Encompass Reports Record Second Quarter Revenue and Earnings
- Gains in Technology Infrastructure Projects Help Drive Strong Growth
- Successful Integration Leads to Management Transition
HOUSTON, Aug. 7 /PRNewswire/ -- Encompass Services Corporation
(NYSE: ESR), the premier facilities services company in the United States,
today reported results for its second quarter ended June 30, 2000. Revenues
for the quarter increased $175 million to $1.1 billion, versus $916 million in
the prior year pro forma period. Earnings before interest, taxes,
depreciation and amortization (EBITDA) increased to $92.1 million, up from a
pro forma $85.6 million in the prior year. Net income rose to $28.4 million,
or $0.35 per diluted share, compared to pro forma net income of $26.4 million,
or $0.32 per diluted share, for the prior year. Cash earnings for the quarter
were $0.45 per diluted share.
Commenting on the quarter, Joe Ivey, president and chief executive
officer, said, "Encompass continues to lever its size and multi-discipline
capabilities to secure new national customers and expand relationships with
existing customers resulting in a record backlog of $1.8 billion. Our
national account activity, which is delivered through local operations,
continues to fuel outstanding top-line growth. Much of this work relates to
the construction of co-location facilities, data centers and switch sites for
the data and telecommunications market."
Encompass is currently helping Southwestern Bell expand nationally by
providing mechanical and electrical services critical to the construction of
26 switch sites and call centers, generating over $80 million in revenues for
Encompass locations coast to coast. The company currently has in the works
over $500 million worth of similar projects for other technology or
telecommunications-oriented customers such as Qwest, Exodus, and MCI WorldCom.
Overall, the second quarter performance met expectations and produced
other bright spots in addition to the success of the national accounts
activity. The Industrial, Residential and Cleaning businesses combined to
produce solid revenue gains and all added operating margin improvements
resulting in combined profit growth of 21% compared to the prior year pro
forma period.
Ivey continued, "Our Mechanical and Electrical businesses posted excellent
year-over-year revenue gains and sequential improvement in operating margins.
Our focus on continuing to improve margins in these businesses includes a
careful evaluation of our customer mix to ensure we deploy our limited work
force on the most profitable projects, consolidation of selected operating
locations, and the development of regional pre-fabrication centers.
"Lastly, efforts to reach our goal of a 'single company going to market'
have been set in motion. We have launched a company-wide branding effort that
will, within 30 months, ensure that customers across the nation view Encompass
as one seamless, integrated company, a single-source solution for all of their
facility service needs," Ivey concluded.
Management Changes Evidence Successful Integration
Following a successful six-month integration and transition period since
the merger which formed Encompass Services, chairman Rick Millinor will
transfer his remaining executive responsibilities to Joe Ivey, president and
chief executive officer, effective September 30. "The integration process has
been as smooth as we could have hoped for," Millinor said, "and this move is
both a tribute to the excellent job Joe has done and an indication of the
strength of our senior management team. I will continue to serve as chairman
of the Board of Directors and of the Executive Committee and, as such, will
remain heavily involved in our company's future direction."
Also, as had been planned since last year, Don Luke, chief operating
officer, retired August 1. With the company since 1997, Luke was instrumental
in defining and implementing the operating structure for the post-merger
company. "Don made it clear from the start that he didn't want to work past
his three-year commitment," stated Millinor. "He has been a tremendous asset
during his tenure. He will continue as a member of the Board so we will be
retaining his insight and experience."
In response to the increasing role that technology and related information
systems are expected to play in the future strategic direction of the company,
Dan Kipp was promoted to senior vice president. In addition to his focus on
the information infrastructure for the company, Kipp will assume
responsibility for human resources and certain treasury functions, including
risk and cash management. Kipp, chief accounting officer since 1997, was
critical in developing the internal and external reporting structure of
Encompass' predecessor companies.
Encompass will host a conference call with a simultaneous webcast on
Tuesday, August 8, 2000 at 10:00 a.m. Eastern Time to discuss its second
quarter 2000 results. To listen to the call live via the Internet visit the
investor relations' section of our web site at www.encompserv.com at least
fifteen minutes prior to the call to register, download and install any
necessary audio software. Also, the call will be available on the Investor
Broadcast Network web site at www.vcall.com. A replay will be available for
those who cannot listen to the call live.
About Encompass Services Corporation
Encompass Services Corporation is the premier provider of facilities
systems and solutions in the United States. With revenues approaching
$4 billion, Encompass provides a portfolio of electrical technologies,
mechanical services and cleaning systems to commercial, industrial and
residential customers nationwide. The company, with over 30,000 employees,
has operations in some 250 locations, providing services in each of America's
100 largest cities. Additional information and press releases about Encompass
are available on the company's Web site at www.encompserv.com.
Certain statements in this press release may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on the company's current expectations and
involve risks and uncertainties that could cause the company's actual results
to differ materially from these set forth in the statements. The company can
give no assurance that such expectations will prove to be correct. Factors
that could cause the company's results to differ materially from current
expectations include: the level of demand for its services by multi-site
customers; the level of interest rates, which affects demand for the company's
services and its interest expense; working capital requirements; general
economic conditions; as well as other factors listed in the company's Form 10-
K for the year ended December 31, 1999.
Encompass Services Corporation
Combined Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
Historical Pro Forma Pro Forma Pro Forma
2000 1999 2000 1999
Revenues $1,090,229 $915,651 $2,056,751 $1,710,931
Cost of Services 891,432 727,304 1,689,450 1,363,580
Gross Profit 198,797 188,347 367,301 347,351
SG&A 115,555 110,234 229,164 207,275
Goodwill Amortization 9,050 8,750 17,800 17,500
Income from Operations 74,192 69,363 120,337 122,576
Other Income (Expense):
Interest Expense, Net (22,886) (21,513) (44,399) (43,025)
Other 170 707 918 1,559
Income before Taxes 51,476 48,557 76,856 81,110
Income Taxes 23,061 22,205 34,431 37,092
Net Income 28,415 26,352 42,425 44,018
Less: Convertible Preferred
Dividends 4,758 4,758 9,527 9,527
Net Income to Common
Shareholders $ 3,657 $ 21,594 $ 32,898 $ 34,491
Earnings per Share (EPS)
- Basic $ 0.37 $ 0.34 $ 0.52 $ 0.55
- Diluted $ 0.35 $ 0.32 $ 0.52 $ 0.54
Weighted Average Shares
- Basic 63,362 63,160 63,353 63,160
- Diluted 81,926 82,171 82,004 82,016
EBITDA $ 92,112 $85,568 $154,974 $154,603
Cash EPS (A) $ 0.45 $ 0.42 $ 0.72 $ 0.74
The unaudited pro forma results presented above reflect the combined
results of Encompass as if the merger of Building One and Group Maintenance
America was completed on January 1st of each year. The merger of the two
companies closed on February 22, 2000, forming the current Encompass Services
Corporation. The pro forma presentation excludes all merger, integration and
other related charges recorded during the first quarter and discussed more
fully in the company's quarterly report on Form 10Q for the quarter ended
March 31, 2000.
(A) Cash Earnings per Share is calculated by adding back goodwill
amortization, net of tax effect associated with deductible goodwill,
to net income and dividing the sum by the number of diluted shares
outstanding for the period. |
