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<SEC-DOCUMENT>0000930413-01-000293.txt : 20010224
<SEC-HEADER>0000930413-01-000293.hdr.sgml : 20010224
ACCESSION NUMBER: 0000930413-01-000293
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 8
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010220
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: EMCOR GROUP INC
CENTRAL INDEX KEY: 0000105634
STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL WORK [1731]
IRS NUMBER: 112125338
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-08267
FILM NUMBER: 1549740
BUSINESS ADDRESS:
STREET 1: 101 MERRITT SEVEN CORPORATE PK
STREET 2: 7TH FLOOR
CITY: NORWALK
STATE: CT
ZIP: 06851
BUSINESS PHONE: 2038497800
MAIL ADDRESS:
STREET 1: 101 MERRITT SEVEN CORPORATE PARK
STREET 2: 7TH FLOOR
CITY: NORWALK
STATE: CT
ZIP: 06851
FORMER COMPANY:
FORMER CONFORMED NAME: JWP INC/DE/
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: JAMAICA WATER PROPERTIES INC
DATE OF NAME CHANGE: 19860518
FORMER COMPANY:
FORMER CONFORMED NAME: WELSBACH CORP
DATE OF NAME CHANGE: 19761119
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
--------------------------
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 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)
Registrant's telephone number, including area code
(203) 849-7800
Securities registered pursuant to section 12(b) of the act:
Common Stock, par value $.01 per share
(Title of each class)
Securities registered pursuant to section 12(g) of the act:
5 3/4% Convertible Subordinated Notes
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 if disclosure of delinquent filings pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in Part III of this Form 10-K to be filed as an
amendment hereto. [_]
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [_]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant on December 31, 2000 was approximately
$249,036,749.
Number of shares of Common Stock outstanding as of the close of business on
February 16, 2001: 10,485,624 shares.
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business
General ....................................................... 1
The Business .................................................. 1
Competition ................................................... 4
Employees ..................................................... 4
Backlog ....................................................... 4
Item 2. Properties ....................................................... 5
Item 3. Legal Proceedings ................................................ 7
Item 4. Submission of Matters to a Vote of Security Holders .............. 7
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters .................................. 9
Item 6. Selected Financial Data .......................................... 10
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition ............................ 11
Item 8. Financial Statements and Supplementary Data ...................... 16
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ........................... 38
PART III
Item 10. Directors and Executive Officers of the Registrant ............... 38
Item 11. Executive Compensation ........................................... 38
Item 12. Security Ownership of Certain Beneficial Owners and Management ... 38
Item 13. Certain Relationships and Related Transactions ................... 38
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .. 39
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
EMCOR Group, Inc. ("EMCOR") is one of the largest mechanical and electrical
construction and facilities services firms in the United States, Canada, the
United Kingdom and in the world. In 2000, EMCOR had revenues of more than $3.46
billion. EMCOR provides services to a broad range of commercial, industrial,
utility, and institutional customers through approximately 45 principal
operating subsidiaries, including its majority interest in a limited liability
company that provides facilities services to over 2,500 buildings with more than
70 million square feet of space. These businesses have offices in 32 states and
the District of Columbia in the United States, seven provinces in Canada and ten
primary locations in the United Kingdom. In the United Arab Emirates, Saudi
Arabia and South Africa, EMCOR carries on business through subsidiaries and
joint ventures. EMCOR's executive offices are located at 101 Merritt Seven
Corporate Park, Norwalk, Connecticut 06851-1060, and its telephone number at
those offices is (203) 849-7800.
EMCOR specializes in the design, integration, installation, start-up,
operation and maintenance of:
o Systems for generation and distribution of electrical power;
o Lighting systems;
o Low-voltage systems, such as fire alarm, security, communications and
process control systems;
o Voice and data communications systems;
o Heating, ventilation, air conditioning, refrigeration and clean-room
process ventilation systems; and
o Plumbing, process and high-purity piping systems.
EMCOR also provides services needed to support the operation of customers'
facilities, which services are not related to customers' construction programs.
These services, frequently referred to as facilities services, include site
based operations and maintenance, mobile maintenance and service, small
modification and retrofit projects, consulting, program development and
management for energy systems, and maintenance of facilities. Facilities
services are provided to a wide range of commercial, industrial, utility and
institutional facilities, including those at which EMCOR provided construction
services and others at which construction services were provided by other
contractors. EMCOR's varied facilities services are frequently combined to
provide integrated service packages which include mechanical, electrical and
other services.
EMCOR provides mechanical and electrical construction services and
facilities services directly to corporations, municipalities and other
governmental entities, owners/developers and tenants of buildings. It also
provides these services indirectly by acting as a subcontractor to construction
managers, general contractors, systems suppliers and other subcontractors.
Worldwide, EMCOR employs approximately 22,000 people.
EMCOR's revenues are derived from many different customers in numerous
industries which have operations in several different geographical areas. Of
EMCOR's 2000 revenues, approximately 80% were generated in the United States and
approximately 20% were generated internationally. In 2000, approximately 43% of
revenues were derived from new construction projects and approximately 57% of
revenues were derived from renovation and retrofit of customers' existing
facilities and from EMCOR's facilities services operations (renovation and
retrofit work and facilities services operations are sometimes referred to by
stock analysts as maintenance, repair and replacement or "MRR"). Approximately
84% of 2000 revenues were generated from both new construction and renovation
and retrofit projects, and approximately 16% of 2000 revenues were generated
from facilities services operations. For the period 1997 through 2000, revenues
and EBITDA grew at compound annual growth rates of 21.1% and 38.7%,
respectively.
THE BUSINESS
The broad scope of EMCOR's operations are more particularly described
below.
MECHANICAL AND ELECTRICAL CONSTRUCTION SERVICES AND FACILITIES SERVICES
EMCOR believes that the mechanical and electrical construction services and
facilities services business is highly fragmented, consisting of thousands of
small companies across the United States and around the world. Because EMCOR has
total assets, annual revenues, net worth, access to bank credit and surety
bonding, and expertise significantly greater than most of its competitors, EMCOR
believes it has a significant competitive advantage. The mechanical and
electrical construction services industry has a higher growth rate than the
overall construction industry, due principally to the increase in content and
complexity of mechanical and electrical systems in all types of projects. This
increased content and complexity is, in part, a result of the expanded use of
computers and more technologically advanced voice and data communications,
lighting, and environmental control systems in all types of facilities. For
these reasons, buildings of all types consume
1
<PAGE>
more electricity per square foot than in the past and thus need more extensive
electrical distribution systems. In addition, advanced voice and data
communication systems require more sophisticated power supplies and extensive
low voltage and fiber-optic communications cabling. Moreover, the need for
greater environmental controls within a building, such as the heightened need
for climate control to maintain extensive computer systems at optimal
temperatures, and the growing demand for environmental control in individual
spaces, have created expanded opportunities for the mechanical and electrical
construction services and facilities services business.
Mechanical and electrical construction services primarily involve the
design, integration, installation and start-up of: (1) systems for the
generation and distribution of electrical power, including power cables,
conduits, distribution panels, transformers, generators, uninterruptible power
supply systems and related switch gear and controls; (2) lighting systems,
including fixtures and controls; (3) low-voltage systems, including fire alarm,
security, and process control systems; (4) voice and data communications
systems, including fiber-optic and low voltage copper cabling; (5) heating,
ventilation, air conditioning (collectively, "HVAC"), refrigeration and
clean-room process ventilation systems and (6) plumbing, process and high-purity
piping systems.
Mechanical and electrical construction services generally fall into one of
two categories: (1) large installation projects with contracts often in the
multi-million dollar range that involve construction of industrial and
commercial buildings and institutional and public works facilities or the
fit-out of large blocks of space within commercial buildings and (2) smaller
installation projects typically involving fit-out, renovation and retrofit work.
EMCOR's mechanical and electrical construction services operations
accounted for about 84% of its 2000 revenues, of which approximately 52% was
related to new construction and approximately 48% was related to renovation and
retrofit projects. EMCOR provides mechanical and electrical construction
services for both large and small installation and renovation projects. Its
largest projects include those (1) for institutional use (such as water and
wastewater treatment facilities, hospitals, correctional facilities, schools and
research laboratories); (2) for industrial use (such as pharmaceutical
factories, steel, pulp and paper mills, chemical, automotive and semiconductor
plants, and oil refineries); (3) for transportation systems (such as airports
and transit systems) and (4) for commercial use (such as office buildings, data
centers, hotels, casinos, convention centers, sports stadiums, shopping malls
and resorts). EMCOR's largest projects, typically in excess of $10.0 million,
are usually multi-year projects and range in size up to, and occasionally in
excess of, $50.0 million. These projects represented about 25% of EMCOR's
construction services revenues in 2000.
EMCOR's projects of less than $10.0 million accounted for approximately 75%
of 2000 construction services revenues. These projects are typically completed
in less than a year. They usually involve mechanical and electrical construction
services when an end-user or owner undertakes construction or modification of a
facility to accommodate a specific use. These projects frequently require
mechanical and electrical systems to meet special needs such as redundant power
supply systems, special environmental controls and high-purity air systems,
sophisticated electrical and mechanical systems for data centers, including
those associated with internet service providers and electronic commerce,
trading floors in financial services businesses, new production lines in
manufacturing plants and office arrangements in existing office buildings. These
types of projects are not usually dependent upon the new construction market.
Demand for them is often prompted by the expiration of leases, changes in
technology or changes in the customer's plant or office layout in the normal
course of a customer's business.
EMCOR performs its services pursuant to contracts with owners, such as
corporations, municipalities and other governmental entities, general
contractors, systems suppliers, construction managers, developers, other
subcontractors and tenants of commercial properties. Institutional and public
works projects are frequently long-term, complex projects that require
significant technical and management skills and the financial strength to, among
other things, obtain bid and performance bonds, which are often a condition to
bidding for, and award of these projects.
EMCOR also installs and maintains street, highway, bridge and tunnel
lighting, traffic signals, computerized traffic control systems and signal and
communication systems for mass transit systems in several metropolitan areas. In
addition, in the United States, EMCOR manufactures and installs sheet metal air
handling systems for both its own mechanical construction operations and for
unrelated mechanical contractors. EMCOR also maintains welding and pipe
fabrication shops for some of its own mechanical operations.
EMCOR also provides customers with facility support services which are not
related to construction projects. These services, frequently referred to as
facilities services, generated approximately 16% of 2000 revenues. Following
completion of construction projects, EMCOR has historically provided technical
support services to many of its customers, involving maintenance and service of
mechanical and electrical systems and small modification and retrofit projects
that support their day-to-day needs. In addition, EMCOR provides other services
to owners, operators, tenants and managers of all types of facilities both on a
contract basis for a specified period of time and on an individual task order
basis.
Facilities services include customer-based operations and maintenance,
mobile maintenance service, small modification and retrofit projects,
consulting, program development and management for energy systems and
maintenance activities. These services are provided to a wide range of
commercial, industrial and institutional facilities, including both those for
which EMCOR provided construction services and those for which construction
services were provided by others. The services are frequently bundled to provide
integrated service packages and may include services in addition to EMCOR's core
mechanical and electrical services.
2
<PAGE>
EMCOR has experienced an expansion in the demand for its facilities
services which it believes is driven by customers' downsizing programs and their
focus on their own core competencies, the increasing technical complexity of
their facilities and their mechanical, electrical, voice and data and other
systems, and the need for increased reliability, especially in mechanical and
electrical systems. These trends have led to outsourcing and privatization
programs whereby customers in both the private and public sectors seek to
contract out those activities that support but are not directly involved in the
customer's business.
In the early 1990's, the market for facilities services grew rapidly in the
United Kingdom as a result of government initiatives. EMCOR's United Kingdom
subsidiary expanded its traditional technical service business in response to
these opportunities and established a dedicated unit to focus on the facilities
services business. This unit currently provides a full range of facilities
services to public and private sector customers under multi-year agreements,
including maintaining British Airways' facilities at Heathrow and Gatwick
Airports, the new British Library, the Department of Trade and Industry offices
in London, and the new Jubilee Line Extension of the London Underground. In the
United Kingdom, EMCOR also provides facilities services at several manufacturing
plants for various British Aerospace and Rolls Royce facilities. In addition,
the United Kingdom operations provide on-call and mobile service support on a
task-order or contract basis, small renovation project work, data
communications, security system installation, and maintenance services.
EMCOR, by virtue of its construction and facilities services expertise, is
involved with private finance initiatives ("PFIs") sponsored by the British
government. The PFIs, which involve governmental bodies responsible, among other
things, for the national healthcare system, social security, air traffic
control, schools, and hospitals, seek to transfer ownership and management of
United Kingdom government facilities, including office buildings and
institutional buildings, to groups of financial institutions, consulting service
organizations, and others, which competitively bid for PFI contracts. EMCOR has
been awarded several contracts by such groups to provide mechanical and
electrical services, ground maintenance and other ancillary services for periods
typically ranging from 5 to 35 years at buildings which were formerly owned and
managed by government bodies and privatized as part of the PFI program. EMCOR
has built on its United Kingdom experience to market its facilities services
business to international markets and currently provides facilities services
through joint ventures to several companies in South Africa.
In 1997, EMCOR established a new subsidiary to expand its facilities
services operations in North America patterned on its United Kingdom business.
This unit seeks to build on existing mechanical and electrical services
capabilities, facilities services activities at existing subsidiaries, and
EMCOR's client relationships in order to expand the scope of services currently
offered and to develop packages of services for customers on a regional,
national and global basis. EMCOR's North American facilities services strategy
includes initiation and expansion of facilities services operations at
subsidiaries that provide mechanical and electrical construction services,
including the offering of bundled facilities services programs, integrating two
or more services, and development of facilities services business independent of
construction services through an acquisition program. In addition, management
also has targeted growth in facilities services opportunities arising from the
deregulation of the electric utility industry, deregulation and expansion of the
telecommunications industry and the REIT-driven consolidation of the commercial
real estate industry.
In April 2000, EMCOR and CB Richard Ellis Inc., a nationwide real estate
management company, created a limited liability company, in which EMCOR has a
majority interest, which provides facilities services to approximately 2,500
buildings with over 70 million square feet of space in 30 states. The facilities
services, which had been provided by a division of CB Richard Ellis Inc.,
consist of the operation, maintenance and supervision of building systems
including heating, air conditioning, plumbing, lighting, ventilating, electrical
control and energy management sytems.
The deregulation of, and increased competition in, the utility industry,
along with government mandates calling for reduced energy consumption by
government entities, have led to renewed focus on energy costs and conservation
measures. These measures typically include energy assessments and engineering
studies, retrofit construction to implement energy savings measures, and the
long-term operation and maintenance of energy savings measures to ensure
continued performance. Various subsidiaries of EMCOR participate in energy
savings programs, and EMCOR believes it has the ability to be a single source
provider of construction and facilities services required for energy assessment
and for design, installation, and operations and maintenance of energy savings
measures.
As part of its expansion of its facilities services business, during 1998,
EMCOR acquired a Bakersfield, California based maintenance program consulting
service firm, a Los Angeles, California area based mobile, mechanical services
firm and a Richmond, Virginia based industrial facilities services firm to
expand its capabilities in this field. In 1999, EMCOR acquired a Boston,
Massachusetts based firm that provides mobile services in the New England area
and site based operations and maintenance services throughout the Eastern United
States. These acquisitions permit EMCOR to offer integrated construction and
operations and maintenance services.
The deregulation and expansion of the telecommunications industry have led
to a rapid expansion of installed infrastructure, including wireless
communication systems and long distance networks, much of which has been built
by companies that do not have existing maintenance operations and which seek to
contract out such services. EMCOR has provided construction services for the
infrastructure of telecommunications companies and facilities services to
support their operations. In this industry, EMCOR has worked on facilities owned
by such service providers as Sprint, AT&T, and MCI WorldCom, has installed and
maintained equipment for suppliers such as Lucent, Nortel, and Seimens, and has
provided construction and maintenance services to competitive local service
providers and to users who maintain their own systems.
3
<PAGE>
EMCOR has also provided construction and maintenance services to many
internet service providers in support of their data center facilities. These
customers include Metromedia Fiber Network, Exodus Communications and Qwest
Communications International.
EMCOR offers facilities services to customers on single-task and multi-task
bases depending on a customer's needs, under either short-term or multi-year
agreements. EMCOR's services often require that its employees be permanently
assigned to customer premises twenty-four hours per day.
EMCOR believes mechanical and electrical construction services and
facilities services activities are complementary, permitting it to offer
customers a comprehensive package of services. The ability to offer both
construction and facilities services should enhance EMCOR's competitive position
with customers. Furthermore, EMCOR's facilities services operations tend to be
less cyclical than its construction operations because facilities services are
more responsive to the needs of an industry's operations requirements rather
than its construction requirements.
COMPETITION
EMCOR believes that the mechanical and electrical construction services
business is highly fragmented and competitive. A majority of EMCOR's revenues
are derived from jobs requiring competitive bids; however, an invitation to bid
is often conditioned upon prior experience, technical capability and financial
strength. EMCOR competes with national, regional and local companies, many of
which are small, owner-operated entities that operate in a limited geographic
area. There are few public companies focused on providing mechanical and
electrical construction services, although in the last four years more public
national and regional firms have been established. EMCOR is one of the largest
providers of mechanical and electrical construction services in the United
States, Canada, the United Kingdom and in the world. In the future, significant
competition may be encountered from public utilities and companies attempting to
consolidate mechanical and electrical construction services companies.
Competitive factors in the mechanical and electrical construction services
business include: (1) the availability of qualified and/or licensed personnel;
(2) reputation for integrity and quality; (3) safety record; (4) cost structure;
(5) relationships with customers; (6) geographic diversity; (7) the ability to
control project costs; (8) experience in specialized markets; (9) the ability to
obtain surety bonding; (10) adequate working capital and (11) access to bank
credit.
While the facilities services business is also highly fragmented, a number
of large corporations such as Johnson Controls, Inc. and Fluor Corp. are engaged
in this field, and there are other companies seeking to consolidate facilities
services businesses. EMCOR's facilities services operations are well established
in the United Kingdom and are being developed through the combination of
acquisitions and growth of EMCOR's existing operations in the United States,
including its limited liability company owned jointly with CB Richard Ellis Inc.
EMPLOYEES
EMCOR presently employs approximately 22,000 people, approximately 78% of
whom are represented by various unions pursuant to more than 225 collective
bargaining agreements between EMCOR's individual subsidiaries and local unions.
EMCOR believes that its employee relations are generally good. None of these
collective bargaining agreements are nationwide or regional in scope.
BACKLOG
EMCOR had backlog as of December 31, 2000 of approximately $1.80 billion,
compared with backlog of approximately $1.77 billion as of December 31, 1999.
Backlog principally includes electrical and mechanical construction services
contracts with a value of $250,000 or more and facilities services revenues to
be derived during the 12 months ending December 31, 2001 pursuant to contracts.
Backlog increased by $30.0 million as of December 31, 2000 compared to December
31, 1999. Backlog attributable to United States electrical construction and
facilities services backlog increased approximately $140.0 million as of
December 31, 2000, when compared to December 31, 1999. However, backlog
attributable to Canada and United Kingdom construction and facilities services
backlog decreased approximately $110.0 million as of December 31, 2000, when
compared to December 31, 1999, due primarily to completion of several large
projects during 2000. For the year ended December 31, 2000, EMCOR had more than
$3.46 billion in revenues compared to more than $2.89 billion in revenues for
the year ended December 31, 1999.
4
<PAGE>
ITEM 2. PROPERTIES
The operations of EMCOR are conducted primarily in leased properties. The
following table lists major facilities, both leased and owned:
LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------- ----------------
CORPORATE HEADQUARTERS
101 Merritt Seven Corporate Park
Norwalk, Connecticut ................... 20,805 4/7/05
OPERATING FACILITIES
1200 North Sickles Drive
Tempe, Arizona ......................... 29,000 Owned
4050 Cotton Center Boulevard
Phoenix, Arizona ....................... 9,704 2/28/06
1000 N. Kraemer Place
Anaheim, California .................... 24,540 6/30/02
4520 California Avenue
Bakersfield, California ................ 12,682 8/31/05
3208 Landco Drive
Bakersfield, California ................ 49,875 6/30/02
1166 Fesler Street
El Cajun, California ................... 42,760 8/31/10
25601 Clawiter Road
Hayward, California .................... 34,800 6/30/03
3100-3120 Diablo Avenue
Hayward, California .................... 23,641 5/31/01
5 Vanderbilt
Irvine, California ..................... 18,000 7/31/04
4462 Corporate Center Drive
Los Alamitos, California ............... 57,863 7/31/06
825 Howe Road
Martinez, California ................... 109,800 12/31/02
414 Brannan Street
San Francisco, California .............. 10,283 3/31/01
4405 and 4420 Race Street
Denver, Colorado ....................... 16,890 9/30/01
345 Sheridan Boulevard
Lakewood, Colorado ..................... 63,000 Owned
367 Research Parkway
Meriden, Connecticut ................... 23,500 7/31/04
1781 N.W. North River Drive
Miami, Florida ......................... 11,285 Owned
8801 Miami Lakes Drive
Miami Lakes, Florida ................... 10,000 5/31/03
3145 Northwoods Parkway
Norcross, Georgia ...................... 25,808 1/31/06
2100 South York Road
Oak Brook, Illinois .................... 87,700 5/31/08
2655 Garfield Road
Highland, Indiana ...................... 45,816 6/30/06
300 Walnut Street
Owensboro, Kentucky .................... 20,600 1/07/04
5
<PAGE>
LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------- ----------------
4530 Hollins Ferry Road
Baltimore, Maryland .................... 26,792 Owned
306 Northern Avenue
Boston, Massachusetts .................. 47,456 6/30/05
70-70D Hawes Way
Stoughton, Massachusetts ............... 24,400 12/31/05
22925-22931 Industrial Drive West
St. Clair Shores, Michigan ............. 19,000 4/30/05
6060 Hix Road
Westland, Michigan ..................... 23,000 12/31/03
3555 W. Oquendo Road
Las Vegas, Nevada ...................... 90,000 11/30/03
6325 South Valley Boulevard
Las Vegas, Nevada ...................... 23,190 12/31/01
6754 W. Washington Avenue
Pleasantville, New Jersey .............. 45,400 1/14/02
26 West Street
Brooklyn, New York ..................... 15,000 Owned
111-01 and 109-15 14th Avenue
College Point, New York ................ 82,000 2/28/11
301 and 305 Suburban Avenue
Deer Park, New York .................... 33,535 3/31/05
111 West 19th Street
New York, New York ..................... 26,885 5/31/03
Two Penn Plaza
New York, New York ..................... 57,200 2/01/06
4906 Barrow Avenue
Cincinnati, Ohio ....................... 16,300 9/30/03
4914 Ridge Avenue
Cincinnati, Ohio ....................... 8,100 9/30/03
2300-2310 International Street
Columbus, Ohio ......................... 25,500 8/30/01
5550 Airline Drive
Houston, Texas ......................... 77,483 6/30/01
515 Norwood Road
Houston, Texas ......................... 26,676 6/30/01
1574 South West Temple
Salt Lake City, Utah ................... 64,170 12/31/01
2925-2941 Space Road
Richmond, Virginia ..................... 26,000 8/19/03
22930 Shaw Road
Dulles, Virginia ....................... 32,600 7/31/06
109-D Executive Drive
Dulles, Virginia ....................... 19,000 8/31/04
7973-7985 Livingston Road
Manassas, Virginia ..................... 28,800 12/31/01
1 Thameside Centre
Kew Bridge Road
Kew Bridge, Middlesex, United Kingdom .. 14,000 12/22/12
6
<PAGE>
LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------- ----------------
86 Talbot Road
Old Trafford, Manchester,
United Kingdom ......................... 24,300 12/24/06
2116 Logan Avenue
Winnipeg, Manitoba, Canada ............. 19,800 Owned
3455 Landmark Boulevard
Burlington, Ontario, Canada ............ 16,100 Owned
EMCOR believes that all of its property, plant and equipment are well
maintained, in good operating condition and suitable for the purposes for which
they are used.
See Note K to the consolidated financial statements for additional
information regarding lease costs. EMCOR utilizes substantially all of its
leased facilities and believes there will be no difficulty either in negotiating
the renewal of its real property leases as they expire or in finding alternative
space, if necessary.
ITEM 3. LEGAL PROCEEDINGS
In February 1995, as part of an investigation by the New York County
District Attorney's office into the business affairs of a general contractor
that did business with EMCOR's subsidiary, Forest Electric Corp. ("Forest"), a
search warrant was executed at Forest's executive offices. On July 12, 2000,
Forest was served with a Subpoena Duces Tecum to produce certain documents as
part of a broader investigation by the New York County District Attorney's
office into illegal business practices in the New York City construction
industry. Forest has been informed by the New York County District Attorney's
office that it and certain of its officers are targets of the investigation.
Forest intends to produce documents in response to the subpoena and to cooperate
fully with the District Attorney's office investigation as it proceeds.
On July 31, 1998 a former employee of a subsidiary of EMCOR filed a
class-action complaint on behalf of the participants in two employee benefit
plans sponsored by EMCOR against EMCOR and other defendants for breach of
fiduciary duty under the Employee Retirement Income Security Act. All of the
claims relate to alleged acts or omissions which occurred during the period May
1991 to December 1994. The principal allegations of the complaint are that the
defendants breached their fiduciary duties by causing the plans to purchase and
hold stock of EMCOR when it was then known as JWP, Inc. and when the defendants
knew or should have known it was imprudent to do so. The plaintiff has not made
claim for a specific dollar amount of damages but generally seeks to recover for
the benefit plans the loss in value of JWP, Inc. stock held by the plans. EMCOR
and the other defendants intend to vigorously defend the case. Insurance
coverage may be applicable under an EMCOR pension trust liability insurance
policy for EMCOR and those present and former employees of EMCOR who are
defendants in the action.
Substantial settlements or damage judgements arising out of these matters
could have a material adverse effect on EMCOR'S business, operating results and
financial conditions.
In addition to the above, EMCOR is involved in other legal proceedings and
claims asserted by and against EMCOR, which have arisen in the ordinary course
of business. EMCOR believes it has a number of valid defenses to these actions,
and EMCOR intends to vigorously defend or assert these claims and does not
believe that a significant liability will result. However, EMCOR cannot predict
the outcome thereof or the impact that an adverse result of the matters
discussed above will have upon EMCOR'S financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
7
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
FRANK T. MACINNIS, Age 54; Chairman of the Board and Chief Executive
Officer of the Company since April 1994 and President of the Company from April
1994 to April 1997. From April 1990 to April 1994, Mr. MacInnis served as
President and Chief Executive Officer, and from August 1990 to April 1994 as
Chairman of the Board, of Comstock Group, Inc., a nationwide electrical
contracting company. From 1986 to April 1990, Mr. MacInnis was Senior Vice
President and Chief Financial Officer of Comstock Group, Inc. In addition, from
1986 to April 1994, Mr. MacInnis was also President of Spie Group Inc., which
had interests in Comstock Group, Inc., Spie Construction Inc., a Canadian
pipeline construction company, and Spie Horizontal Drilling Inc., a U.S. company
engaged in underground drilling for the installation of pipelines and
communications cable.
JEFFREY M. LEVY, Age 48; President of the Company since April 1997 and
Chief Operating Officer of the Company since February 1994, Executive Vice
President of the Company from November 1994 to April 1997, Senior Vice President
of the Company from December 1993 to November 1994. From May 1992 to December
1993, Mr. Levy was President and Chief Executive Officer of the Company's
subsidiary EMCOR Mechanical/Electrical Services (East) Inc. From January 1991 to
May 1992, Mr. Levy served as Executive Vice President and Chief Operating
Officer of Lehrer McGovern Bovis, Inc., a construction management and
construction company.
SHELDON I. CAMMAKER, Age 61; Executive Vice President and General Counsel
of the Company since September 1987 and Secretary of the Company since May 1997.
Prior to September 1987, Mr. Cammaker was a senior partner of the New York City
law firm of Botein, Hays, & Sklar.
LEICLE E. CHESSER, Age 54; Executive Vice President and Chief Financial
Officer of the Company since May 1994. From April 1990 to May 1994, Mr. Chesser
served as Executive Vice President and Chief Financial Officer of Comstock
Group, Inc., and from 1986 to May 1994, Mr. Chesser was also Executive Vice
President and Chief Financial Officer of Spie Group, Inc.
R. KEVIN MATZ, Age 42; Vice President and Treasurer of the Company since
April 1996 and Staff Vice President - Financial Services of the Company from
March 1993 to April 1996. From March 1991 to March 1993, Mr. Matz was Treasurer
of Sprague Technologies Inc., a manufacturer of electronic components.
MARK A. POMPA, Age 36; Vice President and Controller of the Company since
September 1994. Prior to September 1994, Mr. Pompa was an Audit and Business
Advisory Manager of Arthur Andersen LLP, an accounting firm.
8
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION. On November 16, 2000, EMCOR's common stock began
trading on the New York Stock Exchange under the symbol "EME". Prior to that
time, EMCOR's common stock had been traded on the Nasdaq National Market tier of
the Nasdaq Stock Market.
The following table sets forth high and low sales prices for the common
stock for the periods indicated as reported by the Nasdaq National Market
through November 15, 2000, and thereafter, as reported by the New York Stock
Exchange:
2000 HIGH LOW
---- ---- ---
First Quarter ......................... $24 1/4 $17 1/2
Second Quarter ........................ $24 3/4 $17 3/4
Third Quarter ......................... $28 1/8 $22 1/4
Fourth Quarter (through November 15) .. $26 1/4 $22 3/4
Fourth Quarter (commencing November 16) $26 $23
1999 HIGH LOW
---- ---- ---
First Quarter ......................... $17 5/8 $16 1/16
Second Quarter ........................ $26 $16 1/2
Third Quarter ......................... $25 1/4 $19
Fourth Quarter ........................ $20 1/8 $16 7/8
HOLDERS. As of February 12, 2001, there were 138 shareholders of record
and, as of that date, EMCOR estimates there were approximately 1,100 beneficial
owners holding stock in nominee or "street" name.
DIVIDENDS. EMCOR did not pay dividends on its common stock during 2000 or
1999, and it does not anticipate that it will pay dividends on its common stock
in the foreseeable future. EMCOR's working capital credit facility limits the
payment of dividends on its common stock.
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data has been derived from audited
financial statements and should be read in conjunction with the consolidated
financial statements, the related notes thereto and the report of independent
public accountants thereon, included elsewhere in this Form 10-K and in
previously filed annual reports on Form 10-K of EMCOR.
<TABLE>
<CAPTION>
INCOME STATEMENT DATA YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues ........................................................ $3,460,204 $2,893,962 $2,210,374 $1,950,868 $1,669,274
Gross profit .................................................... 357,817 295,907 223,287 182,183 160,788
Operating income ................................................ 78,925 58,091 37,224 27,414 17,114
Income before extraordinary items ............................... 40,089 27,821 17,092 8,581 9,437
Extraordinary items--loss on early extinguishment
of debt, net of income taxes .................................. -- -- (4,777) (1,004) --
---------- ---------- ---------- ---------- ----------
Net income ...................................................... $ 40,089 $ 27,821 $ 12,315 $ 7,577 $ 9,437
========== ========== ========== ========== ==========
Basic earnings per share: (a)
Income before extraordinary items ............................... $ 3.84 $ 2.86 $ 1.67 $ 0.90 $ 1.00
Extraordinary items--loss on early extinguishment
of debt, net of income taxes .................................. -- -- (0.47) (0.11) --
---------- ---------- ---------- ---------- ----------
Basic earnings per share ........................................ $ 3.84 $ 2.86 $ 1.20 $ 0.79 $ 1.00
========== ========== ========== ========== ==========
Diluted earnings per share: (a)
Income before extraordinary items ............................... $ 2.95 $ 2.21 $ 1.46 $ 0.84 $ 0.96
Extraordinary items--loss on early extinguishment
of debt, net of income taxes .................................. -- -- (0.35) (0.10) --
---------- ---------- ---------- ---------- ----------
Diluted earnings per share ...................................... $ 2.95 $ 2.21 $ 1.11 $ 0.74 $ 0.96
========== ========== ========== ========== ==========
----------------------------------------------------------------
BALANCE SHEET DATA AS OF DECEMBER 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Stockholders' equity (b) ........................................ $ 233,503 $ 170,249 $ 119,816 $ 95,323 $ 83,883
Total assets .................................................... $1,261,864 $1,052,246 $ 801,002 $ 660,654 $ 620,700
Goodwill ........................................................ $ 67,625 $ 68,009 $ 22,745 $ 927 --
Notes payable ................................................... -- $ 1,150 $ 8,314 -- --
Borrowings under working capital credit lines ................... -- -- -- $ 9,497 $ 14,200
Other long-term debt, including current maturities .............. $ 116,056 $ 116,534 $ 116,086 $ 62,657 $ 72,405
Capital lease obligations ....................................... $ 573 $ 554 $ 837 $ 1,482 $ 1,007
</TABLE>
- ----------
(a) Effective December 31, 1997, EMCOR adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". Accordingly, earnings
per share information for years prior to December 31, 1997 has been
restated to conform to this presentation.
(b) No cash dividends on EMCOR's common stock have been paid during the past
five years.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
HIGHLIGHTS
Revenues for the year ended December 31, 2000 were $3.46 billion, compared
to $2.89 billion and $2.21 billion for the years ended December 31, 1999 and
1998, respectively. Income before extraordinary item was $40.1 million for 2000,
an increase of $12.3 million, or 44.1%, from $27.8 million for 1999. For 1998,
income before extraordinary item was $17.1 million. Diluted earnings per share
on income before extraordinary item were $2.95 per share for 2000, compared to
$2.21 per share for 1999 and $1.46 per share for 1998.
OPERATING SEGMENTS
EMCOR's business consists of the following operating 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 South Africa and the Middle East,
performing electrical construction, mechanical construction and facilities
services.
RESULTS OF OPERATIONS
REVENUES
Revenues for the year ended December 31, 2000 increased 19.6% to $3.46
billion, compared to $2.89 billion of revenues for 1999. The $566.2 million
increase in revenues for 2000 compared to 1999 was attributable to revenue
growth from EMCOR's operations (excluding Building Technology Engineers of North
America, LLC ("BTENA") and 1999 acquisitions) of $420.2 million, and to revenues
from BTENA and 1999 acquisitions which approximated $146.0 million in
incremental revenues during 2000. Revenues for 1999 of $2.89 billion represented
a 30.9% increase over revenues of $2.21 billion for 1998. Companies acquired
during 1999 and 1998 accounted for approximately $476.1 million of the $683.6
million increase in 1999 revenues over 1998.
The following table presents EMCOR's revenues by operating segment and the
approximate percentage of total revenues for the years ended December 31, 2000,
1999 and 1998 (in millions, except for percentages):
<TABLE>
<CAPTION>
% OF % OF % OF
2000 TOTAL 1999 TOTAL 1998 TOTAL
-------- ------- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
United States electrical construction and facilities services ..... $1,350.7 39% $ 993.1 34% $ 888.6 40%
United States mechanical construction and facilities services ..... 1,253.7 36% 1,053.7 36% 599.6 27%
United States other services ...................................... 172.3 5% 96.2 3% 14.4 1%
-------- -------- --------
Total United States operations 2,776.7 80% 2,143.0 74% 1,502.6 68%
Canada construction and facilities services ....................... 237.0 7% 196.7 7% 201.9 9%
United Kingdom construction and facilities services ............... 446.2 13% 553.7 19% 493.3 22%
Other international construction and facilities services .......... 0.3 -- 0.6 -- 12.6 1%
-------- -------- --------
Total worldwide operations ........................................ $3,460.2 100% $2,894.0 100% $2,210.4 100%
======== ======== ========
</TABLE>
Revenues for EMCOR's United States electrical construction and facilities
services segment for 2000 increased by $357.6 million, or 36.0%, compared to
1999. The increase in revenues was due to favorable market conditions for most
of the business units in the segment, and was primarily attributable to both new
construction and renovation and retrofit jobs for commercial construction and
the communication infrastructure and technology markets. Offsetting this overall
increase was a decrease in new construction revenues for casino work, although
this was partially offset by increased renovation and retrofit casino work.
Additionally, certain industrial construction related renovation and retrofit
revenues decreased principally due to these facilities not having as many
shut-downs in production to perform major maintenance during 2000. The $104.5
million, or 11.8%, increase in 1999 revenues compared to 1998, was attributable
to $23.0 million of revenues from companies acquired during 1999 and 1998 and
$81.5 million, or a 9.2% increase, due to growth from the balance of EMCOR's
United States electrical construction and facilities services businesses.
United States mechanical construction and facilities services revenues
increased $200.0 million, or 19.0%. The increase in revenues was primarily
attributable to revenue growth from EMCOR's operations excluding acquisitions.
Revenues from the impact of 1999 acquisitions contributed toward approximately
$77.5 million of the increase. Eastern and Western United States based
operations were the major contributors to the increase in revenue due to the
continued strong renovation market and new construction markets in New York
City, Houston, Connecticut, Denver and California. A $454.1 million, or 75.7%,
increase in revenues for 1999 compared to 1998 was attributable to $377.5
million of revenues related to 1999 and 1998 acquisitions, and $76.6 million of
the increase in revenues, or a 12.8% increase, was due to growth from the
balance of EMCOR's United States mechanical construction and facilities
services.
11
<PAGE>
United States other revenues increased by $76.1 million for 2000 compared
to 1999. The primary source of the increase in 2000 was revenues of $68.6
million from BTENA and companies acquired during 1999, as well as increases from
the balance of EMCOR's other United States operations. Revenues for 1999
increased by $81.8 million versus 1998, primarily attributable to revenues of
$75.6 million from companies acquired during 1999 and 1998 and revenues from the
balance of EMCOR's United States other operations.
Revenues of Canada construction and facilities services increased by $40.3
million, or 20.5%, for 2000 as compared to 1999 revenues. The increase in
revenues for 2000 compared with 1999 was primarily due to an increased level of
activities in Eastern Canada, especially in the second half of 2000. The $5.2
million, or 2.6%, decrease in revenues for 1999 compared with 1998 was
attributable to a reduced level of activities in Eastern Canada and from delays
during 1999 in the commencement of certain projects caused by delays in the
bidding process for certain jobs.
United Kingdom construction and facilities services revenues decreased
$107.5 million, or 19.4%, for 2000 compared to 1999 revenues principally due to
the completion of the Jubilee Line project in London at the end of 1999. The
$60.4 million, or 12.2%, increase in 1999 revenues compared with 1998 revenues
was attributable to continued growth in selected construction and facilities
markets, combined with an increase in revenues associated with two major
projects.
Revenues of the Other international construction and facilities services
decreased for 2000 to $0.3 million, compared to $0.6 million for 1999 and $12.6
million for 1998. Other international construction and facilities services
primarily consist of EMCOR's operations in the Middle East. Substantially all of
the current projects in this operating segment are being performed by joint
ventures, and accordingly, no revenue attributable to such joint ventures was
recorded. In 1999, several projects in which EMCOR had majority ownership were
completed. 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, for the years ended December 2000, 1999 and
1998 (in millions, except for percentages):
2000 1999 1998
-------- -------- --------
Cost of sales .............................. $3,102.4 $2,598.1 $1,987.1
Gross profit ............................... $ 357.8 $ 295.9 $ 223.3
Gross profit as a percentage of revenues ... 10.3% 10.2% 10.1%
Gross profit increased $61.9 million, or 20.9%, for 2000 compared to 1999.
Gross profit as a percentage of revenues was 10.3% for 2000 compared to 10.2%
for 1999. The increase in gross profit was due to the increase in revenues of
EMCOR's operations excluding acquisitions, as well as incremental gross profit
from companies acquired in 1999. The increase in gross profit as a percentage of
revenues was primarily a result of an increase in gross profits on projects due
to overall favorable market conditions, partially offset by losses on jobs in
the South and North Carolina markets undertaken by EMCOR's Poole & Kent
subsidiary prior to their acquisition by EMCOR. Gross profit increased $72.6
million, or 32.5%, for 1999 compared to 1998, and gross profit as a percentage
of revenues increased 0.1% for the 1999 period compared with 1998. The increase
in gross profit and gross profit as a percentage of revenues was primarily due
to the mix of projects completed and in progress during 1999.
The following table presents EMCOR's selling, general and administrative
expenses, and selling, general and administrative expenses as a percentage of
revenues for the years ended December 31, 2000, 1999 and 1998 (in millions,
except for percentages):
2000 1999 1998
------- ------- -------
Selling, general
& administrative expenses .................... $ 278.9 $ 237.8 $ 186.1
Selling, general & administrative
expenses as a percentage of revenues ......... 8.1% 8.2% 8.4%
Selling, general & administrative
expenses as a percentage of revenues,
excluding amortization of goodwill ........... 7.9% 8.1% 8.4%
Selling, general and administrative expenses increased $41.1 million, or
17.3%, between 2000 and 1999. As a percentage of revenues, total selling,
general and administrative expenses decreased by 0.1% to 8.1% in 2000 as
compared to 8.2% in 1999. Selling, general and administrative expenses increased
$51.7 million, or 27.8%, between 1999 and 1998. As a percentage of revenues,
total selling, general and administrative expenses decreased by 0.2% to 8.2% in
1999 as compared to 8.4% in 1998. The dollar increase during 2000 compared to
1999 was attributable to the increase in revenues and corresponding increases in
variable selling, general and administrative expenses required to support the
increased revenue base, incremental fixed costs to support the current growth in
operations, plus selling, general and administrative expenses associated with
BTENA and 1999 acquisitions. 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. The increase in selling, general and
administrative expenses for 1999 as compared to 1998 was primarily attributable
to incremental selling, general and administrative expenses from companies
acquired during 1999 and 1998, as well as the effect of the overall increase in
revenues on variable indirect overhead costs. The decrease
12
<PAGE>
of 0.2% in total selling, general and administrative expenses as a percentage of
revenues was primarily due to the leveraging of fixed costs over increased
revenues and the generally lower total selling, general and administrative
expenses as a percentage of revenues for companies acquired during 1999 and
1998.
The following table presents EMCOR's operating income, and operating income
as a percentage of segment revenues, for the years ended December 31, 2000, 1999
and 1998 (in millions, except for percentages):
<TABLE>
<CAPTION>
% OF % OF % OF
SEGMENT SEGMENT SEGMENT
2000 REVENUES 1999 REVENUES 1998 REVENUES
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Operating income (loss):
United States electrical construction and facilities services ...... $ 58.6 4.3% $ 38.5 3.9% $ 36.3 4.1%
United States mechanical construction and facilities services ...... 36.4 2.9% 37.8 3.6% 21.0 3.5%
United States other ................................................ (6.0) -- (4.4) -- (4.8) --
----- ------ ------
Total United States operations ..................................... 89.0 3.2% 71.9 3.4% 52.5 3.5%
Canada construction and facilities services ........................ 5.2 2.2% 4.0 2.0% 5.0 2.5%
United Kingdom construction and facilities services ................ 6.0 1.4% 3.2 0.6% (0.9) --
Other international construction and facilities services ........... 0.5 -- (0.3) -- (1.3) --
Corporate administration ........................................... (21.8) -- (20.7) -- (18.1) --
------ ------ ------
Total worldwide operations ......................................... 78.9 2.3% 58.1 2.0% 37.2 1.7%
Other corporate items:
Interest expense ................................................... (9.7) (10.5) (11.1)
Interest income .................................................... 2.4 2.1 3.6
------ ------ ------
Income before taxes and extraordinary item ......................... $ 71.6 $49.7 $29.7
====== ====== ======
</TABLE>
Operating income increased for the United States electrical construction
and facilities services operations for 2000 compared to 1999. The dollar
increase in operating income for 2000 of $20.1 million, or 52.2%, as compared to
1999, was attributable to the continuing favorable market conditions due to
increased renovation projects as well as new construction spending, particularly
in Eastern and Western United States. As a percentage of revenues, operating
income increased by 0.4% for 2000 as compared to 1999. Operating income for 1999
for the United States electrical construction and facilities services operations
increased $2.2 million, or 6.0%, from 1998 levels due to the effect of
businesses acquired during 1999 and 1998 as well as growth from the balance of
EMCOR's operations.
United States mechanical construction and facilities services operations
operating income decreased $1.4 million for 2000, a 3.7% decrease over 1999
amounts. The decrease was primarily due to losses on jobs in the South and North
Carolina markets undertaken by EMCOR's Poole & Kent subsidiary prior to its
acquisition by EMCOR offsetting the increased operating income for most of the
operations in this segment. For 1999 compared with 1998, operating income
increased $16.9 million, or 80.5%, primarily due to growth of EMCOR's businesses
and operating income contributed by businesses acquired during 1999 and 1998. As
a percentage of revenues, operating income increased 0.1% from 1998 to 1999 and
decreased 0.7% from 1999 to 2000, principally due to the reasons cited above.
United States other operating losses increased $1.6 million for 2000 as
compared to 1999 primarily due to the continuing development costs of the
consulting and maintenance services operations. These operating losses for 1999
compared to 1998 decreased by $0.4 million primarily due to operating income
from certain related businesses acquired during 1999 and 1998, partially offset
by costs of development for the consulting and maintenance service operations.
Canada construction and facilities services operations operating income
increased by $1.2 million for 2000 compared to 1999 principally due to an
increased level of activities in Eastern Canada. Operating income as a
percentage of revenues increased 0.2% in 2000 compared to 1999 due to the jobs
available in 2000 having higher gross profit margins. The 0.5% decrease in
operating income as a percentage of revenues for 1999 compared to 1998 was
primarily due to the decrease in revenues from Eastern Canada operations,
attributable, among other things, to the delay in commencing certain projects in
1999 caused by delays in the bidding process for certain jobs.
United Kingdom construction and facilities services operating income
increased by $2.8 million for 2000 compared to 1999. The improvement was
primarily attributable to the commencement of new projects that have resulted in
higher gross profits in 2000 than in previous years due to improved market
conditions. For 1999, operating income increased to $3.2 million as compared to
operating losses of $0.9 million for 1998. This increase was attributable to
growth in selected construction and facilities services markets in the United
Kingdom.
General corporate expenses for 2000 increased by $1.1 million from 1999
levels and increased by $2.6 million between 1999 and 1998. The increases are
attributable to increased variable overhead costs associated with the Company's
increased revenues, as well as incremental fixed costs to support growth in
operations.
13
<PAGE>
Interest expense decreased by $0.8 million for 2000 compared to 1999 and by
$0.5 million in 1999 compared to 1998, principally due to lower average
outstanding borrowings.
Interest income increased by $0.3 million for 2000 compared with 1999.
Interest income decreased by $1.5 million for 1999 compared to 1998. This
decrease for 1999 compared to 1998 was due to reduced cash available to invest
after approximately $55.8 million was utilized for acquisitions in 1999.
LIQUIDITY AND CAPITAL RESOURCES
In 1998, EMCOR sold, pursuant to underwritten public offerings, $115.0
million principal amount of 5.75% convertible subordinated notes and 1,100,000
shares of its common stock. Interest on the 5.75% convertible subordinated notes
is payable semi-annually. The 5.75% convertible subordinated notes are unsecured
indebtedness of EMCOR and are convertible at any time into common stock of EMCOR
at a conversion price of $27.34 per share.
During the third quarter of 1998, EMCOR's Board of Directors authorized a
stock repurchase program under which EMCOR may repurchase up to $20.0 million of
its common stock. EMCOR did not repurchase shares during 2000 and, as of
December 31, 2000, EMCOR had repurchased 1,132,000 shares of its Common Stock at
an aggregate cost of approximately $16.8 million.
Proceeds received from the sale of the 5.75% convertible subordinated notes
along with proceeds from the sale of common stock were used to (a) redeem
EMCOR's Series C Notes in the aggregate principal amount of $61.9 million; (b)
repay then outstanding borrowings under its working capital credit facility; (c)
prepay EMCOR's note in the aggregate principal amount of $5.5 million and
accrued interest thereon payable to its subsidiary Sellco and (d) fund its
acquisition of certain businesses through December 31, 1999.
The following table presents EMCOR's net cash provided by operating
activities, net cash used in investing activities and net cash (used in)
provided by financing activities for the years ended December 31, 2000 and 1999
(in millions):
2000 1999
------- -------
Net cash provided by operating activities .............. $ 91.4 $ 34.5
Net cash used in investing activities .................. $ (11.1) $ (59.4)
Net cash (used in) provided by financing activities .... $ (1.2) $ 0.4
The Company's consolidated cash balance increased by $79.1 million from
$58.6 million at December 31, 1999 to $137.7 million at December 31, 2000. Net
cash provided by operating activities for 2000 was $91.4 million, an increase of
$56.9 million from $34.5 million for 1999. The cash provided by operating
activities was primarily due to increased net income, decreased net inventories
and contracts in progress, increased accounts payable and accrued expenses,
offset partially by increased accounts receivable. Net cash used in investing
activities for 2000 of $11.1 million consisted primarily of $4.2 million for
acquisitions of businesses and related earn-out payments, net proceeds received
from other investments of $7.0 million and $16.7 million for the purchase of
property, plant and equipment, versus $55.8 million, $6.8 million and $10.7
million used for the same activities for 1999, respectively. Net cash used in
financing activities for 2000 of $1.2 million was primarily due to the
repayments of long-term debt and capital lease obligations.
On December 22, 1998, EMCOR and certain of its subsidiaries amended and
restated a June 19, 1996 credit facility; the amended credit facility provides
EMCOR with a credit facility for borrowings of up to $150.0 million. The amended
credit facility, which has an expiration date of June 30, 2002, is guaranteed by
certain direct and indirect subsidiaries of EMCOR. It is secured by
substantially all of the assets of EMCOR and those subsidiaries, and it provides
for borrowing capacity available in the form of revolving loans and/or letters
of credit. The amended credit facility contains various covenants, including
among other things, maintenance of certain financial ratios, and significant
restrictions with respect to cumulative aggregate payments for dividends, common
stock repurchases, investments, acquisitions, indebtedness, capital
expenditures, and prepayments of subordinated debt, all as defined therein. The
revolving loans bear interest at (1) a rate which is the prime commercial
lending rate announced by Harris Trust and Savings Bank from time to time (9.5%
at December 31, 2000) plus 0% to 0.5%, based on certain financial tests or (2)
at a LIBOR rate (6.3% at December 31, 2000) plus 1.25% to 2.0% based on certain
financial tests. The interest rates in effect at December 31, 2000 were 9.5% and
7.6%, respectively. Letters of credit fees issued under the credit facility
ranging from 0.5% to 2.0% are charged based on type of letters of credit issued
and certain financial tests. As of December 31, 2000 and 1999, EMCOR had
approximately $12.1 million and $17.4 million of letters of credit outstanding,
respectively. No revolving loans were outstanding under the credit facility at
December 31, 2000 or 1999.
In December 2000, 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 and
provides for interest at the bank's prime rate (7.5% at December 31, 2000).
There were no borrowings outstanding under this credit agreement at December 31,
2000 or 1999. The Canadian subsidiary may utilize EMCOR's credit facility for
its working capital requirements.
14
<PAGE>
In 1998, EMCOR issued notes in connection with the acquisition of two
companies. A principal payment of $1.0 million was made in August 1999 in
respect of one note issued in August 1998, and a principal payment of the
balance of $1.15 million was made in respect of that note in August 2000.
Interest on the note was paid together with payments of principal. The other
note, issued in the principal amount of $6.2 million in December 1998, was paid
in full in January 1999.
The Company 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.
CERTAIN INSURANCE MATTERS
As of December 31, 2000, EMCOR was utilizing approximately $12.1 million of
letters of credit obtained under its working capital credit facility as
collateral for its current insurance obligations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of SFAS No. 133", and
Statement of Financial Accounting Standards No. 138 "Accounting for Certain
Derivative Instruments and Hedging Activities" ("SFAS 138"), 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 has evaluated this standard
and has concluded that the provisions of SFAS 133 will have no significant
effect on the financial condition or results of operations of EMCOR.
In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS
140"). SFAS 140 is a replacement of Statement of Financial Accounting Standards
No. 125. SFAS 140 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities occurring after
March 31, 2001. EMCOR has evaluated this standard and has concluded that the
provisions of SFAS 140 will not have a significant effect on the financial
conditions or results of operations of EMCOR.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EMCOR is exposed to market risk for changes in interest rates for
borrowings under its working capital credit facility. The working capital credit
facility bears interest at variable rates, and the fair value of this borrowing
is not significantly affected by changes in market interest rates.
Amounts invested in EMCOR's foreign operations are translated into U. S.
dollars at the exchange rates in effect at year end. The resulting translation
adjustments are recorded as accumulated other comprehensive income, a component
of stockholders' equity, in the consolidated balance sheets.
THIS ANNUAL REPORT ON FORM 10-K 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 INVOLVE RISKS AND UNCERTAINTIES, THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN ANY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO ADVERSE CHANGES IN
GENERAL ECONOMIC CONDITIONS, INCLUDING CHANGES IN THE SPECIFIC MARKETS FOR THE
COMPANY'S SERVICES, ADVERSE BUSINESS CONDITIONS, DECREASED OR LACK OF GROWTH IN
THE MECHANICAL AND ELECTRICAL CONSTRUCTION AND FACILITIES SERVICES INDUSTRIES,
INCREASED COMPETITION, PRICING PRESSURES AND RISK ASSOCIATED WITH FOREIGN
OPERATIONS AND OTHER FACTORS.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EMCOR GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31,
-----------------------
2000 1999
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 137,685 $ 58,552
Accounts receivable, less allowance for
doubtful accounts of $36,917 and $31,083,
respectively .................................... 825,803 713,593
Costs and estimated earnings in excess
of billings on uncompleted contracts ............ 158,073 142,000
Inventories ....................................... 6,909 9,776
Prepaid expenses and other ........................ 10,290 9,018
---------- ----------
Total current assets ............................ 1,138,760 932,939
Investments, notes and other long-term receivables ... 10,364 8,216
Property, plant and equipment, net ................... 38,959 36,509
Goodwill, less accumulated amortization of $8,822
and $4,204, respectively ........................... 67,625 68,009
Other assets ......................................... 6,156 6,573
---------- ----------
Total assets ......................................... $1,261,864 $1,052,246
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital
lease obligations ............................... $ 751 $ 2,235
Accounts payable .................................. 365,139 342,917
Billings in excess of costs and estimated earnings
on uncompleted contracts ........................ 314,929 216,152
Accrued payroll and benefits ...................... 103,897 84,496
Other accrued expenses and liabilities ............ 67,671 67,539
---------- ----------
Total current liabilities ....................... 852,387 713,339
Long-term debt and capital lease obligations ......... 115,878 116,003
Other long-term obligations .......................... 60,096 52,655
---------- ----------
Total liabilities .................................... 1,028,361 881,997
---------- ----------
Stockholders' equity:
Preferred Stock, $0.10 par value, 1,000,000 shares
authorized, zero issued and outstanding ............ -- --
Common Stock, $0.01 par value, 30,000,000 shares
authorized, 10,470,624 and 10,427,690 shares
issued and outstanding, respectively ............... 117 117
Capital surplus ...................................... 167,742 142,894
Accumulated other comprehensive loss ................. (3,906) (2,223)
Retained earnings .................................... 86,386 46,297
Treasury stock, at cost, 1,131,990 and
1,131,995 shares, respectively ..................... (16,836) (16,836)
---------- ----------
Total stockholders' equity ........................... 233,503 170,249
---------- ----------
Total liabilities and stockholders' equity ........... $1,261,864 $1,052,246
========== ==========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
16
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2000 1999 1998
---------- ---------- ----------
Revenues ............................. $3,460,204 $2,893,962 $2,210,374
Cost of sales ........................ 3,102,387 2,598,055 1,987,087
---------- ---------- ----------
Gross profit ......................... 357,817 295,907 223,287
Selling, general and
administrative expenses ............ 278,892 237,816 186,063
---------- ---------- ----------
Operating income ..................... 78,925 58,091 37,224
Interest expense ..................... (9,705) (10,520) (11,041)
Interest income ...................... 2,367 2,107 3,558
---------- ---------- ----------
Income before income taxes and
extraordinary item ................. 71,587 49,678 29,741
Income tax provision ................. 31,498 21,857 12,649
---------- ---------- ----------
Income before extraordinary item ..... 40,089 27,821 17,092
Extraordinary item - loss on early
extinguishment of debt, net of
income taxes ....................... -- -- (4,777)
---------- ---------- ----------
Net income ........................... $ 40,089 $ 27,821 $ 12,315
========== ========== ==========
Basic earnings per share:
Income before extraordinary item ..... $ 3.84 $ 2.86 $ 1.67
Extraordinary item - loss on early
extinguishment of debt, net of
income taxes ....................... -- -- (0.47)
---------- ---------- ----------
Basic earnings per share ............. $ 3.84 $ 2.86 $ 1.20
========== ========== ==========
Diluted earnings per share:
Income before extraordinary item ..... $ 2.95 $ 2.21 $ 1.46
Extraordinary item - loss on early
extinguishment of debt, net of
income taxes ....................... -- -- (0.35)
---------- ---------- ----------
Diluted earnings per share ........... $ 2.95 $ 2.21 $ 1.11
========== ========== ==========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
17
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
2000 1999 1998
-------- -------- --------
Cash flows from operating activities:
Net income .................................... $ 40,089 $ 27,821 $ 12,315
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization ............... 11,483 10,675 9,846
Amortization of goodwill .................... 4,618 3,418 734
Provision for doubtful accounts ............. 6,419 5,967 3,508
Non-cash expense for amortization
of debt issuance costs .................... 1,236 1,236 408
Provision in lieu of income taxes ........... 24,422 15,645 8,151
Non-cash portion of extraordinary item ...... -- -- 3,152
Other, net .................................. -- -- 416
-------- -------- --------
88,267 64,762 38,530
Change in operating assets and
liabilities excluding effect
of businesses acquired:
Increase in accounts receivable ............. (118,629) (96,875) (27,219)
Decrease in inventories and contracts
in progress, net .......................... 76,376 17,784 1,236
Increase (decrease) in accounts payable ..... 22,222 36,830 (3,522)
Increase in accrued payroll and
benefits and other accrued expenses
and liabilities ........................... 19,533 6,633 20,363
Changes in other assets and
liabilities, net .......................... 3,667 5,371 5,924
-------- -------- --------
Net cash provided by operating activities ..... 91,436 34,505 35,312
-------- -------- --------
Cash flows from investing activities:
Proceeds from sale of assets ................ 2,765 347 308
Purchase of property, plant and equipment ... (16,698) (10,737) (10,946)
Payments for acquisitions of businesses
and related earn-out agreements ........... (4,234) (55,782) (28,520)
Net proceeds (disbursements) from
other investments ......................... 7,047 6,810 (1,073)
-------- -------- --------
Net cash used in investing activities ......... (11,120) (59,362) (40,231)
-------- -------- --------
Cash flows from financing activities:
Proceeds from working capital credit lines .. 722,829 306,400 --
Repayments of working capital credit lines .. (722,829) (306,400) (9,497)
Net repayments of long-term debt
and capital lease obligations ............. (1,609) (7,012) (1,840)
Repayment and redemption of Series C Notes .. -- -- (61,854)
Net proceeds from exercise of stock options . 426 221 518
Premiums paid on early extinguishment
of debt ................................... -- -- (2,437)
Repayment and redemption of Supplemental
SellCo Note ............................... -- -- (5,464)
Issuance of convertible subordinated notes .. -- -- 115,000
Net proceeds from exercise of common
stock warrants ............................ -- 10,015 --
Net proceeds from issuance of common stock .. -- -- 22,485
Purchase of common stock .................... -- (2,868) (13,968)
Debt issuance costs ......................... -- -- (4,347)
-------- -------- --------
Net cash (used in) provided by
financing activities ........................ (1,183) 356 38,596
-------- -------- --------
Increase (decrease) in cash and
cash equivalents ............................ 79,133 (24,501) 33,677
Cash and cash equivalents at beginning
of year ..................................... 58,552 83,053 49,376
-------- -------- --------
Cash and cash equivalents at end of year ...... $137,685 $ 58,552 $ 83,053
======== ======== ========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
18
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL ACCUMULATED
STOCK- OTHER
HOLDERS' COMMON CAPITAL COMPREHENSIVE RETAINED TREASURY COMPREHENSIVE
EQUITY STOCK WARRANTS SURPLUS LOSS (1) EARNINGS STOCK INCOME
--------- ------ -------- -------- ------------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 ......... $ 95,323 $ 96 $ 2,154 $ 87,107 $ (195) $ 6,161 $ --
Net income ....................... 12,315 -- -- -- -- 12,315 -- $12,315
Foreign currency translation
adjustments .................... (1,627) -- -- -- (1,627) -- -- (1,627)
-------
Comprehensive income ............. -- -- -- -- -- -- -- $10,688
=======
Provision in lieu of income taxes,
net of benefit of extraordinary
item of $3,381 ................. 4,770 -- -- 4,770 -- -- --
Issuance of common stock ......... 22,485 11 -- 22,474 -- -- --
Common stock issued under
stock option plans ............. 518 2 -- 516 -- -- --
Treasury stock, at cost .......... (13,968) -- -- -- -- -- (13,968)
--------- ------ ------ -------- -------- ------- --------
Balance, December 31, 1998 ......... 119,816 109 2,154 114,867 (1,822) 18,476 (13,968)
Net income ....................... 27,821 -- -- -- -- 27,821 -- $27,821
Foreign currency translation
adjustments .................... (401) -- -- -- (401) -- -- (401)
-------
Comprehensive income -- -- -- -- -- -- -- $27,420
=======
Provision in lieu of
income taxes ................... 15,645 -- -- 15,645 -- -- --
Common stock issued pursuant to
warrants exercised ............. 10,015 7 (1,190) 11,198 -- -- --
Value of expired warrants ........ -- -- (964) 964 -- -- --
Common stock issued under
stock option plans ............. 221 1 -- 220 -- -- --
Treasury stock, at cost .......... (2,868) -- -- -- -- -- (2,868)
--------- ------ ------ -------- -------- ------- --------
Balance, December 31, 1999 ......... 170,249 117 -- 142,894 (2,223) 46,297 (16,836)
Net income ....................... 40,089 -- -- -- -- 40,089 -- $40,089
Foreign currency translation
adjustments .................... (1,683) -- -- -- (1,683) -- -- (1,683)
-------
Comprehensive income ............. -- -- -- -- -- -- -- $38,406
=======
Provision in lieu of
income taxes ................... 24,422 -- -- 24,422 -- -- --
Common stock issued under
stock option plans ............. 426 -- -- 426 -- -- --
Treasury stock, at cost .......... -- -- -- -- -- -- --
--------- ------ ------ -------- -------- ------- --------
Balance, December 31, 2000 ......... $ 233,503 $ 117 $ -- $167,742 $ (3,906) $86,386 $(16,836)
========= ====== ====== ======== ======== ======= ========
</TABLE>
- ----------
(1) Represents cumulative foreign currency translation adjustments.
The accompanying notes to the consolidated financial statements are an
integral part of these statements.
19
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--NATURE OF OPERATIONS
EMCOR Group, Inc., a Delaware corporation, and subsidiaries ("EMCOR") is
one of the largest mechanical and electrical construction and facilities
services firms in the United States, Canada, the United Kingdom and in the
world. EMCOR specializes in the design, integration and installation, start-up
of: (1) systems for the generation and distribution of electrical power,
including power cables, conduits, distribution panels, transformers, generators,
uninterruptible power supply systems and related switch gear and controls; (2)
lighting systems, including fixtures and controls; (3) low-voltage systems,
including fire alarm, security, and process control systems; (4) voice and data
communications systems, including fiber-optic and low voltage copper cabling;
(5) heating, ventilation, air conditioning (collectively, "HVAC"), refrigeration
and clean-room process ventilation systems and (6) plumbing, process and
high-purity piping systems. EMCOR provides mechanical and electrical
construction services and facilities services directly to corporations,
municipalities and other governmental entities, owners/developers, and tenants
of buildings. It also provides these services indirectly by acting as a
subcontractor to construction managers, general contractors, systems suppliers
and other subcontractors. Mechanical and electrical construction services
generally fall into one of two categories: (1) large installation projects with
contracts often in the multi-million dollar range that involve construction of
industrial and commercial buildings and institutional and public works
facilities or the fit-out of large blocks of space within commercial buildings
and (2) smaller installation projects typically involving fit-out, renovation
and retrofit work. In addition, EMCOR also provides services needed to support a
customer's facilities not related to construction projects. These services,
frequently referred to as facilities services, include customer based operations
and maintenance, mobile maintenance and service, small modification and retrofit
projects, consulting, program development and management for energy systems, and
maintenance of facilities. These services are provided to a wide range of
commercial, industrial, and institutional buildings including facilities at
which EMCOR provided construction services and at which construction services
were provided by others. Facilities services are frequently bundled to provide
integrated service packages and may include services in addition to EMCOR's core
mechanical and electrical services.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of EMCOR and its
majority-owned subsidiaries. Significant intercompany accounts and transactions
have been eliminated. Investments over which EMCOR exercises significant
influence, but does not control (generally a 20% to 50% ownership interest), are
accounted for using the equity method of accounting.
PRINCIPLES OF PREPARATION
The preparation of the consolidated financial statements in conformity with
United States generally accepted accounting principles requires EMCOR to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Reclassifications of prior years data have been made in the accompanying
consolidated financial statements where appropriate to conform to the current
presentation.
REVENUE RECOGNITION
Revenues from long-term contracts are recognized on the
percentage-of-completion method. Percentage-of-completion is measured
principally by the percentage of costs incurred and accrued to date for each
contract to the estimated total costs for each contract at completion. Certain
of EMCOR's 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. Revenues
from services contracts are recognized as services are provided.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. In forecasting ultimate
profitability on certain contracts, estimated recoveries are included for work
performed under customer change orders to contracts for which firm prices have
not yet been negotiated. Due to uncertainties inherent in the estimation
process, it is reasonably possible that completion costs, including those
arising from contract penalty provisions and final contract settlements, will be
revised in the near-term. Such revisions to costs and income are recognized in
the period in which the revisions are determined.
20
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings in excess of billings on uncompleted contracts
arise when revenues have been recorded but the amounts cannot be billed under
the terms of the contracts. Such amounts are recoverable from customers upon
various measures of performance, including achievement of certain milestones,
completion of specified units or completion of the contract.
Also included in costs and estimated earnings on uncompleted contracts are
amounts EMCOR seeks 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). These amounts are recorded at their estimated net realizable value when
realization is probable and can be reasonably estimated. No profit is recognized
on the construction costs incurred in connection with these amounts. Unapproved
change orders involve the use of estimates, and it is reasonably possible that
revisions to the estimated recoverable amounts of recorded unapproved change
orders may be made in the near-term. Claims made by EMCOR involve negotiation
and, in certain cases, litigation. EMCOR expenses litigation costs as incurred,
although it may seek to recover these costs as part of the claim. EMCOR believes
that it has established legal basis for pursuing recovery of recorded claims,
and it is management's intention to pursue and litigate these claims, if
necessary, until a decision or settlement is reached. Claims also involve the
use of estimates, and it is reasonably possible that revisions to the estimated
recoverable amounts of recorded claims may be made in the near-term. Claims
against EMCOR are recognized when a loss is considered probable and amounts are
reasonably determinable.
Costs and estimated earnings on uncompleted contracts and related amounts
billed as of December 31, 2000 and 1999 were as follows (in thousands):
2000 1999
----------- -----------
Costs incurred on uncompleted contracts ...... $ 5,552,430 $ 4,906,654
Estimated earnings ........................... 403,416 410,755
----------- -----------
5,955,846 5,317,409
Less: billings to date ....................... 6,112,702 5,391,561
----------- -----------
$ (156,856) $ (74,152)
=========== ===========
Such amounts were included in the accompanying Consolidated Balance Sheets
at December 31, 2000 and 1999 under the following captions (in thousands):
2000 1999
----------- -----------
Costs and estimated earnings in excess
of billings on uncompleted contracts ....... $ 158,073 $ 142,000
Billings in excess of costs and estimated
earnings on uncompleted contracts .......... (314,929) (216,152)
----------- -----------
$ (156,856) $ (74,152)
=========== ===========
As of December 31, 2000, costs and estimated earnings in excess of billings
on uncompleted contracts included unbilled revenues for unapproved change orders
of approximately $19.7 million and claims of approximately $12.8 million. In
addition, accounts receivable as of December 31, 2000 includes claims and
contractually billed amounts related to such contracts of approximately $20.1
million. Claims and related amounts included in accounts receivable aggregated
approximately $28.3 million as of December 31, 1999. Generally, contractually
billed amounts will not be paid by the customer to EMCOR until final resolution
of related claims.
CLASSIFICATION OF CONTRACT AMOUNTS
In accordance with industry practice, EMCOR classifies as current all assets
and liabilities related to the performance of long-term contracts. The
contracting cycle for certain long-term contracts may extend beyond one year
and, accordingly, collection or payment of amounts related to these contracts
may extend beyond one year. Accounts receivable at December 31, 2000 and 1999
included $160.9 million and $128.7 million, respectively, of retainage billed
under terms of the contracts. EMCOR estimates that approximately 75% of
retainage recorded at December 31, 2000 will be collected during 2001.
21
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-- (CONTINUED)
CASH AND CASH EQUIVALENTS
For purposes of the consolidated financial statements, EMCOR considers all
highly liquid instruments with original maturities of three months or less to be
cash equivalents. EMCOR maintains a centralized cash management program whereby
its excess cash balances are invested in high quality, short-term money market
instruments which are considered cash equivalents. At times, cash balances in
EMCOR's bank accounts may exceed federally insured limits.
INVENTORIES
Inventories, which consist primarily of construction materials, are stated
at the lower of cost or market. Cost is determined principally using average
cost.
INVESTMENTS, NOTES AND OTHER LONG-TERM RECEIVABLES
Investments, notes and other long-term receivables at December 31, 2000
were $10.4 million compared to $8.2 million at December 31, 1999, and primarily
consist of investments in joint ventures accounted for using the equity method
of accounting.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is recorded
principally using the straight-line method over estimated useful lives ranging
from 3 to 40 years.
Property, plant and equipment in the accompanying Consolidated Balance
Sheets consisted of the following amounts as of December 31, 2000 and 1999 (in
thousands):
2000 1999
-------- --------
Machinery and equipment ............................ $ 45,042 $ 42,233
Furniture and fixtures ............................. 16,905 13,658
Land, buildings and leasehold improvements ......... 24,740 21,449
-------- --------
86,687 77,340
Accumulated depreciation and amortization .......... (47,728) (40,831)
-------- --------
$ 38,959 $ 36,509
======== ========
GOODWILL
Goodwill at December 31, 2000 and 1999, was approximately $67.6 million and
$68.0 million, respectively, and reflects the excess of cost over fair market
value of net identifiable assets of companies acquired in purchase transactions.
Goodwill is being amortized using the straight-line method over periods ranging
from 5 to 20 years.
At the end of each quarter, EMCOR reviews events and changes in
circumstances to determine whether the recoverability of the carrying value of
goodwill should be reassessed. Should events or circumstances indicate that the
carrying value may not be recoverable based on undiscounted future cash flows,
an impairment loss measured by the difference between the discounted future cash
flows (or another acceptable method for determining fair value) and the carrying
value of goodwill would be recognized by EMCOR. Through December 31, 2000, no
adjustment for the impairment of goodwill carrying value has been required.
INSURANCE RESERVES
EMCOR's insurance liability is determined actuarially based on claims filed
and an estimate of claims incurred but not yet reported. At December 31, 2000
and 1999, the estimated current portion of the discounted insurance liability
was included in "Other accrued expenses and liabilities" in the accompanying
Consolidated Balance Sheets. The non-current portion of the discounted insurance
liability was included in "Other long-term obligations".
22
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
EMCOR's financial instruments include accounts receivable, investments,
notes and other long-term receivables, long-term debt and other financing
commitments, for which carrying values approximate their fair values.
At December 31, 2000, the fair value of EMCOR's 5.75% Convertible
Subordinated Notes was $116.2 million compared to the carrying value of $115.0
million. The fair value was estimated based on quoted market prices and market
interest rates as of December 31, 2000.
FOREIGN OPERATIONS
The financial statements and transactions of EMCOR's foreign subsidiaries
are maintained in their functional currency and translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation". Translation adjustments have been accumulated as a
separate component of Stockholders' equity as Accumulated other comprehensive
loss.
INCOME TAXES
EMCOR accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach which
requires the recognition of deferred tax assets and deferred tax liabilities for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Valuation
allowances are established when necessary to reduce net deferred tax assets to
the amount expected to be realized.
DERIVATIVES AND HEDGING ACTIVITIES
Gains and losses on contracts designated as hedges of net investments in
foreign subsidiaries are recognized in the Consolidated Statements of
Stockholders' Equity and Comprehensive Income as a component of Accumulated
other comprehensive loss.
As of December 31, 2000, EMCOR did not have any forward contracts in
effect, and the forward contracts in effect during the year were not material to
the Consolidated Financial Statements.
VALUATION OF STOCK OPTION GRANTS
EMCOR accounts for its stock options under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). See Note
I for pro forma information relating to treatment of EMCOR's stock options under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123").
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of SFAS No. 133", and
Statement of Financial Accounting Standards No. 138 "Accounting for Certain
Derivative Instruments and Hedging Activities" ("SFAS 138"), 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 has evaluated this standard
and has concluded that the provisions of SFAS 133 will have no significant
effect on the financial condition or results of operations of EMCOR.
In September 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS
140"). SFAS 140 is a replacement of Statement of Financial Accounting Standards
No. 125. SFAS 140 provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities occurring after
March 31, 2001. EMCOR has evaluated this standard and has concluded that the
provisions of SFAS 140 will not have a significant effect on the financial
conditions or results of operations of EMCOR.
23
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE C--ACQUISITIONS OF BUSINESSES
During 2000, EMCOR paid additional consideration by reason of earn-outs for
prior year acquisitions of an aggregate of $4.2 million in cash. During 1999,
EMCOR acquired two businesses and paid additional consideration by reason of
earn-outs with respect to prior year acquisitions of an aggregate of $55.8
million in cash. During 1998, EMCOR acquired ten businesses for an aggregate
purchase price of $36.8 million, $28.5 million of which was paid in cash and
$8.3 million was paid in notes made by EMCOR. The purchase price of certain
transactions are subject to finalization based on certain contingencies provided
for in the purchase agreements. These acquisitions were accounted for by the
purchase method, and the purchase price has been allocated to the assets
acquired and liabilities assumed, based upon the estimated fair values of these
assets and liabilities at the dates of acquisition. Goodwill, representing the
excess purchase price over the fair value of amounts assigned to the net
tangible assets acquired, was $67.6 million and $68.0 million at December 31,
2000 and 1999, respectively, and is being amortized over periods of 5 to 20
years. Amortization expense for the years ended December 31, 2000, 1999 and 1998
was $4.6, $3.4 million and $0.7 million, respectively. The pro forma effect on
EMCOR's revenues, net income and earnings per share for 1999 and 1998, as though
the acquisitions occurred as of January 1 of each year, was not material.
NOTE D--EARNINGS PER SHARE
The following tables summarize EMCOR's calculation of Basic and Diluted
Earnings per Share ("EPS") for the years ended December 31, 2000, 1999 and 1998:
PER
INCOME SHARES SHARE
2000 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ---------- -----
BASIC EPS
Income available to common stockholders .... $40,089,000 10,440,089 $3.84
=====
EFFECT OF DILUTIVE SECURITIES:
Convertible Subordinated Notes, including
assumed interest savings, net of tax ..... 3,967,500 4,206,291
Options .................................... -- 297,306
Warrants ................................... -- --
----------- ----------
DILUTED EPS ................................ $44,056,500 14,943,686 $2.95
=========== ========== =====
PER
INCOME SHARES SHARE
1999 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ---------- -----
BASIC EPS
Income available to common stockholders .... $27,821,000 9,732,930 $2.86
=====
EFFECT OF DILUTIVE SECURITIES:
Convertible Subordinated Notes, including
assumed interest savings, net of tax ..... 4,099,750 4,206,291
Options .................................... -- 245,893
Warrants ................................... -- 259,708
----------- ----------
DILUTED EPS ................................ $31,920,750 14,444,822 $2.21
=========== ========== =====
PER
INCOME SHARES SHARE
1998 (NUMERATOR) (DENOMINATOR) AMOUNT
- ---- ----------- ---------- -----
BASIC EPS
Income before extraordinary item
available to common stockholders ......... $17,092,000 10,232,527 $1.67
=====
EFFECT OF DILUTIVE SECURITIES:
Convertible Subordinated Notes, including
assumed interest savings, net of tax ..... 2,785,000 2,952,672
Options .................................... -- 215,531
Warrants ................................... -- 228,995
----------- ----------
DILUTED EPS ................................ $19,877,000 13,629,725 $1.46
=========== ========== =====
The number of EMCOR's options granted, which were excluded from the
computation of Diluted EPS for the years ended December 31, 2000, 1999 and 1998
because they would be antidilutive, were 26,325, 211,720 and 306,785,
respectively.
24
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E--CURRENT DEBT
1998 CREDIT FACILITY
On December 22, 1998, EMCOR and certain of its subsidiaries amended and
restated its June 19, 1996 credit facility; the amended credit facility provides
EMCOR with a credit facility for borrowings of up to $150.0 million. The amended
credit facility, which has an expiration date of June 30, 2002, is guaranteed by
certain direct and indirect subsidiaries of EMCOR. It is secured by
substantially all of the assets of EMCOR and those subsidiaries, and it provides
for borrowing capacity available in the form of revolving loans and/or letters
of credit. The amended credit facility contains various covenants, including
among other things, maintenance of certain financial ratios, and significant
restrictions with respect to cumulative aggregate payments for dividends, common
stock repurchases, investments, acquisitions, indebtedness, capital
expenditures, and prepayments of subordinated debt, all as defined therein. The
revolving loans bear interest at (1) a rate which is the prime commercial
lending rate announced by Harris Trust and Savings Bank from time to time (9.5%
at December 31, 2000) plus 0% to 0.5%, based on certain financial tests or (2) a
LIBOR rate (6.3% at December 31, 2000) plus 1.25% to 2.0% based on certain
financial tests. The interest rates in effect at December 31, 2000 were 9.5% and
7.6%, respectively. Letters of credit fees issued under the credit facility
ranging from 0.5% to 2.0% are charged based on type of letters of credit issued
and certain financial tests. As of December 31, 2000 and 1999, EMCOR had
approximately $12.1 million and $17.4 million of letters of credit outstanding,
respectively. No revolving loans were outstanding under the 1998 Credit Facility
at December 31, 2000 or 1999.
FOREIGN BORROWINGS
In December 2000, EMCOR'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 and
provides for interest at the bank's prime rate (7.5% at December 31, 2000).
There were no borrowings outstanding under this facility at December 31, 2000 or
1999. The Canadian subsidiary may utilize EMCOR's 1998 credit facility for any
future working capital requirements.
NOTE F--LONG-TERM DEBT
Long-term debt in the accompanying Consolidated Balance Sheets consisted of
the following amounts as of December 31, 2000 and 1999 (in thousands):
2000 1999
-------- --------
Convertible Subordinated Notes
at 5.75% due 2005 ...................................... $115,000 $115,000
Note Payable at 6.0%, due 2000 ........................... -- 1,150
Capitalized Lease Obligations at weighted average
interest rates from 5.0% to 11.6%, payable in
varying amounts through 2005 ........................... 573 554
Other, at weighted average interest rates of
approximately 10.0%, payable in varying amounts
through 2016 ........................................... 1,056 1,534
-------- --------
116,629 118,238
Less: current maturities ................................. 751 2,235
-------- --------
$115,878 $116,003
======== ========
CONVERTIBLE SUBORDINATED NOTES
In March 1998, EMCOR sold, pursuant to an underwritten public offering,
$115.0 million principal amount of 5.75% Convertible Subordinated Notes
("Subordinated Notes"). The Subordinated Notes will mature on April 1, 2005 and
are general, unsecured obligations of EMCOR, subordinated in right to all
existing and future Senior Indebtedness (as defined in the indenture pursuant to
which Subordinated Notes were issued (the "Subordinated Indenture")) of EMCOR.
The Subordinated Indenture does not contain any financial covenants or any
restrictions on the payment of dividends, the repurchase of equity securities of
EMCOR or the incurrence of Indebtedness (as defined in the Subordinated
Indenture) or Senior Indebtedness. Holders of the Subordinated Notes have the
right at any time to convert the Subordinated Notes into Common Stock of EMCOR
at a conversion price of $27.34 per share.
25
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F--LONG-TERM DEBT -- (CONTINUED)
SERIES C NOTES
On December 15, 1994, EMCOR issued approximately $62.8 million principal
amount of Series C Notes. Interest on the Series C Notes was payable
semiannually through June 15, 1996 by the issuance of additional Series C Notes
and was thereafter payable quarterly in cash until redemption. The Series C
Notes were unsecured indebtedness of EMCOR and were subordinate to indebtedness
under EMCOR's 1996 credit facility. The Series C Notes were recorded at a
discount to their face amount to yield an estimated effective interest rate of
14.0%.
On June 3, 1997, EMCOR purchased $1.0 million of Series C Notes and retired
such notes. On June 27, 1997, EMCOR 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, EMCOR
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.
On March 18, 1998, EMCOR called for redemption approximately $61.9 million
principal amount of Series C Notes and irrevocably funded such amounts, together
with the redemption premium, with the trustee of the Series C Notes. In
accordance with the Indenture governing the Series C Notes, the redemption price
of the Series C Notes was 104% of the principal amount redeemed. Accordingly,
EMCOR recorded an extraordinary loss of $4.8 million net of income taxes related
to the early retirement of debt. The extraordinary loss consisted primarily of
the write-off of the associated debt discount plus the redemption premium and
costs associated with the redemption, net of income tax benefits.
SUPPLEMENTAL SELLCO NOTE
On December 15, 1994, EMCOR issued to its wholly-owned subsidiary SellCo
Corporation ("SellCo") its 8.0% promissory note in the principal amount of
approximately $5.5 million (the "Supplemental SellCo Note"). The Supplemental
SellCo Note provided that it matured on the earlier of (i) December 15, 2004 or
(ii) one day prior to the date on which the SellCo Notes (hereafter defined) are
deemed canceled. The Supplemental SellCo Note was recorded at a discount to its
face amount to yield an estimated effective interest rate of 14.0%.
In June 1998, EMCOR prepaid in full, including accrued interest thereon,
the Supplemental SellCo Note.
SELLCO NOTES
On December 15, 1994, SellCo issued approximately $48.1 million principal
amount of 12.0% Subordinated Contingent Payments Notes, due 2004, (the "SellCo
Notes"). Interest is payable semiannually in additional SellCo Notes. Net Cash
Proceeds (as defined in the Indenture pursuant to which the SellCo Notes were
issued) from the sales of stock or assets of SellCo subsidiaries were to be used
to redeem SellCo Notes. The SellCo Notes are not obligations of EMCOR and,
accordingly, are not included in the accompanying Consolidated Balance Sheets as
of December 31, 2000 and 1999. Since the date of issuance, approximately $21.5
million of the SellCo Notes have been redeemed with proceeds from the sale of
stock and assets of SellCo subsidiaries and the prepayment by EMCOR of the
Supplemental SellCo Note. The SellCo Notes mature on December 15, 2004 if not
deemed canceled at an earlier date pursuant to the Indenture.
NOTES PAYABLE
In 1998, EMCOR issued notes in connection with the acquisition of two
companies. A principal payment of $1.0 million was made in August 1999 in
respect of one note issued in August 1998, and a principal payment of the
balance of $1.15 million was made in respect of that note in August 2000.
Interest on the note was payable together with payments of principal. The other
note, issued in the principal amount of $6.2 million in December 1998, was paid
in full in January 1999.
CAPITALIZED LEASE OBLIGATIONS
See Note K in the Notes to Consolidated Financial Statements.
26
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F--LONG-TERM DEBT -- (CONTINUED)
OTHER LONG-TERM DEBT
Other long-term debt consists primarily of loans for real estate, office
equipment, automobiles and building improvements. As of December 31, 2000 and
1999, respectively, other long-term debt, excluding current maturities, totaling
$1.1 million and $1.5 million was owed by certain of EMCOR's subsidiaries. The
aggregate amount of other long-term debt maturing during the next five years is
approximately: $0.2 million in each of 2001 and 2002, $0.1 million in each of
2003, 2004 and 2005, and $0.4 million thereafter.
NOTE G--INCOME TAXES
EMCOR files a consolidated federal income tax return including all its U.S.
subsidiaries. At December 31, 2000, EMCOR had net operating loss carryforwards
("NOLs") for U.S. income tax purposes of approximately $40.0 million, which
expire in the years 2009 through 2012. The NOLs are subject to review by the
Internal Revenue Service. Future changes in ownership of EMCOR, as defined by
Section 382 of the Internal Revenue Code, could limit the amount of NOLs
available for use in any one year. In the United Kingdom, EMCOR's wholly owned
subsidiary, Drake & Scull, has a trading loss carry-forward of approximately
$6.0 million. Trading losses may be carried forward, without a time limit,
against future income from the same trade.
EMCOR adopted Fresh-Start Accounting in connection with EMCOR's
reorganization in December 1994. As a result, the tax benefit of any net
operating loss carryforwards or net deductible temporary differences which
existed as of December 15, 1994 will result in a charge to the tax provision
(provision in lieu of income taxes) and to capital surplus. Amounts credited to
capital surplus were $24.4 million, $15.6 million and $8.2 million for the years
ended December 31, 2000, 1999 and 1998, respectively.
The income tax provision in the accompanying Consolidated Statements of
Operations for the years ended December 31, 2000, 1999 and 1998 consisted of the
following (in thousands):
2000 1999 1998
------- ------- -------
Current:
Federal ...................................... $ 1,364 $ 872 $ 302
State and local .............................. 3,394 2,510 2,035
Foreign ...................................... 1,180 1,730 2,161
------- ------- -------
5,938 5,112 4,498
------- ------- -------
Deferred:
Foreign ...................................... 1,138 1,100 --
------- ------- -------
Provision in lieu of income taxes .............. 24,422 15,645 8,151
------- ------- -------
$31,498 $21,857 $12,649
======= ======= =======
Factors accounting for the variation from U.S. statutory income tax rates
relating to continuing operations for the years ended December 31, 2000, 1999
and 1998 were as follows (in thousands):
2000 1999 1998
------- ------- -------
Federal income taxes at the statutory rate ..... $25,055 $17,387 $10,409
State and local income taxes, net of
federal tax benefits ......................... 3,894 2,990 1,058
Foreign income taxes ........................... 890 271 1,247
Non-deductible goodwill amortization ........... 1,211 843 101
Other .......................................... 448 366 (166)
------- ------- -------
$31,498 $21,857 $12,649
======= ======= =======
27
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G--INCOME TAXES -- (CONTINUED)
The components of the net deferred income tax liability (asset) included in
"Other accrued expenses and liabilities" in the accompanying Consolidated
Balance Sheets for the years ended December 31, 2000, and 1999 were as follows
(in thousands):
2000 1999
-------- --------
Deferred tax liabilities:
Costs capitalized for financial statement purposes
and deducted for income tax purposes ................. $ 7,885 $ 23,407
-------- --------
Total deferred tax liabilities ......................... 7,885 23,407
-------- --------
Deferred tax assets:
Net operating loss carryforwards ....................... (16,257) (42,166)
Excess of amounts expensed for financial statement
purposes over amounts deducted for income
tax purposes ......................................... (49,900) (64,149)
Other .................................................. (6,403) (2,899)
-------- --------
Total deferred tax assets .............................. (72,560) (109,214)
Valuation allowance for deferred tax assets ............ 68,787 88,781
-------- --------
Net deferred tax assets ................................ (3,773) (20,433)
-------- --------
Net deferred tax liability ............................. $ 4,112 $ 2,974
======== ========
Income before income taxes and extraordinary item for the years ended
December 31, 2000, 1999, and 1998 consisted of the following (in thousands):
2000 1999 1998
-------- -------- --------
United States ............................... $ 59,105 $ 42,714 $ 27,130
Foreign ..................................... 12,482 6,964 2,611
-------- -------- --------
$ 71,587 $ 49,678 $ 29,741
======== ======== ========
NOTE H--COMMON STOCK
On March 18, 1998, EMCOR sold, pursuant to an underwritten public offering,
1,100,000 of its common stock at a price of $21.875 per share.
As part of a program previously authorized by the Board of Directors, EMCOR
purchased 174,100 and 957,900 shares of its common stock during 1999 and 1998,
respectively. The aggregate amount of $16.8 million paid for those shares has
been classified as "Treasury stock, at cost" in the Consolidated Balance Sheet
at December 31, 2000. EMCOR management is authorized to repurchase up to $20.0
million of EMCOR's common stock under this program.
28
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I--STOCK OPTIONS AND WARRANTS
EMCOR has stock based compensation plans under which employees receive
stock options and outside directors receive stock options or shares of common
stock. During 2000 and 1999, certain stock options were granted by the board of
directors outside of established stock option plans. A summary of the general
terms of the stock option and stock unit plans, plus other stock option grants
follows:
<TABLE>
<CAPTION>
AUTHORIZED EXERCISE
SHARES VESTING EXPIRATION PRICE
---------- ------- ---------- --------
<S> <C> <C> <C> <C>
1994 Management Stock Option Plan 1,000,000 Generally, Ten years from Fair market value
(the "1994 Plan") 33 1/3% on each grant date of common stock
anniversary of grant on grant date
date
1995 Non-Employee Directors' Non- 200,000 100% on grant date Ten years from Fair market value
Qualified Stock Option Plan grant date of common stock
(the "1995 Plan") on grant date
1997 Non-Employee Directors' Non- 300,000 (1) Five years from Fair market value
Qualified Stock Option Plan grant date of common stock
(the "1997 Directors' Stock on grant date (3)
Option Plan")
1997 Stock Plan for Directors (the 150,000 (2) Five years from Fair market value
"1997 Directors' Stock Plan") grant date of common stock
on grant date (4)
Other Stock Option Grants Not applicable Generally, either Ten years from Fair market value
100% on first grant date of common stock
anniversary of grant on grant date
date or 33 1/3% on
each anniversary of
grant date
</TABLE>
- ----------
(1) At the election of an individual serving as a Director, the individual may
elect to receive one-third, two-thirds or all of his retainer for a
calendar year in the form of stock options. Such options become exercisable
quarterly over the calendar year. In addition, the individual will receive
additional stock options equal to the product of 0.5 times the amount of
stock options otherwise issued as a result of his election.
(2) At the election of an individual serving as a Director, the individual may
elect to receive one-third, two-thirds or all of his retainer for a
calendar year in the form of deferred stock units equal in value to the
retainer. In addition, the individual will receive additional deferred
stock units equal to 0.2 times the amount of deferred stock units otherwise
issued as a result of his election. Following termination of Board service,
the director receives shares of common stock equal to the number of
deferred stock units.
(3) The grant date is the first business day of a calendar year for individuals
who are serving as Directors as of such date, and on the date of grant.
(4) The grant date is the first business day of a calendar year for individuals
who are serving as Directors as of such date.
29
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I--STOCK OPTIONS AND WARRANTS -- (CONTINUED)
The following table summarizes EMCOR's stock option activity since December
31, 1997:
<TABLE>
<CAPTION>
1997 OTHER
DIRECTORS' STOCK 1997 DIRECTORS' STOCK OPTION
1994 PLAN 1995 PLAN OPTION PLAN STOCK PLAN GRANTS
---------------- ---------------- ---------------- ------------------ ----------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------- ------ ------- ------ ------- ------ --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 ........ 918,377 $11.12 67,500 $11.53 -- -- -- -- -- --
Granted ......................... 90,000 $20.06 18,000 $19.63 35,785 $19.94 1,800 $20.00 -- --
Forfeited ....................... (205,000) $19.73 -- -- -- -- -- -- -- --
Exercised ....................... (81,676) $ 5.29 -- -- -- -- -- -- -- --
------- ------- ------- --------- -------
Balance, December 31, 1998 ........ 721,701 $10.44 85,500 $13.24 35,785 $19.94 1,800 $20.00 -- --
Granted ......................... -- -- 18,000 $22.13 40,968 $16.19 330 $19.63 315,000 $18.49
Forfeited ....................... -- -- -- -- -- -- -- -- -- --
Exercised ....................... (16,933) $ 9.13 (10,500) $ 6.34 -- -- (1,200) $20.00 -- --
------- ------- ------- --------- -------
Balance, December 31, 1999 ........ 704,768 $10.47 93,000 $15.74 76,753 $17.94 930 $19.87 315,000 $18.49
Granted ......................... -- -- 18,000 $27.13 45,612 $17.56 -- -- 94,000 $18.44
Forfeited ....................... -- -- -- -- -- -- -- -- -- --
Exercised ....................... (23,001) $ 7.54 (10,500) $ 6.34 (6,828) $16.19 (600) $20.00 (2,000) $16.50
------- ------- ------- --------- -------
Balance, December 31, 2000 ........ 681,767 $10.57 100,500 $18.76 115,537 $17.89 330 $19.63 407,000 $18.49
======= ======= ======= ========= =======
</TABLE>
At December 31, 2000, 1999 and 1998, approximately 1,005,000, 943,000 and
642,000 options were exercisable, respectively. The weighted average exercise
price of exercisable options at December 31, 2000, 1999 and 1998 was
approximately $12.77, $12.28 and $8.43, respectively.
The following table summarizes information about EMCOR's stock options at
December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------- --------------------
WEIGHTED- WEIGHTED-
WEIGHTED- AVERAGE AVERAGE
RANGE OF AVERAGE EXERCISE EXERCISE
EXERCISE PRICE NUMBER REMAINING LIFE PRICE NUMBER PRICE
- -------------- ------ -------------- --------- ------ --------
$4.75-$5.13 424,600 4.26 Years $ 4.95 424,600 $ 4.95
$9.38-$9.63 12,000 4.88 Years $ 9.51 12,000 $ 9.51
$14.13-$20.00 801,868 7.33 Years $18.62 544,204 $18.55
$20.38-$22.13 48,666 8.45 Years $21.64 24,668 $21.66
$27.13 18,000 9.57 Years $27.13 -- --
The weighted average fair value of options granted during 2000, 1999 and
1998 were $19.18, $18.41 and $15.18, respectively.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 2000, 1999 and 1998: risk-free interest rates of
4.6% to 6.6% (representing the risk-free interest rate at the date of the
grant); expected dividend yields of zero percent; expected terms of 3.3 to 6.5
years; and expected volatility of 71.2%, 73.6%, 87.3% and 79.8% for options
granted during 2000, 1999, 1998 and 1997, respectively.
30
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE I--STOCK OPTIONS AND WARRANTS -- (CONTINUED)
EMCOR applies APB 25 and related interpretations in accounting for its
stock options. Accordingly, no compensation cost has been recognized in the
accompanying Consolidated Statements of Operations for the years ended December
31, 2000, 1999 and 1998 for stock options granted during those years. Had
compensation cost for these options been determined consistent with SFAS 123,
EMCOR's net income, Basic EPS and Diluted EPS would have been reduced from the
following as reported amounts to the following pro forma amounts (in thousands,
except per share amounts):
2000 1999 1998
------- ------- -------
Net income:
As reported ........................... $40,089 $27,821 $12,315
Pro forma ............................. $37,204 $25,597 $10,176
Basic EPS:
As reported ........................... $ 3.84 $ 2.86 $ 1.20
Pro forma ............................. $ 3.56 $ 2.63 $ 0.99
Diluted EPS:
As reported ........................... $ 2.95 $ 2.21 $ 1.11
Pro forma ............................. $ 2.76 $ 2.06 $ 0.75
WARRANTS
On December 15, 1994, EMCOR issued to the holders of $7,040,000 principal
amount of its pre-bankruptcy petition 7.75% Convertible Subordinated Debentures
and $9,600,000 principal amounts of its pre-bankruptcy petition 12.0%
Subordinated Notes, their pro rata share of each of two series of five-year
Warrants to purchase shares of Common Stock, namely Series X Warrants and Series
Y Warrants, with an exercise price of $12.55 per share and $17.55 per share,
respectively. In addition, approximately 28,000 Series X Warrants and 28,000
Series Y Warrants, were issued to Belmont Capital Partners II, L. P. as a
portion of additional interest under a debtor-in-possession credit facility.
During 1999, 600,603 Series X and 141,944 Series Y Warrants were exercised. All
unexercised Series X and Series Y Warrants expired on December 15, 1999.
31
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J-- RETIREMENT PLANS
EMCOR's United Kingdom subsidiary has a defined benefit pension plan
covering substantially all eligible employees. The benefits under the plan are
based on wages and years of service with the subsidiary. EMCOR's policy is to
fund the minimum amount required by law.
The change in benefit obligation and plan assets for the years ended
December 31, 2000 and 1999 consisted of the following components (in thousands):
2000 1999
-------- --------
CHANGE IN PENSION BENEFIT OBLIGATION
Benefit obligation at beginning of year ................ $ 97,217 $ 87,574
Service cost ........................................... 6,028 6,285
Interest cost .......................................... 5,553 5,243
Changes in actuarial assumptions ....................... 4,276 3,965
Benefits paid .......................................... (4,209) (2,881)
Foreign currency exchange rate changes ................. (7,377) (2,969)
-------- --------
Benefit obligation at end of year ...................... $101,488 $ 97,217
-------- --------
CHANGE IN PENSION PLAN ASSETS
Fair value of plan assets at beginning of year ......... $101,247 $ 82,428
Actual return on plan assets ........................... (1,359) 17,810
Employer contributions ................................. 5,357 4,529
Plan participants' contributions ....................... 2,529 2,155
Benefits paid .......................................... (4,209) (2,881)
Foreign currency exchange rate changes ................. (7,683) (2,794)
-------- --------
Fair values of plan assets at end of year .............. $ 95,882 $101,247
-------- --------
Funded status .......................................... $ (5,606) $ 4,030
Unrecognized transition amount ......................... (278) (383)
Unrecognized prior service cost ........................ 409 518
Unrecognized losses/(gains) ............................ 4,433 (6,338)
-------- --------
Net amount recognized .................................. $ (1,042) $ (2,173)
======== ========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
FINANCIAL STATEMENTS
Employer contributions ................................. $ 5,357 $ 4,529
Net periodic pension benefit cost ...................... (4,391) (5,408)
Accrued pension cost brought forward ................... (2,173) (1,340)
Foreign currency exchange rate changes ................. 165 46
-------- --------
Net amount recognized as accrued pension liability ..... $ (1,042) $ (2,173)
======== ========
The assumptions used as of December 31, 2000, 1999 and 1998 in determining
pension cost and liability shown above were as follows:
2000 1999 1998
-------- -------- --------
Discount rate ............................... 6.0% 6.0% 6.0%
Annual rate of salary provision ............. 4.0% 4.0% 6.5%
Annual rate of return on plan assets ........ 7.0% 7.5% 10.0%
For measurement purposes, a 2.5% annual rate of increase in the per capita
cost of covered pension benefits was assumed for 2000 and 1999.
The components of net periodic pension benefit cost for the years ended
December 31, 2000, 1999 and 1998 were as follows (in thousands):
- 2000 1999 1998
------- -------- --------
Service cost ................................ $ 6,028 $ 6,285 $ 4,994
Interest cost ............................... 5,553 5,243 5,554
Expected return on plan assets .............. 1,359 (17,810) (9,666)
Net amortization of prior service cost
and actuarial (gain)/loss ................. (8,549) 11,690 2,436
------- -------- --------
Net periodic pension benefit cost ........... $ 4,391 $ 5,408 $ 3,318
======= ======== ========
32
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J-- RETIREMENT PLANS -- (CONTINUED)
EMCOR contributes to various union pension funds based upon wages paid to
union employees of EMCOR. Such contributions approximated $88.9 million, $71.1
million and $57.4 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
EMCOR has a defined contribution retirement plan that covers its U.S.
non-union eligible employees. Contributions to this plan are based on a
percentage of the employee's base compensation. The expense recognized for the
years ended December 31, 2000, 1999 and 1998, for the defined contribution plan
was $2.9 million, $2.2 million and $1.9 million, respectively.
NOTE K--COMMITMENTS AND CONTINGENCIES
EMCOR and its subsidiaries lease land, buildings and equipment under
various leases. The leases frequently include renewal options and require EMCOR
to pay for utilities, taxes, insurance and maintenance expenses.
Future minimum payments, by year and in the aggregate, under capital
leases, non-cancelable operating leases and related sub-leases with initial or
remaining terms of one or more years at December 31, 2000 were as follows (in
thousands):
CAPITAL OPERATING SUBLEASE
LEASE LEASE INCOME
------- --------- --------
2001 ......................................... $ 366 $23,807 $ 358
2002 ......................................... 117 19,783 366
2003 ......................................... 81 15,095 355
2004 ......................................... 19 10,973 253
2005 ......................................... -- 7,301 54
Thereafter ................................... -- 12,053 --
----- ------- ------
Total minimum lease payment .................. 583 $89,012 $1,386
======= ======
Amounts representing interest ................ (10)
-----
Present value of net minimum lease payments .. $ 573
=====
Rent expense for the years ended December 31, 2000, 1999 and 1998 was $25.4
million, $15.1 million and $12.1 million, respectively. Rent expense for the
years ended December 31, 2000, 1999 and 1998 included sublease rental income of
$0.6 million, $0.7 million and $0.1 million, respectively.
EMCOR has employment agreements with certain of its executive officers and
management personnel. These agreements generally continue until terminated by
the executive or EMCOR and provide for severance benefits if terminated. Certain
of the agreements provide the employees with certain additional rights if a
change of control (as defined) of EMCOR occurs.
EMCOR is contingently liable to sureties in respect of performance and
payment bonds issued by the sureties in connection with certain contracts
entered into by EMCOR's subsidiaries in the normal course of their business.
EMCOR has agreed to indemnify the sureties for any payments made by them in
respect of such bonds.
EMCOR is subject to regulation with respect to the handling of certain
materials used in construction which are classified as hazardous or toxic by
Federal, State and local agencies. EMCOR's practice is to avoid participation in
projects principally involving the remediation or removal of such materials.
However, where remediation is a required part of contract performance, EMCOR
believes it complies with all applicable regulations governing the discharge of
material into the environment or otherwise relating to the protection of the
environment.
NOTE L--ADDITIONAL CASH FLOW INFORMATION
The following presents information about cash paid for interest and income
taxes for the years ended December 31, 2000, 1999 and 1998 (in thousands):
2000 1999 1998
------ ------ -------
Cash paid during the year for:
Interest ................................... $8,290 $9,018 $10,849
Income taxes ............................... $4,039 $5,418 $ 1,480
33
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M--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 South Africa and the Middle East, performing
electrical construction, mechanical construction and facilities services.
Extraordinary item - loss on early extinguishment of debt, net of income taxes,
of $4.8 million for the year ended December 31, 1998 is related to the Corporate
Administration of EMCOR.
The following presents information about industry segments and geographic
areas for the years ended December 31, 2000, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues from unrelated entities:
United States electrical construction and facilities services .............. $ 1,350,716 $ 993,073 $ 888,594
United States mechanical construction and facilities services .............. 1,253,663 1,053,727 599,616
United States other services ............................................... 172,279 96,150 14,392
----------- ----------- -----------
Total United States operations ............................................. 2,776,658 2,142,950 1,502,602
Canada construction and facilities services ................................ 236,961 196,694 201,918
United Kingdom construction and facilities services ........................ 446,251 553,654 493,278
Other international construction and facilities services ................... 334 664 12,576
----------- ----------- -----------
Total worldwide operations ................................................. $ 3,460,204 $ 2,893,962 $ 2,210,374
=========== =========== ===========
Total revenues:
United States electrical construction and facilities services .............. $ 1,373,977 $ 1,000,234 $ 892,090
United States mechanical construction and facilities services .............. 1,275,253 1,061,326 601,975
United States other services ............................................... 175,246 96,843 14,449
Less intersegment revenues ................................................. (47,818) (15,453) (5,912)
----------- ----------- -----------
Total United States operations ............................................. 2,776,658 2,142,950 1,502,602
Canada construction and facilities services ................................ 236,961 196,694 201,918
United Kingdom construction and facilities services ........................ 446,251 553,654 493,278
Other international construction and facilities services ................... 334 664 12,576
----------- ----------- -----------
Total worldwide operations ................................................. $ 3,460,204 $ 2,893,962 $ 2,210,374
=========== =========== ===========
Operating income (loss):
United States electrical construction and facilities services .............. $ 58,644 $ 38,485 $ 36,315
United States mechanical construction and facilities services .............. 36,345 37,815 20,955
United States other services ............................................... (5,989) (4,390) (4,783)
----------- ----------- -----------
Total United States operations ............................................. 89,000 71,910 52,487
Canada construction and facilities services ................................ 5,160 3,991 5,000
United Kingdom construction and facilities services ........................ 6,026 3,208 (876)
Other international construction and facilities services ................... 551 (355) (1,260)
Corporate administration ................................................... (21,812) (20,663) (18,127)
----------- ----------- -----------
Total worldwide operations ................................................. 78,925 58,091 37,224
Other corporate items:
Interest expense ........................................................... (9,705) (10,520) (11,041)
Interest income ............................................................ 2,367 2,107 3,558
----------- ----------- -----------
Income before taxes and extraordinary item ................................. $ 71,587 $ 49,678 $ 29,741
=========== =========== ===========
Capital expenditures:
United States electrical construction and facilities services .............. $ 3,495 $ 3,689 $ 2,928
United States mechanical construction and facilities services .............. 5,938 3,012 2,473
United States other services ............................................... 2,000 655 116
----------- ----------- -----------
Total United States operations ............................................. 11,433 7,356 5,517
Canada construction and facilities services ................................ 1,520 804 990
United Kingdom construction and facilities services ........................ 3,470 2,226 3,928
Other international construction and facilities services ................... -- 113 48
Corporate administration ................................................... 275 238 463
----------- ----------- -----------
Total worldwide operations ................................................. $ 16,698 $ 10,737 $ 10,946
=========== =========== ===========
</TABLE>
34
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M--SEGMENT INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Depreciation and amortization:
United States electrical construction and facilities services ................... $ 3,485 $ 3,284 $ 3,315
United States mechanical construction and facilities services ................... 5,787 5,083 2,664
United States other services .................................................... 3,067 2,329 526
------- ------- -------
Total United States operations .................................................. 12,339 10,696 6,505
Canada construction and facilities services ..................................... 836 680 651
United Kingdom construction and facilities services ............................. 2,858 2,550 3,072
Other international construction and facilities services ........................ -- 60 207
Corporate administration ........................................................ 68 107 145
------- ------- -------
Total worldwide operations ...................................................... $16,101 $14,093 $10,580
======= ======= =======
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Costs and estimated earnings in excess of billings on uncompleted contracts:
United States electrical construction and facilities services ....................................... $ 46,323 $ 38,889
United States mechanical construction and facilities services ....................................... 91,741 83,044
United States other services ........................................................................ 2,776 3,417
---------- ----------
Total United States operations ...................................................................... 140,840 125,350
Canada construction and facilities services ......................................................... 9,087 7,949
United Kingdom construction and facilities services ................................................. 8,146 8,675
Other international construction and facilities services ............................................ -- 26
---------- ----------
Total worldwide operations .......................................................................... $ 158,073 $ 142,000
========== ==========
Billings in excess of costs and estimated earnings on uncompleted contracts:
United States electrical construction and facilities services ....................................... $ 190,276 $ 103,278
United States mechanical construction and facilities services ....................................... 93,477 79,535
United States other services ........................................................................ 2,205 1,786
---------- ----------
Total United States operations ...................................................................... 285,958 184,599
Canada construction and facilities services ......................................................... 5,835 8,252
United Kingdom construction and facilities services ................................................. 23,136 18,494
Other international construction and facilities services ............................................ -- 4,807
---------- ----------
Total worldwide operations .......................................................................... $ 314,929 $ 216,152
========== ==========
Total assets:
United States electrical construction and facilities services ....................................... $ 422,552 $ 343,309
United States mechanical construction and facilities services ....................................... 445,003 378,813
United States other services ........................................................................ 85,099 58,950
---------- ----------
Total United States operations ...................................................................... 952,654 781,072
Canada construction and facilities services ......................................................... 60,122 62,141
United Kingdom construction and facilities services ................................................. 136,645 151,414
Other international construction and facilities services ............................................ 14,181 18,295
Corporate administration ............................................................................ 98,262 39,324
---------- ----------
Total worldwide operations .......................................................................... $1,261,864 $1,052,246
========== ==========
</TABLE>
35
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE N--SELECTED UNAUDITED QUARTERLY INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
2000 QUARTERLY RESULTS
Revenues ........................ $741,522 $866,850 $921,568 $930,264
Gross profit .................... $ 72,545 $ 85,343 $ 88,469 $111,460
Net income ...................... $ 4,930 $ 9,158 $ 11,479 $ 14,522
Basic EPS ....................... $ 0.47 $ 0.88 $ 1.10 $ 1.39
======== ======== ======== ========
Diluted EPS ..................... $ 0.40 $ 0.68 $ 0.83 $ 1.03
======== ======== ======== ========
1999 QUARTERLY RESULTS
Revenues ........................ $539,983 $696,489 $810,749 $846,741
Gross profit .................... $ 51,955 $ 66,628 $ 78,017 $ 99,307
Net income ...................... $ 2,051 $ 5,427 $ 8,639 $ 11,704
Basic EPS ....................... $ 0.21 $ 0.56 $ 0.89 $ 1.19
======== ======== ======== ========
Diluted EPS ..................... $ 0.20 $ 0.45 $ 0.66 $ 0.88
======== ======== ======== ========
NOTE O--LEGAL PROCEEDINGS
In February 1995, as part of an investigation by the New York County
District Attorney's office into the business affairs of a general contractor
that did business with EMCOR's subsidiary, Forest Electric Corp. ("Forest"), a
search warrant was executed at Forest's executive offices. On July 12, 2000,
Forest was served with a Subpoena Duces Tecum to produce certain documents as
part of a broader investigation by the New York County District Attorney's
office into illegal business practices in the New York City construction
industry. Forest has been informed by the New York County District Attorney's
office that it and certain of its officers are targets of the investigation.
Forest intends to produce documents in response to the subpoena and to cooperate
fully with the District Attorney's office investigation as it proceeds.
On July 31, 1998, a former employee of a subsidiary of EMCOR filed a
class-action complaint on behalf of the participants in two employee benefit
plans sponsored by EMCOR against EMCOR and other defendants for breach of
fiduciary duty under the Employee Retirement Income Security Act. All of the
claims relate to alleged acts or omissions which occurred during the period May
1991 to December 1994. The principal allegations of the complaint are that the
defendants breached their fiduciary duties by causing the plans to purchase and
hold stock of EMCOR when it was then known as JWP, Inc. and when the defendants
knew or should have known it was imprudent to do so. The plaintiff has not made
claim for a specific dollar amount of damages but generally seeks to recover for
the benefit plans the loss in the value of JWP, Inc. stock held by the plans.
EMCOR and the other defendants intend to vigorously defend the case. Insurance
coverage may be applicable under an EMCOR pension trust liability insurance
policy for EMCOR and those present and former employees of EMCOR who are
defendants in the action.
Substantial settlements or damage judgements against EMCOR arising out of
these matters could have a material adverse effect on EMCOR's business,
operating results and financial condition.
In addition to the above, EMCOR is involved in other legal proceedings and
claims, asserted by and against EMCOR, which have arisen in the ordinary course
of business. EMCOR believes it has a number of valid defenses to these actions
and EMCOR intends to vigorously defend or assert these claims and does not
believe that a significant liability will result. However, EMCOR cannot predict
the outcome thereof or the impact that an adverse result of the matters
discussed above will have upon EMCOR's financial position or results of
operations.
36
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of EMCOR Group, Inc.:
We have audited the accompanying consolidated balance sheets of EMCOR
Group, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, cash flows and stockholders' equity and comprehensive income for
each of the three years in the period ended December 31, 2000. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of Valuation and Qualifying
Accounts is presented for purposes of complying with the Securities and Exchange
Commission rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
February 16, 2001
37
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable
PART III
The Items comprising Part III information will be filed as an amendment to
this Form 10-K no later than 120 days after December 31, 2000, the end of
EMCOR's fiscal year covered by this Form 10-K.
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of EMCOR Group, Inc.
and Subsidiaries are included in Part II, Item 8:
Financial Statements:
Consolidated Balance Sheets--December 31, 2000 and 1999
Consolidated Statements of Operations--Years Ended December 31, 2000,
1999 and 1998
Consolidated Statements of Cash Flows--Years Ended December 31, 2000,
1999 and 1998
Consolidated Statements of Stockholders' Equity and Comprehensive
Income--Years Ended December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
(a)(2) The following financial statement schedules are included in this Form
10-K report:
Schedule II - Valuation And Qualifying Accounts
All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the
consolidated financial statements or notes thereto.
(a)(3) The exhibits listed on the Exhibit Index following the consolidated
financial statements hereof are filed herewith in response to this
Item.
39
<PAGE>
SCHEDULE II
EMCOR GROUP, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING COSTS AND CHARGED TO BALANCE AT
DESCRIPTION OF YEAR EXPENSES OTHER ACCOUNTS DEDUCTIONS (1) END OF YEAR
- ----------------------------------------- ---------- --------- -------------- -------------- -----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 2000 ......................... $31,083 6,419 -- (585) $36,917
Year Ended December 31, 1999 ......................... $24,006 5,967 5,094 (3,984) $31,083
Year Ended December 31, 1998 ......................... $20,456 3,508 475 (433) $24,006
</TABLE>
- ----------
(1) Deductions represent uncollectible balances of accounts receivable written
off, net of recoveries.
40
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
EXHIBIT INDEX
INCORPORATED
EXHIBIT BY REFERENCE TO, OR
NO. DESCRIPTION PAGE NUMBER
---- ----------- -------------------
2(a) - Disclosure Statement and Third Amended Exhibit 2(a) to
Joint Plan of Reorganization (the "Plan EMCOR's Registration
of Reorganization") proposed by EMCOR Statement on Form 10
Group, Inc. (formerly JWP INC.) (the as originally filed
"Company" or "EMCOR") and its subsidiary March 17, 1995
SellCo Corporation ("SellCo"), as (the "Form 10")
approved for dissemination by the United
States Bankruptcy Court, Southern
District of New York (the "Bankruptcy
Court"), on August 22, 1994.
2(b) - Modification to the Plan of Reorganization Exhibit 2(b) to
dated September 29, 1994 Form 10
2(c) - Second Modification to the Plan of Exhibit 2(c) to
Reorganization dated September 30, 1994 Form 10
2(d) - Confirmation Order of the Bankruptcy Court Exhibit 2(d) to
dated September 30, 1994 (the Form 10
"Confirmation Order") confirming the Plan
of Reorganization, as amended
2(e) - Amendment to the Confirmation Order Exhibit 2(e) to
dated December 8, 1994 Form 10
2(f) - Post-confirmation modification to the Plan Exhibit 2(f) to
of Reorganization entered on Form 10
December 13, 1994
3(a-1) - Restated Certificate of Incorporation of Exhibit 3(a-5) to
EMCOR filed December 15, 1994 Form 10
3(a-2) - Amendment dated November 28, 1995 to the Exhibit 3(a-2) to
Restated Certificate of Incorporation of EMCOR's Annual
EMCOR Report on Form 10-K
for the year ended
December 31, 1995
(the "1995
Form 10-K")
3(a-3) - Amendment dated February 12, 1998 to the Exhibit 3(a-3) to
Restated Certificate of Incorporation EMCOR's Annual Report
on Form 10-K for
the year ended
December 31, 1997
(the "1997 Form 10-K")
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
(the "1998 Form 10-K")
3(c) - Rights Agreement dated March 3, 1997 Exhibit 1 to EMCOR's
between EMCOR and the Bank of New York Report on Form 8-K
dated March 3, 1997
4.1 - Amendment and Restatement of Credit Exhibit 4.1 to 1998
Agreement (the "Credit Agreement") dated Form 10-K
as of December 22, 1998 among EMCOR,
certain of its subsidiaries and Harris
Trust and Savings Bank, individually and
as agent, and the Lenders which are or
become Parties thereto*
4.2 Subordinated Indenture dated as of March Exhibit 4(b) to
18, 1998 ("Indentured") between EMCOR and EMCOR's Quarterly
State Street Bank and Trust Company, as Report on Form 10-Q
Trustee ("State Street Bank") for the quarter
ended March 31, 1998
("March 1998
Form 10-Q")
4.3 First Supplemental Indenture dated as of Exhibit 4(c) to
March 18, 1998 to Indenture between EMCOR March 1998 Form 10-Q
and State Street Bank
41
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
EXHIBIT INDEX -- (CONTINUED)
INCORPORATED
EXHIBIT BY REFERENCE TO, OR
NO. DESCRIPTION PAGE NUMBER
---- ----------- -------------------
4.4 Indenture dated as of December 15, 1994, Exhibit 4.4 to
between SellCo and Fleet National Bank of Form 10
Connecticut, as trustee, in respect of
SellCo's 12% Subordinated Contingent
Payment Notes, Due 2004
10(a) Amended and Restated Employment Agreement Exhibit 10(a) to
made as of May 4, 1999 between EMCOR and EMCOR's Quarterly
Frank T. MacInnis Report on Form 10-Q
for the quarter
ended June 30, 1999
("June 1999
Form 10-Q")
10(b) Amended and Restated Employment Agreement Exhibit 10(b) to
made as of May 4, 1999 between EMCOR and June 1999 Form 10-Q
Sheldon I. Cammaker
10(c) Amended and Restated Employment Agreement Exhibit 10(b) to
made as of May 4, 1999 between EMCOR and June 1999 Form 10-Q
Leicle E. Chesser
10(d) Amended and Restated Employment Agreement Exhibit 10(e) to
made as of May 4, 1999 between EMCOR and June 1999 Form 10-Q
Jeffrey M. Levy
10(e) Amended and Restated Employment Agreement Exhibit 10(f) to
made as of May 4, 1999 between EMCOR and R. June 1999 Form 10-Q
Kevin Matz
10(f) Amended and Restated Employment Agreement Exhibit 10(g) to
made as of May 4, 1999 between EMCOR and June 1999 Form 10-Q
Mark A. Pompa
10(g-1) 1994 Management Stock Option Plan ("1994 Exhibit 10(o) to
Option Plan") Form 10
10(g-2) Amendment to Section 12 of the 1994 Option Page
Plan*
10(g-3) Amendment to Section 13 of the 1994 Option Page
Plan*
10(h-1) 1995 Non-Employee Directors' Non-Qualified Exhibit 10(p) to
Stock Option Plan ("1995 Option Plan") Form 10
10(h-2) Amendment to Section 10 of the 1995 Option Page
Plan*
10(i-1) 1997 Non-Employee Directors' Non-Qualified Exhibit 10(k) to
Stock Option Plan ("1997 Option Plan") 1999 Form 10-K
10(i-2) Amendment to Section 9 of the 1997 Option Page
Plan*
10(j) 1997 Stock Plan for Directors Exhibit 10(l) to
1999 Form 10-K
10(k-1) Continuity Agreement dated as of June 22, Exhibit 10(a) to
1998 between Frank T. MacInnis and EMCOR EMCOR's Quarterly
("MacInnis Continuity Agreement") Report on Form 10-Q
for the quarter ended
June 30, 1998 ("June
1998 Form 10-Q")
10(k-2) Amendment dated as of May 4, 1999 to Exhibit 10(h) to
MacInnis Continuity Agreement June 1999 Form 10-Q
10(l-1) Continuity Agreement dated as of June 22, Exhibit 10(c) to the
1998 between Sheldon I. Cammaker and EMCOR June 1998 Form 10-Q
("Cammaker Continuity Agreement")
10(l-2) Amendment dated as of May 4, 1999 to Exhibit 10(i) to
Cammaker Continuity Agreement June 1999 Form 10-Q
10(m-1) Continuity Agreement dated as of June 22, Exhibit 10(d) to the
1998 between Leicle E. Chesser and EMCOR June 1998 Form 10-Q
("Chesser Continuity Agreement")
42
<PAGE>
EMCOR GROUP, INC.
AND SUBSIDIARIES
EXHIBIT INDEX -- (CONTINUED)
INCORPORATED
EXHIBIT BY REFERENCE TO, OR
NO. DESCRIPTION PAGE NUMBER
---- ----------- -------------------
10(m-2) Amendment dated as of May 4, 1999 to Exhibit 10(j) to
Chesser Continuity Agreement June 1999 Form 10-Q
10(n-1) Continuity Agreement dated as of June 22, Exhibit 10(b) to the
1998 between Jeffrey M. Levy and EMCOR June 1998 Form 10-Q
("Levy Continuity Agreement")
10(n-2) Amendment dated as of May 4, 1999 to Levy Exhibit 10(l) to
Continuity Agreement June 1999 Form 10-Q
10(o-1) Continuity Agreement dated as of June 22, Exhibit 10(f) to the
1998 between R. Kevin Matz and EMCOR ("Matz June 1998 Form 10-Q
Continuity Agreement")
10(o-2) Amendment dated as of May 4, 1999 to Matz Exhibit 10(m) to
Continuity Agreement June 1999 Form 10-Q
10(p-1) Continuity Agreement dated as of June 22, Exhibit 10(g) to the
1998 between Mark A. Pompa and EMCOR June 1998 Form 10-Q
("Pompa Continuity Agreement")
10(p-2) Amendment dated as of May 4, 1999 to Pompa Exhibit 10(n) to
Continuity Agreement June 1999 Form 10-Q
10(q) Release and Settlement Agreement dated Exhibit 10(q) to
December 22, 1999 between EMCOR and Thomas EMCOR's Annual Report
D. Cunningham on Form 10-K for
the year ended
December 31, 1999
10(r) Executive Stock Bonus Plan* Page
11 Computation of Basic EPS and Diluted EPS Page
for the years ended December 2000 and 1999*
21 List of Significant Subsidiaries* Page
23 Consent of Arthur Andersen LLP* Page
- -------
*Filed Herewith
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, upon request of the
Securities and Exchange Commission, the Registrant hereby undertakes to furnish
a copy of any unfiled instrument which defines the rights of holders of
long-term debt of the Registrant's subsidiaries.
43
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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: February 20, 2001 by /s/ FRANK T. MACINNIS
---------------------
FRANK T. MACINNIS
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON FEBRUARY 20, 2001.
/s/ FRANK T. MACINNIS Chairman of the Board of Directors and
--------------------- Chief Executive Officer
Frank T. MacInnis
/s/ STEPHEN W. BERSHAD Director
----------------------
Stephen W. Bershad
/s/ DAVID A. B. BROWN Director
---------------------
David A. B. Brown
/s/ GEORGES L. DE BUFFEVENT Director
---------------------------
Georges L. de Buffevent
/s/ ALBERT FRIED, JR. Director
---------------------
Albert Fried, Jr.
/s/ RICHARD F. HAMM, JR. Director
------------------------
Richard F. Hamm, Jr.
/s/ KEVIN C. TONER Director
------------------
Kevin C. Toner
/s/ LEICLE E. CHESSER Executive Vice President and
--------------------- Chief Financial Officer
Leicle E. Chesser
/s/ MARK A. POMPA Vice President and Controller
-----------------
Mark A. Pompa
44
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(G-2)
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>SECTION 12 - MANAGEMENT STOCK OPTION PLAN
<TEXT>
EXHIBIT 10 (g-2)
AMENDED SECTION 12 OF THE 1994 MANAGEMENT STOCK OPTION PLAN
12. (a) NON-TRANSFERABILITY OF OPTIONS. Options and all other rights
thereunder shall be non-transferrable or non-assignable by the holder thereof
except to the extent that the estate of a deceased holder of an Option may be
permitted to exercise them. Options may be exercised or surrendered during the
holder's lifetime only by the holder thereof.
(b) Notwithstanding the foregoing, the Committee may in the
applicable option certificate or at any time after the date of grant by an
instrument amending terms provided for in the option certificate provide that
Options may be transferred by a holder without consideration, subject to such
rules as the Committee may adopt consistent with the terms of the applicable
option certificate to preserve the purposes of the Plan, to:
(A) any person who is a "family member" of the holder, as such
term is used in the instructions to Form S-8 (collectively,
the "Immediate Family Members");
(B) a trust solely for the benefit of the holder and his or her
Immediate Family Members;
(C) a partnership or limited liability company whose only
partners or shareholders are the holder and his or her
Immediate Family Members; or
(D) any other transferee as may be approved either (a) by the
Board of Directors or the Committee in its sole discretion,
or (b) as provided in the terms of the applicable option
certificate;
(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter
referred to as a "Permitted Transferee"); PROVIDED that the holder gives the
Committee advance written notice describing the terms and conditions of the
proposed transfer and the Committee notifies the holder in writing that such a
transfer would comply with the requirements of the Plan and the terms of any
applicable option certificate.
(c) The terms of any Option transferred in accordance with the
immediately preceding sentence shall apply to the Permitted Transferee and any
reference in the Plan or in an option certificate to a holder shall be deemed to
refer to the Permitted Transferee, except that (a) Permitted Transferees shall
not be entitled to transfer any Options, other than by will or the laws of
descent and distribution; (b) Permitted Transferees shall not be entitled to
exercise any transferred Options unless there shall be in effect a registration
statement on an appropriate form covering the shares to be acquired pursuant to
the exercise of such Option if the Committee determines, consistent with the
terms of any applicable option certificate, that such a registration statement
is necessary or appropriate, (c) the Committee or the Company shall not be
required to provide any notice to a Permitted Transferee, whether or not such
notice is or would otherwise have been required to be given to the holder under
the Plan or otherwise, and (d) the consequences of termination of the holder's
employment by, or services to, the Company or a Subsidiary under the terms of
the Plan and the applicable option certificate shall continue to be applied with
respect to the holder, following which the Options shall be exercisable by the
Permitted Transferee only to the extent, and for the periods, specified in the
Plan and the terms of the applicable option certificate.
45
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(G-3)
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>SECTION 13 - MANAGEMENT STOCK OPTION PLAN
<TEXT>
EXHIBIT 10 (g-3)
AMENDED SECTION 13 OF THE 1994 MANAGEMENT STOCK OPTION PLAN
Unless the Committee determines otherwise at the time of grant of an Option
or thereafter by amendment of an Option, all or any part of any Option, to the
extent unexercised, shall terminate immediately, upon the cessation or
termination for any reason of the holder's employment by the Corporation or any
Subsidiary, except that the holder shall have until the end of the three-month
period following the cessation of his employment with the Corporation or its
Subsidiaries, and no longer, to exercise any unexercised Option that he could
have exercised on the day on which such employment terminated; provided, that
such exercise must be accomplished prior to the expiration of the term of such
Option. Notwithstanding the foregoing, if the cessation of employment is due to
retirement on or after attaining the age of sixty-five (65) years, or to
disability (to an extent and in a manner as shall be determined in each case by
the Committee in its sole discretion) or to death, the holder or the
representative of the estate of a deceased holder shall have the privilege of
exercising the Option which is unexercised at the time of such retirement, or of
such disability or death; provided, however, that such exerciser must be
accomplished prior to the expiration of the term of such Option and (a) within
three months of the holder's retirement or disability, or (b) within six months
of the holder's death, as the case may be, unless the Committee at the time of
grant of such Option or thereafter by amendment of such Option permits its
exercise for a longer period but in no event after the expiration of the term of
such Option.
46
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(H-2)
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>SECTION 10 - STOCK OPTION PLAN
<TEXT>
EXHIBIT 10 (h-2)
AMENDED SECTION 10 OF THE
1995 NON-EMPLOYEE DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
10. (a) NON-TRANSFERABILITY OF OPTIONS. Options and all other rights
thereunder shall be non-transferrable or non-assignable by the holder thereof
otherwise than by will or the laws of descent and distribution. Options may be
exercised or surrendered during the holder's lifetime only by the holder thereof
or his guardian or legal representative.
(b) Notwithstanding the foregoing, the Board of Directors may in the
applicable option certificate or at any time after the date of grant by an
instrument amending terms provided for in the option certificate provide that
Options may be transferred by a holder without consideration, subject to such
rules as the Board of Directors may adopt consistent with the terms of the
applicable option certificate to preserve the purposes of the Plan, to:
(A) any person who is a "family member" of the holder, as such
term is used in the instructions to Form S-8 (collectively,
the "Immediate Family Members");
(B) a trust solely for the benefit of the holder and his or her
Immediate Family Members;
(C) a partnership or limited liability company whose only
partners or shareholders are the holder and his or her
Immediate Family Members; or
(D) any other transferee as may be approved either (a) by the
Board of Directors in its sole discretion, or (b) as
provided in the terms of the applicable option certificate;
(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter
referred to as a "Permitted Transferee"); PROVIDED that the holder gives the
Board of Directors advance written notice describing the terms and conditions of
the proposed transfer and the Committee notifies the holder in writing that such
a transfer would comply with the requirements of the Plan and the terms of any
applicable option certificate.
(c) The terms of any Option transferred in accordance with the
mmediately preceding sentence shall apply to the Permitted Transferee and any
reference in the Plan or in an option certificate to a holder shall be deemed to
refer to the Permitted Transferee, except that (a) Permitted Transferees shall
not be entitled to transfer any Options, other than by will or the laws of
descent and distribution; (b) Permitted Transferees shall not be entitled to
exercise any transferred Options unless there shall be in effect a registration
statement on an appropriate form covering the shares to be acquired pursuant to
the exercise of such Option if the Board of Directors determines, consistent
with the terms of any applicable option certificate, that such a registration
statement is necessary or appropriate, (c) the Board of Directors or the Company
shall not be required to provide any notice to a Permitted Transferee, whether
or not such notice is or would otherwise have been required to be given to the
holder under the Plan or otherwise, and (d) the consequences, if any, of
termination of the holder's service as a member of the Board of Directors under
the terms of the Plan and the applicable option certificate shall continue to be
applied with respect to the holder, following which the Options shall be
exercisable by the Permitted Transferee only to the extent, and for the periods,
specified in the Plan and the terms of the applicable option certificate.
47
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(I-2)
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>AMENDED SECTION 9 - STOCK OPTION PLAN
<TEXT>
EXHIBIT 10 (i-2)
AMENDED SECTION 9 OF THE
1997 NON-EMPLOYEE DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
9. (a) NON-TRANSFERABILITY OF OPTIONS. Options and all other rights
thereunder and hereunder may not be assigned or transferred by a Director
otherwise than by will or the laws of descent and distribution, and Options may
be exercised or surrendered during the Director's lifetime only by him or his
guardian or legal representative.
(b) Notwithstanding the foregoing, the Board may in the applicable
option certificate or at any time after the date of grant by an instrument
amending terms provided for in the option certificate provide that Options may
be transferred by a Director without consideration, subject to such rules as the
Board may adopt consistent with the terms of the applicable option certificate
to preserve the purposes of the Plan, to:
(A) any person who is a "family member" of the Director, as such
term is used in the instructions to Form S-8 (collectively,
the "Immediate Family Members");
(B) a trust solely for the benefit of the Director and his or
her Immediate Family Members;
(C) a partnership or limited liability company whose only
partners or shareholders are the Director and his or her
Immediate Family Members; or
(D) any other transferee as may be approved either (a) by the
Board in its sole discretion, or (b) as provided in the
terms of the applicable option certificate;
(each transferee described in clauses (A), (B), (C) and (D) above is hereinafter
referred to as a "Permitted Transferee"); PROVIDED that the Director gives the
Board advance written notice describing the terms and conditions of the proposed
transfer and the Board notifies the Director in writing that such a transfer
would comply with the requirements of the Plan and the terms of any applicable
option certificate.
(c) The terms of any Option transferred in accordance with the
immediately preceding sentence shall apply to the Permitted Transferee and any
reference in the Plan or in an option certificate to a Director shall be deemed
to refer to the Permitted Transferee, except that (a) Permitted Transferees
shall not be entitled to transfer any Options, other than by will or the laws of
descent and distribution; (b) Permitted Transferees shall not be entitled to
exercise any transferred Options unless there shall be in effect a registration
statement on an appropriate form covering the shares to be acquired pursuant to
the exercise of such Option if the Board determines, consistent with the terms
of any applicable option certificate, that such a registration statement is
necessary or appropriate, (c) the Board or the Company shall not be required to
provide any notice to a Permitted Transferee, whether or not such notice is or
would otherwise have been required to be given to the Director under the Plan or
otherwise, and (d) the consequences, if any, of termination of the Director's
services as a member of the Board under the terms of the Plan and the applicable
option certificate shall continue to be applied with respect to the Director,
following which the Options shall be exercisable by the Permitted Transferee
only to the extent, and for the periods, specified in the Plan and the terms of
the applicable option certificate.
48
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(R)
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>AMENDED SECTION 9 - STOCK OPTION PLAN
<TEXT>
EXHIBIT 10 (r)
EMCOR GROUP, INC.
EXECUTIVE STOCK BONUS PLAN
SECTION I. PURPOSE.
The purpose of the Plan is to encourage stock ownership in the
Company by its senior management and to provide a vehicle through which (i) a
portion of each annual bonus payable to a Participant will be deferred and
ultimately may be paid in the form of Company Stock and (ii) an additional
portion of each annual bonus payable to a Participant may, at such Participant's
election, be deferred and ultimately may be paid in the form of Company Stock.
SECTION 2. DEFINITIONS.
As used in the Plan, the following capitalized terms shall have the
following meanings:
"Bonus" means the annual bonus, if any, awarded to a Participant by
the Committee.
"Board" means the Board of Directors of the Company.
"Change of Control" means when:
(i) any person or persons acting in concert (excluding Company benefit
plans) becomes the beneficial owner of securities of the Company having at least
25% of the voting power of the Company's then outstanding securities (unless the
event causing the 25% threshold to be crossed is an acquisition of voting common
securities directly from the Company, other than upon the conversion of
convertible debt securities or other securities and/or the exercise of options
or warrants); or
(ii) the stockholders of the Company shall approve any merger or other
business combination of the Company, sale or lease of the Company's assets or
combination of the foregoing transactions (a "Transaction") other than a
Transaction immediately following which the stockholders of the Company and any
trustee or fiduciary of any Company employee benefit plan immediately prior to
the Transaction own at least 65% of the voting power, directly or indirectly, of
(A) the surviving corporation in any such merger or other business combination;
(B) the purchaser or lessee of the Company's assets; or (C) both the surviving
corporation and the purchaser or lessee in the event of any combination of
Transactions; or
(iii) within any 24 month period, the persons who were directors
immediately before the beginning of such period (the "Incumbent Directors")
shall cease (for any reason other than death) to constitute at least a majority
of the Board or the board of directors of a successor to the Company. For this
purpose, any director who was not a director at the beginning of such period
shall be deemed to be an Incumbent Director if such director was elected to the
Board by, or on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as Incumbent Directors (so long
as such director was not nominated by a person who has expressed an intent to
effect a Change of Control or engage in a proxy or other control contest).
"Committee" means the Compensation and Personnel Committee of the Board.
"Company" means EMCOR Group, Inc., a Delaware corporation, or any
successor corporation.
"Company Stock" means common stock of the Company, par value $.01 per
share.
"Designated Beneficiary" means the beneficiary or beneficiaries designated
in accordance with Section 8.6 to receive the shares of Company Stock, if any,
payable to a Participant under the Plan upon the Participant's death.
49
<PAGE>
"Fair Market Value" means, as of a specified date, the closing price
at which a share of Company Stock is traded on the stock exchange, if any, on
which such shares are primarily traded or, if the shares are not then traded on
a stock exchange, the closing price of a share as reported on the NASDAQ
National Market System or, if the shares are not then traded on the NASDAQ
National Market System, the average of the closing bid and ask prices at which a
share is traded on the over-the-counter market, but if no shares were traded on
such date, then on the last previous date on which a share was so traded, or, if
none of the above are applicable, the value of a share as determined by an
unaffiliated investment banking firm selected by the Board of Directors.
"Financial Hardship" means severe financial hardship caused by
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant, as determined by the Committee in its
sole and absolute discretion.
"Participant" means each person designated to participate in the
Plan pursuant to Section 3.1.
"Plan" means the EMCOR Group, Inc. Executive Stock Bonus Plan.
"Plan Year" means the accounting fiscal year of the Company.
SECTION 3. ELIGIBILITY AND PARTICIPATION.
3.1 DESIGNATION. The Committee shall, in its sole discretion,
designate by March 31 of each Plan Year which executive officers of the Company
will participate in the Plan for such Plan Year. Each Participant will be
notified of his selection as soon after such selection as is practicable.
Notwithstanding the foregoing, for the Plan Year 2000 the following persons
shall be Participants in the Plan: Frank T. MacInnis, Jeffrey M. Levy, Sheldon
I. Cammaker, Leicle E. Chesser, R. Kevin Matz, and Mark A. Pompa.
3.2 NO RIGHT TO PARTICIPATE. No person has or at any time will
have any right to be selected for current or future participation in the Plan,
nor may any person selected for participation in the Plan decline to participate
therein.
SECTION 4. ADMINISTRATION.
4.1 AUTHORITY OF THE COMMITTEE. The Committee has and will have
all the authority that may be necessary or helpful to enable it to discharge its
responsibilities with respect to the Plan. Without limiting the generality of
the foregoing, and in addition to any authority or responsibility specifically
granted to the Committee elsewhere in the Plan, the Committee has the exclusive
right to (a) interpret the Plan, (b) decide the amount of each Participant's
Bonus, subject to and in accordance with any employment agreement or other
agreement between the Company and the Participant, (c) construe any ambiguous
provision of the Plan, (d) supply any omission, (e) reconcile any inconsistency,
(f) issue administrative guidelines as an aid to administer the Plan, (g) make
regulations, if any, for carrying out the Plan and to make changes in such
regulations as they from time to time deem proper, and (h) decide any and all
questions arising in the administration, interpretation and application of the
Plan.
4.2 DISCRETIONARY AUTHORITY. The Committee shall have full
discretionary authority in all matters related to the discharge of its
responsibilities and the exercise of its authority under the Plan including,
without limitation, its construction of the terms of the Plan. It is the intent
of the Company in establishing the Plan that the decisions of the Committee and
its action with respect to the Plan will be final, binding and conclusive upon
all persons having or claiming to have any right or interest in or under the
Plan.
SECTION 5. BONUSES.
5.1 ESTABLISHMENT OF AMOUNT AND COMMUNICATION TO PARTICIPANTS. On
or before March 31 of each year, commencing with the year 2001, the Committee
shall determine the Bonus, if any, payable to each Participant in respect of the
immediately preceding calendar year. Determination of such Bonus shall be
subject to and in accordance with any employment agreement or any other
agreement between the Company and the Participant.
5.2 MANDATORY DEFERRAL. 25% of each such Bonus shall be
immediately deferred into a Mandatory Stock Unit Account in accordance with the
provisions of Section 6.2(b), unless the Committee in its discretion determines,
on or before March 31 of each year (but no later than the day on which such
deferral occurs),
50
<PAGE>
commencing with the year 2001, that the percentage of each such Bonus for the
immediately preceding year to be deferred into a Mandatory Stock Unit Account
shall be a lower percentage but not less than 10%; provided further that any
such determination shall apply uniformly to all Participants participating in
the Plan.
5.3 VOLUNTARY DEFERRAL. That portion of a Participant's Bonus (or
any part thereof) that is not subject to a mandatory deferral referred to in
Section 5.2 may be deferred into a Voluntary Stock Unit Account in accordance
with the provisions of Sections 6.1 and 6.2(c).
5.4 CASH PAYMENT. The balance of the Participant's Bonus as to
which the above-mentioned mandatory deferral and the above-mentioned voluntary
deferral does not apply shall be payable in a lump sum cash payment by March 31
of each year.
5.5 MODIFICATION OF VOLUNTARY DEFERRAL. Notwithstanding any other
provision of the Plan, at any time prior to the last day of any calendar year
the Committee may, in its sole discretion, determine to decline to implement
voluntary deferrals made under the Plan with respect to Bonuses payable in
respect of such year; provided that any such determination shall apply uniformly
to all Participants participating in the Plan.
SECTION 6. DEFERRED BONUSES.
6.1 VOLUNTARY DEFERRAL BONUS. A Participant may elect ("Deferred
Bonus Election") to defer the payment of all or part of his Bonus that is not
mandatorily deferred into a Voluntary Stock Unit Account (as described in
Section 6.2(c) below) by submitting an election form ("Deferred Bonus Election
Form") to the Company by June 30 of the Plan Year in respect of which a Bonus
may be payable, except with respect to the Bonus for 2000, in which case such
Deferred Bonus Election Form shall be submitted to the Company by October 31,
2000. The Deferred Bonus Election Form shall indicate: (i) the Elected Date (as
that term is defined in Section 6.3(b)), and (ii) the percentage of the Bonus,
if any, to be voluntarily deferred that will not be mandatorily deferred.
All deferral elections shall be irrevocable once made. A Participant
may designate, in a Deferred Bonus Election Form, one or more Designated
Beneficiaries to receive any distributions under the Plan upon the death of the
Participant in accordance with Section 8.6.
6.2 COMMON STOCK, STOCK UNIT ACCOUNTS AND DIVIDEND EQUIVALENTS.
(a) COMPANY STOCK. Subject to the following sentence, the
aggregate number of shares of Company Stock reserved for issuance under the Plan
shall be 220,000 shares presently held in the treasury of the Company. In the
event of any merger, reorganization, recapitalization, consolidation, sale or
other distribution of all or substantially all of the assets of the Company, any
stock dividend, split, spin-off, split-up, split-off, distribution of securities
or other property by the Company, or other change in the Company's corporate
structure affecting the shares of Company Stock, the number of shares reserved
under the Plan and the number of Stock Units then credited to Mandatory and
Voluntary Stock Unit Accounts pursuant to Section 6.3 shall be appropriately
adjusted as determined by the Committee in its sole discretion in a manner
intended to prevent dilution or enlargement of the intended benefits to
Participants under the Plan.
(b) MANDATORY STOCK UNIT ACCOUNTS. Each portion of a Bonus
required to be deferred pursuant to the Plan ("Mandatory Deferred Amount")
shall be credited to a separate account ("Mandatory Stock Unit Account") in
units, with each unit representing one share of Company Stock ("Stock Units")
and the number of Stock Units calculated in accordance with Section 6.2(d). A
separate Mandatory Stock Unit Account shall be established for the portion of
each year's Bonus required to be deferred pursuant to the Plan.
(c) VOLUNTARY STOCK UNIT ACCOUNTS. Each portion of a Bonus
deferred by a Participant pursuant to a properly completed Deferred Bonus
Election Form under Section 6.1 (the "Voluntary Deferred Amount") shall be
credited to a separate account ("Voluntary Stock Unit Account") in Stock Units
with the number of Stock Units calculated in accordance with Section 6.2(d). A
separate Voluntary Stock Unit Account shall be established for the portion of
each year's Bonus elected to be deferred pursuant to the Plan. (Mandatory Stock
Unit Accounts and Voluntary Stock Unit Accounts are referred to herein
collectively as "Stock Unit Accounts".)
(d) CALCULATION OF STOCK UNITS. The number of Stock Units
credited to each Stock Unit Account shall be an amount equal to the Mandatory
Deferred Amount and Voluntary Deferred Amount,
51
<PAGE>
respectively, divided by 85% of the Fair Market Value of a share of Company
Stock on the day on which the Bonus to which such Mandatory Deferral Amount and/
or Voluntary Deferral Amount relates is determined.
(e) DIVIDEND EQUIVALENTS. If Stock Units exist in a
Participant's Mandatory Stock Unit Account or Voluntary Stock Unit Account on a
dividend record date for the Company Stock, each Stock Unit Account shall be
credited, on the dividend payment date, with an additional number of Stock Units
equal to (i) the cash value of the dividend paid on one share of Company Stock
multiplied by the number of Stock Units in the Stock Unit Account on the
dividend record date and (ii) divided by 85% of the Fair Market Value of a share
of Company Stock on the trading day immediately preceding the dividend payment
date.
(f) VESTING. All Mandatory and Voluntary Deferred Amounts
allocated to Stock Unit Accounts shall be fully vested at all times and shall be
credited to the appropriate Stock Unit Account as of the date a Participant's
Bonus is determined.
6.3 DISTRIBUTIONS.
(a) DISTRIBUTION DATE OF MANDATORY DEFERRED PAYMENT. Subject
to the provisions of Section 6.3(d), amounts credited to a Participant's
Mandatory Stock Unit Account shall be paid in shares of Company Stock equal to
the number of Stock Units credited thereto on the earlier of (i) the first
business day of the fourth calendar year following the year in respect of which
the Bonus was payable, (ii) the Participant's termination of employment for any
reason or (iii) immediately prior to a Change of Control ("Mandatory
Distribution Date").
(b) DISTRIBUTION DATE OF VOLUNTARY DEFERRED PAYMENT. Subject
to the provisions of Section 6.3(d), amounts credited to a Participant's
Voluntary Stock Unit Account shall be paid in shares of Company Stock equal to
the number of Stock Units credited thereto on the earlier of (i) the Elected
Date, (ii) the Participant's termination of employment for any reason or (iii)
immediately prior to a Change of Control ("Voluntary Distribution Date"). Each
Participant shall designate on a Deferred Bonus Election Form a date (the
"Elected Date") on which he or she elects to have the amounts credited to the
Participant's Voluntary Stock Unit Account paid; provided that such date is no
earlier than the first business day of the fourth calendar year following the
year in respect of which the Bonus was payable and no later than the first
business day of the eleventh calendar year following the year in respect of
which the Bonus was payable. Notwithstanding the foregoing, but subject to
proviso of the immediately preceding sentence, the Participant may, at least six
months prior to the Elected Date and in the calendar year preceeding the Elected
Date, on one or more occasions, defer such Elected Date by filing with the
Secretary of the Company a written extension of the Elected Date and the latest
such extended date shall be deemed thereafter to be the "Elected Date" with
respect to such Voluntary Stock Unit Account.
(c) EARLY DISTRIBUTION. Notwithstanding anything contained
herein to the contrary, the Committee may permit distribution of all or a part
of a Participant's Mandatory Stock Unit Account and/or Voluntary Stock Unit
Account earlier than otherwise provided herein if it determines, in its sole
discretion, following written request therefor by the Participant, that the
Participant (or his estate or beneficiary) is experiencing a Financial Hardship;
provided that such distribution may not be in an amount greater than that
determined by the Committee as necessary to alleviate the Financial Hardship.
(d) CASH IN LIEU OF STOCK. Notwithstanding anything
contained herein to the contrary, if, in the opinion of counsel to the Company,
due to the absence of stockholder approval of the Plan or for any other reason
(A) the issuance of shares of Company Stock to Participants in respect of Stock
Units would constitute a violation of law or of the rules of any stock exchange
on which the Company Stock is then listed for trading or the rules of the NASDAQ
National Market System if the Company Stock is then traded thereon or (B) shares
of Company Stock issuable to Participants in respect of Stock Units may not be
listed for trading on any stock exchange on which the Company Stock is then
listed for trading or may not be traded on the NASDAQ National Market System if
the Company Stock is then traded thereon, then each Participant shall be paid in
cash an amount equal to the value of the shares of Company Stock that would
otherwise have been distributed to him or her in respect of such Stock Units;
such shares of Company Stock shall be valued at their Fair Market Value as of
the close of business on the Mandatory Distribution Date or Voluntary
Distribution Date, as the case may be, or in the case of distributions pursuant
to Section 6.3(c), on the date of determination provided for therein.
If any fractional shares or securities would be issuable to a Participant
in respect of Stock Units, in lieu thereof such fractional shares or securities
shall be payable in cash based upon the Fair Market Value of such shares or
52
<PAGE>
securities on the Mandatory Distribution Date or Voluntary Distribution Date, as
the case may be, or in the case of a distribution pursuant to Section 6.3(c), on
the date of determination as provided for therein.
(e) DISTRIBUTION FOR TAXES. Notwithstanding anything
contained herein to the contrary, the Committee shall immediately distribute any
portion of a Participant's Mandatory Stock Unit Account and/or Voluntary Stock
Unit Account which has been determined by the Internal Revenue Service or a
taxing authority of another jurisdiction, in a manner which cannot be appealed
or as to which the time to appeal has expired, to be currently taxable to the
Participant or to have been taxable to the Participant in a prior taxable year.
SECTION 7. TERMINATION OR AMENDMENT OF THE PLAN.
The Board may amend, modify, suspend or terminate the Plan at any
time, except that without stockholder approval the Board may not increase the
maximum number of shares which may be issued under the Plan (other than
increases pursuant to the second sentence of Section 6.2(a)) or extend the term
of the Plan. The termination or any modification, suspension, or amendment of
the Plan shall not, without the consent of a Participant, adversely affect the
Participant's rights with respect to Bonuses, Stock Units and/or Company Stock
previously awarded to him or her or credited to his or her Stock Unit Accounts
or result in a distribution of amounts credited to his or her Stock Unit
Accounts earlier than otherwise provided herein.
SECTION 8. MISCELLANEOUS.
8.1 REORGANIZATION OR DISCONTINUANCE. The obligations of the
Company under the Plan shall be binding upon any successor corporation or
organization resulting from merger, consolidation or other reorganization of the
Company, or upon any successor corporation or organization succeeding to
substantially all of the assets and business of the Company. The Company will
make appropriate provision for the preservation of Participants' rights under
the Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
8.2 NON-ALIENATION OF BENEFITS. A Participant may not assign,
sell, encumber, transfer or otherwise dispose of any rights or interests under
the Plan except by will or by the laws of descent and distribution. Any
attempted disposition in contravention of the preceding sentence shall be null
and void.
8.3 NO CLAIM OR RIGHT TO PLAN PARTICIPATION. Except as otherwise
specifically provided in the Plan, no employee or other person shall have any
claim or right to be selected as a Participant under the Plan. Neither the Plan
nor any action taken pursuant to the Plan shall be construed as giving any
employee any right to be retained in the employ of the Company or any
subsidiary.
8.4 RESTRICTIONS ON STOCK TRANSFERABILITY. The Committee shall
impose such restrictions on disposition of shares of Company Stock acquired
under the Plan as it may deem advisable to comply with applicable Federal
securities laws, the requirements of any stock exchange upon which the Company
Stock is then listed or the National Association of Securities Dealers if the
Company Stock is not then listed and is traded on the NASDAQ National Market
System or on the over-the-counter market, and blue sky or state securities laws
applicable to such shares.
8.5 TAXES. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
Federal, state and local withholding tax requirements on any distribution of
shares of Company Stock or cash pursuant to this Plan. To the extent permissible
under applicable tax, securities, and other laws, the Company shall, at the
Participant's election, permit the Participant to satisfy a tax withholding
requirement by directing the Company to apply shares of Company Stock to which
the Participant is entitled under the Plan to satisfy such requirement, which
shares shall be valued at their Fair Market Value as of the Mandatory or
Voluntary Distribution Date, as the case may be, or in the case of amounts
distributed pursuant to Section 6.3(c), valued as of the date of determination
provided for therein.
8.6 DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant may
indicate at any time after being notified that he or she is a Participant the
designation of one or more persons as his or her Designated Beneficiary who
shall be entitled to receive the amount, if any, payable under the Plan upon the
death of the Participant. Such designation shall be in writing to the Committee,
or an officer of the Company designated by the
53
<PAGE>
Committee. A Participant may, from time to time, revoke or change his or her
Designated Beneficiary without the consent of any prior Designated Beneficiary
by filing a written designation with the Committee or such designated officer.
The last such designation received by the Committee or such officer shall be
controlling; provided, however, that no designation, or change or revocation
thereof, shall be effective unless received by the Committee prior to the
Participant's death, and in no event shall it be effective as of a date prior to
such receipt. In the absence of any designation of a Designated Beneficiary, the
benefits hereunder unpaid at the Participant's death shall be paid to his
estate.
8.7 PAYMENTS TO PERSONS OTHER THAN THE PARTICIPANT. If the
Committee shall find that any person to whom any amount is payable under the
Plan is unable to care for his or her affairs because of illness or accident,
then any payment due to such person or his or her estate (unless a prior claim
therefor has been made by a duly appointed legal representative) may, if the
Committee so directs, be paid to his or her spouse, a child, a relative, an
institution maintaining or having custody of such person, or any other person
deemed by the Committee, in its sole discretion, to be a proper recipient on
behalf of such person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Company therefor.
8.8 NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee
shall be personally liable by reason of any act taken hereunder or any failure
to act hereunder or on his or her behalf in his or her capacity as a member of
the Committee, and the Company shall indemnify and hold harmless each member of
the Committee and any employee, officer, or director of the Company to whom any
duty or power relating to the administration or interpretation of the Plan may
be delegated, against any cost or expense (including legal fees, disbursements
and other related charges) or liability (including any sum paid in settlement of
a claim with the approval of the Board of Directors) arising out of any act or
omission to act in connection with the Plan, unless arising out of such person's
own fraud or willful misconduct.
8.9 UNFUNDED PLAN. Participants shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations under the Plan. Nothing contained in the Plan, and
no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company and
any Participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan.
The Plan is not intended to be subject to the Employee Retirement
Income Security Act of 1974, as amended (ERISA").
8.10 RIGHTS AS A STOCKHOLDER. No Participant shall have any rights
as a stockholder of the Company with respect to any Stock Units credited to his
Stock Unit Accounts.
8.11 GOVERNING LAW. This Plan shall be governed by and construed in
accordance with laws of the State of Delaware applicable to agreements made and
to be performed entirely within such state (without regard to any conflict of
law provisions that might indicate the applicability of any other laws).
8.12 EFFECTIVE DATE. This Plan shall become effective as of October
24, 2000.
8.13 DURATION. Subject to the provisions of Section 7, the Plan
shall remain in effect until the earlier of (a) all shares of Company Stock
subject to it shall have been allocated to Stock Unit Accounts in the form of
Stock Units and paid out to Participants, (b) the Board terminates the Plan, or
(c) 10 years from the effective date of the Plan.
54
<PAGE>
EXHIBIT 11
SEE NOTE C TO THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS FOR INFORMATION
RELATING TO THE CALCULATION OF BASIC EPS AND DILUTED EPS.
55
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>LIST OF SIGNIFICANT SUBSIDIARIES
<TEXT>
EXHIBIT 21
LIST OF SIGNIFICANT SUBSIDIARIES
Dyn Specialty Contracting, Inc.
MES Holding Corporation
SellCo Corporation
EMCOR Construction Holdings Services Inc.
EMCOR International, Inc.
EMCOR Mechanical/Electrical Services (East), Inc.
EMCOR Mechanical/Electrical Services (Midwest), Inc.
EMCOR Mechanical/Electrical Services (West), Inc.
EMCOR Mechanical/Electrical Services (South), Inc.
EMCOR (UK) Limited
Drake & Scull Group Ltd.
56
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>8
<FILENAME>0008.txt
<DESCRIPTION>CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<TEXT>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Company's previously filed
Registration Statement Filed Nos. 333-44369, 333-02819 and 333-75449.
Stamford, Connecticut
February 16, 2001
57
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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