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EXHIBIT 99
[SERVICE EXPERTS LOGO]
FOR IMMEDIATE RELEASE Contact: Alan R. Sielbeck,
Chief Executive Officer
or
Anthony M. Schofield,
Chief Financial Officer
(615) 371-9990
SERVICE EXPERTS, INC. REPORTS 1998 RESULTS
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FOURTH QUARTER EARNINGS -- $0.31 PER SHARE BEFORE POOLING EXPENSES
NASHVILLE, Tenn., February 23, 1999 -- Service Experts, Inc. (NYSE: SVE) today
announced financial results for the fourth quarter and year ended December 31,
1998.
Alan R. Sielbeck, chairman of the board, president and chief executive
officer of Service Experts, said, "Service Experts had another successful year
of operations and continued to build our national network, ending the year with
104 service centers in 34 states. Despite an unusually warm fourth quarter which
negatively affected our revenue mix, we reported a 35.5 percent increase in net
income for the fourth quarter and a 46.9 percent increase for 1998. Not only did
we exceed our acquisition goals for the year, but we reported our tenth
consecutive quarter of improving earnings, despite the difficult weather
pattern.
"During the fourth quarter alone we added twelve new service centers
and eleven "tuck-in" companies with approximately $42.4 million in revenues,
bringing our annualized revenues to just over $500 million and added the 34th
state to our network."
SEI Management Company, LLC
Six Cadillac Drive - Suite 400 - Brentwood, Tennessee 37027 - (615) 371-9990 -
Fax (615) 221-9881
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For the fourth quarter ended December 31, 1998, net income before
one-time pooling-of-interest charges was $5.4 million, or $.31 per share,
compared with $3.9 million, or $0.24 per share in the prior year's fourth
quarter. Results included one-time pooling-of-interest charges of $179,000 in
this year's fourth quarter and $164,000 in last year's fourth quarter. Net
revenue for the quarter increased 56.0 percent to $114.2 million from $73.2
million last year.
For the year ended December 31, 1998, net income before the
above-mentioned pooling charges was $23.5 million, or $1.38 per share, compared
with $16.0 million, or $1.08 per share a year ago. Net revenue increased 64.4
percent to $407.8 million from $248.1 million last year. During the year we
acquired a total of 43 service centers and 63 smaller "tuck-ins," representing a
total of $170 million in annualized net revenue. One was accounted for under the
pooling-of-interests method of accounting.
Mr. Sielbeck said, "we made great progress in 1998 in the execution of
our growth and service strategies. While we continued to expand the network, we
also improved our integration process, strengthened our marketing programs, and
recruited managers who have excelled in our industry. In 41 of our 104 service
centers, we installed our new operations software system which provides for more
efficient operations, improved customer service levels and Y2K compliance.
"Because 1999 has started with continuing warm weather affecting first
quarter product mix, and because we have budgeted additional fixed overhead
which particularly impacts results in periods when volumes are lower, we are
adjusting our net income expectations for the year to a range of $1.65-1.70 per
share. We will continue to utilize our light commercial service and installation
capabilities in selected markets during unfavorable weather patterns and will
market products such as indoor air quality (IAQ) to generate supplementary
revenues during periods with decreased demand service. At this point, we
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expect our first quarter results to slightly exceed the first quarter of 1998
reported net income of $0.19 per diluted share (as restated to reflect a
subsequent poolings-of-interest transaction).
"The additional investments being made in our management and marketing
systems are building necessary infrastructure. This will allow us to leverage
our leading market position and brand advantage in the future. Our management
team continues to implement better practices throughout our 104 centers. These
become the foundation for effective brand development. I am very pleased with
our progress in this area. We remain focused on our opportunity as the clear
leader in the residential HVAC segment and enthusiastic about our growth plans
for 1999."
Service Experts, Inc. is one of the leading providers of residential
HVAC services and replacement equipment in the United States with 104 service
centers in 34 states. The Company installs, services and maintains central air
conditioners, furnaces and heat pumps, primarily in existing homes.
This release contains certain forward-looking statements regarding the
anticipated continued growth of the Company which could be affected by a number
of factors which could cause the Company's actual results to differ from those
discussed in this release, including those relating to the successful closing of
pending acquisitions, the availability of additional HVAC companies for
acquisition, the successful integration of acquired companies, the ability to
obtain and retain key management personnel, the absence of any material year
2000 problems, and the adequacy of the Company's capital resources.
(Table to follow)
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Service Experts, Inc.
Consolidated Financial Statements
($ in thousands, except earnings per share)
Three Months Ended Twelve Months Ended
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December 31, December 31, December 31, December 31,
1998 1997 1998 1997
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Net revenue $ 114,231 $ 73,237 $ 407,835 $ 248,110
Cost of goods sold 73,587 47,768 261,670 161,281
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Gross margin 40,644 25,469 146,165 86,829
Selling, general and
administrative 30,967 19,204 104,627 62,103
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Income from operations 9,677 6,265 41,538 24,726
Other income (expense):
Interest expense (1,313) (177) (3,708) (772)
Interest income 64 160 419 793
Other income (47) 175 436 578
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Other income (expense) (1,296) 158 (2,853) 599
------------ ------------ ------------ ------------
Income before taxes 8,381 6,423 38,685 25,325
Income tax expense 3,119 2,541 15,260 9,380
------------ ------------ ------------ ------------
Net income $ 5,262 $ 3,882 $ 23,425 $ 15,945
============ ============ ============ ============
Basic earnings per share $ 0.30 $ 0.25 $ 1.39 $ 1.08
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Basic weighted average shares 17,431,000 15,704,000 16,875,000 14,774,000
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Diluted earnings per share $ 0.30 $ 0.24 $ 1.37 $ 1.07
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Diluted weighted average shares 17,589,000 15,863,000 17,068,000 14,924,000
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