<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K/A
----------------
AMENDMENT NO. 1
TO
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: DECEMBER 22, 1998
(DATE OF EARLIEST EVENT REPORTED: NOVEMBER 13, 1998)
GROUP MAINTENANCE AMERICA CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 1-13565 76-0535259
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
8 GREENWAY PLAZA, SUITE 1500
HOUSTON, TEXAS 77046
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 860-0100
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 13, 1998, Group Maintenance America Corp. (the "Company")
completed the acquisition of Trinity Contractors, Inc., a Texas corporation
("Trinity"). The Company purchased all of the outstanding capital stock of
Trinity through its wholly-owned subsidiary, GroupMAC Holding Corp. ("Holding
Corp."). The acquisition was effected in accordance with the Stock Purchase
Agreement (the "Stock Purchase Agreement") dated as of November 3, 1998, among
the Company, Holding Corp., Trinity, and the shareholders of Trinity. A copy
of the Stock Purchase Agreement has been filed as an exhibit to this Current
Report on Form 8-K and is incorporated herein by reference. The purchase price
paid or to be paid by the Company for Trinity consists of approximately $42.0
million in cash, 1.5 million shares of the Company's common stock, par value
$.001 per share ("Common Stock"), $16.0 million in notes payable, warrants to
purchase 0.8 million shares of Common Stock, and an additional number of
shares of Common Stock contingent upon the future performance of Trinity as
described in the Stock Purchase Agreement.
Substantially all of the stockholders of Trinity prior to the acquisition
will be employed by Trinity after the acquisition. Robert Munson III, a
shareholder of Trinity prior to the acquisition, was elected a member of the
Board of Directors of the Company on November 19, 1998. In the Company's
acquisition of Trinity, Robert Munson III received approximately $16.1 million
in cash, $6.1 million of subordinated notes of the Company, 556,437 shares of
common stock and warrants to purchase 317,510 shares of common stock.
Prior to the acquisition, Trinity was engaged in the business of providing
full-service mechanical and electrical contracting services, including a broad
range of engineering, construction, preventive maintenance and other on-site
mechanical and electrical services to industrial, institutional and commercial
customers throughout the southern United States. The assets of Trinity
consisted primarily of cash, accounts receivable, inventory, equipment,
vehicles, real property and goodwill. The Company expects that Trinity will
continue to conduct its business in substantially the same manner as conducted
before the acquisition.
The cash portion of the consideration paid by the Company in connection with
the acquisition was provided pursuant to loans made under a Second Amended and
Restated Credit Agreement dated as of October 15, 1998 (the "Credit
Agreement") among the Company, certain subsidiaries of the Company, Chase Bank
of Texas, National Association, as Agent, Bank of America, Texas, N.A., as Co-
Agent, Paribas, as Syndication Agent, ABN AMRO Bank, N.V., as Documentation
Agent, and the other banks named therein (the "Lenders"). Under the Credit
Agreement, a syndicate of banks agreed to provide up to $230 million of
financing to the Company on a secured basis. A list of the Lenders is set
forth on Exhibit 99 which is incorporated herein by reference.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Trinity Contractors, Inc. and The Partners
Trinity Air Technologies, L.P.:
We have audited the accompanying combined balance sheets of Trinity
Contractors, Inc. and Trinity Air Technologies, L.P. (collectively referred to
as the Company) as of December 31, 1996 and 1997, and the related combined
statements of operations, owners' equity and cash flows for each of the years
in the three-year period ended December 31, 1997. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Trinity
Contractors, Inc. and Trinity Air Technologies, L.P. as of December 31, 1996
and 1997, and the results of their operations and their cash flows for each of
the years in the three-year period ended December 31, 1997 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
November 3, 1998
3
<PAGE>
TRINITY CONTRACTORS, INC. AND TRINITY AIR TECHNOLOGIES, L.P.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1997 1998
------------ ------------ -------------
ASSETS (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............ $ 2,007,091 $ 5,466,601 $ 461,149
Accounts receivable--trade........... 19,836,987 16,149,983 21,839,543
Accounts receivable, other........... 197,545 156,936 774,662
Inventories.......................... 78,706 75,313 146,215
Costs and estimated earnings in ex-
cess of billings on uncompleted con-
tracts.............................. 1,103,531 990,862 1,000,931
Prepaid expenses and other current
assets.............................. 178,643 375,502 213,086
----------- ----------- -----------
Total current assets............... 23,402,503 23,215,197 24,435,586
PROPERTY AND EQUIPMENT, NET............ 4,279,567 5,485,545 5,955,325
OTHER LONG TERM ASSETS................. 100,823 294,132 328,876
----------- ----------- -----------
Total assets....................... $27,782,893 $28,994,874 $30,719,787
=========== =========== ===========
<CAPTION>
LIABILITIES AND OWNERS' EQUITY
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable..................... $ 3,603,989 $ 5,570,815 $ 6,117,564
Accrued expenses..................... 4,497,225 4,810,562 5,528,571
Billings in excess of costs and esti-
mated earnings on uncompleted con-
tracts.............................. 7,682,604 7,524,187 8,455,265
Short-term borrowings and current ma-
turities of long-term debt.......... 1,590,000 -- 500,000
----------- ----------- -----------
Total current liabilities.......... 17,373,818 17,905,564 20,601,400
LONG-TERM DEBT, net of current maturi-
ties.................................. 90,000 -- --
COMMITMENTS AND CONTINGENCIES
OWNERS' EQUITY:
Common stock, $0.10 par value;
100,000 shares authorized; 31,946,
31,946 and 32,287 shares issued..... 3,195 3,195 3,229
Additional paid-in capital........... 3,605,765 3,605,765 3,957,445
Retained earnings.................... 6,522,872 6,973,252 6,171,617
Treasury stock....................... (27,625) (27,625) (13,904)
Partners' capital.................... 214,868 534,723 --
----------- ----------- -----------
Total owners' equity............... 10,319,075 11,089,310 10,118,387
----------- ----------- -----------
Total liabilities and owners'
equity............................ $27,782,893 $28,994,874 $30,719,787
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
4
<PAGE>
TRINITY CONTRACTORS, INC. AND TRINITY AIR TECHNOLOGIES, L.P.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................ $70,973,334 $89,788,636 $93,883,705 $66,369,557 $75,656,729
COST OF SERVICES........ 60,859,945 74,238,634 75,915,513 53,474,633 61,179,912
----------- ----------- ----------- ----------- -----------
Gross profit........ 10,113,389 15,550,002 17,968,192 12,894,924 14,476,817
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 6,554,095 8,472,714 9,721,909 6,877,537 7,964,568
----------- ----------- ----------- ----------- -----------
Income from
operations......... 3,559,294 7,077,288 8,246,283 6,017,387 6,512,249
OTHER INCOME (EXPENSE):
Interest income....... 253,961 140,287 136,197 63,055 13,051
Interest expense...... (48,590) (20,089) (36,321) (34,038) (76,165)
Other, net............ 274,289 234,687 175,575 176,765 37,314
----------- ----------- ----------- ----------- -----------
Income before income
tax provision...... 4,038,954 7,432,173 8,521,734 6,223,169 6,486,449
INCOME TAX PROVISION.... 161,962 281,075 304,069 157,885 201,906
----------- ----------- ----------- ----------- -----------
NET INCOME.............. $ 3,876,992 $ 7,151,098 $ 8,217,665 $ 6,065,284 $ 6,284,543
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
5
<PAGE>
TRINITY CONTRACTORS, INC. AND TRINITY AIR TECHNOLOGIES, L.P.
COMBINED STATEMENTS OF OWNERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON ADDITIONAL RETAINED TREASURY PARTNERS' OWNERS'
STOCK PAID-IN CAPITAL EARNINGS STOCK CAPITAL EQUITY
------ --------------- ---------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... $2,922 $3,106,584 $4,028,272 $ -- $ 157,445 $ 7,295,223
Purchase of 264 shares
of treasury stock.... -- -- -- (48,299) -- (48,299)
Issuance of common
stock................ 272 497,352 497,624
Net income............ -- -- 3,872,001 -- 4,991 3,876,992
Distributions to
shareholders and
partners............. -- -- (3,326,306) -- (672) (3,326,978)
------ ---------- ---------- -------- --------- -----------
Balance, December 31,
1995................... 3,194 3,603,936 4,573,967 (48,299) 161,764 8,294,562
Sale of 264 shares of
treasury stock....... -- -- -- 48,299 -- 48,299
Issuance of common
stock................ 1 1,829 -- -- -- 1,830
Purchase of 151 shares
of treasury stock.... -- -- -- (27,625) -- (27,625)
Net income............ -- -- 7,098,666 -- 52,432 7,151,098
Distributions to
shareholders and
partners............. -- -- (5,149,761) -- 672 (5,149,089)
------ ---------- ---------- -------- --------- -----------
Balance, December 31,
1996................... 3,195 3,605,765 6,522,872 (27,625) 214,868 10,319,075
Net income............ -- -- 7,897,810 -- 319,855 8,217,665
Distributions to
shareholders and
partners............. -- -- (7,447,430) -- -- (7,447,430)
------ ---------- ---------- -------- --------- -----------
Balance, December 31,
1997................... 3,195 3,605,765 6,973,252 (27,625) 534,723 11,089,310
Issuance of common
stock (unaudited).... 34 351,680 -- -- -- 351,714
Net income
(unaudited).......... -- -- 6,140,438 -- 144,105 6,284,543
Sale of shares of
treasury stock
(unaudited).......... -- -- -- 13,721 -- 13,721
Distributions to
shareholders and
partners (unaudited). -- -- (6,942,073) -- (117,000) (7,059,073)
Purchase of
partnership interest
from common owners
(unaudited).......... -- -- -- -- (561,828) (561,828)
------ ---------- ---------- -------- --------- -----------
Balance, September 30,
1998 (unaudited)....... $3,229 $3,957,445 $6,171,617 $(13,904) $ -- $10,118,387
====== ========== ========== ======== ========= ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
6
<PAGE>
TRINITY CONTRACTORS, INC. AND TRINITY AIR TECHNOLOGIES, L.P.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, DECEMBER 31, ----------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............ $ 3,876,992 $ 7,151,098 $ 8,217,665 $6,065,284 $6,284,543
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation......... 675,843 786,170 882,529 663,608 749,310
Loss (gain) on sale
of property and
equipment........... 13,405 (22,094) (10,091) (8,669) (17,002)
Increase in cash
surrender value of
life insurance...... (14,086) (15,913) (16,020) -- (10,471)
Change in operating
assets and
liabilities:
(Increase) decrease
in --
Accounts
receivable--trade. 1,320,016 (8,837,097) 3,687,004 (946,171) (5,689,560)
Accounts
receivable, other. (28,797) (131,054) 40,609 48,382 (617,726)
Inventories........ (52,303) 58,755 3,393 (25,255) (70,902)
Costs and estimated
earnings in excess
of billings on
uncompleted
contracts......... (78,855) 1,592,999 (45,748) 3,984,897 921,009
Prepaid expenses
and other current
assets............ 7,126 (7,396) (239,850) (17,307) 3,845
Increase (decrease)
in --
Accounts payable... (391,936) (351,463) 1,966,826 345,011 546,749
Accrued expenses... 228,626 2,291,070 313,337 1,409,399 718,009
----------- ----------- ----------- ---------- ----------
Net cash provided
by operating
activities....... 5,556,031 2,515,075 14,799,654 11,519,179 2,817,804
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property
and equipment........ (1,617,068) (1,586,770) (2,142,153) (1,745,886) (1,246,924)
Other, net............ 4,698 52,720 (70,561) 56,277 179,134
----------- ----------- ----------- ---------- ----------
Net cash used in
investing
activities....... (1,612,370) (1,534,050) (2,212,714) (1,689,609) (1,067,790)
----------- ----------- ----------- ---------- ----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from short-
term borrowings and
long-term debt....... -- 1,410,000 -- -- 500,000
Payments on short-term
borrowings and long-
term debt............ (351,806) -- (1,680,000) (1,567,500) --
Issuance on common
stock................ 497,624 1,830 -- -- 351,714
Purchase of treasury
shares............... (48,299) (27,625) -- -- --
Sale of treasury
shares............... -- 48,299 -- -- 13,721
Purchase of
partnership interest
from common owners... -- -- -- -- (561,828)
Distributions to
shareholders and
partners............. (3,326,978) (5,149,089) (7,447,430) (6,644,765) (7,059,073)
----------- ----------- ----------- ---------- ----------
Net cash used in
financing
activities....... (3,229,459) (3,716,585) (9,127,430) (8,212,265) (6,755,466)
----------- ----------- ----------- ---------- ----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS........... 714,202 (2,735,560) 3,459,510 1,617,305 (5,005,452)
CASH AND CASH
EQUIVALENTS, beginning
of period............. 4,028,449 4,742,651 2,007,091 2,007,091 5,466,601
----------- ----------- ----------- ---------- ----------
CASH AND CASH
EQUIVALENTS, end of
period................ $ 4,742,651 $ 2,007,091 $ 5,466,601 $3,624,396 $ 461,149
=========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
7
<PAGE>
TRINITY CONTRACTORS, INC. AND TRINITY AIR TECHNOLOGIES, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
(ALL INFORMATION WITH RESPECT TO THE INTERIM PERIODS ENDED SEPTEMBER 30, 1997
AND 1998 IS UNAUDITED)
1. BUSINESS AND ORGANIZATION
Trinity Contractors, Inc. (TCI), a Delaware corporation, is a mechanical and
industrial contractor with its primary office located in the Dallas/Fort Worth
area and performs work primarily in Texas and Alabama. Trinity Air
Technologies, L.P. (TAT) is a limited partnership that manufactures and
installs pollution control equipment for industrial customers worldwide. Prior
to September 1998, TCI owned a 50% interest in both the general and limited
partner of TAT. In addition, the shareholders of TCI held the remaining
interests in the general and limited partner of TAT. In September 1998, TCI
purchased the remaining interests in the general and limited partner of TAT,
so that TAT is now wholly owned by TCI. As common control existed among TCI
and TAT (collectively referred to as the Company), the financial statements
have been combined for all periods presented. TCI's acquisition of the
remaining ownership interests in TAT was accounted for as a reduction of the
combined owners' equity in a manner similar to a dividend to the control
group. All significant intercompany transactions and balances have been
eliminated in combination.
2. SUMMARY OF SIGNIFICANT POLICIES
Interim Financial Information
The interim combined financial statements as of September 30, 1998 and for
the nine months ended September 30, 1997 and 1998 are unaudited, and certain
information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been omitted. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present
the financial position, results of operations and cash flows with respect to
the interim financial statements, have been included. The results of
operations for the interim periods are not necessarily indicative of the
results for the entire year.
Use of Estimates
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue and Cost Recognition
Revenues from fixed price contracts are recognized on the percentage of
completion method. The completed percentage is measured by the percentage of
cost incurred to date as compared to the estimated total cost for each
contract, including work for approved change orders. The length of contract
varies but is generally less than one year.
Contract costs include all direct material, labor and equipment rental costs
and a provision for indirect costs such as indirect labor, supplies, tools and
repairs. Selling, general and administrative costs are charged to expense as
incurred. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Changes in job performance,
job conditions, and estimated profitability, including those arising from
contract penalty provisions, and final contract settlements may result in
revisions to costs and revenues and are recognized in the period in which the
revisions are determined.
8
<PAGE>
TRINITY CONTRACTORS, INC. AND TRINITY AIR TECHNOLOGIES, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with original maturities of three months
or less to be cash equivalents. Cash payments for interest were $48,590,
$20,089 and $37,766 for the years ended December 31, 1995, December 31, 1996
and December 31, 1997, respectively, and $34,038 and $76,165 for the nine
months ended September 30, 1997 and 1998, respectively. Cash payments for
taxes were $129,085, $162,354, $284,128 for the years ended December 31, 1995,
1996 and 1997, respectively, and $213,096 and $297,240 for the nine months
ended September 30, 1997 and 1998, respectively.
Accounts Receivable
Accounts receivable consists of the following at December 31, 1996 and
December 31, 1997:
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Accounts receivable--billed...................... $15,122,592 12,531,250
Retainage receivable............................. 4,964,395 3,868,733
----------- ----------
20,086,987 16,399,983
Allowance for doubtful accounts.................. (250,000) (250,000)
----------- ----------
$19,836,987 16,149,983
=========== ==========
</TABLE>
Inventories
Inventories consist of parts and supplies for general use and items for
specific jobs. Inventories are stated at lower of cost or market. Cost is
determined using the first-in, first-out method.
Related Party Transactions
At December 31, 1997, $225,619 has been advanced to shareholders. Such
advances are non-interest bearing and have no fixed repayment terms.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the useful lives of the assets. Expenditures for
major renewals and improvements, which extend the useful lives of existing
equipment, are capitalized and depreciated. The estimated useful lives of
assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Machinery and equipment............................................. 5
Office equipment, furniture and fixtures............................ 3
Transportation equipment............................................ 3
Buildings and improvements.......................................... 15-31
</TABLE>
Expenditures for repairs and maintenance are charged to expense when
incurred. Upon retirement or disposition of property and equipment, the cost
and related accumulated depreciation are removed from the accounts and any
resulting gain or loss is recognized in the statements of operations.
The Company periodically reviews its property and equipment for impairment.
Accordingly, in the event that facts and circumstances indicate that property
and equipment may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted
cash flows associated with the asset are compared to the asset's carrying
amount to determine if a write-down to fair value is necessary. No such
impairment has been recorded as of December 31, 1997.
9
<PAGE>
TRINITY CONTRACTORS, INC. AND TRINITY AIR TECHNOLOGIES, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
The shareholders of TCI have elected to be taxed for federal tax purposes as
an S Corporation whereby the shareholders' respective equitable share in the
taxable income of TCI is reportable on his individual tax return. Accordingly,
no provision or liability for federal income taxes is recognized by TCI. TCI
has made distributions to the shareholders each year at least in the amounts
necessary to pay personal income taxes payable on TCI's taxable income. TCI is
subject to local and state income taxes. As of December 31, 1996 and 1997
deferred income taxes are insignificant.
The profits and losses of TAT are reported for income tax purposes by the
respective partners and are allocated to the partners in accordance with the
terms of the partnership agreement. Accordingly, no provision for income taxes
is reflected by TAT in the accompanying combined financial statements.
3. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
A summary of the status of uncompleted contracts as of December 31, 1996 and
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Costs incurred................................. $80,672,768 $79,468,976
Estimated earnings recognized.................. 10,475,539 7,967,623
----------- -----------
91,148,307 87,436,599
Less billings on contracts..................... 97,727,380 93,969,924
----------- -----------
$(6,579,073) $(6,533,325)
----------- -----------
</TABLE>
These costs and estimated earnings on uncompleted contracts are included in
the accompanying combined balance sheets under the following captions:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts............ $ 1,103,531 $ 990,862
Billings in excess of costs and estimated
earnings on uncompleted contracts............ (7,682,604) (7,524,187)
----------- -----------
$(6,579,073) $(6,533,325)
=========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
The principal categories of property and equipment as of December 31, 1996
and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Land............................................ $ 357,165 $ 357,165
Buildings and improvements...................... 3,306,090 4,293,279
Machinery and equipment......................... 1,395,269 1,532,529
Transportation equipment........................ 1,496,353 1,996,720
Furniture and fixtures.......................... 1,203,064 1,513,685
----------- -----------
7,757,941 9,693,378
Less accumulated depreciation................... (3,478,374) (4,207,833)
----------- -----------
Total property and equipment, net........... $ 4,279,567 $ 5,485,545
=========== ===========
</TABLE>
10
<PAGE>
TRINITY CONTRACTORS, INC. AND TRINITY AIR TECHNOLOGIES, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. SHORT- AND LONG-TERM DEBT
The Company has available a working capital line of credit from a bank for
$4,500,000, with interest payable monthly at the bank's prime rate maturing
April 30, 1999. The note is subject to terms of a commercial loan agreement
setting forth requirements for maintenance of various financial ratios
including net worth and working capital. There was $1,500,000 outstanding
under this line of credit as of December 31, 1996. There were no outstanding
balances on the line of credit at December 31, 1997.
The note is subject to a security agreement covering equipment and accounts
receivable, contract rights and chattel paper not pledged to sureties.
The Company had a note payable to a bank secured by equipment, accounts
receivable and other assets. As of December 31, 1996 there was $180,000
outstanding on the note, with a scheduled maturity of December 31, 1998. The
Company repaid the note in full during 1997.
6. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
7. EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution plan under section 401(k) of
the Internal Revenue Code. Under the plan, eligible employees may elect to
defer up to 15% of their salary, subject to the Internal Revenue Service
limits. The Company may make a discretionary match as well as a discretionary
contribution. The combined contributions totaled $508,970, $680,442 and
$948,156 for the years ended December 31, 1995, 1996 and 1997, respectively.
8. CONCENTRATIONS OF CREDIT RISK
The three largest customers of the Company accounted for the following
percentages of total revenues for each of the years ended December 31, 1995,
1996 and 1997:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A.............................................. 6.9% 15.5% 22.1%
Customer B.............................................. 2.8% 28.9% 11.0%
Customer C.............................................. 10.4% 1.6% 0.3%
</TABLE>
Accounts receivable and costs and estimated earnings on uncompleted
contracts result primarily from customers located in Texas and Alabama. Credit
is extended to customers after an evaluation for credit worthiness; however,
the Company does not require collateral or other security from customers.
9. FINANCIAL INSTRUMENTS
The Company's significant financial instruments consist of cash and cash
equivalents and short- and long-term debt. The Company believes the carrying
value of these instruments on the accompanying combined balance sheets at
December 31, 1996 and 1997 approximates their fair value.
10. EVENT SUBSEQUENT TO INDEPENDENT AUDITORS' REPORT--ACQUISITION OF COMPANY
(UNAUDITED)
Effective November 13, 1998, Group Maintenance America Corp. (GroupMAC)
acquired all of the outstanding shares of the Company for a combination of
cash, common stock of GroupMAC, notes payable and warrants to purchase common
shares of GroupMAC.
11
<PAGE>
(b) Pro forma financial information.
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
Although for legal purposes Airtron, Inc. ("Airtron") was acquired by Group
Maintenance America Corp. ("GroupMAC"), for accounting purposes, the
transaction was accounted for as a reverse acquisition, as if Airtron acquired
GroupMAC, due to the fact that the former shareholders of Airtron then owned a
majority of the GroupMAC common stock. The following unaudited pro forma
combined financial statements give effect to the acquisition of Airtron and
(i) 10 companies acquired prior to the IPO (together with Airtron, the "Pre-
IPO Companies"), (ii) 13 companies acquired in connection with the IPO (the
"IPO Companies") and (iii) 15 companies in the first quarter of 1998 (the
"First Quarter Post-IPO Companies"), 12 companies in the second quarter of
1998 (the "Second Quarter Post-IPO Companies"), eight companies in the third
quarter of 1998 (the "Third Quarter Post-IPO Companies") and the effects of
the acquisition of four companies in the fourth quarter of 1998 (the "Fourth
Quarter Post-IPO Companies", and together with the First Quarter Post-IPO
Companies, the Second Quarter Post-IPO Companies and the "Third Quarter Post-
IPO Companies", the "Post-IPO Companies", and together with the Pre-IPO
Companies and the IPO Companies, the "GroupMAC Companies"). The Post-IPO
Companies are as follows:
<TABLE>
<CAPTION>
DATE
COMPANY ACQUIRED
------- --------
<S> <C>
Sterling Air Conditioning, Inc........................................ 1/6/98
A-1 Mechanical of Lansing, Inc........................................ 1/15/98
Air Conditioning Engineers, Inc....................................... 1/15/98
Air Conditioning, Plumbing & Heating Service Co., Inc................. 1/15/98
Hungerford Mechanical Corporation..................................... 1/15/98
Mechanical Interiors, Inc............................................. 1/15/98
Valley Wide Plumbing & Heating, Inc................................... 1/15/98
Weigold & Sons, Inc................................................... 1/15/98
AA Advance Air, Inc................................................... 2/12/98
DIVCO, Inc............................................................ 2/12/98
J. D. Steward Air Conditioning, Inc................................... 2/13/98
New Construction Air Conditioning, Inc................................ 2/13/98
Aircon Energy, Incorporated........................................... 3/13/98
Ray & Claude Goodwin, Inc. (d/b/a "Ray's Plumbing, Inc.")............. 3/13/98
Sun Plumbing, Inc..................................................... 3/13/98
Barr Electric Corp.................................................... 5/8/98
Premex, Inc. and Subsidiary (d/b/a "Commercial Air, Power & Cable,
Inc.")............................................................... 5/8/98
Vantage Mechanical Contractors, Inc................................... 5/12/98
Wade's Heating and Cooling............................................ 5/15/98
Gilbert Mechanical Contractors, Inc................................... 5/15/98
HPS Plumbing Services, Inc............................................ 5/15/98
Atlantic Industrial Constructors, Inc. ............................... 6/12/98
Colonial Air Conditioning, Inc........................................ 6/12/98
Laney's, Inc. ........................................................ 6/12/98
Noron, Inc. .......................................................... 6/12/98
Team Mechanical, Inc. ................................................ 6/12/98
Air Conditioning and Heating Service, Inc............................. 6/14/98
Phoenix Electric Company.............................................. 7/31/98
Merritt Island Air & Heat, Inc........................................ 7/31/98
The Farfield Company.................................................. 8/12/98
Reliable Mechanical, Inc.............................................. 8/14/98
Ferguson Electric Corporation......................................... 8/14/98
Clark Converse Electric Service, Inc.................................. 8/28/98
Romanoff Electric Corp................................................ 8/31/98
Central Air Conditioning Contractors, Inc............................. 8/31/98
Gentzler Electrical Contractors, Inc. ................................ 10/13/98
Continental Electrical Construction Co. .............................. 10/15/98
Stephen C. Pomeroy, Inc. ............................................. 10/15/98
Trinity Contractors, Inc. ............................................ 11/13/98
</TABLE>
12
<PAGE>
All of the acquisitions were or will be accounted for under the purchase
method of accounting. These unaudited pro forma combined financial statements
are based on the historical financial statements of the acquired companies and
estimates and assumptions set forth below and in the notes to the unaudited
pro forma combined financial statements.
The unaudited pro forma combined balance sheet combines the historical
consolidated balance sheet of the Company and the balance sheets of the Fourth
Quarter Post-IPO Companies, as if such acquisitions had occurred on September
30, 1998. The accompanying unaudited pro forma statements of operations of the
Company combines the historical statements of operations of the Company and
the statements of operations of the acquired entities as if such acquisitions
had occurred on January 1, 1997.
GroupMAC has analyzed the savings that it expects to realize from reductions
in salaries and certain benefits to the owners. To the extent the owners of
the GroupMAC Companies have agreed prospectively to reductions in salary,
bonuses and benefits, these reductions have been reflected in the unaudited
pro forma combined statements of operations. With respect to other potential
cost savings, GroupMAC cannot fully quantify these savings at this time. It is
anticipated that these savings will be partially offset by costs related to
GroupMAC's corporate management and by the costs associated with being a
public company. However, because these savings and costs cannot be accurately
quantified at this time, they have not been included in the pro forma combined
financial information of GroupMAC.
The pro forma adjustments are based on available information and certain
assumptions that management deems appropriate and may be revised as additional
information becomes available. Certain acquisitions are subject to final
equity adjustments, of which an estimate is reflected in the pro forma
adjustments. The pro forma combined financial data do not purport to represent
what GroupMAC's financial position or results of operations would actually
have been if such transactions had in fact occurred on those dates and are not
necessarily representative of GroupMAC's financial position or results of
operations for any future period. Since the acquisitions have not historically
been under common control or management, historical pro forma combined results
may not be indicative of or comparable to future performance. The unaudited
pro forma combined financial statements should be read in conjunction with
other financial statements and notes thereto included in GroupMAC's Transition
Report on Form 10-K for the ten month period ended December 31, 1997 and its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
13
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
FOURTH QUARTER
GROUPMAC AND POST-IPO PRO FORMA PRO FORMA
SUBSIDIARIES CONTINENTAL TRINITY COMPANIES ADJUSTMENTS COMBINED
ASSETS ------------ ----------- ------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equiva-
lents.................. $ 2,189 $ 1,041 $ 461 $1,700 $ (5,391) $ --
Accounts receivable:
Trade, net of allow-
ance................. 138,335 15,037 21,840 5,647 -- 180,859
Other................ -- 112 775 332 -- 1,219
Due from related par-
ties................... -- -- -- 27 (27) --
Inventories............ 15,624 493 146 142 -- 16,405
Costs and estimated
earnings in excess of
billings on uncom-
pleted contracts....... 24,674 4,920 1,001 473 -- 31,068
Refundable income tax-
es..................... -- -- -- 132 -- 132
Deferred tax asset..... 3,936 114 -- -- (30) 4,020
Prepaid expenses and
other current assets... 4,990 232 213 48 -- 5,483
-------- ------- ------- ------ -------- --------
Total current as-
sets................ 189,748 21,949 24,436 8,501 (5,448) 239,186
PROPERTY AND EQUIPMENT,
net..................... 31,632 616 5,955 490 -- 38,693
GOODWILL, net........... 281,354 1,067 -- -- 108,719 391,140
DEFERRED TAX ASSETS..... 4,798 -- -- -- 5 4,803
DEFERRED FINANCING
COSTS................... 761 -- -- -- -- 761
REFUNDABLE INCOME TAXES. 3,478 -- -- -- -- 3,478
OTHER LONG-TERM ASSETS.. 2,396 1,453 329 5 (1,339) 2,844
-------- ------- ------- ------ -------- --------
Total assets........ $514,167 $25,085 $30,720 $8,996 $101,937 $680,905
======== ======= ======= ====== ======== ========
<CAPTION>
LIABILITIES AND
SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable and
accrued expenses....... $ 81,307 $ 5,358 $11,647 $2,710 $ -- $101,022
Short-term debt, in-
cluding current matu-
rities................. 7,745 9,189 500 1,090 (10,779) 7,745
Billings in excess of
costs and estimated
earnings on uncom-
pleted contracts....... 21,612 1,351 8,455 1,143 -- 32,561
Deferred service reve-
nue.................... 4,897 -- -- -- -- 4,897
Income taxes payable... 9,041 179 -- 200 -- 9,420
Deferred tax liabili-
ties................... -- 7 -- 23 (30) --
Other current liabili-
ties................... 5,350 -- -- -- -- 5,350
Due to related par-
ties................... 10,877 2,350 -- 1,000 (3,350) 10,877
-------- ------- ------- ------ -------- --------
Total current lia-
bilities............ 140,829 18,434 20,602 6,166 (14,159) 171,872
SENIOR DEBT, net of cur-
rent maturities......... 107,800 1,057 -- 168 75,255 184,280
SUBORDINATED DEBT....... 820 -- -- -- 15,180 16,000
DUE TO RELATED PARTIES.. 4,360 -- -- -- -- 4,360
OTHER LONG-TERM LIABILI-
TIES.................... 1,281 -- -- -- -- 1,281
SHAREHOLDERS' EQUITY:
Common stock........... 29 32 3 2 (33) 33
Additional paid-in
capital................ 274,821 1,381 3,957 12 38,681 318,852
Retained earnings
(deficit).............. (15,773) 4,181 6,172 2,648 (13,001) (15,773)
Treasury stock......... -- -- (14) -- 14 --
-------- ------- ------- ------ -------- --------
Total shareholders'
equity.............. 259,077 5,594 10,118 2,662 25,661 303,112
-------- ------- ------- ------ -------- --------
Total liabilities
and shareholders'
equity.............. $514,167 $25,085 $30,720 $8,996 $101,937 $680,905
======== ======= ======= ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
14
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUPPLEMENTAL
GROUPMAC AND COMMERCIAL BARR ATLANTIC PRO FORMA
SUBSIDIARIES HUNGERFORD MIINC AIR ELECTRIC INDUSTRIAL ROMANOFF CONTINENTAL TRINITY ADJUSTMENTS
------------ ---------- ------- ---------- -------- ---------- -------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES.......... $138,479 $32,850 $42,283 $20,750 $7,717 $37,035 $33,008 $71,556 $93,884 $ --
COST OF SERVICES.. 101,762 24,602 35,909 13,855 5,148 28,625 25,430 54,810 75,916 --
-------- ------- ------- ------- ------ ------- ------- ------- ------- --------
Gross profit..... 36,717 8,248 6,374 6,895 2,569 8,410 7,578 16,746 17,968 --
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES.......... 35,862 5,591 5,360 5,649 1,496 1,936 4,930 9,707 9,722 (4,463)
GOODWILL
AMORTIZATION...... 633 -- -- -- -- -- -- -- -- 4,640
-------- ------- ------- ------- ------ ------- ------- ------- ------- --------
Income from
operations....... 222 2,657 1,014 1,246 1,073 6,474 2,648 7,039 8,246 (177)
OTHER INCOME
(EXPENSE):
Interest expense. (1,542) (121) (73) (152) -- (24) (30) (137) (36) (7,896)
Interest income.. 398 89 21 10 42 91 29 25 136 --
Other............ 112 42 -- 69 (4) 27 (3) (123) 176 --
-------- ------- ------- ------- ------ ------- ------- ------- ------- --------
INCOME (LOSS)
BEFORE
INCOME TAX PRO-
VISION.......... (810) 2,667 962 1,173 1,111 6,568 2,644 6,804 8,522 (8,073)
INCOME TAX PROVI-
SION.............. 2,832 -- 409 493 -- 11 26 108 304 9,456
-------- ------- ------- ------- ------ ------- ------- ------- ------- --------
NET INCOME (LOSS). $ (3,642) $ 2,667 $ 553 $ 680 $1,111 $ 6,557 $ 2,618 $ 6,696 $ 8,218 $(17,529)
======== ======= ======= ======= ====== ======= ======= ======= ======= ========
BASIC EARNINGS
(LOSS) PER SHARE:
EARNINGS (LOSS)
PER SHARE........ $ (0.34)
========
WEIGHTED AVERAGE
SHARES........... 10,800
========
DILUTED EARNINGS
(LOSS) PER SHARE:
EARNINGS (LOSS)
PER SHARE........ $ (0.34)
========
WEIGHTED AVERAGE
SHARES........... 10,800
========
<CAPTION>
OTHER
PRE-IPO,
IPO AND COMBINED
SUPPLEMENTAL POST-IPO PRO FORMA PRO FORMA
PRO FORMA COMPANIES ADJUSTMENTS COMBINED
------------ ---------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES.......... $477,562 $500,918 $ -- $978,480
COST OF SERVICES.. 366,057 390,713 -- 756,770
------------ ---------- ------------- ------------
Gross profit..... 111,505 110,205 -- 221,710
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES.......... 75,790 99,030 (29,844)(a) 144,976
GOODWILL
AMORTIZATION...... 5,273 -- 4,506 (b) 9,779
------------ ---------- ------------- ------------
Income from
operations....... 30,442 11,175 25,338 66,955
OTHER INCOME
(EXPENSE):
Interest expense. (10,011) (2,238) (3,107)(c) (15,356)
Interest income.. 841 678 (1,519)(d) --
Other............ 296 754 -- 1,050
------------ ---------- ------------- ------------
INCOME (LOSS)
BEFORE
INCOME TAX PRO-
VISION.......... 21,568 10,369 20,712 52,649
INCOME TAX PROVI-
SION.............. 13,639 2,346 8,986 (e) 24,971
------------ ---------- ------------- ------------
NET INCOME (LOSS). $ 7,929 $ 8,023 $11,726 $ 27,678
============ ========== ============= ============
BASIC EARNINGS
(LOSS) PER SHARE:
EARNINGS (LOSS)
PER SHARE........ $ 0.83
============
WEIGHTED AVERAGE
SHARES........... 33,151(f)
============
DILUTED EARNINGS
(LOSS) PER SHARE:
EARNINGS (LOSS)
PER SHARE........ $ 0.83
============
WEIGHTED AVERAGE
SHARES........... 33,382(f)
============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
15
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OTHER
PRE-IPO,
IPO AND
GROUPMAC AND COMMERCIAL BARR ATLANTIC POST-IPO
SUBSIDIARIES HUNGERFORD MIINC AIR ELECTRIC INDUSTRIAL ROMANOFF CONTINENTAL TRINITY COMPANIES
------------ ---------- ------- ---------- -------- ---------- -------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES.......... $82,226 $24,346 $31,382 $15,114 $6,258 $28,481 $24,034 $54,654 $66,370 $390,740
COST OF SERVICES.. 59,211 18,127 26,553 12,027 4,058 22,026 18,311 42,015 53,475 304,346
------- ------- ------- ------- ------ ------- ------- ------- ------- --------
Gross profit..... 23,015 6,219 4,829 3,087 2,200 6,455 5,723 12,639 12,895 86,394
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES.......... 26,488 4,143 3,764 2,444 900 1,260 3,185 6,092 6,878 68,787
GOODWILL AMORTIZA-
TION.............. 204 -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------ ------- ------- ------- ------- --------
Income (Loss)
from operations.. (3,677) 2,076 1,065 643 1,300 5,195 2,538 6,547 6,017 17,607
OTHER INCOME
(EXPENSE):
Interest expense. (1,135) (76) (19) (92) -- (11) (18) (103) (34) (1,740)
Interest income.. 245 76 17 2 22 54 22 22 63 456
Other............ 266 34 -- 184 (4) 28 (8) (125) 177 568
------- ------- ------- ------- ------ ------- ------- ------- ------- --------
INCOME (LOSS)
BEFORE INCOME
TAX PROVISION
(BENEFIT)....... (4,301) 2,110 1,063 737 1,318 5,266 2,534 6,341 6,223 16,891
INCOME TAX PROVI-
SION (BENEFIT).... 1,156 -- 748 (380) -- 102 21 100 158 2,681
------- ------- ------- ------- ------ ------- ------- ------- ------- --------
NET INCOME (LOSS). $(5,457) $ 2,110 $ 315 $ 1,117 $1,318 $ 5,164 $ 2,513 $ 6,241 $ 6,065 $ 14,210
======= ======= ======= ======= ====== ======= ======= ======= ======= ========
BASIC EARNINGS
(LOSS) PER SHARE:
EARNINGS (LOSS)
PER SHARE........ $ (0.62)
=======
WEIGHTED AVERAGE
SHARES........... 8,787
=======
DILUTED EARNINGS
(LOSS) PER SHARE:
EARNINGS (LOSS)
PER SHARE........ $ (0.62)
=======
WEIGHTED AVERAGE
SHARES........... 8,787
=======
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS COMBINED
-------------- ------------
<S> <C> <C>
REVENUES.......... $ -- $723,605
COST OF SERVICES.. -- 560,149
-------------- ------------
Gross profit..... -- 163,456
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES.......... (20,856)(a) 103,085
GOODWILL AMORTIZA-
TION.............. 7,130 (b) 7,334
-------------- ------------
Income (Loss)
from operations.. 13,726 53,037
OTHER INCOME
(EXPENSE):
Interest expense. (8,289)(c) (11,517)
Interest income.. (979)(d) --
Other............ -- 1,120
-------------- ------------
INCOME (LOSS)
BEFORE INCOME
TAX PROVISION
(BENEFIT)....... 4,458 42,640
INCOME TAX PROVI-
SION (BENEFIT).... 15,404 (e) 19,990
-------------- ------------
NET INCOME (LOSS). $(10,946) $ 22,650
============== ============
BASIC EARNINGS
(LOSS) PER SHARE:
EARNINGS (LOSS)
PER SHARE........ $ 0.68
============
WEIGHTED AVERAGE
SHARES........... 33,151(f)
============
DILUTED EARNINGS
(LOSS) PER SHARE:
EARNINGS (LOSS)
PER SHARE........ $ 0.68
============
WEIGHTED AVERAGE
SHARES........... 33,382(f)
============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
16
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OTHER
GROUPMAC AND COMMERCIAL BARR ATLANTIC POST-IPO PRO FORMA
SUBSIDIARIES AIR ELECTRIC INDUSTRIAL ROMANOFF CONTINENTAL TRINITY COMPANIES ADJUSTMENTS
------------ ---------- -------- ---------- -------- ----------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES........... $477,944 $5,003 $950 $8,853 $24,652 $54,259 $75,657 $136,496 $ --
COST OF SERVICES... 364,225 3,921 712 6,918 18,992 41,051 61,180 108,060 --
-------- ------ ---- ------ ------- ------- ------- -------- --------
Gross profit...... 113,719 1,082 238 1,935 5,660 13,208 14,477 28,436 --
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES........... 77,814 918 206 576 3,879 7,636 7,965 21,483 (5,782)(a)
GOODWILL AMORTIZA-
TION............... 3,586 -- -- -- -- -- -- -- 3,748 (b)
-------- ------ ---- ------ ------- ------- ------- -------- --------
Income (Loss)
from operations... 32,319 164 32 1,359 1,781 5,572 6,512 6,953 2,034
OTHER INCOME (EX-
PENSE):
Interest expense.. (3,013) (41) -- (4) (2) (231) (76) (387) (7,763)(c)
Interest income... 328 -- 10 67 11 31 13 142 (602)(d)
Other............. 346 25 -- 18 363 74 37 (35) --
-------- ------ ---- ------ ------- ------- ------- -------- --------
INCOME (LOSS)
BEFORE INCOME
TAX PROVISION... 29,980 148 42 1,440 2,153 5,446 6,486 6,673 (6,331)
INCOME TAX PROVI-
SION............... 13,243 394 -- 13 50 179 202 206 7,061 (e)
-------- ------ ---- ------ ------- ------- ------- -------- --------
NET INCOME (LOSS).. $ 16,737 $ (246) $ 42 $1,427 $ 2,103 $ 5,267 $ 6,284 $ 6,467 $(13,392)
======== ====== ==== ====== ======= ======= ======= ======== ========
BASIC EARNINGS PER
SHARE:
EARNINGS PER
SHARE............. $ 0.66
========
WEIGHTED AVERAGE
SHARES............ 25,361
========
DILUTED EARNINGS
PER SHARE:
EARNINGS PER
SHARE............. $ 0.65
========
WEIGHTED AVERAGE
SHARES............ 25,781
========
<CAPTION>
PRO FORMA
COMBINED
-------------
<S> <C>
REVENUES........... $783,814
COST OF SERVICES... 605,059
-------------
Gross profit...... 178,755
SELLING, GENERAL
AND ADMINISTRATIVE
EXPENSES........... 114,695
GOODWILL AMORTIZA-
TION............... 7,334
-------------
Income (Loss)
from operations... 56,726
OTHER INCOME (EX-
PENSE):
Interest expense.. (11,517)
Interest income... --
Other............. 828
-------------
INCOME (LOSS)
BEFORE INCOME
TAX PROVISION... 46,037
INCOME TAX PROVI-
SION............... 21,348
-------------
NET INCOME (LOSS).. $ 24,689
=============
BASIC EARNINGS PER
SHARE:
EARNINGS PER
SHARE............. $ 0.74
=============
WEIGHTED AVERAGE
SHARES............ 33,151 (f)
=============
DILUTED EARNINGS
PER SHARE:
EARNINGS PER
SHARE............. $ 0.74
=============
WEIGHTED AVERAGE
SHARES............ 33,584 (f)
=============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
17
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BACKGROUND:
The respective results of operations for the Pre-IPO and IPO Companies from
January 1, 1997 to the dates of the acquisitions were combined with the
Company and the Post-IPO Companies, excluding Premex, Inc. ("Commercial Air"),
actual results of operations for the twelve months ended December 31, 1997 and
Commercial Air for the twelve months ended March 31, 1998 to determine the pro
forma results of operations for the twelve months ended December 31, 1997.
The respective results of operations for the Pre-IPO Companies, IPO
Companies and the Post-IPO Companies from January 1, 1997 to the dates of the
acquisitions, or September 30, 1997 for acquisitions consummated subsequent to
September 30, 1997, were combined with actual results of the Company for the
nine months ended June 30, 1997 to determine the pro forma results of
operations for the nine months ended September 30, 1997. The respective
results of operations for the Post-IPO Companies from January 1, 1998 to the
dates of the acquisitions, or September 30, 1998 for acquisitions consummated
subsequent to September 30, 1998, were combined with actual results of the
Company for the nine months ended September 30, 1998 to determine the pro
forma results of operations for the nine months ended September 30, 1998.
2. ACQUISITIONS:
The acquisitions of the Pre-IPO Companies were financed by borrowings under
a credit agreement dated May 2, 1997 (the "Original Credit Agreement"). The
Original Credit Agreement provided secured facilities consisting of (a) an 18-
month revolving credit facility providing up to $3 million in revolving loans
(the "Revolving Credit Facility"), (b) a six-year term loan of $20 million to
help fund the acquisition of Airtron (the "Airtron Term Loan"), and (c) a term
loan facility available until October 31, 1998, providing for up to $12
million in term loans having a final maturity six years after the date of the
Original Credit Agreement (the "Acquisition Credit Facility"). Borrowings
under this facility were repaid with proceeds from the IPO.
The results of operations of the acquired businesses are included in the
actual results of operations of the Company from the date of acquisition and
the historical balance sheet at September 30, 1998 includes the acquisitions
completed as of that date. All of the acquisitions are accounted for as
purchases. The cash consideration associated with the acquisition of the IPO
Companies and the Post-IPO Companies was provided by proceeds from the IPO and
borrowings under an amended and restated credit agreement dated October 15,
1998 (the "Credit Agreement") and an earlier agreement dated June 12, 1998 and
December 11, 1997. The Credit Agreement is more fully described in Note 7 to
the GroupMAC and subsidiaries consolidated financial statements and notes
thereto included in GroupMAC's Transition Report on Form 10-K for the ten
month period ended December 31, 1997.
The following table sets forth the consideration paid or to be paid in (a)
cash, (b) subordinated debt, (c) shares of non-convertible, non-voting
Preferred Stock to the shareholders of the Pre-IPO Companies and (d) shares of
Common Stock to the shareholders of the Pre-IPO, IPO and Post-IPO Companies.
The Preferred Stock was redeemable at any time after the initial issuance, in
whole or in part, at the option of the Company, at an amount equal to the
liquidation value of $1.00 per share plus any accrued but unpaid dividends.
Redemption of all outstanding Preferred Stock occurred in connection with the
IPO.
For purposes of computing the estimated purchase price for accounting
purposes for the Fourth Quarter Post-IPO Companies, the value of the Common
Stock is determined using an estimated weighted average fair value of $10.22
per share, which represents a discount rate of 20.0% from the weighted average
stock price of $12.78 at the respective dates of acquisition due primarily to
restrictions on the sale and transferability of such shares. The restrictions
are created by a contractual restriction imposed on the shares issued in
connection with the acquisition of the acquired businesses. This contractual
provision prohibits the shareholders from selling,
18
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
transferring or otherwise disposing of any shares for one year following the
date of acquisition of such shares and limiting dispositions for one
additional year to no more than 36% of their holdings.
The estimated purchase price and related allocations of the excess purchase
price for the Post-IPO Companies are based upon preliminary estimates and are
subject to certain purchase price adjustments at and following closing. Based
upon management's preliminary analysis, it is anticipated that the historical
carrying value of the assets and liabilities of the Fourth Quarter Post-IPO
Companies (representing $18.4 million) will approximate fair value. This
results in an allocation to goodwill of approximately $108.7 million.
Management has not identified any other material tangible or identifiable
intangible assets to which a portion of the purchase price could reasonably be
allocated. Amounts in thousands.
<TABLE>
<CAPTION>
SUBORDINATED
DEBT AND
NOTES SHARES OF SHARES OF TOTAL
CASH PAYABLE PREFERRED STOCK(1) COMMON STOCK(3) CONSIDERATION(2)
-------- ------------ ------------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Airtron................. $ 20,849 $ -- 14,873 4,652 $ 58,192
-------- ------- ------ ------ --------
Pre-IPO Companies
(excluding Airtron).... 12,504 -- 4,405 1,437 32,033
IPO Companies........... 30,585 -- -- 3,007 64,851
First Quarter Post-IPO
Companies.............. 35,511 820 -- 2,506 67,072
Second Quarter Post-IPO
Companies.............. 49,079 -- -- 2,906 89,817
Third Quarter Post-IPO
Companies.............. 42,179 4,000 -- 2,385 80,884
Fourth Quarter Post-IPO
Companies.............. 67,883 16,000 -- 4,161 127,099
-------- ------- ------ ------ --------
Total Acquisitions.... 237,741 20,820 4,405 16,402 461,756
-------- ------- ------ ------ --------
Totals................ $258,590 $20,820 19,278 21,054 $519,948
======== ======= ====== ====== ========
</TABLE>
- --------
(1) The preferred stock is valued at $1 per share. This stock was redeemed for
$1 per share in connection with the IPO.
(2) The total consideration specified above has been reduced by distributions
totaling $20.7 million representing substantially all of the previously
taxed undistributed earnings of such acquired companies from the acquired
companies that are S corporations.
(3) Excludes 0.4 million of options and 1.3 million of warrants to purchase
common stock.
19
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
a) Records the deferred income tax liabilities on certain Fourth Quarter
Post-IPO Companies associated with converting all acquired companies taxed
under Subchapter S of the Internal Revenue Code (the Code) to corporations
taxed under Subchapter C of the Code.
b) Records the settlement of all shareholder receivables and payables with
cash at closing and the elimination of investments not acquired.
c) Records the elimination of the historical equity accounts of the Fourth
Quarter Post-IPO Companies.
d) Records the purchase of the Fourth Quarter Post-IPO Companies, including
the cash, issuance of notes payable, options to purchase Common Stock and
Common Stock consideration due to these companies.
e) Records the refinancing of debt assumed in connection with the acquisition
of the Fourth Quarter Post-IPO Companies with the Credit Agreement. Also,
records the conversion of a subordinated note issued in connection with the
acquisition of a First Quarter Post-IPO Company into shares of Common Stock.
The following table summarizes unaudited pro forma combined balance sheet
adjustments (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
--- ------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ $-- $ 366 $ -- $ (5,757) $ -- $ (5,391)
Due from related
parties................ -- (27) -- -- -- (27)
Deferred tax assets..... (30) -- -- -- -- (30)
Goodwill................ (5) -- (18,374) 127,098 -- 108,719
Deferred tax assets
(noncurrent)........... 5 -- -- -- -- 5
Other noncurrent assets. -- (1,339) -- -- -- (1,339)
Short-term debt,
including current
maturities............. -- (2,350) -- -- 13,129 10,779
Deferred tax
liabilities............ 30 -- -- -- -- 30
Due to related parties.. -- 3,350 -- -- -- 3,350
Senior debt, net of
current maturities..... -- -- -- (62,126) (13,129) (75,255)
Subordinated debt....... -- -- -- (16,000) 820 (15,180)
Common stock............ -- -- 37 (4) -- 33
Additional paid-in
capital................ -- -- 5,350 (43,211) (820) (38,681)
Retained earnings....... -- -- 13,001 -- -- 13,001
Treasury stock.......... -- -- (14) -- -- (14)
--- ------- -------- -------- -------- --------
Total................. $-- $ -- $ -- $ -- $ -- $ --
=== ======= ======== ======== ======== ========
</TABLE>
20
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
a) Reflects the prospective reduction in salaries, bonuses and benefits to
the owners of the GroupMAC Companies to which they have agreed. These
reductions in salaries, bonuses and benefits are in accordance with the terms
of the employment agreements. Such employment agreements are primarily for
three years, contain restrictions related to competition and provide severance
for termination of employment in certain circumstances.
The salaries, bonuses, benefits and other compensation items recorded in the
individual financial statements amounted to $38.0 million, $19.5 million and
$8.6 million for the year ended December 31, 1997 and the nine month periods
ended September 30, 1997 and 1998, respectively. The contractually agreed upon
compensation and benefits for these same businesses, on a going forward basis,
amount to $10.7 million, $5.6 million and $2.8 million for the year ended
December 31, 1997 and the nine month periods ended September 30, 1997 and
1998, respectively. The difference between these respective amounts equates to
$27.3 million, $13.9 million and $5.8 million and are reflected as pro forma
adjustments.
Also reflects the reduction in compensation expense related to the non-
recurring, non-cash compensation charge of $7.0 million recorded by the
Company in the second quarter of 1997 related to the reverse acquisition of
GroupMAC.
b) Reflects the amortization of goodwill to be recorded as a result of the
acquisitions over a 40-year estimated life.
21
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
c) Represents the adjustment necessary to reflect interest expense related to
borrowings under the Credit Agreement to fund the cash portion of the purchase
price and the assumption of debt related to the Post-IPO Companies, and
interest related to the subordinated debt and notes issued to fund the S
Corporation distributions. A summary of the historical and pro forma debt
outstanding and a summary of the pro forma interest expense (including amounts
recognized in the historical financial statements) assuming the acquisitions
occurred on January 1, 1997, is as follows (in thousands):
<TABLE>
<CAPTION>
INTEREST EXPENSE
--------------------------
SEPTEMBER 30, SEPTEMBER 30, TWELVE NINE
SEPTEMBER 30, PRO FORMA 1998 PRO FORMA 1998 MONTHS ENDED MONTHS ENDED
1998 ACQUISITION PRO FORMA REFINANCING PRO FORMA INTEREST DECEMBER 31, SEPTEMBER 30,
BALANCES ADJUSTMENTS BALANCES ADJUSTMENTS COMBINED RATE 1997 1997 AND 1998
------------- ----------- ------------- ----------- ------------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term Senior
Debt:
Historical
September 30,
1998 short-term
debt........... $ 4,444 $ -- $ 4,444 $(4,000)(i) $ 444 7.50%(iv) $ 33 $ 25
Historical
September 30,
1998 S
Corporation
notes.......... 3,301 -- 3,301 (2,902)(ii) 399 6.00%(v) 24 18
-------- ------- -------- ------- -------- ------- -------
Total short-term
senior
debt/interest
expense........ $ 7,745 $ -- $ 7,745 $(6,902) $ 843 $ 57 $ 43
======== ======= ======== ======= ======== ======= =======
Long-Term Senior
Debt:
Historical
September 30,
1998 Credit
Agreement...... $107,800 $ -- $107,800 $ 6,902 (i),(ii) $114,702 7.50%(iv) $ 8,603 $ 6,452
Fourth Quarter
Post-IPO
Companies
assumed debt
refinanced..... -- 14,354 14,354 -- 14,354 7.50%(iv) 1,077 808
Fourth Quarter
Post-IPO
Companies
borrowings to
fund cash
portion of
purchase
prices......... -- 62,126 62,126 -- 62,126 7.50%(iv) 4,659 3,494
-------- ------- -------- ------- -------- ------- -------
Total long-term
senior
debt/interest
expense........ $107,800 $76,480 $184,280 $ 6,902 $191,182 $14,339 $10,754
======== ======= ======== ======= ======== ======= =======
Long Term
Subordinated
Debt:
Historical
September 30,
1998 long-term
debt........... $ 820 $ -- $ 820 $ (820)(iii) $ -- -- $ -- $ --
Fourth Quarter
Post-IPO
Companies
subordinated
debt........... -- 16,000 16,000 -- 16,000 6.00%(vi) 960 720
-------- ------- -------- ------- -------- ------- -------
Total long-term
subordinated
debt/interest
expense........ $ 820 $16,000 $ 16,820 $ (820) $ 16,000 $ 960 $ 720
======== ======= ======== ======= ======== ======= =======
Total
debt/interest
expense......... $116,365 $92,480 $208,845 $ (820) $208,025 $15,356 $11,517
======== ======= ======== ======= ======== ======= =======
</TABLE>
- ------
(i) This note contractually matured on December 12, 1998 and was repaid with
proceeds from the Credit Agreement.
(ii) This note contractually matures on January 5, 1999 and was repaid with
proceeds from the Credit Agreement.
(iii) This subordinated note was converted to 68,334 shares of Common Stock in
November 1998.
(iv) Represents the current borrowing rates under the Credit Agreement.
(v) Represent the contractual interest rate for the S Corporation notes.
(vi) Represents the contractual interest rate for this subordinated note
payable.
d) Reflects the reduction to historical interest income earned on acquired
cash and the remaining IPO proceeds, all of which is assumed to be used for the
acquisition of the GroupMAC Companies.
e) Reflects the incremental provision for federal and state income taxes
relating to the compensation differential and other pro forma adjustments
discussed in this Note 4 as well as income taxes on S Corporation earnings.
22
<PAGE>
GROUP MAINTENANCE AMERICA CORP.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
f) Weighted average shares outstanding include the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Shares issued in Initial Public
Offering............................. 8,340 8,340 8,340
Shares issued under Subscription
Agreement dated October 24, 1996..... 2,600 2,600 2,600
Shares issued to Pre-IPO Companies.... 6,141 6,141 6,141
Shares issued to IPO Companies........ 3,007 3,007 3,007
Shares issued to First Quarter Post-
IPO Companies........................ 2,574 2,574 2,574
Shares issued to Second Quarter Post-
IPO Companies........................ 2,906 2,906 2,906
Shares issued to Third Quarter Post-
IPO Companies........................ 2,385 2,385 2,385
Shares issued to Fourth Quarter Post-
IPO Companies........................ 4,161 4,161 4,161
Shares issued to Founding Management
and Directors........................ 1,037 1,037 1,037
------ ------ ------
Weighted average shares outstanding--
basic................................ 33,151 33,151 33,151
Incremental effect of options and
warrants on shares outstanding....... 231 231 433
------ ------ ------
Weighted average shares outstanding--
diluted.............................. 33,382 33,382 33,584
====== ====== ======
</TABLE>
23
<PAGE>
(c) Exhibits.
The following exhibits are filed with this report:
<TABLE>
<C> <S>
2.1* Stock Purchase Agreement dated as of November 3, 1998 among the Company,
Holding Corp., Trinity Contractors, Inc. and the shareholders of Trinity
Contractors, Inc.
23 Consent of KPMG Peat Marwick LLP.
99* List of Lenders under the Credit Agreement.
</TABLE>
- --------
* Incorporated by reference to the Company's Form 8-K filed November 25, 1998.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Group Maintenance America Corp.
/s/ Randolph W. Bryant
By: _________________________________
Randolph W. Bryant
Senior Vice President and General
Counsel
Date: December 22, 1998
25
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Group Maintenance America Corp.
We consent to incorporation by reference in the registration statements (No.
333-41749, No. 333-41751, No. 333-58651, No. 333-60537 and No. 333-69421) on
Form S-8 of Group Maintenance America Corp. of our report dated November 3,
1998, relating to the combined balance sheets of Trinity Contractors, Inc. and
Trinity Air Technologies, L.P. as of December 31, 1996 and 1997, and the
related combined statements of operations, owners' equity and cash flows for
each of the years in the three year period ended December 31, 1997, which
report appears in the current report on Form 8-K/A of Group Maintenance
America Corp. dated December 22, 1998.
KPMG PEAT MARWICK LLP
Houston, Texas
December 22, 1998
