S&P 500 Index SMUN (NYSE:SVE)
Industry: Financial
Service Experts, Inc. is a leading provider of residential heating ventilating, and air conditioning (HVAC) services and replacement equipment in the United States and is a leading consolidator of the fragmented HVAC service and replacement industry. As of December 31, 1998, the Company operated 104 HVAC service and replacement businesses (Service Centers) in 34 states. The Company also owns Contractor Success Group, Inc. (CSG), a company that provides HVAC businesses proprietary products, as well as marketing, management, educational and advisory services. The Company had net revenue of approximately $408 million in 1998, compared to $248 million in 1997. The Company intends to develop national brand recognition of the Service Experts name through acquisitions and establishing a national reputation. The Company has implemented an aggressive acquisition strategy, acquiring 106 HVAC businesses including 43 Service Centers during 1998.The Company's acquisitions during 1998 expanded geographic coverage by providing entry to the Arizona, Colorado, New Jersey, New Mexico, Pennsylvania, and Virginia markets and increasing the Company's market presence in California, Florida, Georgia, Missouri, Oklahoma, and Tennessee. Management targets for acquisition HVAC businesses that operate successfully in the Company's targeted markets. Typically, these businesses have annual net revenue ranging from $1million to $10 million. The Company primarily provides installation and replacement services to existing homes and small to medium-sized businesses. Services offered by each Service Center include the sale of replacement central air conditioners, furnaces, and heat pumps; the maintenance and repair of HVAC units; diagnostic analysis of the condition of existing units; and the sale of ancillary products such as IAQ devices and monitors.Most of the Service Centers employ an in-house sales force that sells replacement units; installation technicians who install replacement equipment in existing homes; service technicians who service and maintain the equipment; and an administrative staff to perform dispatching, purchasing, and other administrative functions. In addition, some of the Service Centers offer plumbing services. Some of the Service Centers offer HVAC services to small and medium-sized businesses. In 1998, non-residential revenue generated from the provision of services and sale of products, including those related to commercial, electrical and plumbing services and products, represented approximately 25% of the Company's net revenue. The Service Centers target restaurants, small office buildings, warehouses and theaters as potential prospects for their commercial services. The Company has approximately 190,000 maintenance agreements with customers.These agreements are for a term of one to three years and generally provide for two diagnostic and precision maintenance visits during the year at an average annual cost to the customer of approximately $135. Each Service Center generally purchases the HVAC units, parts, and supplies it uses from distributors. The Company's Preferred Vendor Program allows the Service Centers to purchase these items at a lower cost through discounts and rebates available from vendors participating in the program. The principal manufacturers participating in the Company's Preferred Vendor Program include The Trane Company, Lennox Industries, Inc., Amana, and Carrier Corporation. Distribution channels including Pameco Corp., Hughes Supply, Inc., Johnstone Supply, and R.E. Michel Co., Inc. In order to service the replacement market, the Company maintains relationships with several national, regional,and local manufacturers of replacement units in order to offer a wide variety of products to its customers. CSG was formed in 1991 to offer HVAC companies proprietary products and marketing, management, educational, and advisory services not available from industry trade associations. Currently, there are approximately 260 members of CSG serving distinct market areas in the United States. CSG
As Of: 10/07 00:00 ET
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