<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
(MARK ONE)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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
BUILDING ONE SERVICES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 52-2054952
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
800 CONNECTICUT AVENUE, NW, SUITE 1111
WASHINGTON, D.C. 20006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(202) 261-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
THE COMPANY'S FORMER NAME WAS CONSOLIDATION CAPITAL CORPORATION
(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 November 13, 1998, there were 44,960,179 shares of common stock
outstanding and 500,000 shares of convertible non-voting common stock
outstanding.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
BUILDING ONE SERVICES CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of December 31, 1997 and September
30, 1998.......................................................... 1
Consolidated Statement of Operations for the three months ended
September 30, 1998 and 1997 and for the nine months ended Septem-
ber 30, 1998 and 1997............................................. 2
Consolidated Statement of Stockholders' Equity for the nine months
ended September 30, 1998.......................................... 3
Consolidated Statement of Cash Flows for the nine months ended Sep-
tember 30, 1998 and 1997.......................................... 4
Notes to Consolidated Financial Statements......................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 15
PART II--OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds..................... 15
Item 4. Submission of Matters to a Vote of Security Holders........... 16
Item 5. Other Events.................................................. 16
Item 6. Exhibits and Reports on Form 8-K.............................. 16
Signatures............................................................ 17
Exhibit Index.........................................................
</TABLE>
(i)
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BUILDING ONE SERVICES CORPORATION
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $534,294 $272,022
Accounts receivable, net.......................... 34,771 205,502
Costs and estimated earnings in excess of billings
on uncompleted contracts......................... 3,298 20,410
Prepaid expenses and other current assets......... 6,047 12,955
-------- --------
Total current assets............................ 578,410 510,889
Property and equipment, net......................... 7,091 31,718
Goodwill, net....................................... 152 404,528
Other assets........................................ 2,011 4,674
-------- --------
Total assets.................................... $587,664 $951,809
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt................................... $ 3,967 $ 3,864
Accounts payable.................................. 12,530 57,256
Billings in excess of costs and estimated earnings
on uncompleted contracts......................... 4,322 59,361
Income taxes payable.............................. 351 9,300
Accrued compensation.............................. 4,130 31,796
Accrued liabilities--other........................ 4,926 17,970
-------- --------
Total current liabilities....................... 30,226 179,547
Long-term debt...................................... 13,794 3,094
Other liabilities................................... 1,486 3,028
-------- --------
Total liabilities............................... 45,506 185,669
-------- --------
Stockholders' equity:
Common stock, $.001 par value, 250,000,000 shares
authorized, 34,411,168 and 44,160,179 shares is-
sued and outstanding, respectively............... 35 44
Convertible Non-Voting Common Stock, $.001 par
value, 500,000 shares authorized, issued and
outstanding...................................... 1 1
Additional paid-in capital........................ 532,222 748,276
Accumulated other comprehensive income (loss)..... 292 (15)
Treasury stock.................................... (27,048)
Retained earnings................................. 9,608 44,882
-------- --------
Total stockholders' equity...................... 542,158 766,140
-------- --------
Total liabilities and stockholders' equity...... $587,664 $951,809
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
BUILDING ONE SERVICES CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- ---------------------
1998 1997 1998 1997
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues........................ $ 265,741 $ 41,603 $ 551,325 $ 127,813
Cost of revenues................ 207,280 34,075 431,318 105,531
---------- --------- ---------- ---------
Gross profit................ 58,461 7,528 120,007 22,282
Selling, general and administra-
tive expenses.................. 31,999 5,212 70,281 16,594
Goodwill amortization........... 2,405 4,376
Non-recurring acquisition
costs.......................... 1,147
---------- --------- ---------- ---------
Operating income............ 24,057 2,316 44,203 5,688
Other (income) expense:
Interest expense.............. 239 396 1,151 1,202
Interest income............... (4,299) (43) (16,964) (322)
Other, net.................... 66 (78) (508) (893)
---------- --------- ---------- ---------
Income before taxes............. 28,051 2,041 60,524 5,701
Provision for income taxes...... 11,412 433 25,135 1,079
---------- --------- ---------- ---------
Net income...................... $ 16,639 $ 1,608 $ 35,389 $ 4,622
========== ========= ========== =========
Net income per Common Share--Ba-
sic............................ $ 0.38 $ 0.25 $ 0.87 $ 0.75
========== ========= ========== =========
Net income per Common Share--Di-
luted.......................... $ 0.37 $ 0.23 $ 0.85 $ 0.71
========== ========= ========== =========
Weighted average shares
outstanding--Basic............. 44,159,551 6,562,035 40,655,279 6,125,692
========== ========= ========== =========
Weighted average shares out-
standing--Diluted.............. 45,293,114 6,982,920 41,860,216 6,546,577
========== ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
BUILDING ONE SERVICES CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CONVERTIBLE
NON-VOTING
COMMON STOCK COMMON STOCK ACCUMULATED
------------------- ------------------ ADDITIONAL OTHER TOTAL TOTAL
SHARES SHARES PAID-IN- COMPREHENSIVE TREASURY RETAINED STOCKHOLDERS' COMPREHENSIVE
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL INCOME (LOSS) STOCK EARNINGS EQUITY INCOME
----------- ------ ----------- ------ ---------- ------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1997......... 34,411,168 $ 35 500,000 $ 1 $532,222 $ 292 $ 9,608 $542,158
Transactions of
Pooled Companies:
Distributions
paid............ (2,222) (2,222)
Adjustment to
conform year end
of Pooled
Company......... (110) 1,204 1,094
Stock issued
upon exercise of
options......... 115,116 217 217
Issuance of com-
mon stock for ac-
quisitions....... 11,472,596 11 216,566 216,577
Stock issued un-
der employee
stock purchase
plan............. 16,299 174 174
Stock repur-
chase............ (1,855,000) (2) $(27,048) (27,050)
Unrealized loss
on marketable se-
curities--net of
tax.............. (197) (197) $ (197)
Net income....... 1,319 34,070 35,389 35,389
-------
Total
comprehensive
income........... $35,192
---------- ----- ------- ----- -------- ----- -------- ------- -------- =======
Balance,
September 30,
1998 ............ 44,160,179 $ 44 500,000 $ 1 $748,276 $(15) $(27,048) $44,882 $766,140
========== ===== ======= ===== ======== ===== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BUILDING ONE SERVICES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 35,389 $ 4,622
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization............................ 8,073 1,056
Loss on disposal of equipment............................ 27
Net realized gain on available-for-sale securities....... (2,206)
Deferred income taxes.................................... (147) 27
Minority interest........................................ 1,279 735
Changes in operating assets and liabilities:
Accounts receivable..................................... (11,592) (6,608)
Costs and estimated earnings in excess of billings...... 1,187 (1,486)
Prepaid expenses and other current assets............... (2,398) (452)
Billings in excess of costs and estimated earnings...... 12,871 1,774
Accounts payable........................................ (1,645) 36
Accrued liabilities..................................... 9,708 4,062
Change in other assets................................... 218 1,264
--------- -------
Net cash provided by operating activities.............. 52,970 2,824
--------- -------
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired.......... (201,752)
Purchases of property and equipment....................... (6,850) (876)
Proceeds on sale of equipment............................. 855
Proceeds from sales of available-for-sale securities...... 1,543
Other..................................................... 15
--------- -------
Net cash provided by (used in) investing activities.... (207,732) 667
--------- -------
Cash flows from financing activities:
Net payments on short-term debt........................... (42,152) (225)
Payments on long-term debt................................ (41,282) (338)
Proceeds from long-term debt.............................. 1,942 1,323
Dividends paid............................................ (2,222) (1,761)
Proceeds from related party loans......................... 629 237
Payments on related party loans........................... (82) (387)
Adjustments to conform year ends of pooled companies...... 2,491
Proceeds from issuance of stock on options exercised...... 217
Proceeds from issuance of stock under employee stock
purchase plan............................................ 174
Distributions to minority partners........................ (175) (353)
Purchase of treasury stock................................ (27,050)
--------- -------
Net cash (used in) financing activities................ (107,510) (1,504)
--------- -------
Net (decrease) increase in cash and cash equivalents....... (262,272) 1,987
Cash and cash equivalents, beginning of period............. 534,294 3,142
--------- -------
Cash and cash equivalents, end of period................... $ 272,022 $ 5,129
========= =======
The Company issued shares of common stock and cash in connection with certain
business combinations during the nine months ended September 30, 1998. The
fair values of the assets acquired and liabilities assumed at the dates of
acquisition are as follows:
Accounts receivable........................................ $ 153,907
Inventories................................................ 2,013
Costs and earnings in excess of billings................... 22,162
Prepaid expenses and other current assets.................. 5,092
Property and equipment..................................... 23,421
Intangible assets.......................................... 406,478
Other assets............................................... 6,962
Short-term debt............................................ (29,358)
Accounts payable........................................... (46,412)
Accrued liabilities........................................ (35,393)
Billings in excess of costs and estimated earnings......... (47,210)
Long-term debt............................................. (40,516)
Other long-term liabilities................................ (2,819)
---------
Net assets acquired........................................ $ 418,327
=========
These acquisitions were funded as follows:
Common stock, 11,472,596 shares............................ $ 216,575
Cash, net of cash acquired................................. 201,752
---------
$ 418,327
=========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
BUILDING ONE SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1--BASIS OF PRESENTATION
Building One Services 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 services industry with the
intent to become a national single-source provider of facilities 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. 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 nine months ended September 30, 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., Wilson Electric Company, Inc., United Service
Solutions, Inc., G.S. Group, Inc., Taylor Electric, Inc., Regency Electric
Company, Inc., National Network Services, Inc., Riviera Electric of
California, Inc., McIntosh Mechanical, Inc., Ivey Mechanical Company, Tri-M
Corporation and Chambers Electronic Communications LLC (the "Purchased
Companies") in business combinations accounted for under the purchase method
of accounting. The accompanying consolidated financial statements include the
accounts of the Purchased Companies from their respective acquisition dates.
Additionally, during the nine months ended September 30, 1998, the Company
acquired all of the outstanding common stock of Perimeter Maintenance
Corporation, Crest International LLC, Spann Building Maintenance Company, The
Lewis Companies, Inc. and Robinson Mechanical, Inc. (collectively, the "Pooled
Companies") in business combinations accounted for under the pooling-of-
interests method of accounting. Accordingly, the accompanying consolidated
financial statements give retroactive effect to these pooling-of-interests
business combinations for all periods presented.
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 of 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, and the Company's audited
supplemental consolidated financial statements included in the Company's
Registration Statement on Form S-4, as filed with the Securities and Exchange
Commission on August 3, 1998.
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>
BUILDING ONE SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
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
ranging from three to seven years. Leasehold improvements are capitalized and
amortized over the lesser of the life of the lease or the estimated useful
life of the asset. Buildings are amortized over a period of 40 years.
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.
Other Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards "SFAS" No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for the reporting
and display of comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of general purpose financial statements. SFAS
No. 130 requires that all items required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The Company adopted SFAS No. 130 during the first quarter of 1998.
Prior periods have been reclassified for comparative purposes.
The Company's other comprehensive income consists of unrealized gains
(losses) on marketable securities, net of applicable taxes.
Non-Recurring Acquisition Costs
Non-recurring acquisition costs consist of costs incurred in conjunction
with the business combinations accounted for under the pooling-of-interests
method. These costs include legal and accounting fees, broker fees and other
costs directly attributable to the business combination.
New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments in annual and interim financial
statements. Operating segments are determined consistent with the way
management organizes and evaluates financial information internally for making
decisions and assessing performance. It also requires related disclosures
about products, geographic areas, and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. The Company
intends to adopt SFAS No. 131 for the year ending December 31, 1998.
Implementation of this disclosure standard will not affect the Company's
financial position or results of operations.
NOTE 3--BUSINESS COMBINATIONS
Purchase Method
As discussed in Note 1, during the nine months ended September 30, 1998, the
Company completed nineteen business combinations that were accounted for under
the purchase method of accounting. The consolidated financial statements
include the results of these acquired entities from their respective dates of
acquisition. The aggregate consideration paid for these acquisitions consisted
of 11,472,596 shares of Common Stock, $227,460 in cash, including applicable
professional fees, and the assumption of approximately $33,847 in debt, which
was paid at closing.
6
<PAGE>
BUILDING ONE SERVICES CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The aggregate purchase price does not include the potential payment of
additional contingent consideration of up to $114,470 in cash and in shares of
Common Stock based upon the performance of the businesses acquired.
The total purchase price was allocated to the fair value of the net assets
acquired, resulting in goodwill of approximately $407,000. 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 are 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.
The following presents the unaudited pro forma results of operations of the
Company for the three- and nine-month periods ended September 30, 1998 and
1997, respectively, as if all of the acquisitions of the Purchased Companies
had been consummated as of January 1, 1997. The pro forma results of
operations reflect certain pro forma adjustments.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1998 1997 1998 1997
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 301,380 $ 251,510 $857,884 $733,380
Net income $ 17,002 $ 9,253 $ 45,627 $ 26,803
Net income per share--Basic $ 0.38 $ 0.29 $ 1.00 $ 0.84
Net income per share--Diluted $ 0.37 $ 0.29 $ 0.97 $ 0.83
</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.
Pooling-of-Interests Method
During the nine months ended September 30, 1998, the Company issued
4,376,284 shares of Common Stock to acquire five companies in business
combinations accounted for under the pooling-of-interests method.
Additionally, one of the Pooled Companies had previously existing vested stock
options which were converted into stock options for 403,389 shares of the
Company's Common Stock (the "Replacement Options"). The Replacement Options
are fully vested and have an exercise price of $4.84 per share.
The Company's consolidated financial statements give retroactive effect to
the acquisitions of the Pooled Companies for all periods presented. The Lewis
Companies, Inc. ("Lewis") previously reported on a fiscal year ending June 30.
As such, financial information for the three- and nine-month fiscal periods
ended March 31, 1997 of Lewis were combined with Building One Services
Corporation's financial information for the three- and nine-month periods
ended September 30, 1997, respectively, for purposes of the related statements
of operations, of stockholders' equity and of cash flows. The net income of
Lewis for the six months from July 1, 1997 to December 31, 1997 is reflected
as an adjustment to the Company's retained earnings during the three-month
period ended March 31, 1998. This net adjustment of $1,204 is comprised of
$30,774 of revenues, partially offset by $29,570 of costs and expenses.
7
<PAGE>
BUILDING ONE SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The following presents the separate results, in each of the periods
presented, of Building One Services Corporation (excluding the results of
Pooled Companies prior to the dates on which they were acquired), and the
Pooled Companies up to the dates on which they were acquired:
<TABLE>
<CAPTION>
BUILDING ONE POOLED
SERVICES COMPANIES COMBINED
------------ --------- --------
<S> <C> <C> <C>
For the three months ended September 30, 1997
Revenues..................................... $ -- $ 41,603 $ 41,603
Net income................................... $ -- $ 1,608 $ 1,608
For the three months ended September 30, 1998
Revenues..................................... $252,325 $ 13,416 $265,741
Net income................................... $ 15,589 $ 1,050 $ 16,639
For the nine months ended September 30, 1997
Revenues..................................... $ -- $127,813 $127,813
Net income................................... $ -- $ 4,622 $ 4,622
For the nine months ended September 30, 1998
Revenues..................................... $451,874 $ 99,451 $551,325
Net income................................... $ 29,758 $ 5,631 $ 35,389
</TABLE>
NOTE 4--COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
Costs incurred on uncompleted contracts.. $30,606 $740,367
Estimated earnings....................... 6,474 161,223
------- --------
37,080 901,590
Less: Billings to date................... 35,524 940,541
------- --------
$ 1,556 $(38,951)
======= ========
Costs and estimated earnings in excess of
billings on uncompleted contracts....... $ 2,781 $ 20,410
Billings in excess of costs and estimated
earnings on uncompleted contracts....... 1,225 59,361
------- --------
$ 1,556 $(38,951)
======= ========
</TABLE>
NOTE 5--STOCK PURCHASE AND AWARD PLANS
In addition to the Replacement Options (see Note 3, "Business
Combinations"), in connection with business combinations consummated during
the period from January 1, 1998 through September 30, 1998, the Company has
granted options for approximately 1,453,496 shares of the Company's Common
Stock, and is expected to issue options for an additional 177,512 shares of
the Company's Common Stock, under the Company's Long-Term Incentive Plan. All
of the options, except the Replacement Options, vest over a four-year period
from its date of grant. These options have been, or will be, granted with an
exercise price equal to the market price of the Company's Common Stock on the
date of grant.
During the three-months ended September 30, 1998, the Company issued 16,299
shares of common stock to employees under the Company's Employee Stock
Purchase Plan.
NOTE 6--NET EARNINGS PER SHARE
The Company has adopted SFAS No. 128 "Earnings Per Share" which became
effective for financial statements issued for periods ending after December
15, 1997. SFAS No. 128 requires presentation of basic and diluted earnings per
share ("EPS") and restatement of EPS data for all prior periods. Basic EPS
includes no dilution and is computed by dividing net income by the Company's
weighted average shares of Common Stock
8
<PAGE>
BUILDING ONE SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
outstanding. Diluted EPS is computed by dividing net income by the Company's
weighted average shares of Common Stock outstanding and dilutive Common Stock
equivalents. The following table reconciles the numerators and denominators of
the basic and diluted EPS computations for the three- and nine- month periods
ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Basic earnings per share:
Net income...................... $ 16,639 $ 1,608 $ 35,389 $ 4,622
Weighted average shares
outstanding--Basic............. 44,159,551 6,562,035 40,655,279 6,125,692
----------- ---------- ----------- ----------
Net income per share--Basic..... $ 0.38 $ 0.25 $ 0.87 $ 0.75
=========== ========== =========== ==========
Diluted earnings per share:
Net income...................... $ 16,639 $ 1,608 $ 35,389 $ 4,622
=========== ========== =========== ==========
Weighted average shares
outstanding--Basic............. 44,159,551 6,562,035 40,655,279 6,125,692
Convertible Non-Voting Common
Stock.......................... 500,000 -- 500,000 65,934
Common stock equivalents from
stock options and warrants..... 192,711 420,885 524,258 354,951
Contingently issuable shares.... 440,852 -- 180,679 --
----------- ---------- ----------- ----------
Total weighted average shares
outstanding--Diluted........... 45,293,114 6,982,920 41,860,216 6,546,577
----------- ---------- ----------- ----------
Net income per share--Diluted... $ 0.37 $ 0.23 $ 0.85 $ 0.71
=========== ========== =========== ==========
</TABLE>
Outstanding stock options and warrants to purchase 6,255,774 shares of
Common Stock as of September 30, 1998 were not included in the computation of
diluted earnings per share because the options' exercise prices were higher
than the average market price of the Common Stock during the period.
NOTE 7--SUBSEQUENT EVENTS
Subsequent to September 30, 1998, the Company completed the acquisition of
Welcon Management Company, Inc., the parent company of Watson Electrical
Construction, Inc. ("Watson"), for an aggregate consideration of 1,500,000
shares of Common Stock and approximately $24,000 in cash and Boxberger, Inc.
and its affiliate for total consideration of $3,800 in cash. These business
combinations are to be accounted for under the purchase method of accounting.
Additionally, there is the potential for the payment of up to an additional
$11,500 in cash and shares of Common Stock based upon the future performance
of Watson, in connection with a contingent consideration arrangement.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTION
The following discussion should be read in conjunction with the consolidated
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, and the Company's audited
supplemental consolidated financial statements as filed in the Company's
Registration Statement on Form S-4 (File No. 333-60053) filed on August 3,
1998.
Founded in February 1997, Building One Services Corporation is consolidating
the facilities services industry with the corporate goal of becoming a
national single-source provider of facilities services. The Company completed
its initial public offering, ("IPO"), in December 1997 raising net proceeds of
approximately $527 million. The proceeds are being used by the Company
primarily in its acquisition program, although some are being used to fund
operations of the Company.
During the nine months ended September 30, 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., Wilson Electric Company, Inc., United Service
Solutions, Inc., G.S. Group, Inc., Taylor Electric, Inc., Regency Electric
Company, Inc., National Network Services, Inc., Riviera Electric of
California, Inc., McIntosh Mechanical, Inc., Ivey Mechanical Company, Tri-M
Corporation and Chambers Electronic Communications LLC (the "Purchased
Companies") in business combinations accounted for under the purchase method
of accounting. The following discussion includes the results of the Purchased
Companies from their respective acquisition dates.
Additionally, during the nine months ended September 30, 1998, the Company
acquired all of the outstanding stock of Perimeter Maintenance Corporation,
Crest International LLC, Spann Building Maintenance Company, The Lewis
Companies, Inc. and Robinson Mechanical, Inc. (collectively, the "Pooled
Companies") in business combinations accounted for under the pooling-of-
interests method of accounting. Accordingly, the following discussion includes
the results of the Pooled Companies for all periods presented.
Subsequent to September 30, 1998 and through November 13, 1998, the Company
completed the acquisition of Welcon Management Company, Inc., the parent
company of Watson Electrical Construction Company, Inc. ("Watson"), for
aggregate consideration of 1,500,000 shares of Common Stock and $24 million in
cash and Boxberger, Inc. and its affiliate for total consideration of $3.8
million in cash. Additionally, there is the potential for the payment of up to
an additional $11.5 million in cash and shares of Common Stock based upon the
future performance of Watson, in connection with a contingent consideration
arrangement for Watson.
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. 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.
The Company's revenues are derived primarily from the providing of
janitorial maintenance management services, electrical installation and
maintenance services and mechanical installation and maintenance services. For
the three and nine months ended September 30, 1998, approximately 17%, 65% and
18% of the Company's revenues were derived from janitorial maintenance
management services, electrical installation and maintenance services and
mechanical installation and maintenance services, respectively.
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.
10
<PAGE>
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.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information about operating segments in annual and interim financial
statements. Operating segments are determined consistent with the way
management organizes and evaluates financial information internally for making
decisions and assessing performance. It also requires related disclosures
about products, geographic areas, and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. The Company
intends to adopt SFAS No. 131 for the year ending December 31, 1998.
Implementation of this disclosure standard will not affect the Company's
financial position or results of operations.
CONSOLIDATED RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
Revenues. Consolidated revenues for the three months ended September 30,
1998 increased $224.1 million, or 538.8%, to $265.7 million from $41.6 million
for the three months ended September 30, 1997. This increase was a result of
the acquisition of the Purchased Companies during the nine months ended
September 30, 1998, which have been included since their respective dates of
acquisition, and, to a lesser extent, an increase in the revenues of the
Pooled Companies, which experienced growth in revenues of approximately 15.5%.
Gross profit. Gross profit for the three months ended September 30, 1998
increased $50.9 million, or 676.6%, to $58.5 million from $7.5 million for the
three months ended September 30, 1997. This increase was a result of the
acquisition of the Purchased Companies and, to a lesser extent, the increased
gross profit of the Pooled Companies. Gross profit as a percentage of revenues
("gross margin") increased to 22.0% for the three months ended September 30,
1998 from 18.1% for the three months ended September 30, 1997. This increase
in the gross margin was attributable to the higher gross margins of the
Purchased Companies, as well as an increase in the gross margins of the Pooled
Companies.
Selling, general and administrative. Selling, general and administrative
expenses for the three months ended September 30, 1998 increased $26.8
million, or 513.9%, to $32.0 million from $5.2 million for the three months
ended September 30, 1997. This increase was primarily attributable to the
selling, general and administrative expenses of the Purchased Companies, and
the general and administrative costs of the Company's corporate activities.
Selling, general and administrative expenses as a percentage of revenues
decreased slightly to 12.0% for the three months ended September 30, 1998 from
12.5% for the three months ended September 30, 1997.
Goodwill amortization. Goodwill amortization increased to $2.4 million for
the three months ended September 30, 1998 as a result of the goodwill
recorded in conjunction with the Purchased Companies.
Other income, net. Other income, net for the three months ended September
30, 1998 increased $4.3 million, or 1552.4%, to $4.0 million from other
expense of $.3 million for the three months ended September 30, 1997. This
increase was primarily attributable to the interest income of $4.3 million
generated from the investment of the proceeds raised in the Company's initial
public offering in December 1997.
Provision for income taxes. The provision for income taxes for the three
months ended September 30, 1998 increased $11.0 million, to $11.4 million from
$.4 million for the three months ended September 30, 1997, reflecting an
effective tax rate of 40.7% and 21.2%, respectively. The increase in the
effective rate was primarily attributable to the increase in income generated
from entities which were subject to C corporation taxes, versus certain of the
Pooled Companies which had elected to be treated as subchapter S corporations
for tax purposes prior to their being acquired by the Company. Additionally,
the 40.7% effective rate reflects the non-deductibility of goodwill
amortization associated with certain acquisitions.
11
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
Revenues. Consolidated revenues for the nine months ended September 30, 1998
increased $423.5 million, or 331.4%, to $551.3 million from $127.8 million for
the nine months ended September 30, 1997. This increase was a result of the
acquisition of the Purchased Companies during the nine months ended
September 30, 1998, which have been included since their respective dates of
acquisition, and, to a lesser extent, an increase in the revenues of the
Pooled Companies, which experienced growth in revenues of approximately 9.9%.
Gross profit. Gross profit for the nine months ended September 30, 1998
increased $97.7 million, or 438.6%, to $120.0 million from $22.3 million for
the nine months ended September 30, 1997. This increase was a result of the
acquisition of the Purchased Companies and, to a lesser extent, the increased
gross profit of the Pooled Companies. Gross margin increased to 21.8% for the
nine months ended September 30, 1998, from 17.4% for the nine months ended
September 30, 1997. This increase in the gross margin was primarily
attributable to the higher gross margins of the Purchased Companies.
Selling, general and administrative. Selling, general and administrative
expenses for the nine months ended September 30, 1998 increased $53.7 million,
or 323.5%, to $70.3 million from $16.6 million for the nine months ended
September 30, 1997. This increase was primarily attributable to the selling,
general and administrative expenses of the Purchased Companies, and the
general and administrative costs of the Company's corporate activities.
Selling, general and administrative expenses as a percentage of revenues
decreased to 12.7% for the nine months ended September 30, 1998 from 13.0% for
the nine months ended September 30, 1997.
Goodwill amortization. Goodwill amortization increased to $4.4 million for
the nine months ended September 30, 1998 as a result of the goodwill recorded
in conjunction with the Purchased Companies.
Non-recurring acquisition costs. Non-recurring acquisition costs of $1.1
million consist of costs incurred in conjunction with the business
combinations accounted for under the pooling-of-interests method. These costs
include legal and accounting fees, broker fees and other costs directly
attributable to the business combination.
Other income, net. Other income, net for the nine months ended September 30,
1998 increased $16.3 million from $.01 million for the nine months ended
September 30, 1997. This increase is primarily attributable to the interest
income of $17.0 million generated from the investment of the proceeds raised
in the Company's initial public offering in December 1997.
Provision for income taxes. The provision for income taxes for the nine
months ended September 30, 1998 increased $24.1 million, to $25.1 million from
$1.1 million for the nine months ended September 30, 1997, reflecting an
effective tax rate of 41.5% and 18.9% respectively. The increase in the
effective rate was primarily attributable to the increase in income generated
from entities which were subject to C corporation taxes, versus certain of the
Pooled Companies which had elected to be treated as subchapter S corporations
for tax purposes prior to their being acquired by the Company. Additionally,
the 41.5% effective rate reflects the non-deductibility of goodwill
amortization associated with certain acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1998, net cash provided by
operating activities was $53 million. Net cash used in investing activities
for the nine months ended was $208 million, which primarily consisted of $202
million used for acquisitions. Net cash used in financing activities for the
nine-months ended September 30, 1998 was $108 million, which consisted
primarily of net payments on short-term debt of $42 million, payments on long-
term debt of $41 million, which primarily consists of debt assumed in
acquisitions, and $27 million of cash used to repurchase 1,855,000 shares of
the Company's Common Stock. These shares were repurchased in accordance with a
stock repurchase program covering 3,100,000 shares which was announced on
August 24, 1998. The number of shares to be repurchase was determined based
upon the number of shares issued in connection with acquisitions accounted for
under the purchase method of accounting. Subsequent to September 30, 1998, the
Company repurchased an additional 700,000 shares for approximately $7.6
million. The Board of Directors has not authorized an increase to the share
buyback program at this time. The Board will, however, continue to evaluate
the appropriateness of additional stock repurchases, whether in connection
with future acquisitions or otherwise. In determining whether to authorize
additional repurchases, the Board will consider various factors, including,
but not limited to, the current market price of the Company's Common Stock,
the impact generally on the Company's acquisition program and business
strategy, the effect on the Company's financial statements resulting from an
inability to use pooling-of-interests accounting with respect to previous and
future acquisitions, and general market and business conditions.
12
<PAGE>
At September 30, 1998, the Company had cash and cash equivalents of $272.0
million and working capital of $331.3 million. Additionally, BT Alex. Brown
Incorporated has provided the Company with a letter, dated November 12, 1998,
in which BT confirms that, upon the Company's request, BT commits to use its
best efforts to arrange and syndicate a $350 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. It is anticipated that this
credit facility will be finalized when the Company requires funds to complete
acquisitions or other capital requirements. 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.
Additionally, the acquisitions completed during the nine months ended
September 30, 1998 of the Purchased Companies also provide for the potential
payment of approximately $114 million in cash and shares of the Company's
Common Stock based upon the performance of the Purchased Companies. The
Company believes that its cash and cash equivalents, cash flow from
operations, financing from the Company's proposed credit facility 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 September 1999.
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
Quarterly results 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 or nine months ended September 30,
1998.
YEAR 2000 ISSUE
The Year 2000 issue refers to a number of date-related problems that may
affect information technology and non-information technology systems,
including codes embedded in chips and other hardware devices. These problems
include systems that identify a year by two digits and not four so that a date
using "00" would be recognized as the year "1900" rather than "2000." This
could result in system failures, miscalculations or errors causing disruptions
of operations or other business problems, including, among others, a temporary
inability to process transactions, send invoices or engage in normal business
activities. The Year 2000 issue is a significant issue for most, if not all
companies, with far reaching implications, some of which cannot be anticipated
or predicted with any degree of certainty.
13
<PAGE>
STATE OF READINESS. Since its IPO in December 1997, the Company has acquired
26 companies offering mechanical, electrical and janitorial services. The due
diligence relating to the Year 2000 issue that was performed on these
companies did not reveal any significant internal operating systems issues. In
addition, such due diligence revealed that most of the acquired companies have
addressed the Year 2000 issue, but are in different phases of assessment and
remediation. Accordingly, the Company is currently in the process of
completing a comprehensive survey to be completed by management of the
Company's operating subsidiaries to ensure that the Company's operating
subsidiaries are adequately addressing, or have adequately addressed, the Year
2000 issue.
The survey mentioned above is expected to cover the following areas: (i) the
Company's information technology and operating systems, including job-costing,
billing, payroll and accounting systems; (ii) the Company's non-information
technology systems, such as buildings, plant, equipment and other
infrastructure systems that may contain embedded microcontroller technology;
(iii) the systems of its major vendors, insofar as they relate to the
Company's business; and (iv) the systems of its major customers for which the
Company has performed installation and maintenance services. This survey is
expected to be completed during the first quarter of 1999.
COSTS RELATED TO THE YEAR 2000 ISSUE. As part of the survey mentioned above,
the Company will be requesting an estimate from each operating subsidiary of
the material historical and estimated costs of assessment and remediation.
Accordingly, such costs, including, among other things, the costs of
assessment, software upgrade fees, hardware changes and general implementation
of a Year 2000 action plan, are not known at this time. The projected effort
for the majority of the systems is expected to include sending letters to
substantially all of the Company's significant hardware, software and other
equipment vendors, third party providers and other material service providers
requesting detailed, written information relating to Year 2000 compliance and,
where necessary, upgrades to recent vendor software releases that are fully
Year 2000 compliant.
The Company is also embarking on an initiative to develop standard
information systems for use throughout the organization for its overall
information needs that will be free of any Year 2000 limitations. However, no
assurances can be made that such systems will be in place prior to the Year
2000.
CONTINGENCY PLAN. Until the Company completes the survey described above, the
Company will not be able to develop its most reasonably likely worst case Year
2000 scenarios. The Company intends to complete its determination of worst
case scenarios after it has received and analyzed responses to the survey and
to all of the inquiries it has made to its vendors.
RISKS RELATED TO THE YEAR 2000 ISSUE. Although the Company's Year 2000 efforts
are intended to minimize the adverse effects of the Year 2000 issue on the
Company's business and operations, the actual effects of the issue cannot be
known until the Year 2000. Due to the fact that the Company's operations are
primarily service oriented and are not heavily dependent on complex
information systems, the Company believes that non-information technology
systems (i.e. embedded technology such as microcontrollers) do not represent a
significant area of risk relative to Year 2000 readiness. In addition, the
Company's operations do not include capital intensive equipment with embedded
microcontrollers.
However, failure by the Company or its major vendors and customers to
adequately address their respective Year 2000 issues generally in a timely
manner (insofar as they relate to the Company's business) could result in,
among other things, the Company's inability to obtain equipment that it is
obligated to install in a timely manner, reductions in the quality of
materials used in the Company's business, reductions, delays or cancellations
of customer projects, delays in payments by customers for services performed,
or a general inability to record, track and consummate business transactions.
Any or all of these events could have a material adverse effect on the
Company's business, results of operations and financial condition.
14
<PAGE>
FACTORS AFFECTING THE COMPANY'S BUSINESS
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 "Risk Factors" in the Company's Registration Statement on Form S-4
(File No. 333-60053) filed with the Securities and Exchange Commission on
August 3, 1998. The Company does not undertake any obligation to revise these
forward-looking statements to reflect any future events or circumstances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
PART II-OTHER INFORMATION
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.
(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
September 30, 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, net of cash acquired.............. $201,752,000
Repurchase of shares of Common Stock......................... $ 27,050,000
Repayment of indebtedness owed to Jonathan Ledecky........... 309,000
------------
Total........................................................ $229,111,000
============
</TABLE>
15
<PAGE>
Corporate expenses of the Company have been funded in part by
interest income on the investment of the IPO proceeds.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of the Company's stockholders was held on September 15,
1998. All nominees for Director were elected pursuant to the following votes:
<TABLE>
<CAPTION>
AUTHORITY
NOMINEE FOR WITHELD
------- --- ---------
<S> <C> <C> <C>
Mary K. Bush 34,876,575 1,481,605
Vincent W. Eades 34,876,575 1,481,605
Thomas D. Heule 34,872,689 1,485,491
David Ledecky 34,876,575 1,481,605
Jonathan J. Ledecky 34,913,275 1,444,905
William P. Love, Jr. 34,891,275 1,466,905
W. Russell Ramsey 34,913,275 1,444,905
M. Jude Reyes 34,929,527 1,428,653
</TABLE>
The stockholders approved the amendment to, and restatement of, the
Company's Restated Certificate of Incorporation to change the name of the
Company to Building One Services Corporation.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
35,082,636 1,242,303 33,241
</TABLE>
The stockholders approved the adoption of the Company's 1998 Long-Term
Incentive Plan.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
22,151,584 13,551,120 638,468
</TABLE>
The stockholders ratified the Board of Directors' selection of
PricewaterhouseCoopers LLP as the Company's independent accountants to audit
the Company's consolidated financial statements for the fiscal year ending
December 31, 1998.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
36,166,431 159,961 31,788
</TABLE>
ITEM 5. OTHER EVENTS
On October 7, 1998, Joe Ivey, the President of the Building One Mechanical
group, was elected to the Board of Directors of the Company. Mr. Ivey, the
former owner of Ivey Mechanical Company, which was acquired by the Company in
September 1998, has previously served as the national President of the
Associated Builders and Contractors ("ABC"), a national building industry
trade association representing over 18,000 members. In 1996, Mr. Ivey was
selected by ABC National as "Contractor of the Year."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
11.1Statement regarding computation of net income per share
27Financial 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 June 24, 1998 and filed with the Commission on July 8,
1998 reporting information under Items 2 and 7. The financial statements
otherwise required had been previously filed and were not filed as part of
this Form 8-K.
ii. Form 8-K dated August 24, 1998 and filed with the Commission on
August 28, 1998 reporting information under Items 5 and 7.
iii. Form 8-K dated September 15, 1998 and filed with the Commission on
September 22, 1998 reporting information under Items 2 and 7.
16
<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
November 14, 1998 By:__________________________________
- -----------
JONATHAN J. LEDECKY
Date
CHIEF EXECUTIVE OFFICER
Timothy C. Clayton
November 14, 1998 By:__________________________________
- -----------
TIMOTHY C. CLAYTON
Date
CHIEF FINANCIAL OFFICER
17
<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
BUILDING ONE SERVICES CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Basic earnings per share:
Net income................................................ $ 16,639 $ 1,608 $ 35,389 $ 4,622
Weighted average shares outstanding - Basic............... 44,159,551 6,562,035 40,655,279 6,125,692
----------- ----------- ----------- -----------
Net income per share - Basic.............................. $ 0.38 $ 0.25 $ 0.87 $ 0.75
=========== =========== =========== ===========
Diluted earnings per share:
Net income................................................ $ 16,639 $ 1,608 $ 35,389 $ 4,622
----------- ----------- ----------- -----------
Weighted average shares outstanding - Basic............... 44,159,551 6,562,035 40,655,279 6,125,692
Convertible Non-Voting Common Stock....................... 500,000 500,000 65,934
Common stock equivalents from stock options and warrants.. 192,711 420,885 524,258 354,951
Contingently issuable shares.............................. 440,852 180,679
----------- ----------- ----------- -----------
Total weighted average shares outstanding - Diluted....... 45,293,114 6,982,920 41,860,216 6,546,577
----------- ----------- ----------- -----------
Net income per share - Diluted............................ $ 0.37 $ 0.23 $ 0.85 $ 0.71
=========== =========== =========== ===========
</TABLE>
Outstanding stock options and warrants to purchase 6,255,774 shares of common
stock as of September 30, 1998 were not included in the computation of diluted
earnings per share because the options' exercise prices were greater than the
average market price of the common shares during the period.
<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> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 272,022
<SECURITIES> 0
<RECEIVABLES> 207,153
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0
0
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</TABLE>
