Encompass Discusses Current Business Environment and Outlook, Reports Progress On Cash Generation and Debt Repayment
Company Will Discontinue Global Technologies Group
HOUSTON, Sept. 25 /PRNewswire/ -- As a result of the continuing lack of revenue visibility caused by an uncertain economic environment and exacerbated by world events, Encompass Services Corporation (NYSE: ESR) today announced that it is withdrawing revenue, earnings and EBITDA guidance for the third and fourth quarters of this year.
"Business fixed investment, including construction spending, continues to be under tremendous pressure, and we believe our third- and fourth-quarter results will be significantly below our previous expectations," said Joe Ivey, Encompass president and chief executive officer. "Furthermore, the tragic events of September 11 have injected even more uncertainty into an already struggling economy, giving us extremely limited visibility. Because of this, we believe it is prudent to remove our guidance for the remainder of the year."
Encompass Reports Progress on Cash Generation and Debt Repayment, Reiterates Long-Term Positive Outlook
During the first eight months of 2001, Encompass produced $87 million of free cash flow, $67 million of which was used to reduce total debt.
"Our diligent focus on improving our balance sheet and aggressively managing working capital is producing positive results, and we expect to continue to produce substantial free cash flow from operations," said Ivey. "Overall, we continue to make progress in our multi-year effort to become a cohesive, streamlined company and size the organization to fit the current business environment. We are building Encompass for the long term and are not discouraged by a few tough quarters. Despite the adverse impact of the current economic environment, we remain optimistic about the long-term prospects for our company and our industry."
Encompass Discontinues Global Technologies Group
The company also announced that it is ceasing operations of its Encompass Global Technologies (EGT) group effective September 30. Accordingly, Encompass will report EGT as a discontinued operation during the third quarter. In 2000, EGT reported proforma revenue of $153 million, or less than 4 percent of Encompass' total 2000 revenue.
"Given the outlook for capital spending on colocation facilities, telecom hotels and Web hosting centers, maintaining a business group that provides construction management services to mission-critical technology facilities is no longer a wise use of our resources," said Ivey.
Integration Moves Company to Geographic Management Structure
During the fourth quarter, the operations of the company's current Electrical Technologies and Mechanical Services groups will begin transitioning to a geographic structure of five zones -- Southeast, Southwest, Midwest, West and East -- each composed of five to ten electrical and mechanical regions. The new structure will become effective January 1, 2002.
"Now that we have successfully implemented the regional/branch office structure in our electrical and mechanical groups, the transition to a geographic orientation is the next logical step in our business strategy," said Ivey. "It allows us to have a more integrated focus on local and regional markets and customers, continues to build the foundation to adopt best practices, and optimizes management span of control over these businesses."
Conference Call Information
The company will host a conference call to discuss the information in this press release on Wednesday, September 26 at 9 a.m. EDT. To participate in the call, dial 1-800-366-3964 five to ten minutes before the call begins and ask for the Encompass Services conference.
A replay of the call will be available from Wednesday, September 26 at noon EDT to Wednesday, October 10 at 11 p.m. EDT. To access the replay, dial 303-590-3010 and use passcode number 399178. |
