<PAGE> 1
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-11849
AMERICAN RESIDENTIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C>
DELAWARE 76-0484996
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
POST OAK TOWER, SUITE 725 77056-5604
5051 WESTHEIMER ROAD (Zip code)
HOUSTON, TEXAS
(Address of principal executive offices)
</TABLE>
(713) 599-0100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At November 13, 1997, 15,321,322 shares of Common Stock, par value $.001
per share, of the registrant were outstanding.
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<PAGE> 2
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 9,984 $ 3,724
Accounts receivable --
Trade, net............................................. 30,735 47,674
Other.................................................. 2,023 5,654
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 1,391 5,562
Inventories............................................... 11,290 17,564
Prepaid expenses and other current assets................. 1,572 4,475
Net assets held for resale................................ 338 360
-------- --------
Total current assets.............................. 57,333 85,013
PROPERTY AND EQUIPMENT, net................................. 21,660 30,837
GOODWILL, net............................................... 131,193 196,234
OTHER NONCURRENT ASSETS..................................... 1,438 5,304
-------- --------
Total assets...................................... $211,624 $317,388
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 2,202 $ 492
Accounts payable and accrued liabilities.................. 29,984 40,407
Unearned revenue on service and warranty contracts........ 4,007 5,549
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 2,503 3,063
-------- --------
Total current liabilities......................... 38,696 49,511
LONG-TERM DEBT, net of current maturities................... 53,861 116,041
UNEARNED REVENUE ON SERVICE AND WARRANTY CONTRACTS.......... 633 1,041
DEFERRED INCOME TAXES....................................... 2,183 3,131
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 10,000,000 shares
authorized; none issued and outstanding................ -- --
Common stock, $.001 par value, 50,000,000 shares
authorized; 13,389,255 and 15,205,769 shares issued and
outstanding............................................ 13 15
Additional paid-in capital................................ 126,226 150,611
Retained deficit.......................................... (9,988) (2,962)
-------- --------
Total stockholders' equity........................... 116,251 147,664
-------- --------
Total liabilities and stockholders' equity........ $211,624 $317,388
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE> 3
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------- --------------------
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES........................................ $ 31,428 $109,500 $ 85,145 $272,781
COST OF SERVICES................................ 22,967 79,200 61,783 194,512
-------- -------- -------- --------
Gross profit.................................. 8,461 30,300 23,362 78,269
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.... 9,634 21,925 22,173 56,051
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS................... (1,173) 8,375 1,189 22,218
OTHER INCOME (EXPENSE):
Interest expense.............................. (4,366) (2,147) (4,572) (4,955)
Interest income............................... 21 56 76 140
Other, net.................................... 90 123 215 683
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES............... (5,428) 6,407 (3,092) 18,086
PROVISION FOR INCOME TAXES...................... 501 2,819 1,257 7,838
-------- -------- -------- --------
NET INCOME (LOSS)............................... $ (5,929) $ 3,588 $ (4,349) $ 10,248
======== ======== ======== ========
WEIGHTED AVERAGE SHARES 4,085
OUTSTANDING................................... 15,262 4,085 14,457
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE....................... $ (1.45) $ 0.24 $ (1.06) $ 0.71
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 4
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
--------------------
1996 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ (4,349) $ 10,248
Adjustments to reconcile net income to net cash provided
by (used in) operating activities --
Depreciation and amortization......................... 1,535 8,104
Stock portion of compensation and financing fees 6,276
related to the purchase of EHC....................... --
Deferred tax expense (benefit)........................ (429) 761
Loss (gain) on sale of property and equipment......... (5) (229)
Current taxes on acquired S corporations.............. 986 826
Changes in operating assets and liabilities --
(Increase) decrease in --
Accounts receivable, net......................... (2,568) (10,059)
Cost and estimated earnings in excess of billings (95)
on uncompleted contracts........................ (2,805)
Inventories...................................... (510) (2,117)
Prepaid expenses and other current assets........ (1,653) (2,726)
Other noncurrent assets.......................... 69 328
Increase (decrease) in --
Accounts payable and accrued liabilities......... 2,180 (10,847)
Unearned revenue on service and warranty 192
contracts....................................... 3,460
Billings in excess of costs and estimated 156
earnings on uncompleted contracts............... 166
Other, net............................................ (34) --
-------- --------
Net cash provided by (used in) operating 1,751
activities........................................ (4,890)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................... (2,810) (7,763)
Proceeds from sales of property and equipment............. 180 508
Cash paid for business acquisitions, net of cash (28,468)
acquired................................................ (37,692)
-------- --------
Net cash used in investing activities.............. (31,098) (44,947)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt...................... (23,485) (133,659)
Proceeds from long-term debt.............................. 9,808 183,119
Proceeds from issuance of Common Stock, net of offering 52,725
costs................................................... --
Distributions to Founding Company stockholders............ (5,384) --
S corporation dividends paid by the Restated Businesses... (1,150) (3,222)
Other, net................................................ (415) (2,661)
-------- --------
Net cash provided by financing activities.......... 32,099 43,577
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 2,752 (6,260)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 2,508 9,984
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 5,260 $ 3,724
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest................................................ $ 165 $ 1,799
Income taxes............................................ 473 4,274
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 5
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
American Residential Services, Inc. ("ARS" and, collectively with its
subsidiaries, the "Company") was incorporated in October 1995 and conducted no
operations of its own prior to the closing on September 27, 1996 of its initial
public offering (the "IPO") of its common stock, par value $.001 per share
("Common Stock"), and its acquisition of seven residential services businesses
(the "Founding Companies"). For financial statement presentation purposes, Atlas
Services, Inc. ("Atlas"), one of the Founding Companies, is the accounting
acquiror. The Company has accounted for the acquisitions of the remaining
Founding Companies in accordance with the purchase method of accounting, and
their results of operations are included with those of Atlas from September 30,
1996, the effective closing date of their acquisition for accounting purposes.
From September 30, 1996 through September 30, 1997, the Company acquired an
additional 72 businesses (collectively with the Founding Companies other than
Atlas, the "Acquired Businesses"). Of the 72 Acquired Businesses, 49 (the
"Purchased Businesses") were accounted for under the purchase method of
accounting, and the remainder (the "Pooled Businesses") were accounted for under
the pooling-of-interests method of accounting. The allocation of the purchase
price to the assets acquired and liabilities assumed in certain purchase
transactions has been recorded initially based on preliminary estimates of fair
value and may be revised as additional information concerning the valuation of
such assets and liabilities becomes available. In addition, for all acquisitions
accounted for under the purchase method of accounting, preliminary estimates of
value have been assigned to the shares of Common Stock issued in those
acquisitions, to the extent those shares were, when issued, restricted as to
resale by the holders, and such value may be revised as additional information
becomes available.
The historical financial statements of the Company (including those of
Atlas prior to September 30, 1996) have been retroactively restated to give
effect to the operations of 15 of the 23 Pooled Businesses (the "Restated
Businesses"). The eight remaining Pooled Businesses are not significant to prior
historical periods and are included in the consolidated results of the Company
beginning on their respective dates of acquisition.
The Company's retail appliance sales division, previously reported as
discontinued operations, was reclassified in the third quarter of 1997 as assets
held for resale, and the results of operations associated with that division are
included in selling, general and administrative expenses for the three and nine
months ended September 30, 1997. The consolidated financial statements of the
Company presented herein have been restated for the reclassification, the effect
of which is not material to these consolidated financial statements.
The consolidated financial statements herein have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission that permit certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles to be condensed or omitted. The Company believes
the presentation and disclosures herein are adequate to make the information not
misleading, and the financial statements reflect all elimination entries and
normal recurring adjustments that are necessary for a fair presentation of the
results for the three and nine months ended September 30, 1996 and 1997.
Operating results for interim periods are not necessarily indicative of the
results for a full year. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements of
the Company and the related notes thereto included in ARS's Annual Report on
Form 10-K for the year ended December 31, 1996.
4
<PAGE> 6
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes in the accounting policies of the
Company during the periods presented. For a description of these policies, see
Note 2 of the Notes to Consolidated Financial Statements of the Company in ARS's
Annual Report on Form 10-K for the year ended December 31, 1996.
3. LONG-TERM DEBT
The Company has in place a revolving credit facility (the "Credit
Facility") with a syndicate of banks. On March 3, 1997, the Company increased
the total commitment under the Credit Facility from $55.0 million, which was in
place at December 31, 1996, to $100.0 million. For a description of the Credit
Facility, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" in Item 2 of this
Report. As of September 30, 1997, the Company had $59.0 million in outstanding
borrowings under the Credit Facility, bearing interest at a weighted average
rate of approximately 7.02%.
On April 2, 1997, ARS sold $55.0 million aggregate principal amount of its
7 1/4% Convertible Subordinated Notes due 2004 (the "7 1/4% Notes"). The 7 1/4%
Notes are unsecured obligations of ARS and are convertible at $25.50 per share,
subject to adjustment in certain events, into an aggregate of 2,156,863 shares
of Common Stock. The Company used substantially all the net proceeds of the
offering of the 7 1/4% Notes to repay indebtedness outstanding under the Credit
Facility.
4. EARNINGS (LOSS) PER SHARE
The following table summarizes weighted average shares outstanding for each
of the periods presented (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------- --------------
1996 1997 1996 1997
----- ------ ----- ------
<S> <C> <C> <C> <C>
Shares issued in the acquisition of Atlas................... 1,067 1,067 1,067 1,067
Shares issued in the acquisitions of the Restated
Businesses................................................ 3,018 3,018 3,018 3,018
Shares issued in the formation of ARS....................... -- 1,267 -- 1,267
Shares issued to the stockholders of the
remaining Founding Companies.............................. -- 1,876 -- 1,876
Shares sold in the IPO...................................... -- 4,830 -- 4,830
Shares awarded to certain employees and consultants......... -- 40 -- 40
Shares issued in the acquisitions of the Purchased
Businesses and the Pooled Businesses (excluding the
Restated Businesses)...................................... -- 2,713 -- 1,910
Shares issuable upon conversion of stock options and
warrant, net of assumed repurchases of stock under the
treasury stock method..................................... -- 451 -- 449
----- ------ ----- ------
Weighted average shares outstanding.................... 4,085 15,262 4,085 14,457
===== ====== ===== ======
</TABLE>
In February 1997, the Financial Standards Accounting Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS
No. 128 revised the methodology to be used in computing earnings per share
("EPS"), such that the computations required for primary and fully diluted EPS
are to be replaced with "basic" and "diluted" EPS. Basic EPS is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the year. Diluted EPS reflects the potential dilution that
could occur if securities and other contracts to issue common stock were
exercised or converted into common stock. Diluted EPS is computed in the same
manner as fully diluted EPS, except that, among other changes, the average share
price for the period is used in all cases when applying the treasury stock
method to potentially dilutive outstanding options.
5
<PAGE> 7
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company will adopt SFAS No. 128 effective December 15, 1997, and will
restate EPS for all periods presented. Presented below is the expected impact of
SFAS No. 128 on the Company's EPS for all periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
-------------------------------------
1996 1997
----------------- -----------------
BASIC DILUTED BASIC DILUTED
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss)...................................... $(5,929) $(5,929) $ 3,588 $ 3,588
======= ======= ======= =======
Weighted average shares outstanding.................... 4,085 4,085 14,811 15,262
======= ======= ======= =======
Earnings (loss) per share.............................. $ (1.45) $ (1.45) $ 0.24 $ 0.24
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
-------------------------------------
1996 1997
----------------- -----------------
BASIC DILUTED BASIC DILUTED
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss)...................................... $(4,349) $(4,349) $10,248 $10,248
======= ======= ======= =======
Weighted average shares outstanding.................... 4,085 4,085 14,008 14,457
======= ======= ======= =======
Earnings (loss) per share.............................. $ (1.06) $ (1.06) $ 0.73 $ 0.71
======= ======= ======= =======
</TABLE>
5. INCOME TAXES
The Company files a consolidated federal income tax return, which includes
the operations of all Acquired Businesses for periods subsequent to their
respective dates of acquisition. Acquired Businesses file "short period" federal
income tax returns through their respective acquisition dates.
Certain of the Pooled Businesses were S corporations for income tax
purposes prior to their acquisition by the Company. Accordingly, any income tax
liabilities for the periods prior to their acquisition dates are the
responsibility of their former owners. For purposes of these consolidated
financial statements, federal and state income taxes have been reflected as if
those Pooled Businesses had filed C corporation tax returns for the pre-
acquisition periods, with the current income tax expense of those S corporations
reflected as an increase to additional paid-in capital.
6. BUSINESS COMBINATIONS
Poolings
During the first nine months of 1997, the Company acquired the 23 Pooled
Businesses under the pooling-of-interests method in exchange for 3,689,909
shares of Common Stock. The results of operations of the 15 Restated Businesses
are included in all periods herein, while the results of operations of the other
eight Pooled Businesses are included from their respective effective acquisition
dates. The combined revenues and net income of the 15 Restated Businesses for
the periods prior to their acquisitions by the Company were as follows (in
millions):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------- --------------
1996 1997 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues.......................................... $22.1 $ 7.2 $61.8 $41.5
Net Income........................................ 0.8 0.3 2.1 2.4
</TABLE>
6
<PAGE> 8
AMERICAN RESIDENTIAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Purchases
From September 30, 1996 through September 30, 1997, the Company acquired
the 49 Purchased Businesses under the purchase method of accounting. The
aggregate consideration paid in those transactions consisted of $83.4 million in
cash (including short-term notes that were subsequently repaid with proceeds
from borrowings under the Credit Facility), 2,391,255 shares of Common Stock and
a promissory note in the principal amount of $1.8 million. The accompanying
balance sheet as of September 30, 1997 includes preliminary estimates of fair
value that may be revised as additional information concerning the valuation of
the assets and liabilities of the businesses acquired becomes available. See
Note 1 above.
Subsequent Acquisitions
Subsequent to September 30, 1997 through the date of filing of this Report,
the Company completed seven additional acquisitions (the "Subsequent
Acquisitions") for approximately $5.6 million in cash and 115,553 shares of
Common Stock. The Company will account for these acquisitions as purchase
transactions. The businesses acquired in the Subsequent Acquisitions contributed
approximately $10.5 million and $11.0 million in revenues to the pro forma
financial information set forth below for the nine months ended September 30,
1996 and 1997, respectively.
Set forth below are unaudited pro forma combined revenue and net income
data reflecting the pro forma effect of the acquisitions of the Acquired
Businesses and the Subsequent Acquisitions as if they had occurred at the
beginning of each period presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
(IN MILLIONS, EXCEPT
PER
SHARE AMOUNTS)
(UNAUDITED)
--------------------
1996 1997
-------- --------
<S> <C> <C>
Pro forma revenues.......................................... $318.2 $348.9
====== ======
Pro forma net income........................................ $ 9.6 $12.9
====== ======
Pro forma net income per share.............................. $ 0.64 $0.82
====== ======
</TABLE>
Pro forma adjustments included in the amounts above primarily relate to:
(i) compensation differentials, reflecting reduced compensation amounts agreed
to in connection with the acquisitions, (ii) adjustments for rent expense on
certain leased facilities, reflecting reductions in rent agreed to in connection
with the acquisitions, (iii) adjustments for the effects of assets distributed
to and costs of certain leases assumed by former owners of certain of the
businesses acquired, (iv) adjustments for pro forma goodwill amortization
expense using a 40-year estimated life, (v) eliminations of historical interest
expense related to certain obligations that were repaid or not assumed by the
Company, reduced by interest expense on borrowed funds used to pay the cash
portion of the purchase price of the businesses acquired, (vi) the issuance and
sale of the 7 1/4% Notes by ARS and the application of the proceeds from that
sale and (vii) adjustments to the federal and state income tax provisions on pro
forma operating results. Net income per share for the nine months ended
September 30, 1996 and 1997 assumes all shares issued for the acquisitions of
the Acquired Businesses and the Subsequent Acquisitions had been outstanding for
the periods presented.
The pro forma results presented are not necessarily indicative of actual
results that might have occurred had the operations and management teams of the
Company and the businesses acquired been combined at the beginning of the
periods presented.
7. SUBSEQUENT EVENT
The Company expects that certain costs associated with the settlement of
employment agreements with the Company's former chief executive officer and
another officer of the Company will result in a one-time charge to earnings of
approximately $1.7 million in the fourth quarter of 1997.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 1 of this
Report and the financial statements and notes thereto included in ARS's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K").
Statements herein regarding future financial or operational performance and
results of the Company or other similar matters that are not historical facts
constitute forward-looking statements and are subject to numerous risks and
uncertainties, including but not limited to the availability of attractive
acquisition opportunities, the successful integration and profitable management
of businesses acquired, the improvement of operating efficiencies, the
availability of working capital and funding for future acquisitions, the ability
to grow internally through expansion of services and customer bases and
reduction of overhead, the level and nature of competition from other
residential services and commercial maintenance services providers and other
factors discussed in the 1996 Form 10-K.
The Company derives its revenues primarily from (i) owners and occupants of
homes and small commercial buildings, (ii) builders and developers of new homes,
residential developments and small commercial buildings and (iii) owners and
managers of large commercial, industrial and institutional facilities. Cost of
services consists primarily of salaries and benefits of service and installation
personnel, parts and materials, subcontracted services, depreciation,
maintenance, fuel and equipment rentals. Selling, general and administrative
expenses consist primarily of compensation and related benefits payable to
former owners of Acquired Businesses and to management and administrative
personnel, advertising, office rent and utilities, communications and
professional fees.
Prior to their acquisition by the Company, the Acquired Businesses were
managed as independent private businesses, and their results of operations
reflect different tax structures (S corporations and C corporations), which have
influenced, among other things, their historical levels of owners' compensation.
Certain owners agreed to reductions in their compensation and benefits in
connection with the acquisition of their businesses by the Company.
For financial reporting purposes, Atlas is presented as the acquiror in all
the acquisitions by ARS through September 30, 1996, the effective date of the
acquisitions of the Founding Companies for accounting purposes. The Company's
historical financial statements for periods ended on or before September 30,
1996 are the consolidated historical financial statements of Atlas retroactively
restated to give effect to the operations of the 15 Restated Businesses
accounted for under the pooling-of-interests method of accounting. As used in
this discussion, the "Company" means (i) Atlas prior to September 30, 1996 and
(ii) ARS and its consolidated subsidiaries on that date and thereafter, and the
term "Acquired Businesses" does not include Atlas.
RESULTS OF OPERATIONS
The following table sets forth various items as a percentage of the
Company's revenues:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------- ---------------
1996 1997 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues................................................. 100.0% 100.0% 100.0% 100.0%
Cost of services......................................... 73.1 72.3 72.6 71.3
----- ----- ----- -----
Gross profit........................................... 26.9 27.7 27.4 28.7
Selling, general and administrative expenses............. 30.6 20.0 26.0 20.5
----- ----- ----- -----
Income (loss) from operations.......................... (3.7) 7.7 1.4 8.2
Interest expense......................................... (13.9) (2.0) (5.4) (1.8)
Interest income and other, net........................... 0.3 0.2 0.4 0.3
----- ----- ----- -----
Income (loss) before income taxes........................ (17.3) 5.9 (3.6) 6.7
Income taxes............................................. 1.6 2.6 1.5 2.9
----- ----- ----- -----
Net income (loss)........................................ (18.9)% 3.3% (5.1)% 3.8%
===== ===== ===== =====
</TABLE>
8
<PAGE> 10
Revenues increased by 248.7% from $31.4 million for the three months ended
September 30, 1996 to $109.5 million for the three months ended September 30,
1997. Revenues increased 220.6% from $85.1 million for the nine months ended
September 30, 1996 to $272.8 million for the nine months ended September 30,
1997. Approximately $71.5 million and $168.0 million of the increase from the
three and nine months ended September 30, 1996 to the corresponding periods in
1997, respectively, resulted from the inclusion of revenues from those Acquired
Businesses for which the results of operations are included in the Company's
consolidated results from their respective acquisition dates. The remainder of
the increase was primarily attributable to increased demand for the Company's
services.
Cost of services increased 244.8% and 214.8% to $79.2 million and $194.5
million for the three and nine months ended September 30, 1997, respectively, as
compared to the corresponding periods in the prior year, reflecting increased
costs associated with the higher level of revenues. Gross profit, as a
percentage of revenues, increased from 26.9% for the three months ended
September 30, 1996 to 27.7% for the three months ended September 30, 1997. Gross
profit, as a percentage of revenues, increased from 27.4% for the nine months
ended September 30, 1996 to 28.7% for the nine months ended September 30, 1997.
The improvement in gross profit in 1997 was primarily attributable to the
purchase acquisitions of businesses providing residential maintenance services,
which typically generate higher margins than new residential installation
services, as well as purchase discounts from equipment vendors through
consolidated purchasing.
Selling, general and administrative expenses increased $12.3 million and
$33.9 million to $21.9 million and $56.1 million for the three and nine months
ended September 30, 1997, respectively, as compared to the corresponding periods
in the prior year. The increases were primarily due to the operations of those
Acquired Businesses for which the results of operations are included in the
Company's consolidated results from their respective acquisition dates and
goodwill amortization associated with the purchase acquisitions, coupled with
the addition of ARS's corporate personnel and administrative infrastructure.
Those increases, however, were partially offset by non-recurring charges in the
third-quarter of 1996 of (i) approximately $3.1 million representing
compensation expense related to the acquisition of Enterprises Holding Company
("EHC") by ARS and (ii) $0.6 million representing compensation expense related
to the issuance of 39,987 shares of Common Stock to certain employees,
consultants and three officers of the Company.
Interest expense decreased $2.2 million for the three months ended
September 30, 1997 and increased $0.4 million for the nine months ended
September 30, 1997. The decrease in interest expense for the three months ended
September 30, 1997 primarily related to a non-recurring charge in the third
quarter of 1996 of $4.2 million paid to the holders of EHC preferred stock in
connection with the acquisition of EHC by ARS. The increase in interest expense
for the nine months ended September 30, 1997 was attributable to the use of debt
financing to fund the cash portion of the purchase prices of the Acquired
Businesses and the issuance by ARS on April 2, 1997 of the 7 1/4% Notes,
partially offset by the effect of the third-quarter 1996 non-recurring charge
relating to the EHC preferred stock as described above.
Interest income and other, net increased $0.1 million and $0.5 million for
the three and nine months ended September 30, 1997. The increase was primarily
attributable to (i) gains realized on the non-recurring sale of excess vehicles
and equipment and (ii) rental income earned on property held by the Company and
leased to third parties.
The effective tax rate for the nine months ended September 30, 1997 was
43.3%, representing management's estimate of the effective tax rate for fiscal
1997.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1997, net cash used in operating
activities was $4.9 million, which was primarily attributable to an increase in
accounts receivable and a decrease in accounts payable and accrued liabilities
since December 31, 1996. The increase in accounts receivable related primarily
to (i) the additional accounts receivable acquired through the acquired
companies and (ii) the seasonal nature of the Company's operations, which
generally results in increased levels of services provided in the second and
third quarters as compared to the first and fourth quarters. The decrease in
current liabilities during the nine months ended September 30, 1997 resulted
primarily from the conformity of the accounts payable of the businesses
9
<PAGE> 11
acquired with the Company's accounts payable policy, which mandates prompt
payment to achieve vendor discounts and uniform timing for payments. Also during
the nine months ended September 30, 1997, capital expenditures totaled $7.8
million and net borrowings of debt amounted to $49.4 million. The Company
anticipates capital expenditures (exclusive of acquisitions) of approximately
$2.0 million during the remainder of 1997, primarily for computer systems,
leasehold improvements and furniture and fixtures. The Company believes its cash
flow from operations and the borrowings available under its revolving credit
facility will be sufficient to support its ongoing operations and anticipated
capital expenditures for the remainder of 1997.
On March 3, 1997, the Company increased the size of its Credit Facility
from $55.0 million to $100.0 million. Borrowings under the Credit Facility may
be used for general corporate purposes, including the funding of any cash paid
in connection with acquisitions, refinancing indebtedness of businesses
acquired, capital expenditures and working capital. Loans under the Credit
Facility bear interest at a designated variable base rate plus a margin ranging
from 0 to 50 basis points, depending on the ratio of the Company's interest-
bearing debt to its trailing 12-month earnings before interest, taxes,
depreciation and amortization. At the Company's option, the loans may bear
interest based on a designated London interbank offering rate plus a margin
ranging from 100 to 200 basis points, depending on the same ratio. The margin is
reset on a quarterly basis and also may be reset on the closing of an
acquisition involving cash consideration in excess of $5.0 million or upon a
principal repayment in excess of $5.0 million. Commitment fees of 30 to 50 basis
points per annum are payable on the unused portion of the line of credit. The
Credit Facility has a $5.0 million sublimit for standby letters of credit. The
Credit Facility requires the consent of the lenders for acquisitions exceeding a
certain level of cash consideration, prohibits the payment of dividends by the
Company (except for dividends payable in Common Stock and certain preferred
stock), does not permit the Company to incur or assume other indebtedness (other
than approved subordinated indebtedness) in excess of any amount equal to 5% of
its consolidated net worth and requires the Company to comply with certain
financial covenants. The Credit Facility will terminate and all amounts
outstanding, if any, thereunder will be due and payable in September 1999. The
Company's subsidiaries have guaranteed the repayment of all amounts due under
the Credit Facility, and the Company has pledged the stock of its operating
subsidiaries as collateral for its obligations under the Credit Facility. At
September 30, 1997, the Company's outstanding borrowings under the Credit
Facility were $59.0 million, bearing interest at a weighted average rate of
7.02%. As of November 13, 1997, the Company had outstanding borrowings under the
Credit Facility in the amount of $75.9 million, bearing interest at a weighted
average rate of 7.19%. The higher weighted average rate of interest at November
13, 1997, as compared to September 30, 1997, is attributable to a higher
proportion of borrowings on November 13, 1997 at the base rate. The Company is
currently negotiating an increase in the size of the Credit Facility.
On April 2, 1997, ARS sold $55.0 million aggregate principal amount of its
7 1/4% Notes. These notes are unsecured obligations of ARS and are convertible
into an aggregate of 2,156,863 shares of Common Stock of the Company at a
conversion price of $25.50 per share, subject to adjustment in certain events.
ARS used substantially all the net proceeds from its sale of the 7 1/4% Notes to
repay indebtedness outstanding under the Credit Facility.
In January 1997, ARS registered 5,000,000 shares of its Common Stock under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
shelf registration statement on Form S-4, for issuance from time to time in
connection with acquisitions. In July 1997, ARS registered an additional
10,000,000 shares of Common Stock and $100.0 million aggregate principal amount
of convertible subordinated debt securities (the "Convertible Debt Securities")
under the Securities Act pursuant to a shelf registration statement on Form S-4,
also for issuance from time to time in connection with acquisitions. ARS is
currently authorized pursuant to its Credit Facility to issue up to $25.0
million aggregate principal amount of Convertible Senior Subordinated Notes,
Series A (the "Series A Notes") (representing a series of the Convertible Debt
Securities), maturing April 15, 2004. Certain terms of the Series A Notes,
including the interest rate and the conversion price, will be determined by ARS
in connection with the acquisitions for which such notes are issued.
In 1997 (through September 30), the Company acquired 59 businesses for an
aggregate consideration of $42.2 million in cash, 4,740,524 shares of Common
Stock and a promissory note in the principal amount of
10
<PAGE> 12
$1.8 million. From September 30, 1997 to the date of filing of this Report, the
Company acquired an additional seven businesses for an aggregate consideration
of $5.6 million in cash and 115,553 shares of Common Stock. All shares of Common
Stock issued for the acquisitions during 1997 were issued under ARS's shelf
registration statements. Funding of the cash portion of the purchase prices and
repayment of indebtedness assumed in connection with those acquisitions was
provided by funds from operations and borrowings under the Credit Facility.
The Company intends to continue to pursue attractive acquisition
opportunities of both residential services and commercial maintenance services
businesses; however, the timing, size or success of any acquisitions effort and
the associated potential capital commitments are unpredictable. The Company has
recently revised its criteria used to select acquisition candidates to focus on
larger companies and to involve its operations personnel in the integration
planning for acquisitions at an earlier stage in the process than they were
previously. Due to these revisions, the Company anticipates that contributions
to operating results from acquisitions in the fourth quarter of 1997 will be
less than would have been the case had these revisions not been made. The
Company expects to fund future acquisitions primarily through a combination of
Common Stock, working capital, cash flow from operations and borrowings,
including the unborrowed portion of the Credit Facility, issuances of the
Convertible Debt Securities and the possible public or private sale of
additional debt or equity securities.
The Company expects that certain costs associated with the settlement of
employment agreements with the Company's former chief executive officer and
another officer of the Company will result in a one-time charge to earnings of
approximately $1.7 million in the fourth quarter of 1997.
SEASONALITY AND FLUCTUATIONS IN OPERATIONS RESULTS
The Company has experienced, and expects that it will in the future
experience, quarterly fluctuations in revenues, operating income and cash flows
as a result of changes in weather conditions. Except for certain areas of the
southern United States, the demand for new residential installations is lower in
the winter months because new construction activity is lower as a result of
colder weather (although the Company expects that such reduction in demand may
be partially offset by increases in the demand for commercial replacement
services generally experienced in the winter months). Demand for heating,
ventilation and air conditioning services is generally higher in the second and
third quarters. In addition to the effects of seasonality, the Company's
quarterly results may fluctuate as a result of a number of other factors,
including the timing of acquisitions and the cyclical nature of the homebuilding
industry, which will influence the levels of housing starts from time to time in
the markets in which the Company engages in new residential installation
services and affect the Company's ability to maintain or increase revenues from
those services. Accordingly, quarterly comparisons of the Company's revenues and
operating results should not be relied on as an indication of future
performance, and the results of any quarterly period may not be indicative of
the results to be expected for a full year.
11
<PAGE> 13
AMERICAN RESIDENTIAL SERVICES, INC.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*2.1 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which American Residential Services, Inc. ("ARS")
and Climatic Corporation of Vero Beach are parties (Form
S-1, Reg. No. 333-06195, Ex. 2.1).
*2.2 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning, Inc. are parties (Form S-1, Reg. No.
333-06195, Ex. 2.2).
*2.3 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Atlas Services, Inc. are parties
(Form S-1, Reg. No. 333-06195, Ex. 2.3).
*2.4 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and DIAL ONE Meridian and Hoosier, Inc.
are parties (Form S-1, Reg. No. 333-06195, Ex. 2.4).
*2.5 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Bullseye Air Conditioning, Inc. are
parties (Form S-1, Reg. No. 333-06195, Ex. 2.5).
*2.6 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning Duct, Inc. are parties (Form S-1, Reg. No.
333-06195, Ex. 2.6).
*2.7 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning Service, Inc. are parties (Form S-1, Reg.
No. 333-06195, Ex. 2.7).
*2.8 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and General Heating Engineering
Company, Inc. are parties (Form S-1, Reg. No. 333-06195,
Ex. 2.8).
*2.9 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Enterprises Holding Company ("EHC")
are parties (Form S-1, Reg. No. 333-06195, Ex. 2.9).
*2.10 -- Form of Uniform Provisions for the Acquisition of
Founding Companies (Form S-1, Reg. No. 333-06195, Ex.
2.10).
*2.11 -- Agreement and Plan of Reorganization dated as of December
11, 1996 to which ARS and Metro Heating and Air
Conditioning, Inc. are parties (Form S-4, Reg. No.
333-18623, Ex. 2.11).
*3.1 -- Restated Certificate of Incorporation of ARS (Form S-1,
Reg. No. 333-06195, Ex. 3.1).
*3.2 -- Bylaws of ARS (Form S-1, Reg. No. 333-06195, Ex. 3.2).
*3.3 -- Certificate of Designation of Series A Junior
Participating Preferred Stock (Form S-1, Reg. No.
333-06195, Ex. 3.3).
*4.1 -- Form of Certificate representing Common Stock (Form S-1,
Reg. No. 333-06195, Ex. 4.1).
*4.2 -- Rights Agreement of ARS, including form of Rights
Certificate as Exhibit B thereto (Form S-8, Reg. No.
333-13299, Ex. 4.4).
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*4.3 -- Registration Rights Agreement among ARS and the
stockholders listed on the signature pages thereto (Form
S-1, Reg. No. 333-06195, Ex. 4.3).
*4.4 -- Stock Registration Agreement dated as of March 6, 1996
between ARS and Equus II Incorporated (Form S-1, Reg. No.
333-06195, Ex. 4.4).
*4.5 -- Stock Piggyback Registration Agreement dated as of March
19, 1996 between EHC and NationsBank of Texas, N.A.
("NationsBank") (Form S-1, Reg. No. 333-06195, Ex. 4.5).
*4.6 -- Revolving Loan Agreement dated March 3, 1997 among ARS,
NationsBank and the other parties designated therein
(Form 10-K for 1996, File No. 1-11849, Ex. 4.6).
*4.7 -- First Amendment to Revolving Loan Agreement dated March
24, 1997, among ARS, NationsBank and the other parties
designated therein (Form 10-K for 1996, File No. 1-11849,
Ex. 4.7).
*4.8 -- Second Amendment to Revolving Loan Agreement dated as of
June 30, 1997, among ARS, NationsBank and the other
parties designated therein (Form 10-Q for the period
ended June 30, 1997, File No. 1-11849, Ex. 4.8).
*4.9 -- Indenture dated as of April 1, 1997 between ARS and U.S.
Trust Company of Texas, N.A., as Trustee, relating to the
$55,000,000 aggregate principal amount of 7 1/4%
Convertible Subordinated Notes due 2004 of ARS (Form S-4,
Reg. No. 333-18623, Ex. 4.8).
*4.10 -- Registration Rights Agreement dated as of April 1, 1997
between ARS and Smith Barney Inc., Goldman, Sachs & Co.
and Montgomery Securities (Form S-4, Reg. No. 333-18623,
Ex. 4.9).
*4.11 -- Indenture dated as of July 31, 1997, between ARS and U.S.
Trust Company of Texas, N.A., as Trustee, relating to
Convertible Subordinated Debt Securities of ARS (Form
10-Q for the period ended June 30, 1997, File 1-11849,
Ex. 4.11).
-- ARS and certain of its subsidiaries are parties to
certain debt instruments under which the total amount of
its securities authorized does not exceed 10% of the
total assets of ARS and its subsidiaries on a
consolidated basis. Pursuant to paragraph 4(iii)(A) of
Item 601(b) of Regulation S-K, ARS agrees to furnish a
copy of such instruments to the Commission upon request.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Incorporated by reference.
(b) Reports on Form 8-K.
None.
13
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, American Residential Services, Inc., has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN RESIDENTIAL SERVICES, INC.
By: /s/ HARRY O. NICODEMUS, IV
------------------------------------
Harry O. Nicodemus, IV
Senior Vice President
(Chief Financial Officer and
Chief Accounting Officer)
Dated: November 14, 1997
14
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
*2.1 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which American Residential Services, Inc. ("ARS")
and Climatic Corporation of Vero Beach are parties (Form
S-1, Reg. No. 333-06195, Ex. 2.1).
*2.2 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning, Inc. are parties (Form S-1, Reg. No.
333-06195, Ex. 2.2).
*2.3 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Atlas Services, Inc. are parties
(Form S-1, Reg. No. 333-06195, Ex. 2.3).
*2.4 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and DIAL ONE Meridian and Hoosier, Inc.
are parties (Form S-1, Reg. No. 333-06195, Ex. 2.4).
*2.5 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Bullseye Air Conditioning, Inc. are
parties (Form S-1, Reg. No. 333-06195, Ex. 2.5).
*2.6 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning Duct, Inc. are parties (Form S-1, Reg. No.
333-06195, Ex. 2.6).
*2.7 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Florida Heating and Air
Conditioning Service, Inc. are parties (Form S-1, Reg.
No. 333-06195, Ex. 2.7).
*2.8 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and General Heating Engineering
Company, Inc. are parties (Form S-1, Reg. No. 333-06195,
Ex. 2.8).
*2.9 -- Agreement and Plan of Reorganization dated as of June 13,
1996 to which ARS and Enterprises Holding Company ("EHC")
are parties (Form S-1, Reg. No. 333-06195, Ex. 2.9).
*2.10 -- Form of Uniform Provisions for the Acquisition of
Founding Companies (Form S-1, Reg. No. 333-06195, Ex.
2.10).
*2.11 -- Agreement and Plan of Reorganization dated as of December
11, 1996 to which ARS and Metro Heating and Air
Conditioning, Inc. are parties (Form S-4, Reg. No.
333-18623, Ex. 2.11).
*3.1 -- Restated Certificate of Incorporation of ARS (Form S-1,
Reg. No. 333-06195, Ex. 3.1).
*3.2 -- Bylaws of ARS (Form S-1, Reg. No. 333-06195, Ex. 3.2).
*3.3 -- Certificate of Designation of Series A Junior
Participating Preferred Stock (Form S-1, Reg. No.
333-06195, Ex. 3.3).
*4.1 -- Form of Certificate representing Common Stock (Form S-1,
Reg. No. 333-06195, Ex. 4.1).
*4.2 -- Rights Agreement of ARS, including form of Rights
Certificate as Exhibit B thereto (Form S-8, Reg. No.
333-13299, Ex. 4.4).
*4.3 -- Registration Rights Agreement among ARS and the
stockholders listed on the signature pages thereto (Form
S-1, Reg. No. 333-06195, Ex. 4.3).
*4.4 -- Stock Registration Agreement dated as of March 6, 1996
between ARS and Equus II Incorporated (Form S-1, Reg. No.
333-06195, Ex. 4.4).
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
*4.5 -- Stock Piggyback Registration Agreement dated as of March
19, 1996 between EHC and NationsBank of Texas, N.A.
("NationsBank") (Form S-1, Reg. No. 333-06195, Ex. 4.5).
*4.6 -- Revolving Loan Agreement dated March 3, 1997 among ARS,
NationsBank and the other parties designated therein
(Form 10-K for 1996, File No. 1-11849, Ex. 4.6).
*4.7 -- First Amendment to Revolving Loan Agreement dated March
24, 1997, among ARS, NationsBank and the other parties
designated therein (Form 10-K for 1996, File No. 1-11849,
Ex. 4.7).
*4.8 -- Second Amendment to Revolving Loan Agreement dated as of
June 30, 1997, among ARS, NationsBank and the other
parties designated therein (Form 10-Q for the period
ended June 30, 1997, File No. 1-11849, Ex. 4.8).
*4.9 -- Indenture dated as of April 1, 1997 between ARS and U.S.
Trust Company of Texas, N.A., as Trustee, relating to the
$55,000,000 aggregate principal amount of 7 1/4%
Convertible Subordinated Notes due 2004 of ARS (Form S-4,
Reg. No. 333-18623, Ex. 4.8).
*4.10 -- Registration Rights Agreement dated as of April 1, 1997
between ARS and Smith Barney Inc., Goldman, Sachs & Co.
and Montgomery Securities (Form S-4, Reg. No. 333-18623,
Ex. 4.9).
*4.11 -- Indenture dated as of July 31, 1997, between ARS and U.S.
Trust Company of Texas, N.A., as Trustee, relating to
Convertible Subordinated Debt Securities of ARS (Form
10-Q for the period ended June 30, 1997, File 1-11849,
Ex. 4.11).
-- ARS and certain of its subsidiaries are parties to
certain debt instruments under which the total amount of
its securities authorized does not exceed 10% of the
total assets of ARS and its subsidiaries on a
consolidated basis. Pursuant to paragraph 4(iii)(A) of
Item 601(b) of Regulation S-K, ARS agrees to furnish a
copy of such instruments to the Commission upon request.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Incorporated by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN RESIDENTIAL SERVICES, INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,724
<SECURITIES> 0
<RECEIVABLES> 55,738
<ALLOWANCES> 2,506
<INVENTORY> 17,564
<CURRENT-ASSETS> 85,013
<PP&E> 67,378
<DEPRECIATION> 36,541
<TOTAL-ASSETS> 317,388
<CURRENT-LIABILITIES> 49,511
<BONDS> 116,041
0
0
<COMMON> 15
<OTHER-SE> 147,649
<TOTAL-LIABILITY-AND-EQUITY> 317,388
<SALES> 272,781
<TOTAL-REVENUES> 272,781
<CGS> 194,512
<TOTAL-COSTS> 194,512
<OTHER-EXPENSES> 56,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,955
<INCOME-PRETAX> 18,086
<INCOME-TAX> 7,838
<INCOME-CONTINUING> 10,248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,248
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
</TABLE>
