Encompass Service Corp., Houston, has revised its 2002 forecasts to reflect lower-than-expected margins on future job awards, a competitive environment and a soft non-residential construction market.
The provider of facilities systems and services, which predicted revenues as high as $3.9 billion in February, dropped its May forecast to between $3.5 and $3.8 billion, then lowered its revenue guidance again to between $3.4 billion and $3.6 billion.
Encompass, the second largest electrical contractor with 2001 total sales of $3.8 billion, reported a loss from continuing operations of $13.7 million or 54 cents a share last year. 2002 has brought continued softness in construction spending, particularly in sectors such as commercial office buildings, hotels and industrial facilities.
Along with dropping forecast numbers for 2002, Encompass also recently completed an amendment to its $300 million credit revolver. As part of the agreement, the company plans to issue up to $72.5 million in common and preferred stock.
The Apollo Investment Fund, which currently holds about $300 million in company stock, will purchase $35 million of the equity offering, which is subject to shareholder approval.
Encompass is required to apply 50% of any proceeds from the equity offering in excess of $35 million toward permanent reduction of the revolver and the term loans on a pro-rata basis.
The company has agreed, as part of the amendment, to complete the rights offering, which includes the Apollo Investment, by Oct. 15.