Encompass Announces Strategic Initiatives, Operational and Financial OutlookFor 2001
Investments in Integration, Information Systems, Sales and Marketing To
Enhance Operational Performance
HOUSTON, Dec. 20 /PRNewswire/ -- Encompass Services Corporation (NYSE: ESR), the premier facilities services company in the United States, today announced a series of strategic initiatives for 2001 designed to further streamline the organization, improve its operating efficiencies and enhance its sales culture.
"As we continue to fine tune our company, we have identified several initiatives that we believe will help us achieve optimal performance," said Joe Ivey, Encompass president and chief executive officer. "We believe the real value of the investments we're making in 2001 lies in what they mean for the future: a stronger, more cohesive company that can deliver superior earnings growth through enhanced purchasing savings; common technology platforms for processing and sharing information; improved control and oversight; and a more effective sales culture."
Highlights of the company's 2001 initiatives include:
-- Operational realignment -- Encompass will consolidate its 80 electrical
and mechanical operating units into 25 units, each composed of one
platform operation and multiple business units. Expected benefits
include improved workflows and capacity utilization, reduced selling,
general and administrative costs, improved control, and the ability to
better leverage best practices across the company. Reducing the number
of touchpoints in the field is expected to be cost-neutral in 2001.
-- Information systems investments -- Encompass will make capital
investments of approximately $20 - $25 million for information systems
upgrades and improvements. Approximately $6 million of that amount
will be used to migrate the Cleaning Systems and Residential Services
groups to new software systems. The systems expenditures also include
investments to expand existing systems in mechanical, electrical and
industrial field operations. The company expects these investments to
enhance its ability to plan, budget, forecast and share best practices
more effectively.
-- Purchasing improvements -- Approximately $6 million of the systems
investments will be used to enhance the company's e-procurement
capabilities and leverage the size of the company's purchasing volumes,
resulting in improved pricing, quality and consistency in materials.
The company anticipates that this initiative could generate annual cost
savings of more than $20 million when fully implemented.
-- Enhanced national sales and marketing infrastructure -- Consistent with
its goal to be recognized as the premium national brand in its
industry, Encompass has committed an additional $4 million to building
a national sales and marketing infrastructure. To create a more
customer-relevant, high-impact direct sales force, Encompass has
enhanced its national sales team to help operating locations target and
service the most profitable customers, identify and retain their most
valuable customers and prospect more effectively for new leads.
Encompass also expects to gain valuable insight into customer buying
habits through a new national market research and media testing
program.
-- People development -- The company will invest more than $1 million in
2001 in a comprehensive employee development program which includes the
Encompass Leadership Institute -- an initiative to enhance the
capabilities and skills of the company's leaders -- as well as
performance management, career development, succession planning, and
training and development programs for all levels of Encompass'
leadership team.
Financial Outlook for 2001
Encompass confirmed previously disclosed guidance for the fourth quarter of 2000. The company also announced that it anticipates growing revenue between 7 and 11 percent in 2001. The investments listed above, as well as other initiatives in 2001, are expected to increase the company's selling, general and administrative expenses by approximately $9 million, resulting in an earnings impact of approximately $.06 per diluted share.
Encompass expects to report diluted earnings per share of $1.15 - $1.20 and earnings before interest, taxes, depreciation and amortization (EBITDA) of $348 million - $358 million for fiscal 2001. For the first quarter which ends March 31, 2001, the company anticipates reporting diluted earnings per share of $.14 - $.16 and EBITDA of $68 - $70 million.
The expectations listed above exclude special one-time non-cash charges of approximately $3 - $5 million, or $.02 - $.04 per diluted share, that the company anticipates recording as a result of write-offs of legacy computer systems, leasehold improvements at redundant facilities and other items at field locations that will migrate to those of their platform business organizations. These charges will be recognized throughout 2001 as restructuring activities occur.
The company anticipates generating free cash flow of approximately $90 - $100 million in 2001 and using it to reduce long-term debt and repurchase stock.
Stock Repurchase Program
Encompass also announced that its Board of Directors has authorized the repurchase of up to 2.5 million shares of common stock in the open market.
"A stock buyback will protect our shareholders from dilution as we honor the common stock component of earn-out obligations during the year," said Ivey. "In addition, we believe the current valuation of our equity is extremely compelling and represents an attractive investment opportunity."
Company Believes Outlook is Positive
"As we continue to improve our company, we are more excited than ever about the future," said Ivey. "Our backlog level of $1.9 billion at October 31, 2000 suggests a positive outlook for Encompass. We believe that our geographic scope, business mix, service offering variety and customer diversity would allow us to maintain our expectations in the event of a modest economic softening."
Conference Call/Webcast Information
The company will host a conference call and Webcast to discuss these investments and its outlook for 2001 on Wednesday, December 20 at 10 a.m. ET. The Webcast will include a presentation by members of senior management. To participate in the call, dial 800.795.1259 five to ten minutes before the call begins and ask for the Encompass Services conference. To view the slides during the call, visit the company's Website at www.encompserv.com at least 10 minutes prior to the Webcast to pre-register, test connections and download any necessary software.
A replay of the call will be available shortly after its conclusion at 800.938.2796. The Webcast will also be archived on the company's home page. |
