<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
COMMISSION FILE NUMBER 0-23241
CONSOLIDATION CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-2054952
(STATE OF OTHER JURISDICTION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION.) IDENTIFICATION NO.)
800 CONNECTICUT AVENUE, NW, SUITE 1111
WASHINGTON, D.C. 20006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(202) 261-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
1747 PENNSYLVANIA AVENUE, NW, SUITE 900
WASHINGTON, D.C. 20006
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
As of May 1, 1998, there were 36,856,369 shares of common stock outstanding
and 500,000 shares of convertible non-voting common stock outstanding.
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<PAGE>
CONSOLIDATION CAPITAL CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet December 31, 1997 and March 31, 1998.... 1
Consolidated Statement of Operations For the Three Months Ended
March 31, 1998.................................................... 2
Consolidated Statement of Stockholders' Equity For the Three Months
Ended March 31, 1998.............................................. 3
Consolidated Statement of Cash Flows For the Three Months Ended
March 31, 1998.................................................... 4
Notes to Consolidated Financial Statements......................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 8
PART II--OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds..................... 10
Item 6. Exhibits and Reports on Form 8-K.............................. 11
Signatures............................................................ 13
Exhibit Index.........................................................
</TABLE>
(i)
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATION CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $528,392 $424,462
Accounts receivable, net............................ 82,755
Costs and estimated earnings in excess of billings
on uncompleted contracts........................... 7,934
Prepaid expenses and other current assets........... 434 5,965
Deferred tax asset.................................. 219 568
-------- --------
Total current assets.............................. 529,045 521,684
Property and equipment, net........................... 20 10,664
Goodwill.............................................. 175,002
Other assets.......................................... 2,859
-------- --------
Total assets...................................... $529,065 $710,209
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt..................................... $ 5,796
Accounts payable.................................... $ 156 21,588
Billings in excess of costs and estimated earnings
on uncompleted contracts........................... 27,977
Income taxes payable................................ 283 4,407
Accrued compensation................................ 1,042 6,902
Accrued liabilities--other.......................... 287 8,254
-------- --------
Total current liabilities......................... 1,768 74,924
Long-term debt........................................ 3,414
Other liabilities..................................... 1,917
-------- --------
Total liabilities................................. 1,768 80,255
-------- --------
Stockholders' equity:
Common stock, $.001 par value, 250,000,000 shares
authorized, 30,150,000 and 35,238,049 shares issued
and outstanding, respectively...................... 30 35
Convertible Non-Voting Common Stock, $.001 par
value, 500,000 shares authorized, issued and
outstanding........................................ 1 1
Additional paid-in capital.......................... 527,259 624,648
Retained earnings................................... 7 5,270
-------- --------
Total stockholders' equity........................ 527,297 629,954
-------- --------
Total liabilities and stockholders' equity........ $529,065 $710,209
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
1998
-----------
(UNAUDITED)
<S> <C>
Revenues........................................................... $ 37,497
Cost of revenues................................................... 30,245
----------
Gross profit................................................... 7,252
Selling, general and administrative expenses....................... 4,595
Goodwill amortization.............................................. 324
----------
Operating income............................................... 2,333
Other (income) expense:
Interest income.................................................. (6,652)
----------
Income before taxes................................................ 8,985
Provision for income taxes......................................... 3,722
----------
Net income......................................................... $ 5,263
==========
Net income per Common Share--Basic................................. $ 0.17
==========
Net income per Common Share--Diluted............................... $ 0.16
==========
Weighted average number of Common Shares outstanding............... 31,696,546
==========
Weighted average number of Common and Potentially Dilutive Shares
outstanding....................................................... 32,670,033
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE
NON-VOTING
COMMON STOCK COMMON STOCK
------------------ ------------------ ADDITIONAL TOTAL
SHARES SHARES PAID-IN- RETAINED STOCKHOLDERS'
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL EARNINGS EQUITY
----------- ------ ----------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1997................... 30,150,000 $ 30 500,000 $ 1 $527,259 $ 7 $527,297
Issuance of common
stock for acquisitions
(unaudited)........... 5,088,049 5 97,389 97,394
Net income (unaudited). 5,263 5,263
---------- ----- ------- ----- -------- ------ --------
Balance, March 31, 1998
(unaudited)............ 35,238,049 $ 35 500,000 $ 1 $624,648 $5,270 $629,954
========== ===== ======= ===== ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
(UNAUDITED)
<S> <C>
Cash flows from operating activities:
Net income...................................................... $ 5,263
Depreciation and amortization................................... 625
Changes in operating assets and liabilities:
Accounts receivable............................................ (10,106)
Costs and estimated earnings in excess of billings............. 2,405
Prepaid expenses and other current assets...................... (1,125)
Billings in excess of costs and estimated earnings............. 5,552
Accounts payable............................................... 2,141
Accrued liabilities............................................ 2,812
Change in other assets.......................................... (525)
--------
Net cash provided by operating activities.................... 7,042
--------
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired................ (111,840)
Purchases of property and equipment............................. (532)
Proceeds on sale of equipment................................... 450
Payments received on notes receivable........................... 304
--------
Net cash used in investing activities........................ (111,618)
--------
Cash flows from financing activities:
Net proceeds (payments) on short-term debt...................... (396)
Payments on long-term debt...................................... (158)
Proceeds on long-term debt...................................... 1,200
--------
Net cash provided by financing activities.................... 646
--------
Net (decrease) in cash and cash equivalents...................... (103,930)
Cash and cash equivalents, beginning of period................... 528,392
--------
Cash and cash equivalents, end of period......................... $424,462
========
The Company issued shares of common stock and cash in connection with certain
business combinations during the three months ended March 31, 1998. The fair
values of the assets acquired and liabilities assumed at the dates of
acquisition are as follows:
Accounts receivable.............................................. $ 73,351
Inventories...................................................... 1,022
Costs and earnings in excess of billings......................... 10,426
Prepaid expenses and other current assets........................ 3,660
Property and equipment........................................... 11,520
Intangible assets................................................ 175,132
Other assets..................................................... 2,526
Short-term debt.................................................. (7,113)
Accounts payable................................................. (19,103)
Accrued liabilities.............................................. (14,052)
Billings in excess of costs and estimated earnings............... (22,425)
Long-term debt................................................... (2,909)
Other long-term liabilities...................................... (2,801)
--------
Net assets acquired.......................................... $209,234
========
These acquisitions were funded as follows:
Common stock, 5,088,049 shares................................... $ 97,394
Cash, net of cash acquired....................................... 111,840
--------
$209,234
========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1--BASIS OF PRESENTATION
Consolidation Capital Corporation, a Delaware corporation (the "Company"),
was incorporated in September 1997. Ledecky Brothers L.L.C., ("LLC"), a
limited liability corporation formed in February 1997, merged with and into
the Company in September 1997 (the "Merger"). The sole member of LLC received,
in connection with the Merger, 2,300,000 shares of Common Stock of the Company
which represented all of the issued and outstanding shares of Common Stock, in
exchange for 100% of his ownership interest in the LLC. The Merger was
implemented to facilitate a public offering of securities. Because both of the
organizations were under control of the sole owner, the Merger was accounted
for on a historical cost basis.
The Company is consolidating the facilities management industry with the
intent to become a national single-source provider of facilities management
services. Through December 31, 1997, the Company's operations consisted of
organizational activities, research and analysis with respect to industry
consolidations and acquisition opportunities, efforts to refine the Company's
business strategy and meetings and negotiations with potential acquisition
candidates. Activity for the period from inception to March 31, 1997 consisted
only of minimal operating expenses and accordingly statements of operations
and cash flows for the period of inception to March 31, 1997 would not provide
meaningful information and have therefore not been presented.
The Company completed an initial public offering of its Common Stock in
December 1997, selling 27,850,000 shares of Common Stock and 500,000 shares of
Convertible Non-Voting Common Stock and raising net proceeds of approximately
$527,000.
During the three months ended March 31, 1998, the Company acquired all of
the outstanding stock of Service Management USA, Inc., Garfield Electric
Company, Indecon, Inc., Riveria Electric Construction Co., Inc., SKC Electric,
Inc., Town & Country Electric, Inc., Tri-City Electrical Contractors, Inc.,
Walker Engineering, Inc. and Wilson Electric Company, Inc. (the "Purchased
Companies") in business combinations accounted for under the purchase method
of accounting.
The accompanying consolidated financial statements and related notes to
consolidated financial statements include the accounts of the Company, and the
Purchased Companies from their respective acquisition dates.
In the opinion of management, the information contained herein reflects all
adjustments necessary to make the results of operations for the interim period
a fair presentation of such operations. All such adjustments are of a normal
recurring nature. Operating results for interim periods are not necessarily
indicative of results that may be expected for the year as a whole. It is
suggested that these consolidated financial statements be read in conjunction
with the Company's audited consolidated financial statements for the fiscal
year ended December 31, 1997.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
The Company utilizes the percentage-of-completion method of accounting for
the recognition of revenues and costs of all significant installation
contracts. Revenues are recognized according to the ratio of costs incurred to
estimated total contract costs. Changes in job performance, job conditions,
estimated profitability and final contract settlements may result in revisions
to costs and income and are recognized in the period in which the revisions
are determined. Maintenance and other service revenues are recognized as the
services are performed.
5
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1998
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are capitalized and amortized over the lesser of the
life of the lease or the estimated useful life of the asset.
Goodwill
Goodwill, which represents the excess of cost over the fair value of assets
acquired in business combinations accounted for under the purchase method, is
being amortized on a straight-line basis over 40 years which is the estimated
period benefitted. The recoverability of the unamortized balance of goodwill
is assessed on an ongoing basis by comparing anticipated undiscounted future
cash flows from operations to net book value.
NOTE 3--BUSINESS COMBINATIONS
As discussed in Note 1, during the three months ended March 31, 1998, the
Company completed nine business combinations, which were accounted for under
the purchase method of accounting. The consolidated financial statements
include the results of these acquired entities from the date of acquisition.
The aggregate consideration paid for these acquisitions consisted of 5,088,049
shares of Common Stock and $118,368 in cash, including applicable professional
fees.
This purchase price does not include contingent consideration of up to
$80,000 in cash and in shares of Common Stock based upon the performance of
the various acquisitions.
The total purchase price was allocated to the fair value of the net assets
acquired resulting in goodwill of approximately $175,000. Such allocations are
preliminary in nature, pending the outcome of a detailed analysis being
performed by the Company of the assets and liabilities acquired. For purposes
of computing the estimated purchase price for accounting purposes, the value
of the shares was determined in consideration of restrictions on the sale and
transferability of the shares issued. The shares generally will be subject to
the following restrictions on resale: up to one-third of the shares may be
resold beginning twelve months after their date of acquisition, the first one-
third and an additional one-third may be resold beginning eighteen months
after their date of acquisition and the first two-thirds and the remaining
one-third may be resold beginning twenty-four months after their date of
acquisition.
6
<PAGE>
CONSOLIDATION CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1998
The following presents the unaudited pro forma results of operations of the
Company for the three month periods ended March 31, 1997 and 1998,
respectively, as if all of the acquisitions of the Purchase Companies had been
consummated as of January 1, 1997. The pro forma results of operations reflect
certain pro forma adjustments.
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1998
------------ ------------
<S> <C> <C>
Revenues $96,117 $102,810
Net income $ 1,947 $ 4,545
Net income per share--Basic $ 0.14 $ 0.13
Net income per share--Dilutive $ 0.14 $ 0.13
</TABLE>
The pro forma results of operations are prepared for comparative purposes
only and do not necessarily reflect the results that would have occurred had
the acquisitions occurred as of January 1, 1997 or the results that may occur
in the future.
NOTE 4--SUBSEQUENT EVENTS
Subsequent to March 31, 1998, the Company completed two business
combinations for an aggregate consideration of 1,618,320 shares of Common
Stock and the assumption of approximately $34,500 in debt, which was paid upon
closing. Additionally, the Company has signed letters of intent or definitive
agreements to acquire two janitorial maintenance management services
businesses and seven electrical installation and maintenance services
businesses. Total consideration which may be issued in connection with these
pending acquisitions is $169,400 in cash and shares of Common Stock.
Additionally, there is the potential for the payment of up to an additional
$23,100 in cash and shares of Common Stock in connection with contingent
consideration arrangements.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This Quarterly Report on Form 10-Q contains forward-looking statements that
involve risks and uncertainties. When used in this Report, the words
"anticipate," "believe," "estimate," "intend," "may," "will," "expect" and
similar expressions as they relate to the Company or its management are
intended to identify such forward-looking statements. The Company's actual
results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Factors that
could cause or contribute to such differences include those discussed under
the heading "--Factors Affecting the Company's Business" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. The Company
does not undertake any obligation to revise these forward-looking statements
to reflect any future events or circumstances.
INTRODUCTION
The following discussion should be read in conjunction with the consolidated
historical financial statements, including the related notes thereto,
appearing elsewhere in this Quarterly Report on Form 10-Q, as well as the
Company's audited consolidated financial statements for the year ended
December 31, 1997 as filed on Form 10-K.
Due to the Company's growth through acquisitions, comparisons of the
historical results of the Company's operations have been and will continue to
be affected primarily by the addition of acquired companies. In most
instances, these dollar increases in the various revenues and expense
components of the Company's results are due primarily to growth from
acquisitions. Neither the magnitude nor the source of such changes is
necessarily indicative of changes that will occur in the future.
CONSOLIDATED RESULTS OF OPERATIONS
During the three months ended March 31, 1998, the Company acquired all of
the outstanding stock of Service Management USA, Inc., Garfield Electric
Company, Indecon, Inc., Riviera Electric Construction Co., Inc., SKC Electric,
Inc., Town & Country Electric, Inc., Tri-City Electrical Contractors, Inc.,
Walker Engineering, Inc. and Wilson Electric Company, Inc. (the "Purchased
Companies") in business combinations accounted for under the purchase method
of accounting.
The following discussion includes the results of Consolidation Capital
Corporation and the companies acquired in business combinations accounted for
under the purchase method from their respective acquisition dates.
Through December 31, 1997, the Company's operations consisted of
organizational activities, research and analysis with respect to industry
consolidations and acquisition opportunities, efforts to refine the Company's
business strategy and meetings and negotiations with potential acquisition
candidates. Activity for the period from inception to March 31, 1997 consisted
only of minimal operating expenses and accordingly statements of operations
for the period of inception to March 31, 1997 would not provide meaningful
information and have therefore not been presented.
THREE MONTHS ENDED MARCH 31, 1998
The Company's revenues are derived primarily from the providing of
janitorial maintenance management services and the electrical installation and
maintenance services. For the three months ended March 31, 1998, approximately
14.7% and 85.3% of the Company's revenues were derived from janitorial
maintenance management services and electrical installation and maintenance
services, respectively.
8
<PAGE>
The Company's revenues are recognized as services are performed for
maintenance and service contracts. Additionally, the Company utilizes the
percentage-of-completion method of accounting for installation contracts.
Under this method, revenues are recognized according to the ratio of costs
incurred to estimated total contract costs. Changes in job performance, job
conditions, estimated profitability and final contract settlements may result
in revisions to costs and income and are recognized in the period in which the
revisions are determined.
Consolidated revenues were approximately $37.5 million for the three months
ended March 31, 1998. These revenues were generated from the Purchased
Companies which have been included since their respective dates of
acquisition.
Gross profit was approximately $7.3 million or 19.3% of revenues for the
three months ended March 31, 1998.
Selling, general and administrative expenses approximated $4.9 million, or
13.1% as a percentage of revenues. Selling, general and administrative
expenses consist of general and administrative costs associated with the
Company's corporate activities, selling, general and administrative costs of
the Purchased Companies and goodwill amortization associated with the
Purchased Companies. Selling, general and administrative costs as a percentage
of revenues for the three months ended March 31, 1998 are disproportionately
higher as a result of the Company's Corporate costs relative to the operating
results which are only included since their respective dates of acquisition.
Accordingly, the Company anticipates that selling, general and administrative
costs as a percentage of revenues will decrease as the operating results of
the acquisitions are included for the entire period.
Interest income was approximately $6.7 million for the three months ended
March 31, 1998. This interest income was generated from the Company's
investment of the proceeds raised in its initial public offering in November
1997. This interest income represents an effective interest rate of 5.56%.
Provision for income taxes was approximately $3.7 million for the three
months ended March 31, 1998, reflecting an effective income tax rate of 41.4%.
The effective income tax rates reflect the recording of tax provisions at the
federal statutory rate of 35.0%, appropriate state and local taxes and the
non-deductibility of certain goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash and cash equivalents of $424.5
million and working capital of $446.8 million. Additionally, BT Alex. Brown
Incorporated has provided the Company with a letter, dated October 29, 1997,
in which BT confirms that, upon the Company's request, BT commits to use its
best efforts to arrange and syndicate a $100 million senior secured revolving
bank credit facility to be used by the Company for future acquisitions or
other capital requirements. This bank credit facility may, under certain
conditions to be mutually agreed upon, be increased up to a $500 million
facility. The terms and conditions of any BT debt facility, including the fee
arrangements, are subject to mutual agreement. Use of any such facility would
likely be subject to conditions customary to facilities of this type,
including restrictions on other indebtedness, mergers, acquisitions,
dispositions and similar transactions. The Company may not succeed in
obtaining a facility of any size or in negotiating terms satisfactory to the
Company. Except for this proposed bank credit facility, the Company currently
has no plan or intention to obtain additional capital through debt or equity
financing in the next 12 months. If and when the Company requires additional
financing for its acquisition program or for other capital requirements, the
Company may be unable to obtain any such financing on terms that the Company
deems acceptable.
The Company also expects to utilize its Common Stock as a source of capital
to provide a portion of the consideration paid to acquire certain companies.
The Company believes that its cash and cash equivalents, cash flow from
operations and its available authorized but unissued and unreserved shares of
Common Stock that may be issued in acquisitions, will be sufficient to fund
its operations and acquisition program through the end of 1998.
9
<PAGE>
During the three months ended March 31, 1998, net cash provided by operating
activities was $7 million. Net cash used in investing activities was $111.6
million, which primarily consisted of $111.8 million used for acquisitions.
The acquisitions completed during the three months ended March 31, 1998 of
the Purchased Companies also provide for the potential payment of $80 million
in cash and shares of common stock based upon the performance of companies.
Subsequent to March 31, 1998 and through May 1, 1998, the Company completed
two business combinations for an aggregate consideration of 1,618,320 shares
of Common Stock and the assumption of approximately $34.5 million in debt
which was paid at the time of closing.
Additionally, the Company has signed letters of intent or definitive
agreements to acquire two janitorial maintenance management services
businesses and seven companies offering electrical installation and
maintenance services. Total consideration which may be issued in connection
with these pending acquisitions is $169.4 million in cash and shares of Common
Stock. Additionally, there is the potential for the payment of up to an
additional $23.1 million in cash and shares of Common Stock in connection with
contingent consideration agreements.
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
Quarterly results also may be materially affected by the timing of
acquisitions, the timing and magnitude of costs related to such acquisitions,
variations in services provided by the Company and the timing of these
services, general economic conditions, and the retroactive restatement in
accordance with generally accepted accounting principles of the Company's
consolidated financial statements for acquisitions accounted for under the
pooling-of-interests method. Moreover, the operating margins of companies
acquired by the Company may differ substantially from those of the Company,
which could contribute to the further fluctuation in its quarterly operations.
Therefore, results for any quarter are not necessarily indicative of the
results that the Company may achieve for any subsequent fiscal quarter or for
a full fiscal year.
INFLATION
The Company does not believe that inflation has had a material impact on its
results of operations during the three months ended March 31, 1998.
FACTORS AFFECTING THE COMPANY'S BUSINESS
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, which describes a number of factors that may effect
the Company's future operating results.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(i) Pursuant to Item 701(f) of Regulation S-K, the following information is
being furnished to disclose certain information regarding the uses of the
proceeds received by the Company in its IPO:
(1) The Registration Statement for the IPO (File No. 333-36193) was
declared effective on November 25, 1997.
(2) The offering commenced on November 25, 1997 and terminated when all
of the shares were sold in December 1997.
(3) The managing underwriter was Friedman, Billings, Ramsey & Co., Inc.
10
<PAGE>
(4) In the IPO, the Company registered and sold an aggregate of
27,850,000 shares of Common Stock, par value $.001 per share, and
500,000 shares of Convertible Non-Voting Common Stock, par value
$.001 per share, which is convertible into Common Stock.
(5) The aggregate offering price of the shares sold was $567,000,000.
(6) The following expenses were incurred in connection with the IPO:
<TABLE>
<S> <C>
Underwriting discounts and commissions........................ $38,640,000
Expenses paid to or for underwriters.......................... 60,000
Accountants' fees............................................. 100,000
Legal fees.................................................... 315,000
Printing expenses............................................. 255,000
Miscellaneous filing fees and expense......................... 466,000
-----------
$39,836,000
===========
</TABLE>
Except as described under "Certain Relationships and Related
Transactions" in the Company's annual report on Form 10-K, the payments
referred to above were not made directly or indirectly to officers,
directors, general partners of the issuer or their associates, or to
any person owning 10% or more of any class of securities of the issuer,
or to any officers of the issuer and were not direct or indirect
payments to others.
(7) The net offering proceeds were approximately $527,000,000.
(8) From the effective date of the IPO registration statement to March
31, 1998, the amount of net offering proceeds used for any purpose for
which at least 5% of the offering proceeds or $100,000 (whichever is less)
was used is as follows:
<TABLE>
<S> <C>
Cash used in acquisitions.................................... $118,368,000
Repayment of indebtedness owed to Jonathan Ledecky........... 309,000
------------
Total........................................................ $118,677,000
============
</TABLE>
Corporate expenses of the Company have been funded in part by
interest income on the investment of the IPO proceeds.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
11.1 Statement regarding computation of net income per share
27 Financial Data Schedule
(b) Reports on Form 8-K. During the period covered by this report, the
Company filed the following Current Reports on Form 8-K:
i. Form 8-K dated January 9, 1997 and filed with the Commission on
January 21, 1998 reporting information under Item 5. No financial
statements were filed as part of this Form 8-K.
ii. Form 8-K dated February 4, 1998 and filed with the Commission on
February 17, 1998 reporting information under Items 2 and 7.
Financial statements filed:
(a) Financial Statements of Business Acquired
(1) Consolidated financial statements of Service Management USA,
Inc. as of December 31, 1995 and 1996 and for the years then ended
and the nine months ended September 30, 1996 and
11
<PAGE>
Amendment No. 1 to Post Effective Amendment No. 2 of the
Registration Statement on Form S-1, filed on March 5, 1998 (File No.
333-42317).
(2) Consolidated financial statements of Indecon, Inc. as of
December 31, 1996 and 1997 and for the three years ended December
31, 1997--incorporated by reference to the Pre-Effective Amendment
No. 1 to Post Effective Amendment No. 2 of the Registration
Statement on Form S-1, filed on March 5, 1998 (File No. 333-42317).
(3) Consolidated financial statements of Riviera Electric
Construction as of December 31, 1996 and 1997 and for the three
years ended December 31, 1997--incorporated by reference to the Pre-
Effective Amendment No. 1 to Post Effective Amendment No. 2 of the
Registration Statement on Form S-1, filed on March 5, 1998 (File No.
333-42317).
(4) Consolidated financial statements of SKC Electric, Inc. as of
December 31, 1996 and 1997 and for the years then ended and the
three months ended December 31, 1995--incorporated by reference to
the Pre-Effective Amendment No. 1 to Post Effective Amendment No. 2
of the Registration Statement on Form S-1, filed on March 5, 1998
(File No. 333-42317).
(5) Consolidated financial statements of Town & Country Electric,
Inc. as of December 31, 1996 and 1997 and for the three years ended
December 31, 1997--incorporated by reference to the Pre-Effective
Amendment No. 1 to Post Effective Amendment No. 2 of the
Registration Statement on Form S-1, filed on March 5, 1998 (File No.
333-42317).
(6) Consolidated financial statements of Tri-City Electrical
Contractors, Inc. as of December 31, 1996 and 1997 and for the three
years ended December 31, 1997--incorporated by reference to the Pre-
Effective Amendment No. 1 to Post Effective Amendment No. 2 of the
Registration Statement on Form S-1, filed on March 5, 1998 (File No.
333-42317).
(7) Consolidated financial statements of Wilson Electric Company,
Inc. as of November 30, 1995, 1996 and 1997 and for the three years
then ended--incorporated by reference to the Pre-Effective Amendment
No. 1 to Post Effective Amendment No. 2 of the Registration
Statement on Form S-1, filed on March 5, 1998 (File No. 333-42317).
(b) Pro Forma Financial Information
(1) Pro forma information as of December 31, 1997 and for the year
then ended--incorporated by reference to the Pre-Effective Amendment
No. 1 to Post Effective Amendment No. 2 of the Registration
Statement on Form S-1, filed on March 5, 1998 (File No. 333-42317).
12
<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 THEREUNTO DULY AUTHORIZED.
Consolidation Capital Corporation
Jonathan J. Ledecky
May 14, 1998 By:---------------------------------
- ------------ JONATHAN J. LEDECKY
Date
CHIEF EXECUTIVE OFFICER
Timothy C. Clayton
May 14, 1998 By:----------------------------------
- ------------ TIMOTHY C. CLAYTON
Date
CHIEF FINANCIAL OFFICER
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. EXHIBIT PAGE
--- ------------------------------------------------------- ----
<C> <S> <C>
11.1 Statement regarding computation of net income per share
27 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 11.1
CONSOLIDATION CAPITAL CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share amounts)
Three Months
Ended
1998
-------------
Basic earnings per share:
Net income................................................ $ 5,263
Weighted average shares outstanding....................... 31,696,546
-----------
Net income per share - Basic.............................. $ 0.17
===========
Diluted earnings per share:
Net income................................................ $ 5,263
-----------
Weighted average shares outstanding....................... 31,696,546
Convertible Non-Voting Common Stock....................... 500,000
Common stock equivalents from stock options and warrants.. 473,487
-----------
Total weighted average shares outstanding................. 32,670,033
-----------
Net income per share - Dilutive........................... $ 0.16
===========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated financial statements included in the Company's Quarterly
Report on Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 424,462
<SECURITIES> 0
<RECEIVABLES> 83,835
<ALLOWANCES> (1,080)
<INVENTORY> 0
<CURRENT-ASSETS> 521,684
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 710,209
<CURRENT-LIABILITIES> 74,924
<BONDS> 0
0
0
<COMMON> 35
<OTHER-SE> 629,919
<TOTAL-LIABILITY-AND-EQUITY> 710,209
<SALES> 37,497
<TOTAL-REVENUES> 37,497
<CGS> 30,245
<TOTAL-COSTS> 30,245
<OTHER-EXPENSES> 4,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 8,985
<INCOME-TAX> 3,722
<INCOME-CONTINUING> 2,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,263
<EPS-PRIMARY> .17
<EPS-DILUTED> .16
</TABLE>
