Encompass Announces 2001 Fourth-Quarter and Full-Year Results; Provides Outlook for 2002
HOUSTON--(BUSINESS WIRE)--Feb. 20, 2002--Encompass Services Corporation (NYSE:ESR):
-- Company Reduces Debt by $69 Million During the Quarter and
153 Million Throughout 2001
-- $18 Million Accounts Receivable Reserve Substantially Reduces
Telecom Receivables Exposure
-- Company Projects Significant Improvement in 2002 Operating
Results
Encompass Services Corporation (NYSE:ESR) today reported the following GAAP financial results for the fourth quarter and the fiscal year ended Dec. 31, 2001.
in millions, except
per share data Fourth Quarter Fiscal Year
12/31/01 12/31/01
-------------- --------------
Revenues $931.7 $3,904.7
Operating income (loss) (11.9) 87.8
Net loss from continuing operations (24.3) (13.7)
Loss from discontinued operations -- (10.9)
Loss on disposal of discontinued
operations (3.4) (26.5)
Net loss to common shareholders (33.0) (71.7)
EBITDA 6.1 160.1
Earnings (Loss) Per Share:
--------------------------
Net loss from continuing operations $(.46) $(.54)
Loss from discontinued operations -- (.17)
Loss on disposal of discontinued
operations (.06) (.41)
Net loss to common shareholders (.52) (1.12)
Cash earnings (loss) from continuing
operations (.33) .01
Fourth quarter and full year results included $18.0 million and $27.8 million in charges, respectively, to reserve certain accounts receivable from customers in the telecommunications industry to management's best estimates of their ultimate collectibility. The company's net receivables from telecommunications customers are currently less than $15.0 million, all from paying customers.
During the year ended Dec. 31, 2001, Encompass generated cash flow from operations of $242 million, including $105 million in the fourth quarter, and reduced total debt by $153 million during the year. Availability under the company's credit facility was approximately $180 million as of Feb. 15, 2002.
Management Perspective on 2001
"2001 was a difficult year for our company and our industry, as evidenced by the double-digit year-over-year decline in private, non-residential construction spending recently reported by the U.S. Department of Commerce," said Joe Ivey, Encompass president and chief executive officer. "The severe economic downturn, collapse of a significant piece of our business mix -- the technology and telecommunications sectors -- and the impact of significant integration activities all contributed to our sub-par financial performance."
As previously discussed, the company's 2001 results were negatively affected by items, outlined below, that in management's judgment are unique and not likely to recur. The following items are offered for consideration to more fully understand management's perspective on the GAAP results reported above:
in millions Fourth Quarter Fiscal Year
12/31/01 12/31/01
-------------- --------------
Specific telecommunications
receivables reserves $18.0 $27.8
Operating losses at two isolated
business units with severe
integration-related issues 9.5 29.9
Excluding the full effect of the above items would result in the
following results from continuing operations:
$ in millions Fourth Quarter Fiscal Year
12/31/01 12/31/01
-------------- --------------
Revenues $931.7 $3,904.7
EBITDA 33.6 217.8
2001 Accomplishments -- debt repayment, cash generation and organizational integration
During 2001, Encompass reported the following financial and operational accomplishments:
-- Reduced total debt by $153 million.
-- Generated $242 million of cash flow from operations.
-- Reduced working capital employed in the business from nearly
12 percent of 2000 pro forma revenues to less than 9 percent
of 2001 revenues.
-- Integrated over 80 commercial/industrial reporting entities
into 4 geographic business groups and 19 regional centers.
-- Implemented a common brand in our commercial/industrial
business.
-- Reduced the number of financial and other systems in field
operations by more than half.
-- Negotiated national purchasing agreements with seven of its
top vendors.
Solid Core Businesses
"Our 'performing' core businesses, which accounted for approximately 75 percent of 2001 revenues, have historically delivered consistent results, maintained healthy margins, are located in key strategic markets, have solid leadership and are the foundation of our company," said Ivey. "Our recently underperforming businesses have tremendous potential but did not perform up to our standards in 2001 for a variety of reasons, including too much dependence on telecom and technology industry revenues and integration-related distractions. During 2002, we expect that our 2001 efforts to re-focus these businesses in non-technology customer sectors, improve processes and complete integration activities will yield better results."
2002 Outlook
Encompass anticipates that the economy will languish through the first half of the year and begin to recover during the second half. It expects that nationwide private, non-residential construction spending will be flat to slightly down during the year compared to 2001.
Based on these and other assumptions, Encompass expects to report revenues of $3.6 - $3.9 billion, EBITDA of $200 - $230 million, and diluted earnings per share of $.45 - $.70 for the full year of 2002. The EPS estimates exclude the amortization of goodwill, as the company adopted Statement of Financial Accounting Standards No. 142 (FAS 142) on Jan. 1, 2002.
The EPS estimates also exclude any one-time, non-cash goodwill impairment charge the company may record as a result of adopting FAS 142. Based on a preliminary review of the new standard, management believes the company will record a goodwill impairment charge upon adoption, and that the amount of such charge will be significant in relation to the company's unamortized goodwill balance. Such impairment charge will be recorded as a cumulative effect of a change in accounting principle and therefore will not affect operating income. Also, this charge will not affect the financial covenant calculations under the company's credit agreements.
During 2002, Encompass plans to make additional progress toward cash generation and debt reduction. The company's goal is to reduce total debt by at least $25-$40 million.
"At this time, we believe the first quarter of 2002 will result in a slight loss on an earnings-per-share basis but will show improvement over the third and fourth quarters of 2001. We expect the remainder of the year will show steady improvement as the national economy begins to recover," said Ivey. "Our backlog at Dec. 31, 2001 was $1.6 billion, slightly higher than our backlog a year ago, excluding the data/telecom projects in backlog at that time. With a solid backlog entering 2002, we are ready to capitalize on opportunities as the national economy improves, as well as opportunities we will create for ourselves through hard work, standardized processes and improved operational control."
Conference Call Information
The company will host a conference call to discuss the information in this press release on Wednesday, Feb. 20, 2002 at 11:00 a.m. Eastern Time.
To participate in the call, dial 719/457-2631 five to ten minutes before the call begins and ask for the Encompass Services conference. The call will also be broadcast live over the Internet from the company's home page at www.encompass.com.
A replay will be available approximately two hours after the live broadcast ends and will be accessible until April 19, 2002. To access the replay, dial 719/457-0820 and use passcode number 577730. The call also will be archived on the company's Web site. |
