Earnings Per Share of $.22 Before Special Charge In Line With Previously
Announced Guidance
HOUSTON, Aug. 6 /PRNewswire/ -- Encompass Services Corporation (NYSE: ESR) today reported financial results for the second quarter ended June 30, 2001 that were consistent with guidance previously issued by the company.
Reflecting the extended weakness in the economy and significant reductions in capital spending by telecommunications and technology customers, revenues for the quarter were $1.04 billion, compared to $1.09 billion in the prior-year period. Net income available to common shareholders, excluding a special charge for receivables from certain technology customers, totaled $14.1 million, or $.22 per diluted share, compared to $23.7 million, or $.35 per diluted share, in the prior-year period. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $75.3 million versus $92.1 million a year ago. Cash earnings per diluted share for the quarter were $.33, compared to $.45 in second quarter 2000.
These results exclude a special, pre-tax charge of $18 million, or $.16 per diluted share, to reserve against receivables from technology customers which were discussed in the company's first-quarter earnings release and conference call in May. Including this charge, Encompass reported net income available to common shareholders of $3.7 million, or $.06 per diluted share, and cash earnings of $.19 per share for the quarter.
"During the quarter, the U.S. economy turned in its weakest performance in eight years," said Joe Ivey, Encompass president and chief executive officer. "Hitting our financial and operational targets in this environment demonstrates the fundamental soundness of our company and the hard work of our employees."
For the six-month period ended June 30, excluding the special charge, Encompass reported net income of $22.8 million, or $.35 per diluted share, on revenues of $2.1 billion. EBITDA was $141.6 million, and cash EPS was $.60. In the prior-year period, the company reported pro forma net income of $32.9 million, or $.52 per diluted share, on revenues of $2.1 billion. EBITDA was $155.0 million, and cash EPS was $.72.
Encompass Repays Debt, Repurchases Stock and Reports Progress on Integration
Using free cash flow from operations, the company had, as of August 3, repaid $39 million of long-term debt and repurchased approximately 1.2 million shares of its outstanding common stock since January 1.
Encompass reported continued progress in its operational integration. The regional reporting structure in Electrical Technologies and Mechanical Services is in place, bringing the number of reporting entities in these groups to 22, compared to 80 at the beginning of the year. As of July 31, these groups had reduced by half the number of accounting, estimating, human resources, purchasing and scheduling information systems in place on January 1.
"Despite the current listless economy, we are building the company for the long-term," said Ivey. "Our integration is producing a streamlined, efficient, unified organization that is unmatched in geographic reach, customer diversity and service offering variety. It is an accomplishment all of our employees can be proud of."
Third-Quarter and Full-Year Outlook
"The economy continues to perform poorly, and the second-half recovery we were anticipating does not appear likely," said Ivey. "The downturn in the technology and telecommunications markets has been more pronounced and prolonged than we expected earlier in the year, as established, well-capitalized companies have significantly reduced their capital spending budgets."
Encompass estimates that customers have canceled or delayed approximately $850 million worth of projects the company had factored into its original full-year forecast. Approximately $550 million of this amount is from technology and telecommunications customers.
However, better-than-expected growth in other end markets, particularly those related to energy, has partially offset the drop in technology and telecommunications revenue. The company's backlog at June 30, 2001 totaled $1.7 billion, down from $1.8 billion a year earlier.
Allowing for the absence of the previously anticipated second-half economic recovery and the void in the technology and telecommunications markets, Encompass expects to report diluted earnings per share of $.22 - $.27 and EBITDA of $77 - $84 million for the third quarter, which ends September 30. For the fourth quarter, the company anticipates reporting diluted earnings per share of $.23 - $.28 and EBITDA of $78 - $86 million. These figures exclude the effects of additional charges, if any, related to technology receivables.
For the year, Encompass anticipates reporting diluted earnings per share of $.80 - $.90 and EBITDA of $297 - $312 million, excluding the effects of any special charges. The company expects to report annual revenue of $4.2 - $4.4 billion.
"Based on our current forecast, we believe that our financial results this year will be comparable to last year's, excluding the effects of the special charge related to technology receivables," said Ivey. "Although disappointing compared to our original expectations, given the state of the external environment and the magnitude of our company-wide integration activities, this will be a respectable performance that positions us well for the future."
Conference Call and Webcast Information
The company will host a conference call and Webcast to discuss the results on Tuesday, August 7, at 10 a.m. EDT. The Webcast will include a presentation by members of senior management.
To participate in the call, dial 1-800-218-8862 five to ten minutes before the call begins and ask for the Encompass Services conference. To view the presentation during the call, visit the company's Web site at www.encompserv.com at least 10 minutes prior to the call to pre-register, test connections and download any necessary complimentary software.
Participants who do not wish to ask questions during the call are encouraged to listen to the audio and view the presentation via the Webcast.
A replay of the call will be available from Tuesday, August 7, at noon EDT until Tuesday, August 14, at 7 p.m. EDT. To access the replay, dial 1-800-405-2236 and use passcode number 360750.
The call and presentation also will be archived on the company's Web site. |
