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 March 31, 2000 -------------- 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 Identification incorporation or organization) 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 Corporate Issuers Number of shares of Common Stock outstanding as of the close of business on April 25, 2000: 10,429,690 shares.
EMCOR GROUP, INC. INDEX Page No. PART I - Financial Information Item 1 Financial Statements Condensed Consolidated Balance Sheets - as of March 31, 2000 and December 31, 1999 1 Condensed Consolidated Statements of Operations - three months ended March 31, 2000 and 1999 3 Condensed Consolidated Statements of Cash Flows - three months ended March 31, 2000 and 1999 4 Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income - three months ended March 31, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Results of Operations and Financial Condition 9 PART II - Other Information Item 1 Legal Proceedings 14 Item 4 Submission of Matters to a Vote of Security Holders 14 Item 6 Exhibits and Reports on Form 8-K 14
2 PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) - -------------------------------------------------------------------------------- March 31, December 31, 2000 1999 (Unaudited) - -------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 58,114 $ 58,552 Accounts receivable, net 735,539 713,593 Costs and estimated earnings in excess of billings on uncompleted contracts 150,296 137,048 Inventories 7,936 9,776 Prepaid expenses and other 8,535 9,018 ---------- ---------- Total current assets 960,420 927,987 Investments, notes and other long-term receivables 20,877 17,411 Property, plant and equipment, net 37,101 36,509 Goodwill 67,034 68,009 Other assets 6,283 6,573 ---------- ---------- Total assets $1,091,715 $1,056,489 ========== ========== See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) - -------------------------------------------------------------------------------- March 31, December 31, 2000 1999 (Unaudited) - -------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt and capital lease obligations $ 2,069 $ 2,235 Accounts payable 337,107 342,917 Billings in excess of costs and estimated earnings on uncompleted contracts 243,212 216,152 Accrued payroll and benefits 89,439 84,496 Other accrued expenses and liabilities 73,632 71,782 ---------- ---------- Total current liabilities 745,459 717,582 Long-term debt and capital lease obligations 115,893 116,003 Other long-term obligations 52,335 52,655 ---------- ----------- Total liabilities 913,687 886,240 ---------- ----------- Stockholders' equity: Preferred stock, $0.10 par value, 1,000,000 shares authorized, zero issued and outstanding -- -- Common stock, $0.01 par value, 13,700,000 shares authorized, 10,427,690 shares issued and outstanding 117 117 Capital surplus 145,788 142,894 Accumulated other comprehensive income (2,268) (2,223) Retained earnings 51,227 46,297 Treasury stock, at cost, 1,131,995 shares (16,836) (16,836) ---------- ----------- Total stockholders' equity 178,028 170,249 ---------- ----------- Total liabilities and stockholders' equity $1,091,715 $1,056,489 ========== =========== 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 March 31, 2000 1999 - -------------------------------------------------------------------------------- Revenues $741,522 $539,983 Costs and expenses: Cost of sales 668,977 488,028 Selling, general and administrative 61,998 46,907 -------- -------- 730,975 534,935 -------- -------- Operating income 10,547 5,048 Interest expense, net 1,744 1,473 ------- -------- Income before income taxes 8,803 3,575 Provision for income taxes 3,873 1,524 -------- -------- Net income $ 4,930 $ 2,051 ======== ======== Basic earnings per share $ 0.47 $ 0.21 ======== ======== Diluted earnings per share $ 0.40 $ 0.20 ======== ======== See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) - -------------------------------------------------------------------------------- Three months ended March 31, 2000 1999 - -------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 4,930 $ 2,051 Depreciation and amortization 2,525 2,413 Amortization of goodwill 924 446 Other non-cash expenses 4,276 1,673 Changes in operating assets and liabilities (6,234) 15,520 ------- ------- Net cash provided by operating activities 6,421 22,103 ------- ------- Cash flows from investing activities: Purchase of property, plant and equipment, net (3,117) (1,891) (Increase) decrease in investments, notes and other long-term receivables (3,466) 36 ------- -------- Net cash used in investing activities (6,583) (1,855) ------- -------- Cash flows from financing activities: Purchase of treasury stock -- (2,868) Payment of long-term debt and capital lease obligations (276) (6,328) Exercise of stock options -- 67 ------- -------- Net cash used in financing activities (276) (9,129) ------- -------- (Decrease)increase in cash and cash equivalents (438) 11,119 Cash and cash equivalents at beginning of period 58,552 83,053 ------- -------- Cash and cash equivalents at end of period $58,114 $94,172 ======= ======== Supplemental cash flow information: Cash paid for: Interest $129 $130 Income Taxes $841 $582 See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries <TABLE> <CAPTION> CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (In thousands) (Unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ Accumulated other Common Capital comprehensive Retained Treasury Comprehensive Total stock Warrants surplus loss (1) earnings stock income - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> <C> <C> Balance, January 1, 1999 $119,816 $109 $2,154 $114,867 $(1,822) $18,476 $(13,968) Net income 2,051 -- -- -- -- 2,051 -- $2,051 Foreign currency translation adjustments (235) -- -- -- (235) -- -- (235) ------ Comprehensive income -- -- -- -- -- -- -- $1,816 ====== Provision in lieu of income taxes 1,318 -- -- 1,318 -- -- -- Common stock issued under stock option plans 67 -- -- 67 -- -- -- Treasury stock repurchased (2,868) -- -- -- -- -- (2,868) -------- ---- ------ -------- ------- ------- -------- Balance, March 31, 1999 $120,149 $109 $2,154 $116,252 $(2,057) $20,527 $(16,836) ======== ==== ====== ======== ======= ======= ======== Balance, January 1, 2000 $170,249 $117 $ -- $142,894 $(2,223) $46,297 $(16,836) Net income 4,930 -- -- -- -- 4,930 -- $4,930 Foreign currency translation adjustments (45) -- -- -- (45) -- -- (45) ------- Comprehensive income -- -- -- -- -- -- -- $4,885 ======= Provision in lieu of income taxes 2,894 -- -- 2,894 -- -- -- -------- ---- ------ -------- ------- ------- -------- Balance, March 31, 2000 $178,028 $117 $ -- $145,788 $(2,268) $51,227 $(16,836) ======== ==== ====== ======== ======= ======= ======== (1) Represents cumulative foreign currency translation adjustments. </TABLE> See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE A Basis of Presentation The accompanying condensed consolidated financial statements have been prepared by EMCOR Group, Inc. and Subsidiaries ("EMCOR"), without audit, pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Readers of this report should refer to the consolidated financial statements and the notes thereto included in EMCOR's latest Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of EMCOR, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of a normal recurring nature) necessary to present fairly the financial position of EMCOR and the results of its operations. The results of operations for the three month period ended March 31, 2000 are not necessarily indicative of the results to be expected for the year ending December 31, 2000. Certain reclassifications of prior year amounts have been made to conform to current year presentation. NOTE B Income Taxes EMCOR files a consolidated federal income tax return including all U.S. subsidiaries. At March 31, 2000, EMCOR had net operating loss carryforwards ("NOLs") for U.S. income tax purposes of approximately $105.0 million, which expire in the years 2007 through 2012. The NOLs are subject to review by the Internal Revenue Service. Future changes in ownership of EMCOR, as defined by Section 382 of the Internal Revenue Code, could limit the amount of EMCOR's NOLs available for use in any one year. 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 EMCOR's emergence from Chapter 11 in December 1994 will result in a charge to the tax provision (provision in lieu of income taxes) and be allocated to capital surplus. EMCOR has provided a valuation allowance as of March 31, 2000 for the full amount of the tax benefit of its remaining NOLs and other deferred tax assets. Income tax expense recorded for the three month periods ended March 31, 2000 and 1999 represent a provision primarily for federal, foreign and state and local income taxes. EMCOR's utilization of NOLs and other deferred tax assets for the three month period ended March 31, 2000 and 1999 of approximately $2.9 million and $1.3 million have been added to capital surplus, respectively.
NOTE C Earnings Per Share The following tables summarize EMCOR's calculation of Basic and Diluted Earnings per Share ("EPS") for the three month periods ended March 31, 2000 and 1999: <TABLE> <CAPTION> Three months ended March 31, 2000 ----------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount ----------- ------------- --------- <S> <C> <C> <C> Basic EPS Income available to common stockholders $4,930,000 10,427,690 $0.47 Effect of Dilutive Securities: ===== Convertible Subordinated Notes, including assumed interest savings, net of tax 1,019,000 4,206,291 Options -- 248,999 ----------- ---------- Diluted EPS $5,949,000 14,882,980 $0.40 ========== ========== ===== </TABLE> <TABLE> <CAPTION> Three months ended March 31, 1999 ----------------------------------------- Income Shares Per Share (Numerator) (Denominator) Amount ----------- ------------- --------- <S> <C> <C> <C> Basic EPS Income available to common stockholders $2,051,000 9,700,162 $0.21 Effect of Dilutive Securities: ===== Options -- 212,061 Warrants -- 148,493 ---------- ---------- Diluted EPS -before extraordinary item $2,051,000 10,060,716 $0.20 ========== ========== ===== </TABLE> For the three month period ended March 31, 1999, the "if converted" amount of Subordinated Notes was excluded from the calculation of Diluted EPS as the effect would be antidilutive. For the three month periods ended March 31, 2000 and 1999, 31,333 and 129,973 options, respectively, were excluded from the calculation of Diluted EPS as the inclusion of the options would be antidilutive. NOTE D New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of SFAS No. 133", establishes for fiscal quarters of fiscal years beginning after June 15, 2000 accounting and reporting standards requiring derivative instruments, as defined, to be measured in the financial statements at fair value. SFAS 133 also requires that changes in the derivative instruments' fair value be recognized currently in earnings unless certain accounting criteria are met. EMCOR does not expect the provision of SFAS 133 to have a significant effect on the financial condition or results of operations of EMCOR. NOTE E Segment Information EMCOR has the following reportable segments: United States electrical construction and facilities services, United States mechanical construction and facilities services, Canada construction and facilities services and United Kingdom construction and facilities services. United States other services primarily represents those operations which principally provide consulting and maintenance services. Other International construction and facilities services represents EMCOR's operations outside of the United States, Canada, and the United Kingdom, primarily in the Middle East performing electrical construction, mechanical construction and facilities services. Inter-segment sales are not material for any of the periods presented.
The following presents information about industry segments and geographic areas (in thousands): <TABLE> <CAPTION> For the three months ended ------------------------------- March 31, 2000 March 31, 1999 -------------- -------------- <S> <C> <C> Revenues: United States electrical construction and facilities services $279,917 $219,546 United States mechanical construction and facilities services 270,429 144,583 United States other services 29,358 7,929 -------- -------- Total United States Operations 579,704 372,058 Canada construction and facilities services 59,503 33,182 United Kingdom construction and facilities services 101,982 134,336 Other International construction and facilities services 333 407 -------- -------- Total Worldwide Operations $741,522 $539,983 ======== ======== Operating income: United States electrical construction and facilities services $ 9,984 $ 7,597 United States mechanical construction and facilities services 7,132 3,698 United States other services (942) (1,463) -------- -------- Total United States Operations 16,174 9,832 Canada construction and facilities services 623 79 United Kingdom construction and facilities services (1,560) (661) Other International construction and facilities services 14 (256) Corporate Administration (4,704) (3,946) -------- --------- Total Worldwide Operations 10,547 5,048 Other Corporate items: Interest expense (2,269) (2,272) Interest income 525 799 -------- -------- Income before income taxes $ 8,803 $ 3,575 ======== ======== </TABLE> <TABLE> <CAPTION> March 31, December 31, 2000 1999 --------- ------------ <S> <C> <C> Total assets: United States electrical construction and facilities services $ 358,423 $ 343,309 United States mechanical construction and facilities services 413,807 378,813 United States other services 57,727 58,950 ---------- ---------- Total United States Operations 829,957 781,072 Canada construction and facilities services 62,015 62,141 United Kingdom construction and facilities services 137,073 151,414 Other International construction and facilities services 13,213 18,295 Corporate Administration 49,457 43,567 ---------- ---------- Total Worldwide Operations $1,091,715 $1,056,489 ========== ========== </TABLE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Unaudited) Highlights EMCOR Group Inc.'s ("EMCOR") revenues for the three months ended March 31, 2000 and 1999 were $741.5 million and $540.0 million, respectively. Net income for the three months ended March 31, 2000 was $4.9 million compared to net income of $2.1 million for the three months ended March 31, 1999. Diluted Earnings Per Share ("Diluted EPS") were $0.40 per share for the three months ended March 31, 2000 compared to Diluted EPS of $0.20 per share in the year earlier period. Operating Segments EMCOR has the following reportable segments: United States electrical construction and facilities services, United States mechanical construction and facilities services, Canada construction and facilities services and United Kingdom construction and facilities services. United States other services primarily represents those operations which principally provide consulting and maintenance services. Other International construction and facilities services represents EMCOR's operations outside of the United States, Canada, and the United Kingdom, primarily in the Middle East performing electrical construction, mechanical construction and facilities services. Results of Operations Revenues The following table presents EMCOR's revenues by operating segment and the percentage of total revenues (in thousands, except for percentages): <TABLE> <CAPTION> For the three months ended March 31, ------------------------------------ % of % of 2000 Total 1999 Total Revenues: ---- ----- ---- ----- <S> <C> <C> <C> <C> United States electrical construction and facilities services $279,917 38% $219,546 41% United States mechanical construction and facilities services 270,429 36% 144,583 27% United States other services ............................. 29,358 4% 7,929 1% -------- ---- -------- ---- Total United States Operations ........................... 579,704 78% 372,058 69% Canada construction and facilities services .............. 59,503 8% 33,182 6% United Kingdom construction and facilities services ...... 101,982 14% 134,336 25% Other International....................................... 333 -- 407 -- -------- ---- -------- ---- Total Worldwide Operations ............................... $741,522 100% $539,983 100% ======== ==== ======== ==== </TABLE> EMCOR had a $201.5 million or 37.3% increase in revenues for the three months ended March 31, 2000 compared to 1999. The increase over the prior year period was primarily attributable to revenue growth from EMCOR's operations (excluding 1999 acquisitions) of $105.5 million, or a 19.5% increase, and to the impact of 1999 acquisitions which contributed approximately $96.0 million of additional revenues during 2000. Many of the markets in which EMCOR operates recorded a growth in revenues, particularly the New York City, Boston, Washington, D.C. and Canada markets, offset partially by anticipated decreases in the United Kingdom and Las Vegas markets due to the completion of large projects. Revenues of electrical construction and facilities services business units for the three months ended March 31, 2000 were $279.9 million compared to $219.5 million for the three months ended March 31, 1999. The $60.4 million increase in the revenues for the three months ended March 31, 2000 compared to the same period in 1999 was attributable to continuing favorable market conditions across the United States particularly in New York City, Boston and Washington, D.C. markets. Revenues of mechanical construction and facilities services business units for the three months ended March 31, 2000 were $270.4 million compared to $144.6 million for the three months ended March 31, 1999. The $125.8 million or 87.0% increase in revenues was attributable to $77.5 million of revenues derived from 1999 acquired companies and the remaining increase was attributable to the balance of EMCOR's operations. Other United States services revenues of $29.4 million for the three months ended March 31, 2000, which include those operations which principally provide consulting and maintenance services, increased by $21.4 million compared to the same three months in 1999. The increase in revenues was primarily attributable to $18.9 million of revenues from 1999 acquired companies and the remaining increase was attributable to the balance of EMCOR's operations. Revenues of Canada construction and facilities services for the three months ended March 31, 2000 were $59.5 million compared to $33.2 million for the three months ended March 31, 1999. The increase in revenues in the current period was primarily due to an increased level of activities in Western Canada and from commencement of certain projects delayed from the initially planned fourth quarter 1999 start dates. Revenues of United Kingdom construction and facilities services business units for the three months ended March 31, 2000 were $102.0 million compared to $134.3 million for the three months ended March 31, 1999. The $32.4 million decrease in revenues was attributable to the substantial completion of the Jubilee Line project in December of 1999 that had contributed revenues in the three months ended March 31, 1999. Other International construction and facilities services primarily consists of EMCOR's operations in the Middle East. Revenues for the three months ended March 31, 2000 were $0.3 million compared to $0.4 million for the three months ended March 31, 1999. The decline in revenues was due to the completion of projects in the Middle East markets that were active last year. EMCOR continues to pursue new business selectively in these markets, however, the availability of opportunities has been significantly reduced as a result of local economic factors. Cost of Sales and Gross Profit The following table presents EMCOR's cost of sales, gross profit, and gross profit as a percentage of revenues (in thousands, except for percentages): For the three months ended March 31, 2000 1999 ---- ---- Cost of sales ................................ $668,977 $488,028 Gross profit.................................. $72,545 $51,955 Gross profit as a percentage of revenues...... 9.8% 9.6% Gross profit (revenues less cost of sales) increased $20.6 million for the three months ended March 31, 2000 to $72.5 million compared to $52.0 million for the three months ended March 31, 1999. As a percentage of revenues, gross profit increased to 9.8% from 9.6% for the three months ended March 31, 2000 and 1999, respectively. The dollar increase in gross profit was due to the increase in revenues of EMCOR's operations (excluding 1999 acquired companies) and was due to revenues from companies acquired in 1999. The increase in gross profit as a percentage of revenues was primarily a result of an increase in gross profit in the United Kingdom, in addition to an increase in gross profit for certain other EMCOR subsidiaries.
Selling, general and administrative expenses The following table presents EMCOR's selling, general and administrative expenses, and selling, general and administrative expenses as a percentage of revenues (in thousands, except for percentages): <TABLE> <CAPTION> For the three months ended March 31, 2000 1999 ---- ---- <S> <C> <C> Selling, general and administrative expenses......................... $61,998 $46,907 Selling, general and administrative expenses, as a percentage of revenues............................................................ 8.4% 8.7% Selling, general and administrative expenses, as a percentage of revenues, excluding amortization of goodwill........................ 8.2% 8.6% </TABLE> Selling, general and administrative expenses for the three months ended March 31, 2000 increased $15.1 million. Selling, general and administrative expenses as a percentage of revenues was 8.4% for the three months ended March 31, 2000, compared to 8.7% for the three months ended March 31, 1999. The dollar increase in selling, general and administrative expenses for the three months ended March 31, 2000 compared to the prior year was attributable to the increase in revenues and corresponding increases in variable selling, general and administrative expenses. The decrease in selling, general and administrative expenses as a percentage of revenues was primarily due to the leveraging of fixed costs over increased revenues. Operating income The following table presents EMCOR's operating income, and operating income as percentage of segment revenues: (in thousands, except for percentages) <TABLE> <CAPTION> For the three months ended March 31, ------------------------------------ % of % of Segment Segment 2000 Revenues 1999 Revenues Operating income (loss): <S> <C> <C> <C> <C> United States electrical construction and facilities services ..... $ 9,984 3.6% $7,597 3.5% United States mechanical construction and facilities services ..... 7,132 2.6% 3,698 2.6% United States other services ...................................... (942) -- (1,463) -- ------- ---- ------ ---- Total United States Operations .................................... 16,174 2.8% 9,832 2.6% Canada construction and facilities services ....................... 623 1.0% 79 0.2% United Kingdom construction and facilities services ............... (1,560) -- (661) -- Other International................................................ 14 -- (256) -- Corporate Administration........................................... (4,704) -- (3,946) -- ------- ---- ------ ---- Total Worldwide Operations ........................................ 10,547 1.4% 5,048 0.9% Other Corporate Items: Interest expense ............................................... (2,269) (2,272) Interest income ................................................ 525 799 ------ ------ Income before income taxes ........................................ $8,803 $3,575 ====== ====== </TABLE> EMCOR had operating income of $10.6 million for the three months ended March 31, 2000 compared with operating income of $5.0 million for the three months ended March 31, 1999. The increase of $5.6 million in operating income for the three months ended March 31, 2000 as compared to the same period in 1999 was due to increased revenues from EMCOR's operations excluding 1999 acquired companies, as well as revenue and incremental operating income attributable to businesses acquired in 1999. United States electrical construction and facilities services operating income (before deduction of general corporate and other expenses discussed below) for the three months ended March 31, 2000 was $10.0 million or 3.6% of revenues, compared to $7.6 million or 3.5% of revenues for the three months ended March 31, 1999. The $2.4 million increase in revenues for the three months ended March 31, 2000 compared to the same period in 1999 was primarily attributable to the continuing favorable market conditions across the United States particularly in New York City, Boston and Washington, D.C. United States mechanical construction and facilities services operating income for the three months ended March 31, 2000 was $7.1 million or 2.6% of revenues, compared to $3.7 million or 2.6% of revenues for the three months ended March 31, 1999. The $3.4 million increase in operating income was attributable to growth from EMCOR's operations (excluding 1999 acquired companies) and operating income from 1999 acquisitions. Other United States services operating losses were $0.9 million and $1.5 million for the three months ended March 31, 2000 and 1999, respectively. These operating losses were primarily attributable to costs associated with the continued development of the consulting operations and maintenance services activities. Canada construction and facilities services operating income was $0.6 million compared to $0.1 million for the three months ended March 31, 2000 and 1999, respectively. The increase in operating income in the current period was primarily due to an increased level of activities in Western Canada. United Kingdom construction and facilities services operating losses for the three months ended March 31, 2000 and 1999 were $1.6 million and $0.7 million, respectively. The activity in this segment continued to produce operating losses in these periods. Other International construction and facilities services operating income was $0.01 million for the three months ended March 31, 2000 compared to an operating loss of $0.3 million for three months ended March 31, 1999. Operating income in 2000 reflects the decline in revenues and business activity due to the completion of projects in the Middle East markets that were active last year. The operating losses in 1999 were due to costs associated with the administration and completion of the activities in these regions. EMCOR continues to pursue new business selectively in these markets; however, the availability of opportunities has been significantly reduced as a result of local economic factors. General corporate expenses for the three months ended March 31, 2000 were $4.7 million compared to $3.9 million for the three months ended March 31, 1999. The increase in general corporate expenses was due to increased variable overhead costs associated with EMCOR's increased revenues, as well as incremental fixed costs to support current growth in operations. Interest expense for the three months ended March 31, 2000 and 1999 was $2.3 million. The decrease in Interest income of $0.3 million for the three months ended March 31, 2000 compared to the same three months in 1999 was attributable to less cash available to invest in the three months ended March 31, 2000 compared to the same period in 1999. The income tax provision increased by $2.3 million to $3.9 million for the three months ended March 31, 2000, versus $1.5 million for the same period in 1999. The increase in provision was primarily due to increased income before taxes plus an increase in the effective income tax rate for the three months ended March 31, 2000 to 44% from 43% for 1999. The increase in the effective income tax rate was due to changes in the tax jurisdictions in which income was earned. A portion of the liability for income taxes, $2.9 million for 2000 and $1.3 million for 1999, was not payable in cash due to the utilization of NOL's and was recorded as an increase in capital surplus for both years. EMCOR's backlog was $1.82 billion at March 31, 2000 and $1.77 billion at December 31, 1999. Between December 31, 1999 and March 31, 2000, EMCOR's backlog in Canada decreased by $8.5 million, its backlog in the United Kingdom decreased by $15.7 million and its backlog in the United States increased by $74.5 million. The decrease in the Canada and United Kingdom backlogs was due to work performed on projects awarded in the fourth quarter of 1999 in Canada, and the completion of several large projects in the United Kingdom. The increase in the United States backlog was due to continued favorable economic conditions. EMCOR's backlog at March 31, 2000 was $1.82 billion compared to $1.40 billion at March 31, 1999. Excluding backlog from acquisitions of $340.0 million, backlog increased $80.7 million in the last 12 months. The $80.7 million increase was attributed to a United States backlog increase of $86.1 million, a Canada backlog increase of $26.6 million, and a United Kingdom backlog decrease of $32.1 million primarily due to the substantial completion of the Jubilee line project in December 1999. Liquidity and Capital Resources The following table presents EMCOR's net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities (in thousands): For the three months ended March 31, 2000 1999 ---- ---- Net cash provided by operating activities............. $ 6,421 $22,103 Net cash used in investing activities................. $(6,583) $(1,855) Net cash used in financing activities................. $ (276) $(9,129) EMCOR's consolidated cash balance decreased by approximately $0.5 million from $58.6 million at December 31, 1999 to $58.1 million at March 31, 2000. Net cash provided by operating activities for the three months ended March 31, 2000 of $6.4 million was a $15.7 million decrease from the net cash provided by operating activities of $22.1 million in the same period last year. The decrease in net cash provided by operating activities was primarily attributable to changes in operating assets and liabilities due to an increase in business activity, partially offset by increased net income and non-cash expenses. Net cash used for investing activities of $6.6 million for the three months ended March 31, 2000 increased by $4.7 million compared to the $1.9 million of cash used in investing activities in the same period last year. The increase in net cash used in investing activities was due to increased spending on the purchase of property, plant and equipment, in addition to an increase in EMCOR's investments, notes and other long-term receivables. Net cash used in financing activities of $0.3 million was a decrease of $8.8 million from $9.1 million of net cash used in financing activities for the three months ended March 31, 1999. The decrease in net cash used in financing activities was attributable to the purchase of treasury stock in 1999 of $2.9 million compared to no purchases of treasury stock in 2000, and payment of long-term debt and capital lease obligations of $6.3 million in 1999 and compared to $0.3 million in 2000. As of March 31, 2000 EMCOR's total borrowing capacity under its revolving credit facility was $150.0 million. EMCOR had approximately $17.4 million of letters of credit outstanding as of that date. There were no revolving loans outstanding as of March 31, 2000 and December 31, 1999 under the revolving credit facility. EMCOR believes that current cash balances and borrowing capacity available under lines of credit, combined with cash expected to be generated from operations, will be sufficient to provide short-term and foreseeable long-term liquidity and meet expected capital expenditure requirements. This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995, particularly statements regarding market opportunities., market share growth, competitive growth, gross profit, and selling, general and administrative expenses. These forward-looking statements involved risks and uncertainties, that could cause actual results to differ materially from those in any such forward-looking statements. Such factors include, but are not limited to adverse changes in general economic conditions, including changes in the specific markets for EMCOR's services, adverse business conditions, decreased or lack of growth in the mechanical and electrical construction and facilities services industries, increased competition, pricing pressures, risks associated with foreign operations and other factors.
PART II - OTHER INFORMATION Item 1 - Legal Proceedings The information on legal proceedings is hereby incorporated by reference to Note P of EMCOR's Notes to Consolidated Financial Statements included in EMCOR's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. Item 6 - Exhibits and Reports on Form 8-K (a)Exhibits Incorporated by Reference to, Exhibit No Description or Page Number 4 Third Amendment to Amended and Page Restated Credit Agreement 10 Amendment to 1994 Management Page Stock Option Plan 11 Computation of Basic Note E of the Notes EPS and Diluted EPS to the Condensed Consolidated for the three months Financial Statements. end March 31, 2000 and 1999 27 Financial Data Schedule Filed herewith. (b)No reports on Form 8-K were filed during the quarter ended March 31, 2000
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: April 26, 2000 By: /s/FRANK T. MACINNIS ------------------------------------------ Frank T. MacInnis Chairman of the Board of Directors and Chief Executive Officer Date: April 26, 2000 By: /s/LEICLE E. CHESSER ------------------------------------------ ------------------------------------------ Leicle E. Chesser Executive Vice President and Chief Financial Officer