SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or
15(d) of the Securities Exchange Act of 1934
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission file number 0-2315
EMCOR Group, Inc.
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(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)
301 Merritt Seven Corporate Park
Norwalk, Connecticut 06851-1060
- --------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
(203) 849-7800
- ---------------------------------
(Registrant's telephone number)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days. Yes X No __
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No __
Applicable Only To Corporate Issuers
Number of shares of Common Stock outstanding as of the close of business on
July 21, 2003: 14,990,715 shares.
EMCOR GROUP, INC.
INDEX
Page No.
PART I - Financial Information
Item 1 Financial Statements
Condensed Consolidated Balance Sheets -
as of June 30, 2003 and December 31, 2002 1
Condensed Consolidated Statements of Operations -
three months ended June 30, 2003 and 2002 3
Condensed Consolidated Statements of Operations -
six months ended June 30, 2003 and 2002 4
Condensed Consolidated Statements of Cash Flows -
six months ended June 30, 2003 and 2002 5
Condensed Consolidated Statements of Stockholders'
Equity and Comprehensive Income -
six months ended June 30, 2003 and 2002 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Results of Operations
and Financial Condition 16
Item 3 Quantitative and Qualitative Disclosures about Market Risk 28
Item 4 Controls and Procedures 29
PART II - Other Information
Item 1 Legal Proceedings 29
Item 4 Submission of Matters to a Vote of Security Holders 31
Item 6 Exhibits and Reports on Form 8-K 32
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- --------------------------------------------------------------------------------
June 30, December 31,
2003 2002
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 57,752 $ 93,103
Accounts receivable, net 986,307 964,968
Costs and estimated earnings in excess
of billings on uncompleted contracts 257,988 235,809
Inventories 11,944 12,271
Prepaid expenses and other 34,737 28,784
---------- ----------
Total current assets 1,348,728 1,334,935
Investments, notes and other long-term
receivables 28,999 24,642
Property, plant and equipment, net 69,832 70,750
Goodwill 293,889 290,412
Identifiable intangible assets, net 12,094 13,845
Other assets 20,945 23,907
---------- ----------
Total assets $1,774,487 $1,758,491
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
- --------------------------------------------------------------------------------
June 30, December 31,
2003 2002
(Unaudited)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under working capital credit line $ 166,800 $ 112,000
Current maturities of long-term debt and capital
lease obligations 588 22,276
Accounts payable 380,720 409,562
Billings in excess of costs and estimated
earnings on uncompleted contracts 379,432 363,092
Accrued payroll and benefits 128,037 159,416
Other accrued expenses and liabilities 115,791 113,529
---------- ----------
Total current liabilities 1,171,368 1,179,875
Long-term debt and capital lease obligations 689 905
Other long-term obligations 93,321 87,841
---------- ----------
Total liabilities 1,265,378 1,268,621
---------- ----------
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, 16,120,032 and 16,050,862 shares
issued, respectively 161 161
Capital surplus 315,007 312,393
Accumulated other comprehensive loss (91) (5,148)
Retained earnings 210,829 199,300
Treasury stock, at cost 1,129,317 and 1,131,985
shares, respectively (16,797) (16,836)
---------- ----------
Total stockholders' equity 509,109 489,870
---------- ----------
Total liabilities and stockholders' equity $1,774,487 $1,758,491
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data) (Unaudited)
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Three months ended June 30, 2003 2002
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Revenues $1,144,378 $986,399
Cost of sales 1,021,103 866,183
---------- --------
Gross profit 123,275 120,216
Selling, general and administrative expenses 106,638 93,292
---------- --------
Operating income 16,637 26,924
Interest expense, net 1,842 445
---------- --------
Income before income taxes 14,795 26,479
Income tax provision 6,522 11,651
---------- --------
Net income $ 8,273 $ 14,828
========== ========
Basic earnings per share $ 0.55 $ 1.00
========== ========
Diluted earnings per share $ 0.53 $ 0.96
========== ========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data) (Unaudited)
- --------------------------------------------------------------------------------
Six months ended June 30, 2003 2002
- --------------------------------------------------------------------------------
Revenues $2,205,408 $1,796,698
Cost of sales 1,965,364 1,587,096
---------- ----------
Gross profit 240,044 209,602
Selling, general and administrative expenses 215,813 170,147
---------- ----------
Operating income 24,231 39,455
Interest expense, net 3,644 28
---------- ----------
Income before income taxes 20,587 39,427
Income tax provision 9,058 17,348
---------- ----------
Net income $ 11,529 $ 22,079
========== ==========
Basic earnings per share $ 0.77 $ 1.49
========== ==========
Diluted earnings per share $ 0.74 $ 1.43
========== ==========
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) (Unaudited)
- -------------------------------------------------------------------------------
Six months ended June 30, 2003 2002
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 11,529 $ 22,079
Depreciation and amortization 10,347 7,305
Amortization of identifiable intangible assets 1,751 --
Other non-cash expenses 4,153 2,471
Changes in operating assets and liabilities,
excluding the effect of business acquired (80,927) 36,231
-------- --------
Net cash (used in) provided by operating activities (53,147) 68,086
-------- --------
Cash flows from investing activities:
Payments for acquisitions of businesses, net of
cash acquired, and related earn-out agreements (3,478) (164,649)
Proceeds from sale of assets 732 360
Purchase of property, plant and equipment (9,216) (9,039)
Net (disbursements) proceeds related to other
investments (4,357) 5,480
-------- --------
Net cash used in investing activities (16,319) (167,848)
-------- --------
Cash flows from financing activities:
Proceeds from working capital credit lines 878,198 50,000
Repayments of working capital credit lines (823,398) (50,000)
Net repayments for long-term debt (22,139) (1,578)
Net borrowings (repayments) for capital lease
obligations 235 (10)
Net proceeds from exercise of stock options 1,219 1,300
-------- --------
Net cash provided by (used in) financing activities 34,115 (288)
-------- --------
Decrease in cash and cash equivalents (35,351) (100,050)
Cash and cash equivalents at beginning of year 93,103 189,766
-------- --------
Cash and cash equivalents at end of period $ 57,752 $ 89,716
======== ========
Supplemental cash flow information:
Cash paid for:
Interest $ 3,297 $ 488
Income taxes $ 11,597 $ 22,130
Non-cash financing activities:
Debt assumed in acquisition $ -- $ 22,115
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(In thousands) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
Accumulated
other
Common Capital comprehensive Retained Treasury Comprehensive
Total stock surplus loss (1) earnings stock income
- ------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 2002 $421,933 $159 $307,636 $(5,424) $136,398 $(16,836)
Net income 22,079 -- -- -- 22,079 -- $22,079
Foreign currency translation
adjustments 2,697 -- -- 2,697 -- -- 2,697
-------
Comprehensive income -- -- -- -- -- -- $24,776
=======
Common stock issued under
stock option plans 1,300 0 1,300 -- -- --
Value of Restricted Stock
Units (2) 2,901 -- 2,901 -- -- --
-------- ---- -------- -------- -------- --------
Balance, June 30, 2002 $450,910 $159 $311,837 $(2,727) $158,477 $(16,836)
======== ==== ======== ======= ======== ========
Balance, January 1, 2003 $489,870 $161 $312,393 $(5,148) $199,300 $(16,836)
Net income 11,529 -- -- -- 11,529 -- $11,529
Foreign currency translation
adjustments 5,057 -- -- 5,057 -- -- 5,057
-------
Comprehensive income -- -- -- -- -- -- $16,586
=======
Common stock issued under
stock option plans 1,219 0 1,180 -- -- 39
Value of Restricted Stock
Units (3) 1,434 -- 1,434 -- -- --
-------- ---- -------- ------- -------- --------
Balance, June 30, 2003 $509,109 $161 $315,007 $ (91) $210,829 $(16,797)
======== ==== ======== ======= ======== ========
(1) Represents cumulative foreign currency translation adjustments and minimum
pension liability adjustments.
(2) Shares of common stock will be issued in respect of restricted stock units
granted pursuant to EMCOR's Executive Stock Bonus Plan. This amount
represents the value of restricted stock units at the date of grant plus
the related compensation expense recorded in 2002 due to an increase in
market value of the underlying common stock. As of October 2002, the terms
of the Executive Stock Bonus Plan were changed resulting in prospective
fixed plan accounting for both existing and new grants.
(3) Shares of common stock will be issued in respect of restricted stock units.
This amount represents the value of restricted stock units at the date of
grant.
See Notes to Condensed Consolidated Financial Statements.
EMCOR Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE A Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared
by EMCOR Group, Inc. and Subsidiaries ("EMCOR"), without audit, pursuant to the
interim period reporting requirements of Form 10-Q. Consequently, certain
information and note disclosures normally included in financial statements
prepared in conformity with accounting principles generally accepted in the
United States have been condensed or omitted. Readers of this report should
refer to the consolidated financial statements and the notes thereto included in
EMCOR's latest Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
In the opinion of EMCOR, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of a normal
recurring nature) necessary to present fairly the financial position of EMCOR
and the results of its operations. The results of operations for the three and
six month periods ended June 30, 2003 are not necessarily indicative of the
results to be expected for the year ending December 31, 2003.
On March 1, 2002, EMCOR acquired from Comfort Systems USA, Inc. ("CSU") a group
of companies (the "Acquired Comfort Companies"). On December 19, 2002, EMCOR
acquired all the capital stock of Consolidated Engineering Services, Inc.
("CES") from Archstone-Smith Operating Trust and others. EMCOR acquired two
additional companies during 2002. These acquisitions were accounted for by the
purchase method, and the purchase prices have been allocated to the assets
acquired and liabilities assumed, based upon the estimated fair values of these
assets and liabilities at their respective dates of acquisition. The purchase
price for CES is subject to adjustment based on the difference between the net
assets of CES on the closing date and an agreed upon preclosing date. The
purchase price allocation is also subject to finalization.
Certain reclassifications of prior year amounts have been made to conform to
current year presentation.
NOTE B New Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board (the "FASB") issued
Financial Accounting Standards Board Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No.
5, 57, and 107 and Rescission of FASB Interpretation No. 34" ("FIN 45" or the
"Interpretation"). FIN 45 clarifies the requirements of FASB Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies," relating
to the guarantor's accounting for, and disclosure of, the issuance of certain
types of guarantees. FIN 45 may require, that upon issuance of a guarantee, the
guarantor to recognize a liability for the fair value of the obligation it
assumes under that guarantee. The disclosure provisions of the Interpretation
are effective for financial statements of interim or annual periods that end
after December 15, 2002. The Interpretation's provisions for initial recognition
and measurement should be applied on a prospective basis to guarantees issued or
modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end. The guarantor's previous accounting for guarantees that were issued
before the date of FIN 45's initial application may not be revised or restated
to reflect the effect of the recognition and measurement provisions of the
Interpretation. EMCOR has determined that the adoption of FIN 45 will only
impact disclosures and that its accounting for guarantees is not impacted as of
June 30, 2003.
In January 2003, the FASB issued Statement of Financial Accounting Standards No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure"
("SFAS 148"). SFAS 148 amends FASB Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123
NOTE B New Accounting Pronouncements - (Continued)
to require prominent disclosures in both annual and interim financial statements
of the method of accounting for stock-based employee compensation and the effect
of the method used on reported results. SFAS 148 is effective for fiscal years
beginning after December 15, 2002 and was adopted by EMCOR for all periods
presented herein. EMCOR did not change to the fair value based method of
accounting for stock-based employee compensation; therefore, adoption of SFAS
148 will only impact disclosures, not the financial results, of EMCOR.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). FIN 46 expands upon and strengthens
existing accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of another entity. A
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. FIN 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entity's activities or is entitled to receive a majority of the entity's
residual returns or both. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. EMCOR is currently evaluating the effect that adoption of Fin 46 will have
on EMCOR's consolidated financial condition or results of operations.
In April 2003, the FASB issued Statement of Financial Accounting Standards No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" ("SFAS 149"). SFAS 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS 133. The new guidance
amends SFAS 133 for decisions made: (a) as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS 133,
(b) in connection with other Board projects dealing with financial instruments,
and (c) regarding implementation issues raised in relation to the application of
the definition of a derivative. The amendments set forth in SFAS 149 improve
financial reporting by requiring that contracts with comparable characteristics
be accounted for similarly. SFAS 149 is generally effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. It is not expected that the provisions of SFAS
149 will have a material impact on EMCOR's consolidated financial position,
results of operations or cash flows.
In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity" ("SFAS 150"). SFAS 150 requires certain financial
instruments that embody obligations of the issuer and have characteristics of
both liabilities and equity to be classified as liabilities. The provisions of
SFAS 150 are effective for financial instruments entered into or modified after
May 31, 2003 and to all other instruments that exist as of the beginning of the
first interim financial reporting period beginning after June 15, 2003. EMCOR
does not have any financial instruments that meet the provisions of SFAS 150;
therefore, adopting the provisions of SFAS 150 is not expected to have a
material impact on EMCOR's consolidated financial position, results of
operations or cash flows.
NOTE C Earnings Per Share
Calculation of Basic and Diluted Earnings per share
The following tables summarize EMCOR's calculation of Basic and Diluted Earnings
per Share ("EPS") for the three and six month periods ended June 30, 2003 and
2002:
Three months ended
June 30, 2003
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------------------------------------------
Basic EPS
Income available to common
stockholders $8,273,000 14,988,836 $0.55
=====
Effect of Dilutive Securities:
Options -- 517,963
---------- ----------
Diluted EPS $8,273,000 15,506,799 $0.53
========== ========== =====
Six months ended
June 30, 2003
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------------------------------------------
Basic EPS
Income available to common
stockholders $11,529,000 14,959,666 $0.77
=====
Effect of Dilutive Securities:
Options -- 516,996
----------- ----------
Diluted EPS $11,529,000 15,476,662 $0.74
=========== ========== =====
NOTE C Earnings Per Share - (Continued)
Three months ended
June 30, 2002
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------------------------------------------
Basic EPS
Income available to common
stockholders $14,828,000 14,863,074 $1.00
=====
Effect of Dilutive Securities:
Options -- 628,228
----------- ----------
Diluted EPS $14,828,000 15,491,302 $0.96
=========== ========== =====
Six months ended
June 30, 2002
----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------------------------------------------
Basic EPS
Income available to common
stockholders $22,079,000 14,846,079 $1.49
=====
Effect of Dilutive Securities:
Options -- 605,216
----------- ----------
Diluted EPS $22,079,000 15,451,295 $1.43
=========== ========== =====
There were options to purchase 219,403 shares of common stock outstanding during
both the three and six month periods ended June 30, 2003, which options were
anti-dilutive and required to be excluded from the calculation of diluted EPS.
There were no anti-dilutive stock options that were required to be excluded from
the calculation of diluted EPS for the three and six month periods ended June
30, 2002.
NOTE D Valuation of Stock Option Grants
At June 30, 2003, EMCOR had eight stock-based compensation plans and programs.
EMCOR applies Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related interpretations in accounting for
its stock options. Accordingly, no compensation cost has been recognized in the
accompanying Condensed Consolidated Statements of Operations for the three and
six month periods ended June 30, 2003 and 2002 in respect of stock options
granted during those periods inasmuch as EMCOR grants stock options at fair
market value. Had compensation cost for these options been determined consistent
with SFAS 123 and SFAS 148, EMCOR's net income, basic earnings per share ("Basic
EPS") and diluted earnings per share ("Diluted EPS") would have been reduced
from the "as reported amounts" below to the "pro forma amounts" below for the
three and six months ended June 30, 2003 and 2002 (in thousands, except per
share amounts):
For the three months For the six months
ended June 30, ended June 30,
-------------------- ------------------
2003 2002 2003 2002
---- ---- ---- ----
Net income:
As reported..................................................... $8,273 $14,828 $11,529 $22,079
Less: Total stock-based compensation expense determined
under a fair value based method, net of related tax effects.. 321 422 633 2,548
------ ------- ------- -------
Pro Forma....................................................... $7,952 $14,406 $10,896 $19,531
====== ======= ======= =======
Basic EPS:
As reported..................................................... $ 0.55 $ 1.00 $ 0.77 $ 1.49
Pro Forma....................................................... $ 0.53 $ 0.97 $ 0.73 $ 1.32
Diluted EPS:
As reported..................................................... $ 0.53 $ 0.96 $ 0.74 $ 1.43
Pro Forma....................................................... $ 0.51 $ 0.93 $ 0.70 $ 1.26
Common Stock
As of June 30, 2003 and December 31, 2002, 14,990,715 and 14,918,877 shares of
EMCOR common stock were outstanding, respectively.
NOTE E Long-Term Debt
Long-term debt in the accompanying Condensed Consolidated Balance Sheets
consisted of the following amounts (in thousands):
June 30, December 31,
2003 2002
-------- ------------
Notes Payable at 10.0%, due 2003 $ -- $21,815
Capitalized lease obligations 586 351
Other 691 1,015
------ -------
1,277 23,181
Less: current maturities 588 22,276
------ -------
$ 689 $ 905
====== =======
The Notes Payable of $21.8 million at December 31, 2002 were notes made by CSU
to former owners of certain Acquired Comfort Companies, which notes were assumed
by EMCOR in connection with the acquisition of the Acquired Comfort Companies.
The Notes Payable accrued interest at 10.0% per annum, and they were paid in
full in April 2003.
NOTE F Segment Information
EMCOR has the following reportable segments which provide services associated
with the design, integration, installation, startup, operation and maintenance
of various systems: United States electrical construction and facilities
services (systems for generation and distribution of electrical power; lighting
systems; low voltage systems such as fire alarm, security, communications and
process control systems; and voice and data systems), United States mechanical
construction and facilities services (systems for heating, ventilation, air
conditioning, refrigeration and clean room process ventilation systems; and
plumbing, process and high-purity piping systems), United States facilities
services, Canada construction and facilities services, United Kingdom
construction and facilities services, and Other international construction and
facilities services. The segment "United States facilities services" principally
consists of those operations which primarily provide a portfolio of services
needed to support the operation and maintenance of customers' facilities (mobile
operation and maintenance services, site-based operation and maintenance
services, call center services, facility planning and consulting and energy
management programs) which services are not related to customer' construction
programs. The Canada, United Kingdom and Other international segments perform
electrical construction, mechanical construction and facilities 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 during the periods presented).
The following tables present information about industry segments and geographic
areas. The tables also present pro forma revenues and operating income as if the
2002 acquisitions had occurred at the beginning of fiscal 2002. Certain
reclassifications of prior year amounts have been made to conform to current
year segment presentation. The unaudited pro forma revenues and operating income
are not necessarily indicative of future operating results (in thousands):
For the three months ended June 30,
As Reported Pro Forma
--------------------- ----------
2003 2002 2002
---------- -------- ----------
Revenues from unrelated entities:
United States electrical construction and facilities services $ 322,035 $289,275 $ 289,465
United States mechanical construction and facilities services 426,088 437,873 450,269
United States facilities services 164,777 52,813 148,854
---------- -------- ----------
Total United States operations 912,900 779,961 888,588
Canada construction and facilities services 91,264 84,132 84,132
United Kingdom construction and facilities services 140,214 122,306 122,306
Other international construction and facilities services -- -- --
---------- -------- ----------
Total worldwide operations $1,144,378 $986,399 $1,095,026
========== ======== ==========
Total revenues:
United States electrical construction and facilities services $ 328,176 $291,448 $ 291,638
United States mechanical construction and facilities services 428,236 441,162 453,558
United States facilities services 165,174 53,209 149,250
Less intersegment revenues (8,686) (5,858) (5,858)
---------- -------- ----------
Total United States operations 912,900 779,961 888,588
Canada construction and facilities services 91,264 84,132 84,132
United Kingdom construction and facilities services 140,214 122,306 122,306
Other international construction and facilities services -- -- --
---------- -------- ----------
Total worldwide operations $1,144 378 $986,399 $1,095,026
========== ======== ==========
NOTE F Segment Information - (Continued)
For the six months ended June 30,
As Reported Pro Forma
----------------------- ----------
2003 2002 2002
---------- ---------- ----------
Revenues from unrelated entities:
United States electrical construction and facilities services $ 575,909 $ 577,013 $ 579,055
United States mechanical construction and facilities services 842,591 745,043 863,360
United States facilities services 333,189 104,617 288,314
---------- ---------- ----------
Total United States operations 1,751,689 1,426,673 1,730,729
Canada construction and facilities services 184,326 138,651 138,651
United Kingdom construction and facilities services 269,393 231,374 231,374
Other international construction and facilities services -- -- --
---------- ---------- ----------
Total worldwide operations $2,205,408 $1,796,698 $2,100,754
========== ========== ==========
Total revenues:
United States electrical construction and facilities services $ 592,075 $ 581,747 $ 583,789
United States mechanical construction and facilities services 845,197 751,155 869,472
United States facilities services 334,266 105,475 289,172
Less intersegment revenues (19,849) (11,704) (11,704)
---------- ---------- ----------
Total United States operations 1,751,689 1,426,673 1,730,729
Canada construction and facilities services 184,326 138,651 138,651
United Kingdom construction and facilities services 269,393 231,374 231,374
Other international construction and facilities services -- -- --
---------- ---------- ----------
Total worldwide operations $2,205,408 $1,796,698 $2,100,754
========== ========== ==========
For the three months ended June 30,
As Reported Pro Forma
----------------------- ----------
2003 2002 2002
---------- ---------- ----------
Operating income (loss):
United States electrical construction and facilities services $ 16,156 $ 14,507 $ 14,530
United States mechanical construction and facilities services 6,243 19,170 19,588
United States facilities services 4,566 301 6,852
---------- ---------- ----------
Total United States operations 26,965 33,978 40,970
Canada construction and facilities services 1,145 693 693
United Kingdom construction and facilities services (2,862) 689 689
Other international construction and facilities services (272) 206 206
Corporate administration (8,339) (8,642) (8,642)
---------- ---------- ----------
Total worldwide operations 16,637 26,924 33,916
Other corporate items:
Interest expense (2,031) (823) (2,520)
Interest income 189 378 381
---------- ---------- ----------
Income before income taxes $ 14,795 $ 26,479 $ 31,777
========== ========== ==========
For the six months ended June 30,
As Reported Pro Forma
----------------------- ----------
2003 2002 2002
---------- ---------- ----------
Operating income (loss):
United States electrical construction and facilities services $ 29,110 $ 30,870 $ 31,172
United States mechanical construction and facilities services 10,586 25,929 27,470
---------- ---------- ----------
Total United States operations 46,436 56,250 68,744
Canada construction and facilities services 1,766 235 235
United Kingdom construction and facilities services (7,337) (309) (309)
Other international construction and facilities services (115) (95) (95)
Corporate administration (16,519) (16,626) (16,626)
---------- ---------- ----------
Total worldwide operations 24,231 39,455 51,949
Other corporate items:
Interest expense (4,028) (1,340) (4,573)
Interest income 384 1,312 1,317
---------- ---------- ----------
Income before income taxes $ 20,587 $ 39,427 $ 48,693
========== ========== ==========
June 30, Dec. 31,
2003 2002
---------- ----------
Total assets:
United States electrical construction and facilities services $ 346,537 $ 308,752
United States mechanical construction and facilities services 793,896 810,498
United States facilities services 286,856 292,218
---------- ----------
Total United States operations 1,427,289 1,411,468
Canada construction and facilities services 96,470 77,727
United Kingdom construction and facilities services 183,129 191,563
Other international construction and facilities services 4,201 5,071
Corporate administration 63,398 72,662
---------- ----------
Total worldwide operations $1,774,487 $1,758,491
========== ==========
NOTE G Pro Forma Results of Operations
The following tables present pro forma results of operations including all
companies acquired during 2002. The results of operations presented assume the
acquisitions had occurred at the beginning of fiscal 2002. The pro forma results
of operations are not necessarily indicative of the results of operations had
the acquisitions actually occurred at the beginning of fiscal 2002, nor is it
necessarily indicative of future operating results (in thousands, except per
share data):
NOTE G Pro Forma Results of Operations - (Continued)
Adjustments to Arrive at Pro Forma Results of Operations
--------------------------------------------------------
For the three months ended
June 30, 2002
---------------------------------------------------------
EMCOR Other
as Reported CES (1) Acquisitions(1) Pro Forma
---------------------------------------------------------
Revenues $986,399 $102,265 $6,362 $1,095,026
Operating income $ 26,924 $ 6,778 $ 214 $ 33,916
Interest income (expense), net $ (445) $ (1,697) $ 3 $ (2,139)
Income before income taxes $ 26,479 $ 5,081 $ 217 $ 31,777
Net income $ 14,828 $ 2,845 $ 122 $ 17,795
Basic earnings per share $ 1.00 $ 0.19 $ 0.01 $ 1.20
Diluted earnings per share $ 0.96 $ 0.18 $ 0.01 $ 1.15
For the six months ended
June 30, 2002
---------------------------------------------------------------------
Acquired
EMCOR Comfort Other
as Reported Companies(2) CES(3) Acquisitions(3) Pro Forma
--------------------------------------------------------------------
Revenues $1,796,698 $94,084 $196,572 $ 13,400 $2,100,754
Operating income $ 39,455 $ (40) $ 11,161 $ 1,373 $ 51,949
Interest income (expense), net $ (28) $ 162 $ (3,395) $ 5 $ (3,256)
Income before income taxes $ 39,427 $ 122 $ 7,766 $ 1,378 $ 48,693
Net income $ 22,079 $ 68 $ 4,349 $ 772 $ 27,268
Basic earnings per share $ 1.49 $ 0.01 $ 0.29 $ 0.05 $ 1.84
Diluted earnings per share $ 1.43 $ 0.00 $ 0.28 $ 0.05 $ 1.76
The pro forma results of operations, for segment information, is included in
Note F Segment Information.
(1) Adjustments to arrive at pro forma results of operations for the three
months ended June 30, 2002 represent results of operations from April 1,
2002 through June 30, 2002.
(2) Adjustments to arrive at pro forma results of operations for the six months
ended June 30, 2002 represent results of operations from January 1, 2002
through the acquisition date of March 1, 2002.
(3) Adjustments to arrive at pro forma results of operations for the six months
ended June 30, 2002 represent results of operations from January 1, 2002
through June 30, 2002.
NOTE H Legal Proceedings
See Part II - Other Information, Item 1 - Legal Proceedings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Highlights
EMCOR Group, Inc.'s ("EMCOR") revenues for the three months ended June 30, 2003
and 2002 were $1,144.4 million and $986.4 million, respectively. Net income for
the three months ended June 30, 2003 was $8.3 million compared to net income of
$14.8 million for the three months ended June 30, 2002. Diluted Earnings Per
Share ("Diluted EPS") was $0.53 per share for the three months ended June 30,
2003 compared to Diluted EPS of $0.96 per share for the three months ended June
30, 2002.
Revenues for the six months ended June 30, 2003 and 2002 were $2,205.4 million
and $1,796.7 million, respectively. Net income for the six months ended June 30,
2003 and 2002 was $11.5 million and $22.1 million, respectively. Diluted EPS was
$0.74 per share for the six months ended June 30, 2003 compared to $1.43 per
share for the same period in the prior year.
On March 1, 2002, EMCOR acquired from Comfort Systems USA, Inc. ("CSU") a group
of companies (the "Acquired Comfort Companies"). On December 19, 2002, EMCOR
acquired all the capital stock of Consolidated Engineering Services, Inc.
("CES") from Archstone-Smith Operating Trust and others. EMCOR acquired two
additional companies during 2002. These acquisitions were accounted for by the
purchase method, and the purchase prices have been allocated to the assets
acquired and liabilities assumed, based upon the estimated fair values of these
assets and liabilities at their respective dates of acquisition. The purchase
price for CES is subject to adjustment based on the difference between the net
assets of CES on the closing date and an agreed upon preclosing date. The
purchase price allocation is also subject to finalization.
Operating Segments
EMCOR has the following reportable segments which provide services associated
with the design, integration, installation, startup, operation and maintenance
of various systems: United States electrical construction and facilities
services (systems for generation and distribution of electrical power; lighting
systems; low voltage systems such as fire alarm, security, communications and
process control systems; and voice and data systems), United States mechanical
construction and facilities services (systems for heating, ventilation, air
conditioning, refrigeration and clean room process ventilation systems; and
plumbing, process and high-purity piping systems), United States facilities
services, Canada construction and facilities services, United Kingdom
construction and facilities services, and Other international construction and
facilities services. The segment "United States facilities services" principally
consists of those operations which primarily provide a portfolio of services
needed to support the operation and maintenance of customers' facilities (mobile
operation and maintenance services, site-based operation and maintenance
services, call center services, facility planning and consulting and energy
management programs) which services are not related to customers' construction
programs. The Canada, United Kingdom and Other international segments perform
electrical construction, mechanical construction and facilities 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 during the periods presented).
Results of Operations
The results presented reflect certain reclassifications of prior period amounts
to conform to current year presentation.
Revenues
The following table presents EMCOR's operating segment revenues and their
respective percentage of total revenues (in thousands, except for percentages):
For the three months ended June 30,
-----------------------------------
% of % of
2003 Total 2002 Total
---- ----- ---- -----
Revenues:
United States electrical construction and facilities services $ 322,035 28% $ 289,275 29%
United States mechanical construction and facilities services 426,088 37% 437,873 44%
United States facilities services 164,777 14% 52,813 5%
---------- ----------
Total United States operations 912,900 80% 779,961 79%
Canada construction and facilities services 91,264 8% 84,132 9%
United Kingdom construction and facilities services 140,214 12% 122,306 12%
Other international construction and facilities services -- -- -- --
---------- ----------
Total worldwide operations $1,144,378 100% $ 986,399 100%
========== ==========
For the six months ended June 30,
---------------------------------
% of % of
2003 Total 2002 Total
---- ----- ---- -----
Revenues:
United States electrical construction and facilities services $ 575,909 26% $ 577,013 32%
United States mechanical construction and facilities services 842,591 38% 745,043 41%
United States facilities services 333,189 15% 104,617 6%
---------- ----------
Total United States operations 1,751,689 79% 1,426,673 79%
Canada construction and facilities services 184,326 8% 138,651 8%
United Kingdom construction and facilities services 269,393 12% 231,374 13%
Other international construction and facilities services -- -- -- --
---------- ----------
Total worldwide operations $2,205,408 100% $1,796,698 100%
========== ==========
EMCOR's revenues increased $158.0 million for the three months ended June 30,
2003 compared to the second quarter of 2002, of which $114.4 million was
attributable to companies acquired in 2002 and the balance was attributable to
EMCOR's other subsidiaries. Revenues increased $408.7 million for the six months
ended June 30, 2003 compared to the six months ended June 30, 2002, of which
$315.0 million was attributable to companies acquired in 2002 and the balance to
EMCOR's other subsidiaries. Excluding the impact of 2002 acquisitions, the
increase in revenues of $43.6 million for the three month period ended June 30,
2003 compared to the same period in the prior year was principally due to an
increase in the number of longer-term public transportation infrastructure,
power generation and healthcare construction projects and an increase in the
number of site-based facilities services operation and maintenance contracts,
partially offset by a reduction in new construction projects and discretionary
spending, typically associated with projects of less than six months duration
related to improvements, enhancements and repairs of facilities, in the
commercial office and industrial markets. In addition to these factors, the
revenues increase of $93.7 million for the six months ended June 30, 2003
compared to the same period in the prior year was partially offset by a decrease
in private sector fast-track and development projects.
Revenues of United States electrical construction and facilities services
business units for the three months ended June 30, 2003 were $322.0 million
compared to $289.3 million for the three months ended June 30, 2002. Revenues of
this segment for the six months ended June 30, 2003 were $575.9 million compared
to $577.0 million in the same period a year earlier. The revenues for the three
and six month periods ended June 30, 2003, when compared to the same periods in
2002, reflected an increase in revenues from transportation infrastructure
programs, power generation and healthcare projects, offset by a reduction in new
construction projects and discretionary spending in the commercial office and
industrial markets attributable to the economic slow-down. The six month period
ended June 30, 2003 also reflected the absence of fast-track projects.
Revenues of United States mechanical construction and facilities services
business units for the three months ended June 30, 2003 were $426.1 million
compared to $437.9 million for the three months ended June 30, 2002. Revenues of
this segment for the six months ended June 30, 2003 were $842.6 million compared
to $745.0 million in the same period in the prior year. The decrease in revenues
for the three months ended June 30, 2003 compared to the same period in the
prior year was due to a reduction in discretionary spending in the commercial
office and industrial markets due to the economic slow-down, as well as a
reduction in demand for services as a result of cooler than normal weather
conditions in the United States. The increase in revenues of $97.5 million for
the six month period was primarily attributable to revenues from companies
acquired in 2002.
United States facilities services revenues for the three months ended June 30,
2003 were $164.8 million compared to $52.8 million for the same three months in
2002. Revenues for the six months ended June 30, 2003 were $333.2 million
compared to $104.6 million in the same period in 2002. The revenues increases of
$112.0 million and $228.6 million for the three and six month periods,
respectively, were primarily attributable to revenues of $103.5 million and
$212.3 million, respectively, from companies acquired in 2002 and the balance to
increases in site-based facilities operation and maintenance services performed
by EMCOR's other subsidiaries, partially offset by a reduction in demand for
mobile services related to cooler than normal weather conditions in the United
States and in discretionary spending due to the economic slow-down.
Revenues of Canada construction and facilities services for the three months
ended June 30, 2003 were $91.3 million compared to $84.1 million for the three
months ended June 30, 2002. Revenues for the six months ended June 30, 2003 were
$184.3 million compared to $138.7 million in the same period in the prior year.
The increase in revenues for both the three and six month periods was primarily
attributable to continuing work on longer-term power generation construction
projects.
Revenues of United Kingdom construction and facilities services business units
for the three months ended June 30, 2003 were $140.2 million compared to $122.3
million for the three months ended June 30, 2002. Revenues for the six months
ended June 30, 2003 were $269.4 million compared to $231.4 million in the same
period in the prior year. The increase in revenues for both the three and six
month periods was principally attributable to the start-up of recently awarded
contracts in the facilities services and transportation infrastructure
construction markets.
Other international construction and facilities services activities consist of
EMCOR's operations primarily in the Middle East and South Africa. All of the
current projects in these markets are being performed by joint ventures in which
EMCOR has less than majority ownership. Accordingly, the results of these joint
venture operations are accounted for under the equity method of accounting, and
revenues attributable to such joint ventures are not reflected as revenues in
the consolidated financial statements. EMCOR continues to selectively pursue new
business in these markets and Continental Europe; however, the availability of
opportunities has been significantly reduced as a result of local economic
factors.
Cost of sales and Gross profit
The following table presents EMCOR's cost of sales, gross profit, and gross
profit as a percentage of revenues (in thousands, except for percentages):
For the three months ended June 30,
-----------------------------------
2003 2002
---- ----
Cost of sales $1,021,103 $ 866,183
Gross profit $ 123,275 $ 120,216
Gross profit, as a percentage of revenues 10.8% 12.2%
For the six months ended June 30,
-----------------------------------
2003 2002
---- ----
Cost of sales $1,965,364 $1,587,096
Gross profit $ 240,044 $ 209,602
Gross profit, as a percentage of revenues 10.9% 11.7%
Gross profit (revenues less cost of sales) increased $3.1 million for the three
months ended June 30, 2003 to $123.3 million compared to $120.2 million gross
profit for the three months ended June 30, 2002. As a percentage of revenues,
gross profit decreased to 10.8% from 12.2% for the three months ended June 30,
2003 and 2002, respectively. Gross profit for the six months ended June 30, 2003
of $240.0 million was $30.4 million higher than the $209.6 gross profit in the
same period last year. As a percentage of revenues, gross profit decreased to
10.9% from 11.7% for the six months ended June 30, 2003 and 2002, respectively.
The increase in gross profit in both the three and six month 2003 periods, was
primarily due to gross profit of $22.4 million and $54.2 million, respectively,
from companies acquired in 2002. This increase was partially offset by a
decrease in gross profit for the three and six months ended June 30, 2003
compared to the same periods in the prior year primarily attributable to losses
from construction activity in the United Kingdom and a reduction in gross profit
from certain mechanical construction operations. The decrease in gross profit as
a percentage of revenues was attributable to a change in the mix of work
performed with a higher percentage of longer-term (over one year duration) new
construction projects in the institutional, healthcare and transportation
sectors and a lower percentage of work in the commercial sector, particularly
fast-track (less than six months) office construction and renovation work. New
construction projects are typically characterized by lower gross profits than
fast-track commercial work. In addition, gross profit declines were also
attributable to a decrease in discretionary spending and competitive pressures
due to the economic slow-down. These decreases were partially offset by an
increase in facilities services work which is generally performed at gross
margins higher than construction work. The revenue for such work increased over
the prior year due to 2002 acquisitions.
Selling, general and administrative expenses
The following table presents EMCOR's selling, general and administrative
expenses, and selling, general and administrative expenses as a percentage of
revenues (in thousands, except for percentages):
For the three months ended June 30,
-----------------------------------
2003 2002
---- ----
Selling, general and administrative expenses $106,638 $ 93,292
Selling, general and administrative expenses,
as a percentage of revenues 9.3% 9.5%
For the six months ended June 30,
---------------------------------
2003 2002
---- ----
Selling, general and administrative expenses $215,813 $170,147
Selling, general and administrative expenses,
as a percentage of revenues 9.8% 9.5%
Selling, general and administrative expenses for the three months ended June 30,
2003 increased $13.3 million to $106.6 million compared to $93.3 million for the
three months ended June 30, 2002. Selling, general and administrative expenses
as a percentage of revenues were 9.3% for the three months ended June 30, 2003,
compared to 9.5% for the three months ended June 30, 2002. Selling, general and
administrative expenses for the six months ended June 30, 2003 were $215.8
million, an increase of $45.7 million compared to $170.1 million for the six
months ended June 30, 2002. Selling, general and administrative expenses as a
percentage of revenues were 9.8% for the six months ended June 30, 2003,
compared to 9.5% for the six months ended June 30, 2002. Included in selling,
general and administrative expenses was amortization expense of identifiable
intangible assets associated with acquisitions of $0.9 million and $1.8 million
for the three and six month periods ended June 30, 2003, respectively. Excluding
2002 acquisitions, selling, general and administrative expenses (including costs
of acquisitions integration) were approximately $89.2 million (8.6% of revenues)
and $166.8 million (8.8% of revenues) for the three and six month periods ended
June 30, 2003, respectively, compared to $93.3 million (9.5% of revenues) and
$170.1 million (9.5% of revenues) for the same three and six month periods ended
June 30, 2002. The decrease in selling, general and administrative expenses,
excluding the 2002 acquired companies, was attributable to a managed reduction
of both variable and fixed expenses across EMCOR as a result of changes in its
business activities.
Operating income
The following table presents EMCOR's operating income and operating income as a
percentage of segment revenues (in thousands, except for percentages):
For the three months ended June 30,
-----------------------------------
% of % of
Segment Segment
2003 Revenues 2002 Revenues
---- -------- ---- --------
Operating income (loss):
United States electrical construction and facilities services $16,156 5.0% $14,507 5.0%
United States mechanical construction and facilities services 6,243 1.5% 19,170 4.4%
United States facilities services 4,566 2.8% 301 0.6%
------- -------
Total United States operations 26,965 3.0% 33,978 4.4%
Canada construction and facilities services 1,145 1.3% 693 0.8%
United Kingdom construction and facilities services (2,862) 689 0.6%
Corporate administration (8,339) (8,642)
------- -------
Total worldwide operations 16,637 1.5% 26,924 2.7%
Other corporate items:
Interest expense (2,031) (823)
Interest income 189 378
------- -------
Income before income taxes $14,795 $26,479
======= =======
For the six months ended June 30,
---------------------------------
% of % of
Segment Segment
2003 Revenues 2002 Revenues
---- -------- ---- --------
Operating income (loss):
United States electrical construction and facilities services $29,110 5.1% $30,870 5.4%
United States mechanical construction and facilities services 10,586 1.3% 25,929 3.5%
United States facilities services 6,740 2.0% (549)
------- -------
Total United States operations 46,436 2.7% 56,250 3.9%
Canada construction and facilities services 1,766 1.0% 235 0.2%
United Kingdom construction and facilities services (7,337) (309)
Other international construction and facilities services (115) (95)
Corporate administration. (16,519) (16,626)
------- -------
Total worldwide operations 24,231 1.1% 39,455 2.2%
Other corporate items:
Interest expense (4,028) (1,340)
Interest income 384 1,312
------- -------
Income before income taxes $20,587 $39,427
======= =======
EMCOR had operating income of $16.6 million for the three months ended June 30,
2003 compared with operating income of $26.9 million for the three months ended
June 30, 2002. Operating income was $24.2 million and $39.5 million for the six
months ended June 30, 2003 and 2002, respectively. The decrease of $10.3 million
and $15.2 million in operating income for the three and six month periods ended
June 30, 2003 as compared to the same periods in 2002 was due primarily to
operating losses in the United Kingdom, as well as a reduction in operating
income from certain United States mechanical construction operations, due to a
reduction in discretionary spending related to the economic slow-down, a change
in the type of work performed to longer-term construction projects that
generally has produced lower gross profits than fast-track commercial work and a
reduction in demand for services as a result of cooler than normal weather
conditions in the United States. These conditions were partially offset by
operating income attributable to 2002 acquisitions, an increase in
transportation infrastructure, healthcare and institutional projects, and an
increase in certain other longer-term projects in both the United States and
Canada, as well as operating income from the United States facilities services
markets.
United States electrical construction and facilities services operating income
for the three months ended June 30, 2003 was $16.2 million or 5.0% of revenues,
compared to $14.5 million or 5.0% of revenues for the three months ended June
30, 2002. Operating income for the six months ended June 30, 2003 was $29.1
million, or 5.1% of revenues, compared to $30.9 million, or 5.4% of revenues,
for the six months ended June 30, 2002. The operating income increase of $1.7
million for the three months ended June 30, 2003 compared to the prior year was
primarily attributable to certain transportation infrastructure projects and to
close-outs and continuing work on power generation projects. The operating
income decrease of $1.8 million for the six month period ended June 30, 2003
compared to the same period in the prior year was attributable to a reduction in
discretionary spending in the commercial office and industrial markets due to
the economic slow-down, partially offset by positive operating income
contributed by the transportation infrastructure and power generation projects.
United States mechanical construction and facilities services operating income
for the three months ended June 30, 2003 was $6.2 million or 1.5% of revenues,
compared to $19.2 million or 4.4% of revenues for the three months ended June
30, 2002. Operating income for the six months ended June 30, 2003 was $10.6
million, or 1.3% of revenues, compared to $25.9 million, or 3.5% of revenues,
for the six months ended June 30, 2002. The decrease in operating income for
both the three and six month periods ended June 30, 2003 compared to the
comparable prior year periods was primarily attributable to certain construction
operations which experienced reductions in operating income due to a reduction
in discretionary spending related to the economic slow-down, a change in the
type of work performed to longer-term construction projects that generally has
produced lower gross profits than fast-track commercial work and a reduction in
the demand for services as a result of cooler than normal weather conditions in
the United States.
United States facilities services operating income was $4.6 million for the
three months ended June 30, 2003 compared to operating income of $0.3 million
for the three months ended June 30, 2002. For the six months ended June 30, 2003
and 2002, operating income was $6.7 million and operating losses were $0.5
million, respectively. The increase in operating income for the 2003 three and
six month periods compared to the first and second quarter of 2002 was
attributable to operating income of $4.1 million and $6.1 million, respectively,
earned by companies acquired in 2002 and to operating income from site-based
facilities management contracts in this segment, partially offset by a decrease
in mobile maintenance services related to the cooler than normal weather
conditions in the United States and a decrease in discretionary spending related
to the economic slow-down, as well as certain costs related to the integration
of CES.
Canada construction and facilities services operating income was $1.1 million
for the three months ended June 30, 2003, compared to $0.7 million for the three
months ended June 30, 2002. For the six months ended June 30, 2003, operating
income was $1.8 million compared to operating income of $0.2 million for the
same period in the prior year. The increase in operating income for both the
three and six month periods was primarily due to operating income earned on
continuing longer-term power generation construction projects.
United Kingdom construction and facilities services operating losses for the
three months ended June 30, 2003 were $2.9 million compared to operating income
of $0.7 million for the same period in the prior year. For the six months ended
June 30, 2003, operating losses were $7.3 million compared to an operating loss
of $0.3 million for the same period in the prior year. The increase in operating
loss for the three and six months ended June 30, 2003 compared to the same
periods in 2002 was attributable to unfavorable performance, settlements and
close-outs on certain projects which offset operating income earned on certain
projects in the construction and facilities services markets.
Other international construction and facilities services operating losses were
$0.3 million for the three months ended June 30, 2003 compared to operating
income of $0.2 million for three months ended June 30, 2002. For the six months
ended June 30, 2003 and 2002, operating losses were $0.1 million for both
periods. EMCOR continues to selectively pursue new business in the Middle East
and South Africa as well as Continental Europe; however, the availability of
opportunities has been significantly reduced as a result of local economic
factors.
General corporate expense for the three months ended June 30, 2003 was $8.3
million compared to $8.6 million for the three months ended June 30, 2002. For
the six months ended June 30, 2003, general corporate expense was $16.5 million
compared to $16.6 million for the same period in the prior year. The decrease in
general corporate expenses was primarily due to cost reductions attributable to
reduced variable expenditures, offset by increased operations support activities
related to the management and integration of more than 30 companies acquired
during 2002.
Interest expense for the three months ended June 30, 2003 and 2002 was $2.0
million and $0.8 million, respectively. Interest expense for the six months
ended June 30, 2003 and 2002 was $4.0 million and $1.3 million, respectively.
The increase in interest expense for both the three and six month periods was
primarily due to $156.0 million of borrowings under the working capital credit
line for the acquisition of CES on December 19, 2002 and to increased working
capital needs related to a shift to increased revenues from longer-term new
construction projects which typically require working capital during their
inception until initial billing milestones are achieved. Interest income
decreased $0.2 million and $0.9 million for the three and six months ended June
30, 2003, respectively, compared to the same periods in 2002 due to lower cash
on hand related to cash used to pay a portion of the CES acquisition price in
December 2002 and cash used in operating activities.
The income tax provision decreased to $6.5 million for the three months ended
June 30, 2003 compared to $11.7 million for the same period in 2002. For the six
months ended June 30, 2003, the income tax provision was $9.1 million versus
$17.3 million for the six months ended June 30, 2002. The decreases in this
provision compared to the prior periods were primarily due to reduced income
before taxes. The effective income tax rate was approximately 44% for both the
three and six months ended June 30, 2003 and 2002.
EMCOR's contract backlog was $3.2 billion at June 30, 2003 and $2.9 billion at
December 31, 2002. The $0.3 billion increase in backlog was primarily due to an
increase in backlog for the United States and the United Kingdom.
EMCOR's contract backlog at June 30, 2003 was $3.2 billion compared to $2.8
billion at June 30, 2002. The increase was primarily attributable to backlog of
$0.2 billion for CES subsidiaries acquired in 2002 and net growth in backlog of
$0.2 billion from contracts awarded to other subsidiaries in the United States,
the United Kingdom and Canada.
Liquidity and Capital Resources
The following table presents EMCOR's net cash provided by (used in) operating
activities, investing activities and financing activities (in thousands):
For the six months ended
June 30,
------------------------
2003 2002
---- ----
Net cash (used in) provided by operating activities $(53,147) $ 68,086
Net cash used in investing activities $(16,319) $(167,848)
Net cash provided by (used in) financing activities $ 34,115 $ (288)
EMCOR's consolidated cash balance decreased by approximately $35.4 million from
$93.1 million at December 31, 2002 to $57.8 million at June 30, 2003. Net cash
used in operating activities of $53.1 million for the six months ended June 30,
2003 was a $121.2 million decrease from the net cash provided by operating
activities of $68.1 million in the same period last year. The increase in net
cash used in operating activities was primarily attributable to a net increase
in working capital requirements related to a decrease in accounts payable and
contracts in progress, partially offset by a decrease in accounts receivable.
Net cash used in investing activities of $16.3 million decreased by $151.5
million compared to $167.8 million in the same period last year. The decrease in
cash used in investing activities was due primarily to payments of $164.6
million for the acquisition of the Acquired Comfort Companies in the first half
of 2002 and a decrease in EMCOR's investments, notes and other long-term
receivables in the first half of 2002 compared to an increase in this account in
the first half of 2003. Net cash provided by financing activities of $34.1
million represented a $34.4 million increase from the net cash used in financing
activities of $0.3 million for the six months ended June 30, 2002. The increase
in net cash provided by financing activities was attributable to an increase in
borrowings under working capital credit lines, partially offset by a reduction
in net repayments of long-term debt and capital lease payments.
The following is a summary of EMCOR's material contractual obligations and other
commercial commitments (in millions):
Payments Due by Period
----------------------
Less
Contractual than 1-3 4-5 After
Obligations Total 1 year years years 5 years
- -------------------------------- ----- ------ ----- ----- -------
Other long-term debt $ 0.7 $ 0.3 $ 0.2 $ 0.2 $ --
Capital lease obligations 0.6 0.2 0.2 0.2 --
Operating leases 147.6 40.3 59.1 28.7 19.5
Open purchase obligations (1) 550.1 385.4 156.2 8.5 --
Other long-term obligations (2) 93.3 -- 93.3 -- --
------ ------ ------ ----- -----
Total Contractual Obligations $792.3 $426.2 $309.0 $37.6 $19.5
====== ====== ====== ===== =====
Amount of Commitment Expiration by Period
-----------------------------------------
Total Less
Other Commercial Amounts than 1-3 4-5 After
Commitments Committed 1 year years years 5 years
- ----------------------------- --------- ------ ----- ----- -------
Revolving credit facility (3) $166.8 $ -- $ -- $166.8 $ --
Letters of credit 50.3 13.2 0.6 1.3 35.2
Guarantees 25.0 -- -- -- 25.0
------ ------ ------ ------ -----
Total Commercial Commitments $242.1 $ 13.2 $ 0.6 $168.1 $60.2
====== ====== ====== ====== =====
(1) Represent open purchase orders for material and subcontracting costs
related to the Company's construction and service contracts. These purchase
orders are not reflected in EMCOR's consolidated balance sheet and should
not impact future cash flows as amounts will be recovered through customer
billings.
(2) Represent primarily insurance related liabilities, the timing for which
payments beyond one year is not practical to estimate.
(3) EMCOR classifies these borrowings as short-term on its consolidated balance
sheet because of EMCOR's intent and ability to repay the amounts on a
short-term basis. The revolving credit facility expires in September 2007.
As of June 30, 2003, EMCOR's total borrowing capacity under its revolving credit
facility was $296.0 million. EMCOR had approximately $50.3 million of letters of
credit outstanding under the revolving credit facility as of that date. The
amount of borrowings outstanding under the revolving credit facility as of June
30, 2003 and December 31, 2002 were $166.8 million and $112.0 million,
respectively. Effective July 9, 2003, EMCOR increased its total borrowing
capacity under its revolving credit facility to $350.0 million.
A subsidiary of EMCOR has guaranteed indebtedness of a venture in which it has a
40% interest; the other venture partner, Baltimore Gas and Electric, has a 60%
interest. The venture designs, constructs, owns, operates, leases and maintains
facilities to produce chilled water for sale to customers for use in air
conditioning of commercial properties. These guarantees are not expected to have
a material effect on EMCOR's financial position or results of operations. Each
of the venturers is jointly and severally liable, in the event of default, for
the venture's $25.0 million borrowing due December 2031. During September 2002,
each venture partner contributed equity to the venture, of which EMCOR's
contribution was $14.0 million.
There are $0.6 million in current maturities of EMCOR's long-term debt and
capital lease obligations as of June 30, 2003.
EMCOR is contingently liable to sureties in respect of performance and payment
bonds issued by sureties, usually at the request of customers in connection with
construction projects which secure EMCOR payment and performance obligations
under contracts for such projects. In addition, at the request of labor unions
representing certain EMCOR employees, bonds are sometimes provided to secure
obligations for wages and benefits payable to or for such employees. As of June
30, 2003 and December 31, 2002, sureties had issued bonds for the account of
EMCOR in the aggregate amount of approximately $2.1 billion. To the extent such
bonds were for the benefit of customers (as distinct from labor unions), they
related to approximately 1,100 construction projects. The bonds are issued by
EMCOR's sureties in return for a premium which can vary depending on the size
and type of the bonds. The largest individual bond is approximately $170.0
million. EMCOR has agreed to indemnify the sureties for any payments made by
them in respect of bonds issued on EMCOR's behalf.
EMCOR does not have any other material financial guarantees or off-balance sheet
arrangements other than those disclosed herein.
The primary source of liquidity for EMCOR has been, and is expected to continue
to be, cash generated by operating activities. EMCOR also maintains a revolving
credit facility that may be utilized, among other things, to meet short-term
liquidity needs in the event cash generated by operating activities is
insufficient, or to enable EMCOR to seize opportunities to participate in joint
ventures or to make acquisitions that may require access to cash on short notice
or for any other reason. EMCOR may also increase liquidity through an equity
offering or other debt instruments. Short-term changes in macroeconomic trends
may have an affect, positively or negatively, on liquidity. In order to manage
through these uncertainties, EMCOR currently has the capacity to borrow funds,
if necessary, to meet short-term requirements. In addition to managing
borrowings, EMCOR's focus on the facilities services market is intended to
provide an additional buffer against economic downturns as the facilities
services market is characterized by annual and multi-year contracts that provide
a more predictable stream of cash flows than the construction market. The
acquisition of CES in December 2002, which is primarily focused on the
facilities services market, is part of EMCOR's plan to grow its facilities
services business. Short-term liquidity is also impacted by the type and length
of construction contracts in place. During economic downturns, such as the 2001
through 2003 period, construction contracts trend away from short-cycle
contracts toward larger longer-term infrastructure and public sector contracts.
Performance of longer duration contracts typically require working capital
during their inception until initial billing milestones are achieved. While
EMCOR strives to maintain a net over-billed position with its customers, there
can be no assurance that a net over-billed position can be maintained. EMCOR's
net over-billings, defined as the balance sheet accounts billings in excess of
costs and estimated earnings on uncompleted contracts less cost and estimated
earnings in excess of billings on uncompleted contracts, was $121.4 million and
$127.3 million as of June 30, 2003 and December 31, 2002, respectively.
Long-term liquidity requirements can be expected to be met through cash
generated from operating activities, the revolving credit facility, and the sale
of various secured or unsecured debt and/or equity interests in the public and
private markets. Based upon EMCOR's current credit ratings and financial
position, EMCOR can reasonably expect to be able to issue long-term debt
instruments and/or equity. Over the long term, EMCOR's primary revenue risk
factor continues to be the level of demand for non-residential construction
services, which is in turn influenced by macroeconomic trends including interest
rates and governmental economic policy. In order to provide protection against
demand cycles in private sector construction services, EMCOR has increased its
participation, and its backlog of contracts, in the public sector and in the
facilities services market.
EMCOR believes that current cash balances and borrowing capacity available under
existing lines of credit or other forms of financing available through debt or
equity offerings, 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. However, EMCOR is a party to
lawsuits and other proceedings in which other parties seek to recover from it
amounts ranging from a few thousand dollars to over $60.0 million. If EMCOR was
required to pay damages in one or more such proceedings, such payments could
have a material adverse effect on its cash flow and/or earnings.
Certain Insurance Matters
As of June 30, 2003 and December 31, 2002, EMCOR utilized approximately $31.2
million and $24.5 million, respectively, of letters of credit issued pursuant to
its revolving credit facility as collateral for its insurance obligations.
Application of Critical Accounting Policies
The condensed consolidated financial statements are based on the application of
significant accounting policies, which require management to make significant
estimates and assumptions. EMCOR's significant accounting policies are described
in Note B - Summary of Significant Accounting Policies of the notes to
consolidated financial statements included in Item 8 of its annual report on
Form 10-K for the year ended December 31, 2002. There was no initial adoption of
any accounting policies during the three and six months ended June 30, 2003
other than those listed under "New Accounting Pronouncements" below. EMCOR
believes that some of the more critical judgment areas in the application of
accounting policies that affect its financial condition and results of
operations are estimates and judgments pertaining to (a) revenue recognition
from (i) long term construction contracts for which the percentage of completion
method of accounting is used and (ii) services contracts, (b) collectibility or
valuation of accounts receivable, (c) insurance liabilities, (d) income taxes
and (e) intangible assets.
Revenue Recognition for Long-term Construction Contracts and Services Contracts
EMCOR believes its most critical accounting policy is revenue recognition from
long-term construction contracts for which EMCOR uses the
percentage-of-completion method of accounting. Percentage-of-completion
accounting is the prescribed method of accounting for long-term contracts in
accordance with accounting principles generally accepted in the United States,
Statement of Position No. 81-1, "Accounting for Performance of Construction -
Type and Certain Production - Type Contracts" and, accordingly, the method used
for revenue recognition within EMCOR's industry. Percentage-of-completion for
each contract is measured principally by the ratio of costs incurred to date for
each contract to the estimated total costs for such 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. Provisions
for the entirety of estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Application of
percentage-of-completion accounting results in the recognition of costs and
estimated earnings in excess of billings on uncompleted contracts in EMCOR's
consolidated balance sheets. Costs and estimated earnings in excess of billings
on uncompleted contracts reflected in the consolidated balance sheets arise when
revenues have been recognized but the amounts cannot be billed under the terms
of contracts. Such amounts are recoverable from customers upon various measures
of performance, including achievement of certain milestones, completion of
specified units or completion of a contract. Costs and estimated earnings in
excess of billings on uncompleted contracts also include amounts 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. Such amounts are recorded at estimated net realizable
value and take into account factors that may affect the ability to bill and
collect amounts billed. Due to uncertainties inherent within estimates employed
to apply percentage-of-completion accounting, estimates may be revised as
project work progresses. Application of percentage-of-completion accounting
requires that the impact of those revised estimates be reported in the
consolidated financial statements prospectively.
In addition to revenue recognition for long-term construction contracts, EMCOR
recognizes revenues from services contracts as these services are performed in
accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). There are two basic types of services: (1)
those provided pursuant to fixed price services contracts which are signed in
advance for operation and maintenance services work over periods typically
ranging from one to three years (for which EMCOR employees may be assigned to
the customer's site full time) and (2) services for similar operation and
maintenance services work performed on an as needed basis. Fixed price services
contracts are generally performed evenly over the contract period, and
accordingly, revenue is recognized on a pro-rata basis over the term of the
contract. Revenues derived from other services are recognized when the services
are rendered in accordance with SAB 101. Expenses related to all service
contracts are recognized as services are provided.
Accounts Receivable
EMCOR is required to estimate the collectibility of accounts receivable. A
considerable amount of judgment is required in assessing the realization of
receivables, which assessment factors include the creditworthiness of the
customer, EMCOR's prior collection history with the customer and related aging
of the past due balances. At June 30, 2003 and December 31, 2002, accounts
receivable of $986.3 million and $965.0 million, respectively, included
allowances of $40.3 million and $40.6 million, respectively. Specific accounts
receivable are evaluated when EMCOR believes a customer may not be able to meet
its financial obligations due to a deterioration of its financial condition,
credit ratings or bankruptcy. The allowance requirements are based on the best
facts available and are re-evaluated and adjusted as additional information is
received.
Insurance Liabilities
EMCOR has deductibles for certain workers' compensation, auto liability, general
liability and property claims, has self-insured retentions for certain other
casualty claims, and is self-insured for employee-related health care claims.
Losses are recorded based upon estimates of the liability for claims incurred
and an estimate of claims incurred but not reported. The liabilities are derived
from known facts, historical trends and industry averages utilizing the
assistance of an actuary to determine the best estimate of these obligations.
EMCOR believes its liabilities for these obligations are adequate. However, such
obligations are difficult to assess and estimate due to numerous factors,
including severity of injury, determination of liability in proportion to other
parties, timely reporting of occurrences and effectiveness of safety and risk
management programs. Therefore, if actual experience differs from the
assumptions and estimates used for recording the liabilities, adjustments may be
required and recorded in the period that the experience becomes known.
Income Taxes
EMCOR has net deferred tax assets primarily resulting from deductible temporary
differences, which will reduce taxable income in future periods. A valuation
allowance is required when it is more likely than not that all or a portion of a
deferred tax asset will not be realized. As of June 30, 2003 and December 31,
2002, the total valuation allowance on net deferred tax assets was approximately
$2.1 million.
Intangible Assets
As of June 30, 2003, EMCOR had goodwill and net identifiable intangible assets
of $293.9 million and $12.1 million, respectively, in connection with the
acquisition of certain companies. The determination of related estimated useful
lives for identifiable intangible assets and whether those assets are impaired
involves significant judgments based upon short and long-term projections of
future performance. Certain of these forecasts reflect assumptions regarding the
ability to successfully integrate acquired companies. Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142") requires goodwill to be tested for impairment under certain circumstances,
and written down when impaired, rather than being amortized as previous
standards required. Furthermore, SFAS 142 requires identifiable intangible
assets other than goodwill to be amortized over their useful lives unless their
lives are determined to be indefinite. Changes in strategy and/or market
conditions may result in adjustments to identifiable intangible asset balances.
As of June 30, 2003, no indicators of impairment of EMCOR's goodwill or
identifiable intangible assets existed in accordance with the provisions of SFAS
142.
New Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board (the "FASB") issued
Financial Accounting Standards Board Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No.
5, 57, and 107 and Rescission of FASB Interpretation No. 34" ("FIN 45" or the
"Interpretation"). FIN 45 clarifies the requirements of FASB Statement of
Financial Accounting Standards No. 5, "Accounting for Contingencies," relating
to the guarantor's accounting for, and disclosure of, the issuance of certain
types of guarantees. FIN 45 may require, that upon issuance of a guarantee, the
guarantor to recognize a liability for the fair value of the obligation it
assumes under the guarantee. The disclosure provisions of the Interpretations
are effective for financial statements of interim or annual periods that end
after December 15, 2002. The Interpretation's provisions for initial recognition
and measurement should be applied on a prospective basis to guarantees issued or
modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end. The guarantor's previous accounting for guarantees that were issued
before the date of FIN 45's initial application may not be revised or restated
to reflect the effect of the recognition and measurement provisions of the
Interpretation. EMCOR has determined that the adoption of FIN 45 will only
impact its disclosures and that its accounting for guarantees is not impacted as
of June 30, 2003.
In January 2003, the FASB issued Statement of Financial Accounting Standards No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure"
("SFAS 148"). SFAS 148 amends FASB Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements of the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS 148 was effective for fiscal years beginning
after December 15, 2002 and was adopted by EMCOR for all periods presented.
EMCOR did not change to the fair value based method of accounting for
stock-based employee compensation, and accordingly, adoption of SFAS 148 impacts
only disclosures, not the financial results, of EMCOR.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). FIN 46 expands upon and strengthens
existing accounting guidance that addresses when a company should include in its
financial statements the assets, liabilities and activities of another entity. A
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. FIN 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entity's activities or is entitled to receive a majority of the entity's
residual returns or both. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. EMCOR is currently evaluating the effect that adoption of FIN 46 will have
on EMCOR's consolidated financial condition or results of operations.
In April 2003, the FASB issued Statement of Financial Accounting Standards No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" ("SFAS 149"). SFAS 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS 133. The new guidance
amends SFAS 133 for decisions made: (a) as part of the Derivatives
Implementation Group process that effectively required amendments to SFAS 133,
(b) in connection with other Board projects dealing with financial instruments,
and (c) regarding implementation issues raised in relation to the application of
the definition of a derivative. The amendments set forth in SFAS 149 improve
financial reporting by requiring that contracts with comparable characteristics
be accounted for similarly. SFAS 149 is generally effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. It is not expected that the provisions of SFAS
149 will have a material impact on EMCOR's consolidated financial position,
results of operations or cash flows.
In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150, "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity" ("SFAS 150"). SFAS 150 requires certain financial
instruments that embody obligations of the issuer and have characteristics of
both liabilities and equity to be classified as liabilities. The provisions of
SFAS 150 are effective for financial instruments entered into or modified after
May 31, 2003 and to all other instruments that exist as of the beginning of the
first interim financial reporting period beginning after June 15, 2003. EMCOR
does not have any financial instruments that meet the provisions of SFAS 150;
therefore, adopting the provisions of SFAS 150 is not expected to have a
material impact on EMCOR's consolidated financial position, results of
operations or cash flows.
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of the Private Securities Reform Act of 1995, particularly
statements regarding market opportunities, market share growth, competitive
growth, gross profit, and selling, general and administrative expenses. These
forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those in any such forward-looking
statements. Such risk and uncertainties include, but are not limited to adverse
changes in general economic conditions, including changes in the specific
markets for EMCOR's services, adverse business conditions, decreased or lack of
growth in the mechanical and electrical construction and facilities services
industries, increased competition, pricing pressures, risks associated with
foreign operations and other factors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EMCOR has not used derivative financial instruments for any purpose during the
three and six months ended June 30, 2003 and 2002, including trading or
speculating on changes in interest rates or commodity prices of materials used
in its business.
EMCOR is exposed to market risk for changes in interest rates for borrowings
under its revolving credit facility. Borrowings under the credit facility bear
interest at variable rates, and the fair value of this borrowing is not
significantly affected by changes in market interest rates. As of June 30, 2003,
there were $166.8 million of borrowings outstanding under the revolving credit
facility, and these borrowings bear interest at (1) a rate which is the prime
commercial lending rate announced by Harris Trust and Savings Bank from time to
time (4.00% at June 30, 2003) plus 0% to 1.0% based on certain financial tests
or (2) at a LIBOR rate (1.12% at June 30, 2003) plus 1.5% to 2.5% based on
certain financial tests. Based on borrowings of $166.8 million, if interest
rates were to increase by 1.0%, the net of tax interest expense would increase
$1.0 million in the next twelve months. Conversely, if interest rates were to
decrease by 1.0%, interest expense would decrease by $1.0 million in the next 12
months. The revolving credit facility expires in September 2007. There is no
guarantee that EMCOR will be able to renew the facility at its expiration.
EMCOR is also exposed to market risk and its potential related impact on
accounts receivable or costs and estimated earnings in excess of billings on
uncompleted contracts. The amounts recorded may be at risk if customers' ability
to pay these obligations is negatively impacted by economic conditions. EMCOR
continually monitors the creditworthiness of its customers and maintains
on-going discussions with customers regarding contract status with respect to
change orders and billing terms. Therefore, EMCOR believes it takes appropriate
action to manage market and other risks, but there is no assurance that it will
be able to reasonably identify all risks with respect to collectibility of these
assets. See also the previous discussion of Accounts Receivable under the
heading, "Application of Critical Accounting Policies" in the Management's
Discussion and Analysis of Results of Operations and Financial Condition.
Amounts invested in EMCOR's foreign operations are translated into U. S. dollars
at the exchange rates in effect at the end of the period. The resulting
translation adjustments are recorded as accumulated other comprehensive income
(loss), a component of stockholders' equity, in its condensed consolidated
balance sheets. EMCOR believes the exposure to the effects that fluctuating
foreign currencies may have on its consolidated results of operations is limited
because the foreign operations primarily invoice customers and collect
obligations in their respective local currencies. Additionally, expenses
associated with these transactions are generally contracted and paid for in the
same local currencies.
ITEM 4. CONTROLS AND PROCEDURES
Based on an evaluation of EMCOR's disclosure controls and procedures (as defined
in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of
1934) as of the end of the period covered by this Form 10-Q as required by
paragraph (b) of Rules 13a-15 or 15d-15 promulgated under the Securities
Exchange Act of 1934, the Chairman of the Board and Chief Executive Officer of
EMCOR, Frank T. MacInnis, and the Chief Financial Officer of EMCOR, Leicle E.
Chesser, have concluded that EMCOR's disclosure controls and procedures are
effective.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments during the quarter ended June 30, 2003
regarding legal proceedings previously reported.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of EMCOR was held on June 12, 2003.
(b) The Board of Directors of EMCOR consists of seven individuals each of whom
was nominated at the annual meeting for re-election as a director of EMCOR
for the ensuing year. Each director was re-elected.
(c) Set forth below are the names of each director elected at the annual
meeting, the number of shares voted for his re-election and the number of
votes withheld from his re-election. There were no broker non-votes.
Name Votes For Votes Withheld
---- --------- --------------
Stephen W. Bershad 13,537,597 110,465
David A. B. Brown 13,537,722 110,340
Larry J. Bump 13,558,822 89,240
Albert Fried, Jr. 13,496,524 151,538
Richard F. Hamm, Jr. 13,537,597 110,465
Frank T. MacInnis 13,399,222 248,840
Michael T. Yonker 13,558,697 89,385
In addition, at the annual meeting adoption by the Board of Directors of each of
the plans set forth below was approved; set forth opposite each such plan is the
number of shares voted in favor of such approval, the number of shares voted
against such approval and the number of shares that abstained from voting
thereon. There were no broker non-votes.
Number of Shares Number of Shares Number of Shares
Plan Voted for Approval Voted against Approval that Abstained
---- ------------------ ---------------------- ----------------
2003 Non Employee
Directors' Stock Option Plan 12,504,241 1,108,882 34,939
2003 Management
Stock Incentive Plan 12,435,504 1,181,739 30,819
Key Executive Incentive
Stock Bonus Plan 12,894,158 720,858 32,046
At the annual meeting, the stockholders also voted upon a proposal to ratify the
appointment by the Audit Committee of the Board of Directors of Ernst & Young
LLP, independent auditors, as EMCOR's independent auditors for 2003; 13,563,867
shares voted in favor of ratification, 79,023 shares voted against ratification
and 5,172 votes abstained from voting thereon. There were no broker non-votes.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Incorporated by Reference to,
Exhibit No. Description or Page Number
- ---------- ----------- ------------------------------
3(a-1) Restated Certificate of Exhibit 3(a-1) to Form 10
Incorporation of EMCOR
filed December 15, 1994
3(a-2) Amendment dated November 28, Exhibit 3(a-2) to EMCOR's
1995 to the Restated Certificate Annual Report on Form 10-K for
of Incorporation of EMCOR the year ended December 31, 1995
3(a-3) Amendment dated February 12, Exhibit 3(a-3) to EMCOR's
1998 to the Restated Certificate Annual Report on Form 10-K for
of Incorporation the year ended December 31, 1997
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
4.1(a) U.S. $275,000,000 Credit Agreement Exhibit 4.1(a) to EMCOR's Report
by and among EMCOR Group, Inc. and on Form 8-K dated October 4, 2002
certain of its Subsidiaries and
Harris Trust and Savings Bank
individually and as Agent("Harris")
and the Lenders which are or become
parties thereto dated as of September
26, 2002 (the "Credit Agreement")
4.1(b) Amendment and Waiver letter dated Exhibit 4.1(b) on EMCOR's
December 10, 2002 to the Annual Report on Form 10-K
Credit Agreement for the year ended December 31,
2002
4.1 (c) First Amendment to Credit Agreement Page
dated as of June 2003
4.1 (d) Second Amendment to Credit Agreement Page
dated as of July 2003
4.1(e) Commitment Amount Increase Request Page
dated June 26, 2003 among Harris,
National City Bank and EMCOR
Item 6 - Exhibits and Reports on Form 8-K - (Continued)
Incorporated by Reference to,
Exhibit No. Description or Page Number
- ----------- ----------- -----------------------------
4.1(f) Commitment Amount Increase Request Page
dated June 26, 2003 among
Harris, WebsterBank and EMCOR
4.1(g) Commitment Amount Increase Request Page
dated June 26, 2003 among Harris,
Union Bank of California, N.A. and
EMCOR
4.1(h) Commitment Amount Increase Request Page
dated June 26, 2003 among Harris,
Sovereign Bank and EMCOR
4.1(i) Commitment Amount Increase Request Page
dated July 9, 2003 among Harris,
Bank Hapoalim B.M. and EMCOR
4.1(j) Commitment Amount Increase Request Page
dated July 9, 2003 among Harris,
The Governor and Company Bank of
Scotland and EMCOR
4.1(k) Commitment Amount Increase Request Page
dated July 9, 2003 among Harris,
U.S. Bank, National Association
and EMCOR
10(a) 2003 Non Employee Directors' Stock Exhibit A to EMCOR's Proxy
Option Plan Statement for its Annual Meeting
of Stockholders held June 12,
2003 (the "2003 Proxy Statement")
10(b) 2003 Management Stock Incentive Plan Exhibit B to the 2003 Proxy
Statement
10(c) Key Executive Incentive Bonus Plan Exhibit C to the 2003 Proxy
Statement
11 Computation of Basic Note C of the Notes
EPS and Diluted EPS to the Condensed Consolidated
for the three and six months Financial Statements.
ended June 30, 2003
and 2002
99.1 Additional Exhibit - Page
Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of
2002 by the Chief Executive Officer
Item 6 - Exhibits and Reports on Form 8-K - (Continued)
Incorporated by Reference to,
Exhibit No. Description or Page Number
- ----------- ----------- ---------------------------
99.2 Additional Exhibit - Page
Certification Pursuant to Section
302 of the Sarbanes-Oxley Act of
2002 by the Chief Financial Officer
99.3 Additional Exhibit - Page
Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002 by the Chief Executive Officer
99.4 Additional Exhibit - Page
Certification Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002 by the Chief Financial Officer
(b) The following reports on Form 8-K were filed during the quarter ended June
30, 2003:
(1) Current Report on Form 8-K, dated as of April 9, 2003 - Press release
dated April 9, 2003 with respect to updated guidance for EMCOR's
fiscal 2003 first quarter ended March 31, 2003.
(2) Current Report on Form 8-K, dated as of April 24, 2003 - Press release
dated April 24, 2003 with respect to the results of operations for
EMCOR's fiscal 2003 first quarter ended March 31, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 24, 2003 EMCOR GROUP, INC.
-----------------------------------------
(Registrant)
By: /s/FRANK T. MACINNIS
-----------------------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
/s/LEICLE E. CHESSER
----------------------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
/s/ MARK A. POMPA
-----------------------------------------
Mark A. Pompa
Senior Vice President,
Chief Accounting Officer
and Treasurer
(Principal Accounting Officer)
Exhibit 4.1(c)
EMCOR GROUP, INC.
FIRST AMENDMENT TO CREDIT AGREEMENT
To the Lenders Party to the Credit
Agreement identified below
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of September 26, 2002 among EMCOR
Group, Inc. a Delaware corporation, Comstock Canada Ltd., a Canadian
corporation, and EMCOR Drake & Scull Group plc., a United Kingdom corporation
(collectively the "Borrowers"), Harris Trust and Savings Bank as Agent for the
Lenders and the financial institutions from time to time parties thereto as
Lenders, all as amended and currently in effect between us (the "Credit
Agreement"). Capitalized terms used herein without definition to have the
meanings ascribed to them in the Credit Agreement.
The Borrowers have requested that the Lenders amend the Credit Agreement in
order to add a new credit facility to be made available in the form of Excess
Revolving Loans, and make certain other amendments to the Credit Agreement, and
the Lenders are willing to do so under the terms and conditions set forth in
this Agreement (herein, the "Amendment").
SECTION 1. ADDITION OF EXCESS COMMITMENT LENDERS.
Upon the effectiveness of this Amendment, each of Bank of Montreal, Chicago
Branch ("BMO"), LaSalle Bank National Association ("LaSalle") and Fleet National
Bank ("Fleet"; BMO, LaSalle and Fleet are each referred to in their respective
capacities as Excess Commitment Lenders herein individually as an "Excess
Commitment Lender" and collectively as the "Excess Commitment Lenders") shall
become an Excess Commitment Lender party to the Credit Agreement and be deemed a
"Lender" signatory to the Credit Agreement and shall have all the rights,
benefits duties and obligations of a "Lender" under the Credit Agreement except
as otherwise specified herein. Except as otherwise specified in Section 1.10 of
the Credit Agreement as amended hereby, all references in the Credit Agreement
and the Loan Documents to the term "Lender" and "Lenders" shall be deemed to
include and be a reference to the Excess Commitment Lenders. The amount of each
Excess Commitment Lender's Excess Commitment is the amount set forth opposite
such Excess Commitment Lender's name on Schedule I hereto. The address and the
lending office that appears on BMO's signature page hereto shall be BMO's
address and lending office for all purposes of the Credit Agreement.
The Company hereby agrees to execute and deliver to each Excess Commitment
Lender a Note in the principal amount equal to such Excess Commitment Lender's
Excess Commitment.
SECTION 2. AMENDMENTS.
Subject to the satisfaction of the conditions precedent set forth in
Section 3 below, the Credit Agreement shall be and hereby is amended and
supplemented as follows:
2.1. The Credit Agreement is hereby amended by adding thereto a new Section 1.10
which reads as follows:
1.10. Excess Commitment.
(a) Generally. Subject to all of the terms and conditions hereof,
each Excess Commitment Lender, by its acceptance hereof,
severally agrees to make Revolving Loans to the Company in the
amount of its Excess Commitment set forth opposite its name on
Schedule 1.1 hereof (its "Excess Commitment" and cumulatively for
all of the Excess Commitment Lenders, the "Excess Commitments")
from time to time prior to the Excess Commitment Termination
Date. Subject to the terms and conditions hereof, the Excess
Commitments may be availed of by the Company in its discretion
from time to time, be repaid and used again, during the period
from and including June 2, 2003 to and including the Excess
Commitment Termination Date. The Excess Commitment, subject to
all of the terms and conditions hereof, may be utilized solely by
the Company in the form of Revolving Loans all as more fully
hereinafter set forth; provided, however, that the aggregate
amount of the Revolving Loans outstanding at any one time to the
Company from the Excess Commitment Lenders shall at no time
exceed the Excess Commitments. The obligations of the Excess
Commitment Lenders hereunder are several and not joint and no
Excess Commitment Lender shall under any circumstances be
obligated to extend credit in excess of its Excess Commitment. In
addition, in no event shall any Lender other than the Excess
Commitment Lenders have any obligation to extend credit under the
Excess Commitments.
(b) Excess Revolving Loans. Subject to all of the terms and
conditions hereof, the Excess Commitments shall be availed of by
the Company solely in the form of loans (individually an "Excess
Revolving Loan" and collectively the "Excess Revolving Loans").
Each Borrowing of Excess Revolving Loans shall, except to the
extent otherwise agreed by all Excess Commitment Lenders, be made
ratably by the Excess Commitment Lenders in accordance with their
respective Excess Commitments and not by any other Lender. Each
Borrowing of Excess Commitment Loans shall be in the minimum
amount specified in Section 1.5 hereof for Revolving Loans. All
Excess Revolving Loans made by an Excess Commitment Lender to the
Company shall be evidenced by a single Excess Revolving Credit
Note of the Company (individually an "Excess Commitment Note" and
collectively the "Excess Commitment Notes") payable to the order
of such Excess Commitment Lender, each such Excess Revolving
Credit Note to be in the form (with appropriate insertions)
attached hereto as Exhibit A-3. Without regard to the face
principal amount of any Excess Commitment Note, the actual
principal amount at any time outstanding and owing by the Company
on account of Excess Revolving Loans shall be the sum of all
Excess Revolving Loans then or theretofore made thereon by such
Excess Commitment Lender to the Company, less all payments
actually received thereon.
(c) Conditions Precedent to Excess Revolving Loans. The obligation of
the Excess Commitment Lenders to make any Excess Revolving Loans
(including the first Excess Revolving Loan) shall be subject to
the conditions precedent that as of the time of each such Excess
Revolving Loan:
(i) Each of the conditions precedent set forth in Section 6.1
hereof shall be satisfied with respect to such Excess
Revolving Loan;
(ii) After giving effect to such Excess Revolving Loan, the
aggregate principal amount of all Excess Revolving Loans
shall not exceed the Excess Revolving Commitment then in
effect; and
(iii)The Revolving Loan Availability immediately prior to the
making of such Excess Revolving Loan is less than or equal
to $5,000,000.
Any request made by or on behalf of the Company to the Agent for an Excess
Revolving Loan shall be deemed to constitute a representation and warranty that
the foregoing statements are true and correct.
(d) Manner of Borrowing Excess Revolving Loans. The Company shall
give the Agent notice (which shall be irrevocable and may be
written or oral, but if oral, promptly confirmed in writing) by
10:00 a.m. (central time) on any Business Day of each request for
a Borrowing of Excess Revolving Loans, in each case, specifying
the amount of such Borrowing, the date such Borrowing is to be
made, which shall not be less than three (3) Business Days hence
in the case of a Borrowing of Eurodollar Loans, but which may be
the same day in the case of a Borrowing of a Domestic Rate Loans,
whether the Borrowing is to be of Domestic Rate Loans or
Eurodollar Loans and, in all cases other than a Borrowing of
Domestic Rate Loans, of the Interest Period selected therefor.
The Agent shall promptly notify each Excess Commitment Lender of
its receipt of such notice. Not later than 1:00 p.m. on the date
specified for any Borrowing of Excess Revolving Loans, each
Excess Commitment Lender shall make the proceeds of such Excess
Revolving Loan comprising part of such Borrowing available in
immediately available funds to the Agent in Chicago, Illinois.
Borrowings under the Excess Commitments shall be made in U.S.
Dollars only. As between the Agent and each Excess Commitment
Lender, the provisions of Section 1.4(b) shall be deemed to apply
to any Borrowing of Excess Revolving Loans.
(e) Maturity Date. The Excess Commitments shall immediately and
automatically terminate and each Excess Revolving Loan shall
mature and become due and payable on the Excess Commitment
Termination Date.
(f) Credit Agreement Provisions. Except as otherwise set forth in
this Section 1.10, the following provisions shall apply to the
Excess Commitment, the Excess Commitment Lenders, the Excess
Commitment Notes and the Excess Revolving Loans for the purposes
of the Credit Agreement:
(i) Except as otherwise specified herein, all references to the
terms "Revolving Loan" and "Revolving Loans" shall be deemed
to include Excess Revolving Loans;
(ii) Except as otherwise specified herein, all references to the
terms "Note," "Notes," "Revolving Note" and "Revolving
Notes" shall be deemed to include the Excess Commitment
Notes;
(iii)Except as otherwise specified herein, all references to the
terms "Commitment" and "Commitments" shall be deemed to
include the Excess Commitments; and
(iii)Except as otherwise specified herein, references to the
terms "Lender" and "Lenders" shall be deemed to include the
Excess Commitment Lenders.
Notwithstanding the foregoing, no Excess Commitment Lender
shall be required to make any Revolving Loan (other than an
Excess Revolving Loan) or fund or purchase participations with
respect to Letters of Credit or Swing Loans except and to the
extent that such Excess Commitment Lender has provided a
Commitment under the Credit Agreement other than its Excess
Commitment. For all purposes of the making of Revolving Loans
other than Excess Commitment Loans, the terms "Commitment" and
"Commitments" shall exclude the Excess Commitments.
(g) Reductions of Excess Commitment. From and after the date on which
any Additional Lender becomes a party to this Agreement pursuant
to Section 1.11 hereof, the Excess Commitments shall be reduced
ratably as among the Excess Commitment Lenders in accordance with
their respective Excess Commitments, dollar for dollar by an
amount equal to such Additional Lender's Commitment. In the event
that any such reduction of the Excess Commitments would reduce
the Excess Commitments below the then outstanding principal
amount of Excess Revolving Loans, the Company shall prepay the
Excess Revolving Loans to the extent necessary to reduce the
outstanding principal amount of Excess Revolving Loans to an
amount equal to the then outstanding Excess Commitments as so
reduced. On the date on which any such Additional Lender becomes
party to the Credit Agreement, and in the event that at such time
Excess Revolving Loans are outstanding, the Company shall be
deemed to have irrevocably requested a Borrowing of Revolving
Loans under the Credit Agreement from the Lenders (including such
Additional Lender but excluding the Excess Commitment Lenders in
their capacities as such) in an amount equal to the lesser of (i)
the aggregate principal amount of Excess Revolving Loans then
outstanding and (ii) such Additional Lender's Commitment, and
each Lender (including such Additional Lender) hereby irrevocably
agrees to fund to the Agent its ratable share of such Borrowing
on such date, whether or not the conditions of Section 6.1 of the
Agreement have been satisfied. The proceeds of each such
Borrowing shall be used to reduce the outstanding principal
amount of and accrued interest on Excess Revolving Loans until
paid in full. The obligations of the Lenders hereunder shall be
absolute and unconditional and shall not be affected or impaired
by any Default or Event of Default which may be occurring under
the Credit Agreement.
2.2. The Credit Agreement is hereby amended by adding thereto a new Section 1.11
which reads as follows:
Section 1.11. Increase in Commitment. Provided no Default or Event of
Default has occurred and is continuing, the Company may, on any
Business Day on or prior to the Excess Commitment Termination Date,
with the written consent of the Agent (which consent shall not be
unreasonably withheld), increase the aggregate amount of the
Commitments up to a maximum amount of $350,000,000 by delivering a
Commitment Amount Increase Request in the form of Exhibit F hereto at
least five (5) Business Days prior to the desired effective date of
such increase (the "Commitment Amount Increase") identifying an
additional Lender (or additional Commitment agreed to be made by any
existing Lender) each such additional Lender or existing Lender (in
its capacity as such) being referred to as an "Additional Lender") and
the amount of its Commitment (or additional amount of its Commitment).
The effective date of the Commitment Amount Increase shall be agreed
upon by the Company, such Lender and the Agent (whose consent shall
not be unreasonably withheld). Upon the effectiveness thereof, each
new Lender (or, if applicable, each existing Lender which consented to
an increase in its Commitment) shall advance Revolving Loans and
purchase Participating Interests in all then outstanding Letters of
Credit in an amount sufficient such that after giving effect to such
Revolving Loans and purchases each Lender shall have outstanding its
pro rata share of Revolving Loans and Participating Interests. It
shall be a condition to such effectiveness that no Eurodollar Loans be
outstanding on the date of such effectiveness and that the Company
shall not have terminated any portion of the Commitments pursuant to
Section 3.5(a) hereof. The Company agrees to pay any fees or expenses
of the Agent relating to any Commitment Amount Increase.
Notwithstanding anything herein to the contrary, no Lender shall have
any obligation to increase its Commitment and no Lender's Commitment
shall be increased without its consent thereto, and each Lender may at
its option, unconditionally and without cause, decline to increase its
Commitment.
2.3. Section 3.1 of the Credit Agreement is hereby amended in its entirety and
as so amended shall be restated to read as follows:
Section 3.1. Commitment Fee. (a) Commitments. For the period from the date
hereof to and including the Termination Date, the Borrowers shall pay
to the Agent for the account of the Lenders (other than the Excess
Commitment Lenders in their capacities as such) a non-refundable
commitment fee at the rate per annum equal to the Applicable Margin
(computed on the basis of a year of 360 days and actual days elapsed)
on the average daily Unused Commitments; provided however that for any
calendar quarter during which the average daily outstanding balance of
Revolving Loans, Swing Loans and L/C Obligations is less than 25% of
the aggregate Commitments the rate per annum set forth above shall
increase by 0.10%; provided further, that in no event shall the rate
per annum payable pursuant hereto exceed 0.50%. Such fee is due and
payable in arrears on the last day of each calendar quarter
(commencing with the first of such dates after the date hereof) and on
the Termination Date; and provided further that for the purposes
hereof, "Unused Commitments" shall be calculated without regard to the
Excess Commitments.
(b) Excess Commitments. For the period from June 2, 2003 to and
including the Excess Commitment Termination Date, the Company
shall pay to the Agent for the account of the Excess Commitment
Lenders a non-refundable commitment fee at the rate per annum
equal to the Applicable Margin (computed on the basis of a year
of 360 days and actual days elapsed) on the average daily Unused
Excess Commitments. Such fee is due and payable in arrears on the
last day of each calendar quarter (commencing with the first of
such dates after the date hereof) and on the Excess Commitment
Termination Date
2.4. Section 3.4 of the Credit Agreement is hereby amended in its entirety and
as so amended shall be restated to read as follows:
Section 3.4. Voluntary Prepayments. The Borrowers shall have the privilege
of prepaying without premium or penalty (except as set forth in
Section 2.5 above) and in whole or in part (but, if in part, then: (i)
in an amount not less than $2,000,000, or such lesser amount as may
then be outstanding, and (ii) in each case, in an amount such that the
minimum amount required for a Borrowing pursuant to Section 1.5 hereof
remains outstanding) any Borrowing of Eurodollar Loans at any time
upon 3 Business Days prior notice by the Borrower to the Agent or, in
the case of a Borrowing of Domestic Rate Loans or Swing Loans, notice
delivered by the Borrower to the Agent no later than 10:00 a.m.
(Chicago time) on the date of prepayment, such prepayment to be made
by the payment of the principal amount to be prepaid and, in the case
of any Eurodollar Loans or Swing Loans, accrued interest thereon to
the date fixed for prepayment plus any amounts due the Lenders under
Section 2.5 hereof. Notwithstanding anything contained herein to the
contrary, from and including the Section 2.4 Effective Date (as
defined in the First Amendment to this Agreement) to and including the
Excess Commitment Termination Date, all voluntary prepayments made
pursuant to this Section 3.4 shall be applied first to the payment of
outstanding principal of and accrued interest on Excess Revolving
Loans until payment in full thereof.
2.5. Section 3.5 of the Credit Agreement is hereby amended by (i) redesignating
subsection (c) thereof as subsection (e) and (ii) by adding thereto the
following new subsections (c) and (d):
(c) If at any time during the period from and including the Amendment
Effective Date of the First Amendment to this Agreement (as
defined in the First Amendment to this Agreement) to and
including the Excess Commitment Termination Date any Borrower or
any Subsidiary shall issue any Indebtedness for Borrowed Money
permitted by Section 7.10(b) hereof, the Company shall promptly
notify the Agent of the estimated Net Cash Proceeds of such
issuance to be received by or for the account of such Borrower or
such Subsidiary in respect thereof. Promptly upon receipt by such
Borrower or such Subsidiary of Net Cash Proceeds of such
issuance, the Company shall ratably prepay the Excess Revolving
Loans (and outstanding Revolving Loans and L/C Obligations if an
Event of Default then exists) in an aggregate amount equal to
100% of the amount of such Net Cash Proceeds. The Excess
Commitments (or all Commitments if an Event of Default then
exists) shall immediately be ratably reduced by an amount equal
to the principal amount of any such Net Cash Proceeds.
(d) If at any time during the period from and including the Amendment
Effective Date (as defined in the First Amendment to this
Agreement) of the First Amendment to this Agreement to and
including the Excess Commitment Termination Date any Borrower or
any Subsidiary shall issue new equity securities (whether common
or preferred stock or otherwise), other than equity securities
issued in connection with the exercise of employee stock options,
issued to the seller of an acquired business in connection with a
Permitted Acquisition, issued to a Borrower or any Subsidiary or
issued as a distribution or dividend to holders thereof, the
Company shall promptly notify the Agent of the estimated Net Cash
Proceeds of such issuance to be received by or for the account of
such Borrower or such Subsidiary in respect thereof. Promptly
upon receipt by such Borrower or such Subsidiary of Net Cash
Proceeds of such issuance, the Company shall ratably prepay the
Excess Revolving Loans (and outstanding Revolving Loans and L/C
Obligations if an Event of Default exists) in an aggregate amount
equal to 100% of the amount of such Net Cash Proceeds. The Excess
Commitments (or all Commitments if an Event of Default then
exists) shall immediately be ratably reduced by an amount equal
to the principal amount of any such Net Cash Proceeds.
2.6. Section 3.6 of the Credit Agreement is hereby amended in its entirety and
as so amended shall be restated to read as follows:
Section 3.6. Voluntary Terminations. The Borrowers shall have the privilege
upon five Business Days' prior notice from the Company (which need not be
joined in by any Borrower) to the Agent (which shall promptly notify the
Lenders) to ratably terminate the Commitments (including the Excess
Commitments) in whole or in part (but if in part then in the amount of
$5,000,000 or such greater amount which is an integral multiple of
$100,000); provided that the Commitments may not be reduced to an amount
less than the sum of all Revolving Loans and all L/C Obligations then
outstanding unless there is deposited with the Agent as cash collateral for
such Revolving Loans and L/C Obligations cash in the amount by which the
same exceed the amount of the Commitments. Any termination of the Revolving
Commitments below any Sublimit or the Swing Line Sublimit then in effect
shall reduce such Sublimit or Swing Line Sublimit, as applicable, by a like
amount. The Agent shall give prompt notice to each Lender of any such
termination of the Commitments. Notwithstanding the foregoing, any
termination of the Commitments hereunder shall first ratably reduce the
Excess Commitments until the same are reduced or terminated in whole prior
to any reduction of the Commitments (other than the Excess Commitments).
2.7. Section 4.1 of the Credit Agreement is hereby amended by adding thereto the
following sentence at the end thereof:
In no event shall any Collateral of the U.K. Borrowers or the Canadian
Borrowers secure the Excess Revolving Loans.
2.8. The first sentence of Section 5.2 of the Credit Agreement is hereby amended
in its entirety and as so amended shall be restated to read as follows:
"Except as set forth in the Side Letter (as hereinafter defined),
each Restricted Subsidiary is duly organized, validly existing and in
good standing (or their equivalents under applicable local law) under
the laws of the jurisdiction in which it is incorporated or organized,
as the case may be, has full and adequate power to own its Property
and conduct its business as now conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the
failure to be so qualified would have a Material Adverse Effect.
2.9. Section 5.5 of the Credit Agreement shall be amended by (i) striking the
reference to "December 31, 2001" appearing therein and substituting
therefor "December 31, 2002", (ii) striking the reference to "June 30,
2002" appearing therein and substituting therefor "March 31, 2003", (iii)
striking the reference to "the six (6) months then ended" appearing therein
and substituting therefor "the three (3) months then ended", (iv) striking
the reference to "Arthur Andersen, LLP" appearing therein and substituting
therefor "Ernst & Young LLP" and (v) striking the reference to "that
certain Side Letter dated September 26, 2002" and substituting therefor
"that certain Side Letter dated June 2, 2003".
2.10.The following definitions appearing in Section 9.1 of the Credit Agreement
are hereby amended in their respective entireties and as so amended shall
be restated to read as follows:
"Borrowing" shall mean, (i) with respect to Revolving Loans and
Swing Loans, the total of Revolving Loans or Swing Loans made to a
given Borrower by all of the Lenders on a single date, in a single
currency and having the same maturity and (ii) with respect to Excess
Revolving Loans, the total of Excess Revolving Loans made to the
Company by all of the Excess Commitment Lenders on a single date and
having the same maturity. Borrowings of Revolving Loans are to be made
and maintained ratably from each of the Lenders according to their
Percentages except to the extent otherwise agreed in writing by all
Lenders. Borrowings of Swing Loans are made by the Agent in accordance
with the procedures set forth in Section 1.8 hereof. Borrowings of
Excess Revolving Loans are to be made and maintained ratably from each
of the Excess Commitment Lenders in accordance with their respective
Excess Commitments except to the extent otherwise agreed in writing by
all Excess Commitment Lenders.
"Net Cash Proceeds" means, as applicable, (a) with respect to any
Disposition by a Person, cash and cash equivalent proceeds received by
or for such Person's account, net of (i) reasonable direct costs
relating to such Disposition and (ii) sale, use or other transactional
taxes paid or payable by such Person as a direct result of such
Disposition, (b) with respect to any Event of Loss of a Person, cash
and cash equivalent proceeds received by or for such Person's account
(whether as a result of payments made under any applicable insurance
policy therefor or in connection with condemnation proceedings or
otherwise), net of reasonable direct costs incurred in connection with
the collection of such proceeds, awards or other payments and (c) with
respect to any offering of equity securities of a Person or the
issuance of any Indebtedness for Borrowed Money by a Person, cash and
cash equivalent proceeds received by or for such Person's account, net
of reasonable legal, underwriting, and other fees and expenses
incurred as a direct result thereof.
2.11.Sections 7.10(a) and (b) of the Credit Agreement are hereby amended in
their respective entireties and as so amended shall be restated to read as
follows:
(a) the Obligations (including without limitation the
Excess Revolving Loans under the Excess Commitments);
(b) long-term secured indebtedness of the Borrowers
in an aggregate principal amount not to exceed an amount equal
to $200,000,000 (less the aggregate principal amount of all
Commitment Amount Increases pursuant to Section 1.11 hereof at
any one time outstanding) on terms and conditions reasonably
satisfactory to the Required Lenders including without
limitation that the holders of such indebtedness have entered
into an intercreditor agreement with the Agent in form and
substance reasonably satisfactory to the Required Lenders;
2.12.Section 9.1 of the Credit Agreement is hereby amended by adding thereto
the following new definitions in the appropriate alphabetical locations:
"Additional Lender" is defined in Section 1.11.
"Excess Commitment" is defined in Section 1.10(a).
"Excess Commitment Lenders" means Bank of Montreal, Chicago
Branch, LaSalle Bank National Association and Fleet National
Bank.
"Excess Revolving Commitment Termination Date" means
September 2, 2003 or such earlier date on which the Commitments
are terminated in whole pursuant to Sections 3.5, 3.6, 8.2 or 8.3
hereof or the Excess Commitment is terminated in whole pursuant
to Sections 1.10, 3.5(c) or 3.5(d) hereof.
"Excess Revolving Loan" is defined in Section 1.10(b).
"Excess Revolving Note" is defined in Section 1.10(b).
"Revolving Loan Availability" means, at any time the same is
to be determined, the amount by which the aggregate Commitments
(excluding any Excess Commitments in effect at such time) exceed
the aggregate principal amount of all Revolving Loans (other than
Excess Revolving Loans), Swing Loans and L/C Obligations
outstanding as of such time.
"Unused Excess Commitments" means, at any time, the
difference between the Excess Commitments then in effect and the
aggregate outstanding principal amount of Excess Revolving Loans.
2.13.The Credit Agreement is hereby amended by adding a new Exhibit A-3 and
Exhibit F in the forms attached hereto as Exhibit A-3 and Exhibit F,
respectively.
2.14.Schedules 1.1, 4.2 and 5.2 to the Credit Agreement are hereby amended in
their entireties and as so amended shall be restated to read as set forth
on Schedules 1.1, 4.2 and 5.2 hereto, respectively.
SECTION 3. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
3.1. The Borrowers and the Agent shall have executed this
Amendment (such execution may be in several counterparts and the
several parties hereto may execute on separate counterparts).
3.2. The Agent shall have received an Excess Commitment Note
payable to each Excess Commitment Lender in the amount of such Excess
Commitment Lender's Excess Commitment.
3.3 The Agent shall have received for the account of the Excess
Commitment Lenders payment of the fees agreed to in writing between
the Company, the Agent and the Excess Commitment Lenders.
3.4. The Agent shall have received copies (executed or certified,
as may be appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Amendment and the
Excess Commitment Notes to the extent the Agent or its counsel may
reasonably request.
3.5. Legal matters incident to the execution and delivery of this
Amendment and the Excess Commitment Notes shall be satisfactory to the
Agent and its counsel; and the Agent shall have received the favorable
written opinion of counsel for the Company in form and substance
satisfactory to the Agent and its counsel.
3.6. The Borrowers shall be in full compliance with all of the
terms and conditions of the Loan Documents and no Default or Event of
Default shall have occurred and be continuing thereunder or shall
result after giving effect to this Amendment.
3.7. Each of the Guarantors organized under the laws of the
United States (the "U.S. Guarantors") and currently party to the
Guaranty shall have executed and delivered to the Agent their consent
to this Amendment in the form set forth below.
SECTION 4. EFFECTIVENESS.
Upon satisfaction of the conditions precedent set forth in Section 3 hereof
and the execution hereof by the Required Lenders (the "Amendment Effective
Date"), this Amendment (other than Section 2.4 hereof) shall become effective.
Upon satisfaction of the conditions precedent set forth in Section 3 hereof and
the execution hereof by each of the Lenders (the "Section 2.4 Effective Date"),
this Amendment (including Section 2.4 hereof) shall become effective.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Each of the Borrowers, by its execution of this Amendment, hereby certifies
and warrants the following:
(a) after giving effect to the transactions contemplated hereby
each of the representations and warranties set forth in Section 5 of
the Credit Agreement, as amended hereby, is true and correct as of the
date hereof as if made on the date hereof, except that the
representations and warranties made under Section 5.5 of the Credit
Agreement, as amended hereby, shall be deemed to refer to the most
recent annual report furnished to the Lenders by the Borrowers; and
(b) each of the Borrowers is in full compliance with all of the
terms and conditions of the Credit Agreement and no Default or Event
of Default has occurred and is continuing thereunder.
SECTION 6. NEW SUBSIDIARIES; CANADIAN RESTRUCTURING.
Not less than thirty (30) days following the later of (x) the Amendment
Effective Date and (y) such later date on which the Agent or its counsel
notifies the Company in writing of the documents to be provided in connection
with the following, the Company shall have (i) caused each of the Subsidiaries
acquired or created pursuant to the CES Acquisition to comply with the terms of
Section 7.21 of the Credit Agreement, and (ii) delivered such Collateral
Documents and other documents as may be required pursuant to the Credit
Agreement with respect to the matters set forth in the Company's letter to the
Lenders dated as of May 1, 2003 such that the Company is in compliance with
Sections 4.1, 4.2 and 7.21 of the Credit Agreement. Notwithstanding anything
contained in this Amendment, the Credit Agreement or any other Loan Document to
the contrary, during the above-referenced 30-day period, all references to
"Guarantors" shall be deemed to include only those U.S. Guarantors party to the
Guaranty as of the Amendment Effective Date.
SECTION 7. MISCELLANEOUS.
7.1. The Borrowers and the Guarantors heretofore executed and delivered to the
Agent the Collateral Documents. Each Borrower and Guarantor hereby
acknowledges and agrees that the Liens created and provided for by the
Collateral Documents continue to secure, among other things, the
Obligations arising under the Credit Agreement as amended hereby, including
without limitation the Excess Revolving Loans; and the Collateral Documents
and the rights and remedies of the Agent and the Lenders thereunder, the
obligations of the Borrowers and the Guarantors thereunder, and the Liens
created and provided for thereunder remain in full force and effect and
shall not be affected, impaired or discharged hereby. Nothing herein
contained shall in any manner affect or impair the priority of the liens
and security interests created and provided for by the Collateral Documents
as to the indebtedness which would be secured thereby prior to giving
effect to this Amendment. The Borrowers and the Guarantors heretofore
executed and delivered to the Agent that certain Guaranty Agreement dated
as of September 26, 2002 (the "Guaranty"). Each Borrower and Guarantor
hereby acknowledges and agrees that the "indebtedness hereby guaranteed"
set forth in the Guaranty continues to include, among other things, the
Obligations arising under the Credit Agreement as amended hereby, including
without limitation the Excess Revolving Loans; and the Guaranty and the
rights and remedies of the Agent and the Lenders thereunder, the
Obligations of the Borrowers and the Guarantors thereunder, remain in full
force and effect and shall not be affected, impaired or discharged hereby.
Nothing herein contained shall in any manner affect or impair the
Obligations of the Borrowers and Guarantors under the Guaranty as to the
Indebtedness which would be guaranteed thereby prior to giving effect to
this Amendment.
7.2 No reference to this First Amendment need be made in any Loan Document or
other instrument or document referring to the Credit Agreement, a reference
to the Credit Agreement in any of such to be deemed to be a reference to
the Credit Agreement as amended hereby. The Borrowers hereby certify to the
Lenders that no Default or Event of Default has occurred and is continuing.
This First Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, all of such counterparts
taken together to be deemed to constitute one and the same instrument. This
First Amendment shall be construed in accordance with and governed by the
internal laws of the state of Illinois.
7.3. Each of the Borrowers hereby agree to pay all reasonable costs and
expenses, including without limitation attorneys fees, incurred by the
Agent and each of the Lenders in connection with the preparation,
negotiation, execution and delivery of this Amendment and the other
documents contemplated hereby.
[SIGNATURE PAGES TO FOLLOW]
Dated as of this ___ day of June, 2003.
EMCOR GROUP, INC.
By
Its___________________________________________________
COMSTOCK CANADA LTD.
By
Its___________________________________________________
EMCOR DRAKE & SCULL GROUP PLC.
By
Its___________________________________________________
Signature Page to First Amendment to Credit Agreement
Accepted and agreed to as of the day and years last above written.
HARRIS TRUST AND SAVINGS BANK, individually and as Agent
By
Its____________________________________________________
LASALLE BANK NATIONAL ASSOCIATION
By
Its____________________________________________________
UNION BANK OF CALIFORNIA, N.A.
By
Its____________________________________________________
FLEET NATIONAL BANK
By
Its____________________________________________________
NATIONAL CITY BANK
By
Its____________________________________________________
BANK ONE, N.A.
By
Its____________________________________________________
SOVEREIGN BANK
By
Its____________________________________________________
WEBSTER BANK
By
Its____________________________________________________
Signature Page to First Amendment to Credit Agreement
U.S. BANK, NATIONAL ASSOCIATION
By
Its____________________________________________________
_
BANK OF MONTREAL
By
Its____________________________________________________
115 South LaSalle Street
Chicago, Illinois 60603
Attention: ___________________
Signature Page to First Amendment to Credit Agreement
GUARANTOR'S CONSENT
The undersigned have heretofore executed and delivered to the Lenders an
Amended and Restated Guaranty Agreement dated September 26, 2002 (the
"Guaranty"), pursuant to which the undersigned have jointly and severally
guaranteed all of the indebtedness, obligations and liabilities of EMCOR Group,
Inc, Comstock Canada Ltd., and EMCOR Drake & Scull Group plc. owing to the Agent
and the Lenders. The undersigned hereby agree that the Borrowers and the Lenders
may enter into the foregoing First Amendment and the transactions contemplated
thereby, and that the foregoing First Amendment shall not in any way affect or
impair or modify the terms or provisions of, or the obligations of the
undersigned under, the Guaranty. The undersigned further agree that their
consent to any further amendments to the Loan Documents, or to the foregoing
Amendment or any other documents which the Lenders and the Borrowers may enter
into from time to time hereafter, shall not be required as a result of this
consent having been obtained.
EMCOR GROUP, INC.
By _____________________________________________________
Its____________________________________________________
DYN SPECIALTY CONTRACTING, INC.
By _____________________________________________________
Its____________________________________________________
DYNALECTRIC COMPANY
By _____________________________________________________
Its____________________________________________________
DYNALECTRIC COMPANY OF NEVADA
By _____________________________________________________
Its____________________________________________________
CONTRA COSTA ELECTRIC, INC.
By _____________________________________________________
Its____________________________________________________
B & B CONTRACTING & SUPPLY COMPANY
By _____________________________________________________
Its____________________________________________________
KDC INC.
By _____________________________________________________
Its____________________________________________________
EMCOR CONSTRUCTION HOLDING SERVICES, INC.
By _____________________________________________________
Its____________________________________________________
EMCOR MECHANICAL/ELECTRICAL SERVICES (EAST), INC.
By _____________________________________________________
Its____________________________________________________
WELSBACH ELECTRIC CORP.
By _____________________________________________________
Its____________________________________________________
FOREST ELECTRIC CORP.
By _____________________________________________________
Its____________________________________________________
EMCOR MECHANICAL/ELECTRICAL SERVICES (MIDWEST), INC.
By _____________________________________________________
Its____________________________________________________
EMCOR MIDWEST, INC.
By _____________________________________________________
Its____________________________________________________
EMCOR MECHANICAL/ELECTRICAL SERVICES (WEST), INC.
By _____________________________________________________
Its____________________________________________________
NEWCOMB ANDERSON ASSOCIATES
By _____________________________________________________
Its____________________________________________________
EMCOR MECHANICAL/ELECTRICAL SERVICES (SOUTH), INC.
By _____________________________________________________
Its____________________________________________________
EMCOR GOWAN, INC.
By _____________________________________________________
Its____________________________________________________
EMCOR INTERNATIONAL INC.
By _____________________________________________________
Its____________________________________________________
INTE-FAC CORP.
By _____________________________________________________
Its____________________________________________________
ZACK POWER & INDUSTRIAL COMPANY
By _____________________________________________________
Its____________________________________________________
MES HOLDINGS CORPORATION
By _____________________________________________________
Its____________________________________________________
UNIQUE CONSTRUCTION COMPANY
By _____________________________________________________
Its___________________________________________________
_
FORTI/POOLE AND KENT, L.L.C.
By _____________________________________________________
Its____________________________________________________
CSUSA HOLDINGS L.L.C.
By _____________________________________________________
Its____________________________________________________
CS48 ACQUISITION CORP.
By _____________________________________________________
Its____________________________________________________
SHAMBAUGH & SON, L.P.
By _____________________________________________________
Its____________________________________________________
BORDER ELECTRIC CO., L.P.
By _____________________________________________________
Its____________________________________________________
BORDER MECHANICAL CO., L.P.
By _____________________________________________________
Its____________________________________________________
DYNALECTRIC COMPANY OF OHIO
HERITAGE AIR SYSTEMS INC.
EMCOR TECHNOLOGIES, INC.
WELSBACH ELECTRIC CORP. OF L.I.
PENGUIN MAINTENANCE AND SERVICES INC.
PENGUIN AIR CONDITIONING CORP.
R. S. HARRITAN & COMPANY, INC.
J.C. HIGGINS CORP.
LABOV MECHANICAL, INC.
LABOV PLUMBING, INC.
DUFFY MECHANICAL CORP.
JWP/HYRE ELECTRIC CO. OF INDIANA, INC.
GIBSON ELECTRIC CO., INC.
DYNALECTRIC OF MICHIGAN, INC.
MESA ENERGY SYSTEMS, INC.
UNIVERSITY MECHANICAL & ENGINEERING CONTRACTORS, INC.,
a California corporation
PACE MECHANICAL SERVICES, INC.
NORTHERN O & M CONSULTING GROUP, INC.
THE FRED B. DEBRA CO.
UNIVERSITY MECHANICAL & ENGINEERING CONTRACTORS, INC.,
an Arizona corporation
HANSEN MECHANICAL CONTRACTORS, INC.
TRAUTMAN & SHREVE, INC.
MARELICH MECHANICAL CO., INC.
DESIGN AIR, LIMITED
EMCOR FACILITIES SERVICES, INC.
F.J. O'TOOLE COMPANY
BALCO, INC.
BUILDING TECHNOLOGY ENGINEERS, INC.
ROLLINS, KING & MCKONE & ASSOCIATES, INC.
BTE SERVICE, INC.
MONUMENTAL INVESTMENT CORPORATION
THE POOLE AND KENT CORPORATION
POOLE AND KENT-CONNECTICUT, INC.
POOLE AND KENT - NEW ENGLAND, INC.
MONUMENTAL HEATING, VENTILATING AND AIR CONDITIONING CONTRACTORS, INC.
ENVIRONMENTAL ENGINEERING COMPANY
HVAC, LTD.
ATLANTIC COAST MECHANICAL, INC.
GREAT MONUMENT CONSTRUCTION COMPANY
THE POOLE AND KENT COMPANY
POOLE AND KENT DISTRIBUTORS, INC.
EMCOR-CSI HOLDING CO.
AMERICAN MECHANICAL INC.
CENTRAL MECHANICAL CONSTRUCTION CO., INC.
E.L. PRUITT COMPANY
F & G MECHANICAL CORPORATION
F & G PLUMBING, INC.
GOTHAM AIR CONDITIONING SERVICE, INC.
HILLCREST SHEET METAL, INC.
KILGUST MECHANICAL, INC.
KUEMPEL SERVICE, INC.
LOWRIE ELECTRIC COMPANY, INC.
MANDELL MECHANICAL CORPORATION
MAXIMUM REFRIGERATION & AIR CONDITIONING CORP.
MEADOWLANDS FIRE PROTECTION CORP.
NOGLE & BLACK MECHANICAL, INC.
NORTH JERSEY MECHANICAL CONTRACTORS, INC.
TEMPRITE AIR CONDITIONING AND REFRIGERATION, INC.
THE FAGAN COMPANY
WALKER-J-WALKER, INC.
By _____________________________________________________
Its____________________________________________________
2-
EXHIBIT A-3
EXCESS COMMITMENT NOTE
_________________, 2003
For value received, the undersigned, _____________________, a
________________ corporation ("Borrower"), hereby promises to pay to the order
of ________________________ ______________________ (the "Lender"), at the
principal office of Harris Trust and Savings Bank in Chicago, Illinois, in the
currency of each Excess Revolving Loan evidenced hereby in accordance with
Section 1 of the Credit Agreement, the aggregate unpaid principal amount of each
Excess Revolving Loan made by the Lender to the Borrower pursuant to the Credit
Agreement on the due date therefore as specified in the Credit Agreement,
together with interest on the principal amount of each Excess Revolving Loan
from time to time outstanding hereunder at the rates, and payable in the manner
and on the dates specified in the Credit Agreement.
The Lender shall record on its books or records or on a schedule attached
to this Note, which is a part hereof, each Excess Revolving Loan made by it
pursuant to the Credit Agreement, any repayment of principal and interest and
the principal balances from time to time outstanding hereon, and the currency in
which made, provided that prior to the transfer of this Note all such amounts
shall be recorded on a schedule attached to this Note. The record thereof,
whether shown on such books or records or on a schedule to this Note, shall be
prima facie evidence of the same, provided, however, that the failure of the
Lender to record any of the foregoing or any error in any such record shall not
limit or otherwise affect the obligation of the Borrower to repay all Excess
Revolving Loans made to it pursuant to the Credit Agreement together with
accrued interest thereon.
This Note is one of the Excess Commitment Notes referred to in the Credit
Agreement dated as of September 26, 2002, among the Borrowers, Harris Trust and
Savings Bank, as Agent, and the Lenders from time to time party thereto, as
amended (the "Credit Agreement"), and this Note and the holder hereof are
entitled to all the benefits provided for thereby or referred to therein, to
which Credit Agreement reference is hereby made for a statement thereof. All
defined terms used in this Note, except terms otherwise defined herein, shall
have the same meaning as in the Credit Agreement.
This Note is issued by the Borrower under the terms and provisions of the
Credit Agreement and is secured by the Collateral Documents, and this Note and
the holder hereof are entitled to all of the benefits and security provided for
thereby or referred to therein, to which reference is hereby made for a
statement thereof. This Note may be declared to be, or be and become, due prior
to its expressed maturity, voluntary prepayments may be made hereon, and certain
prepayments are required to be made hereon, all in the events, on the terms and
with the effects provided in the Credit Agreement.
This Note shall be construed in accordance with, and governed by, the
internal laws of the State of Illinois without regard to principles of conflicts
of law.
The Borrower hereby promises to pay all costs and expenses (including
attorneys' fees) suffered or incurred by the holder hereof in collecting this
Note or enforcing any rights in any collateral herefor. The Borrower hereby
waives presentment for payment and demand.
________________________________________________________
By _____________________________________________________
Its____________________________________________________
F-3
EXHIBIT F
COMMITMENT AMOUNT INCREASE REQUEST
_______________, 2003
Harris Trust and Savings Bank,
as Agent (the "Agent")
for the Lenders referred to below
111 West Monroe Street
Chicago, Illinois 60603
Attention: _______________
Re: Credit Agreement dated as of September 26, 2002
among EMCOR Group, Inc., the Lenders party thereto and
Harris Trust and Savings Bank, as Agent
(as amended, modified or supplemented from
time to time, the "Credit Agreement"),
-------------------------------------------------------
Ladies and Gentlemen:
In accordance with the Credit Agreement, the Company hereby requests that
the Agent consent to an increase in the aggregate Commitments (the "Commitment
Amount Increase"), in accordance with Section 1.11 of the Credit Agreement, to
be effected by [an increase in the Commitment of [name of existing Lender] the
addition of [name of Additional Lender] (the "Additional Lender") as a Lender
under the terms of the Credit Agreement]. Capitalized terms used herein without
definition shall have the same meanings herein as such terms have in the Credit
Agreement.
After giving effect to such Commitment Amount Increase, and upon the
effectiveness of the Commitment Amount Increase, the Commitment of [the Lender
increasing its Commitment] [the Additional Lender] will be as set forth on
Attachment I hereto.
[Include paragraphs 1-4 for an Additional Lender]
1. The Additional Lender hereby confirms that it has received a copy of the
Credit Agreement and the exhibits and schedules related thereto, together with
copies of the documents which were required to be delivered under the Credit
Agreement as a condition to the making of the Loans and other extensions of
credit thereunder. The Additional Lender acknowledges and agrees that it has
made and will continue to make, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it has
deemed appropriate, its own credit analysis and decisions relating to the Credit
Agreement. The Additional Lender further acknowledges and agrees that the Agent
has not made any representations or warranties about the credit worthiness of
the Company or any other party to the Credit Agreement or with respect to the
legality, validity, sufficiency or enforceability of the Credit Agreement or the
value of any security therefor.
2. Except as otherwise provided in the Credit Agreement, effective as of
the date of acceptance hereof by the Agent, the Additional Lender (i) shall be
deemed automatically to have become a party to the Credit Agreement and have all
the rights and obligations of a "Lender" under the Credit Agreement as if it
were an original signatory thereto and (ii) agrees to be bound by the terms and
conditions set forth in the Credit Agreement as if it were an original signatory
thereto.
3. The Additional Lender hereby advises you of the following administrative
details with respect to its Loans and Commitment:
(A) Notices:
Institution Name:_________________
Address: _______________________
_______________________
Telephone: ______________________
Facsimile: ______________________
(B) Payment Instructions:
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
The Commitment Amount Increase shall be effective when the executed consent
of the Agent is received or otherwise in accordance with Section 1.11 of the
Credit Agreement, but not in any case prior to ___________________, ____. It
shall be a condition to the effectiveness of the Commitment Amount Increase that
(i) all fees and expenses referred to in Section 1.11 of the Credit Agreement
shall have been paid and (ii) no Eurodollar Loans shall be outstanding on the
date of such effectiveness.
The Company hereby certifies that no Default or Event of Default has
occurred and is continuing.
Please indicate the Agent's consent to such Commitment Amount Increase by
signing the enclosed copy of this letter in the space provided below.
Very truly yours,
EMCOR GROUP, INC.
By _____________________________________________________
Name:__________________________________________________
Title:_________________________________________________
[ADDITIONAL LENDER/LENDER INCREASING COMMITMENTS]
By:_____________________________________________________
Name:__________________________________________________
Title:_________________________________________________
The undersigned hereby consents on this __ day of _____________, ___ to the
above-requested Commitment Amount Increase.
HARRIS TRUST AND SAVINGS BANK,
as Agent
By:_____________________________________________________
Name:__________________________________________________
Title:_________________________________________________
-9-
ATTACHMENT I
LENDER COMMITMENT
SCHEDULE 1.1
COMMITMENTS
LENDER COMMITMENT PERCENTAGE
- ------ ---------- ----------
Harris Trust and Savings Bank $65,000,000 23.6363636364%
Fleet National Bank $50,000,000 18.1818181819%
LaSalle National Bank $40,000,000 14.5454545454%
Bank One, Arizona, N.A. $25,000,000 9.0909090909%
Sovereign Bank $25,000,000 9.0909090909%
U.S. Bank, National Association $25,000,000 9.0909090909%
Union Bank of California $20,000,000 7.2727272727%
National City Bank $15,000,000 5.4545454545%
Webster Bank $10,000,000 3.6363636364%
EXCESS COMMITMENTS
LENDER EXCESS COMMITMENT PERCENTAGE
- ------ ----------------- ----------
Bank of Montreal $30,500,000 61%
Fleet National Bank $9,500,000 19%
LaSalle National Bank $10,000,000 20%
SCHEDULE 4.2
THE GUARANTORS
GUARANTORS
JURISDICTION OF PERCENTAGE
NAME INCORPORATION OWNERSHIP OWNER
EMCOR Group, Inc. Delaware
Consolidated Engineering Services, Inc. Maryland 100% EMCOR Facilities Services,
Inc.
AAS Environmental, Inc. Delaware 100% Consolidated Engineering
Services, Inc.
Aircond Corporation Georgia 100% Consolidated Engineering
Services, Inc.
The Betlem Service Corporation New York 100% Consolidated Engineering
Services, Inc.
CES Facilities Management Services, Inc. Maryland 100% Consolidated Engineering
Services, Inc.
Combustioneer Corporation Maryland 100% Consolidated Engineering
Services, Inc.
Commonwealth Air Conditioning Massachusetts 100% Consolidated Engineering
and Heating, Inc. Services, Inc.
Hayes Mechanical, Inc. Illinois 100% Consolidated Engineering
Services, Inc.
Illingworth Corporation Wisconsin 100% Consolidated Engineering
Services, Inc.
New England Mechanical Massachusetts 100% Consolidated Engineering
Services of Massachusetts, Inc. Services, Inc.
New England Mechanical Massachusetts 100% Consolidated Engineering
Services, Inc. Services, Inc.
Trimech Corporation New Jersey 100% Consolidated Engineering
Services, Inc.
Trimech Plumbing, L.L.C. Delaware 90% Consolidated Engineering
Services, Inc.
Viox Services, Inc. Ohio 100% Consolidated Engineering
Services, Inc.
DYN Specialty Contracting, Inc. Virginia 100% EMCOR Construction Holding
Services, Inc.
Dynalectric Company Delaware 100% DYN Specialty Contracting, Inc.
Dynalectric Company of Nevada Nevada 100% DYN Specialty Contracting, Inc.
Contra Costa Electric, Inc. California 100% DYN Specialty Contracting, Inc.
B&B Contracting & Supply Company Texas 100% DYN Specialty Contracting, Inc.
KDC Inc. California 100% DYN Specialty Contracting, Inc.
EMCOR Construction Holding Delaware 100% MES Holding Corp.
Services, Inc.
EMCOR Mechanical/Electrical Delaware 100% EMCOR Construction Holding
Services (East), Inc. Services, Inc.
Heritage Air Systems Inc. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Welsbach Electric Corp Delaware 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Forest Electric Corp. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Welsbach Electric Corp. of L.I. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Penguin Maintenance and Delaware 100% EMCOR Mechanical/Electrical
Services, Inc. Services (East), Inc.
Penguin Air Conditioning Corp. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
R.S. Harritan & Company, Inc. Virginia 100% EMCOR Mechanical/Electrical
Services (East), Inc.
J.C. Higgins Corp. Delaware 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Labov Mechanical, Inc. Delaware 100% J.C. Higgins Corp.
Labov Plumbing, Inc. Delaware 90% Labov Mechanical, Inc.
Duffy Mechanical Corp. Maryland 100% EMCOR Mechanical/Electrical
Services (East), Inc.
EMCOR Mechanical/Electrical Delaware 100% EMCOR Construction Holding
Services(Midwest), Inc. Services, Inc.
JWP/Hyre Electric Co. of Delaware 100% EMCOR Mechanical/Electrical
Indiana, Inc. ServiceS, Inc.
Dynalectric Company of Ohio Ohio 100% EMCOR Mechanical/Electrical
Services (Midwest), Inc.
EMCOR Midwest, Inc. Delaware 100% EMCOR Mechanical/Electrical
Services (Midwest), Inc.
Unique Construction Company Illinois 100% Gibson Electric Co., Inc.
Gibson Electric Co., Inc. New Jersey 100% EMCOR Midwest, Inc.
EMCOR Mechanical/Electrical Delaware 100% EMCOR Construction Holding
Service(West), Inc. Services, Inc.
Dynalectric of Michigan, Inc. Delaware 100% EMCOR Mechanical/Electrical
(formerly John Miller Electric Company) Services (Midwest), Inc.
University Mechanical & Engineering California 100% EMCOR Mechanical.Electrical
Contractors, Inc. Services (West), Inc.
Pace Mechanical Services, Inc. Michigan 100% University Mechanical & Engineering
Contractors Inc.
Northern O & M Consulting California 100% EMCOR Facilities Services, Inc.
Group, Inc.
Newcomb Anderson Associates California 100% EMCOR Facilities Services, Inc.
UMS Facilities Consulting, Inc. Delaware 100% EMCOR Facilities Services, Inc.
The Fred B. DeBra Co. Delaware 100% EMCOR Mechanical/Electrical
Services (Midwest), Inc.
University Mechanical & Engineering Arizona 100% University Mechanical & Engineering
Contractors, Inc. Contractors Inc., a California corporation
Hansen Mechanical Contractors, Nevada 100% University Mechanical & Engineering
Inc. Contractors Inc., a California corporation
Trautman & Shreve, Inc. Colorado 100% University Mechanical & Engineering
Contractors Inc., a California corporation
EMCOR Mechanical/Electrical Services Delaware 100% EMCOR Construction Holding
(South), Inc. Services, Inc.
EMCOR Gowan, Inc. Texas 100% EMCOR Mechanical/Electrical
Services (South), Inc.
EMCOR International, Inc. Delaware 100% MES Holdings Corporation
Marelich Mechanical Co., Inc. California 100% EMCOR Mechanical/Electrical
Services (West), Inc.
Design Air, Limited Washington 100% EMCOR Mechanical/Electrical
Services (West), Inc.
Inte-Fac Corp. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Zack Power & Industrial Company Delaware 100% EMCOR Mechanical/Electrical
Services (East), Inc.
EMCOR Facilities Services, Inc. Delaware 100% MES Holdings Corporation
Mesa Energy Systems, Inc. California 100% EMCOR Facilities Services, Inc.
BALCO, Inc. Massachusetts 100% EMCOR Facilities Services, Inc.
Building Technology Engineers, Inc. Massachusetts 100% EMCOR Facilities Services, Inc.
Rollins, King & McKone & Associates, Inc. New Hampshire 100% EMCOR Facilities Services, Inc.
BTE Service, Inc. Massachusetts 100% EMCOR Facilities Services, Inc.
EMCOR Energy & Technologies, Inc. Delaware 100% MES Holdings Corporation
Monumental Investment Corporation Maryland 100% MES Holdings Corporation
The Poole and Kent Corporation Maryland 100% Monumental Investment Corporation
Poole and Kent - Connecticut, Inc. Maryland 100% Monumental Investment Corporation
Poole and Kent - New England, Inc. Maryland 100% Monumental Investment Corporation
Monumental Heating, Ventilating and Air Maryland 100% Monumental Investment Corporation
Conditioning Contractors, Inc.
Forti/Poole and Kent, L.L.C. Maryland 100% Monumental Heating, Ventilating and Air
Conditioning Company, Inc.
Environmental Engineering Company Marland 100% Monumental Investment Corporation
HVAC, Ltd. Maryland 100% Monumental Investment Corporation
Atlantic Coast Mechanical, Inc. Maryland 100% HVAC, Ltd.
Great Monument Construction Company Maryland 100% HVAC, Ltd.
The Poole and Kent Company Maryland 100% Monumental Investment Corporation
Poole and Kent Distributors, Inc. Maryland 100% The Poole and Kent Company
EMCOR-CSI Holding Co. Delaware 100% MES Holdings Corporation
CSUSA Holdings L.L.C. Delaware 100% EMCOR CSI Holding Co.
CS48 Acquisition Corp. Delaware 100% CSUSA Holdings, LLC
Shambaugh & Son, L.P. Texas General CSUSA Holdings, LLC
Partner
Shambaugh & Son, L.P. Texas Limited CS48 Acquistions Corp.
Partner
Border Electric Co., L.P. Texas General CSUSA Holdings, LLC
Partner
Border Electric Co., L.P. Texas Limited CS48 Acquisition Corp.
Partner
Border Mechanical Co., L.P. Texas General CSUSA Holdings, LLC
Partner
Border Mechanical Co., L.P. Texas Limited CS48 Acquisition Corp.
Partner
American Mechanical Inc. Michigan 100% EMCOR CSI Holding Co.
Central Mechanical Construction Delaware 100% EMCOR CSI Holding Co.
Co., Inc.
E. L. Pruitt Company Delaware 100% EMCOR CSI Holding Co.
F & G Mechanical Corporation Delaware 100% EMCOR CSI Holding Co.
F & G Plumbing, Inc. New Jersey 100% F & G Mechanical Corporation
Gotham Air Conditioning Service, Inc. Delaware 100% EMCOR CSI Holding Co.
Hillcrest Sheet Metal, Inc. Delaware 100% EMCOR CSI Holding Co.
Kilgust Mechanical, Inc. Delaware 100% EMCOR CSI Holding Co.
Kuempel Service, Inc. Ohio 100% EMCOR CSI Holding Co.
Lowrie Electric Company, Inc. Tennessee 100% EMCOR CSI Holding Co.
Mandell Mechanical Corporation New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Maximum Refrigeration & Air Delaware 100% EMCOR CSI Holding Co.
Conditioning Corp.
Meadowlands Fire Protection Corp. New Jersey 100% EMCOR CSI Holding Co.
Nogle & Black Mechanical, Inc. Delaware 100% EMCOR CSI Holding Co.
North Jersey Mechanical Contractors, Inc. New Jersey 100% EMCOR CSI Holding Co.
Temprite Air Conditioning and Delaware 100% EMCOR CSI Holding Co.
Refrigeration, Inc.
The Fagan Company Kansas 100% EMCOR CSI Holding Co.
Walker-J-Walker, Inc. Tennessee 100% EMCOR CSI Holding Co.
MES Holdings Corporation Delaware 100% EMCOR Group, Inc.
EMCOR (UK) Limited UK 100% EMCOR International Inc.
EMCOR Drake & Scull Group plc UK 100% EMCOR (UK) Limited
Drake & Scull Airport Services, Ltd. UK 100% EMCOR Drake & Scull Group plc
EMCOR Facilities Services Ltd. UK 100% EMCOR Drake & Scull Group plc
Drake & Scull Engineering (UK) Limited UK 100% EMCOR Drake & Scull Group plc
Drake & Scull International, Ltd. UK 100% EMCOR Drake & Scull Group plc
EMCOR Rail Ltd. UK 100% EMCOR Drake & Scull Group plc
EMCOR Drake & Scull Ltd. UK 100% EMCOR Drake & Scull Group plc
Drake & Scull Holdings Ltd. UK 100% EMCOR Drake & Scull Group plc
Delcommerce (Contract Services) ltd. UK 100% EMCOR Drake & Scull Group plc
Drake & Scull (Scotland) Ltd. UK 100% EMCOR (UK) Limited
DSE (Far East) Ltd. UK 100% EMCOR Drake & Scull Group plc
BL Distribution UK 100% EMCOR (UK) Ltd.
Drake & Scull Properties, Ltd. UK 100% EMCOR (UK) Ltd.
Businessland Holdings Ltd. UK 100% EMCOR Drake & Scull Group plc
Langgit Tinggi Sdn Bhd* Malaysia 100% EMCOR (UK) Limited
Drake & Scull France EURL* France 100% EMCOR (UK) Limited
Drake & Scull (Cayman Islands) Ltd* Cayman Islands 100% EMCOR International, Inc.
JWP Technical Services Malaysia 100% EMCOR International, Inc.
(Malaysia) Sdn Bhd*
University Mechanical deMexico Mexico 98% University Mechanical & Engineering
Contractors Inc.
EMCOR Canada Ltd. Canada 100% EMCOR International, Inc.
EMCOR Holdings LP Canada 100% 3072455 Nova Scotia Company
JWP NRO Holdings, Inc. Canada 100% EMCOR Holdings LP
3072455 Nova Scotia Company Canada 100% EMCOR International, Inc.
Comstock Canada, Ltd. Canada 100% 3072454 Nova Scotia Company
3072454 Nova Scotia Company Canada 100% EMCOR International, Inc.
Comstock Power Ltd. Canada 100% Comstock Canada, Ltd.
SCHEDULE 5.2
RESTRICTED SUBSIDIARIES
JURISDICTION OF PERCENTAGE
NAME INCORPORATION OWNERSHIP OWNER
AAS Environmental, Inc. Delaware 100% Consolidated Engineering
Services, Inc.
Aircond Corporation Georgia 100% Consolidated Engineering
Services, Inc.
Aircond-Atlanta Corporation Georgia 100% Consolidated Engineering
Services, Inc.
The Betlem Service Corporation New York 100% Consolidated Engineering
Services, Inc.
CES Facilities Management Services, Inc. Maryland 100% Consolidated Engineering
Services, Inc.
Combustioneer Corporation Maryland 100% Consolidated Engineering
Services, Inc.
Commonwealth Air Conditioning Massachusetts 100% Consolidated Engineering
and Heating, Inc. Services, Inc.
Consolidated Engineering Services, Inc. Maryland 100% EMCOR Facilities Services, Inc.
Hayes Mechanical, Inc. Illinois 100% Consolidated Engineering
Services, Inc.
Illingworth Corporation Wisconsin 100% Consolidated Engineering
Services, Inc.
New England Mechanical Services Massachusetts 100% Consolidated Engineering
of Massachusetts, Inc. Services, Inc.
New England Mechanical Services, Inc. Connecticut 100% Consolidated Engineering
Services, Inc.
Trimech Corporation New Jersey 100% Consolidated Engineering
Services, Inc.
Trimech Plumbing, L.L.C. Delaware 90% Consolidated Engineering
Services, Inc.
Viox Services, Inc. Ohio 100% Consolidated Engineering
Services, Inc.
DYN Specialty Contracting, Inc. Virginia 100% EMCOR Construction Holding
Services, Inc.
Dynalectric Company Delaware 100% DYN Specialty Contracting, Inc.
Dynalectric Company of Nevada Nevada 100% DYN Specialty Contracting, Inc.
Contra Costa Electric, Inc. California 100% DYN Specialty Contracting, Inc.
B&B Contracting & Supply Company Texas 100% DYN Specialty Contracting, Inc.
KDC Inc. California 100% DYN Specialty Contracting, Inc.
EMCOR Construction Holding Delaware 100% MES Holdings Corp.
Services, Inc.
Defender Indemnity, Ltd. Vermont 100% EMCOR Risk Holdings, Inc.
EMCOR Risk Holdings, Inc. Delaware 100% MES Holdings Corp.
EMCOR Mechanical/Electrical Delaware 100% EMCOR Construction Holding
Services (East), Inc. Services, Inc.
Heritage Air Systems Inc. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Welsbach Electric Corp. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Forest Electric Corp. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Welsbach Electric Corp. of L.I. New York 100 EMCOR Mechanical/Electrical
Services (East), Inc.
Penguin Maintenance and Services, Inc. Delaware 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Inte-Fac Corp. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Penguin Air Conditioning Corp. New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
R.S. Harritan & Company, Inc. Virginia 100% EMCOR Mechanical/Electrical
Services (East), Inc.
J.C. Higgins Corp. Delaware 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Labov Mechanical, Inc. Delaware 100% J.C. Higgins Corp.
Labov Plumbing, Inc. Delaware 90% Labov Mechanical, Inc.
Duffy Mechanical Corp. Maryland 100% EMCOR Mechanical/Electrical
Services (East), Inc.
EMCOR Facilities Services, Inc. Delaware 100% MES Holdings Corp.
Mesa Energy Systems, Inc. California 100% EMCOR Facilities Services, Inc.
Northern O & M Consulting Group, Inc. California 100% EMCOR Facilities Services, Inc.
Newcomb Anderson Associates California 100% EMCOR Facilities Services, Inc.
UMS Facilities Consulting, Inc. Delaware 100% EMCOR Facilities Services, Inc.
EMCOR Mechanical/Electrical Delaware 100% EMCOR Construction Holding
Services (Midwest), Inc. Services, Inc.
JWP/Hyre Electric Co. of Indiana, Inc. Delaware 100% EMCOR Mechanical/Electrical
Services, Inc.
Dynalectric Company of Ohio Ohio 100% EMCOR Mechanical/Electrical
Services (Midwest), Inc.
Dynalectric of Michigan, Inc. Delaware 100% EMCOR Mechanical/Electrical
(Formerly known as John Miller Services (Midwest), Inc.
Electric Company)
EMCOR Midwest, Inc. Delaware 100% EMCOR Mechanical/Electrical
Services (Midwest), Inc.
Gibson Electric Co., Inc. New Jersey 100% EMCOR Midwest, Inc.
Unique Construction Company Illinois 100% Gibson Electric Co., Inc.
The Fred B. DeBra Co. Delaware 100% EMCOR Mechanical/Electrical
Services (Midwest), Inc.
Zack Power & Industrial Company Delaware 100% EMCOR Mechanical/Electrical
Services (Midwest), Inc.
EMCOR Mechanical/Electrical Delaware 100% EMCOR Construction Holding
Service (West), Inc. Services, Inc.
University Mechanical & California 100% EMCOR Mechanical/Electrical
Engineering Contractors, Inc. Services (West), Inc.
Pace Mechanical Services, Inc. Michigan 100% University Mechanical &
Engineering Contractors Inc.
University Mechanical & Arizona 100% University Mechanical &
Engineering Contractors, Inc. Engineering Contractors, Inc.,
a California corporation
MES Holdings Corp. Delaware 100% EMCOR Group, Inc.
Hansen Mechanical Contractors, Inc. Nevada 100% University Mechanical &
Engineering Contractors, Inc.,
a California corporation
Trautman & Shreve, Inc. Colorado 100% University Mechanical &
Engineering Contractors, Inc.,
a California corporation
Marelich Mechanical Co., Inc. California 100% EMCOR Mechanical/Electrical
Services (West), Inc.
Design Air, Limited Washington 100% EMCOR Mechanical/Electrical
Services (West), Inc.
EMCOR Mechanical/Electrical Delaware 100% EMCOR Construction Holding
Services (South), Inc. Services, Inc.
EMCOR Gowan, Inc. Texas 100% EMCOR Mechanical/Electrical
Services (South), Inc.
EMCOR International Inc. Delaware 100% MES Holdings Corp.
EMCOR Energy & Technologies, Inc. Delaware 100% MES Holdings Corp.
Building Technology Engineers of Delaware 51% EMCOR Facilities Services, Inc.
North America, LLC
BALCO, Inc. Massachusetts 100% EMCOR Facilities Services, Inc.
Building Technology Engineers, Inc. Massachusetts 100% EMCOR Facilities Services, Inc.
Rollins, King & McKone & New Hampshire 100% EMCOR Facilities Services, Inc.
Associates, Inc.
BTE Service, Inc. Massachusetts 100% EMCOR Facilities Services, Inc.
Monumental Investment Corporation Maryland 100% MES Holdings Corporation
The Poole and Kent Corporation Maryland 100% Monumental Investment Corporation
Poole and Kent - Connecticut, Inc. Maryland 100% Monumental Investment Corporation
Poole and Kent - New England, Inc. Maryland 100% Monumental Investment Corporation
Monumental Heating, Ventilating Maryland 100% Monumental Investment Corporation
and Air Conditioning Contractors, Inc.
Forti/Poole and Kent, L.L.C. Maryland 100% Monumental Heating, Ventilating
and Air Conditioning Conpany, Inc.
Environmental Engineering Company Maryland 100% Monumental Investment Corporation
HVAC, Ltd. Maryland 100% Monumental Investment Corporation
Atlantic Coast Mechanical, Inc. Maryland 100% HVAC, Ltd.
Great Monument Construction Company Maryland 100% HVAC, Ltd.
The Poole and Kent Company Maryland 100% Monumental Investment Corporation
Poole and Kent Distributors, Inc. Maryland 100% The Poole and Kent Company
EMCOR-CSI Holding Co. Delaware 100% MES Holdings Corporation
CSUSA Holdings L.L.C. Delaware 100% EMCOR CSI Holding Co.
CS48 Acquisition Corp. Delaware 100% CSUSA Holdings, LLC
Shambaugh & Son, L.P. Texas General CSUSA Holdings, LLC
Partner
Shambaugh & Son, L.P. Texas Limited CS48 Acquistions Corp.
Partner
Border Electric Co., L.P. Texas General CSUSA Holdings, LLC
Partner
Border Electric Co., L.P. Texas Limited CS48 Acquisition Corp.
Partner
Border Mechanical Co., L.P. Texas General CSUSA Holdings, LLC
Partner
Border Mechanical Co., L.P. Texas Limited CS48 Acquisition Corp.
Partner
American Mechanical Inc. Michigan 100% EMCOR CSI Holding Co.
Central Mechanical Construction Delaware 100% EMCOR CSI Holding Co.
Co., Inc.
E. L. Pruitt Company Delaware 100% EMCOR CSI Holding Co.
F & G Mechanical Corporation Delaware 100% EMCOR CSI Holding Co.
F & G Plumbing, Inc. New Jersey 100% F & G Mechanical Corporation
Gotham Air Conditioning Service, Inc. Delaware 100% EMCOR CSI Holding Co.
Hillcrest Sheet Metal, Inc. Delaware 100% EMCOR CSI Holding Co.
Kilgust Mechanical, Inc. Delaware 100% EMCOR CSI Holding Co.
Kuempel Service, Inc. Ohio 100% EMCOR CSI Holding Co.
Lowrie Electric Company, Inc. Tennessee 100% EMCOR CSI Holding Co.
Mandell Mechanical Corporation New York 100% EMCOR Mechanical/Electrical
Services (East), Inc.
Maximum Refrigeration & Air Delaware 100% EMCOR CSI Holding Co.
Conditioning Corp.
Meadowlands Fire Protection Corp. New Jersey 100% EMCOR CSI Holding Co.
Nogle & Black Mechanical, Inc. Delaware 100% EMCOR CSI Holding Co.
North Jersey Mechanical Contractors, Inc. New Jersey 100% EMCOR CSI Holding Co.
Temprite Air Conditioning and Delaware 100% EMCOR CSI Holding Co.
Refrigeration, Inc.
The Fagan Company Kansas 100% EMCOR CSI Holding Co.
Walker-J-Walker, Inc. Tennessee 100% EMCOR CSI Holding Co.
EMCOR Canada Ltd. Canada 100% EMCOR International, Inc.
JWP NRO Holdings, Inc. Canada 100% EMCOR Holdings, LP
3072455 Nova Scotia Company Canada 100% EMCOR International, Inc.
Comstock Canada, Ltd Canada 100% 3072454 Nova Scotia Company
3072454 Nova Scotia Company Canada 100% EMCOR International, Inc.
Comstock Power Ltd. Canada 100% Comstock Canada, Ltd.
EMCOR (UK) Limited UK 100% EMCOR International, Inc.
Poole and Kent, Ltd. Bermuda 100% Monumental Investment Corporation
Atlas Indemnity, Ltd. Bermuda 100% EMCOR Risk Holdings, Inc.
EMCOR Drake & Scull Group plc UK 100% EMCOR (UK) Limited
EMCOR Facilities Services Ltd. UK 100% EMCOR Drake & Scull Group plc
Drake & Scull Airport Services, Ltd. UK 100% EMCOR Drake & Scull Group plc
Drake & Scull Engineering (UK) Ltd. UK 100% EMCOR Drake & Scull Group plc
Drake & Scull International, Ltd. UK 100% EMCOR Drake & Scull Group plc
EMCOR Rail Ltd. UK 100% EMCOR Drake & Scull Group plc
EMCOR Drake & Scull Ltd. UK 100% EMCOR Drake & Scull Group plc
Drake & Scull Holdings Ltd. UK 100% EMCOR Drake & Scull Group plc
Delcommerce (Contract Services) Ltd. UK 100% EMCOR (UK) Ltd.
Drake & Scull (Scotland) Ltd. UK 100% EMCOR (UK) Limited
DSE (Far East) Ltd. UK 100% EMCOR Drake & Scull Group plc
BL Distribution Ltd. UK 100% EMCOR (UK) Ltd.
Drake & Scull Properties, Ltd. UK 100% EMCOR (UK) Ltd.
Businessland Holdings UK 100% EMCOR Drake & Scull Group, plc
Langgit Tinggi Sdn Bhd* Malaysia 100% EMCOR (UK) Limited
Drake & Scull France Eurl* France 100% EMCOR (UK) Limited
Drake & Scull (Cayman Islands) Ltd.* Cayman Islands 100% EMCOR International, Inc.
JWP Technical Services Malaysia 100% EMCOR International, Inc.
(Malaysia) Sdn Bhd*
University Mechanical deMexico Mexico 98% University Mechanical &
S.A. DeC.V* Engineering Contractors Inc.
- ------------------
*Designated Foreign Restricted Subsidiaries
Exhibit 4.1(d)
EMCOR GROUP, INC.
SECOND AMENDMENT TO CREDIT AGREEMENT
To the Lenders Party to the Credit
Agreement identified below
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of September 26, 2002 among EMCOR
Group, Inc. a Delaware corporation, Comstock Canada Ltd., a Canadian corporation
and EMCOR Drake & Scull Group plc., a United Kingdom corporation (collectively
the "Borrowers"), Harris Trust and Savings Bank as Agent for the Lenders and the
financial institutions from time to time parties thereto as Lenders, all as
amended and currently in effect between us (the "Credit Agreement"). Capitalized
terms used herein without definition to have the meanings ascribed to them in
the Credit Agreement.
The Borrowers have requested that the Lenders make certain amendments to
the Credit Agreement, and the Lenders are willing to do so under the terms and
conditions set forth in this Agreement (herein, the "Amendment").
SECTION 1. AMENDMENTS.
Subject to the satisfaction of the conditions precedent set forth in
Section 3 below, the Credit Agreement shall be and hereby is amended and
supplemented as follows:
1.1 The first sentence of Section 1.4(a) of the Credit Agreement is hereby
amended in its entirety and as so amended shall be restated to read as
follows:
The Company (which is acting on behalf of the Borrowers pursuant to
Section 1.7 hereof) shall give the Agent notice (which shall be
irrevocable and may be written or oral, but if oral, promptly
confirmed in writing) by 10:00 a.m. (Central Time) on any Business Day
of each request for a Borrowing of Revolving Loans, in each case
specifying the Borrower to which the proceeds of such Borrowing are to
be disbursed, the amount of each such Borrowing, the currency of such
Borrowing (which must be U.S. Dollars or an Alternative Currency,
except that Domestic Rate Loans shall only be available in U.S.
Dollars), the date such Borrowing is to be made, which shall be not
less than (i) one Business Day hence in the case of a Borrowing of
Domestic Rate Loans and (ii) three Business Days hence in the case of
a Borrowing in an Alternative Currency or a Borrowing of Eurodollar
Loans, whether the Borrowing is to be of Domestic Rate Loans or
Eurodollar Loans and, in all cases other than a Borrowing of Domestic
Rate Loans, of the Interest Period selected therefor.
1.2 Clause (b) of the definition of "Interest Period" is hereby amended in its
entirety and so amended shall be restated to read as follows:
(b) in the case of a Swing Loan, on the date 1 to 5 Business Days
thereafter as mutually agreed to by the Company and the Agent;
1.3 The definition of "Swingline Sublimit" appearing in Section 9.1 of the
Credit Agreement is hereby amended in its entirety and as so amended shall
be restated to read as follows:
"Swing Line Sublimit" means $35,000,000, as reduced pursuant to the
terms hereof.
1.4 Schedule 1.1 to the Credit Agreement is hereby amended in its entirety and
as so amended shall be restated to read as set forth on Schedule 1.1
hereto.
SECTION 2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
2.1 The Borrowers, the Required Lenders and the Agent shall have executed this
Amendment (such execution may be in several counterparts and the several
parties hereto may execute on separate counterparts).
2.2 Legal matters incident to the execution and delivery of this Amendment
shall be satisfactory to the Agent and its counsel.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Each of the Borrowers, by its execution of the Amendment, hereby certifies
and warrants the following:
(a) after giving effect to the transactions contemplated hereby each of
the representations and warranties set forth in Section 5 of the
Credit Agreement, as amended hereby, is true and correct as of the
date hereof as if made on the date hereof, except that the
representations and warranties made under Section 5.5 of the Credit
Agreement, as amended hereby, shall be deemed to refer to the most
recent annual report furnished to the Lenders by the Borrowers; and
(b) each of the Borrowers is in full compliance with all of the terms and
conditions of the Credit Agreement and no Default or Event of Default
has occurred and is continuing thereunder.
SECTION 4. MISCELLANEOUS.
4.1 The Borrowers and the Guarantors heretofore executed and delivered to the
Agent the Collateral Documents. Each Borrower hereby acknowledges and
agrees that the Liens created and provided for by the Collateral Documents
continue to secure, among other things, the Obligations arising under the
Credit Agreement as amended hereby; and the Collateral Documents and the
rights and remedies of the Agent and the Lenders thereunder, the
obligations of the Borrowers and the Guarantors thereunder, and the Liens
created and provided for thereunder remain in full force and effect and
shall not be affected, impaired or discharged hereby. Nothing herein
contained shall in any manner affect or impair the priority of the liens
and security interests created and provided for by the Collateral Documents
as to the indebtedness which would be secured thereby prior to giving
effect to this Amendment. The Borrowers and the Guarantors heretofore
executed and delivered to the Agent that certain Guaranty Agreement dated
as of September 26, 2002 (the "Guaranty"). Each Borrower hereby
acknowledges and agrees that the "indebtedness hereby guaranteed" set forth
in the Guaranty continues to include, among other things, the Obligations
arising under the Credit Agreement as amended hereby; and the Guaranty and
the rights and remedies of the Agent and the Lenders thereunder, the
Obligations of the Borrowers thereunder, remain in full force and effect
and shall not be affected, impaired or discharged hereby.
4.2 No reference to this Amendment need be made in any Loan Document or other
instrument or document referring to the Credit Agreement, a reference to
the Credit Agreement in any of such to be deemed to be a reference to the
Credit Agreement as amended hereby. The Borrowers hereby certify to the
Lenders that no Default or Event of Default has occurred and is continuing.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts taken together to be
deemed to constitute one and the same instrument. This Amendment shall be
construed in accordance with and governed by the internal laws of the state
of Illinois.
4.3 Each of the Borrowers hereby agree to pay all reasonable costs and
expenses, including without limitation attorneys fees, incurred by the
Agent in connection with the preparation, negotiation, execution and
delivery of this Amendment and the other documents contemplated hereby.
[SIGNATURE PAGES TO FOLLOW]
Dated as of the __ day of July, 2003
EMCOR GROUP, INC.
By
--------------------------------------
Its
---------------------------------
COMSTOCK CANADA LTD.
By
--------------------------------------
Its
---------------------------------
EMCOR DRAKE & SCULL GROUP PLC.
By
--------------------------------------
Its
---------------------------------
Accepted and agreed to as of the day and years last above written.
HARRIS TRUST AND SAVINGS BANK, individually
and as Agent
By
----------------------------------------------------
Its
----------------------------------------------
LASALLE BANK NATIONAL ASSOCIATION
By
----------------------------------------------------
Its
----------------------------------------------
UNION BANK OF CALIFORNIA, N.A.
By
----------------------------------------------------
Its
----------------------------------------------
FLEET NATIONAL BANK
By
----------------------------------------------------
Its
----------------------------------------------
NATIONAL CITY BANK
By
----------------------------------------------------
Its
----------------------------------------------
BANK ONE, N.A.
By
----------------------------------------------------
Its
----------------------------------------------
SOVEREIGN BANK
By
----------------------------------------------------
Its
----------------------------------------------
WEBSTER BANK
By
----------------------------------------------------
Its
----------------------------------------------
U.S. BANK, NATIONAL ASSOCIATION
By
----------------------------------------------------
Its
----------------------------------------------
BANK OF MONTREAL
By
----------------------------------------------------
Its
----------------------------------------------
BANK HAPOALIM B.M.
By
----------------------------------------------------
Its
----------------------------------------------
By
----------------------------------------------------
Its
----------------------------------------------
THE GOVERNOR AND COMPANY OF BANK OF SCOTLAND
By
----------------------------------------------------
Its
----------------------------------------------
SCHEDULE 1.1
COMMITMENTS
LENDER COMMITMENT PERCENTAGE
- ------ ---------- ----------
Harris Trust and Savings Bank $64,000,000 18.2857%
Fleet National Bank $50,000,000 14.2857%
LaSalle National Bank $40,000,000 11.4286%
The Governor and Company $40,000,000 11.4286%
Bank of Scotland
Sovereign Bank $32,000,000 9.1429%
U.S. Bank, National $30,000,000 8.5714%
Association
Union Bank of California $26,000,000 7.4286%
Bank One, Arizona, N.A. $25,000,000 7.1429%
National City Bank $20,000,000 5.7143%
Webster Bank $13,000,000 3.7143%
Bank Hapoalim B.M. $10,000,000 2.8751%
Exhibit 4.1(e)
COMMITMENT AMOUNT INCREASE REQUEST
June 26, 2003
Harris Trust and Savings Bank,
as Agent (the "Agent")
for the Lenders referred to below
111 West Monroe Street
Chicago Illinois 60603
Attention: Wes Frangul
Re: Credit Agreement dated as of September 26, 2002
among EMCOR Group, Inc., the Lenders party thereto and
Harris Trust and Savings Bank, as Agent
(as amended, modified or supplemented from
time to time, the "Credit Agreement").
--------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the Credit Agreement, the Company hereby requests that
the Agent consent to an increase in the aggregate Commitments (the "Commitment
Amount Increase"), in accordance with Section 1.11 of the Credit Agreement, to
be effected by an increase in the Commitment of National City Bank (the
"Lender"), in its capacity as a Lender under the terms of the Credit Agreement.
Capitalized terms used herein without definition shall have the same meanings
herein as such terms have in the Credit Agreement.
After giving effect to such Commitment Amount Increase, and upon the
effectiveness of the Commitment Amount Increase, the Commitment of the Lender
increasing its Commitment will be as set forth an Attachment I hereto.
The Lender acknowledges and agrees that it has made and will continue to
make, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, its own
credit analysis and decisions relating to the Credit Agreement. The Lender
further acknowledges and agrees that the Agent has not made any representations
or warranties about the credit worthiness of the Company or any other party to
the Credit Agreement or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement or the value of any security therefore.
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
The Commitment Amount Increase shall be effective when the executed consent
of the Agent is received or otherwise in accordance with Section 1.11 of the
Credit Agreement, but not in any case prior to June 26, 2003. It shall be a
condition to the effectiveness of the Commitment Amount Increase that (i) all
fees and expenses referred to in Section 1.11 of the Credit Agreement shall have
been paid and (ii) no Eurodollar Loans shall be outstanding on the date of such
effectiveness.
The Company hereby certifies that no Default or Event of Default has
occurred and is continuing.
Please indicate the Agent's consent to such Commitment Amount Increase by
signing the enclosed copy of this letter in the space provided below.
Very truly yours,
EMCOR GROUP, INC.
By
-----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
NATIONAL CITY BANK
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
The undersigned hereby consents
on this 26th day of June,
2003 to the above-requested Commitment
Amount Increase.
HARRIS TRUST AND SAVINGS BANK,
as Agent
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTACHMENT I
LENDER COMMITMENT
NATIONAL CITY BANK $20,000,000
Exhibit 4.1(f)
COMMITMENT AMOUNT INCREASE REQUEST
June 26, 2003
Harris Trust and Savings Bank,
as Agent (the "Agent")
for the Lenders referred to below
111 West Monroe Street
Chicago Illinois 60603
Attention: Wes Frangul
Re: Credit Agreement dated as of September 26, 2002
among EMCOR Group, Inc., the Lenders party thereto and
Harris Trust and Savings Bank, as Agent
(as amended, modified or supplemented from
time to time, the "Credit Agreement").
--------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the Credit Agreement, the Company hereby requests that
the Agent consent to an increase in the aggregate Commitments (the "Commitment
Amount Increase"), in accordance with Section 1.11 of the Credit Agreement, to
be effected by an increase in the Commitment of Webster Bank (the "Lender"), in
its capacity as a Lender under the terms of the Credit Agreement. Capitalized
terms used herein without definition shall have the same meanings herein as such
terms have in the Credit Agreement.
After giving effect to such Commitment Amount Increase, and upon the
effectiveness of the Commitment Amount Increase, the Commitment of the Lender
increasing its Commitment will be as set forth an Attachment I hereto.
The Lender acknowledges and agrees that it has made and will continue to
make, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, its own
credit analysis and decisions relating to the Credit Agreement. The Lender
further acknowledges and agrees that the Agent has not made any representations
or warranties about the credit worthiness of the Company or any other party to
the Credit Agreement or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement or the value of any security therefore.
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
The Commitment Amount Increase shall be effective when the executed consent
of the Agent is received or otherwise in accordance with Section 1.11 of the
Credit Agreement, but not in any case prior to June 26, 2003. It shall be a
condition to the effectiveness of the Commitment Amount Increase that (i) all
fees and expenses referred to in Section 1.11 of the Credit Agreement shall have
been paid and (ii) no Eurodollar Loans shall be outstanding on the date of such
effectiveness.
The Company hereby certifies that no Default or Event of Default has
occurred and is continuing.
Please indicate the Agent's consent to such Commitment Amount Increase by
signing the enclosed copy of this letter in the space provided below.
Very truly yours,
EMCOR GROUP, INC.
By
------------------------------------
Name:
------------------------------
Title:
-----------------------------
WEBSTER BANK
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
The undersigned hereby consents
on this 26th day of June,
2003 to the above-requested Commitment
Amount Increase.
HARRIS TRUST AND SAVINGS BANK,
as Agent
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTACHMENT I
LENDER COMMITMENT
WEBSTER BANK $13,000,000
Exhibit 4.1(g)
COMMITMENT AMOUNT INCREASE REQUEST
June 26, 2003
Harris Trust and Savings Bank,
as Agent (the "Agent")
for the Lenders referred to below
111 West Monroe Street
Chicago Illinois 60603
Attention: Wes Frangul
Re: Credit Agreement dated as of September 26, 2002
among EMCOR Group, Inc., the Lenders party thereto and
Harris Trust and Savings Bank, as Agent
(as amended, modified or supplemented from
time to time, the "Credit Agreement").
--------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the Credit Agreement, the Company hereby requests that
the Agent consent to an increase in the aggregate Commitments (the "Commitment
Amount Increase"), in accordance with Section 1.11 of the Credit Agreement, to
be effected by an increase in the Commitment of Union Bank of California, N.A
(the "Lender"), in its capacity as a Lender under the terms of the Credit
Agreement. Capitalized terms used herein without definition shall have the same
meanings herein as such terms have in the Credit Agreement.
After giving effect to such Commitment Amount Increase, and upon the
effectiveness of the Commitment Amount Increase, the Commitment of the Lender
increasing its Commitment will be as set forth an Attachment I hereto.
The Lender acknowledges and agrees that it has made and will continue to
make, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, its own
credit analysis and decisions relating to the Credit Agreement. The Lender
further acknowledges and agrees that the Agent has not made any representations
or warranties about the credit worthiness of the Company or any other party to
the Credit Agreement or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement or the value of any security therefore.
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
The Commitment Amount Increase shall be effective when the executed consent
of the Agent is received or otherwise in accordance with Section 1.11 of the
Credit Agreement, but not in any case prior to June 26, 2003. It shall be a
condition to the effectiveness of the Commitment Amount Increase that (i) all
fees and expenses referred to in Section 1.11 of the Credit Agreement shall have
been paid and (ii) no Eurodollar Loans shall be outstanding on the date of such
effectiveness.
The Company hereby certifies that no Default or Event of Default has
occurred and is continuing.
Please indicate the Agent's consent to such Commitment Amount Increase by
signing the enclosed copy of this letter in the space provided below.
Very truly yours,
EMCOR GROUP, INC.
By
------------------------------------
Name:
------------------------------
Title:
-----------------------------
UNION BANK OF CALIFORNIA N.A.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
The undersigned hereby consents
on this 26th day of June,
2003 to the above-requested Commitment
Amount Increase.
HARRIS TRUST AND SAVINGS BANK,
as Agent
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTACHMENT I
LENDER COMMITMENT
UNION BANK OF CALIFORNIA, N.A. $26,000,000
Exhibit 4.1(h)
COMMITMENT AMOUNT INCREASE REQUEST
June 26, 2003
Harris Trust and Savings Bank,
as Agent (the "Agent")
for the Lenders referred to below
111 West Monroe Street
Chicago Illinois 60603
Attention: Wes Frangul
Re: Credit Agreement dated as of September 26, 2002
among EMCOR Group, Inc., the Lenders party thereto and
Harris Trust and Savings Bank, as Agent
(as amended, modified or supplemented from
time to time, the "Credit Agreement").
--------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the Credit Agreement, the Company hereby requests that
the Agent consent to an increase in the aggregate Commitments (the "Commitment
Amount Increase"), in accordance with Section 1.11 of the Credit Agreement, to
be effected by an increase in the Commitment of Sovereign Bank (the "Lender"),
in its capacity as a Lender under the terms of the Credit Agreement. Capitalized
terms used herein without definition shall have the same meanings herein as such
terms have in the Credit Agreement.
After giving effect to such Commitment Amount Increase, and upon the
effectiveness of the Commitment Amount Increase, the Commitment of the Lender
increasing its Commitment will be as set forth an Attachment I hereto.
The Lender acknowledges and agrees that it has made and will continue to
make, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, its own
credit analysis and decisions relating to the Credit Agreement. The Lender
further acknowledges and agrees that the Agent has not made any representations
or warranties about the credit worthiness of the Company or any other party to
the Credit Agreement or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement or the value of any security therefore.
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
The Commitment Amount Increase shall be effective when the executed consent
of the Agent is received or otherwise in accordance with Section 1.11 of the
Credit Agreement, but not in any case prior to June 26, 2003. It shall be a
condition to the effectiveness of the Commitment Amount Increase that (i) all
fees and expenses referred to in Section 1.11 of the Credit Agreement shall have
been paid and (ii) no Eurodollar Loans shall be outstanding on the date of such
effectiveness.
The Company hereby certifies that no Default or Event of Default has
occurred and is continuing.
Please indicate the Agent's consent to such Commitment Amount Increase by
signing the enclosed copy of this letter in the space provided below.
Very truly yours,
EMCOR GROUP, INC.
By
------------------------------------
Name:
------------------------------
Title:
-----------------------------
SOVEREIGN BANK
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
The undersigned hereby consents
on this 26th day of June,
2003 to the above-requested Commitment
Amount Increase.
HARRIS TRUST AND SAVINGS BANK,
as Agent
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTACHMENT I
LENDER COMMITMENT
SOVEREIGN BANK $32,000,000
Exhibit 4.1(i)
COMMITMENT AMOUNT INCREASE REQUEST
July 9, 2003
Harris Trust and Savings Bank,
as Agent (the "Agent")
for the Lenders referred to below
111 West Monroe Street
Chicago Illinois 60603
Attention: Wes Frangul
Re: Credit Agreement dated as of September 26, 2002
among EMCOR Group, Inc., the Lenders party thereto and
Harris Trust and Savings Bank, as Agent
(as amended, modified or supplemented from
time to time, the "Credit Agreement").
--------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the Credit Agreement, the Company hereby requests that
the Agent consent to an increase in the aggregate Commitments (the "Commitment
Amount Increase"), in accordance with Section 1.11 of the Credit Agreement, to
be effected by an increase in the Commitment of Bank Hapoalim B.M. (the
"Additional Lender") as a Lender under the terms of the Credit Agreement.
Capitalized terms used herein without definition shall have the same meanings
herein as such terms have in the Credit Agreement.
After giving effect to such Commitment Amount Increase, and upon the
effectiveness of the Commitment Amount Increase, the Commitment of the
Additional Lender will be as set forth on Attachment I hereto.
1. The Additional Lender hereby confirms that it has received a copy of the
Credit Agreement and the exhibits and schedules related thereto together
with copies of the documents which were required to be delivered under the
Credit Agreement as a condition to the making of the Loans and extensions
of credit thereunder. The Additional Lender acknowledges and agrees that it
has made and will continue to make, independently and without reliance upon
the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, its own credit analysis and decisions
relating to the Credit Agreement. The Additional Lender further
acknowledges and agrees that the Agent has not made any representations or
warranties about the credit worthiness of the Company or any other party to
the Credit Agreement or with respect to the legality, validity, sufficiency
or enforceability of the Credit Agreement or the value of any security
therefore.
2. Except as otherwise provided in the Credit Agreement, effective as of the
date of acceptance hereof by the Agent, the Additional Lender (i) shall be
deemed automatically to have become a party to the Credit Agreement and
have all the rights and obligations of a "Lender" under the Credit
Agreement as if it were an original signatory thereto and (ii) agrees to be
bound by the terms and conditions set forth in the Credit Agreement as if
it were an original signatory thereto.
3. The Additional Lender hereby advises you of the following administrative
details with respect to its Loans and Commitment.
(A) Notices:
Institution Name: Bank Hapoalim B.M.
Address: 225 N. Michigan Avenue
Suite 900
Chicago, Illinois 60601-7601
Telephone: (312) 228-6410
Facsimile: (312) 228-6490
(B) Payment Instructions:
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
The Commitment Amount Increase shall be effective when the executed consent
of the Agent is received or otherwise in accordance with Section 1.11 of the
Credit Agreement, but not in any case prior to July 9, 2003. It shall be a
condition to the effectiveness of the Commitment Amount Increase that (i) all
fees and expenses referred to in Section 1.11 of the Credit Agreement shall have
been paid and (ii) no Eurodollar Loans shall be outstanding on the date of such
effectiveness.
The Company hereby certifies that no Default or Event of Default has
occurred and is continuing.
Please indicate the Agent's consent to such Commitment Amount Increase by
signing the enclosed copy of this letter in the space provided below.
Very truly yours,
EMCOR GROUP, INC.
By
------------------------------------
Name:
------------------------------
Title:
-----------------------------
BANK HAPOALIM B.M.
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
The undersigned hereby consents
on this 9th day of July,
2003 to the above-requested Commitment
Amount Increase.
HARRIS TRUST AND SAVINGS BANK,
as Agent
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTACHMENT I
LENDER COMMITMENT
BANK HAPOALIM B.M. $10,000,000
Exhibit 4.1(j)
COMMITMENT AMOUNT INCREASE REQUEST
July 9, 2003
Harris Trust and Savings Bank,
as Agent (the "Agent")
for the Lenders referred to below
111 West Monroe Street
Chicago Illinois 60603
Attention: Wes Frangul
Re: Credit Agreement dated as of September 26, 2002
among EMCOR Group, Inc., the Lenders party thereto and
Harris Trust and Savings Bank, as Agent
(as amended, modified or supplemented from
time to time, the "Credit Agreement").
--------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the Credit Agreement, the Company hereby requests that
the Agent consent to an increase in the aggregate Commitments (the "Commitment
Amount Increase"), in accordance with Section 1.11 of the Credit Agreement, to
be effected by an increase in the Commitment of The Governor and Company of Bank
of Scotland (the "Additional Lender") as a Lender under the terms of the Credit
Agreement. Capitalized terms used herein without definition shall have the same
meanings herein as such terms have in the Credit Agreement.
After giving effect to such Commitment Amount Increase, and upon the
effectiveness of the Commitment Amount Increase, the Commitment of the
Additional Lender will be as set forth on Attachment I hereto.
1. The Additional Lender hereby confirms that it has received a copy of the
Credit Agreement and the exhibits and schedules related thereto together
with copies of the documents which were required to be delivered under the
Credit Agreement as a condition to the making of the Loans and extensions
of credit thereunder. The Additional Lender acknowledges and agrees that it
has made and will continue to make, independently and without reliance upon
the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, its own credit analysis and decisions
relating to the Credit Agreement. The Additional Lender further
acknowledges and agrees that the Agent has not made any representations or
warranties about the credit worthiness of the Company or any other party to
the Credit Agreement or with respect to the legality, validity, sufficiency
or enforceability of the Credit Agreement or the value of any security
therefore.
2. Except as otherwise provided in the Credit Agreement, effective as of the
date of acceptance hereof by the Agent, the Additional Lender (i) shall be
deemed automatically to have become a party to the Credit Agreement and
have all the rights and obligations of a "Lender" under the Credit
Agreement as if it were an original signatory thereto and (ii) agrees to be
bound by the terms and conditions set forth in the Credit Agreement as if
it were an original signatory thereto.
3. The Additional Lender hereby advises you of the following administrative
details with respect to its Loans and Commitment.
(A) Notices:
Institution Name: The Governor and Company of Bank of Scotland
Address: 7th Floor, 155 Bishopsgate,
Bishopsgate Exchange,
London, EC2M7YB
Telephone: 44 207 012 9217
Facsimile: 44 207 012 9454
(B) Payment Instructions:
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
The Commitment Amount Increase shall be effective when the executed consent
of the Agent is received or otherwise in accordance with Section 1.11 of the
Credit Agreement, but not in any case prior to July 9, 2003. It shall be a
condition to the effectiveness of the Commitment Amount Increase that (i) all
fees and expenses referred to in Section 1.11 of the Credit Agreement shall have
been paid and (ii) no Eurodollar Loans shall be outstanding on the date of such
effectiveness.
The Company hereby certifies that no Default or Event of Default has
occurred and is continuing.
Please indicate the Agent's consent to such Commitment Amount Increase by
signing the enclosed copy of this letter in the space provided below.
Very truly yours,
EMCOR GROUP, INC.
By
------------------------------------
Name:
------------------------------
Title:
-----------------------------
THE GOVERNOR AND COMPANY OF
BANK OF SCOTLAND
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
The undersigned hereby consents
on this 9th day of July,
2003 to the above-requested Commitment
Amount Increase.
HARRIS TRUST AND SAVINGS BANK,
as Agent
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTACHMENT I
LENDER COMMITMENT
THE GOVERNOR AND COMPANY OF $40,000,000
BANK OF SCOTLAND
Exhibit 4.1(k)
COMMITMENT AMOUNT INCREASE REQUEST
July 9, 2003
Harris Trust and Savings Bank,
as Agent (the "Agent")
for the Lenders referred to below
111 West Monroe Street
Chicago Illinois 60603
Attention: Wes Frangul
Re: Credit Agreement dated as of September 26, 2002
among EMCOR Group, Inc., the Lenders party thereto and
Harris Trust and Savings Bank, as Agent
(as amended, modified or supplemented from
time to time, the "Credit Agreement").
--------------------------------------------------------------
Ladies and Gentlemen:
In accordance with the Credit Agreement, the Company hereby requests that
the Agent consent to an increase in the aggregate Commitments (the "Commitment
Amount Increase"), in accordance with Section 1.11 of the Credit Agreement, to
be effected by an increase in the Commitment of U.S. Bank, National Association
(the "Lender"), in its capacity as a Lender under the terms of the Credit
Agreement. Capitalized terms used herein without definition shall have the same
meanings herein as such terms have in the Credit Agreement.
After giving effect to such Commitment Amount Increase, and upon the
effectiveness of the Commitment Amount Increase, the Commitment of the Lender
increasing its Commitment will be as set forth an Attachment I hereto.
The Lender acknowledges and agrees that it has made and will continue to
make, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, its own
credit analysis and decisions relating to the Credit Agreement. The Lender
further acknowledges and agrees that the Agent has not made any representations
or warranties about the credit worthiness of the Company or any other party to
the Credit Agreement or with respect to the legality, validity, sufficiency or
enforceability of the Credit Agreement or the value of any security therefore.
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL OBLIGATION UNDER, AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ILLINOIS.
The Commitment Amount Increase shall be effective when the executed consent
of the Agent is received or otherwise in accordance with Section 1.11 of the
Credit Agreement, but not in any case prior to July 9, 2003. It shall be a
condition to the effectiveness of the Commitment Amount Increase that (i) all
fees and expenses referred to in Section 1.11 of the Credit Agreement shall have
been paid and (ii) no Eurodollar Loans shall be outstanding on the date of such
effectiveness.
The Company hereby certifies that no Default or Event of Default has
occurred and is continuing.
Please indicate the Agent's consent to such Commitment Amount Increase by
signing the enclosed copy of this letter in the space provided below.
Very truly yours,
EMCOR GROUP, INC.
By
------------------------------------
Name:
------------------------------
Title:
-----------------------------
U.S. BANK, NATIONAL ASSOCIATION
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
The undersigned hereby consents
on this 9th day of July,
2003 to the above-requested Commitment
Amount Increase.
HARRIS TRUST AND SAVINGS BANK,
as Agent
By:
------------------------------------
Name:
-----------------------------
Title:
----------------------------
ATTACHMENT I
LENDER COMMITMENT
U.S. BANK, NATIONAL ASSOCIATION $30,000,000
Exhibit 99.1
CERTIFICATION
I, Frank T. MacInnis, Chairman of the Board and Chief Executive Officer of EMCOR
Group, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of EMCOR Group,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d -15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures as of the end of the period covered by this report
based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: July 24, 2003 /s/ FRANK T. MACINNIS
------------------------
Frank T. MacInnis
Chairman of the Board of
Directors and
Chief Executive Officer
Exhibit 99.2
CERTIFICATION
I, Leicle E. Chesser, Executive Vice President and Chief Financial Officer of
EMCOR Group, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of EMCOR Group,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d -15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures as of the end of the period covered by this report
based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: July 24, 2003 /s/ LEICLE E. CHESSER
---------------------------
Leicle E. Chesser
Executive Vice President
and Chief Financial Officer
Exhibit 99.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT 0F 2002
In connection with the Quarterly Report of EMCOR Group, Inc. (the
"Company") on Form 10-Q for the period ended June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Frank
T. MacInnis, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities and Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: July 24, 2003 /s/ FRANK T. MACINNIS
-----------------------
Frank T. MacInnis
Chief Executive Officer
A signed original of this written statement required in Section 906 has been
provided to EMCOR Group, Inc. and will be retained by EMCOR Group, Inc. and
furnished to the Securities and Exchange Commission of its staff upon request.
Exhibit 99.4
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT 0F 2002
In connection with the Quarterly Report of EMCOR Group, Inc. (the
"Company") on Form 10-Q for the period ended June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Leicle
E. Chesser, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities and Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: July 24, 2003 /s/ LEICLE E. CHESSER
------------------------
Leicle E. Chesser
Chief Financial Officer
A signed original of this written statement required in Section 906 has been
provided to EMCOR Group, Inc. and will be retained by EMCOR Group, Inc. and
furnished to the Securities and Exchange Commission of its staff upon request.