FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 - ------------------------------------------------------------------------------ [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from __________ to __________ - -------------------------------------------------------------------------- Commission file number 0-2315 EMCOR Group, Inc. --------------------------------------- (Exact name of registrant as specified in its charter) Delaware 11-2125338 - ------------------------------------ ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 101 Merritt Seven Corporate Park 06851-1060 ---------------------- Norwalk, Connecticut (Zip Code) - ------------------------------------ (Address of principal executive offices) (203) 849-7800 - ------------------------------------ (Registrant's telephone number) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No __ Applicable Only To Issuers Involved In Bankruptcy Proceedings During The Previous Five Years ------------------- Indicate by check mark whether the registrant has filed all documents required to be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934, subsequent to the distribution of securities under a plan confirmed by a court. Yes X No __ Applicable Only To Corporate Issuers ------------------------------------ Number of shares of Common Stock outstanding as of the close of business on October 28,1997: 9,576,567 shares. EMCOR GROUP, INC. INDEX Page No. PART I - Financial Information Item 1 Financial Statements Condensed consolidated balance sheets - as of September 30, 1997 and December 31, 1996 1 Condensed consolidated statements of operations - three months ended September 30, 1997 and 1996 3 Condensed consolidated statements of operations - nine months ended September 30, 1997 and 1996 4 Condensed consolidated statements of cash flows - nine months ended September 30, 1997 and 1996 5 Condensed consolidated statement of stockholders' equity - nine months ended September 30, 1997 6 Notes to condensed consolidated financial statements 7 Item 2 Management's discussion and analysis of financial condition and results of operations 11 PART II - Other Information Item 1 Legal Proceedings 13 Item 6 Exhibits and Reports on Form 8-K 13 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) - ---------------------------------------------------------------------- September 30, December 31, 1997 1996 (Unaudited) - ---------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $43,955 $50,705 Accounts receivable, net 500,515 442,930 Costs and estimated earnings in excess of billings on uncompleted contracts 70,512 67,765 Inventories 8,171 9,108 Prepaid expenses and other 10,127 8,143 ------------------------------- Total Current Assets 633,280 578,651 ------------------------------- Investments, Notes and Other Long-Term Receivables 5,106 5,737 Property, Plant and Equipment, Net 26,468 26,952 Other Assets 3,085 3,407 ------------------------------- Total Assets $667,939 $614,747 =============================== See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Per Share and Share Amounts) - --------------------------------------------------------------------- September 30, December 31, 1997 1996 (Unaudited) - --------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Borrowings under working capital credit lines $17,596 $14,200 Current maturities of long-term debt 305 361 Accounts payable 235,100 218,099 Billings in excess of costs and estimated earnings on uncompleted contracts 122,612 105,653 Accrued payroll and benefits 49,207 43,789 Other accrued expenses and liabilities 42,531 39,596 ---------------------------- Total Current Liabilities 467,351 421,698 ---------------------------- Long-Term Debt 63,238 73,051 Other Long-Term Obligations 46,974 36,115 Stockholders' Equity: Common stock, $.01 par value, 13,700,000 shares authorized, 9,574,567 shares and 9,514,636 shares issued and outstanding or issuable at September 30, 1997 and December 31, 1996, respectively 96 95 Warrants 2,154 2,154 Capital surplus 84,543 81,672 Cumulative translation adjustment 614 1,378 Retained earnings (accumulated deficit) 2,969 (1,416) ---------------------------- Total Stockholders' Equity 90,376 83,883 ---------------------------- Total Liabilities and Stockholders' $667,939 $614,747 Equity ============================ See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited) - ------------------------------------------------------------ Three months ended September 30, 1997 1996 - ------------------------------------------------------------ Revenues $521,975 $432,452 Costs and Expenses: Cost of sales 473,445 390,903 Selling, general and administrative 39,940 35,566 ------------------------- 513,385 426,469 ------------------------- Operating Income 8,590 5,983 Interest Expense, Net 3,106 2,425 ------------------------- Income Before Income Taxes 5,484 3,558 Provision For Income Taxes 2,248 1,627 ------------------------- Net Income $3,236 $1,931 ========================= Per Share Information: - ---------------------- Net Income Per Common Share and Common Equivalent Share $0.32 $0.19 ========================= See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited) - ------------------------------------------------------------ Nine months ended September 30, 1997 1996 - ------------------------------------------------------------ Revenues $1,431,362 $1,202,853 Costs and Expenses: Cost of sales 1,300,268 1,086,318 Selling, general and administrative 112,795 105,999 ------------------------- 1,413,063 1,192,317 ------------------------- Operating Income 18,299 10,536 Other Income, Net -- 12,500 Interest Expense, Net 9,165 9,915 ------------------------- Income Before Income Taxes 9,134 13,121 Provision For Income Taxes 3,745 5,636 ------------------------- Income Before Extraordinary Item 5,389 7,485 Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes (1,004) -- ------------------------- Net Income $4,385 $7,485 ========================= Per Share Information: - ---------------------- Income Before Extraordinary Item $0.54 $0.75 Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes (0.10) -- ------------------------- Net Income Per Common Share and Common Equivalent Share: $0.44 $0.75 ========================= See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) - --------------------------------------------------------------- Nine months ended September 30, 1997 1996 - --------------------------------------------------------------- CASH FLOWS FROM OPERATIONS: Net income $4,385 $7,485 Non-cash expenses 11,171 10,129 Changes in operating assets and liabilities (7,485) 7,692 -------------------- NET CASH PROVIDED BY OPERATIONS 8,071 25,306 -------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of working capital credit lines (102,512) (45,125) Borrowings under working capital credit lines 105,908 20,125 Payments of 7% Senior Secured Notes (Series A) -- (66,424) Payments of 11% Series C Notes (11,920) -- Borrowings of long-term debt and capital lease obligation 58 (643) Change in notes payable, net -- (3,896) Exercise of stock options 344 487 -------------------- NET CASH USED IN FINANCING ACTIVITIES (8,122) (95,476) -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment, net (7,471) (4,480) Proceeds from sale of businesses and other assets 141 314 Proceeds from sales of net assets held for sale -- 66,424 Decrease in investments, notes and other long-term receivables 631 399 -------------------- NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (6,699) 62,657 -------------------- DECREASE IN CASH AND CASH EQUIVALENTS (6,750) (7,513) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 50,705 53,007 -------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $43,955 $45,494 ==================== SUPPLEMENTAL CASH FLOW INFORMATION Cash Paid For: Interest $6,997 $5,311 Income Taxes $361 $239 See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (In Thousands) (Unaudited) - -------------------------- --------- --------- ---------- ------------ ------------- --------- Retained Cumulative Earnings Common Capital Translation (Accumulated Stock Warrants Surplus Adjustment Deficit) Total - -------------------------- --------- --------- ---------- ------------ ------------- --------- Balance, January 1, 1997 $95 $2,154 $81,672 $1,378 ($1,416) $83,883 Net income - - - - 4,385 4,385 NOL Utilization - - 2,528 - - 2,528 Common stock issued under stock option plans 1 - 343 - - 344 Translation adjustments - - - (764) - (764) --------- --------- ---------- ------------ ------------- --------- Balance, September 30, 1997 $96 $2,154 $84,543 $614 $2,969 $90,376 ========= ========= ========== ============ ============= ========= See notes to condensed consolidated financial statements. EMCOR Group, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE A Nature Of Operations EMCOR Group, Inc. ("EMCOR" or the "Company") is a multinational corporation involved in mechanical and electrical construction and facilities services. EMCOR, which conducts its business through subsidiaries, specializes in the design, integration, installation, start-up, testing, operation and maintenance of (i) distribution systems for electrical power (including power cables, conduits, distribution panels, transformers, generators, uninterruptible power supply systems and related switch gear and control); (ii) lighting systems, including fixtures and controls; (iii) low-voltage systems, including fire alarm, security, communications and process control systems; (iv) heating, ventilation, air conditioning, refrigeration and clean-room process ventilation systems; and (v) plumbing, process and high purity piping systems. EMCOR's subsidiaries provide mechanical and electrical construction services directly to end-users (including corporations, municipalities and other governmental entities, owners/developers, and tenants of buildings) and, indirectly, by acting as a subcontractor, to construction managers, general contractors and other subcontractors. Mechanical and electrical construction services are principally: large installation projects, with contracts generally in the multi-million dollar range; smaller system installation projects involving fit-out, renovation and retrofit work; and maintenance and service. In addition, certain EMCOR subsidiaries operate and maintain mechanical and/or electrical systems for customers under contracts and provide other services commonly referred to as facilities services including the management of facilities and the provision of support services to customers at the customer's facilities. Mechanical and electrical construction and facilities services are provided to a broad range of commercial, industrial and institutional customers through offices located in major markets throughout the United States, Canada and the United Kingdom and in the Middle East and Hong Kong. NOTE B Basis of Presentation The accompanying condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Readers of this report should refer to the consolidated financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of a normal recurring nature) necessary to present fairly the financial position of the Company and the results of its operations. The results of operations for the three and nine month periods ended September 30, 1997 are not necessarily indicative of the results to be expected for the year ending December 31, 1997. NOTE C Net Income Per Common Share and Common Equivalent Share Net income per common share and common equivalent share for the three and nine month periods ended September 30, 1997 and 1996 have been calculated based on the weighted average number of shares of common stock outstanding and common stock equivalents relating to warrants and stock options outstanding when the effect of such common stock equivalents are dilutive. Weighted average number of shares outstanding as of September 30, 1997 and 1996 were 9,535,467 and 9,468,083, respectively (see Note G). NOTE D Long-Term Debt Long-Term Debt in the accompanying condensed consolidated balance sheets consists of the following amounts at September 30, 1997 and December 31, 1996 (in thousands): September December 30, 31, 1997 1996 ------------ ------------ Series C Notes, outstanding face value of approximately $61.9 million and $73.8 million at September 30, 1997 and December 31, 1996, respectively, at 11.0%, discounted to a 14.0% effective rate, due 2001 $56,030 $66,039 Supplemental SellCo Note, outstanding face value of approximately $5.5 million at 8.0%, discounted to a 14.0% effective rate, due 2004 4,663 4,474 Capital Lease Obligations at weighted average interest rates from 7.25% to 11.0%, payable in varying amounts through 2004 1,197 1,007 Other, at weighted average interest rates of approximately 9.6%, payable in varying amounts through 2012 1,653 1,892 ------------ ------------ 63,543 73,412 Less current maturities (305) (361) ------------ ------------ $63,238 $73,051 ============ ============ On June 3, 1997, the Company purchased $1.0 million of Series C Notes and retired such notes. On June 27, 1997, the Company called for the partial redemption of approximately $10.9 million principal amount of Series C Notes. In accordance with the Indenture governing the Series C Notes, the redemption price of the Series C Notes was 105% of the principal amount redeemed. Accordingly, the Company recorded an extraordinary loss of approximately $1.0 million related to the early retirement of debt. The extraordinary loss consisted primarily of the write-off of the associated debt discount plus premiums and costs associated with the redemption, net of income tax benefits of approximately $0.7 million. NOTE E Income Taxes The Company files a consolidated federal income tax return including all U.S. subsidiaries. At September 30, 1997, the Company had net operating loss carryforwards ("NOLs") for U.S. income tax purposes of approximately $180.0 million, which expire in the years 2007 through 2011. The NOLs are subject to review by the Internal Revenue Service. Future changes in ownership of the Company, as defined by Section 382 of the Internal Revenue Code, could limit the amount of NOLs available for use in any one year. As a result of the adoption of Fresh-Start Accounting, the tax benefit of any net operating loss carryforwards or net deductible temporary differences which existed as of the date of the Company's emergence from Chapter 11 in December 1994 will result in a charge to the tax provision (provision in lieu of income taxes) and be allocated to reorganization value in excess of amounts allocable to identifiable assets established in connection with the Company's emergence from bankruptcy and to capital surplus. The Company has provided a valuation allowance as of September 30, 1997 for the full amount of the tax benefit of its remaining NOLs and other deferred tax assets. Income tax expense recorded for the three and nine month periods ended September 30, 1997 and 1996 represent a provision primarily for federal, foreign and state and local income taxes. The Company's utilization of NOLs and other deferred tax assets for the three and nine months ended September 30, 1997 of approximately $1.8 million and approximately $2.5 million, respectively, have been applied to capital surplus. For the three and nine months ended September 30, 1996, the Company's utilization of NOLs and other deferred tax assets were allocated to reorganization value in excess of amounts allocable to identifiable assets. NOTE F Legal Proceedings The Dynalectric Company ("Dynalectric"), a subsidiary of the Company, is a defendant in an action entitled Computran v. Dynalectric, et. al., pending in Superior Court of New Jersey, Bergen County, arising out of its participation in a joint venture. In the action, which was instituted in 1988, the plaintiff, Computran, a participant in and a subcontractor to the joint venture, alleges that Dynalectric wrongfully terminated it from the subcontract, fraudulently diverted funds due it, misappropriated its trade secrets and proprietary information, fraudulently induced it to enter into the joint venture and conspired with other defendants to commit certain acts in violation of the New Jersey Racketeering Influence and Corrupt Organization Act. Dynalectric believes that Computran's claims are without merit and intends to defend this matter vigorously. Dynalectric has filed counterclaims against Computran. Discovery is ongoing and no trial date has been scheduled. In February 1995, as part of an investigation by the New York County District Attorney's office into the business affairs of Herbert Construction Company ("Herbert"), a general contractor that does business with the Company's subsidiary, Forest Electric Corporation ("Forest"), a search warrant was executed at Forest's executive offices. At that time, the Company was informed that Forest and certain of its officers are targets of the continuing investigation. Neither the Company nor Forest has been advised of the precise nature of any suspected violation of law by Forest or its officers. On July 11, 1995, Ted Kohl, a principal of Herbert, and DPL Interiors, Inc., a company allegedly owned by Mr. Kohl, were indicted by a New York County grand jury for grand larceny, fraud, repeated failure to file New York City Corporate Tax Returns and related money laundering charges. Mr. Kohl was also charged with filing false personal income and earnings tax returns, perjury and offering false instruments for filing with the New York City School Construction Authority. In a press release announcing the indictment, the Manhattan District Attorney said that the investigation disclosed that Mr. Kohl allegedly received more than $7.0 million in kickbacks from subcontractors through a scheme in which he allegedly inflated subcontracts on Herbert's construction contracts. At a July 11, 1995 press conference following the indictment, the District Attorney announced that the investigation was continuing and that he expected further indictments in the investigation. On April 7, 1997 Mr. Kohl pled guilty to one count of money laundering, one count of offering a false instrument for filing and one count of filing a false New York State Resident Income Tax Return. DPL Interiors, Inc. also pled guilty to one count of failing to file New York City General Income Tax Returns. Mr. Kohl and DPL Interiors, Inc. have not yet been sentenced. Forest performs electrical contracting services primarily in the New York City commercial market and is one of the Company's largest subsidiaries. In addition to the above, the Company is involved in other legal proceedings and claims asserted by and against the Company, which have arisen in the ordinary course of business. The Company believes it has a number of valid defenses to these actions and the Company intends to vigorously defend or assert these claims and does not believe that a significant liability will result. However, the Company cannot predict the outcome thereof or the impact that an adverse result of the matters discussed above will have upon the Company's financial position or results of operations. Note G New Accounting Pronouncement Statement of Financial Accounting Standards No. 128 ("SFAS No. 128" or the "Statement"), Earnings Per Share ("EPS"), which establishes standards for computing and presenting EPS, is effective for both interim and annual periods ending after December 15, 1997. The statement does not permit early application of its provisions. The statement replaces the presentation of primary EPS with a presentation of basic EPS, as defined. It also requires dual presentation of basic and diluted EPS on the face of the Statement of Operations for entities with a complex capital structure. Had EPS been determined in accordance with SFAS No. 128, the Company's basic EPS and diluted EPS for the three and nine month periods ended September 30, 1997 and 1996 would have been the following pro forma amounts: Three Months Nine Months 1997 1996 1997 1996 -------- -------- -------- -------- Pro Forma Basic EPS - Before Extraordinary Item $0.34 $0.20 $0.57 $0.79 Pro Forma Basic EPS - Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes -- -- (0.11) -- -------- -------- -------- -------- Pro Forma Basic EPS - Net Income $0.34 $0.20 $0.46 $0.79 ======== ======== ======== ======== Pro Forma Diluted EPS - Before Extraordinary Item $0.32 $0.19 $0.54 $0.75 Pro Forma Diluted EPS - Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes -- -- (0.10) -- -------- -------- -------- -------- Pro Forma Diluted EPS - Net Income $0.32 $0.19 $0.44 $0.75 ======== ======== ======== ======== ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Revenues for the third quarter of 1997 were $522.0 million compared to $432.5 million in the third quarter of 1996. In the third quarter of 1997, the Company generated net income of $3.2 million or $0.32 per share compared to net income of $1.9 million or $0.19 per share in the third quarter of 1996. Revenues for the nine months ended September 30, 1997 were $1,431.4 million compared to $1,202.9 million in the same period in the prior year. For the nine months ended September 30, 1997, the Company generated net income of $4.4 million, or $0.44 per share, inclusive of the $1.0 million extraordinary after-tax charge discussed hereafter, compared to net income of $7.5 million, or $0.75 per share, for the nine months ended September 30, 1996. Net income for the nine month period ended September 30, 1997 includes an after-tax charge of $1.0 million ($1.7 million pre-tax) associated with the early retirement of approximately $11.9 million of the Company's Series C Notes which is reflected in the accompanying condensed consolidated statements of operations for the nine month period ended September 30, 1997 under the caption "Extraordinary Item - Loss on Early Extinguishment of Debt, Net of Income Taxes". Net income for the nine months ended September 30, 1996 reflects a net after-tax gain of $8.1 million ($12.5 million pre-tax) on the sale of certain assets held for sale including the sale of substantially all of the assets of Jamaica Water Supply Company which is reflected in the accompanying condensed consolidated statements of operations for the nine month period ended September 30, 1996 under the caption "Other Income, Net". Net income for the first three quarters of 1996 also reflects a $4.8 million charge included in selling, general and administrative expenses ("SG&A") related to an adverse arbitration award, which award was subsequently settled for $4.3 million in October 1996. The Company generated operating income of $8.6 million for the three months ended September 30, 1997 compared to operating income of $6.0 million in the same period of the prior year. For the nine months ended September 30, 1997, the Company had operating income of $18.3 million compared to $10.5 million of operating income in the same period of the prior year. The $2.6 million improvement in operating income for the three months ended September 30, 1997 was principally attributable to an increase in operating volume and a reduction in SG&A as a percentage of revenues as compared to the three months ended September 30, 1996. Operating income for the nine months ended September 30, 1997 as compared to the same period of 1996 increased by $7.8 million due to increases in operating volume during 1997 and the negative impact during the first nine months of 1996 of the adverse arbitration award referred to above net of favorable closeouts of certain contracts in the first quarter of 1996. The increase in revenues for the first nine months of 1997 as compared to the same period in the prior year was primarily attributable to the continued increase in commercial construction activity in the Western United States, to an increase in revenues in the Eastern United States, due principally to the previously announced acquisition of the businesses of two mechanical construction companies in late 1996 and early 1997, and in Canada due to a general increase in industrial construction activity. SG&A for the quarters ended September 30, 1997 and 1996 were $39.9 million, or 7.7% of revenues, and $35.6 million, or 8.2% of revenues, respectively. SG&A for the first nine months of 1997 was $112.8 million, or 7.9% of revenues, compared to $106.0 million, or 8.8% of revenues, for the first nine months of 1996. SG&A expenses for the first three quarters of 1996, exclusive of the adverse arbitration award discussed above, were $101.2 million, or 8.4% of revenues. The increase in SG&A, in absolute dollars, for the three and nine month periods ended September 30, 1997 compared to the same periods in the prior year, exclusive of the adverse arbitration award, is attributable to the increase in operations. On June 3, 1997, the Company purchased $1.0 million of Series C Notes and retired such notes. On June 27, 1997, the Company called for the partial redemption of approximately $10.9 million principal amount of Series C Notes. In accordance with the Indenture governing the Series C Notes, the redemption price of the Notes was 105% of the principal amount redeemed. Accordingly, the Company recorded an extraordinary loss of approximately $1.0 million related to the early retirement of debt. The extraordinary loss referred to above consisted primarily of the write-off of the associated debt discount plus premiums and costs associated with the retirement, net of income tax benefits of approximately $0.7 million. The Company's backlog was $1,067.7 million at September 30, 1997 and $1,043.7 million at December 31, 1996. Between December 31, 1996 and September 30, 1997, the Company's backlog in Canada increased by $17.4 million, its backlog in the United Kingdom increased by $18.3 million and its backlog in the United States decreased by $11.7 million. The increase in the Company's Canadian backlog was primarily attributable to improved economic conditions in Western Canada. The increase in the United Kingdom backlog is due to the award of several large projects and the expansion of selected existing projects offset partially by exchange rate fluctuations. The decline in the domestic backlog is due to the continued progress towards completion of several large projects, primarily in the Western United States. Liquidity and Capital Resources The Company's consolidated cash balance decreased by $6.7 million from $50.7 million at December 31, 1996 to $44.0 million at September 30, 1997. The September 30, 1997 cash balance included approximately $9.0 million at foreign subsidiaries which is available only to support their respective operations. The Company generated positive operating cash flow for the nine months ended September 30, 1997 due to improvements in working capital which were used, along with a portion of the Company's existing cash balances, to fund capital expenditures, purchase $1.0 million of Series C Notes and redeem approximately $10.9 million of Series C Notes. As of September 30, 1997 the Company's total borrowing capacity under its revolving credit facility was $81.6 million. The Company had approximately $35.6 million and $17.6 million of letters of credit and revolving loans, respectively, outstanding as of that date. The revolving loans are classified as Current Liabilities under the caption "Borrowings under working capital credit lines" in the accompanying condensed consolidated balance sheets. In October, 1997, the Company's Canadian subsidiary, Comstock Canada Ltd., renewed a credit agreement with a bank providing for an overdraft facility of up to Cdn. $0.5 million. The facility is secured by a standby letter of credit. The facility provides for interest at the bank's prime rate (4.75% at September 30, 1997). There are no current borrowings outstanding under this credit agreement. The Canadian subsidiary will principally utilize the Company's revolving credit facility for future working capital requirements. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The information in Note F to the Company's September 30, 1997 Notes to Condensed Consolidated Financial Statements (unaudited) regarding legal proceedings is hereby incorporated herein by reference thereto. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit No. 11. Computation of Earnings Per Common Share and Common Equivalent Share for the three and nine month periods ended September 30, 1997. Exhibit No. 27. Financial Data Schedule. (b) No reports on Form 8-K were filed during the quarter ended September 30, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EMCOR GROUP, INC. ---------------------------- (Registrant) Date: October 31, 1997 By: /s/FRANK T. MacINNIS ---------------------------- Frank T. MacInnis Chairman of the Board of Directors and Chief Executive Officer Date: October 31, 1997 By: /s/LEICLE E. CHESSER ---------------------------- Leicle E. Chesser Executive Vice President and Chief Financial Officer Exhibit 11 EMCOR Group, Inc. and Subsidiaries Computation of Earnings Per Common Share and Common Equivalent Share for the three and nine month periods ended September 30, 1997. Three Months Ended Nine Months Ended PRIMARY September 30, 1997 September 30, 1997 - ------------------------------------------------ -------------------- -------------------- Net Income $3,236,000 $4,385,000 ==================== ==================== Weighted average number of common shares outstanding 9,555,619 9,535,467 Add - common equivalent shares using the treasury stock method 542,121 503,316 -------------------- -------------------- Weighted average number of shares used in calculation of primary income per common and common equivalent share 10,097,740 10,038,783 ==================== ==================== Primary net income per common and common equivalent share $0.32 $0.44 ==================== ==================== FULLY DILUTED - ------------------------------------------------ Net Income $3,236,000 $4,385,000 ==================== ==================== Weighted average number of shares used in calculating primary income per share 10,097,740 10,038,783 Shares issuable upon exercise of stock options included in primary calculation above (542,121) (503,316) Shares issuable upon exercise of stock options at period end market price 738,800 738,800 -------------------- -------------------- Weighted average number of shares used in calculation of fully diluted income per common and common equivalent share 10,294,419 10,274,267 ==================== ==================== Fully diluted net income per common and common equivalent share $0.31 $0.43 ==================== ====================