FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or
15(d) of the Securities Exchange Act of 1934
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission file number 0-2315
EMCOR Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2125338
- --------------------------------------------- -----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
101 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
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(Address of principal executive offices) (Zip Code)
(203) 849-7800
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(Registrant's telephone number)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days. Yes X No __ --- ----
Applicable Only To Corporate Issuers
Number of shares of Common Stock outstanding as of the close of business on
July 24, 2001: 14,792,816 shares.
EMCOR GROUP, INC.
INDEX
Page No.
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
as of June 30, 2001 and December 31, 2000 1
Condensed Consolidated Statements of Operations -
three months ended June 30, 2001 and 2000 3
Condensed Consolidated Statements of Operations -
six months ended June 30, 2001 and 2000 4
Condensed Consolidated Statements of Cash Flows -
three months ended June 30, 2001 and 2000 5
Condensed Consolidated Statements of Stockholders'
Equity and Comprehensive Income -
six months ended June 30, 2001 and 2000 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Results of
Operations and Financial Condition 12
PART II - Other Information
Item 1 Legal Proceedings 20
Item 2 Changes in Securities 20
Item 4 Submission of Matters to a Vote of Security Holders 20
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)
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June 30, December 31,
2001 2000
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 165,722 $ 137,685
Accounts receivable, net 810,400 825,803
Costs and estimated earnings in excess
of billings on uncompleted contracts 199,182 158,073
Inventories 7,266 6,909
Prepaid expenses and other 9,356 10,290
---------- ----------
Total current assets 1,191,926 1,138,760
Investments, notes and other long-term
receivables 10,111 10,364
Property, plant and equipment, net 39,296 38,959
Goodwill, net 67,332 67,625
Other assets 4,488 6,156
---------- ----------
Total assets $1,313,153 $1,261,864
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
- --------------------------------------------------------------------------------
June 30, December 31,
2001 2000
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and
capital lease obligations $ 542 $ 751
Accounts payable 318,896 365,139
Billings in excess of costs and estimated
earnings on uncompleted contracts 387,270 314,929
Accrued payroll and benefits 95,771 103,897
Other accrued expenses and liabilities 63,724 67,671
---------- -----------
Total current liabilities 866,203 852,387
Long-term debt and capital lease obligations 795 115,878
Other long-term obligations 67,958 60,096
---------- -----------
Total liabilities 934,956 1,028,361
---------- -----------
Stockholders' equity:
Preferred stock, $0.10 par value, 1,000,000
shares authorized, zero issued and outstanding -- --
Common stock, $0.01 par value, 30,000,000 shares
authorized, 14,787,739 and 10,470,624 shares
issued and outstanding, respectively 159 117
Capital surplus 296,785 167,742
Accumulated other comprehensive income (5,576) (3,906)
Retained earnings 103,665 86,386
Treasury stock, at cost, 1,131,990 shares (16,836) (16,836)
---------- -----------
Total stockholders' equity 378,197 233,503
---------- -----------
Total liabilities and stockholders' equity $1,313,153 $1,261,864
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts) (Unaudited)
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Three months ended June 30, 2001 2000
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Revenues $869,506 $866,850
Cost of sales 776,762 781,507
-------- --------
Gross profit 92,744 85,343
Selling, general and administrative expenses 71,583 66,763
-------- --------
Operating income 21,161 18,580
Interest expense, net 243 2,226
-------- --------
Income before income taxes 20,918 16,354
Income tax provision 9,296 7,196
-------- --------
Net income $ 11,622 $ 9,158
======== ========
Basic earnings per share $ 1.00 $ 0.88
======== ========
Diluted earnings per share $ 0.81 $ 0.68
======== ========
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, 2001 2000
- --------------------------------------------------------------------------------
Revenues $1,707,061 $1,608,372
Cost of sales 1,533,798 1,450,484
---------- ----------
Gross profit 173,263 157,888
Selling, general and administrative expenses 141,256 128,761
---------- ----------
Operating income 32,007 29,127
Interest expense, net 985 3,970
---------- ----------
Income before income taxes 31,022 25,157
Income tax provision 13,743 11,069
---------- ----------
Net income $ 17,279 $ 14,088
========== ==========
Basic earnings per share $ 1.56 $ 1.35
========== ==========
Diluted earnings per share $ 1.25 $ 1.08
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
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Six months ended June 30, 2001 2000
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Cash flows from operating activities:
Net income $ 17,279 $14,088
Depreciation and amortization 6,080 5,024
Amortization of goodwill 2,674 2,251
Other non-cash expenses 16,828 11,448
Changes in operating assets and liabilities (6,975) (33,845)
-------- -------
Net cash provided by (used in) operating activities 35,886 (1,034)
-------- -------
Cash flows from investing activities:
Acquisition of businesses and related earn-out
agreements (2,983) (1,102)
Proceeds from sale of assets 1,131 942
Purchase of property, plant and equipment (7,548) (5,960)
Net proceeds (disbursements) from other investments 253 (4,376)
Other, net -- 34
-------- --------
Net cash used in investing activities (9,147) (10,462)
-------- --------
Cash flows from financing activities:
Borrowings under working capital credit lines, net -- 15,000
Net repayments of long-term debt and capital lease
obligations (292) 346
Net proceeds from exercise of stock options 1,590 27
-------- --------
Net cash provided by financing activities 1,298 15,373
-------- --------
Increase in cash and cash equivalents 28,037 3,877
Cash and cash equivalents at beginning of year 137,685 58,552
-------- --------
Cash and cash equivalents at end of period $165,722 $62,429
======== ========
Supplemental cash flow information:
Cash paid for:
Interest $ 3,307 $ 3,879
Income taxes $ 2,045 $ 2,383
Non-cash financing activities:
5 3/4% Convertible Subordinated Notes due
2005, converted into common stock $115,000 --
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(In thousands) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
other
Common Capital comprehensive Retained Treasury Comprehensive
Total stock surplus loss (1) earnings stock income
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 2000 $170,249 $117 $142,894 $(2,223) $ 46,297 $(16,836)
Net income 14,088 -- -- -- 14,088 -- $14,088
Foreign currency
translation adjustments (1,503) -- -- (1,503) -- -- (1,503)
-------
Comprehensive income -- -- -- -- -- -- $12,585
=======
Provision in lieu of
income taxes 8,338 -- 8,338 -- -- --
Common stock issued under
stock option plans 27 -- 27 -- -- --
Other, net 34 -- 34 -- -- --
-------- ---- -------- -------- ------- --------
Balance, June 30, 2000 $191,233 $117 $151,293 $(3,726) $ 60,385 $(16,836)
======== ==== ======== ======== ======= ========
Balance, January 1, 2001 $233,503 $117 $167,742 $(3,906) $ 86,386 $(16,836)
Net income 17,279 -- -- -- 17,279 -- $17,279
Foreign currency
translation adjustments (1,670) -- -- (1,670) -- -- (1,670)
-------
Comprehensive income -- -- -- -- -- -- $15,609
=======
Provision in lieu of
income taxes 11,569 -- 11,569 -- -- --
Common stock issued under
stock option plans 1,590 -- 1,590 -- -- --
Conversion of 5 3/4%
Convertible Subordinated
Notes (2) 113,876 42 113,834 -- -- --
Value of Restricted
Stock Units (3) 2,050 -- 2,050 -- -- --
-------- ---- -------- -------- -------- --------
Balance, June 30, 2001 $378,197 $159 $296,785 $(5,576) $103,665 $(16,836)
======== ==== ======== ======== ======== ========
(1) Represents cumulative foreign currency translation adjustments.
(2) Represents conversion of $115.0 million 5 3/4% convertible subordinated
notes into common stock, net of related interest and deferred financing
costs.
(3) Represents the value of Restricted Stock Units for the purchase of common
stock at the date of grant plus the related compensation expense in the
current year due to an increase in market value of the underlying common
stock.
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE A Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared
by EMCOR Group, Inc. and Subsidiaries ("EMCOR"), without audit, pursuant to the
interim period reporting requirements of Form 10-Q. Consequently, certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. Readers of this report should refer to the consolidated
financial statements and the notes thereto included in EMCOR's latest Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
In the opinion of EMCOR, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of a normal
recurring nature) necessary to present fairly the financial position of EMCOR
and the results of its operations. The results of operations for the three and
six month periods ended June 30, 2001 are not necessarily indicative of the
results to be expected for the year ending December 31, 2001.
Certain reclassifications of prior year amounts have been made to conform to
current year presentation.
NOTE B Long Term Debt
During the second quarter of 2001, EMCOR called its $115.0 million 5 3/4 %
convertible subordinated notes for redemption. All of the convertible
subordinated notes were converted, net of related deferred financing costs, into
4.2 million shares of EMCOR common stock.
NOTE C Earnings Per Share
The following tables summarize EMCOR's calculation of Basic and Diluted Earnings
per Share ("EPS") for the three and six month periods ended June 30, 2001 and
2000:
Three months ended
June 30, 2001
-----------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------ ---------
Basic EPS
Income available to common
stockholders $11,622,000 11,647,990 $1.00
=====
Effect of Dilutive Securities:
Convertible Subordinated Notes, including
assumed interest savings, net of tax 743,520 3,168,835
Options -- 497,523
----------- ----------
Diluted EPS $12,365,520 15,314,348 $0.81
=========== ========== =====
NOTE C Earnings Per Share - (continued)
Six months ended
June 30, 2001
-----------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
Basic EPS
Income available to common
stockholders $17,279,000 11,074,392 $1.56
=====
Effect of Dilutive Securities:
Convertible Subordinated Notes, including
assumed interest savings, net of tax 1,735,395 3,649,763
Options -- 444,519
----------- ----------
Diluted EPS $19,014,395 15,168,674 $1.25
=========== ========== =====
Three months ended
June 30, 2000
--------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Basic EPS
Income available to common
stockholders $ 9,158,000 10,429,880 $0.88
=====
Effect of Dilutive Securities:
Convertible Subordinated Notes, including
assumed interest savings, net of tax 986,455 4,206,291
Options -- 278,237
----------- ----------
Diluted EPS $10,144,455 14,914,408 $0.68
=========== ========== =====
Six months ended
June 30, 2000
----------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- -------------
Basic EPS
Income available to common
stockholders $14,088,000 10,428,785 $1.35
=====
Effect of Dilutive Securities:
Convertible Subordinated Notes, including
assumed interest savings, net of tax 1,962,070 4,206,291
Options -- 263,618
----------- ----------
Diluted EPS $16,050,070 14,898,694 $1.08
=========== ========== =====
There were no options excluded from the calculation of diluted EPS for the three
and six month periods ended June 30, 2001. For the three and six month periods
ended June 30, 2000, 37,000 and 37,193 options, respectively, were excluded from
the calculation of Diluted EPS as the inclusion of those options would be
antidilutive.
NOTE D Income Taxes
EMCOR files a consolidated federal income tax return including all U.S.
subsidiaries. At June 30, 2001, EMCOR had net operating loss carryforwards
("NOLs") for U.S. income tax purposes of approximately $11.0 million, which
expire in the years 2009 through 2012. The NOLs are subject to review by the
Internal Revenue Service. Future changes in ownership of EMCOR, as defined by
Section 382 of the Internal Revenue Code, could limit the amount of EMCOR's NOLs
available for use in any one year. In the United Kingdom, EMCOR's wholly owned
subsidiary, Drake & Scull, has a trading loss carry-forward of approximately
$3.0 million. Trading losses may be carried forward, without a time limit,
against future income from the same trade.
EMCOR adopted Fresh-Start Accounting in connection with EMCOR's reorganization
in December 1994. As a result, the tax benefit of any net operating loss
carryforwards or net deductible temporary differences which existed as of
December 15, 1994 will result in a charge to the tax provision (provision in
lieu of income taxes) and to capital surplus.
Amounts credited to capital surplus for the six month periods ended June 30,
2001 and 2000 were approximately $11.6 million and $8.3 million, respectively.
NOTE E New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of SFAS No. 133", and
Statement of Financial Accounting Standards No. 138 "Accounting for Certain
Derivative Instruments and Hedging Activities" ("SFAS 138") establish for fiscal
quarters of fiscal years beginning after June 15, 2000 accounting and reporting
standards requiring derivative instruments, as defined, to be measured in the
financial statements at fair value. SFAS 133 also requires that changes in the
derivative instruments' fair value be recognized currently in earnings unless
certain accounting criteria are met. EMCOR adopted these standards as of January
1, 2001; however, there were no derivative instruments outstanding and
therefore, there was no effect on the financial condition or results of
operations of EMCOR.
In July 2001, the Financial Accounting Standards Board published Statement of
Financial Accounting Standard No. 142 "Goodwill and Other Intangible Assets"
("SFAS 142"). SFAS 142 requires goodwill to be subject to at least an annual
assessment for impairment with amortization over its estimated useful life to be
discontinued effective January 1, 2002.
NOTE F Segment Information
EMCOR has the following reportable segments: United States electrical
construction and facilities services, United States mechanical construction and
facilities services, United States other services, Canada construction and
facilities services, United Kingdom construction and facilities services and
Other international construction and facilities services. The segment (i) United
States other services primarily represents those operations which principally
provide consulting and maintenance services; and (ii) Other international
construction and facilities services represents EMCOR's operations outside of
the United States, Canada, and the United Kingdom, primarily South Africa, the
Middle East and Europe, performing electrical construction, mechanical
construction and facilities services.
The following presents information about industry segments and geographic areas
(in thousands):
For the three months ended For the six months ended
------------------------------ -------------------------------
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
------------- ------------- ------------- -------------
Revenues from unrelated entities:
United States electrical construction and facilities services $358,307 $327,008 $ 690,304 $ 606,925
United States mechanical construction and facilities services 288,726 317,407 584,247 590,056
United States other services 58,802 43,879 104,447 71,052
-------- -------- ---------- ----------
Total United States operations 705,835 688,294 1,378,998 1,268,033
Canada construction and facilities services 39,897 67,914 77,782 127,411
United Kingdom construction and facilities services 118,645 110,638 244,257 212,606
Other international construction and facilities services 5,129 4 6,024 322
-------- -------- ---------- ----------
Total worldwide operations $869,506 $866,850 $1,707,061 $1,608,372
======== ======== ========== ==========
Total revenues:
United States electrical construction and facilities services $378,236 $332,308 $ 717,124 $ 614,187
United States mechanical construction and facilities services 304,785 322,551 606,946 597,116
United States other services 62,072 44,589 108,505 71,902
Less intersegment revenues (39,258) (11,154) (53,577) (15,172)
-------- -------- ---------- ----------
Total United States operations 705,835 688,294 1,378,998 1,268,033
Canada construction and facilities services 39,897 67,914 77,782 127,411
United Kingdom construction and facilities services 118,645 110,638 244,257 212,606
Other international construction and facilities services 5,129 4 6,024 322
-------- -------- ---------- ----------
Total worldwide operations $869,506 $866,850 $1,707,061 $1,608,372
======== ======== ========== ==========
NOTE F Segment Information - (continued)
For the three months ended For the six months ended
------------------------------ --------------------------------
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
------------- ------------- ------------- -------------
Operating income:
United States electrical construction and facilities services $16,505 $13,815 $31,009 $24,160
United States mechanical construction and facilities servuces 11,393 9,796 16,460 17,419
United States other services (1,364) (870) (3,290) (1,705)
------- ------- ------- -------
Total United States operations 26,534 22,741 44,179 39,874
Canada construction and facilities services 344 2,158 971 3,031
United Kingdom construction and facilities services 2,406 1,144 2,342 (66)
Other international construction and facilities services (897) 192 (1,437) 205
Corporate administration (7,226) (7,655) (14,048) (13,917)
------- ------- ------- -------
Total worldwide operations 21,161 18,580 32,007 29,127
Other corporate items:
Interest expense (1,754) (2,643) (3,973) (4,912)
Interest income 1,511 417 2,988 942
------- ------- ------- -------
Income before income taxes $20,918 $16,354 $31,022 $25,157
======= ======= ======= =======
June 30, 2001 December 31, 2000
------------- -----------------
Total assets:
United States electrical construction and facilities services $ 421,871 $ 422,647
United States mechanical construction and facilities services 462,119 450,684
United States other services 65,825 79,323
---------- ----------
Total United States operations 949,815 952,654
Canada construction and facilities services 50,131 60,122
United Kingdom construction and facilities services 145,664 136,645
Other international construction and facilities services 14,793 14,181
Corporate administration 152,750 98,262
---------- ----------
Total worldwide operations $1,313,153 $1,261,864
========== ==========
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Unaudited)
Highlights
EMCOR Group Inc.'s ("EMCOR") revenues for the three months ended June 30, 2001
and 2000 were $869.5 million and $866.9 million, respectively. Net income for
the three months ended June 30, 2001 was $11.6 million compared to net income of
$9.2 million for the three months ended June 30, 2000. Diluted Earnings Per
Share ("Diluted EPS") were $0.81 per share for the three months ended June 30,
2001 compared to Diluted EPS of $0.68 per share in the year earlier period.
Revenues for the six months ended June 30, 2001 and 2000 were $1,707.1 million
and $1,608.4 million, respectively. Net income for the six months ended June 30,
2001 was $17.3 million compared to net income of $14.1 million for the six
months ended June 30, 2000. Diluted EPS were $1.25 per share for the six months
ended June 30, 2001 compared to Diluted EPS of $1.08 per share in the year
earlier period.
Operating Segments
EMCOR has the following reportable segments: United States electrical
construction and facilities services, United States mechanical construction and
facilities services, United States other services, Canada construction and
facilities services, United Kingdom construction and facilities services and
Other international construction and facilities services. The segment (i) United
States other services primarily represents those operations which principally
provide consulting and maintenance services; and (ii) Other international
construction and facilities services represents EMCOR's operations outside of
the United States, Canada, and the United Kingdom, primarily South Africa, the
Middle East and Europe, performing electrical construction, mechanical
construction and facilities services.
Results of Operations
Revenues
The following table presents EMCOR's operating segment revenues and their
respective percentage of total revenues (in thousands, except for percentages):
For the three months ended June 30,
-----------------------------------
% of % of
2001 Total 2000 Total
---- ----- ---- -----
Revenues:
United States electrical construction and facilities services $358,307 41% $327,008 38%
United States mechanical construction and facilities services 288,726 33% 317,407 37%
United States other services 58,802 7% 43,879 5%
-------- --------
Total United States operations 705,835 81% 688,294 79%
Canada construction and facilities services 39,897 5% 67,914 8%
United Kingdom construction and facilities services 118,645 14% 110,638 13%
Other international construction and facilities services 5,129 1% 4 --
-------- --------
Total worldwide operations $869,506 100% $866,850 100%
======== ========
For the six months ended June 30,
---------------------------------
% of % of
2001 Total 2000 Total
---- ----- ---- -----
Revenues:
United States electrical construction and facilities services $ 690,304 40% $ 606,925 38%
United States mechanical construction and facilities services 584,247 34% 590,056 37%
United States other services 104,447 6% 71,052 4%
---------- ----------
Total United States operations 1,378,998 81% 1,268,033 79%
Canada construction and facilities services 77,782 5% 127,411 8%
United Kingdom construction and facilities services 244,257 14% 212,606 13%
Other international construction and facilities services 6,024 -- 322 --
---------- ----------
Total worldwide operations $1,707,061 100% $1,608,372 100%
========== ==========
EMCOR had a $2.6 million or 0.3% increase in revenues for the three months ended
June 30, 2001 compared to the second quarter of 2000. EMCOR's operations in most
markets recorded a growth in revenues, particularly those in its New York City,
Boston, Chicago and Denver markets in the United States and in the United
Kingdom. The increase was due primarily to start date delays in Eastern Canada
for certain projects in backlog and a reduction of revenues in Western Canada.
EMCOR had a $98.7 million or a 6.1% increase in revenues for the six months
ended June 30, 2001 compared to the same period in 2000. The increase over the
prior year period was primarily attributable to revenue growth from EMCOR's
operations, primarily in the New York City, Boston, Chicago, Denver and
California markets in the United States.
Revenues of electrical construction and facilities services business units for
the three months ended June 30, 2001 were $358.3 million compared to $327.0
million for the three months ended June 30, 2000. The $31.3 million or 9.6%
increase in the revenues for the three months ended June 30, 2001 compared to
the same period in 2000 was attributable to continuing growth in United States
markets, particularly in the New York City, Chicago, Denver and California
markets, slightly offset by a reduced level of activity in the Las Vegas, Ohio
and Michigan markets. Revenues for the six months ended June 30, 2001 were
$690.3 million compared to $606.9 million for the six months ended June 30,
2000. The $83.4 million or 13.7% increase in revenues for the six months ended
June 30, 2001 compared to the same period in 2000 was attributable to the growth
in the markets previously identified, offset partially by the decrease in the
Las Vegas, Ohio and Michigan markets.
Revenues of mechanical construction and facilities services business units for
the three months ended June 30, 2001 were $288.7 million compared to $317.4
million for the three months ended June 30, 2000. The $28.7 million or 9.0%
decrease in revenues was primarily attributable to a reduced level of activity
at EMCOR's Poole & Kent subsidiary operations in the North and South Carolina
markets as well as the Las Vegas and Houston markets. Revenues for the six
months ended June 30, 2001 were $584.2 million compared to $590.1 million for
the six months ended June 30, 2000. The $5.9 million or 1.0% decrease in
revenues for the six months ended June 30, 2001 compared to the prior year was
attributable to a reduced level of activity at EMCOR's Poole & Kent subsidiary
operations in the North and South Carolina markets as well as the Las Vegas and
Houston markets.
Other United States services revenues of $58.8 million for the three months
ended June 30, 2001, which include those operations which principally provide
consulting and maintenance services, increased by $14.9 million compared to
$43.9 million for the same three months in 2000. The increase in revenues was
primarily attributable to an increase in building maintenance services provided
to customers. Other United States services revenues of $104.4 million for the
six months ended June 30, 2001 increased by $33.3 million compared to $71.1
million for the same six months in 2000. The increase was primarily attributable
to $23.2 million of revenues from a majority-owned joint venture, as well as
increases attributable to the remainder of EMCOR's United States other services
operations.
Revenues of Canada construction and facilities services for the three months
ended June 30, 2001 were $39.9 million compared to $67.9 million for the three
months ended June 30, 2000. The decrease in revenues in the current period was
primarily due to start date delays in Eastern Canada for certain projects in
backlog. Revenues for the six months ended June 30, 2001 were $77.8 million
compared to $127.4 million for the six months ended June 30, 2000. This decrease
in revenues was also primarily attributable to project start date delays and a
reduction of revenues in Western Canada.
Revenues of United Kingdom construction and facilities services business units
for the three months ended June 30, 2001 were $118.6 million compared to $110.6
million for the three months ended June 30, 2000. The $8.0 million increase in
revenues was attributable to continued growth in construction and facilities
markets in the United Kingdom, especially in the northern region. Revenues for
the six months ended June 30, 2001 were $244.3 million compared to $212.6
million for the six months ended June 30, 2000. The increases were principally
attributable to continued growth in construction and facilities markets in the
United Kingdom.
Other international construction and facilities services primarily consists of
EMCOR's operations in the Middle East, South Africa and Europe. Revenues for the
three months ended June 30, 2001 increased by $5.1 million compared to the three
months ended June 30, 2000. Revenues for the six months ended June 30, 2001 were
$6.0 million compared to $0.3 million for the six months ended June 30, 2000.
The increase in revenues for both periods was due to a new technology division
pursuing telecom related work in Europe. The remainder of the work performed in
this operating segment is accounted for under the equity method of accounting
because EMCOR realizes these revenues through joint ventures and has less than
majority ownership. No revenue attributable to such joint ventures was recorded.
EMCOR continues to pursue new business selectively in these markets; however,
the availability of opportunities has been significantly reduced as a result of
local economic factors, particularly in the Middle East.
Cost of sales and Gross profit
The following table presents EMCOR's cost of sales, gross profit, and gross
profit as a percentage of revenues (in thousands, except for percentages):
For the three months ended June 30,
-----------------------------------
2001 2000
---- ----
Cost of sales ................................ $776,762 $781,507
Gross profit.................................. $ 92,744 $ 85,343
Gross profit, as a percentage of revenues..... 10.7% 9.8%
For the six months ended June 30,
---------------------------------
2001 2000
---- ----
Cost of sales ................................ $1,533,798 $1,450,484
Gross profit.................................. $ 173,263 $ 157,888
Gross profit, as a percentage of revenues..... 10.1% 9.8%
Gross profit (revenues less cost of sales) increased $7.4 million for the three
months ended June 30, 2001 to $92.7 million compared to $85.3 million for the
three months ended June 30, 2000. As a percentage of revenues, gross profit
increased to 10.7% from 9.8% for the three months ended June 30, 2001 and 2000,
respectively. The dollar increase in gross profit, as well as the increase in
gross profit as a percentage of revenues, were primarily due to an increase in
gross profits realized due to the type and location of construction and
facilities services contracts performed and continued improvement in project
management.
Gross profit increased $15.4 million for the six months ended June 30, 2001 to
$173.3 million compared to $157.9 million for the six months ended June 30,
2000. As a percentage of revenues, gross profit increased to 10.1% from 9.8% for
the six months ended June 30, 2001 and 2000, respectively. The dollar increase
in gross profit was due to the increase in revenues of EMCOR's operations. The
increase in gross profit as a percentage of revenues was primarily a result of
an increase in gross profits on projects due to the type and location of
construction and facilities services contracts performed and continued
improvement in project management.
Selling, general and administrative expenses
The following table presents EMCOR's selling, general and administrative
expenses, and selling, general and administrative expenses as a percentage of
revenues (in thousands, except for percentages):
For the three months ended June 30,
-----------------------------------
2001 2000
---- ----
Selling, general and administrative expenses . . . . . . . . . . . . . . . . $71,583 $66,763
Selling, general and administrative expenses, as a percentage of revenues . . 8.2% 7.7%
Selling, general and administrative expenses, as a percentage of revenues
excluding amortization of goodwill . . . . . . . . . . . . . . . . . . . . 8.1% 7.6%
For the six months ended June 30,
---------------------------------
2001 2000
---- ----
Selling, general and administrative expenses . . . . . . . . . . . . . . . . $141,256 $128,761
Selling, general and administrative expenses, as a percentage of revenues . . 8.3% 8.0%
Selling, general and administrative expenses, as a percentage of revenues,
excluding amortization of goodwill . . . . . . . . . . . . . . . . . . . . 8.1% 7.9%
Selling, general and administrative expenses for the three months ended June 30,
2001 increased $4.8 million. Selling, general and administrative expenses as a
percentage of revenues were 8.2% for the three months ended June 30, 2001,
compared to 7.7 % for the three months ended June 30, 2000. For the six months
ended June 30, 2001 selling, general and administrative expenses increased $12.5
million compared to the same period in the prior year. Selling, general and
administrative expenses as a percentage of revenues was 8.3% for the six months
ended June 30, 2001, compared to 8.0% for the six months ended June 30, 2000.
For both the three and six month periods ended June 30, 2001, the dollar
increase in selling, general and administrative expenses compared to the prior
year was attributable to the type and location of construction and facilities
services contracts performed plus an overall increase in revenues, corresponding
increases in variable selling, general and administrative expenses and
incremental fixed costs to support the current growth in operations.
Operating income
The following table presents EMCOR's operating income, and operating income as a
percentage of segment revenues (in thousands, except for percentages):
For the three months ended June 30,
-----------------------------------
% of % of
Segment Segment
2001 Revenues 2000 Revenues
---- -------- ---- --------
Operating income (loss):
United States electrical construction and facilities services $16,505 4.6% $13,815 4.2%
United States mechanical construction and facilities services 11,393 3.9% 9,796 3.1%
United States other services . . . . . . . . . . . . . . . . (1,364) -- (870) --
------- -------
Total United States operations . . . . . . . . . . . . . . . 26,534 3.8% 22,741 3.3%
Canada construction and facilities services . . . . . . . . 344 0.9% 2,158 3.2%
United Kingdom construction and facilities services . . . . 2,406 2.0% 1,144 1.0%
Other international construction and facilities services . . (897) -- 192 --
Corporate administration . . . . . . . . . . . . . . . . . . (7,226) -- (7,655) --
------- -------
Total worldwide operations 21,161 2.4% 18,580 2.1%
Other corporate items:
Interest expense . . . . . . . . . . . . . . . . . . . . (1,754) (2,643)
Interest income . . . . . . . . . . . . . . . . . . . . . 1,511 417
------- -------
Income before income taxes . . . . . . . . . . . . . . . . . $20,918 $16,354
======= =======
For the six months ended June 30,
---------------------------------
% of % of
Segment Segment
2001 Revenues 2000 Revenues
---- -------- ---- --------
Operating income (loss):
United States electrical construction and facilities services $31,009 4.5% $24,160 4.0%
United States mechanical construction and facilities services 16,460 2.8% 17,419 3.0%
United States other services . . . . . . . . . . . . . . . . (3,290) -- (1,705) --
------- -------
Total United States operations . . . . . . . . . . . . . . . 44,179 3.2% 39,874 3.1%
Canada construction and facilities services . . . . . . . . 971 1.2% 3,031 2.4%
United Kingdom construction and facilities services . . . . 2,342 1.0% (66) --
Other international construction and facilities services . . (1,437) -- 205 --
Corporate administration . . . . . . . . . . . . . . . . . . (14,048) -- (13,917) --
------- -------
Total worldwide operations . . . . . . . . . . . . . . . . . 32,007 1.9% 29,127 1.8%
Other corporate items:
Interest expense . . . . . . . . . . . . . . . . . . . . (3,973) (4,912)
Interest income . . . . . . . . . . . . . . . . . . . . . 2,988 942
------- -------
Income before income taxes . . . . . . . . . . . . . . . . . $31,022 $25,157
======= =======
EMCOR had operating income of $21.2 million for the three months ended June 30,
2001 compared with operating income of $18.6 million for the three months ended
June 30, 2000. The increase of $2.6 million or 13.9% in operating income for the
three months ended June 30, 2001 as compared to the same period in 2000 was due
to increased revenues and gross profits from many of EMCOR's operations
partially offset by decreases in operating income related to the type and
location of construction and facilities service contracts performed in the prior
year compared to the current year. Operating income for the six months ended
June 30, 2001 was $32.0 million compared to $29.1 million for the same period in
2000. The increase of $2.9 million or 10.0% was due to increased revenues and
gross profits from EMCOR's operations.
United States electrical construction and facilities services operating income
(before deduction of general corporate and other expenses discussed below) for
the three months ended June 30, 2001 was $16.5 million or 4.6% of revenues,
compared to $13.8 million or 4.2% of revenues for the three months ended June
30, 2000. The $2.7 million increase in operating income for the three months
ended June 30, 2001 compared to the same period in 2000 was primarily
attributable to the continuing growth in the United States markets, particularly
in New York City, Chicago, San Diego, Washington, D. C., Atlanta and California,
offset by the decrease in the Las Vegas market. Operating income for the six
months ended June 30, 2001 was $31.0 million or 4.5% of revenues, compared to
$24.2 million or 4.0% of revenues for the six months ended June 30, 2000. The
increase in operating income, similar to the three months ended June 30, 2001,
was attributable to the market growth as mentioned previously, offset by the
decrease in the Las Vegas market.
United States mechanical construction and facilities services operating income
for the three months ended June 30, 2001 was $11.4 million or 3.9% of revenues,
compared to $9.8 million or 3.1% of revenues for the three months ended June 30,
2000. The $1.6 million increase in operating income was attributable to growth
in the California market, offset by losses for EMCOR's Poole & Kent subsidiary
operations in the North and South Carolina markets, as well as a reduction of
activity in the Las Vegas and Houston markets. Operating income for the six
months ended June 30, 2001 was $16.5 million or 2.8% of revenues, compared to
$17.4 million or 3.0% of revenues for the six months ended June 30, 2000. The
decrease in operating income for the six months ended June 30, 2001 compared to
the prior year period was primarily attributable to losses from EMCOR's Poole &
Kent subsidiary operations in the North and South Carolina markets as well as a
reduction of activity in the Las Vegas and Houston markets, partially offset by
growth in the California market.
Other United States services operating losses were $1.4 million and $0.9 million
for the three months ended June 30, 2001 and 2000, respectively. These operating
losses were primarily attributable to costs associated with the continued
development of consulting operations and maintenance services activities. For
the six months ended June 30, 2001, operating losses were $3.3 million compared
to $1.7 million for the six months ended June 30, 2000. These operating losses
were primarily attributable to costs associated with the continued development
of the consulting operations and maintenance services activities.
Canada construction and facilities services operating income was $0.3 million
compared to $2.2 million for the three months ended June 30, 2001 and 2000,
respectively. Operating income for the six months ended June 30, 2001 and 2000
was $1.0 million and $3.0 million, respectively. The decrease in operating
income in the 2001 three and six month periods was primarily due to a decreased
level of activities due to project start date delays in Eastern Canada and a
reduction of revenues in Western Canada.
United Kingdom construction and facilities services operating income for the
three months ended June 30, 2001 and 2000 were $2.4 million and $1.1 million,
respectively. This improvement is attributable to continued growth in
construction and facilities markets in the United Kingdom, especially in the
northern region. Operating income for the six months ended June 30, 2001 was
$2.3 million compared to operating losses of $0.1 million for the six months
ended June 30, 2000. The increase in operating income for the six months ended
June 30, 2001, as compared to the respective prior year period, is attributable
to continued growth in construction and facilities markets in the United
Kingdom.
Other international construction and facilities services operating loss was $0.9
million for the three months ended June 30, 2001 compared to operating income of
$0.2 million for three months ended June 30, 2000. Operating losses for the six
months ended June 30, 2001 were $1.4 million compared to operating income of
$0.2 million for the six months ended June 30, 2000. These operating losses are
attributable to project losses related to a Middle East joint venture. EMCOR
continues to pursue new business selectively in the Middle East, South African
and European markets; however, the availability of opportunities has been
significantly reduced as a result of local economic factors, particularly in the
Middle East.
General corporate expenses for the three months ended June 30, 2001 were $7.2
million compared to $7.7 million for the three months ended June 30, 2000. For
the six months ended June 30, 2001 and 2000, general corporate expenses were
$14.0 million and $13.9 million, respectively. The increase in general corporate
expenses for the six months ended June 30, 2001 was due to increased variable
overhead costs associated with EMCOR's increased revenues, as well as
incremental fixed costs to support current growth in operations.
Interest expense for the three months ended June 30, 2001 and 2000 was $1.8
million and $2.6 million, respectively. For the six months ended June 30, 2001
and 2000, interest expense was $4.0 million and $4.9 million, respectively.
Interest income for the three months ended June 30, 2001 and 2000 was $1.5
million and $0.4 million, respectively. For the six months ended June 30, 2001,
interest income was $3.0 million compared to $0.9 million for the six months
ended June 30, 2000. The increases in interest income of $1.1 million and $2.1
million for the three and six months ended June 30, 2001 compared to the same
three and six months in 2000 was attributable to higher cash on hand in the
current year compared to the same period in the prior year.
The income tax provision increased by $2.1 million to $9.3 million for the three
months ended June 30, 2001, versus $7.2 million for the same period in 2000. The
income tax provision increased by $2.6 million to $13.7 million for the six
months ended June 30, 2001. The increase in provision for both the three and six
months periods were primarily due to increased income before taxes. A portion of
the liability for income taxes, $11.6 million for 2001 and $8.3 million for
2000, was not payable in cash due to the utilization of NOL's and was recorded
as an increase in capital surplus for both years.
EMCOR's backlog was $2.0 billion at June 30, 2001 and $1.8 billion at December
31, 2000. The increase in backlog was primarily due to new projects awarded in
the United States and in Eastern Canada.
Liquidity and Capital Resources
The following table presents EMCOR's net cash provided by (used in) operating
activities, investing activities and financing activities (in thousands):
For the six
months ended June 30,
----------------------
2001 2000
---- ----
Net cash provided by (used in) operating activities $35,886 $ (1,034)
Net cash used in investing activities . . . . . . . $(9,147) $(10,462)
Net cash provided by financing activities . . . . . $ 1,298 $ 15,373
EMCOR's consolidated cash balance increased by approximately $28.0 million from
$137.7 million at December 31, 2000 to $165.7 million at June 30, 2001. Net cash
provided by operating activities for the six months ended June 30, 2001 of $35.9
million was a $36.9 million increase from the net cash used in operating
activities of $1.0 million in the same period last year. The increase in net
cash provided by operating activities was primarily attributable to increased
net income and non-cash expenses and changes in operating assets and
liabilities. Net cash used in investing activities of $9.1 million for the six
months ended June 30, 2001 decreased by $1.4 million compared to $10.5 million
in the same period last year. The decrease in net cash used in investing
activities was due primarily to an increase in EMCOR's investments, notes and
other long-term receivables. Net cash provided by financing activities of $1.3
million was a decrease of $14.1 million from $15.4 million for the six months
ended June 30, 2000. The decrease in net cash provided by financing activities
was attributable to a reduction in borrowings under working capital credit
lines, offset by proceeds from the exercise of stock options.
During the second quarter of 2001, EMCOR called its $115.0 million 5 3/4 %
convertible subordinated notes for redemption. All of the convertible
subordinated notes were converted into 4.2 million shares of EMCOR common stock.
As of June 30, 2001, EMCOR's total borrowing capacity under its revolving credit
facility was $150.0 million. EMCOR had approximately $16.0 million of letters of
credit outstanding under the revolving credit facility as of that date. There
were no revolving loans outstanding as of June 30, 2001 and December 31, 2000
under the revolving credit facility.
EMCOR believes that current cash balances and borrowing capacity available under
lines of credit, combined with cash expected to be generated from operations,
will be sufficient to provide short-term and foreseeable long-term liquidity and
meet expected capital expenditure requirements.
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Reform Act of 1995, particularly
statements regarding market opportunities, market share growth, competitive
growth, gross profit, and selling, general and administrative expenses. These
forward-looking statements involved risks and uncertainties, that could cause
actual results to differ materially from those in any such forward-looking
statements. Such factors include, but are not limited to adverse changes in
general economic conditions, including changes in the specific markets for
EMCOR's services, adverse business conditions, decreased or lack of growth in
the mechanical and electrical construction and facilities services industries,
increased competition, pricing pressures, risks associated with foreign
operations and other factors.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The information on legal proceedings is hereby incorporated by reference to Note
P of EMCOR's Notes to Consolidated Financial Statements included in EMCOR's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
ITEM 2 - CHANGES IN SECURITIES
The Company called for redemption on June 11, 2001 and June 25, 2001 one-half of
its $115.0 million aggregate principal amount of 5 3/4% Convertible Subordinated
Notes due April 1, 2005 (the "Notes"). Notes were redeemable into EMCOR common
stock at a conversion price of $27.34 per share or approximately 36.5764 shares
of EMCOR common stock per $1,000 principal amounts of Notes. As of June 25,
2001, 100% of the Notes were converted into an aggregate of approximately 4.2
million shares of EMCOR common stock.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Incorporated by Reference
Exhibit No Description to, or Page Number
---------- ----------- -------------------------
11 Computation of Basic Note C of the Notes
EPS and Diluted EPS to the Condensed Consolidated
for the three and six Financial Statements.
months ended June 30,
2001 and 2000
(b) No reports on Form 8-K were filed during the quarter ended June 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EMCOR GROUP, INC.
----------------------------------------------
(Registrant)
Date: July 26, 2001 By: /s/FRANK T. MACINNIS
----------------------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
Date: July 26, 2001 By: /s/LEICLE E. CHESSER
----------------------------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer
Date: July 26, 2001 By: /s/ MARK A. POMPA
----------------------------------------------
Mark A. Pompa
Vice President and
Controller