Encompass Lowers Revenue Forecasts, Issues Equity Up to $72.5 Million

Encompass Service Corp. has revised its 2002 forecasts to reflect lower-than-expected margins on future job awards, a competitive environment and a soft non-residential construction market.

The Houston-based provider of facilities systems and services, which predicted revenues as high as $3.9 billion in February, dropped its May forecast to between $3.5 and $3.8 billion, then lowered its revenue guidance again to between $3.4 billion and $3.6 billion.

Along with dropping forecast numbers for 2002, Encompass also recently completed an amendment to its $300 million credit revolver. As part of the agreement, the company plans to issue up to $72.5 million in common and preferred stock.

The Apollo Investment Fund, which currently holds about $300 million in company stock, will purchase $35 million of the equity offering, which is subject to shareholder approval. About $31 million of the potential Apollo funding pays down the term loans (pro rata) and then 50 percent of anything additional (i.e., $35 million from existing common shareholders) would repay revolver and term loans. The company has agreed, as part of the amendment, to complete the rights offering, which includes the Apollo Investment, no later than Oct. 15.