The Internet website address of EMCOR Group, Inc. ("EMCOR" or the "Company")
is http://www.emcorgroup.com. The Company's annual report on Form 10-K,
quarterly reports on Forms 10-Q and current reports on Forms 8-K (and any
amendments to those reports) are available free of charge on or through its
Internet website as soon as reasonably practicable after such material is
electronically filed with or furnished to the Securities and Exchange
Commission.
GENERAL
EMCOR is one of the largest mechanical and electrical construction and
facilities services firms in the United States, Canada, the United Kingdom and
in the world. In 2004, EMCOR had revenues of approximately $4.75 billion. The
Company provides services to a broad range of commercial, industrial, utility,
and institutional customers through approximately 70 principal operating
subsidiaries and joint venture entities. EMCOR has offices in 42 states and the
District of Columbia in the United States, eight provinces in Canada and 12
primary locations in the United Kingdom. In the United Arab Emirates, the
Company carries on business through two joint ventures. Its executive offices
are located at 301 Merritt Seven Corporate Park, Norwalk, Connecticut
06851-1060, and its telephone number at those offices is (203) 849-7800.
EMCOR specializes in providing construction services relating to mechanical
and electrical systems in facilities of all types and in providing comprehensive
services for the operation, maintenance and management of substantially all
aspects of such facilities, commonly referred to as "facilities services."
EMCOR designs, integrates, installs, starts up, operates and maintains
various mechanical and electrical systems, including:
o Heating, ventilation, air conditioning, refrigeration and clean-room
process ventilation systems;
o Plumbing, process and high-purity piping systems;
o Systems for generation and distribution of electrical power;
o Lighting systems;
o Low-voltage systems, such as fire alarm, security, communications and
process control systems; and
o Voice and data communications systems.
EMCOR's facilities services businesses, which support the operation of a
customer's facilities, include:
o Site-based operations and maintenance;
o Mobile maintenance and services;
o Facilities management;
o Remote monitoring;
o Installation and support for building systems;
o Technical consulting and diagnostic services;
o Small modification and retrofit projects; and
o Program development and management for energy systems.
These facilities services are provided to a wide range of commercial,
industrial, utility and institutional facilities, including those at which EMCOR
provided construction services and others at which services were provided by
others. EMCOR's varied facilities services are frequently combined to provide
integrated service packages which include operations and maintenance, mobile
services and facility improvement programs.
EMCOR provides construction services and facilities services directly to
corporations, municipalities and other governmental entities, owners/developers
and tenants of buildings. It also provides these services indirectly by acting
as a subcontractor to general contractors, systems suppliers and other
subcontractors. Worldwide, EMCOR has approximately 26,000 employees.
EMCOR's revenues are derived from many different customers in numerous
industries which have operations in several different geographical areas. Of
EMCOR's 2004 revenues, approximately 80% were generated in the United States and
approximately 20% were generated internationally. In 2004, approximately 49% of
revenues were derived from new construction projects, 21% were derived from
renovation and retrofit of customer's existing facilities and 30% were derived
from facilities services operations.
1
The broad scope of EMCOR's operations are more particularly described below.
For information regarding the revenues, operating income and total assets of
each of EMCOR's segments with respect to each of the last three fiscal years,
and EMCOR's revenues and assets attributable to the United States, Canada, the
United Kingdom and all other foreign countries, see Note M to EMCOR's financial
statements included herein.
OPERATIONS
The mechanical and electrical construction services industry has a higher
growth rate than the overall non-residential construction industry, due
principally to the ever increasing content and complexity of mechanical and
electrical systems in all types of projects. This increasing content and
complexity is, in part, a result of the expanded use of computers and more
technologically advanced voice and data communications, lighting and
environmental control systems in all types of facilities. For these reasons,
buildings of all types consume more electricity per square foot than in the past
and thus need more extensive electrical distribution systems. In addition,
advanced voice and data communication systems require more sophisticated power
supplies and extensive low voltage and fiber-optic communications cabling.
Moreover, the need for greater environmental controls within a building, such as
the heightened need for climate control to maintain extensive computer systems
at optimal temperatures, and the growing demand for environmental control in
individual spaces have created expanded opportunities for the mechanical and
electrical construction services and facilities services businesses.
Mechanical and electrical construction services primarily involve the design,
integration, installation and start-up of: (a) heating, ventilation, air
conditioning, refrigeration and clean-room process ventilation systems; (b)
plumbing, process and high-purity piping systems; (c) systems for the generation
and distribution of electrical power, including power cables, conduits,
distribution panels, transformers, generators, uninterruptible power supply
systems and related switch gear and controls; (d) lighting systems, including
fixtures and controls; (e) low-voltage systems, including fire alarm, security
and process control systems; and (f) voice and data communications systems,
including fiber-optic and low-voltage copper cabling.
Mechanical and electrical construction services generally fall into one of
two categories: (a) large installation projects with contracts often in the
multi-million dollar range that involve construction of industrial and
commercial buildings and institutional and public works facilities or the
fit-out of large blocks of space within commercial buildings and (b) smaller
installation projects typically involving fit-out, renovation and retrofit work.
EMCOR's United States mechanical and electrical construction services
operations accounted for about 60% of its 2004 revenues, of which revenues
approximately 72% were related to new construction and approximately 28% were
related to renovation and retrofit projects. EMCOR's United Kingdom and Canada
mechanical and electrical construction services operations accounted for
approximately 10% of its 2004 revenues, of which revenues approximately 56% were
related to new construction and approximately 44% were related to renovation and
retrofit projects. EMCOR provides mechanical and electrical construction
services for both large and small installation and renovation projects. Its
largest projects include those (a) for institutional use (such as water and
wastewater treatment facilities, hospitals, correctional facilities, schools and
research laboratories); (b) for industrial use (such as pharmaceutical plants,
steel, pulp and paper mills, chemical, automotive and semiconductor
manufacturing facilities and oil refineries); (c) for transportation projects
(such as highways, airports and transit systems); (d) for commercial use (such
as office buildings, data centers, hotels, casinos, convention centers, sports
stadiums, shopping malls and resorts); and (e) for power generation and energy
management projects. EMCOR's largest projects, which typically range in size
from $10.0 million up to and occasionally exceeding $50.0 million and are
usually multi-year projects, represented about 33% of EMCOR's construction
services revenues in 2004.
EMCOR's projects of less than $10.0 million accounted for approximately 67%
of 2004 mechanical and electrical construction services revenues. These projects
are typically completed in less than one year. They usually involve mechanical
and electrical construction services when an end-user or owner undertakes
construction or modification of a facility to accommodate a specific use. These
projects frequently require mechanical and electrical systems to meet special
needs such as critical systems power supply, special environmental controls and
high-purity air systems, sophisticated mechanical and electrical systems for
data centers, including those associated with internet service providers and
electronic commerce, trading floors in financial services businesses, new
production lines in manufacturing plants and office arrangements in existing
office buildings. They are not usually dependent upon the new construction
market. Demand for these projects and types of services is often prompted by the
expiration of leases, changes in technology or changes in the customer's plant
or office layout in the normal course of a customer's business.
EMCOR performs its services pursuant to contracts with owners, such as
corporations, municipalities and other governmental entities, general
contractors, systems suppliers, construction managers, developers, other
subcontractors and tenants of commercial properties. Institutional and public
works projects are frequently long-term complex projects that require
significant technical and management skills and the financial strength to obtain
bid and performance bonds, which are often a condition to bidding for and
winning these projects.
2
EMCOR also installs and maintains lighting for streets, highways, bridges and
tunnels, traffic signals, computerized traffic control systems, and signal and
communication systems for mass transit systems in several metropolitan areas. In
addition, in the United States, EMCOR manufactures and installs sheet metal air
handling systems for both its own mechanical construction operations and for
unrelated mechanical contractors. EMCOR also maintains welding and pipe
fabrication shops in support of some of its own mechanical operations.
Facilities services are provided to a wide range of commercial, industrial
and institutional facilities, including both those for which EMCOR provided
construction services and those for which construction services were provided by
others. Facilities services are frequently bundled to provide integrated service
packages and are provided on a mobile basis or by customer site-based EMCOR
employees.
These facilities services, which generated approximately 30% of 2004
revenues, are provided to owners, operators, tenants and managers of all types
of facilities both on a contract basis for a specified period of time and on an
individual task-order basis.
In 1997, EMCOR established a subsidiary to expand its facilities services
operations in North America. This division has built on EMCOR's traditional
mechanical and electrical construction services operations, facilities services
activities at its mechanical and electrical contracting subsidiaries, and
EMCOR's client relationships, as well as acquisitions, to expand the scope of
services currently offered and to develop packages of services for customers on
a regional, national and global basis.
As a consequence, EMCOR's United States facilities services division offers a
broad range of facilities services, including maintenance and service of
mechanical and electrical systems, which EMCOR has historically provided to
customers following completion of construction projects, and site-based
operations and maintenance, mobile maintenance and service, facilities
management, remote monitoring, installation and support for building systems,
technical consulting and diagnostic services, small modification and retrofit
projects, and program development and management for energy systems.
EMCOR has experienced an expansion in the demand for its facilities services
which it believes is driven by customers' decisions to focus on their own core
competencies, the increasing technical complexity of their facilities and their
mechanical, electrical, voice and data and other systems, and the need for
increased reliability, especially in mechanical and electrical systems. These
trends have led to outsourcing and privatization programs whereby customers in
both the private and public sectors seek to contract out those activities that
support, but are not directly associated with, the customer's core business.
EMCOR clients requiring facilities services include utilities and major
corporations engaged in information technology, telecommunications,
pharmaceuticals, financial services, publishing and manufacturing.
Illustrative of the outsourcing of companies' facilities services are
multi-year agreements with (a) Bank One under which EMCOR provides facilities
services for approximately 2,200 Bank One locations encompassing 32.0 million
square feet of space in 30 states; (b) LAM Research under which EMCOR provides
such services to approximately 1.0 million square feet of production and
research and development facilities and office space; (c) Fifth Third Bank under
which EMCOR provides facilities services to over 1,200 Fifth Third locations
with over 9.5 million square feet in seven states; (d) Exelon Corp. under which
EMCOR provides comprehensive facilities services to substations, power
generation facilities and offices encompassing over 5.7 million square feet of
space in four states; (e) Mattson Technology, Inc. under which EMCOR provides
integrated services to approximately 800,000 square feet of production and
research and development facilities and office space; (f) Fidelity Investments
under which EMCOR provides integrated services to approximately 2.5 million
square feet of office and data center space; and (g) Hewlett-Packard Company
under which EMCOR provides integrated services to approximately 20.0 million
square feet of production, distribution and office space in seven states.
Through a limited liability Company owned by EMCOR and CB Richard Ellis Inc., a
nationwide real estate management company, operations and maintenance services
are provided to over 3,000 commercial facilities comprising approximately 135.0
million square feet of space.
In December 2002, EMCOR acquired Consolidated Engineering Services, Inc.
("CES"), a facilities services business. In Washington D.C., CES is the second
largest facilities services provider to the federal government behind the
General Services Administration and currently provides services to such
preeminent buildings as the Ronald Reagan Building, the second largest federal
government facility after the Pentagon. It currently provides its services in 28
states throughout the Northeast, Midwest, Mid-Atlantic and Southeast. As part of
its operations, CES is responsible for (a) the oversight of all or most of a
business' facilities operations, including operation and maintenance; (b) the
oversight of logistical processes; (c) tenant services and management; (d)
servicing upgrade and retrofit of HVAC, electrical, plumbing, and industrial
piping and sheet metal systems in existing facilities; and (e) diagnostic and
solution engineering for building systems and their components. In November
2003, EMCOR acquired the Facility Management Services division of Siemens
Building Technologies, Inc., including contracts to provide facilities services
to several operating units of Siemens Corporation encompassing 5.0 million
square feet of corporate, manufacturing and research space.
EMCOR's United Kingdom subsidiary also has a division dedicated to facilities
services. This division currently provides a full range of facilities services
to public and private sector customers under multi-year agreements, including
the maintenance of British Airways' facilities at Heathrow and Gatwick Airports,
GlaxoSmithKline Research Laboratories, and the Tubelines, a maintenance
operating company of the London Underground. In the United Kingdom, EMCOR also
provides facilities services at several manufacturing facilities, including BAE
Systems manufacturing plants. In addition, the United Kingdom operations provide
on-call and mobile service support on a task-order or contract basis, small
renovation and alteration project work, and installation and maintenance
services for data communications and security systems.
3
EMCOR's Energy & Technologies business designs and constructs customers'
energy-related projects and for certain of these projects also provides plant
staffing. This business' recent projects include the design and construction of
a $15.6 million 14 megawatt control utility plant and a combined heat and power
facility to supply all HVAC and hot water and electrical requirements for the
Morongo Native American Hotel/Casino complex in Cabazon, California and the
design and construction of a $27.0 million cogeneration facility and chiller
plant to provide cooling, heat and power at the University of New Hampshire main
campus in Durham, New Hampshire. EMCOR will also provide plant staffing to these
projects under long-term contracts. Over the past five years, EMCOR has
completed more than 80 energy-related projects ranging from basic life safety
standby systems to complete utility grade power plants and cogeneration/central
utility plants supplying thermal and power requirements completely separated
from utilities' electrical grids. This business is reported within the United
States facilities services segment.
EMCOR believes mechanical and electrical construction services and facilities
services activities are complementary, permitting it to offer customers a
comprehensive package of services. The ability to offer both construction and
facilities services enhances EMCOR's competitive position with customers.
Furthermore, EMCOR's facilities services operations tend to be less cyclical
than its construction operations because facilities services are more responsive
to the needs of an industry's operational requirements rather than its
construction requirements.
COMPETITION
EMCOR believes that the mechanical and electrical construction services
business is highly fragmented and competitive consisting of thousands of small
companies across the United States and around the world. EMCOR competes with
national, regional and local companies, many of which are small, owner-operated
entities that operate in a limited geographic area. However, there are a few
public companies focused on providing mechanical and electrical construction
services, such as Integrated Electrical Services, Inc. and Comfort Systems USA,
Inc. A majority of EMCOR's revenues are derived from projects requiring
competitive bids; however, an invitation to bid is often conditioned upon prior
experience, technical capability and financial strength. Because EMCOR has total
assets, annual revenues, net worth, access to bank credit and surety bonding,
and expertise significantly greater than most of its competitors, EMCOR believes
it has a significant competitive advantage over its competitors. Competitive
factors in the mechanical and electrical construction services business include:
(a) the availability of qualified and/or licensed personnel; (b) reputation for
integrity and quality; (c) safety record; (d) cost structure; (e) relationships
with customers; (f) geographic diversity; (g) the ability to control project
costs; (h) experience in specialized markets; (i) the ability to obtain surety
bonding; (j) adequate working capital; and (k) access to bank credit.
While the facilities services business is also highly fragmented, a number of
large corporations such as Johnson Controls, Inc., Fluor Corp., Unicco Service
Company, Trammel Crow and Jones Lang LaSalle are engaged in this field.
EMPLOYEES
EMCOR presently employs approximately 26,000 people, approximately 71% of
whom are represented by various unions pursuant to more than 460 collective
bargaining agreements between EMCOR's individual subsidiaries and local unions.
EMCOR believes that its employee relations are generally good. None of these
collective bargaining agreements are national or regional in scope.
BACKLOG
EMCOR had contract backlog as of December 31, 2004 of approximately $2.8
billion, compared with backlog of approximately $3.0 billion as of December 31,
2003. Backlog is not a term recognized under accounting principles generally
accepted in the United States; however, it is a common measurement used in
EMCOR's industry. Backlog includes unrecognized revenues to be realized from
uncompleted construction contracts plus unrecognized revenues expected to be
realized over the remaining term of the facilities services contracts, except if
the remaining term of a facilities services contract exceeds 12 months, the
unrecognized revenues attributable to such contract included in backlog are
limited to only 12 months of revenues. Backlog increased by $0.1 billion as of
December 31, 2003 compared to December 31, 2002. For the year ended December 31,
2004, EMCOR had approximately $4.75 billion in revenues compared to
approximately $4.53 billion in revenues for the year ended December 31, 2003.
4
ITEM 2. PROPERTIES
The operations of EMCOR are conducted primarily in leased properties. The
following table lists major facilities, both leased and owned, and identifies
the business segment that is the principal user of each such facility.
LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------------- ----------------
CORPORATE HEADQUARTERS
301 Merritt Seven Corporate Park
Norwalk, Connecticut ............................................... 32,500 10/31/09
OPERATING FACILITIES
4050 Cotton Center Boulevard
Phoenix, Arizona (a) ............................................... 30,603 3/31/08
1200 North Sickles Drive
Tempe, Arizona (b) ................................................. 29,000 Owned
1000 N. Kraemer Place
Anaheim, California (b) ............................................ 24,384 8/14/12
4540 Easton Drive
Bakersfield, California (c) ........................................ 11,368 3/31/09
3208 Landco Drive
Bakersfield, California (c) ........................................ 49,875 6/30/07
555 Anton Boulevard
Costa Mesa, California (a) ......................................... 17,058 5/31/08
1168 Fesler Street
El Cajun, California (b) ........................................... 48,360 8/31/10
24041 Amador Street
Hayward, California (b) ............................................ 40,000 10/31/11
25601 Clawiter Road
Hayward, California (b) ............................................ 34,800 6/30/14
5 Vanderbilt
Irvine, California (a) ............................................. 18,000 7/31/08
4462 Corporate Center Drive
Los Alamitos, California (c) ....................................... 57,863 7/31/06
825 Howe Road
Martinez, California (c) ........................................... 109,800 12/31/07
8670 Younger Creek Drive
Sacramento, California (a) ......................................... 54,135 1/13/12
9505 and 9525 Chesapeake Drive
San Diego, California (c) .......................................... 25,124 12/31/06
414 Brannan Street
San Francisco, California (c) ...................................... 18,964 3/31/05
4405 and 4420 Race Street
Denver, Colorado (b) ............................................... 17,704 9/30/11
345 Sheridan Boulevard
Lakewood, Colorado (c) ............................................. 63,000 Owned
367 and 377 Research Parkway
Meriden, Connecticut (b) ........................................... 23,500 7/31/11
1781 N.W. North River Drive
Miami, Florida (b) ................................................. 11,285 Owned
2501 S.W. 160th Street
Miramar, Florida (c) ............................................... 15,877 7/31/08
3145 Northwoods Parkway
Norcross, Georgia (c) .............................................. 25,808 1/31/06
5
LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------------- ----------------
400 Lake Ridge Drive
Smyrna, Georgia (a) ................................................ 30,000 9/30/12
2160 North Asland Avenue
Chicago, Illinois (b) .............................................. 67,000 6/30/05
2100 South York Road
Oak Brook, Illinois (c) ............................................ 87,700 5/31/08
3090 Colt Road
Springfield, Illinois (b) .......................................... 40,000 6/09/05
1406 Cardinal Court
Urbana, Illinois (b) ............................................... 33,750 10/01/07
7614 and 7720 Opportunity Drive
Fort Wayne, Indiana (b) ............................................ 136,695 10/31/08
2655 Garfield Road
Highland, Indiana (c) .............................................. 45,816 6/30/06
5124-5128 W. 79th Street
Indianapolis, Indiana (b) .......................................... 12,600 9/30/06
2600 N. Ninth Street Road
Lafayette, Indiana (b) ............................................. 13,798 10/31/08
3100 Brinkerhoff Road
Kansas City, Kansas (b) ............................................ 42,836 11/30/05
3125 Brinkerhoff Road
Kansas City, Kansas (b) ............................................ 22,676 Owned
631 Pecan Circle
Manhattan, Kansas (b) .............................................. 22,750 8/31/08
2118 W. Harry
Wichita, Kansas (b) ................................................ 25,600 8/31/07
300 Walnut Street
Owensboro, Kentucky (c) ............................................ 20,600 1/07/09
4530 Hollins Ferry Road
Baltimore, Maryland (b) ............................................ 26,792 Owned
643 Lofstrand Lane
Rockville, Maryland (a) ............................................ 15,000 2/28/10
306 Northern Avenue
Boston, Massachusetts (a) .......................................... 15,275 6/30/05
200 Old Colony Way
Boston, Massachusetts (b) .......................................... 11,500 3/31/08
70-70D Hawes Way
Stoughton, Massachusetts (b) ....................................... 24,400 12/31/05
80 Hawes Way
Stoughton, Massachusetts (a) (b) ................................... 36,000 6/10/13
1743 Maplelawn
Troy, Michigan (c) ................................................. 22,000 4/30/06
6060 Hix Road
Westland, Michigan (b) ............................................. 23,000 Month to Month
6325 South Valley Boulevard
Las Vegas, Nevada (b) .............................................. 23,190 12/31/08
3555 W. Oquendo Road
Las Vegas, Nevada (c) .............................................. 90,000 11/30/08
6
LEASE EXPIRATION
APPROXIMATE DATE, UNLESS
SQUARE FEET OWNED
----------------- ----------------
6754 W. Washington Avenue
Pleasantville, New Jersey (b) ...................................... 25,000 1/14/06
348 New Country Road
Secaucus, New Jersey (b) ........................................... 37,905 12/31/07
26 West Street
Brooklyn, New York (b) ............................................. 15,000 Owned
301 and 305 Suburban Avenue
Deer Park, New York (b) ............................................ 33,535 3/31/05
24-37 46th Street
Long Island City, New York (a) ..................................... 10,000 1/31/07
111-01 and 109-15 14th Avenue
College Point, New York (c) ........................................ 82,000 2/28/11
516 West 34th Street
New York, New York (c) ............................................. 25,000 6/30/12
253 West 35th Street
New York, New York (c) ............................................. 7,000 8/31/09
Two Penn Plaza
New York, New York (c) ............................................. 55,891 1/31/16
704 Clinton Avenue South
Rochester, New York (a) ............................................ 25,000 7/31/06
8740 Reading Road and
10-15 West Vorhees Street
Cincinnati, Ohio (a) ............................................... 25,600 9/27/06
3976 Southern Avenue
Cincinnati, Ohio (a) ............................................... 44,815 12/31/08
2300-2310 International Street
Columbus, Ohio (c) ................................................. 25,500 10/31/07
2904 S.W. 1st Avenue
Portland, Oregon (c) ............................................... 12,500 3/31/05
700 Gracern Road
Columbia, South Carolina (a) ....................................... 11,850 2/28/07
7520 Bartlett Corp. Avenue, East
Bartlett, Tennessee (c) ............................................ 9,000 12/31/05
4067 New Getwell Road
Memphis, Tennessee (b) ............................................. 36,000 8/28/07
6936 Commerce Avenue
El Paso, Texas (c) ................................................. 18,028 1/31/07
5550 Airline Drive
Houston, Texas (b) ................................................. 78,483 12/31/09
515 Norwood Road
Houston, Texas (b) ................................................. 25,780 12/31/09
1574 South West Temple
Salt Lake City, Utah (c) ........................................... 120,904 12/31/06
320 23rd Street
Arlington, Virginia (a) ............................................ 43,028 3/05/10
109-D Executive Drive
Dulles, Virginia (c) ............................................... 19,000 8/31/09
22930 Shaw Road
Dulles, Virginia (c) ............................................... 32,616 2/28/15
EMCOR believes that all of its property, plant and equipment are well
maintained, in good operating condition and suitable for the purposes for which
they are used.
See Note K -- Commitments and Contingencies of the notes to consolidated
financial statements for additional information regarding lease costs. EMCOR
utilizes substantially all of its leased or owned facilities and believes there
will be no difficulty either in negotiating the renewal of its real property
leases as they expire or in finding alternative space, if necessary.
(a) Principally used by a company engaged in the "United States facilities
services" segment.
(b) Principally used by a company engaged in the "United States mechanical
construction and facilities services" segment.
(c) Principally used by a company engaged in the "United States electrical
construction and facilities services" segment.
(d) Principally used by a company engaged in the "United Kingdom construction
and facilities services" segment.
(e) Principally used by a company engaged in the "Canada construction and
facilities services" segment.
8
ITEM 3. LEGAL PROCEEDINGS
In February 1995, as part of an investigation by the New York County District
Attorney's office into the business affairs of a general contractor that did
business with EMCOR's subsidiary, Forest Electric Corp. ("Forest"), a search
warrant was executed at Forest's executive offices. On July 12, 2000, Forest was
served with a Subpoena Duces Tecum to produce certain documents as part of a
broader investigation by the New York County District Attorney's office into
illegal business practices in the New York City construction industry. Forest
has been informed by the New York County District Attorney's office that it and
certain of its officers are targets of the investigation. Forest has produced
documents in response to the subpoena and intends to cooperate fully with the
District Attorney's office investigation as it proceeds.
EMCOR and three of its officers (Chairman of the Board and Chief Executive
Officer Frank T. MacInnis, Executive Vice President and Chief Financial Officer
Leicle E. Chesser, and Senior Vice President-Chief Accounting Officer and
Treasurer Mark A. Pompa) have been named as defendants in a purported
consolidated class action filed in the United States District Court of
Connecticut entitled IN RE EMCOR GROUP, INC SECURITIES LITIGATION. Plaintiff
purports to represent a class composed of all persons who purchased or otherwise
acquired EMCOR common stock and/or other securities between April 9, 2003 and
October 2, 2003, inclusive. The complaint alleges violations of Section 10(b) of
the Securities Exchange Act and Rule 10b-5 thereunder and of Section 20(A) of
the Securities Exchange Act, relating to alleged misstatements and omissions in
certain of the Company's filings with the Securities and Exchange Commission,
press releases and other public statements between April 9 and October 2, 2003,
and seeks damages on behalf of the purported class in unspecified amounts. A
motion to dismiss the Complaint filed by EMCOR and the individual defendants is
currently under submission. As set forth in the motion, EMCOR and the individual
defendants believe that the plaintiff's allegations are without merit and are
vigorously defending against them.
In July 2003, EMCOR's subsidiary, Poole & Kent Corporation ("Poole & Kent"),
was served with a Subpoena Duces Tecum by a grand jury empaneled by the United
States District Court for the District of Maryland which is investigating, among
other things, Poole & Kent's use of minority and woman-owned business
enterprises. Poole & Kent has produced documents in response to the subpoena and
to subsequent subpoenas directed to it requesting certain business records. On
April 26, 2004, Poole & Kent was advised that it is a target of the grand jury
investigation. Poole & Kent is cooperating with the investigation.
On March 14, 2003, John Mowlem Construction plc ("Mowlem") presented a claim
in arbitration against EMCOR's United Kingdom subsidiary, EMCOR Drake & Scull
Group plc ("D&S"), in connection with a subcontract D&S entered into with Mowlem
with respect to a project for the United Kingdom Ministry of Defence at Abbey
Wood in Bristol, U.K. Mowlem seeks damages arising out of alleged defects in the
D&S design and construction of the mechanical and electrical engineering
services for the project. Mowlem's claim is for 39.5 million British pounds
sterling (approximately $75.8 million), which includes costs allegedly incurred
by Mowlem in connection with rectification of the alleged defects, overhead,
legal fees, delay and disruption costs related to such defects, and interest on
such amounts. The claim also includes amounts in respect of liabilities that
Mowlem accepted in connection with a settlement agreement it entered into with
the Ministry of Defence and which it claims are attributable to D&S. D&S
believes it has good and meritorious defenses to the Mowlem claim. D&S has
denied liability and has asserted a counterclaim for approximately 11.6 million
British pounds sterling (approximately $22.3 million) for certain design, labor
and delay and disruption costs incurred by D&S in connection with its
subcontract with Mowlem.
EMCOR is involved in other proceedings in which damages and claims have been
asserted against it. EMCOR believes it has a number of valid defenses to such
proceedings and claims and intends to vigorously defend itself and does not
believe that a significant liability will result.
Inasmuch as the various lawsuits and arbitrations in which EMCOR or its
subsidiaries are involved range from a few thousand dollars to over $75.0
million, the outcome of which cannot be predicted, adverse results could have a
material adverse effect on EMCOR's financial position and/or results of
operations. These proceedings include the following: (a) a civil action brought
against EMCOR's subsidiary Forest Electric Corp. ("Forest") and seven other
defendants in the United States District Court for the Southern District of New
York under the Sherman Act and New York common law by competitors whose
employees are not members of International Brotherhood of Electrical Workers,
Local #3 (the "IBEW"). The action alleges, among other things, that Forest, six
other electrical contractors and the IBEW conspired to prevent competition and
to monopolize the market for communications wiring services in the New York City
area thereby excluding plaintiffs from wiring jobs in that market. Plaintiffs
allege they have lost profits as a result of this concerted activity and seek
damages in the amount of $50 million after trebling plus attorney's fees.
However, plaintiffs' damages expert has stated in his pre-trial deposition that
he estimates plaintiffs' damages at $8.7 million before trebling. Forest has
denied the allegations of wrongdoing set forth in the complaint and pre-trail
discovery has been completed. No trial date has been set by the Court. Forest
believes that the suit is without merit. (b) A civil action brought by a joint
venture (the "JV") between EMCOR's subsidiary Poole & Kent Corporation ("Poole &
Kent") and an unrelated company in the Fairfax, Virginia Circuit Court in which
the JV seeks damages from the Upper Occoquan Sewage Authority ("UOSA") resulting
from material breaches of a construction contract (the "Contract") entered into
between the JV and UOSA for construction of a wastewater treatment facility.
Poole & Kent incurred unrecovered costs in completing this project, which are
included in the balance sheet account "costs and estimated earnings in excess of
billings on uncompleted contracts" in EMCOR's consolidated balance sheets as of
December 31, 2004 and 2003. A jury has returned a verdict finding that UOSA
committed material
9
breaches of the Contract and a jury trial to establish the JV's damages is
currently in process. The JV claims total damages, based upon alternative
measures of damages, in excess of $75.0 million (exclusive of interest), and in
a jury trial to be subsequently held the JV intends to claim damages in excess
of $18.0 million (exclusive of interest). In accordance with the joint venture
agreement establishing the JV, Poole & Kent would be entitled to approximately
one-half of any damage award received by the JV.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
10
EXECUTIVE OFFICERS OF THE REGISTRANT
FRANK T. MACINNIS, Age 58; Chairman of the Board and Chief Executive Officer
of the Company since April 1994. Mr. MacInnis was elected to the additional
position of President on February 26, 2004 and served as such until October 25,
2004. He also served as President of the Company from April 1994 to April 1997.
From April 1990 to April 1994, Mr. MacInnis served as President and Chief
Executive Officer, and from August 1990 to April 1994 as Chairman of the Board,
of Comstock Group, Inc., a nationwide electrical contracting company. From 1986
to April 1990, Mr. MacInnis was Senior Vice President and Chief Financial
Officer of Comstock Group, Inc. In addition, from 1986 to April 1994, Mr.
MacInnis was also President of Spie Group Inc., which had interests in Comstock
Group, Inc., Spie Construction Inc., a Canadian pipeline construction company,
and Spie Horizontal Drilling Inc., a U.S. company engaged in underground
drilling for the installation of pipelines and communications cable.
ANTHONY J. GUZZI, Age 40; President and Chief Operating Officer since October
25, 2004. From August 2001, until he joined the Company, Mr. Guzzi served as
President of the North American Distribution and Aftermarket Division of Carrier
Corporation ("Carrier"). Carrier is a manufacturer and distributor of commercial
and residential HVAC and refrigeration systems and equipment and a provider of
aftermarket services and components of its own products and those of other
manufacturers in both the HVAC and refrigeration industries. From January 2001
to August 2001, Mr. Guzzi was President of Carrier's Commercial Systems and
Services Division, and from June 1998 to December 2000, he was Vice President
and General Manager of Carrier's Commercial Sales and Services Division.
SHELDON I. CAMMAKER, Age 65; Executive Vice President and General Counsel of
the Company since September 1987 and Secretary of the Company since May 1997.
Prior to September 1987, Mr. Cammaker was a senior partner of the New York City
law firm of Botein, Hays & Sklar.
LEICLE E. CHESSER, Age 58; Executive Vice President and Chief Financial
Officer of the Company since May 1994. From April 1990 to May 1994, Mr. Chesser
served as Executive Vice President and Chief Financial Officer of Comstock
Group, Inc., and from 1986 to May 1994, Mr. Chesser was also Executive Vice
President and Chief Financial Officer of Spie Group, Inc.
R. KEVIN MATZ, Age 46; Senior Vice President - Shared Services of the Company
since June 2003. From April 1996 to June 2003, Mr. Matz served as Vice President
and Treasurer of the Company and Staff Vice President - Financial Services of
the Company from March 1993 to April 1996. From March 1991 to March 1993, Mr.
Matz was Treasurer of Sprague Technologies Inc., a manufacturer of electronic
components.
MARK A. POMPA, Age 40; Senior Vice President - Chief Accounting Officer and
Treasurer of the Company since June 2003. From September 1994 to June 2003, Mr.
Pompa was Vice President and Controller of the Company.
EDGAR® is a federally registered trademark of the U.S. Securities and Exchange Commission. EDGAR®Online is not affiliated with or approved by the U.S. Securities and Exchange Commission.
Next Section
Previous Section