<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: OCTOBER 15, 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 October 15, 1998, Group Maintenance America Corp. (the "Company")
completed the acquisition of Continental Electrical Construction Co., an
Illinois corporation ("Continental"). The Company acquired Continental
pursuant to a merger (the "Merger") of Continental with and into Continental
Acquisition Corp. ("CAC"), a wholly-owned subsidiary of the Company. The
Merger was effected in accordance with the Agreement and Plan of Merger (the
"Merger Agreement") dated as of October 15, 1998, among the Company, CAC,
Continental, and the shareholders of Continental. A copy of the Merger
Agreement has been filed as an exhibit to this Current Report on Form 8-K and
is incorporated herein by reference. CAC was the surviving corporation of the
Merger. The purchase price paid or to be paid by the Company for Continental
consists of $15.7 million in cash, 2.0 million shares of the Company's common
stock and equivalents, par value $.001 per share, and the assumption of $10.7
million of long-term debt.
A majority of the stockholders of Continental prior to the Merger will be
employed by the surviving corporation after the Merger. After the Merger, the
surviving corporation shall continue to lease facilities from real estate
trusts of which certain of the stockholders of Continental prior to the Merger
are beneficiaries.
Prior to the Merger, Continental was engaged in the business of providing
electrical, communication, life safety and security network installation,
maintenance and repair services for commercial and industrial customers in the
Chicago, Illinois marketplace. The assets of Continental consisted primarily
of cash, accounts receivable, inventory, equipment, vehicles and goodwill. The
Company expects that the surviving corporation will continue to conduct its
business in substantially the same manner as conducted before the Merger.
The cash portion of the consideration paid by the Company in connection with
the Merger 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 businesses acquired.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Continental Electrical Construction Co.
We have audited the accompanying balance sheets of Continental Electrical
Construction Co. (the Company) as of December 31, 1996 and 1997, and the
related statements of operations, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly,
in all material respects, the financial position of Continental Electrical
Construction Co. as of December 31, 1996 and 1997, and the results of its
operations and its 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
October 16, 1998
3
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1997 1998
------------ ------------ -------------
(UNAUDITED)
ASSETS
------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............ $ 1,409,429 $ 1,474,903 $ 1,041,100
Accounts receivable--trade........... 12,438,323 13,610,722 15,036,693
Accounts receivable--other........... 18,480 43,702 111,527
Inventories.......................... 208,501 189,637 492,689
Costs and estimated earnings in ex-
cess of billings on uncompleted con-
tracts.............................. 2,342,168 3,055,569 4,919,994
Deferred tax asset................... -- -- 113,800
Prepaid expenses and other current
assets.............................. -- -- 232,725
----------- ----------- -----------
Total current assets............... 16,416,901 18,374,533 21,948,528
PROPERTY AND EQUIPMENT, NET............ 536,802 470,074 615,697
GOODWILL............................... -- -- 1,066,561
INVESTMENTS............................ 721,604 1,148,279 1,338,942
OTHER LONG TERM ASSETS................. 235,969 236,439 114,801
----------- ----------- -----------
Total assets....................... $17,911,276 $20,229,325 $25,084,529
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................... $ 3,550,998 $ 2,460,074 $ 3,156,441
Accrued expenses..................... 1,286,918 1,660,537 2,201,905
Accrued income taxes payable......... 71,500 110,000 178,702
Billings in excess of costs and esti-
mated earnings on
uncompleted contracts............... 1,379,459 1,254,871 1,351,087
Deferred tax liability............... -- -- 6,600
Notes payable--related parties....... 1,050,000 1,675,000 2,350,000
Short term borrowings and current ma-
turities of long term
obligations......................... -- -- 9,188,757
----------- ----------- -----------
Total current liabilities.......... 7,338,875 7,160,482 18,433,492
LONG TERM OBLIGATIONS, net of current
maturities............................ -- -- 1,057,206
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock--$10 par value; 20,000
shares authorized; 3,200 shares is-
sued and outstanding................ 32,000 32,000 32,000
Additional paid-in capital........... -- -- 552,744
Retained earnings.................... 10,540,401 13,036,843 4,180,751
Unrealized gain on securities........ -- -- 828,336
----------- ----------- -----------
Total shareholders' equity......... 10,572,401 13,068,843 5,593,831
----------- ----------- -----------
Total liabilities and shareholders'
equity............................ $17,911,276 $20,229,325 $25,084,529
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
---------------------------------------- ---------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................ $52,645,469 $60,950,227 $71,555,793 $54,654,477 $54,258,969
COST OF SERVICES........ 41,305,153 47,985,806 54,809,528 42,015,127 41,050,969
----------- ----------- ----------- ----------- -----------
Gross profit........ 11,340,316 12,964,421 16,746,265 12,639,350 13,208,000
SELLING, GENERAL AND
ADMINISTRATIVE EX-
PENSES................. 7,482,306 8,199,411 9,707,389 6,092,292 7,636,065
----------- ----------- ----------- ----------- -----------
Income from
operations......... 3,858,010 4,765,010 7,038,876 6,547,058 5,571,935
OTHER INCOME (EXPENSE):
Interest income....... 40,055 44,591 25,484 21,527 31,363
Interest expense...... (69,541) (121,383) (137,195) (103,157) (230,846)
Equity in loss of
partnership.......... -- -- (171,494) (128,621) (381,250)
Gain (loss) on sale of
investments in
partnerships......... 42,675 (13,090) -- -- 520,369
Other, net............ 7,574 16 48,403 3,781 (65,962)
----------- ----------- ----------- ----------- -----------
Income before income
tax
provision.......... 3,878,773 4,675,144 6,804,074 6,340,588 5,445,609
INCOME TAX PROVISION.... 54,478 70,521 107,632 99,686 178,702
----------- ----------- ----------- ----------- -----------
NET INCOME.............. $ 3,824,295 $ 4,604,623 $ 6,696,442 $ 6,240,902 $ 5,266,907
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED TOTAL
---------------- TREASURY PAID-IN RETAINED GAIN ON SHAREHOLDERS'
SHARES AMOUNT STOCK CAPITAL EARNINGS SECURITIES EQUITY
------ -------- ------------ ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... 5,700 $ 57,000 $ (1,102,250) $ -- $ 7,288,732 $ -- $ 6,243,482
Retirement of treasury
stock................ (2,500) (25,000) 1,102,250 -- (1,077,250) -- --
Net income............ -- -- -- -- 3,824,295 -- 3,824,295
Distribution to
shareholders......... -- -- -- -- (1,299,999) -- (1,299,999)
------ -------- ------------ -------- ------------ -------- ------------
Balance, December 31,
1995................... 3,200 32,000 -- -- 8,735,778 -- 8,767,778
Net income............ -- -- -- -- 4,604,623 -- 4,604,623
Distribution to share-
holders.............. -- -- -- -- (2,800,000) -- (2,800,000)
------ -------- ------------ -------- ------------ -------- ------------
Balance, December 31,
1996................... 3,200 32,000 -- -- 10,540,401 -- 10,572,401
Net income............ -- -- -- -- 6,696,442 -- 6,696,442
Distribution to share-
holders.............. -- -- -- -- (4,200,000) -- (4,200,000)
------ -------- ------------ -------- ------------ -------- ------------
Balance, December 31,
1997................... 3,200 32,000 -- -- 13,036,843 -- 13,068,843
Net income (unau-
dited)............... -- -- -- -- 5,266,907 -- 5,266,907
Capital contribution
(unaudited).......... -- -- -- 552,744 -- -- 552,744
Distribution to share-
holders (unaudited).. -- -- -- -- (14,122,999) -- (14,122,999)
Unrealized gain on se-
curities (unaudited). -- -- -- -- -- 828,336 828,336
------ -------- ------------ -------- ------------ -------- ------------
Balance, September 30,
1998 (unaudited)....... 3,200 $ 32,000 $ -- $552,744 $ 4,180,751 $828,336 $ 5,593,831
====== ======== ============ ======== ============ ======== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
---------------------------------------- ---------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............. $ 3,824,295 $ 4,604,623 $ 6,696,442 $ 6,240,902 $ 5,266,907
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization......... 265,357 235,157 152,386 125,000 160,436
Loss on sale of
property and
equipment............ 1,866 30,643 47,447 23,723 103,139
Loss (Gain) on sale of
partnership
investments.......... (42,675) 13,090 -- -- (520,369)
Equity in loss of
partnership.......... -- -- 171,494 128,621 381,250
Change in operating
assets and
liabilities:
(Increase) decrease
in--
Accounts receivable--
trade............... 373,771 (2,106,693) (1,172,398) (180,521) 44,642
Accounts receivable--
other............... (34,919) 19,921 (25,222) (2,802) (67,875)
Inventories.......... 36,166 13,264 18,864 -- --
Costs and estimated
earnings in excess
of billings on
uncompleted
contracts........... (938,258) 446,479 (837,989) (2,131,205) (1,445,039)
Prepaid expenses and
other current
assets.............. -- -- -- (86,480) (187,732)
Other assets......... -- -- (470) (245) 121,689
Increase (decrease)
in--
Accounts payable..... 313,527 1,080,909 (1,090,925) (954,336) 329,110
Income taxes payable. 33,000 17,500 38,500 27,685 104,412
Accrued expenses..... 301,685 (186,002) 373,619 5,448 303,929
----------- ----------- ----------- ----------- -----------
Net cash provided
by operating
activities........ 4,133,815 4,168,891 4,371,748 3,195,790 4,594,499
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property
and equipment......... (131,643) (128,354) (177,805) (100,769) (383,794)
Purchase of Gregory
Electric, Inc., net of
cash acquired......... -- -- -- -- (1,293,860)
Acquisition of
partnership interest.. (50,000) (25,000) (750,000) (750,000) --
Distributions and
proceeds from sale of
partnership........... 548,907 21,614 151,831 151,831 776,791
Redemption of cash
surrender value of
life insurance........ 124,562 -- -- -- --
Proceeds from sale of
property and
equipment............. 3,450 -- 44,700 22,350 148,974
----------- ----------- ----------- ----------- -----------
Net cash provided
by (used in)
investing
activities........ 495,276 (131,740) (731,274) (676,588) (751,889)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net borrowings
(payments) under notes
payable line of
credit................ (1,300,000) -- -- -- 8,631,486
Borrowings under notes
payable .............. 1,850,000 1,770,000 1,025,000 350,000 662,356
Payments of notes
payable............... (700,000) (1,870,000) (400,000) -- --
Payments under long-
term obligations...... (1,647,016) (1,647,016) -- -- --
Capital contributions.. -- -- -- -- 552,744
Distributions to
stockholders.......... (1,299,999) (2,800,000) (4,200,000) (4,199,999) (14,122,999)
----------- ----------- ----------- ----------- -----------
Net cash used in
financing
activities........ (3,097,015) (4,547,016) (3,575,000) (3,849,999) (4,276,413)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ 1,532,076 (509,865) 65,474 (1,330,797) (433,803)
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 387,218 1,919,294 1,409,429 1,409,429 1,474,903
----------- ----------- ----------- ----------- -----------
CASH AND CASH
EQUIVALENTS, end of
period................. $ 1,919,294 $ 1,409,429 $ 1,474,903 $ 78,632 $ 1,041,100
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION
Cash paid during the
period for:
Interest............... $ 69,541 $ 121,383 $ 137,195 $ 54,956 $ 230,846
Income taxes........... 21,478 53,021 69,132 61,998 89,946
Purchase of Gregory
Electric, Inc., net of
cash acquired:
Working capital, other
than cash............. -- -- -- -- (1,183,408)
Property and equipment. -- -- -- -- (174,378)
Long term debt, net of
current maturities.... -- -- -- -- 69,850
Additional liabilities
assumed............... -- -- -- -- 60,637
Minimum future purchase
payments.............. -- -- -- -- 1,000,000
Purchase price in
excess of net assets
acquired.............. -- -- -- -- (1,066,561)
----------- ----------- ----------- ----------- -----------
Net cash used for
acquisition....... $ -- $ -- $ -- $ -- $(1,293,860)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION WITH RESPECT TO THE INTERIM PERIODS ENDED SEPTEMBER 30, 1997
AND 1998 IS UNAUDITED).
1. BUSINESS AND ORGANIZATION
Continental Electrical Construction Co. ("the Company") is a unionized
electrical contractor providing electrical construction, design and
engineering services principally in northeast Illinois. The Company performs
work under cost-plus-fee contracts, fixed price contracts, and time and
material contracts.
2. SUMMARY OF SIGNIFICANT POLICIES
Interim Financial Information
The interim 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 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. Revenues from cost-plus-
fee contracts are recognized on the basis of costs incurred during the period
plus the fee earned, measured by the cost-to-cost method. Revenue from time
and material contracts is accrued at the end of each month based on chargeable
costs incurred through month end. Time and material contracts are billed for
the number of man hours and costs incurred.
Contract costs include all direct material, subcontract and labor costs and
a provision for indirect costs such as indirect labor and equipment costs.
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.
Revenues from customers that represent 10% or more of total revenues for
each of the three years ended December 31, 1995, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A.............................................. 7.5% 6.2% 12.6%
Customer B.............................................. 12.7% 13.4% 2.2%
Customer C.............................................. 0.0% 5.1% 10.9%
</TABLE>
8
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers
investments in money market accounts and certificates of deposits purchased
with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful receivables is required. If accounts
become uncollectible, they will be charged to operations when that
determination is made.
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.
Investments
The Company records its investments in partnerships of 3% ownership or less
at cost. Distributions received from earnings of the partnerships are
recognized as income. Distributions in excess of partnerships earnings are
treated as a reduction of cost until the cost of the investment is fully
recovered. Investments is partnerships greater than 3% ownership are recorded
under the equity method.
Investments in marketable securities are classified as available for sale.
These investments are recorded at fair value with any unrealized gains and
losses recorded as a separate component of shareholders' equity. As of
September 30, 1998, the cost and fair value of these investments were $510,606
and $1,338,942, respectively.
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>
Tools and equipment................................................. 7
Office Equipment.................................................... 5
Automobiles......................................................... 5
Trucks and trailers................................................. 5
Leasehold Improvements.............................................. 7-10
</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.
Income Taxes
The shareholders of the Company have elected to be taxed for federal tax
purposes as an S Corporation whereby the shareholders' respective equitable
share in the taxable income of the Company is reportable on his individual tax
return. Accordingly, no provision or liability for federal income taxes is
recognized by the Company. The Company has made distributions to the
shareholders each year at least in the amounts necessary
9
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
to pay personal income taxes payable on the Company's taxable income. The
Company is subject to state income taxes. As of December 31, 1996 and 1997
deferred income taxes are insignificant.
Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash, accounts receivable
and costs and estimated earnings in excess of billings on uncompleted
contracts.
The Company maintains its cash balances in one financial institution. The
balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. The Company generally has funds deposited in excess of $100,000.
Accounts receivable and costs and estimated earnings in excess of billings
on uncompleted contracts result primarily from contracts with customers
principally in the Company's service area in northeast Illinois. Credit is
extended to customers after an evaluation for credit worthiness; however, the
Company does not require collateral or other security from customers.
New Accounting Pronouncement
In June 1997, SFAS No. 130, Reporting Comprehensive Income, was issued. This
statement establishes standards for reporting and displaying comprehensive
income and its components in a financial statement that is displayed with the
same prominence as other financial statements. Reclassification of the
financial statements for earlier periods, provided for comparative purposes,
is required. The statement also requires the accumulated balance of other
comprehensive income to be displayed separately in the equity section of the
balance sheet. This statement is effective for fiscal years beginning after
December 15, 1997. Total comprehensive income for the nine months ended
September 30, 1998 was $6,095,243; total comprehensive income for the nine
months ended September 30, 1997 was equal to net income.
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................................... $32,783,972 $30,537,462
Estimated earnings recognized.................... 6,002,238 5,882,662
----------- -----------
38,786,210 36,420,124
Less billings on contracts....................... 37,823,501 34,619,426
----------- -----------
$ 962,709 $ 1,800,698
=========== ===========
</TABLE>
These costs and estimated earnings on uncompleted contracts are included in
the accompanying balance sheets under the following captions:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Costs and estimated earnings in excess of
billings..................................... $ 2,342,168 $ 3,055,569
Billings in excess of costs and estimated
earnings..................................... (1,379,459) (1,254,871)
----------- -----------
$ 962,709 $ 1,800,698
=========== ===========
</TABLE>
10
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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>
Tools and equipment................................ $ 294,375 $ 294,375
Office equipment................................... 540,800 568,029
Automobiles........................................ 210,105 176,813
Trucks and trailers................................ 295,668 339,729
Leasehold improvements............................. 412,361 412,361
---------- ----------
1,753,309 1,791,307
Less: Accumulated depreciation..................... 1,216,507 1,321,233
---------- ----------
Total Property and Equipment, net................ $ 536,802 $ 470,074
========== ==========
</TABLE>
5. NOTES PAYABLE AND BORROWINGS UNDER BANK LINES OF CREDIT
Notes payable at December 31, 1996, December 31, 1997 and September 30, 1998
consist of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1997 1998
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Prime note payable to a former
stockholder, due on demand, interest
only payable monthly, unsecured (8.5%
at December 31, 1997)................ $1,050,000 $1,675,000 $2,350,000
========== ========== ==========
</TABLE>
Other short and long term borrowings and obligations consist of the
following:
<TABLE>
<CAPTION>
DECEMBER
31,
----------- SEPTEMBER 30,
1996 1997 1998
----- ----- -------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to a bank with interest rate at prime
rate
(8.5% September 30, 1998) maturing on January 10,
1999............................................... $ -- $ -- $ 8,000,000
Line of credit with a bank with interest rate at
prime rate plus 1% (9.5% at September 30, 1998),
maturing September 1, 1999. Maximum available funds
under this facility are $1,500,000 and borrowings
are secured by all the assets of Gregory Electric,
Inc. (see Note 9).................................. -- -- 1,093,751
Various borrowings secured by vehicles with a bank
with maturities, including interest, of $95,006 in
1999, $63,157 in 2000 and $27,956 in 2001 and with
interest rates ranging from 7.75% to 8.50% ........ -- -- 152,212
Minimum obligation payable to former shareholders of
Gregory Electric, Inc. (see Note 9) with final
payment due July 15, 2001.......................... -- -- 1,000,000
----- ----- -----------
Total short and long term obligations............... -- -- 10,245,963
Less current maturities........................... -- -- 9,188,757
----- ----- -----------
Total long term obligations net of current
maturities......................................... $ -- $ -- $ 1,057,206
===== ===== ===========
</TABLE>
11
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution profit sharing plan which
covers substantially all employees not covered by a collective bargaining
agreement. The Company plan limits the employer contribution to 15% of the
compensation of the plan participants. Contributions to the plan were
$504,607, $588,655 and $738,141 for the years ended December 31, 1995,
December 31, 1996 and December 31, 1997, respectively.
The Company contributes to several union-administered pension plans covering
all of its union employees. Pension expense charged to operations was
$1,954,000, $2,689,000 and $3,443,000 for the years ended December 31, 1995,
December 31, 1996 and December 31, 1997, respectively. Governmental
regulations impose certain requirements relative to multi-employer plans. In
the event of a plan's termination or employer withdrawal, the Company may be
liable for a portion of the plans' unfunded vested benefits, if any. As of
December 31, 1997, there are no unfunded vested pension liabilities under
these plans.
7. LEASES
The Company leases office and warehouse facilities from a trust whose
beneficiary is one of the Company's officers/stockholders. The terms of the
leases provide for minimum monthly rentals and payments of real estate taxes
and maintenance expenses. The lease arrangements expire in July 1999 and
September 2005. Rental expense recorded under these leases was $411,000,
$418,000 and $576,000 for the years ended December 31, 1995, December 31, 1996
and December 31, 1997, respectively. As of December 31, 1997, future minimum
lease payments under non-cancelable operating leases (with initial or
remaining lease terms in excess of one year) are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1998............................................................ $ 264,240
1999............................................................ 264,240
2000............................................................ 264,240
2001............................................................ 264,240
2002............................................................ 264,240
2003 and thereafter............................................. 726,660
----------
$2,047,860
==========
</TABLE>
8. TRANSACTIONS WITH RELATED PARTIES
Officers/stockholders of the Company also have controlling interests in
other business entities. Transactions entered into with these entities were
not material to the Company's operations, except as discussed in Note 7.
9. ACQUISITION OF SUBSIDIARY (UNAUDITED)
Effective April 1, 1998, the Company acquired all of the outstanding common
stock of Gregory Electric, Inc. (Gregory) for $1.4 million in cash and the
assumption of certain obligations. In addition, the purchase agreement
provides for payments of two-thirds of after tax profits of Gregory from the
time of the acquisition through March 31, 2001 with a minimum payment of
$600,000 required. In connection with the acquisition of the Company, the
Company and the former shareholders of Gregory agreed to terminate these
future obligations in return for a payment of $1,000,000. This amount has been
accrued as part of the purchase price and recorded as a long term obligation
on the balance sheet of the Company. The acquisition was accounted for by the
purchase method and the results of operations for Gregory have been included
since the date of acquisition. The excess of the purchase price over the fair
value of net identifiable assets acquired has been recorded as goodwill and is
being amortized on a straight line basis over 40 years.
12
<PAGE>
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited pro forma financial information presents the
combined results of operations of the Company and Gregory as if the
acquisition had occurred at the beginning of the 1997, after giving effect to
certain adjustments including amortization of goodwill, interest expense and
income taxes. The pro forma financial information does not necessarily reflect
the results of operations that would have occurred had the Company and Gregory
constituted a single entity during such periods.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1998
----------- -----------
<S> <C> <C>
Revenues.......................................... $60,119,869 $55,885,945
=========== ===========
Net Income........................................ $ 6,289,569 $ 6,628,109
=========== ===========
</TABLE>
10. FINANCIAL INSTRUMENTS
The Company's significant financial instruments at December 31, 1996 and
1997 consist of cash and cash equivalents and notes payable. The Company
believes the carrying value of these instruments on the accompanying balance
sheets at December 31, 1996 and December 31, 1997 approximates their fair
value.
11. 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.
12. CHANGE IN CAPITAL STRUCTURE AND SUBSEQUENT EVENT
Effective July 15, 1998, the shareholders of the Company altered the capital
structure of the Company from one class of common stock (20,000 shares
authorized; 3,200 shares issued and outstanding) of $10 par value to the
following capital structure.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
CLASS PAR VALUE SHARES AUTHORIZED SHARES ISSUED
----- --------- ----------------- -------------
<S> <C> <C> <C>
Common A........................ $10 1,000 320
Common B........................ $10 19,000 2,880
</TABLE>
Common A shareholders are entitled to one vote for each share of class
common A stock. The holders of class common B stock are not entitled to any
vote. In all other respects, preferences, qualifications, limitations,
restrictions and rights, the common A and common B shares are the same.
Effective October 15, 1998, Group Maintenance America Corp. (GroupMAC)
acquired all of the outstanding shares of the Company for a combination of
cash and common stock of GroupMAC.
13
<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>
14
<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.
15
<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.
16
<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.
17
<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.
18
<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.
19
<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 earlier agreements 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,
20
<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.
21
<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>
22
<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.
23
<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.
24
<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>
25
<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 October 28, 1998.
26
<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
27
<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 October 16,
1998, relating to the balance sheets of Continental Electrical Construction
Co. as of December 31, 1996 and 1997, and the related statements of
operations, shareholders' 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
