UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-8267
EMCOR Group, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 11-2125338
- --------------------------------- ---------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification
of Incorporation or Organization) Number)
301 Merritt Seven
Norwalk, Connecticut 06851-1092
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(Address of Principal Executive (Zip Code)
Offices)
(203) 849-7800
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(Registrant's Telephone Number, Including Area Code)
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 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 such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(Section 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes |_| No |_|
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |X| Accelerated filer |_|
Non-accelerated filer |_| (Do not check if a smaller reporting company)
Smaller reporting company |_|
Indicate by check mark whether the registrant is a shell company (as
defined by Rule 12b-2 of the Exchange Act). Yes |_| No |X|
Applicable Only To Corporate Issuers
Number of shares of Common Stock outstanding as of the close of
business on July 28, 2009: 65,882,245 shares.
EMCOR GROUP, INC.
INDEX
Page No.
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
as of June 30, 2009 and December 31, 2008 1
Condensed Consolidated Statements of Operations -
three months ended June 30, 2009 and 2008 3
Condensed Consolidated Statements of Operations -
six months ended June 30, 2009 and 2008 4
Condensed Consolidated Statements of Cash Flows -
six months ended June 30, 2009 and 2008 5
Condensed Consolidated Statements of
Equity and Comprehensive Income -
six months ended June 30, 2009 and 2008 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 20
Item 3 Quantitative and Qualitative Disclosures about Market Risk 33
Item 4 Controls and Procedures 34
PART II - Other Information
Item 4 Submission of Matters to a Vote of Security Holders 34
Item 6 Exhibits 35
PART I. - FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- --------------------------------------------------------------------------------
June 30, December 31,
2009 2008
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 521,471 $ 405,869
Accounts receivable, net 1,249,020 1,390,973
Costs and estimated earnings in excess
of billings on uncompleted contracts 89,062 105,441
Inventories 45,924 54,601
Prepaid expenses and other 59,620 53,856
---------- ----------
Total current assets 1,965,097 2,010,740
Investments, notes and other long-term
receivables 22,668 14,958
Property, plant and equipment, net 94,802 96,716
Goodwill 586,127 582,714
Identifiable intangible assets, net 287,211 292,128
Other assets 11,842 11,148
---------- ----------
Total assets $2,967,747 $3,008,404
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
- --------------------------------------------------------------------------------
June 30, December 31,
2009 2008
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities:
Borrowings under working capital credit line $ -- $ --
Current maturities of long-term debt and capital
lease obligations 3,405 3,886
Accounts payable 405,791 500,881
Billings in excess of costs and estimated
earnings on uncompleted contracts 629,758 601,834
Accrued payroll and benefits 184,447 221,564
Other accrued expenses and liabilities 172,367 184,990
---------- ----------
Total current liabilities 1,395,768 1,513,155
Long-term debt and capital lease obligations 193,729 196,218
Other long-term obligations 238,209 248,262
---------- ----------
Total liabilities 1,827,706 1,957,635
---------- ----------
Equity:
EMCOR Group, Inc. stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, zero issued and outstanding -- --
Common stock, $0.01 par value, 200,000,000 shares
authorized, 68,483,424 and 68,089,280 shares
issued, respectively 685 681
Capital surplus 403,729 397,895
Accumulated other comprehensive loss (46,482) (49,318)
Retained earnings 790,098 708,511
Treasury stock, at cost 2,628,993 and 2,569,184
shares, respectively (15,875) (14,424)
---------- ----------
Total EMCOR Group, Inc. stockholders' equity 1,132,155 1,043,345
Noncontrolling interests 7,886 7,424
---------- ----------
Total equity 1,140,041 1,050,769
---------- ----------
Total liabilities and equity $2,967,747 $3,008,404
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)(Unaudited)
- --------------------------------------------------------------------------------
Three months ended June 30, 2009 2008
- --------------------------------------------------------------------------------
Revenues $1,422,670 $1,722,972
Cost of sales 1,207,786 1,497,761
---------- ----------
Gross profit 214,884 225,211
Selling, general and administrative expenses 136,974 151,824
Restructuring expenses 3,050 57
---------- ----------
Operating income 74,860 73,330
Interest expense (1,900) (2,638)
Interest income 1,086 2,059
---------- ----------
Income before income taxes 74,046 72,751
Income tax provision 28,818 28,520
---------- ----------
Net income including noncontrolling interests 45,228 44,231
Less: Net income attributable to noncontrolling
interests (409) (277)
---------- ----------
Net income attributable to EMCOR Group, Inc. $ 44,819 $ 43,954
========== ==========
Basic earnings per common share:
Net income attributable to EMCOR Group, Inc.
common stockholders $ 0.68 $ 0.67
========== ==========
Diluted earnings per common share:
Net income attributable to EMCOR Group, Inc.
common stockholders $ 0.67 $ 0.65
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)(Unaudited)
- --------------------------------------------------------------------------------
Six months ended June 30, 2009 2008
- --------------------------------------------------------------------------------
Revenues $2,817,306 $3,384,375
Cost of sales 2,409,263 2,969,239
---------- ----------
Gross profit 408,043 415,136
Selling, general and administrative expenses 264,769 292,066
Restructuring expenses 4,110 71
---------- ----------
Operating income 139,164 122,999
Interest expense (3,693) (6,625)
Interest income 2,628 5,192
---------- ----------
Income before income taxes 138,099 121,566
Income tax provision 55,500 47,931
---------- ----------
Net income including noncontrolling interests 82,599 73,635
Less: Net income attributable to noncontrolling
interests (1,012) (353)
---------- ----------
Net income attributable to EMCOR Group, Inc. $ 81,587 $ 73,282
========== ==========
Basic earnings per common share:
Net income attributable to EMCOR Group, Inc.
common stockholders $ 1.24 $ 1.12
========== ==========
Diluted earnings per common share:
Net income attributable to EMCOR Group, Inc.
common stockholders $ 1.22 $ 1.09
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)(Unaudited)
- -------------------------------------------------------------------------------------------------------
Six months ended June 30, 2009 2008
- -------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income including noncontrolling interests $ 82,599 $ 73,635
Depreciation and amortization 13,157 12,332
Amortization of identifiable intangible assets 9,817 12,193
Deferred income taxes 4,031 (11,614)
Excess tax benefits from share-based compensation (593) (665)
Equity income from unconsolidated entities (1,419) (481)
Other non-cash items 8,267 4,149
Distributions from unconsolidated entities 1,482 2,553
Changes in operating assets and liabilities 21,008 18,648
-------- --------
Net cash provided by operating activities 138,349 110,750
-------- --------
Cash flows from investing activities:
Payments for acquisitions of businesses, identifiable intangible assets
and related earn-out agreements (13,563) (44,123)
Proceeds from sale of property, plant and equipment 437 627
Purchase of property, plant and equipment (13,223) (16,086)
Investment in and advances to unconsolidated entities and joint ventures (8,000) (1,292)
Net disbursements related to other investments -- (238)
-------- --------
Net cash used in investing activities (34,349) (61,112)
-------- --------
Cash flows from financing activities:
Proceeds from working capital credit line -- 58,500
Repayments of working capital credit line -- (58,500)
Repayments of long-term debt (1,522) (26,585)
Repayments of capital lease obligations (812) (509)
Proceeds from exercise of stock options 709 922
Issuance of common stock under employee stock purchase plan 1,001 --
Distributions to noncontrolling interests (550) --
Excess tax benefits from share-based compensation 593 665
-------- --------
Net cash used in financing activities (581) (25,507)
-------- --------
Effect of exchange rate changes on cash and cash equivalents 12,183 (257)
-------- --------
Increase in cash and cash equivalents 115,602 23,874
Cash and cash equivalents at beginning of year 405,869 251,637
-------- --------
Cash and cash equivalents at end of period $521,471 $275,511
======== ========
Supplemental cash flow information:
Cash paid for:
Interest $ 2,909 $ 5,586
Income taxes $ 54,622 $ 51,948
Non-cash financing activities:
Assets acquired under capital lease obligations $ -- $ 393
Capital lease obligations terminated $ 674 $ --
Contingent purchase price accrued $ 1,639 $ 3,687
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
AND COMPREHENSIVE INCOME
(In thousands)(Unaudited)
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EMCOR Group, Inc. Stockholders
------------------------------------------------------
Accumulated
other
Comprehensive Common Capital comprehensive Retained Treasury Noncontrolling
Total income stock surplus (loss) income (1) earnings stock interests
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 2008 $ 891,734 $678 $387,288 $(15,102) $526,307 $(14,130) $6,693
Net income including
noncontrolling interests 73,635 $73,635 -- -- -- 73,282 -- 353
Foreign currency translation
adjustments (1,372) (1,372) -- -- (1,372) -- -- --
Pension adjustment, net of tax
benefit of $0.3 million 820 820 -- -- 820 -- -- --
-------
Comprehensive income 73,083
Less: Net income attributable
to noncontrolling interests (353)
-------
Comprehensive income
attributable to EMCOR $72,730
=======
Issuance of treasury stock
for restricted stock units (2) -- -- (108) -- -- 108 --
Treasury stock, at cost (3) (493) -- -- -- -- (493) --
Common stock issued under
stock option plans, net of
tax benefit(4) 2,066 1 2,065 -- -- -- --
Share-based compensation
expense 3,637 -- 3,637 -- -- -- --
---------- ---- -------- -------- -------- -------- ------
Balance, June 30, 2008 $ 970,027 $679 $392,882 $(15,654) $599,589 $(14,515) $7,046
========== ==== ======== ======== ======== ======== ======
Balance, January 1, 2009 $1,050,769 $681 $397,895 $(49,318) $708,511 $(14,424) $7,424
Net income including
noncontrolling interests 82,599 $82,599 -- -- -- 81,587 -- 1,012
Foreign currency translation
adjustments 1,812 1,812 -- -- 1,812 -- -- --
Pension adjustment, net of tax
benefit of $0.6 million 1,543 1,543 -- -- 1,543 -- -- --
Deferred loss on cash flow
hedge, net of tax benefit of
$0.4 million (519) (519) -- -- (519) -- -- --
-------
Comprehensive income 85,435
Less: Net income attributable
to noncontrolling interests (1,012)
-------
Comprehensive income
attributable to EMCOR $84,423
=======
Treasury stock, at cost (3) (1,589) -- -- -- -- (1,589) --
Common stock issued under
share-based compensation
plans, net of tax
benefit (4) 1,427 4 1,285 -- -- 138 --
Common stock issued under
employee stock purchase plan 1,001 -- 1,001 -- -- -- --
Distributions to noncontrolling
interests (550) -- -- -- -- -- (550)
Share-based compensation
expense 3,548 -- 3,548 -- -- -- --
---------- ---- -------- -------- -------- -------- ------
Balance, June 30, 2009 $1,140,041 $685 $403,729 $(46,482) $790,098 $(15,875) $7,886
========== ==== ======== ======== ======== ======== ======
(1) Represents cumulative foreign currency translation adjustments, pension
liability and derivative adjustments.
(2) Represents common stock transferred at cost from treasury stock upon the
issuance of restricted stock units.
(3) Represents value of shares of common stock withheld by EMCOR for income tax
withholding requirements upon the issuance of restricted stock units.
(4) Includes the tax benefit associated with share-based compensation of $0.7
million and $0.8 million for the six months ended June 30, 2009 and 2008,
respectively.
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
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 accounting principles
generally accepted in the United States have been condensed or omitted.
References to the "Company," "EMCOR," "we," "us," "our" and words of similar
import refer to EMCOR Group, Inc. and its consolidated subsidiaries unless the
context indicates otherwise. Readers of this report should refer to the
consolidated financial statements and the notes thereto included in our latest
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
In our opinion, the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting only of a normal recurring
nature) necessary to present fairly our financial position and the results of
our operations. The results of operations for the three and six month periods
ended June 30, 2009 are not necessarily indicative of the results to be expected
for the year ending December 31, 2009. We have evaluated all subsequent events
through the time of filing this Form 10-Q with the Securities and Exchange
Commission on July 30, 2009, the date the financial statements were issued.
Certain reclassifications of prior year amounts have been made to conform to
current year presentation.
NOTE B New Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board "FASB" issued
Statement No. 141 (revised 2007), "Business Combinations" ("Statement 141(R)").
Statement 141(R) changes the accounting for acquisitions, specifically
eliminating the step acquisition model, changing the recognition of contingent
consideration from being recognized when it is probable to being recognized at
the time of acquisition, disallowing the capitalization of transaction costs and
changing when restructurings related to acquisitions can be recognized. This
statement is effective for fiscal years beginning on or after December 15, 2008,
and, as such, we adopted the provisions of this statement on January 1, 2009.
This statement only affects the accounting for acquisitions that are made after
its adoption.
In December 2007, the FASB issued Statement No. 160, "Noncontrolling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51" ("Statement
160"). This statement is effective for fiscal years beginning on or after
December 15, 2008, with earlier adoption prohibited, and, as such, we adopted
the provisions of this statement on January 1, 2009. This statement requires the
recognition of a noncontrolling interest (minority interest) as equity in the
consolidated financial statements and separate from our equity. The amount of
net income attributable to the noncontrolling interest is included in
consolidated net income on the face of the income statement. It also amends
certain of ARB No. 51's consolidation procedures for consistency with the
requirements of Statement 141(R). This statement also includes expanded
disclosure requirements regarding the interests of the parent and its
noncontrolling interest.
In March 2008, the FASB issued Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133"
("Statement 161"). Statement 161 requires entities to provide enhanced
disclosures about how and why an entity uses derivative instruments, how
derivative instruments and related hedged items are accounted for under FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("Statement 133") and its related interpretations, and how
derivative instruments and related hedged items affect an entity's financial
position, financial performance and cash flows. Statement 161 was effective for
fiscal years and interim periods beginning after November 15, 2008, and, as
such, we adopted the provisions of this statement on January 1, 2009. Although
Statement 161 requires enhanced disclosures, its adoption did not affect our
financial position and results of operations.
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE B New Accounting Pronouncements - (continued)
In April 2008, the FASB issued FASB Staff Position ("FSP") FAS No. 142-3,
"Determination of the Useful Life of Intangible Assets" ("FSP FAS 142-3"). FSP
FAS 142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset under Statement No. 142, "Goodwill and Other Intangible Assets"
("Statement 142"). The intent of this FSP is to improve the consistency between
the useful life of a recognized intangible asset, as determined under the
provisions of Statement 142, and the period of expected cash flows used to
measure the fair value of the asset in accordance with Statement 141(R). FSP FAS
142-3 was effective for fiscal years beginning after December 15, 2008 and is to
be applied prospectively to intangible assets acquired subsequent to its
effective date. Accordingly, we adopted the provisions of this FSP on January 1,
2009. The impact that the adoption of this FSP may have on our financial
position and results of operations will depend on the nature and extent of any
intangible assets acquired subsequent to its effective date.
In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities" ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in
computing earnings per share pursuant to the two-class method, as described in
Statement No. 128, "Earnings per Share" ("Statement 128"). The FSP requires
companies to treat unvested share-based payment awards that have non-forfeitable
rights to dividends or dividend equivalents as a separate class of securities in
calculating earnings per share. FSP EITF 03-6-1 is to be applied on a
retrospective basis and was effective for fiscal years beginning after December
15, 2008; as such, we adopted the provisions of this FSP on January 1, 2009. The
adoption of this FSP did not have any effect on our results of operations.
In November 2008, the FASB ratified EITF Issue No. 08-6, "Equity Method
Investment Accounting Considerations" ("EITF No. 08-6"). EITF No. 08-6 clarifies
the accounting for certain transactions and impairment considerations involving
equity method investments. EITF No. 08-6 was effective for fiscal years
beginning on or after December 15, 2008, and we adopted the provisions of this
statement on January 1, 2009. The adoption of EITF No. 08-6 did not have any
effect on our consolidated financial statements.
In December 2008, the FASB issued FSP FAS No. 132(R)-1, "Employers' Disclosures
about Postretirement Benefit Plan Assets" ("FSP FAS 132(R)-1"). FSP FAS 132(R)-1
amends Statement 132(R), and requires that an employer provide objective
disclosures about the plan assets of a defined benefit pension plan or other
postretirement plan, including disclosures about investment policies and
strategies, categories of plan assets, fair value measurements of plan assets
and significant concentrations of risk. FSP FAS 132(R)-1 is effective for fiscal
years ending after December 15, 2009, and, as such, we plan to adopt the
provisions of FSP FAS 132(R)-1 as of December 31, 2009. Although FSP FAS
132(R)-1 requires enhanced disclosures, its adoption will not affect our
financial position and results of operations.
In April 2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board
("APB") No. 28-1, "Interim Disclosures about Fair Value of Financial
Instruments" ("FSP FAS 107-1 and APB Opinion 28-1"). This statement is effective
for interim or annual fiscal periods ending after June 15, 2009, and, as such,
we adopted the provisions of this statement on June 30, 2009. FSP FAS 107-1 and
APB Opinion 28-1 requires fair value disclosures for financial instruments that
are not reflected in the Condensed Consolidated Balance Sheets at fair value.
Prior to the issuance of FSP FAS 107-1 and APB Opinion 28-1, the fair values of
those assets and liabilities were only disclosed annually. With the issuance of
this statement, we are now required to disclose this information on a quarterly
basis. While the adoption of this FSP required enhanced disclosure, it did not
have any effect on our consolidated financial statements.
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE B New Accounting Pronouncements - (continued)
In April 2009, the FASB issued FSP FAS No. 141(R)-1, "Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination that Arise from
Contingencies" ("FSP FAS No. 141(R)-1"). We adopted FSP FAS No. 141(R)-1 on
January 1, 2009. FSP FAS No. 141(R)-1 applies to all assets acquired and all
liabilities assumed in a business combination that arise from contingencies. FSP
FAS No. 141(R)-1 states that the acquirer will recognize such an asset or
liability if the acquisition-date fair value of that asset or liability can be
determined during the measurement period. If it cannot be determined during the
measurement period, then the asset or liability should be recognized at the
acquisition date if the following criteria, consistent with FASB Statement No.
5, "Accounting for Contingencies", are met: (1) information is available before
the acquisition date and (2) the amount of the asset or liability can be
reasonably estimated. The adoption of this FSP did not have any effect on our
consolidated financial statements.
In April 2009, the FASB issued FSP FAS No. 157-4, "Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly" ("FSP FAS 157-4").
This statement is effective for interim or annual periods ending after June 15,
2009, and, as such, we adopted the provisions of this statement on June 30,
2009. FSP FAS 157-4 clarifies the methodology to be used to determine the fair
value when there is no active market or where the price inputs being used
represent distressed sales. The adoption of this FSP did not have any effect on
our consolidated financial statements.
In May 2009, the FASB issued Statement No. 165, "Subsequent Events" ("Statement
165"). This statement is effective for interim or annual periods ending after
June 15, 2009, and, as such, we adopted the provisions of this statement on June
30, 2009. This statement establishes the accounting for and disclosure of events
that occur after the balance sheet date but before the financial statements are
issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date, that is, whether that date represents the date the financial statements
were issued or were available to be issued. While the adoption of Statement 165
required enhanced disclosure, it did not have any effect on our consolidated
financial statements.
In June 2009, the FASB issued Statement No. 167, "Amendments to FASB
Interpretation No. 46(R)" ("Statement 167"). Statement 167 amends FASB
Interpretation No. 46(R), "Consolidation of Variable Interest Entities" ("FIN
46(R)") and changes the consolidation guidance related to a variable interest
entity ("VIE"). It also amends the guidance governing the determination of
whether an enterprise is the primary beneficiary of a VIE and is, therefore,
required to consolidate an entity, by requiring a qualitative analysis rather
than a quantitative analysis. The qualitative analysis will include, among other
things, consideration of who has the power to direct the activities of the
entity that most significantly impact the entity's economic performance and who
has the obligation to absorb the losses or the right to receive the benefits of
the VIE that could potentially be significant to the VIE. This statement also
requires continuous reassessments of whether an enterprise is the primary
beneficiary of a VIE. Previously, FIN 46(R) required reconsideration of whether
an enterprise is the primary beneficiary of a VIE only when specific events had
occurred. Statement 167 also requires enhanced disclosures about an enterprise's
involvement with a VIE. This statement is effective for interim and annual
periods beginning after November 15, 2009, and, as such, we plan to adopt the
provisions of Statement 167 on January 1, 2010. We have not determined the
effect, if any, that the adoption of Statement 167 may have on our financial
position and/or results of operations.
In June 2009, the FASB issued Statement No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles - a
replacement of FASB Statement No. 162" ("Statement 168"). Statement 168
establishes the FASB Accounting Standards Codification as the source of
authoritative accounting principles recognized by the FASB to be applied to
nongovernmental entities in the preparation of financial statements in
conformity with generally accepted accounting principles in the United States.
This statement is effective for financial statements issued for interim and
annual fiscal periods ending after September 15, 2009. We will adopt the
provisions of this statement on July 1, 2009, and it will not have any effect on
our consolidated financial statements.
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE C Acquisitions of Businesses
On March 2, 2009, we acquired a company for an immaterial amount. This company
provides mobile mechanical services and has been included in our United States
facilities services reporting segment.
During 2008, we acquired five companies, which were not material individually or
in the aggregate, for an aggregate purchase price of $82.5 million. One of the
companies primarily provides industrial services to refineries, another
primarily provides industrial maintenance services, and two others primarily
perform mobile mechanical services. All four of the foregoing companies' results
have been included in our United States facilities services reporting segment.
The fifth company is a fire protection company that has been included in our
United States mechanical construction and facilities services reporting segment.
Goodwill and identifiable intangible assets attributable to these companies, in
the aggregate, were valued at $15.1 million and $48.8 million, respectively,
representing the excess of the aggregate purchase price over the fair value
amounts assigned to their net tangible assets.
We believe these acquisitions further our goals of service and geographical
diversification and/or expansion of our facilities services operations and fire
protection operations.
The purchase prices of certain of these acquisitions are subject to finalization
based on certain contingencies provided for in the purchase agreements. These
acquisitions were accounted for by the purchase method in 2008 and by the
acquisition method in 2009, and the purchase prices have been allocated to the
assets acquired and liabilities assumed, based upon the estimated fair values of
the respective assets and liabilities at the dates of the respective
acquisitions.
NOTE D Earnings Per Share
Calculation of Basic and Diluted Earnings per Common Share
The following tables summarize our calculation of Basic and Diluted Earnings per
Common Share ("EPS") for the three and six month periods ended June 30, 2009 and
2008 (in thousands, except share and per share data):
For the
three months ended
June 30,
---------------------------
2009 2008
----------- -----------
Numerator:
Net income attributable to EMCOR Group, Inc. common stockholders $ 44,819 $ 43,954
=========== ===========
Denominator:
Weighted average shares outstanding used to compute basic earnings per common share 65,835,298 65,322,768
Effect of diluted securities - Share-based awards 1,426,815 1,978,349
----------- -----------
Shares used to compute diluted earnings per common share 67,262,113 67,301,117
=========== ===========
Basic earnings per common share:
Net income attributable to EMCOR Group, Inc. common stockholders $ 0.68 $ 0.67
=========== ===========
Diluted earnings per share:
Net income attributable to EMCOR Group, Inc. common stockholders $ 0.67 $ 0.65
=========== ===========
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE D Earnings Per Share - (continued)
For the
six months ended
June 30,
---------------------------
2009 2008
----------- -----------
Numerator:
Net income attributable to EMCOR Group, Inc. common stockholders $ 81,587 $ 73,282
=========== ===========
Denominator:
Weighted average shares outstanding used to compute basic earnings per common share 65,847,911 65,294,160
Effect of diluted securities - Share-based awards 1,294,417 1,842,950
----------- -----------
Shares used to compute diluted earnings per common share 67,142,328 67,137,110
=========== ===========
Basic earnings per common share:
Net income attributable to EMCOR Group, Inc. common stockholders $ 1.24 $ 1.12
=========== ===========
Diluted earnings per common share:
Net income attributable to EMCOR Group, Inc. common stockholders $ 1.22 $ 1.09
=========== ===========
There were 516,386 and 686,386 anti-dilutive stock options that were excluded
from the calculation of diluted EPS for the three and six month periods ended
June 30, 2009, respectively. There were 285,624 and 295,624 anti-dilutive stock
options that were excluded from the calculation of diluted EPS for the three and
six month periods ended June 30, 2008, respectively.
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE E Inventories
Inventories consist of the following amounts (in thousands):
June 30, December 31,
2009 2008
------------ ------------
Raw materials and construction materials $ 18,346 $ 22,845
Work in process 27,578 31,756
------------ ------------
$ 45,924 $ 54,601
============ ============
NOTE F Investments, Notes and Other Long-Term Receivables
One of our subsidiaries has a 40% interest in a venture that designs,
constructs, owns, operates, leases and maintains facilities to produce chilled
water for sale to customers for use in air conditioning of commercial
properties. The other venture partner, Baltimore Gas and Electric (a subsidiary
of Constellation Energy), has a 60% interest. During the second quarter of 2009,
the venture, using its own cash and cash from additional capital contributions,
acquired its outstanding bonds in the principal amount of $25.0 million. As a
result of this, we were required to make an additional capital contribution of
$8.0 million to the venture.
NOTE G Long-Term Debt
Long-term debt in the accompanying Condensed Consolidated Balance Sheets
consisted of the following amounts (in thousands):
June 30, December 31,
2009 2008
------------ ------------
Term Loan $ 196,250 $ 197,750
Capitalized lease obligations 864 2,313
Other 20 41
------------ ------------
197,134 200,104
Less: current maturities 3,405 3,886
------------ ------------
$ 193,729 $ 196,218
============ ============
On September 19, 2007, we entered into an agreement providing for a $300.0
million term loan ("Term Loan"). The proceeds were used to pay a portion of the
consideration for the acquisition of FR X Ohmstede Acquisition Co. ("Ohmstede")
and costs and expenses incident thereto. The Term Loan contains covenants,
representations and warranties and events of default. The Term Loan covenants
require, among other things, maintenance of certain financial ratios and certain
restrictions with respect to payment of dividends, common stock repurchases,
investments, acquisitions, indebtedness and capital expenditures. We are
required to make principal payments on the Term Loan in installments on the last
day of March, June, September and December of each year, which commenced in
March 2008, in the amount of $0.75 million. A final payment comprised of all
remaining principal and interest is due in October 2010. The Term Loan is
secured by substantially all of our assets and most of the assets of our U.S.
subsidiaries. The Term Loan bears interest at (1) the prime commercial lending
rate announced by Bank of Montreal from time to time (3.25% at June 30, 2009)
plus 0.0% to 0.5% based on certain financial tests or (2) U.S. dollar LIBOR
(0.31% at June 30, 2009) plus 1.0% to 2.25% based on certain financial tests.
The interest rate in effect at June 30, 2009 was 1.31% (see Note H, "Derivative
Instrument and Hedging Activity"). We capitalized approximately $4.0 million of
debt issuance costs associated with the Term Loan. This amount is being
amortized over the life of the loan and is included as part of interest expense.
Since September 19, 2007, we have made prepayments under the Term Loan of $99.25
million, and mandatory repayments of $4.5 million, to reduce the balance to
$196.25 million at June 30, 2009.
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE H Derivative Instrument and Hedging Activity
We account for derivatives in accordance with Statement 133. This standard, as
amended, requires that all derivative instruments be recorded on the balance
sheet at their fair value and that changes in fair value be recorded each period
in current earnings or comprehensive income.
On January 27, 2009, we entered into an interest rate swap agreement (the "Swap
Agreement") providing for an interest rate swap which hedges the interest rate
risk on our Term Loan. We do not enter into financial instruments for trading or
speculative purposes. The Swap Agreement is used to manage the variable interest
rate of our Term Loan and related overall cost of borrowing. We mitigate the
risk of counterparty nonperformance by choosing as our counterparty a major
reputable financial institution with an investment grade credit rating.
The derivative is recognized as either an asset or liability on our Condensed
Consolidated Balance Sheets with measurement at fair value, and changes in the
fair value of the derivative instrument reported in either net income or other
comprehensive income depending on the designated use of the derivative and
whether or not it meets the criteria for hedge accounting. The fair value of
this instrument reflects the net amount required to settle the position. The
accounting for gains and losses associated with changes in fair value of the
derivative and the related effects on the condensed consolidated financial
statements is subject to their hedge designation and whether they meet
effectiveness standards.
The Swap Agreement matures in October 2010, and has an amortizing notional
amount that coincides with our Term Loan. We pay a fixed rate of 1.225% and
receive a floating rate of 30 day LIBOR on the notional amount. This interest
rate swap has been designated as an effective cash flow hedge, whereby changes
in the cash flows from the swap perfectly offset the changes in the cash flows
associated with the floating rate of interest on the Term Loan (see Note G,
"Long-Term Debt"). The fair value of the interest rate swap at June 30, 2009 was
a net liability of $0.9 million based upon the valuation technique known as the
market standard methodology of netting the discounted future fixed cash flows
and the discounted expected variable cash flows. The variable cash flows are
based on an expectation of future interest rates (forward curves) derived from
observable interest rate curves. In addition, we have incorporated a credit
valuation adjustment into our calculation of fair value of the interest rate
swap. This adjustment recognizes both our nonperformance risk and the respective
counterparty's nonperformance risk. The net liability was included in "Other
long-term obligations" on our Condensed Consolidated Balance Sheet. Accumulated
other comprehensive loss at June 30, 2009 included the accumulated loss, net of
income taxes, on the cash flow hedge, of $0.5 million.
We have an agreement with our derivative counterparty that contains a provision
that if we default on certain of our indebtedness, we could also be declared in
default on our derivative obligation.
As of June 30, 2009, the fair value of our derivative is $0.9 million and is in
a net liability position. We have no obligation to post any collateral related
to this derivative. As the credit value adjustment for counterparty
nonperformance is immaterial, had we breached any of the provisions at June 30,
2009, we would have been required to settle our obligation under the Swap
Agreement at its termination value of $0.9 million.
NOTE I Fair Value Measurements
On January 1, 2008, we adopted the provisions of FASB Statement No. 157, "Fair
Value Measurements" related to financial assets and liabilities, and on January
1, 2009, we adopted the provisions of FSP No. 157-2, "Effective Date of FASB
Statement No. 157" related to non-financial assets and liabilities
(collectively, "Statement 157"). Statement 157 establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. The hierarchy, which gives the highest priority to quoted prices in
active markets, is comprised of the following three levels:
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE I Fair Value Measurements - (continued)
Level 1 - Unadjusted quoted market prices in active markets for identical
assets and liabilities.
Level 2 - Observable inputs, other than Level 1 inputs. Level 2 inputs
would typically include quoted prices in markets that are not active or
financial instruments for which all significant inputs are observable,
either directly or indirectly.
Level 3 - Prices or valuations that require inputs that are both
significant to the measurement and unobservable.
We measure the fair value of our derivative instrument on a recurring basis. At
June 30, 2009, the $0.9 million fair value of the interest rate swap was
determined using Level 2 inputs.
We believe that the carrying values of our financial instruments, which include
accounts receivable and other financing commitments, approximate their fair
values due primarily to their short-term maturities and low risk of counterparty
default. The carrying value of our Term Loan approximates the fair value due to
the variable rate on such debt.
NOTE J Income Taxes
For the three months ended June 30, 2009 and 2008, our income tax provisions
were $28.8 million and $28.5 million, respectively, based on an effective income
tax rate, before discrete items, of 39% for both periods. For the six months
ended June 30, 2009 and 2008, our income tax provisions were $55.5 million and
$47.9 million, respectively, based on effective income tax rates, before
discrete items, of 39% for both periods.
As of June 30, 2009 and December 31, 2008, the amount of unrecognized income tax
benefits was $9.6 million (of which $6.3 million would favorably affect our
effective income tax rate, if recognized).
We recognized interest expense related to unrecognized income tax positions in
the income tax provision. As of June 30, 2009 and December 31, 2008, we had
approximately $4.0 million and $3.7 million, respectively, of accrued interest
related to unrecognized income tax benefits included as a liability on the
Condensed Consolidated Balance Sheets, of which less than $0.1 million and
approximately $0.1 million was recorded during each of the three and six month
periods ended June 30, 2009.
It is possible that approximately $1.3 million of unrecognized income tax
benefits at June 30, 2009, primarily relating to uncertain tax positions
attributable to certain intercompany transactions, will become recognized income
tax benefits in the next twelve months due to the expiration of applicable
statutes of limitations.
We file income tax returns with the Internal Revenue Service and various states,
local and foreign jurisdictions. With few exceptions, we are no longer subject
to tax audits by any tax authorities for years prior to 2004. The Internal
Revenue Service has completed its audit of our federal income tax returns for
the years 2005 through 2007. We agreed to the assessment proposed by the
Internal Revenue Service pursuant to such audit and paid such amount. We
recorded a charge of approximately $1.9 million, inclusive of interest, for this
settlement in the first quarter of 2009, which is reflected in the results for
the six months ended June 30, 2009.
NOTE K Common Stock
As of June 30, 2009 and December 31, 2008, 65,854,431 and 65,520,096 shares of
our common stock were outstanding, respectively.
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE K Common Stock - (continued)
For the three months ended June 30, 2009 and 2008, 23,734 and 65,628 shares of
common stock, respectively, were issued upon the exercise of stock options and
upon the satisfaction of required conditions under certain of our share-based
compensation plans. For the six months ended June 30, 2009 and 2008, 387,067 and
165,612 shares of common stock, respectively, were issued upon the exercise of
stock options, upon the satisfaction of required conditions under certain of our
share-based compensation plans and upon the grants of shares of common stock.
On June 18, 2008, our stockholders approved the adoption by our Board of
Directors of an Employee Stock Purchase Plan (the "Stock Purchase Plan"), which
became effective on October 1, 2008. Under the terms of the Stock Purchase Plan,
the maximum number of shares of our common stock that may be purchased is
3,000,000 shares. Generally, our employees and non-union employees of our United
States and Canadian subsidiaries are eligible to participate in the Stock
Purchase Plan. Employees covered by collective bargaining agreements generally
will not be eligible to participate.
NOTE L Retirement Plans
Our United Kingdom subsidiary has a defined benefit pension plan covering all
eligible employees (the "UK Plan"); however, no individual joining the company
after October 31, 2001 may participate in the plan.
Components of Net Periodic Pension Benefit Cost
The components of net periodic pension benefit cost of the UK Plan for three and
six months ended June 30, 2009 and 2008 were as follows (in thousands):
For the three months ended June 30, For the six months ended June 30,
----------------------------------- ---------------------------------
2009 2008 2009 2008
------- ------- ------- -------
Service cost $ 782 $ 1,160 $ 1,506 $ 2,323
Interest cost 2,969 3,801 5,721 7,612
Expected return on plan assets (2,415) (3,807) (4,653) (7,624)
Amortization of prior service cost and actuarial loss -- -- -- --
Amortization of unrecognized loss 1,048 546 2,019 1,094
------- ------- ------- -------
Net periodic pension benefit cost $ 2,384 $ 1,700 $ 4,593 $ 3,405
======= ======= ======= =======
Employer Contributions
For the six months ended June 30, 2009, our United Kingdom subsidiary
contributed $3.9 million to its defined benefit pension plan. It anticipates
contributing an additional $4.2 million during the remainder of 2009.
NOTE M Segment Information
We have the following reportable segments which provide services associated with
the design, integration, installation, start-up, operation and maintenance of
various systems: (a) United States electrical construction and facilities
services (involving systems for electrical power transmission and distribution;
premises electrical and lighting systems; low-voltage systems, such as fire
alarm, security and process control; voice and data communication; roadway and
transit lighting; and fiber optic lines); (b) United States mechanical
construction and facilities services (involving systems for heating,
ventilation, air conditioning, refrigeration and clean-room process ventilation;
fire protection; plumbing, process and high-purity piping; water and wastewater
treatment and central plant heating and cooling); (c) United States facilities
services; (d) Canada construction and facilities services; (e) United Kingdom
construction and facilities services; and (f) Other international construction
and facilities services. The segment "United States facilities services"
principally consists of those operations which provide a portfolio of services
needed to support the operation and maintenance of customers' facilities
(industrial maintenance and
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE M Segment Information - (continued)
services; outage services to utilities and industrial plants; commercial and
government site-based operations and maintenance; military base operations
support services; mobile maintenance and services; facilities management;
installation and support for building systems; technical consulting and
diagnostic services; small modification and retrofit projects; retrofit projects
to comply with clean air laws; and program development, management and
maintenance for energy systems), which services are not generally related to
customers' construction programs, as well as industrial services operations,
which primarily provide aftermarket maintenance and repair services, replacement
parts and fabrication services for highly engineered shell and tube heat
exchangers for refineries and the petrochemical industry. The Canada, United
Kingdom and Other international segments perform electrical construction,
mechanical construction and facilities services. Our "Other international
construction and facilities services" segment, currently operating only in the
Middle East, represents our operations outside of the United States, Canada and
the United Kingdom. The following tables present information about industry
segments and geographic areas for the three and six months ended June 30, 2009
and 2008 (in thousands):
For the three months ended June 30,
-----------------------------------
2009 2008
---------- ----------
Revenues from unrelated entities:
United States electrical construction and facilities services $ 329,861 $ 429,915
United States mechanical construction and facilities services 534,322 626,725
United States facilities services 365,724 403,218
---------- ----------
Total United States operations 1,229,907 1,459,858
Canada construction and facilities services 72,037 96,496
United Kingdom construction and facilities services 120,726 166,618
Other international construction and facilities services -- --
---------- ----------
Total worldwide operations $1,422,670 $1,722,972
========== ==========
For the three months ended June 30,
-----------------------------------
2009 2008
---------- ----------
Total revenues:
United States electrical construction and facilities services $ 331,793 $ 431,467
United States mechanical construction and facilities services 538,997 631,794
United States facilities services 370,440 405,535
Less intersegment revenues (11,323) (8,938)
---------- ----------
Total United States operations 1,229,907 1,459,858
Canada construction and facilities services 72,037 96,496
United Kingdom construction and facilities services 120,726 166,618
Other international construction and facilities services -- --
---------- ----------
Total worldwide operations $1,422,670 $1,722,972
========== ==========
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE M Segment Information - (continued)
For the six months ended June 30,
-----------------------------------
2009 2008
---------- ----------
Revenues from unrelated entities:
United States electrical construction and facilities services $ 646,542 $ 831,193
United States mechanical construction and facilities services 1,054,608 1,228,899
United States facilities services 729,443 756,662
---------- ----------
Total United States operations 2,430,593 2,816,754
Canada construction and facilities services 150,217 202,200
United Kingdom construction and facilities services 236,496 365,421
Other international construction and facilities services -- --
---------- ----------
Total worldwide operations $2,817,306 $3,384,375
========== ==========
For the six months ended June 30,
-----------------------------------
2009 2008
---------- ----------
Total revenues:
United States electrical construction and facilities services $ 650,261 $ 833,183
United States mechanical construction and facilities services 1,062,575 1,240,278
United States facilities services 736,886 760,692
Less intersegment revenues (19,129) (17,399)
---------- ----------
Total United States operations 2,430,593 2,816,754
Canada construction and facilities services 150,217 202,200
United Kingdom construction and facilities services 236,496 365,421
Other international construction and facilities services -- --
---------- ----------
Total worldwide operations $2,817,306 $3,384,375
========== ==========
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE M Segment Information - (continued)
For the three months ended June 30,
-----------------------------------
2009 2008
---------- ----------
Operating income (loss):
United States electrical construction and facilities services $ 31,721 $ 24,869
United States mechanical construction and facilities services 29,390 25,298
United States facilities services 24,326 35,080
---------- ----------
Total United States operations 85,437 85,247
Canada construction and facilities services 4,104 3,155
United Kingdom construction and facilities services 3,550 3,913
Other international construction and facilities services -- --
Corporate administration (15,181) (18,928)
Restructuring expenses (3,050) (57)
---------- ----------
Total worldwide operations 74,860 73,330
Other corporate items:
Interest expense (1,900) (2,638)
Interest income 1,086 2,059
---------- ----------
Income before income taxes $ 74,046 $ 72,751
========== ==========
For the six months ended June 30,
-----------------------------------
2009 2008
---------- ----------
Operating income (loss):
United States electrical construction and facilities services $ 57,673 $ 42,085
United States mechanical construction and facilities services 52,420 42,942
United States facilities services 46,056 60,621
---------- ----------
Total United States operations 156,149 145,648
Canada construction and facilities services 8,859 5,615
United Kingdom construction and facilities services 5,744 6,038
Other international construction and facilities services -- (596)
Corporate administration (27,478) (33,635)
Restructuring expenses (4,110) (71)
---------- ----------
Total worldwide operations 139,164 122,999
Other corporate items:
Interest expense (3,693) (6,625)
Interest income 2,628 5,192
---------- ----------
Income before income taxes $ 138,099 $ 121,566
========== ==========
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE M Segment Information - (continued)
June 30, December 31,
2009 2008
---------- ------------
Total assets:
United States electrical construction and facilities services $ 321,466 $ 379,945
United States mechanical construction and facilities services 733,549 810,199
United States facilities services 1,082,334 1,088,474
---------- ----------
Total United States operations 2,137,349 2,278,618
Canada construction and facilities services 108,359 128,460
United Kingdom construction and facilities services 232,936 203,764
Other international construction and facilities services -- --
Corporate administration 489,103 397,562
---------- ----------
Total worldwide operations $2,967,747 $3,008,404
========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
We are one of the largest electrical and mechanical construction and facilities
services firms in the United States, Canada, and the United Kingdom and in the
world. We provide services to a broad range of commercial, industrial, utility
and institutional customers through approximately 75 operating subsidiaries and
joint venture entities. Our offices are located in the United States, Canada and
the United Kingdom. In the Middle East, we carry on business through a joint
venture.
Overview
The following table presents selected financial data for the three months ended
June 30, 2009 and 2008 (in thousands, except percentages and per share data):
For the three months ended June 30,
-----------------------------------
2009 2008
---------- ----------
Revenues $1,422,670 $1,722,972
Revenues (decrease) increase from prior year (17.4)% 25.6%
Operating income $ 74,860 $ 73,330
Operating income as a percentage of revenues 5.3% 4.3%
Net income attributable to EMCOR Group, Inc. $ 44,819 $ 43,954
Diluted earnings per common share $ 0.67 $ 0.65
The results of our operations for the second quarter of 2009 reflected record
highs for any EMCOR second quarter in terms of gross margin (gross profit as a
percentage of revenues), operating income, operating margin (operating income as
a percentage of revenues), net income and diluted earnings per common share;
however, revenues decreased compared to the year ago quarter. The improvement in
operating income was primarily attributable to: (a) reduced selling, general and
administrative expenses, (b) the turnaround in the performance of one of our
operations within our United States mechanical construction and facilities
services segment, which operation had experienced large operating losses in the
second quarter of 2008, (c) a favorable job close-out within our United States
electrical construction and facilities services segment and (d) a charge to
expense in 2008 of $7.9 million in connection with an adverse ruling in a
lawsuit (the "UOSA Action") within our United States mechanical construction and
facilities services segment. The operating income of our Canada construction and
facilities services segment also improved for the 2009 second quarter compared
to the year ago quarter. These increases were partially offset by lower
operating income from our United States facilities services segment and an
increase in restructuring expenses.
The decrease in revenues for the 2009 second quarter when compared to the prior
year's second quarter was primarily attributable to: (a) a decrease in work
performed on commercial and hospitality projects as a result of the economic
slowdown and (b) the unfavorable exchange rate effects of the weakening British
pound and Canadian dollar against the United States dollar. During the second
quarter of 2009, companies we acquired within the prior 12 months, reported
within our United States facilities services segment, contributed $27.3 million
to revenues and $0.8 million to operating income (net of $1.1 million of
amortization expense attributable to identifiable intangible assets recorded to
cost of sales and selling, general and administrative expenses).
Cash provided by operating activities increased by $27.6 million for the first
six months of 2009, compared to the first six months of 2008, primarily due to
an increase in net income and changes in our working capital. Cash used for
investing activities decreased by $26.8 million for the first six months of
2009, compared to the first six months of 2008, primarily due to a $30.6 million
decrease in payments for acquisitions of businesses, identifiable intangible
assets and payments pursuant to related earn-out agreements. Cash used in
financing activities decreased by $24.9 million during the 2009 first six
months, compared to the prior year's first six months, primarily due to
repayment of a portion of our long-term indebtedness in the first six months of
2008. Interest expense for the first six months of 2009 was $3.7 million, a $2.9
million decrease compared to the first six months of 2008. The decrease in
interest expense was related to a reduction in our long-term indebtedness and
lower interest rates as compared to 2008. Interest income for the first six
months of 2009 was $2.6 million, a $2.6 million decrease compared to the first
six months of 2008. The decrease in interest income was primarily related to
lower interest rates received on our invested cash balances.
We completed one acquisition during the first six months of 2009 for an
immaterial amount. The acquired company, which provides mobile mechanical
services, has been included in our United States facilities services segment and
expands our service capabilities in a geographical area in which we had been
already operating. The acquisition is not material to our results of operations
for the periods presented.
Operating Segments
We have the following reportable segments which provide services associated with
the design, integration, installation, start-up, operation and maintenance of
various systems: (a) United States electrical construction and facilities
services (involving systems for electrical power transmission and distribution;
premises electrical and lighting systems; low-voltage systems, such as fire
alarm, security and process control; voice and data communication; roadway and
transit lighting; and fiber optic lines); (b) United States mechanical
construction and facilities services (involving systems for heating,
ventilation, air conditioning, refrigeration and clean-room process ventilation;
fire protection; plumbing, process and high-purity piping; water and wastewater
treatment and central plant heating and cooling); (c) United States facilities
services; (d) Canada construction and facilities services; (e) United Kingdom
construction and facilities services; and (f) Other international construction
and facilities services. The segment "United States facilities services"
principally consists of those operations which provide a portfolio of services
needed to support the operation and maintenance of customers' facilities
(industrial maintenance and services; outage services to utilities and
industrial plants; commercial and government site-based operations and
maintenance; military base operations support services; mobile maintenance and
services; facilities management; installation and support for building systems;
technical consulting and diagnostic services; small modification and retrofit
projects; retrofit projects to comply with clean air laws; and program
development, management and maintenance for energy systems), which services are
not generally related to customers' construction programs, as well as industrial
services operations, which primarily provide aftermarket maintenance and repair
services, replacement parts and fabrication services for highly engineered shell
and tube heat exchangers for refineries and the petrochemical industry. The
Canada, United Kingdom and Other international segments perform electrical
construction, mechanical construction and facilities services. Our "Other
international construction and facilities services" segment, currently operating
only in the Middle East, represents our operations outside of the United States,
Canada and the United Kingdom.
Results of Operations
Revenues
The following tables present our operating segment revenues from unrelated
entities and their respective percentages of total revenues (in thousands,
except for percentages):
For the three months ended June 30,
-----------------------------------------------
% of % of
2009 Total 2008 Total
---------- ----- ---------- -----
Revenues:
United States electrical construction and facilities services $ 329,861 23% $ 429,915 25%
United States mechanical construction and facilities services 534,322 38% 626,725 36%
United States facilities services 365,724 26% 403,218 23%
---------- ----------
Total United States operations 1,229,907 86% 1,459,858 85%
Canada construction and facilities services 72,037 5% 96,496 6%
United Kingdom construction and facilities services 120,726 8% 166,618 10%
Other international construction and facilities services -- -- -- --
---------- ----------
Total worldwide operations $1,422,670 100% $1,722,972 100%
========== ==========
For the six months ended June 30,
-----------------------------------------------
% of % of
2009 Total 2008 Total
---------- ----- ---------- -----
Revenues:
United States electrical construction and facilities services $ 646,542 23% $ 831,193 25%
United States mechanical construction and facilities services 1,054,608 37% 1,228,899 36%
United States facilities services 729,443 26% 756,662 22%
---------- ----------
Total United States operations 2,430,593 86% 2,816,754 83%
Canada construction and facilities services 150,217 5% 202,200 6%
United Kingdom construction and facilities services 236,496 8% 365,421 11%
Other international construction and facilities services -- -- -- --
---------- ----------
Total worldwide operations $2,817,306 100% $3,384,375 100%
========== ==========
As described below in more detail, our revenues for the three months ended June
30, 2009 decreased to $1.4 billion compared to $1.7 billion of revenues for the
three months ended June 30, 2008, and our revenues for the six months ended June
30, 2009 decreased to $2.8 billion compared to $3.4 billion for the six months
ended June 30, 2008. The decrease in revenues for the three and six month
periods ended June 30, 2009, compared to the same periods in 2008, extended
across all of our business segments and was primarily attributable to: (a) lower
levels of work in our United States electrical construction and facilities
services and mechanical construction and facilities services segments, most
notably on hospitality and commercial projects and (b) the unfavorable exchange
rate effects of the weakening British pound and Canadian dollar against the
United States dollar. This decrease was partially offset by an increase in
revenues for the three and six months ended June 30, 2009 of $27.3 million and
$64.7 million, respectively, attributable to companies acquired within the past
12 months, which are reported within our United States facilities services and
United States mechanical construction and facilities services segments.
Our backlog at June 30, 2009 was $3.40 billion compared to $4.67 billion of
backlog at June 30, 2008. Our backlog was $4.00 billion at December 31, 2008.
Backlog decreases as we perform work on existing contracts and increases with
awards of new contracts. The decrease in our United States electrical
construction and facilities services and our United States mechanical
construction and facilities services segments' backlog at June 30, 2009,
compared to such backlog at June 30, 2008, was primarily due to a decrease in
awards within the hospitality, commercial and industrial construction markets,
partially offset by an increase in awards in the institutional construction
market. Backlog is not a term recognized under United States generally accepted
accounting principles; however, it is a common measurement used in our industry.
Backlog includes unrecognized revenues to be realized from uncompleted
construction contracts plus unrecognized revenues expected to be realized over
the remaining term of facilities services contracts. However, if the remaining
term of a facilities services contract exceeds 12 months, the unrecognized
revenues attributable to such contract included in backlog are limited to only
the next 12 months of revenues.
Revenues of our United States electrical construction and facilities services
segment for the three months ended June 30, 2009 decreased $100.1 million
compared to the three months ended June 30, 2008. Revenues of this segment for
the six months ended June 30, 2009 decreased $184.7 million compared to the six
months ended June 30, 2008. The decrease in revenues for both periods was
primarily attributable to lower levels of work on commercial and hospitality
projects, most notably in the Chicago, Las Vegas, New York City and Washington
D.C. markets, as a result of the recession and tight credit markets.
Revenues of our United States mechanical construction and facilities services
segment for the three months ended June 30, 2009 decreased $92.4 million
compared to the three months ended June 30, 2008. Revenues of this segment for
the six months ended June 30, 2009 decreased $174.3 million compared to the six
months ended June 30, 2008. The decrease in revenues for both periods was
primarily attributable to a decrease in work on hospitality projects, most
notably in the Las Vegas market, and commercial projects. These decreases in
revenues for both periods were offset by an increase in revenues from work
performed on industrial and healthcare projects. Additionally, the decrease in
revenues for the six months ended June 30, 2009 was offset by revenues of $2.2
million from a company acquired during the prior 12 months.
Our United States facilities services revenues decreased $37.5 million for the
three months ended June 30, 2009 compared to the three months ended June 30,
2008 and $27.2 million for the six months ended June 30, 2009 compared to the
six months ended June 30, 2008. The decreases in revenues during the three and
six months ended June 30, 2009 were primarily attributable to lower revenues
from (a) our industrial services operations, (i) which benefited in 2008 from a
significant turnaround/expansion contract at a refinery and (ii) which
experienced adverse industry conditions that led to lower demand for our shop
and field refinery and petrochemical services in 2009 and (b) our mobile
mechanical services group as a result of lower revenues from discretionary
project and controls work. These decreases in revenues for the three and six
month periods ended June 30, 2009 were offset by: (a) revenues of $27.3 million
and $62.5 million, respectively, from companies acquired during the prior 12
months, which perform maintenance services for utility and industrial plants and
perform mobile mechanical services and (b) increases in site-based government
facilities services revenues.
Revenues of our Canada construction and facilities services segment decreased by
$24.5 million for the three months ended June 30, 2009 compared to the three
months ended June 30, 2008. Revenues of this segment decreased $52.0 million for
the six months ended June 30, 2009 compared to the six months ended June 30,
2008. $11.2 million and $29.5 million of the decrease in revenues for the three
and six months ended June 30, 2009, respectively, was a result of the weakening
of the Canadian dollar against the United States dollar. The balance of the
decrease in revenues was primarily attributable to fewer contracts for
automotive and energy projects. This decrease in revenues was partially offset
by more work on healthcare related projects.
United Kingdom construction and facilities services revenues decreased $45.9
million for the three months ended June 30, 2009, compared to the three months
ended June 30, 2008. Approximately $32.8 million of this decrease was a result
of the weakening of the British pound against the United States dollar. Revenues
of this segment decreased $128.9 million for the six months ended June 30, 2009,
compared to the six months ended June 30, 2008. Approximately $76.3 million of
this decrease was a result of the weakening of the British pound against the
United States dollar. In addition, the decrease in revenues was partially
attributable to a decrease in revenues relating to rail contracts and lower
revenues from the United Kingdom's construction business.
Other international construction and facilities services activities consist of
operations currently operating only in the Middle East. All of the current
projects in this market are being performed through a joint venture. The results
of the joint venture were accounted for under the equity method.
Cost of sales and Gross profit
The following tables present our cost of sales, gross profit (revenues less cost
of sales) and gross profit margin (gross profit as a percentage of revenues) (in
thousands, except for percentages):
For the three months ended June 30, For the six months ended June 30,
------------------------------------ ---------------------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Cost of sales $1,207,786 $1,497,761 $2,409,263 $2,969,239
Gross profit $ 214,884 $ 225,211 $ 408,043 $ 415,136
Gross profit, as a percentage of revenues 15.1% 13.1% 14.5% 12.3%
Our gross profit decreased $10.3 million for the three months ended June 30,
2009 compared to the three months ended June 30, 2008. Gross profit decreased
$7.1 million for the six months ended June 30, 2009 compared to the six months
ended June 30, 2008. Gross profit margin was 15.1% and 13.1% for the three
months ended June 30, 2009 and 2008, respectively. Gross profit margin was 14.5%
and 12.3% for the six months ended June 30, 2009 and 2008, respectively. The
decrease in gross profit for the 2009 periods compared to the 2008 periods was
primarily attributable to lower gross profit from our industrial services and
mobile mechanical operations within our United States facilities services
segment due to lower levels of work and from our international operations due to
the unfavorable exchange rate effects of the weakening British pound and
Canadian dollar against the United States dollar. The decrease in gross profit
was offset by increases in the gross profit contributed by our United States
electrical construction and facilities services and mechanical construction and
facilities services segments and by companies acquired during the prior 12
months. Companies acquired during the prior 12 months contributed $2.7 million
and $6.2 million to gross profit, net of amortization expense of $0.7 million
and $1.9 million, for the three and six months ended June 30, 2009,
respectively. The increase in the gross profit margin for the three and six
months ended June 30, 2009 was primarily the result of (a) improved margins
within our United States electrical construction and facilities services segment
as a result of favorable job close-outs and (b) a charge to expense in 2008 of
$7.9 million in connection with the UOSA Action within our United States
mechanical construction and facilities services segment.
Selling, general and administrative expenses
The following tables present our 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, For the six months ended June 30,
----------------------------------- ---------------------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Selling, general and administrative expenses $ 136,974 $ 151,824 $ 264,769 $ 292,066
Selling, general and administrative expenses,
as a percentage of revenues 9.6% 8.8% 9.4% 8.6%
Our selling, general and administrative expenses for the three months ended June
30, 2009 decreased $14.9 million to $137.0 million compared to $151.8 million
for the three months ended June 30, 2008. Selling, general and administrative
expenses as a percentage of revenues were 9.6% and 9.4% for the three and six
months ended June 30, 2009, compared to 8.8% and 8.6% for the three and six
months ended June 30, 2008, respectively. The decrease in selling, general and
administrative expenses for the three and six months ended June 30, 2009
compared to the three and six months ended June 30, 2008 was primarily due to:
(a) lower incentive compensation accruals as a result of reduced forecasted
earnings in 2009 compared to 2008, (b) lower employee costs, such as salaries
and employee benefits, as a result of downsizing of staff at numerous locations,
(c) a $8.2 million decrease as a result of changes in the rates of exchange of
British pounds and Canadian dollars for United States dollars due to the
weakening of the British pound and Canadian dollar and (d) favorable effects
attributable to changes during the three and six month periods ended June 30,
2009 in the valuation of our phantom stock units, whose value is tied to the
value of our common stock. Certain of the phantom stock units referred to above
were settled in cash during the first quarters of 2009 and 2008. These decreases
in selling, general and administrative expenses were partially offset by (a) a
$4.8 million increase in such expenses for the first six months of 2009 directly
related to companies acquired within the prior 12 months, including amortization
expense of $0.9 million and (b) a $3.8 million increase in our provision for
doubtful accounts.
Restructuring expenses
Restructuring expenses, primarily related to employee severance obligations,
were $3.0 million and $4.1 million for the three and six months ended June 30,
2009, respectively. Restructuring expenses were $0.06 million and $0.07 million
for the three and six months ended June 30, 2008. Restructuring expenses for the
first half of 2009 were primarily related to our international operations, our
United States mechanical construction and facilities services segment and our
United States facilities services segment. As of June 30, 2009, the balance of
our severance obligations was $1.2 million and is expected to be paid in 2009.
Operating income
The following tables present our operating income (loss) and operating income
(loss) as a percentage of segment revenues from unrelated entities (in
thousands, except for percentages):
For the three months ended June 30,
----------------------------------------------
% of % of
Segment Segment
2009 Revenues 2008 Revenues
-------- -------- -------- --------
Operating income (loss):
United States electrical construction and facilities services $ 31,721 9.6% $ 24,869 5.8%
United States mechanical construction and facilities services 29,390 5.5% 25,298 4.0%
United States facilities services 24,326 6.7% 35,080 8.7%
-------- --------
Total United States operations 85,437 6.9% 85,247 5.8%
Canada construction and facilities services 4,104 5.7% 3,155 3.3%
United Kingdom construction and facilities services 3,550 2.9% 3,913 2.3%
Other international construction and facilities services -- -- -- --
Corporate administration (15,181) -- (18,928) --
Restructuring expenses (3,050) -- (57) --
-------- --------
Total worldwide operations 74,860 5.3% 73,330 4.3%
Other corporate items:
Interest expense (1,900) (2,638)
Interest income 1,086 2,059
-------- --------
Income before income taxes $ 74,046 $ 72,751
======== ========
For the six months ended June 30,
----------------------------------------------
% of % of
Segment Segment
2009 Revenues 2008 Revenues
-------- -------- -------- --------
Operating income (loss):
United States electrical construction and facilities services $ 57,673 8.9% $ 42,085 5.1%
United States mechanical construction and facilities services 52,420 5.0% 42,942 3.5%
United States facilities services 46,056 6.3% 60,621 8.0%
-------- --------
Total United States operations 156,149 6.4% 145,648 5.2%
Canada construction and facilities services 8,859 5.9% 5,615 2.8%
United Kingdom construction and facilities services 5,744 2.4% 6,038 1.7%
Other international construction and facilities services -- -- (596) --
Corporate administration (27,478) -- (33,635) --
Restructuring expenses (4,110) -- (71) --
-------- --------
Total worldwide operations 139,164 4.9% 122,999 3.6%
Other corporate items:
Interest expense (3,693) (6,625)
Interest income 2,628 5,192
-------- --------
Income before income taxes $138,099 $121,566
======== ========
As described below in more detail, operating income increased by $1.5 million
for the three months ended June 30, 2009 to $74.9 million compared to operating
income of $73.3 million for the three months ended June 30, 2008. Operating
income increased by $16.2 million for the six months ended June 30, 2009 to
$139.2 million compared to $123.0 million for the six months ended June 30,
2008. Operating income as a percentage of revenues ("operating margin")
increased to 5.3% for the three months ended June 30, 2009 compared to 4.3% for
the three months ended June 30, 2008, and increased to 4.9% for the six months
ended June 30, 2009 compared to 3.6% for the six months ended June 30, 2008. The
improvement in operating margin was in large part due to the increase in the
gross profit margin from our domestic construction segments, as well as improved
operating performance by our international businesses.
United States electrical construction and facilities services operating income
of $31.7 million for the three months ended June 30, 2009 increased $6.9 million
compared to operating income of $24.9 million for the three months ended June
30, 2008. Operating income of $57.7 million for the six months ended June 30,
2009 increased $15.6 million compared to operating income of $42.1 million for
the six months ended June 30, 2008. The increases in operating income for the
three and six months ended June 30, 2009 compared to the same periods in 2008
were primarily the result of increased gross profit from industrial projects,
including favorable job close-outs, and from healthcare and transportation
projects offset by lower gross profit from hospitality and commercial projects.
Selling, general and administrative expenses also decreased for the three and
six months ended June 30, 2009 compared to the same periods in 2008 principally
due to lower employee costs, such as salaries and employee benefits, as a result
of downsizing of staff at numerous locations.
United States mechanical construction and facilities services operating income
for the three months ended June 30, 2009 was $29.4 million, a $4.1 million
increase compared to operating income of $25.3 million for the three months
ended June 30, 2008. Operating income for the six months ended June 30, 2009 was
$52.4 million, a $9.5 million improvement compared to operating income of $42.9
million for the six months ended June 30, 2008. Operating income increased
during the three and six months ended June 30, 2009 compared to the prior year
periods primarily due to: (a) a charge to expense in 2008 of $7.9 million in
connection with the UOSA Action, (b) increased gross profits from industrial and
healthcare projects and (c) the turnaround in the performance of one of our
operations which had experienced large operating losses in the first half of
2008. These increases were offset by notably lower operating income from our Las
Vegas subsidiary and from commercial construction projects as a result of the
current economic slowdown. Selling, general and administrative expenses were
lower primarily due to lower employee costs, such as salaries and employee
benefits, as a result of downsizing of staff at numerous locations.
United States facilities services operating income for the three months ended
June 30, 2009 was $24.3 million compared to operating income of $35.1 million
for the three months ended June 30, 2008. Operating income for the six months
ended June 30, 2009 was $46.1 million compared to operating income of $60.6
million for the six months ended June 30, 2008. The decreases in operating
income during the three and six months ended June 30, 2009 compared to the prior
year periods were primarily due to lower operating income from (a) our
industrial services operations, (i) which benefited in 2008 from a significant
turnaround/expansion contract at a refinery and (ii) which experienced adverse
industry conditions that led to lower demand for our shop and field refinery and
petrochemical services in 2009 and (b) our mobile mechanical services as a
result of lower discretionary project and controls work in the first six months
of 2009 when compared to the first six months of 2008. The decreases in
operating income during the three and six months ended June 30, 2009 were
partially offset (a) by operating income from companies acquired within the
prior 12 months, which contributed $0.8 million and $1.5 million of operating
income, net of amortization expense of $1.1 million and $2.8 million,
respectively, and which perform maintenance services at utility and industrial
plants and perform mobile mechanical services and (b) by an increase in
operating income from our site-based government facilities services operations.
Selling, general and administrative expenses increased by $3.0 million in the
first six months of 2009 when compared to the comparable prior year period,
primarily due to companies acquired within the prior 12 months.
Our Canada construction and facilities services operating income was $4.1
million for the three months ended June 30, 2009, compared to operating income
of $3.2 million for the three months ended June 30, 2008. This segment's
operating income was $8.9 million for the six months ended June 30, 2009
compared to operating income of $5.6 million for the six months ended June 30,
2008. The operating income improvement for the first six months of 2009 compared
to the first six months of 2008 was primarily due to improved results from
industrial, commercial and energy construction contracts and reduced selling,
general and administrative expenses as a result of a reduction in employees and
lower discretionary expenses. Operating income for the first six months of 2009
was adversely impacted by (a) $2.7 million in restructuring expenses, (b) $0.6
million and $1.7 million for the three and six months ended June 30, 2009,
respectively, relating to the rate of exchange of Canadian dollars for United
States dollars as a result of the weakening of the Canadian dollar and (c)
reduced automotive projects.
Our United Kingdom construction and facilities services operating income for the
three months ended June 30, 2009 was $3.6 million compared to operating income
of $3.9 million for the three months ended June 30, 2008. This segment's
operating income was $5.7 million for the six months ended June 30, 2009
compared to operating income of $6.0 million for the six months ended June 30,
2008. The decrease in operating income was primarily attributable to decreases
of $1.0 million and $1.8 million for the three and six months ended June 30,
2009, respectively, relating to the rate of exchange of British pounds for
United States dollars as a result of the weakening of the British pound and
lower operating income from the facilities services group in the United Kingdom.
We had no operating income from our Other international construction and
facilities services segment for the three month periods ended June 30, 2009 and
2008, respectively. This segment had no operating income for the six months
ended June 30, 2009 compared to an operating loss of $0.6 million for the six
months ended June 30, 2008.
Our corporate administration expenses for the three months ended June 30, 2009
were $15.2 million compared to $18.9 million for the three months ended June 30,
2008. Our corporate administrative expenses for the six months ended June 30,
2009 were $27.5 million compared to $33.6 million for the six months ended June
30, 2008. These decreases in expenses were primarily attributable to (a) lower
incentive compensation accruals, (b) favorable effects atributable to changes in
the valuation of our phantom stock units, whose value is tied to the value of
our common stock and (c) reduced employee benefits and marketing expenses
incurred.
Interest expense for the three months ended June 30, 2009 and 2008 was $1.9
million and $2.6 million, respectively. Interest expense for the six months
ended June 30, 2009 and 2008 was $3.7 million and $6.6 million, respectively.
The decrease in interest expense was related to a reduction in long-term
indebtedness and lower interest rates as compared to 2008. Interest income for
the three months ended June 30, 2009 was $1.1 million compared to $2.1 million
for the three months ended June 30, 2008. Interest income for the six months
ended June 30, 2009 was $2.6 million compared to $5.2 million for the six months
ended June 30, 2008. The decrease in interest income was primarily related to
lower interest rates received on our invested cash balances.
For the three months ended June 30, 2009 and 2008, our income tax provision was
$28.8 million and $28.5 million, respectively, based on an effective income tax
rate, before discrete items, of 39% for both periods. For the six months ended
June 30, 2009 and 2008, our income tax provision was $55.5 million and $47.9
million, respectively, based on effective income tax rates, before discrete
items, of 39% for both periods.
Liquidity and Capital Resources
The following table presents our net cash provided by (used in) operating
activities, investing activities and financing activities (in thousands):
For the six months ended June 30,
---------------------------------
2009 2008
-------- --------
Net cash provided by operating activities $138,349 $110,750
Net cash used in investing activities $(34,349) $(61,112)
Net cash used in financing activities $ (581) $(25,507)
Effect of exchange rate changes on cash and cash equivalents $ 12,183 $ (257)
Our consolidated cash balance increased by approximately $115.6 million from
$405.9 million at December 31, 2008 to $521.5 million at June 30, 2009. The
$138.3 million in net cash provided by operating activities for the six months
ended June 30, 2009, which increased $27.6 million when compared to $110.8
million in net cash provided by operating activities for the six months ended
June 30, 2008, was primarily due to an increase in net income and changes in our
working capital. Net cash used in investing activities of $34.3 million for the
six months ended June 30, 2009 decreased $26.8 million compared to $61.1 million
used in the six months ended June 30, 2008 and was primarily due to a $30.6
million decrease in payments for acquisitions of businesses, identifiable
intangible assets and payments pursuant to related earn-out agreements and a
$2.9 million decrease in amounts paid for the purchase of property, plant and
equipment, partially offset by a $6.7 million increase in investment in and
advances to unconsolidated entities and joint ventures. Net cash used in
financing activities for the six months ended June 30, 2009 decreased $24.9
million compared to the six months ended June 30, 2008 and was primarily
attributable to repayment of long-term debt in 2008.
The following is a summary of material contractual obligations and other
commercial commitments (in millions):
Payments Due by Period
-----------------------------------------
Less
Contractual than 1-3 4-5 After
Obligations Total 1 year years years 5 years
- ----------------------------------------------------- -------- ------ ------ ------ -------
Term Loan (including interest at 2.225%) $ 202.0 $ 7.4 $194.6 $ -- $ --
Other long-term debt 0.1 0.1 -- -- --
Capital lease obligations 0.9 0.4 0.3 0.2 --
Operating leases 209.2 55.3 77.5 39.7 36.7
Open purchase obligations (1) 738.3 558.4 171.1 8.8 --
Other long-term obligations (2) 216.9 27.3 173.4 16.2 --
Liabilities related to uncertain income tax positions 13.6 1.3 12.3 -- --
-------- ------ ------ ------ -------
Total Contractual Obligations $1,381.0 $650.2 $629.2 $ 64.9 $ 36.7
======== ====== ====== ====== =======
Amount of Commitment Expiration by Period
-----------------------------------------
Less
Other Commercial Total than 1-3 4-5 After
Commitments Committed 1 year years years 5 years
- ----------------------------------------------------- --------- ------ ------ ------ -------
Revolving Credit Facility (3) $ -- $ -- $ -- $ -- $ --
Letters of credit 61.5 -- 61.5 -- --
-------- ------ ------ ------ -------
Total Commercial Obligations $ 61.5 $ -- $ 61.5 $ -- $ --
======== ====== ====== ====== =======
(1) Represents open purchase orders for material and subcontracting costs
related to construction and service contracts. These purchase orders are
not reflected in EMCOR's Condensed Consolidated Balance Sheets and should
not impact future cash flows, as amounts will be recovered through customer
billings.
(2) Represents primarily insurance related liabilities, a pension plan
liability and liabilities for deferred income taxes, classified as other
long-term liabilities in the Condensed Consolidated Balance Sheets. Cash
payments for insurance related liabilities may be payable beyond three
years, but it is not practical to estimate these payments. We provide
funding to our pension plans based on at least the minimum funding required
by applicable regulations. In determining the minimum required funding, we
utilize current actuarial assumptions and exchange rates to forecast
estimates of amounts that may be payable for up to five years in the
future. In our judgment, minimum funding estimates beyond a five year time
horizon cannot be reliably estimated, and, therefore, have not been
included in the table.
(3) We classify these borrowings as short-term on our Condensed Consolidated
Balance Sheets because of our intent and ability to repay the amounts on a
short-term basis. As of June 30, 2009, there were no borrowings outstanding
under the Revolving Credit Facility.
Our revolving credit agreement (the "Revolving Credit Facility") provides for a
revolving credit facility of $375.0 million. As of June 30, 2009 and December
31, 2008, we had approximately $61.5 million and $53.7 million of letters of
credit outstanding, respectively, under the Revolving Credit Facility. There
were no borrowings under the Revolving Credit Facility as of June 30, 2009 and
December 31, 2008.
On September 19, 2007, we entered into an agreement providing for a $300.0
million Term Loan. The proceeds were used to pay a portion of the consideration
for the acquisition of FR X Ohmstede Acquisition Co. ("Ohmstede") and costs and
expenses incident thereto. The Term Loan contains covenants, representations and
warranties and events of default. The Term Loan covenants require, among other
things, maintenance of certain financial ratios and certain restrictions with
respect to payment of dividends, common stock repurchases, investments,
acquisitions, indebtedness and capital expenditures. We are required to make
principal payments on the Term Loan in installments on the last day of March,
June, September and December of each year, which commenced in March 2008, in the
amount of $0.75 million. A final payment comprised of all remaining principal
and interest is due in October 2010. The Term Loan is secured by substantially
all of our assets and most of the assets of our U.S. subsidiaries. The Term Loan
bears interest at (1) the prime commercial lending rate announced by Bank of
Montreal from time to time (3.25% at June 30, 2009) plus 0.0% to 0.5% based on
certain financial tests or (2) U.S. dollar LIBOR (0.31% at June 30, 2009) plus
1.0% to 2.25% based on certain financial tests. The interest rate in effect at
June 30, 2009 was 1.31% (see Note H, "Derivative Instrument and Hedging
Activity"). Since September 19, 2007, we have made prepayments under the Term
Loan of $99.25 million, and mandatory repayments of $4.5 million, to reduce the
balance to $196.25 million at June 30, 2009.
The terms of our construction contracts frequently require that we obtain from
surety companies ("Surety Companies") and provide to our customers payment and
performance bonds ("Surety Bonds") as a condition to the award of such
contracts. The Surety Bonds secure our payment and performance obligations under
such contracts, and we have agreed to indemnify the Surety Companies for
amounts, if any, paid by them in respect of Surety Bonds issued on our behalf.
In addition, at the request of labor unions representing certain of our
employees, Surety Bonds are sometimes provided to secure obligations for wages
and benefits payable to or for such employees. Public sector contracts require
Surety Bonds more frequently than private sector contracts, and accordingly, our
bonding requirements typically increase as the amount of public sector work
increases. As of June 30, 2009, based on our percentage-of-completion of our
projects covered by Surety Bonds, our aggregate estimated exposure, had there
been defaults on all our existing contractual obligations, would have been
approximately $1.3 billion. The Surety Bonds are issued by Surety Companies in
return for premiums, which vary depending on the size and type of bond.
In recent years, there has been a reduction in the aggregate surety bond
issuance capacity of Surety Companies due to industry consolidations and
significant losses of Surety Companies as a result of providing Surety Bonds to
construction companies, as well as companies in other industries. Consequently,
the availability of Surety Bonds has become more limited and the terms upon
which Surety Bonds are available have become more restrictive. We continually
monitor our available limits of Surety Bonds and discuss with our current and
other Surety Bond providers the amount of Surety Bonds that may be available to
us based on our financial strength and the absence of any default by us on any
Surety Bond we have previously obtained. However, if we experience changes in
our bonding relationships or if there are further changes in the surety
industry, we may seek to satisfy certain customer requests for Surety Bonds by
posting other forms of collateral in lieu of Surety Bonds such as letters of
credit or guarantees by EMCOR Group, Inc., by seeking to convince customers to
forego the requirement for Surety Bonds, by increasing our activities in
business segments that rarely require Surety Bonds such as the facilities
services segment, and/or by refraining from bidding for certain projects that
require Surety Bonds. There can be no assurance that we will be able to
effectuate alternatives to providing Surety Bonds to our customers or to obtain,
on favorable terms, sufficient additional work that does not require Surety
Bonds to replace projects requiring Surety Bonds that we may decline to pursue.
Accordingly, if we were to experience a reduction in the availability of Surety
Bonds, we could experience a material adverse effect on our financial position,
results of operations and/or cash flow.
We do not have any other material financial guarantees or off-balance sheet
arrangements other than those disclosed above.
Our primary source of liquidity has been, and is expected to continue to be,
cash generated by operating activities. We also maintain our Revolving Credit
Facility that may be utilized, among other things, to meet short-term liquidity
needs in the event cash generated by operating activities is insufficient or to
enable us to seize opportunities to participate in joint ventures or to make
acquisitions that may require access to cash on short notice or for any other
reason. However, negative macroeconomic trends may have an adverse effect on
liquidity. In addition to managing borrowings, our focus on the facilities
services market is intended to provide an additional buffer against economic
downturns inasmuch as a part of our facilities services business is
characterized by annual and multi-year contracts that provide a more predictable
stream of cash flow than the construction business. Short-term liquidity is also
impacted by the type and length of construction contracts in place. During past
economic downturns, there were typically fewer small discretionary projects from
the private sector, and companies like us aggressively bid larger long-term
infrastructure and public sector contracts. Performance of long duration
contracts typically requires working capital until initial billing milestones
are achieved. While we strive to maintain a net over-billed position with our
customers, there can be no assurance that a net over-billed position can be
maintained. Our net over-billings, defined as the balance sheet accounts
"billings in excess of costs and estimated earnings on uncompleted contracts"
less "cost and estimated earnings in excess of billings on uncompleted
contracts", were $540.7 million and $496.4 million as of June 30, 2009 and
December 31, 2008, respectively.
Long-term liquidity requirements can be expected to be met through cash
generated from operating activities and our Revolving Credit Facility. Based
upon our current credit ratings and financial position, we can reasonably expect
to be able to incur long-term debt to fund acquisitions. Over the long term, our
primary revenue risk factor continues to be the level of demand for
non-residential construction services, which is influenced by macroeconomic
trends including interest rates and governmental economic policy. In addition,
our ability to perform work is critical to meeting long-term liquidity
requirements.
We believe that current cash balances and borrowing capacity available under the
Revolving Credit Facility or other forms of financing available through
borrowings, combined with cash expected to be generated from operations, will be
sufficient to provide our short-term and foreseeable long-term liquidity and
meet our expected capital expenditure requirements. However, we are a party to
lawsuits and other proceedings in which other parties seek to recover from us
amounts ranging from a few thousand dollars to over $63.0 million. If we were
required to pay damages in one or more such proceedings, such payments could
have a material adverse effect on our financial position, results of operations
and/or cash flows.
Certain Insurance Matters
As of June 30, 2009 and December 31, 2008, we utilized approximately $59.2
million and $52.2 million, respectively, of letters of credit obtained under our
Revolving Credit Facility as collateral for our insurance obligations.
New Accounting Pronouncements
We review new accounting standards to determine the expected financial impact,
if any, that the adoption of such standards will have. As of the filing of this
Quarterly Report on Form 10-Q, there were no new accounting standards that were
projected to have a material impact on our consolidated financial position,
results of operations or liquidity. Refer to Part I, Item 1, "Financial
Statements - Notes to Condensed Consolidated Financial Statements - Note B, New
Accounting Pronouncements," for further information regarding new accounting
standards.
Application of Critical Accounting Policies
Our condensed consolidated financial statements are based on the application of
significant accounting policies, which require management to make significant
estimates and assumptions. Our significant accounting policies are described in
Note B - Summary of Significant Accounting Policies of the notes to consolidated
financial statements included in Item 8 of the annual report on Form 10-K for
the year ended December 31, 2008. The following accounting policies were adopted
during the six months ended June 30, 2009: Statement 141(R), Statement 157 for
all non-financial assets and non-financial liabilities, Statement 160, Statement
161, Statement 162, Statement 165, FSP FAS 107-1, FSP FAS 141(R)-1, FSP FAS
142-3, FSP FAS 157-4, FSP EITF No. 03-6-1 and EITF Issue 08-6. We believe that
some of the more critical judgment areas in the application of accounting
policies that affect our financial condition and results of operations are the
impact of changes in the estimates and judgments pertaining to: (a) revenue
recognition from (i) long-term construction contracts for which the
percentage-of-completion method of accounting is used and (ii) services
contracts; (b) collectibility or valuation of accounts receivable; (c) insurance
liabilities; (d) income taxes; and (e) goodwill and identifiable intangible
assets.
Revenue Recognition for Long-term Construction Contracts and Services Contracts
We believe our most critical accounting policy is revenue recognition from
long-term construction contracts for which we use the percentage-of-completion
method of accounting. Percentage-of-completion accounting is the prescribed
method of accounting for long-term contracts in accordance with accounting
principles generally accepted in the United States, Statement of Position No.
81-1, "Accounting for Performance of Construction-Type and Certain
Production-Type Contracts", and, accordingly, is the method used for revenue
recognition within our industry. Percentage-of-completion is measured
principally by the percentage of costs incurred to date for each contract to the
estimated total costs for such contract at completion. Certain of our electrical
contracting business units measure percentage-of-completion by the percentage of
labor costs incurred to date for each contract to the estimated total labor
costs for such contract. Provisions for the entirety of estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Application of percentage-of-completion accounting results in the
recognition of costs and estimated earnings in excess of billings on uncompleted
contracts in our Condensed Consolidated Balance Sheets. Costs and estimated
earnings in excess of billings on uncompleted contracts reflected in the
Condensed Consolidated Balance Sheets arise when revenues have been recognized
but the amounts cannot be billed under the terms of contracts. Such amounts are
recoverable from customers upon various measures of performance, including
achievement of certain milestones, completion of specified units or completion
of a contract.
Costs and estimated earnings in excess of billings on uncompleted contracts also
include amounts we seek or will seek to collect from customers or others for
errors or changes in contract specifications or design, contract change orders
in dispute or unapproved as to both scope and price or other customer-related
causes of unanticipated additional contract costs (claims and unapproved change
orders). Such amounts are recorded at estimated net realizable value and take
into account factors that may affect our ability to bill unbilled revenues and
collect amounts after billing. Due to uncertainties inherent in estimates
employed in applying percentage-of-completion accounting, estimates may be
revised as project work progresses. Application of percentage-of-completion
accounting requires that the impact of revised estimates be reported
prospectively in the condensed consolidated financial statements. In addition to
revenue recognition for long-term construction contracts, we recognize revenues
from the performance of facilities services for maintenance, repair and retrofit
work when the criteria in Staff Accounting Bulletin No. 104, "Revenue
Recognition, revised and updated" ("SAB 104") have been met. Revenues from
service contracts are recognized consistent with the performance of services
generally on a pro-rata basis over the life of the contractual arrangement.
Expenses related to all services arrangements are recognized as incurred.
Revenues related to the engineering, manufacturing and repairing of shell and
tube heat exchangers are recognized when the product is shipped and all other
criteria in SAB 104 have been met. Costs related to this work are included in
inventory until the product is shipped. These costs include all direct material,
labor and subcontracting costs and indirect costs related to performance such as
supplies, tools and repairs.
Accounts Receivable
We are required to estimate the collectibility of accounts receivable. A
considerable amount of judgment is required in assessing the likelihood of
realization of receivables. Relevant assessment factors include the
creditworthiness of the customer, our prior collection history with the customer
and related aging of the past due balances. The provision for doubtful accounts
during the six months ended June 30, 2009 increased $3.8 million compared to the
six months ended June 30, 2008. At June 30, 2009 and December 31, 2008, our
accounts receivable of $1,249.0 million and $1,391.0 million, respectively,
included allowances for doubtful accounts of $36.7 million and $34.8 million,
respectively. Specific accounts receivable are evaluated when we believe a
customer may not be able to meet its financial obligations due to deterioration
of its financial condition or its credit ratings. The allowance requirements are
based on the best facts available and are re-evaluated and adjusted on a regular
basis and as additional information is received.
Insurance Liabilities
We have loss payment deductibles for certain workers' compensation, auto
liability, general liability and property claims, have self-insured retentions
for certain other casualty claims and are self-insured for employee-related
health care claims. Losses are recorded based upon estimates of our liability
for claims incurred and for claims incurred but not reported. The liabilities
are derived from known facts, historical trends and industry averages utilizing
the assistance of an actuary to determine the best estimate for the majority of
these obligations. We believe the liabilities recognized on our balance sheets
for these obligations are adequate. However, such obligations are difficult to
assess and estimate due to numerous factors, including severity of injury,
determination of liability in proportion to other parties, timely reporting of
occurrences and effectiveness of safety and risk management programs. Therefore,
if our actual experience differs from the assumptions and estimates used for
recording the liabilities, adjustments may be required and will be recorded in
the period that the experience becomes known.
Income Taxes
We have net deferred income tax liabilities primarily resulting from differences
between the carrying value and income tax basis of certain depreciable and
identifiable intangible assets, partially offset by non-deductible temporary
differences of $15.1 million and $13.2 million at June 30, 2009 and December 31,
2008, respectively, which will impact our taxable income in future periods. A
valuation allowance is required when it is more likely than not that all or a
portion of a deferred income tax asset will not be realized. As of June 30, 2009
and December 31, 2008, the total valuation allowance on gross deferred income
tax assets was approximately $5.2 million.
Goodwill and Identifiable Intangible Assets
As of June 30, 2009, we had $586.1 million and $287.2 million, respectively, of
goodwill and net identifiable intangible assets (primarily based on the market
values of our contract backlog, developed technology, customer relationships,
non-competition agreements and trade names), primarily arising out of the
acquisition of companies. As of December 31, 2008, goodwill and net identifiable
intangible assets were $582.7 million and $292.1 million, respectively. The
changes to goodwill and net identifiable intangible assets (net of accumulated
amortization) since December 31, 2008 were related to the acquisition of a
company during the first six months of 2009, pending the completion of the final
valuation and purchase price adjustments. In addition, goodwill increased due to
earn-outs paid and accrued related to previous acquisitions. During 2009, the
purchase price accounting for our November 2008 acquisition was finalized. As a
result, identifiable intangible assets ascribed to its goodwill, contract
backlog, customer relationships, trade name and to a non-competition agreement
were adjusted with an insignificant impact. The determination of related
estimated useful lives for identifiable intangible assets and whether those
assets are impaired involves significant judgments based upon short and
long-term projections of future performance. These forecasts reflect assumptions
regarding the ability to successfully integrate acquired companies. FASB
Statement No. 142, "Goodwill and Other Intangible Assets" ("Statement 142")
requires goodwill and other identifiable intangible assets with indefinite
useful lives not be amortized, but instead must be tested at least annually for
impairment (which we test each October 1, absent any impairment indicators), and
be written down if impaired. Statement 142 requires that goodwill be allocated
to its respective reporting unit and that identifiable intangible assets with
finite lives be amortized over their useful lives. Changes in strategy and/or
market conditions may result in adjustments to recorded goodwill and
identifiable intangible asset balances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We have not used any derivative financial instruments, except as discussed
below, during the six months ended June 30, 2009, including trading or
speculating on changes in interest rates or commodity prices of materials used
in our business.
We are exposed to market risk for changes in interest rates for borrowings under
the Revolving Credit Facility. Borrowings under the Revolving Credit Facility
bear interest at variable rates. As of June 30, 2009, there were no borrowings
outstanding under the Revolving Credit Facility. This instrument bears interest
at (1) a rate which is the prime commercial lending rate announced by Bank of
Montreal from time to time (3.25% at June 30, 2009) plus 0.0% to 0.5% based on
certain financial tests or (2) United States dollar LIBOR (0.31% at June 30,
2009) plus 1.0% to 2.25% based on certain financial tests. The interest rates in
effect at June 30, 2009 were 3.25% and 1.31% for the prime commercial lending
rate and the United States dollar LIBOR, respectively. Letter of credit fees
issued under the Revolving Credit Facility range from 1.0% to 2.25% of the
respective face amounts of the letters of credit issued and are charged based on
the type of letter of credit issued and certain financial tests. The Revolving
Credit Facility expires in October 2010. There is no guarantee that we will be
able to renew the Revolving Credit Facility at its expiration.
We had $196.25 million and $197.75 million of borrowings outstanding as of June
30, 2009 and December 31, 2008, respectively, on our Term Loan bearing interest
at the same variable rates as the Revolving Credit Facility discussed in the
preceding paragraph. The carrying value of our Term Loan approximates the fair
value due to the variable rate on such debt. In order to hedge our interest rate
risk on the Term Loan, we entered into an interest rate swap on January 27, 2009
to be effective January 30, 2009 so as to pay a fixed rate of interest and
receive a floating rate of interest of 30 day LIBOR on the amortizing notional
amount of the swap ($196.25 million as of June 30, 2009). This swap fixes the
interest rate on the Term Loan at 1.225%, plus 1.0% to 2.25% based on certain
financial tests. The fair value of the interest rate swap at June 30, 2009 was a
net liability of $0.9 million based upon the valuation technique known as the
market standard methodology of netting the discounted future fixed cash flows
and the discounted expected variable cash flows. The variable cash flows are
based on an expectation of future interest rates (forward curves) derived from
observable interest rate curves. In addition, we have incorporated a credit
valuation adjustment into our fair value of the interest rate swap. This
adjustment factors in both our nonperformance risk and the respective
counterparty's nonperformance risk. As an indication of the interest rate swap's
sensitivity to changes in interest rates based upon an immediate 50 basis point
increase in the appropriate interest rate at June 30, 2009, the termination fair
value of the interest rate swap, without consideration of nonperformance risk,
would increase by approximately $1.2 million to a net asset of $0.3 million.
Conversely, a 50 basis point decrease in that rate would decrease the fair value
of the interest rate swap, without consideration of nonperformance risk, to a
net liability of $2.1 million.
We are also exposed to construction market risk and its potential related impact
on accounts receivable or costs and estimated earnings in excess of billings on
uncompleted contracts. The amounts recorded may be at risk if our customers'
ability to pay these obligations is negatively impacted by economic conditions.
We continually monitor the creditworthiness of our customers and maintain
on-going discussions with customers regarding contract status with respect to
change orders and billing terms. Therefore, we believe we take appropriate
action to manage market and other risks, but there is no assurance that we will
be able to reasonably identify all risks with respect to collectibility of these
assets. See also the previous discussion of Accounts Receivable under the
heading, "Application of Critical Accounting Policies" in Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Amounts invested in our foreign operations are translated into U.S. dollars at
the exchange rates in effect at the end of the period. The resulting translation
adjustments are recorded as accumulated other comprehensive income (loss), a
component of equity, in our Condensed Consolidated Balance Sheets. We believe
the exposure to the effects that fluctuating foreign currencies may have on the
consolidated results of operations is limited because the foreign operations
primarily invoice customers and collect obligations in their respective local
currencies. Additionally, expenses associated with these transactions are
generally contracted and paid for in their same local currencies.
In addition, we are exposed to market risk of fluctuations in certain commodity
prices of materials, such as copper and steel, which are used as components of
supplies or materials utilized in both our construction and facilities services
operations. We are also exposed to increases in energy prices, particularly as
they relate to gasoline prices for our fleet of over 8,600 vehicles. While we
believe we can increase our prices to adjust for some price increases in
commodities, there can be no assurance that continued price increases of
commodities, if they were to occur, would be recoverable.
ITEM 4. CONTROLS AND PROCEDURES.
Based on an evaluation of our disclosure controls and procedures (as required by
Rule 13a-15(b) of the Securities Exchange Act of 1934), our Chairman of the
Board of Directors and Chief Executive Officer, Frank T. MacInnis, and our
Executive Vice President and Chief Financial Officer, Mark A. Pompa, have
concluded that our disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchanges Act of 1934) are effective as of the end
of the period covered by this report.
There have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the
Securities Exchange Act of 1934) during the fiscal quarter ended June 30, 2009
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.
PART II. - OTHER INFORMATION.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of stockholders of EMCOR (the "Annual Meeting") was held
on June 16, 2009.
(b) The Board of Directors of EMCOR consists of nine individuals each of whom
was nominated at the Annual Meeting for re-election as a director of EMCOR
for the ensuing year. Each director was re-elected.
(c) Set forth below are the names of each director elected at the Annual
Meeting, the number of shares voted for his re-election and the number of
votes withheld from his re-election. There were no broker non-votes.
Name Votes For Votes Withheld
- ---------------------- ---------------------- ----------------------
Stephen W. Bershad 56,436,585 4,733,158
David A. B. Brown 56,454,921 4,714,822
Larry J. Bump 59,990,251 1,179,492
Albert Fried, Jr. 59,543,468 1,626,275
Richard F. Hamm, Jr. 56,447,040 4,722,703
David H. Laidley 59,971,130 1,198,613
Frank T. MacInnis 58,570,735 2,599,008
Jerry E. Ryan 56,851,018 4,318,725
Michael T. Yonker 59,941,995 1,227,748
Also at the Annual Meeting, the stockholders voted upon a proposal to ratify the
appointment by the Audit Committee of the Company's Board of Directors of Ernst
& Young LLP, independent auditors, as EMCOR's independent auditors for 2009.
57,303,473 shares voted in favor of ratification, 3,822,005 shares voted against
ratification and 44,265 shares abstained from voting thereon. There were no
broker non-votes.
ITEM 6. EXHIBITS.
Exhibit Incorporated By Reference to or
No. Description Page Number
- ----------- -------------------------------------------------------- -------------------------------------------
2(a-1) Purchase Agreement dated as of February 11, 2002 by and Exhibit 2.1 to EMCOR Group, Inc.'s
among Comfort Systems USA, Inc. and EMCOR-CSI ("EMCOR") Report on Form 8-K dated
Holding Co. February 14, 2002
2(a-2) Purchase and Sale Agreement dated as of August 20, 2007 Exhibit 2.1 to EMCOR's Report on Form 8-K
between FR X Ohmstede Holdings LLC and EMCOR (Date of Report August 20, 2007)
Group, Inc.
3(a-1) Restated Certificate of Incorporation of EMCOR filed Exhibit 3(a-5) to EMCOR's Registration
December 15, 1994 Statement on Form 10 as originally filed
March 17, 1995 ("Form 10")
3(a-2) Amendment dated November 28, 1995 to the Restated Exhibit 3(a-2) to EMCOR's Annual Report on
Certificate of Incorporation of EMCOR Form 10-K for the year ended December 31,
1995 ("1995 Form 10-K")
3(a-3) Amendment dated February 12, 1998 to the Restated Exhibit 3(a-3 )to EMCOR's Annual Report on
Certificate of Incorporation of EMCOR Form 10-K for the year ended December 31,
1997 ("1997 Form 10-K")
3(a-4) Amendment dated January 27, 2006 to the Restated Exhibit 3(a-4) to EMCOR's Annual Report on
Certificate of Incorporation of EMCOR Form 10-K for the year ended December 31,
2005 ("2005 Form 10-K")
3(a-5) Amendment dated September 18, 2007 to the Restated Exhibit A to EMCOR's Proxy Statement dated
Certificate of Incorporation of EMCOR August 17, 2007 for Special Meeting of
Stockholders held September 18, 2007
3(b) Amended and Restated By-Laws Exhibit 3(b) to EMCOR's Annual Report on
Form 10-K for the year ended December 31,
1998 ("1998 Form 10-K")
4(a) U.S. $375,000,000 (originally U.S. $350,000,000) Credit Exhibit 4 to EMCOR's Report on Form 8-K
Agreement dated October 14, 2005 by and among (Date of Report October 17, 2005)
EMCOR Group, Inc. and certain of its subsidiaries and
Harris N.A. individually and as Agent for the Lenders
which are or became parties thereto (the "Credit
Agreement")
4(b) Assignment and Acceptance dated October 14, 2005 Exhibit 4(b) to 2005 Form 10-K
between Harris Nesbitt Financing, Inc. ("HNF") as
assignor, and Bank of Montreal, as assignee of 100%
interest of HNF in the Credit Agreement to Bank of
Montreal
4(c) Commitment Amount Increase Request dated November Exhibit 4(c) to 2005 Form 10-K
21, 2005 between EMCOR and the Northern Trust
Company effective November 29, 2005 pursuant to
Section 1.10 of the Credit Agreement
4(d) Commitment Amount Increase Request dated November Exhibit 4(d) to 2005 Form 10-K
21, 2005 between EMCOR and Bank of Montreal effective
November 29, 2005 pursuant to Section 1.10 of the Credit
Agreement
4(e) Commitment Amount Increase Request dated November Exhibit 4(e) to 2005 Form 10-K
21, 2005 between EMCOR and National City Bank of
Indiana effective November 29, 2005 pursuant to
Section 1.10 of the Credit Agreement
ITEM 6. EXHIBITS. - (continued)
Exhibit Incorporated By Reference to or
No. Description Page Number
- ----------- -------------------------------------------------------- -------------------------------------------
4(f) Assignment and Acceptance dated November 29, 2005 Exhibit 4(f) to 2005 Form 10-K
between Bank of Montreal, as assignor, and Fifth Third
Bank, as assignee, of 30% interest of Bank of Montreal
in the Credit Agreement to Fifth Third Bank
4(g) Assignment and Acceptance dated November 29, 2005 Exhibit 4(g) to 2005 Form 10-K
between Bank of Montreal, as assignor, and Northern
Trust Company, as assignee, of 20% interest of Bank
of Montreal in the Credit Agreement to Northern
Trust Company
4(h) Term Loan Agreement dated as of September 19, 2007 Exhibit 4.1(a) to EMCOR's Form 8-K (Date
among EMCOR, Bank of Montreal, as Administrative Agent, of Report September 19, 2007)
and the several financial institutions listed on the
signature pages thereof
4(i) Second Amended and Restated Security Agreement dated Exhibit 4.1(b) to EMCOR's Form 8-K (Date
as of September 19, 2007 among EMCOR, certain of its of Report September 19, 2007)
U.S. subsidiaries, and Harris N.A., as Agent
4(j) Second Amended and Restated Pledge Agreement dated as Exhibit 4.1(c) to EMCOR's Form 8-K (Date
of September 19, 2007 among EMCOR, certain of its U.S. of Report September 19, 2007)
subsidiaries, and Harris N.A., as Agent
4(k) Guaranty Agreement by certain of EMCOR's U.S. Exhibit 4.1(d) to EMCOR's Form 8-K (Date of
subsidiaries in favor of Harris N.A., as Agent Report September 19, 2007)
4(l) First Amendment dated as of September 19, 2007 to Exhibit 4.1(e) to EMCOR's Form 8-K
Amended and Restated Credit Agreement effective (Date of Report September 19, 2007)
October 14, 2005 among EMCOR, Harris N.A., as Agent,
and certain other lenders party thereto
10(a) Severance Agreement between EMCOR and Frank T. Exhibit 10.2 to EMCOR's Report on Form
MacInnis 8-K (Date of Report April 25, 2005)
("April 2005 Form 8-K")
10(b) Form of Severance Agreement ("Severance Agreement") Exhibit 10.1 to the April 2005 Form 8-K
between EMCOR and each of Sheldon I. Cammaker, R.
Kevin Matz and Mark A. Pompa
10(c) Form of Amendment to Severance Agreement between Exhibit 10(c) to EMCOR's Quarterly Report
EMCOR and each of Frank T. MacInnis, Sheldon I. on Form 10-Q for the quarter ended March
Cammaker, R. Kevin Matz and Mark A. Pompa 31, 2007 ("March 2007 Form 10-Q")
10(d) Letter Agreement dated October 12, 2004 between Exhibit 10.1 to EMCOR's Report on Form
Anthony Guzzi and EMCOR (the "Guzzi Letter 8-K (Date of Report October 12, 2004)
Agreement")
10(e) Form of Confidentiality Agreement between Anthony Exhibit C to Guzzi Letter Agreement
Guzzi and EMCOR
10(f) Form of Indemnification Agreement between EMCOR and Exhibit F to Guzzi Letter Agreement
each of its officers and directors
10(g-1) Severance Agreement ("Guzzi Severance Agreement") Exhibit D to the Guzzi Letter Agreement
dated October 25, 2004 between Anthony Guzzi and
EMCOR
10(g-2) Amendment to Guzzi Severance Agreement Exhibit 10(g-2) to the March 2007 Form
10-Q
10(h-1) 1994 Management Stock Option Plan ("1994 Option Exhibit 10(o) to Form 10
Plan")
ITEM 6. EXHIBITS. - (continued)
Exhibit Incorporated By Reference to or
No. Description Page Number
- ----------- -------------------------------------------------------- -------------------------------------------
10(h-2) Amendment to Section 12 of the 1994 Option Plan Exhibit (g-2) to EMCOR's Annual Report on
Form 10-K for the year ended December 31,
2000 ("2000 Form 10-K")
10(h-3) Amendment to Section 13 of the 1994 Option Plan Exhibit (g-3) to 2000 Form 10-K
10(i-1) 1995 Non-Employee Directors' Non-Qualified Stock Exhibit 10(p) to Form 10
Option Plan ("1995 Option Plan")
10(i-2) Amendment to Section 10 of the 1995 Option Plan Exhibit (h-2) to 2000 Form 10-K
10(j-1) 1997 Non-Employee Directors' Non-Qualified Stock Exhibit 10(k) to EMCOR's Annual Report on
Option Plan ("1997 Option Plan") Form 10-K for the year ended December 31,
1999 ("1999 Form 10-K")
10(j-2) Amendment to Section 9 of the 1997 Option Plan Exhibit 10(i-2) to 2000 Form 10-K
10(k) 1997 Stock Plan for Directors Exhibit 10(l) to 1999 Form 10-K
10(l-1) Continuity Agreement dated as of June 22, 1998 Exhibit 10(a) to EMCOR's Quarterly Report
between Frank T. MacInnis and EMCOR ("MacInnis on Form 10-Q for the quarter ended June
Continuity Agreement") 30, 1998 ("June 1998 Form 10-Q")
10(l-2) Amendment dated as of May 4, 1999 to MacInnis Exhibit 10(h) to EMCOR's Quarterly Report
Continuity Agreement on Form 10-Q for the quarter ended June 30,
1999 ("June 1999 Form 10-Q")
10(l-3) Amendment dated as of March 1, 2007 to MacInnis Exhibit 10(l-3) to the March 2007 Form 10-Q
Continuity Agreement
10(m-1) Continuity Agreement dated as of June 22, 1998 Exhibit 10(c) to the June 1998 Form 10-Q
between Sheldon I. Cammaker and EMCOR ("Cammaker
Continuity Agreement")
10(m-2) Amendment dated as of May 4, 1999 to Cammaker Exhibit 10(i) to the June 1999 Form 10-Q
Continuity Agreement
10(m-3) Amendment dated as of March 1, 2007 to Cammaker Exhibit 10(m-3) to the March 2007 Form
Continuity Agreement 10-Q
10(n-1) Continuity Agreement dated as of June 22, 1998 Exhibit 10(f) to the June 1998 Form 10-Q
between R. Kevin Matz and EMCOR ("Matz Continuity
Agreement")
10(n-2) Amendment dated as of May 4, 1999 to Matz Continuity Exhibit 10(m) to the June 1999 Form 10-Q
Agreement
10(n-3) Amendment dated as of January 1, 2002 to Matz Exhibit 10(o-3) to EMCOR's Quarterly Report
Continuity Agreement on Form 10-Q for the quarter ended March
31, 2002 ("March 2002 Form 10-Q")
10(n-4) Amendment dated as of March 1, 2007 to Matz Continuity Exhibit 10(n-4) to the March 2007 Form
Agreement 10-Q
10(o-1) Continuity Agreement dated as of June 22, 1998 between Exhibit 10(g) to the June 1998 Form 10-Q
Mark A. Pompa and EMCOR ("Pompa Continuity Agreement")
10(o-2) Amendment dated as of May 4, 1999 to Pompa Continuity Exhibit 10(n) to the June 1999 Form 10-Q
Agreement
10(o-3) Amendment dated as of January 1, 2002 to Pompa Exhibit 10(p-3) to the March 2002 Form
Continuity Agreement 10-Q
ITEM 6. EXHIBITS. - (continued)
Exhibit Incorporated By Reference to or
No. Description Page Number
- ----------- -------------------------------------------------------- -------------------------------------------
10(o-4) Amendment dated as of March 1, 2007 to Pompa Continuity Exhibit 10(o-4) to the March 2007 Form 10-Q
Agreement
10(p-1) Change of Control Agreement dated as of October 25, Exhibit E to Guzzi Letter Agreement
2004 between Anthony Guzzi ("Guzzi") and EMCOR
("Guzzi Continuity Agreement")
10(p-2) Amendment dated as of March 1, 2007 to Guzzi Exhibit 10(p-2) to the March 2007 Form
Continuity Agreement 10-Q
10(q) Amendment to Continuity Agreements and Severance Exhibit 10(q) to EMCOR's Annual Report
Agreements with Sheldon I. Cammaker, Anthony J. Guzzi, on Form 10-K for the year ended
Frank T. MacInnis, R. Kevin Matz and Mark A. Pompa December 31, 2008 ("2008 Form 10-K")
10(r-1) Incentive Plan for Senior Executive Officers of EMCOR Exhibit 10.3 to March 4, 2005 Form 8-K
Group, Inc. ("Incentive Plan for Senior Executives")
10(r-2) First Amendment to Incentive Plan for Senior Executives Exhibit 10(t) to 2005 Form 10-K
10(r-3) Amendment made February 27, 2008 to Incentive Plan for Exhibit 10(r-3) to 2008 Form 10-K
Senior Executive Officers
10(r-4) Amendment made December 22, 2008 to Incentive Plan for Exhibit 10(r-4) to 2008 Form 10-K
Senior Executive Officers
10(r-5) Suspension of Incentive Plan for Senior Executive Exhibit 10(r-5) to 2008 Form 10-K
Officers
10(s-1) EMCOR Group, Inc. Long-Term Incentive Plan ("LTIP") Exhibit 10 to Form 8-K (Date of Report
December 15, 2005)
10(s-2) First Amendment to LTIP and updated Schedule A to LTIP Exhibit 10(s-2) to 2008 Form 10-K
10(s-3) Form of Certificate Representing Stock Units issued Exhibit 10(t-2) to EMCOR's Annual
under LTIP Report on Form 10-K for the year ended
December 31, 2007 ("2007 Form 10-K")
10(t-1) 2003 Non-Employee Directors' Stock Option Plan Exhibit A to EMCOR's Proxy Statement
for its Annual Meeting held on June 12,
2003 ("2003 Proxy Statement")
10(t-2) First Amendment to 2003 Non-Employee Directors' Plan Exhibit 10(u-2) to EMCOR's Annual
Report on Form 10-K for the year ended
December 31, 2006 ("2006 Form 10-K")
10(u-1) 2003 Management Stock Incentive Plan Exhibit B to EMCOR's 2003 Proxy
Statement
10(u-2) Amendments to 2003 Management Stock Incentive Plan Exhibit 10(t-2) to EMCOR's Annual
Report on Form 10-K for the year ended
December 31, 2003 ("2003 Form 10-K")
10(u-3) Second Amendment to 2003 Management Stock Incentive Exhibit 10(v-3) to 2006 Form 10-K
Plan
ITEM 6. EXHIBITS. - (continued)
Exhibit Incorporated By Reference to or
No. Description Page Number
- ----------- ------------------------------------------------------- -------------------------------------------
10(v) Form of Stock Option Agreement evidencing grant of Exhibit 10.1 to Form 8-K (Date of
stock options under the 2003 Management Stock Report January 5, 2005)
Incentive Plan
10(w) Key Executive Incentive Bonus Plan Exhibit B to EMCOR's Proxy Statement
for its Annual Meeting held June 16,
2005 ("2005 Proxy Statement")
10(x) 2005 Management Stock Incentive Plan Exhibit B to EMCOR's 2005 Proxy
Statement
10(y) First Amendment to 2005 Management Stock Incentive Exhibit 10(z) to 2006 Form 10-K
Plan
10(z-1) 2005 Stock Plan for Directors Exhibit C to 2005 Proxy Statement
10(z-2) First Amendment to 2005 Stock Plan for Directors Exhibit 10(a)(a-2) to 2006 Form 10-K
10(a)(a) Option Agreement between EMCOR and Frank T. MacInnis Exhibit 4.4 to 2004 Form S-8
dated May 5, 1999
10(b)(b) Form of EMCOR Option Agreement for Messrs. Frank T. Exhibit 4.5 to 2004 Form S-8
MacInnis, Sheldon I. Cammaker, R. Kevin Matz and Mark
A. Pompa (collectively the "Executive Officers") for
options granted January 4, 1999, January 3, 2000 and
January 2, 2001
10(c)(c) Form of EMCOR Option Agreement for Executive Officers Exhibit 4.6 to 2004 Form S-8
granted December 1, 2001
10(d)(d) Form of EMCOR Option Agreement for Executive Officers Exhibit 4.7 to 2004 Form S-8
granted January 2, 2002, January 2, 2003 and January
2, 2004
10(e)(e) Form of EMCOR Option Agreement for Directors granted Exhibit 4.8 to 2004 Form S-8
June 19, 2002, October 25, 2002 and February 27, 2003
10(f)(f) Form of EMCOR Option Agreement for Executive Officers Exhibit 10(g)(g) to 2005 Form 10-K
and Guzzi dated January 3, 2005
10(g)(g-1) 2007 Incentive Plan Exhibit B to EMCOR's Proxy Statement
for its Annual Meeting held June 20,
2007
10(g)(g-2) Option Agreement dated December 13, 2007 under 2007 Exhibit 10(h)(h-2) to 2007 Form 10-K
Incentive Plan between Jerry E. Ryan and EMCOR
10(g)(g-3) Option Agreement dated December 15, 2008 under 2007 Exhibit 10.1 to Form 8-K (Date of
Incentive Plan between David Laidley and EMCOR Report December 15, 2008)
10(g)(g-4) Form of Option Agreement under 2007 Incentive Plan Exhibit 10(h)(h-3) to 2007 Form 10-K
between EMCOR and each non-employee director electing
to receive options as part of annual retainer
10(h)(h) Form of letter agreement between EMCOR and each Exhibit 10(b)(b) to 2004 Form 10-K
Executive Officer with respect to acceleration of
options granted January 2, 2003 and January 2, 2004
10(i)(i) EMCOR Group, Inc. Employee Stock Purchase Plan Exhibit C to EMCOR's Proxy Statement
for its Annual Meeting held June 18,
2008
ITEM 6. EXHIBITS. - (continued)
Exhibit Incorporated By Reference to or
No. Description Page Number
- ------------ ------------------------------------------------------- -------------------------------------------
10(j)(j-1) Certificate dated March 24, 2008 evidencing Phantom Exhibit 10(j)(j-1) to EMCOR's Quarterly
Stock Unit Award to Frank T. MacInnis Report on Form 10-Q for the quarter ended
March 31, 2008 ("March 2008 Form 10-Q")
10(j)(j-2) Certificate dated March 24, 2008 evidencing Phantom Exhibit 10(j)(j-2) to the March 2008 Form
Stock Unit Award to Anthony J. Guzzi 10-Q
10(k)(k) Certificate dated March 24, 2008 evidencing Stock Exhibit 10(k)(k) to the March 2008 Form
Unit Award to Frank T. MacInnis 10-Q
10(l)(l) Restricted Stock Award Agreement dated January 2, Exhibit 10(k)(k) to 2008 Form 10-K
2009 between Richard F. Hamm, Jr. and EMCOR
11 Computation of Basic EPS and Diluted EPS for the Note D of the Notes to the Condensed
three and six months ended June 30, 2009 and 2008 Consolidated Financial Statements
31.1 Certification Pursuant to Section 302 of the Page ___
Sarbanes-Oxley Act of 2002 by Frank T. MacInnis, the
Chairman of the Board of Directors and Chief
Executive Officer *
31.2 Certification Pursuant to Section 302 of the Page ___
Sarbanes-Oxley Act of 2002 by Mark A. Pompa, the
Executive Vice President and Chief Financial Officer *
32.1 Certification Pursuant to Section 906 of the Page ___
Sarbanes-Oxley Act of 2002 by the Chairman of the
Board of Directors and Chief Executive Officer **
32.2 Certification Pursuant to Section 906 of the Page ___
Sarbanes-Oxley Act of 2002 by the Executive Vice
President and Chief Financial Officer **
- ---------------
* Filed Herewith
** Furnished Herewith
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.
Date: July 30, 2009
EMCOR GROUP, INC.
----------------------------------------------
(Registrant)
By: /s/FRANK T. MACINNIS
----------------------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
(Principal Executive Officer)
By: /s/MARK A. POMPA
----------------------------------------------
Mark A. Pompa
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 31.1
CERTIFICATION
I, Frank T. MacInnis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of EMCOR Group,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15(d)-15(f) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: July 30, 2009 /s/FRANK T. MACINNIS
------------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Mark A. Pompa, certify that:
1. I have reviewed this quarterly report on Form 10-Q of EMCOR Group,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15(d)-15(f) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: July 30, 2009 /s/MARK A. POMPA
------------------------------------
Mark A. Pompa
Executive Vice President and
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of EMCOR Group, Inc. (the
"Company") on Form 10-Q for the period ended June 30, 2009 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Frank
T. MacInnis, Chairman of the Board of Directors and Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: July 30, 2009 /s/FRANK T. MACINNIS
-----------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of EMCOR Group, Inc. (the
"Company") on Form 10-Q for the period ended June 30, 2009 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Mark A.
Pompa, Executive Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: July 30, 2009 /s/MARK A. POMPA
-----------------------------------
Mark A. Pompa
Executive Vice President and
Chief Financial Officer