53 per share in the year earlier period. Diluted EPS were $1.33 per share compared to Diluted EPS of $0.56 per share for the nine months ended September 30, 1999 and 1998, respectively. Net income for the nine months ended September 30, 1998 included after-tax charges of approximately $4.8 million ($7.5 million pre-tax), or a Basic EPS loss of $0.46 and a Diluted EPS loss of $0.34, respectively, associated with the early retirement of approximately $61.9 million of the Company's Series C Notes. These extraordinary charges are reflected in the accompanying Consolidated Statements of Operations under the caption "Extraordinary item - loss on early extinguishment of debt, net of income taxes". The increase in Revenues for 1999 compared to 1998 was attributable to $329.6 million of new Revenues from acquisitions and revenue growth from existing operations of $112.4 million. Gross Profit (Revenues less Cost of sales) ("GP") increased to $78.0 million for the three months ended September 30, 1999 compared to $58.0 million for the three months ended September 30, 1998. As a percentage of Revenues, GP was 9.6% and 10.2% for the three months ended September 30, 1999 and 1998, respectively. GP increased to $196.6 million for the nine months ended September 30, 1999, a $42.1 million increase over the GP of $154.5 million for the nine months ended September 30, 1998. As a percentage of Revenues, GP was 9.6% for the nine months ended September 30, 1999 and 1998. The decrease in GP as a percentage of Revenues for the three months ended September 30, 1999 compared to the same period last year was primarily attributable to the fact that GP as a percentage of Revenues, of certain acquired companies, was slightly lower than the GP as a percentage of Revenues for other Company operations. Selling, general and administrative expenses ("SG&A") for the three months ended September 30, 1999 were $59.9 million, or 7.4% of Revenues, compared to $45.9 million, or 8.1% of Revenues for the three months ended September 30, 1998. SG&A expenses for the nine months ended September 30, 1999 were $161.4 million, or 7.9% of Revenues, compared to $130.5 million, or 8.1% of Revenues, for the same period in 1998. The dollar increase in SG&A for the three and nine months ended September 30, 1999 compared to the comparable prior year periods was due to companies acquired during 1998 and 1999 and volume growth of existing Company operations. The decrease in SG&A as a percentage of Revenues was primarily due to the geographic area in which the Revenue was earned in 1999 and 1998 and the generally lower SG&A costs as a percentage of Revenues for acquired companies. This decrease in SG&A was offset partially by increases due to the continued development of the Company's facilities services operations, which operations generally require greater SG&A than construction services. The Company had Operating income of $18.2 million, or 2.2% of Revenues, for the three 13 months ended September 30, 1999 compared with Operating income of $12.0 million, or 2.1% of Revenues, for the three months ended September 30, 1998. Operating income for the nine months ended September 30, 1999 was $35.2 million or 1.7% of Revenues, compared to $24.0 million or 1.5 % of Revenues for the same 1998 period. The increase in Operating income for the three and nine months ended September 30, 1999 as compared to the same periods in 1998 was due to income attributable to businesses acquired in 1998 and 1999 plus revenue growth of other operations, offset partially by increases in SG&A due to the continued development of the Company's facilities services operations. EMCOR's Interest expense, net, increased by $0.5 million for the three months ended September 30, 1999 from the comparable 1998 period primarily due to borrowings on its working capital credit line in the 1999 period, and reduced cash available to invest in 1999 when compared to the same 1998 period, due primarily to payments for companies acquired during the second quarter of 1999. For the nine months ended September 30, 1999 Interest expense, net, increased by $0.7 million compared to the nine months ended September 30, 1998. This increase in Interest expense, net, for the nine months ended September 30, 1999 as compared to the nine months ended September 30, 1998 was due to the reasons cited above with respect to the three month periods ended September 30, 1999 and 1998, offset by borrowings at lower interest rates plus more cash available to invest during the first three months of 1999 versus the first three months of 1998. The Income tax provision was $7.1 million for the three months ended September 30, 1999, compared to $4.4 million for the same period in 1998. For the nine months ended September 30, 1999 the Income tax provision increased to $12.8 million compared to $8.1 million for the same 1998 period. The increase in the provision was due to increased Income before taxes and extraordinary item, plus an increase in the effective income tax rate for the three months ended September 30, 1999 compared to the same three months in 1998 due to changes in the jurisdictions in which income was earned. A portion of the liability for income taxes, $10.3 million for 1999 and $5.3 million for 1998, is not payable in cash due to the utilization of NOL's and was recorded as an increase in Capital surplus for both years. The Company's backlog was $1,830.5 million at September 30, 1999 and $1,329.1 million at December 31, 1998. Between December 31, 1998 and September 30, 1999, the Company's backlog in Canada increased by $47.4 million, its backlog in the United Kingdom and Other International Operations increased by $19.1 million and its backlog in the United States increased by $434.9 million. The increase in the Company's Canadian backlog was primarily attributable to several large contract awards in Western Canada. The increase in the United Kingdom and Other International backlog was due to contracts awarded in the three months ended September 30, 1999. The increase in the United States backlog was due to acquisitions contributing an additional $372.7 million to backlog, plus increases in backlog related to growth of the Company's existing domestic businesses. The Company's backlog at September 30, 1998 was $1,269.9 million. Excluding acquisitions, backlog rose $182.1 million, or 14%, in the last 12 months. United States Operations The Company's United States operations consist of three segments: electrical construction and facilities services, mechanical construction and facilities services and other services. Revenues of electrical construction and facilities services business units ("Electrical Business Units") for the three months ended September 30, 1999 were $257.0 million compared to $224.7 million for the three months ended September 30, 1998. Operating income of the Electrical Business Units (before deduction of general corporate and other expenses discussed below) for the three months ended September 30, 1999 was $10.7 million or 4.1% of Revenues compared to $11.1 million or 4.9% of Revenues for the three months ended September 30, 1998. Revenues for the nine months ended September 30, 1999 were $708.5 million compared to $645.1 million for the same nine months in 1998. Operating income was $25.4 million or 3.6% of Revenues for the nine months of 1999, an increase of $1.4 million compared to $24.0 million or 3.7% of Revenues for the same nine months of 1998. The increase in Revenues and Operating income for both the three and nine month periods ended 14 September 30, 1999 and 1998 was primarily attributable to increasing market strength in the Eastern United States driven by renovation projects and new construction, in addition to acquisitions made during 1998. Revenues of mechanical construction and facilities services business units ("Mechanical Business Units") for the three months ended September 30, 1999 were $321.0 million compared to $152.8 million for the three months ended September 30, 1998. Operating income of the Mechanical Business Units (before deduction of general corporate and other expenses discussed below) for the three months ended September 30, 1999 was $11.6 million or 3.6% of Revenues compared to $5.5 million or 3.6% of Revenues for the three months ended September 30, 1998. Revenues for the nine months ended September 30, 1999 were $741.2 million versus $432.8 million for the nine months ended September 30, 1998. Operating income was $25.4 million, or 3.4% of Revenues, for the nine months of 1999, a $11.7 million increase compared to $13.7 million, or 3.2% of Revenues, for the same nine months of 1998. Acquisitions contributed $142.9 million and $265.9 million to the increase in Revenues in the three and nine month comparable periods, respectively. Additionally, an increase in revenues attributable to the Western United States operations in the three months ended September 30, 1999 contributed to higher Revenues for both the three and nine month periods of 1999 compared to the same periods in 1998. Other United States Revenues of $32.4 million for the three months ended September 30, 1999, which include those operations that principally provide consulting and maintenance services, increased by $28.9 million compared to the same three months in 1998. Revenues for the nine months ended September 30, 1999 were $63.2 million compared to $7.9 million for the nine months ended September 30, 1998. The increase in Revenues for the three and nine month periods ended September 30, 1999 compared to the three and nine month periods ended September 30, 1998 was primarily attributable to acquisitions made in 1999 and 1998. Operating losses attributable to consulting and maintenance services were $0.6 million and $1.1 million for the three months ended September 30, 1999 and 1998, respectively. Operating losses for the nine months ended September 30, 1999 and 1998 were $3.2 million for each period. The Operating losses for both the three and nine month comparable periods were primarily attributable to costs associated with the continued development of the consulting operations and maintenance services activities. International Operations The Company's International Operations consist of three segments: Canada construction and facilities services, United Kingdom construction and facilities services and other international construction and facilities services. Revenues of Canada construction and facilities services business units ("Canada Business Units") for the three months ended September 30, 1999 were $57.8 million compared to $53.5 million for the three months ended September 30, 1998. Revenues for the nine months ended September 30, 1999 and 1998 were $132.6 million and $149.8 million, respectively. Operating income of the Canada Business Units was $0.9 million compared to $1.7 million for the three months ended September 30, 1999 and 1998, respectively. For the nine months ended September 30, 1999 and 1998, operating income was $2.4 million and $4.1 million, respectively. The decrease in both Revenues and Operating income for the nine months ended September 30, 1999 period compared to the same period in 1998 was primarily due to a reduced level of activities in Eastern Canada and from delays early in 1999 on the commencement of certain projects. The impact of decreased Revenues and Operating income has been partially offset by increased GP as a percentage of Revenues in the nine month period of 1999. Revenues of United Kingdom construction and facilities services business units ("United Kingdom Business Units") for the three months ended September 30, 1999 were $142.3 million compared to $128.7 million for the three months ended September 30, 1998. Revenues for the nine months ended September 30, 1999 and 1998 were $401.0 million and $359.8 million, respectively. Operating income of the United Kingdom business units (before deduction of general and other expenses discussed below) for the three months ended September 30, 1999 was $0.8 million compared to a $0.3 million loss for the three months ended September 30, 1998. Operating losses for the nine months ended September 30, 1999 and 1998 were $0.7 million. The increase in Revenues for the three and nine month periods ended September 30, 1999 compared to the three and nine month periods ended September 30, 1998 was primarily attributable to continued growth in selected 15 construction and facilities services markets, combined with an increase in revenue associated with two major projects. The activity in this segment produced operating losses for the nine month period ended September 30, 1999, however, profitability was achieved in the three months ended September 30, 1999. Other International construction and facilities services business units ("Other International Business Units") primarily consists of the Company's operations in the Middle East and Asia. Revenues for the three months ended September 30, 1999 were $0.2 million compared to $2.6 million for the three months ended September 30, 1998. Revenues for the nine months ended September 30, 1999 and 1998 were $0.7 million and $10.1 million, respectively. Operating losses were approximately $0.2 million for the three months ended September 30, 1999 and 1998. Operating losses for the nine months ended September 30, 1999 and 1998 were $0.8 million and $0.9 million, respectively. The decline in Revenues for both the three and nine month comparable periods, was due to the completion of several large projects in the Middle East and Asia markets that were active last year, as well as a reduction of the level of ownership and related share of revenues for certain joint ventures. The Operating losses were due to costs associated with the administration and completion of the activities in these regions. The Company continues to pursue new business selectively in these markets; however, the availability of opportunities has been reduced significantly as a result of local economic factors. General Corporate and Other Expenses General Corporate expenses for the three months ended September 30, 1999 and 1998 were $5.1 million and $4.7 million, respectively. For the nine months ended September 30, 1999 and 1998, General Corporate Expenses were $13.3 million and $12.9 million, respectively. Interest expense for the three months ended September 30, 1999 was $2.6 million compared to $3.5 million for the same three months in 1998. Interest expense for the nine months ended September 30, 1999 was $7.6 million compared to $9.8 million for the nine months ended September 30, 1998. Interest income for the three months ended September 30, 1999 was $0.3 million compared to $1.6 million for the three months ended September 30, 1998. For the nine months ended September 30, 1999, Interest income was $1.3 million, a $2.9 million decrease from $4.2 million for the same period in 1998. For the three month periods ended September 30, 1999 and 1998, both Interest expense and Interest income were impacted by borrowings under working capital credit lines in the 1999 period and by less cash available to invest in 1999 than in the 1998 period. This increase in Interest expense for the nine months ended September 30, 1999 compared to the nine months ended September 30, 1998 was due to the same reasons cited with respect to the three month periods ended September 30, 1999 and 1998, offset by borrowings at lower interest rates, and more cash available to invest during the first three months of 1999 versus the first three months of 1998. Liquidity and Capital Resources During the third quarter of 1998, the Company's Board of Directors authorized a stock repurchase program under which the Company could repurchase up to $20.0 million of its Common Stock. As of September 30, 1999 the Company had cumulatively repurchased 1,132,000 shares of its Common Stock at an aggregate cost of approximately $16.8 million. The Company's consolidated cash balance decreased by approximately $45.2 million from $83.1 million at December 31, 1998 to $37.9 million at September 30, 1999, as a result of Net cash provided by operating activities of $12.5 million, Net cash provided by financing activities of $0.5 million, offset by Net cash used in investing activities of $58.2 million (primarily due to cash paid for acquisitions of $55.8 million). As of September 30, 1999 the Company's total borrowing capacity under its revolving credit facility was $150.0 million. The Company had approximately $17.4 million of letters of credit outstanding as of that date. There were $10.0 million of revolving loans outstanding as of September 30, 1999 and none at December 31, 1998 under the credit facility. The Company believes that current cash balances and borrowing capacity available under its line of credit, 16 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. Year 2000 The Year 2000 issue concerns the inability of information systems to properly recognize and process date sensitive information beyond January 1, 2000. The Company has performed a comprehensive review of its internal application systems ("Internal Systems"), including information technology ("IT") systems and Non-IT systems, to identify those systems that could be affected by the Year 2000 issue and has developed a plan to resolve the Year 2000 issue. The Company defines IT systems as those systems which are software applications and related computer hardware critical to operation of its business. These IT systems include, but are not limited to, accounting systems that encompass billing and estimating, accounts payable and payroll. Additionally, IT systems include other non-accounting software applications that are part of business operations such as network hardware and software, computerized drafting hardware and software, telephone systems and sheet metal fabrication equipment. Non-IT systems would primarily include software applications and related computer hardware that are used in building systems such as, but not limited to, temperature controls, security systems and other building systems. The Company estimates that it is approximately 95% complete with required modifications to its IT Systems and expects the balance of any required modifications to be completed by November, 1999. With respect to Non-IT systems, the modifications required were substantially complete by the end of the third quarter of 1999. Modification costs have and will be expensed as SG&A as incurred and costs of new software have and will be capitalized and amortized over the expected useful life of the related software. Since the inception of the Company's efforts to address the Year 2000 issues, approximately $0.8 million has been expensed as incurred. Additional modification and testing costs to be incurred are not anticipated to exceed an additional $0.2 million. The Company is utilizing both internal and external resources to identify, correct or reprogram, and test its systems to ensure Year 2000 compliance. The Company expects its Year 2000 conversion project to be completed before January 1, 2000. While the Company believes its planning efforts are adequate to address its Year 2000 concerns, the Company's operations and financial results could be adversely impacted by the Year 2000 issue if the conversion schedule and cost estimate for its Internal Systems are not met or suppliers and or customers and other businesses on which the Company relies do not address the Year 2000 issue successfully. The Company has requested that its significant suppliers confirm that they have plans for achieving Year 2000 compliance. Additionally, the Company has been independently investigating third party compliance for critical services and equipment. The Company continues to assess these risks in order to reduce any impact on the Company. Contingency plans include but are not limited to both ordering and receiving where practical, prior to January 1, 2000, an inventory of general supplies to be used on jobs and identifying back-up suppliers for these items. Specific supplies, which may only be available from limited resources will be identified, and if necessary, ordered in advance to meet anticipated job requirements near the January 1, 2000 date where practical. The Company has identified failure in basic infrastructure such as banking services, telecommunications or electrical distribution as the most reasonably likely worst case scenario with respect to the Year 2000 issue. However, failure of basic infrastructure would most likely be isolated and short-lived. With respect to such a failure, management believes it is to the Company's advantage that it operates in a variety of markets in the United States, Canada, the United Kingdom and other countries, and in a number of local markets within these regions. Consequently, it does not believe that a Company-wide risk associated with the Year 2000 issue will likely exist. However, the Company will continue to monitor all identifiable scenarios and prepare contingency plans as necessary to attempt to mitigate any exposures. 17 Based on currently available information, the Company does not believe that the matters discussed above related to its Internal Systems or to services provided to customers will have a material adverse impact on the Company's financial condition or overall trends in results of operations; however, it is uncertain to what extent the Company may be affected by such matters. In addition, there can be no assurance that the failure to ensure Year 2000 capability by a supplier, customer or another third party will not have a material adverse effect on the Company. 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 the Company'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. 18 PART II - OTHER INFORMATION Item 1 - Legal Proceedings Except as hereafter indicated, the information on legal proceedings is hereby incorporated by reference to Note P of the Company's Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. The arbitrator in the arbitration proceeding arising out of the participation of the Company's subsidiary Dynalectric Company ("Dynalectric") in a joint venture with Computran has made an award requiring Dynalectric to pay Computran damages, plus interest thereon, and certain costs of the arbitration. As a consequence, Dynalectric is required to pay to Computran approximately $468,000 (net of amounts for which a third party has agreed to indemnify Dynalectric) in respect of the damage and related interest award and approximately $190,000 (net of amounts for which a third party has agreed to indemnify Dynalectric) in respect of the award of costs representing a portion of the arbitrator's fees and expenses and a portion of Computran's legal fees and related expenses. In addition, Dynalectric is to pay interest on the foregoing amounts from the date of the award until paid. As to Dynalectric, Computran has made a motion with the Superior Court of the District of Columbia to confirm the award as it relates to the damage and related interest award but to have the award vacated as to certain causes of action that the arbitrator found in favor of Dynalectric and other defendants and vacated as to the award of costs (including legal fees) and has requested the court to determine and grant Computran's legal fees and costs. Dynalectric will not object to the confirmation of the damage and related interest award and will seek to have confirmed the arbitrator's award in its entirety, including the award as to costs (including legal fees). Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On July 28, 1999 the Company held its annual meeting of stockholders. (a) Each of the seven individuals nominated for election as a director of the Company for the ensuing year was elected. The seven directors constituted all of the members of the Board of Directors of the Company. Name Votes For Votes Withheld Stephen W. Bershad 7,106,262 1,303,954 David A. B. Brown 7,105,262 1,304,954 Georges L. de Buffevent 7,105,262 1,304,954 Albert Fried, Jr. 7,106,012 1,304,204 Richard F. Hamm, Jr. 8,083,866 326,350 Frank T. MacInnis 8,395,941 14,275 Kevin C. Toner 7,106,212 1,304,004 There were no broker non-votes. (b) The stockholders voted upon a stockholder proposed resolution requesting the Company's Board of Directors to terminate its stockholder rights plan and to refrain from adopting similar plans or a staggered board. 3,205,412 shares were voted for the resolution, 3,222,906 shares were voted against resolution, and 23,840 shares abstained from voting thereon. There were 1,958,058 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 1999. 8,408,886 shares voted in favor of ratification, no shares voted against ratification, and 1,330 shares abstained from voting thereon. There were no broker non-votes. 19 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits
Incorporated by Reference to, Exhibit No Description or Page Number ---------- ------------ ----------------------------- 11 Computation of Basic Note E of the Notes EPS and Diluted EPS to the Condensed Consolidated for the nine months Financial Statements. ended September 30, 1999 and 1998 27 Financial Data Schedule Filed herewith. 99 Copy of Note P of the Company's Filed herewith Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(b) No reports on Form 8-K were filed during the quarter ended September 30, 1999. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EMCOR GROUP, INC. ------------------------------------------------ (Registrant) Date: October 28, 1999 By: /s/FRANK T. MACINNIS ------------------------------------------------ Frank T. MacInnis Chairman of the Board of Directors and Chief Executive Officer Date: October 28, 1999 By: /s/LEICLE E. CHESSER ------------------------------------------------ Leicle E. Chesser Executive Vice President and Chief Financial Officer 21
EX-99 2 LEGAL PROCEEDINGS Exhibit 99 Copy of Note P of the Company's Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. NOTE P - LEGAL PROCEEDINGS The Company's subsidiary Dynalectric Company ("Dynalectric") is party to an arbitration proceeding arising out of Dynalectric's participation in a joint venture with Computran Systems Corp. ("Computran"). The proceeding which was instituted in 1998 in Superior Court of New Jersey, Bergen County ("Superior Court"), by Computran, a participant in, and a subcontractor to, the joint venture alleges that Dynalectric wrongfully terminated its subcontract, fraudulently diverted funds due to it, misappropriated its trade secrets and proprietary information, fraudulently induced it to enter into the joint venture and conspired with others 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 has defended this matter vigorously. Dynalelectric has filed counterclaims against Computran. As a result of a motion made by Dynalectric, the Superior Court has ordered that the matters in dispute Dynalectric and Computran be resolved by binding arbitration in accordance with an original agreement between the parties. The parties are awaiting the decision of the arbitrator. 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 did 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 April 7, 1997, Ted Kohl, a principal of Herbert, 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., a Company allegedly owned by Mr. Kohl, also pled guilty to one count of failing to file New York City General Income Tax Returns. Mr. Kohl and DPL Interiors, Inc. have not yet been sentenced. 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 then 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 the Company arising out of these matters could have a material adverse effect on the Company's business, operating results and financial condition. 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. 22 EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from EMCOR's Condensed Consolidated Financial Statements for the nine months ended September 30, 1999 and is qualified in its entirety by reference to such financial statements. 1,000 U.S. Dollars 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1 37,861 0 722,282 26,350 7,522 906,940 67,001 29,823 1,030,348 713,482 116,056 0 0 109 145,144 1,030,348 2,047,221 2,047,221 1,850,621 2,012,015 0 371 6,313 28,893 12,777 16,116 0 0 0 16,116 1.66 1.33
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