<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended December 31, 1997
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 0-22293
IWL COMMUNICATIONS, INCORPORATED
(Exact name of registrant as specified in its charter)
TEXAS 76-0043882
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
12000 Aerospace Avenue, Suite 200
Houston, Texas 77034
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (281) 482-0289
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 [ ]
COMMON STOCK, $0.01 PAR VALUE 3,961,496
(Title of Each Class) (Number of Shares Outstanding at
January 31, 1998)
<PAGE>
IWL COMMUNICATIONS, INCORPORATED
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at December 31, 1997 and
June 30, 1997 3
Consolidated Statements of Operations for the Three Months
and Six Months Ended December 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 14
2
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IWL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
ASSETS
DECEMBER 31, 1997 JUNE 30, 1997
----------------- -------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents 3,315,566 7,659,983
Accounts receivable
Trade, less allowance for doubtful accounts of $128,447
and $100,936 respectively 6,342,127 5,710,344
Affiliate 30,344 67,074
Other 239,298 116,020
Notes receivable-trade, current portion 0 0
Inventory 4,489,970 1,856,617
Costs and estimated earnings in excess of billings on
uncompleted contracts 25,870 242,862
Deferred tax asset-current 242,317 242,317
Prepaid expenses and deposits 518,360 388,272
-----------------------------
Total current assets 15,203,852 16,283,489
Property, plant and equipment 16,894,189 14,281,182
Accumulated depreciation (6,039,032) (5,164,829)
-----------------------------
Net property, plant and equipment 10,855,157 9,116,353
Investment in unconsolidated subsidiary 0 428,374
Notes receivable-trade, noncurrent portion 0 0
Other assets 311,779 233,527
-----------------------------
Total assets 26,370,788 26,061,743
-----------------------------
-----------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable-current portion 1,376,332 963,595
Trade accounts payable and accrued expenses 3,681,164 5,436,445
Customer deposits 171,972 23,365
Federal income taxes payable 270,464 0
Deferred revenue-current portion 14,667 53,480
Billings in excess of costs and estimated earnings on
uncompleted contracts 0 85,553
-----------------------------
Total current liabilities 5,514,599 6,562,438
-----------------------------
Long-term liabilities:
Notes payable, noncurrent portion 8,190,454 7,692,332
Deferred revenue, noncurrent portion 0 0
Deferred income taxes 413,071 413,071
-----------------------------
Total long-term liabilities 8,603,525 8,105,403
-----------------------------
Total liabilities 14,118,124 14,667,841
Stockholders' equity:
Common stock, $.01 par value; 100,000,000 authorized, issued
and outstanding 3,754,230 and 3,677,816 shares at December 31,
1997 and June 30, 1997, respectively 37,542 36,778
Preferred stock, $.01 par value; 10,000,000 authorized, no
shares issued and outstanding at December 31, 1997 and
June 30, 1997, respectively
Additional paid-in capital 7,601,588 7,251,600
Retained earnings 4,613,534 4,105,524
-----------------------------
Total stockholders' equity 12,252,664 11,393,902
-----------------------------
Total liabilities and stockholders' equity 26,370,788 26,061,743
-----------------------------
-----------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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IWL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales:
Telecom and carrier 6,110,554 4,945,364 10,856,606 9,528,296
Land mobile 591,242 897,434 1,198,057 1,420,571
Product resales 0 2,895,143 0 4,695,225
--------------------------------------------------------
Total sales 6,701,796 8,737,941 12,054,663 15,644,092
Cost of sales-exclusive of items shown
separately below (3,622,120) (3,631,105) (6,556,544 ) (7,004,414)
Cost of sale-product resales 0 (3,001,575) 0 (4,680,001)
--------------------------------------------------------
Gross profit 3,079,676 2,105,261 5,498,119 3,959,677
Selling expenses 431,658 274,300 792,667 494,702
General and administrative expenses 1,546,144 1,047,873 2,838,057 2,240,224
Depreciation and amortization 514,338 342,649 981,733 635,415
--------------------------------------------------------
Income from operations 587,536 440,439 885,662 589,336
Other income (and expense)
Interest income 60,129 8,123 130,024 17,764
Interest expense (168,168) (131,976) (347,844) (231,490)
Equity in earnings (loss) of unconsolidated
subsidiary 0 (7,379) 0 776
Gain (loss) from sale of assets (1,984) 4,704 110,168 18,148
Other 0 0 0 28
--------------------------------------------------------
Total other income (expense) (110,024) (126,528) (107,653) (194,774)
--------------------------------------------------------
Income before taxes 477,513 313,911 778,010 394,562
--------------------------------------------------------
Income tax expense 174,769 134,154 270,000 134,154
Net Income 302,744 179,757 508,010 260,408
--------------------------------------------------------
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Basic net income per share .08 .08 .14 .12
--------------------------------------------------------
--------------------------------------------------------
Diluted net income per share .08 .08 .13 .11
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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IWL COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
SIX MONTHS ENDED DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income 508,010 260,408
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 981,733 635,415
Gain from sale of assets (9,280) (18,148)
Deferred income taxes 0 34,509
Equity in earnings (loss) of unconsolidated subsidiary 0 (776)
Changes in operating assets and liabilities:
Accounts receivable (718,331) 468,269
Inventory (2,633,353) (868,242)
Costs and estimated earnings in excess of billings 216,992 52,410
Prepaid expenses and deposits (130,088) (232,870)
Deferred offering costs 0 (95,334)
Other assets (116,904) (56,096)
Trade accounts payable and accrued expenses (1,755,281) (34,128)
Customer deposits 148,607 (274,894)
Deferred revenue (38,813) 378,151
Billings in excess of costs and estimated earnings (85,553) 86,609
Federal income taxes payable 270,464 (1,643)
------------------------------
Net cash provided (used) by operating activities (3,361,797) 333,640
------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (2,696,745) (2,431,532)
Proceeds from disposal of property, plant and equipment 24,140 28,776
Investments in unconsolidated subsidiary 428,374 (50,000)
------------------------------
Net cash used in investing activities (2,244,231) (2,452,756)
------------------------------
Cash flows from financing activities:
Proceeds from debt 14,242,134 2,684,377
Debt payments (13,331,275) (654,706)
Proceeds from issuance of common stock 350,752 9,997
------------------------------
Net cash provided by financing activities 1,261,611 2,039,668
------------------------------
Net decrease in cash for period (4,344,417) (79,448)
Cash and cash equivalents at beginning of period 7,659,983 360,930
------------------------------
Cash and cash equivalents at end of period $ 3,315,566 $ 281,482
------------------------------
------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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IWL COMMUNICATIONS, INCORPORATED
Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying condensed consolidated financial statements, which
should be read in conjunction with the consolidated financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997, are unaudited (except for the June 30, 1997
consolidated balance sheet, which was derived from the Company's audited
financial statements), but have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair presentation
have been included.
Operating results for the three months ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the entire
fiscal year ending June 30, 1998.
2. Inventories
Inventories consist of the following (in Thousands):
<TABLE>
DECEMBER 31,
1997 JUNE 30, 1997
------------ -------------
<S> <C> <C>
Material 683 $413
Work In-Process 3,807 1,444
-------------------------------------
Total 4,490 1,857
</TABLE>
3. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 (FAS 128), "Earnings Per Share". Statement 128 replaced
the previously reported primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share,
basic earning per share excludes any dilutive effects of options, warrants,
and convertible securities. Diluted earnings per share is very similar to
the previously reported fully diluted earnings per share. All earnings per
share amounts for all periods have been presented, and where necessary,
restated to conform to the Statement 128 requirements.
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) 303 180 508 260
Denominator:
Denominator for basic earnings per share -
weighted-average shares outstanding 3,753 2,234 3,737 2,234
Effect of dilutive securities:
Employee stock options 226 72 181 72
--------------------------------------------
Denominator for diluted earnings per share 3,979 2,306 3,918 2,306
Basic earnings per share .08 .08 .14 .12
Diluted earnings per share .08 .08 .13 .11
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included in the
Company's 1997 Annual Report on Form 10-K. The Company believes that all
necessary adjustments (consisting only of normal recurring adjustments) have
been included in the amounts stated below to present fairly the following
quarterly information. Quarterly operating results have varied significantly
in the past and can be expected to vary in the future. Results of operations
for any particular quarter are not necessarily indicative of results of
operations for a full year.
FORWARD LOOKING INFORMATION
Certain information contained herein contains forward-looking statements
(as defined in the Private Securities Litigation Reform Act of 1995)
regarding future events or the future financial performance of the Company,
and are subject to a number of risks and other factors which could cause the
actual results of the Company to differ materially from those contained in
and anticipated by the forward-looking statements. Among such factors are:
industry concentration and the Company's dependence on major customers,
competition, risks associated with international operations and entry into
new markets, government regulation, variability in operating results, general
business and economic conditions; customer acceptance of and demand for the
Company's new products, the Company's overall ability to design, test, and
introduce new products on a timely basis, reliance on third parties and other
telecommunication carriers, the Company's ability to manage change,
dependence on key personnel, dependence on information systems and changes in
technology, and possible service interruptions. The forward-looking
statements contained herein are necessarily dependent upon assumptions,
estimates and data that may be incorrect or imprecise. Accordingly, any
forward-looking statements included herein do not purport to be predictions
of future events or circumstances and may not be realized. Forward-looking
statements contained herein include, but are not limited to, forecasts,
projections and statements relating to inflation, future acquisitions and
anticipated capital expenditures. All forecasts and projections in this
report are based on management's current expectations of the Company's near
term results, based on current information available pertaining to the
Company, including the aforementioned risk factors. Actual results could
differ materially.
OVERVIEW
The Company's total sales are derived from the provision of a variety of
services, including telecom and carrier services, land mobile services and
product resales. Telecom and carrier services include the resale of long
distance telecommunications services, the provision of private leased lines,
the resale of equipment and the provision of related services to furnish and
install telecommunications systems. The Company operates a tandem switch at
its facility in Houston, Texas to provide services as a switch-based long
distance carrier and is currently completing the installation of its Gulf
Coast regional network. Land mobile services consist of the rental, sale,
service and maintenance of two-way radio communications systems.
In connection with product resales, the Company serves as the exclusive
manufacturer's representative of Alcatel products to the U.S. oil and gas
industry. In fiscal 1996 and 1997, the Company provided services to Shell
Offshore Services Company, which included the resale of a significant amount
of Alcatel products. For the years ended June 30, 1996 and 1997, Shell
purchased from the Company approximately $10.6 million and $7.6 million of
Alcatel products and other equipment and hardware, representing approximately
38.0% and 25.2%, respectively, of total sales during such periods. Although
profitable, the sale of Alcatel products to Shell significantly reduced the
Company's gross margin in these periods. The Shell project was substantially
completed in fiscal 1997 and, therefore, is not expected to contribute in a
material manner to the Company's total sales in future periods.
The Company was founded in 1981 as a contract supplier of communications
technology installation and equipment leasing services, and over the ensuing
years broadened the scope of its service offerings to include microwave,
two-way radio and related wireless services and technologies for an expanded
customer base, primarily comprised of major oil and gas companies operating
in the Gulf of
7
<PAGE>
Mexico region. During this period, the Company began to provide an
increasing variety of services to its oil and gas customers in other remote
and underdeveloped regions around the world, including communications
services for special projects with critical timing and other extreme or
unusual challenges.
To support its international expansion, in 1994 the Company began
providing telecommunications services and network support inside the former
Soviet Union to United States oil and gas customers. As the Company expanded
its service offerings and developed greater infrastructure, it commenced
service as a switchless reseller of long distance services in the United
States in 1994. The Company is continuing to expand its network through its
tandem switch and the installation of fiber optic cable and microwave radios
in targeted service areas. In connection with such expansion, the Company
has also received CLEC status in Texas and Louisiana.
While annual growth rates of the Company's total sales since 1992 have
ranged from 6.3% to 76.0%, the Company's quarterly operating results have
varied significantly in the past, and can be expected to vary in the future.
These fluctuations in operating results generally are caused by a number of
factors, including changes in the Company's services and product mix, levels
of product resales, adverse weather conditions in customer locations, the
degree to which the Company encounters competition in its existing or target
markets, general economic conditions, the volume and timing of orders
received during the period, sales and marketing expenses related to entering
new markets, the timing of new product or service introductions by the
Company or its competitors and changes in billing rates by the Company or its
competitors.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
TOTAL SALES. Total sales decreased $2.0 million or 23.0% to $6.7
million for the three months ended December 31, 1997 from $8.7 million for
the three months ended December 31, 1996. This decline was comprised of an
increase of $1.2 million or 20.4% in the Company's telecom and carrier
services, a decrease of $306,000 or 34.1% in the Company's land mobile
services and a decrease of $2.9 million or 100% in product resales to a
single customer. The increase in telecom and carrier revenues was largely
attributable to increased traffic on the Company's telecom network in the
Gulf of Mexico from the continued expansion of the Company's ODDS services.
The decrease in Land Mobile resulted from decreased product and project
sales. The product resales were substantially completed in fiscal 1997.
GROSS MARGIN. Gross profit increased $974,000 or 46.4% to $3.1 million
for the three months ended December 31, 1997 from $2.1 million for the three
months ended December 31, 1996, representing gross margins of 46.3% and
24.1%, respectively. The increase in margin was due in principal part to the
completion of the product resale to a single customer in May 1997, which had
lower margins, and from changes in the Company's sales mix to higher margin
services. Excluding product resales, gross profit for the three months ended
December 31, 1996 would have been approximately $2.2 million representing a
gross margin of 37.9%.
SELLING EXPENSES. Selling expenses increased $157,000 or 57.3% to
$432,000 for the three months ended December 31, 1997 from $274,000 for the
three months ended December 31, 1996. Selling expenses as a percentage of
total sales increased to 6.4% from 3.1% during these respective periods. The
increase in selling expenses resulted from the addition of sales personnel,
increased advertising, and from increases in travel expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased $498,000 or 47.6% to $1.5 million for the three months
ended December 31, 1997 from $1.0 million for the three months ended December
31, 1996. As a percentage of total sales, general and administrative
expenses increased to 23.1% for the three months ended December 31, 1997 from
12.0% for the three months ended December 31, 1996. The increase in general
and administrative expenses as a percentage of sales was primarily due to the
decline in product resales overall. The increases was also comprised of
increases in telephone expense, insurance expense, rent expense, and legal
expenses.
8
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$172,000 or 50.1% to $514,000 for the three months ended December 31, 1997
from $343,00 in the three months ended December 31, 1996. This increase was
attributable to the acquisition of an additional $6.2 million of property,
plant and equipment, comprised of $4.8 million in equipment for satellite,
microwave and other equipment, $1.0 million for computers, furniture and
fixtures, service vehicles and test equipment and $335,000 for buildings and
improvements.
NET INTEREST EXPENSE. Net interest expense decreased $16,000 or 12.9%
to $108,000 for the three months ended December 31, 1997 from $124,000 for
the three months ended December 31, 1996. The Company's borrowings increased
to $9.6 million for the three months ended December 31, 1997 from $6.0
million for the three months ended December 31, 1996. The increase in
borrowings was used to fund acquisitions of property, plant and equipment.
In addition, the Company had cash investments of $3.3 million at December 31,
1997 which generated $60,000 of interest income for the quarter.
OTHER INCOME, NET. Other income for the three months ended December 31,
1997 was comprised of gains on asset dispositions. Other income for the
three months ended December 31, 1996 included the Company's 50% ownership
interest in the earnings of Kenwood Systems Group as well as certain other
asset dispositions.
INCOME TAX EXPENSE. Provision for income taxes increased $41,000 or
30.6% to $175,000 for the three months ended December 31, 1997 from $134,000
for the three months ended December 31, 1996 which represents an effective
tax rate of 36.6% and 42.7% for each period, respectively.
COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
TOTAL SALES. Total sales decreased $3.6 million or 23.1% to $12.0
million for the six months ended December 31, 1997 from $15.6 million for the
six months ended December 31, 1996. This decrease was comprised of an
increase of $1.3 million or 13.6% in the Company's telecom and carrier
services, a decrease of $223,000 or 14.2% in the Company's land mobile
services and a decrease of $4.7 million or 100% in product resales to a
single customer. The increase in telecom and carrier revenues was largely
attributable to increased traffic on the Company's telecom network in the
Gulf of Mexico and the continued expansion of the Company's ODDS services in
the Gulf of Mexico. The decrease in Land Mobile resulted from a decrease in
product and project sales. The product resales were substantially completed
in fiscal 1997.
GROSS MARGIN. Gross profit increased $1.5 million or 37.5% to $5.5
million for the six months ended December 31, 1997 from $4.0 million for the
six months ended December 31, 1996, representing gross margins of 45.6% and
25.3%, respectively. The increase in margin was due in principal part to the
completion of the product resale to a single customer in May 1997, which had
lower margins, and from changes in the Company's sales mix to higher margin
services. Excluding product resales, gross profit for the six months ended
December 31, 1996 would have been approximately $3.9 million representing a
gross margin of 35.8%.
SELLING EXPENSES. Selling expenses increased $298,000 or 60.2% to
$793,000 for the six months ended December 31, 1997 from $495,000 for the six
months ended December 31, 1996. The increase in selling expenses resulted
from increased salary expenses related to the addition of sales personnel and
from increases in travel and advertising expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased $598,000 or 26.7% to $2.8 million for the six months ended
December 31, 1997 from $2.2 million for the six months ended December 31,
1996. The increase in the dollar amount of general and administrative
expenses over these periods were due in principal part to increases in
salaries and personnel cost, and due to increases in telephone, insurance,
rent, and legal expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$346,000 or 54.5% to $987,000 for the six months ended December 31, 1997 from
$635,000 in the six months ended December 31, 1996. This increase was
primarily for infrastructure and network expansion.
9
<PAGE>
NET INTEREST EXPENSE. Net interest expense increased $4,000 or 1.9% to
$218,000 for the six months ended December 31, 1997 from $214,000 for the six
months ended December 31, 1996. The increase was comprised of an increase in
interest expense of $116,000 to $348,000 from $232,000 for the comparable six
month period last year. This increase was offset by an increase in interest
income of $112,000 to $130,000 from $18,000 for the same six month period
last year.
OTHER INCOME, NET. Other income for the six months ended December 31,
1997 included the gain of $101,000 resulting from the disposition of the
Company's 50% ownership in Kenwood Systems Group as well as certain other
asset dispositions. Other income for the six months ended December 31, 1996
included the Company's 50% ownership interest in the earnings of Kenwood
Systems Group as well as certain other asset dispositions.
INCOME TAX EXPENSE. Provision for income taxes increased $136,000 or
101.5% to $270,000 for the six months ended December 31, 1997 from $134,000
for the six months ended December 31, 1996 which represents an effective tax
rate of 34.7% and 34% for each period, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended December 31, 1997, the Company used $3.4
million of cash in operating activities, borrowed an additional net amount of
$910,850 from credit facilities, and received $351,000 from the sale and
issuance of Common Stock. The Company invested $2.7 million in property and
equipment (net of proceeds of $24,000 from certain dispositions of assets)
and reduced its investment in an unconsolidated subsidiary by $428,324
through disposition. These activities decreased the Company's cash balance
by $4.3 million to a balance of $3.3 million at December 31, 1997.
The Company's working capital was $9.7 million at December 31, 1997.
Accounts receivable increased $595,000 from $5.7 million at June 30, 1997 to
$6.3 million at December 31, 1997, while inventory increased from $1.9
million at June 30, 1997 to $4.5 million at December 31, 1997. The inventory
increase is comprised of increases in work-in-process and stock levels
necessary to support deployment of the Company's ODDS program and the
continued development of its Gulf Coast network. Accounts payable and
accrued expenses decreased from $5.4 million at June 30, 1997 to $3.7 million
at December 31, 1997. In addition, the current portion of notes payable
increased from $964,000 at June 30, 1997 to $1.4 million at December 31,
1997, while deferred revenue and customer deposits increased from $77,000 at
June 30, 1997 to $110,000 at December 31, 1997.
The Company has three credit facilities with Bank One, Texas, N.A., its
primary lender, to provide working capital and to finance equipment to be
leased by the Company to its customers. In May 1997, the Company entered
into a commitment to obtain a secured revolving line of credit (the "Working
Capital Loan"), a secured guidance line of credit (the "Guidance Line"), and
a term facility (the "Term Loan") from Bank One, Texas, N.A. The Working
Capital Loan and Guidance Line were finalized as of August 1, 1997, and the
Term Loan was finalized as of August 28, 1997.
The maximum amount of the Working Capital Loan is $5.0 million subject
to a borrowing base based on accounts receivables and inventory. The proceeds
of the Working Capital Loan are to be used for working capital needs and
general corporate purposes. The maximum amount of the Guidance Line is $5.0
million, which will be used to finance the Company's purchase and subsequent
lease of telecommunications equipment. The Term Loan and the Working Capital
Loan are collateralized by substantially all of the personal property of the
Company. The Guidance Line is secured specifically by the equipment
purchased with the proceeds thereof and by an assignment of the leases of
such equipment, as well as the other personal property of the Company. The
Guidance Line is reduced by the term load created as the leased equipment is
deployed. The interest rate on each facility is, at the Company's option,
Bank One's base rate or 30, 60 or 90 day adjusted LIBOR plus 2.40%. The
interest rate will be subject to downward adjustment in certain circumstances
as specified in the credit agreement. The entire unpaid principal balance
and accrued but unpaid interest for the Working Capital Loan will be due on
October 31, 1998. The Guidance Line expires on May 1, 1998. The Term Loan
matures on September 1, 2001.
10
<PAGE>
Borrowing availability under the Working Capital Loan is based upon
eligible accounts receivable and inventory, and a fee equal to 0.25% will be
charged on any unused portion of the Working Capital Loan. In addition,
fundings under the Guidance Line will only be permitted with respect to
communications equipment and installation pursuant to leases which (a) have a
term of not more than 60 months or the estimated useful life of the leased
equipment, (b) have been assigned to the lender as collateral for the Loans
and (c) have as lessees companies formed and with principal offices in the
United States. The Loans will be collateralized by substantially all of the
Company's assets. The Company is able to reduce the commitment under the
Working Capital Loan and is able to make voluntary prepayments on the
Guidance Line without prepayment penalty. The Loans are cross-defaulted and
cross-collateralized. The credit agreement prohibits the payment of
dividends without prior approval of the lender and requires the Company to
maintain certain covenants and financial ratios including working capital and
net worth ratios. The credit agreement also prohibits certain changes in the
Company's basic business or in its Chief Executive Officer, Chief Financial
Officer and President positions, without prior lender approval.
The Company anticipates that, based on current plans and assumptions
relating to its operations, its financial resources and equipment financing
arrangements will be sufficient to fund the Company's growth and operations
through the end of its fiscal year ending June 30, 1998. The Company believes
that its capital needs at the end of such period will continue to be
significant and, therefore, the Company will continue to seek additional
sources of capital. Further, in the event the Company's plans or assumptions
change or prove to be inaccurate, or if the Company consummates any unplanned
acquisitions of businesses or assets, the Company may be required to seek
additional sources of capital sooner than currently anticipated. Sources of
additional capital may include public and private equity and debt financings,
sales of nonstrategic assets and other financing arrangements.
CONTINGENCIES
The Company is party to ordinary litigation incidental to its business,
none of which is expected to have a material adverse effect on the results of
operations, financial position or liquidity of the Company.
YEAR 2000
As the year 2000 approaches, the Company recognizes the need to ensure
its operations will not be adversely impacted by Year 2000 computer software
failures. The Company is addressing this issue to ensure the availability
and integrity of its financial systems and the reliability of its operational
systems. The Company has established processes for evaluating and managing
the risks and costs associated with this problem. The Company has and will
continue to make certain investments in its software systems and applications
to ensure the Company is Year 2000 compliant. The financial impact to the
Company has not yet been fully determined, however such impact is not
anticipated to have a material adverse effect on the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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IWL COMMUNICATIONS, INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information pertaining to this item is incorporated herein from Part I.
Financial Information (Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Contingencies).
Item 2. Changes in Securities and Use of Proceeds
On June 12, 1997 (the "Effective Date"), the Company's Registration
Statement on Form S-1 (Registration No. 333-22801) relating to its initial
public offering (the "IPO") was declared effective and the offering of up to
1,667,500 shares of the Company's Common Stock covered by such Registration
Statement commenced. The IPO was managed by Cruttenden Roth Incorporated, as
the representative (the "Representative") of the several underwriters (the
"Underwriters") of the IPO. Of the shares of Common Stock sold by the
Company, 1,450,000 shares were sold in June 1997 and 62,495 shares (which
were subject to an overallotment option granted by the Company to the
Underwriters) were sold in July 1997. From the Effective Date of the IPO
until December 31, 1997, total expenses of approximately $1,775,097 were
incurred for the Company's account in connection with the 1,512,495 shares of
Common Stock sold in the IPO, which expenses consisted of: (i) $635,000
representing underwriting discounts and commissions paid to the Underwriters;
(ii) $272,000 representing a nonaccountable expense allowance paid to the
Representative; and (iii) other offering expenses, including without
limitation, attorney's fees, accountants' fees, printing costs and filing
fees, of approximately $868,097. None of such expense payments were direct
or indirect payments to directors or officers of the Company or their
associates or to persons owning 10 percent or more of any class of equity
securities of the Company or to affiliates of the Company. The net offering
proceeds of 1,512,495 shares sold by the Company in the IPO, after deducting
such total expenses, was approximately $7.3 million through December 31,
1997. The Company had expended $2.8 million on infrastructure, property and
equipment, retired debit of $667,000, and used $533,000 for working capital
support. The remaining $3.3 million was invested at December 31, 1997 in a
money market account with the Company's lending bank pending application of
such proceeds by the Company.
Information pertaining to working capital restrictions and other
limitations upon the payment of dividends is incorporated herein from Part I.
Financial Information (Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the Company
(incorporated by reference from Exhibit 3.1 to the Company's
Registration Statement on Form S-1 filed March 5, 1997, as
amended, File No. 333-22801).
+3.2 Amended and Restated Bylaws of the Company, as amended by the
Amendment to Amended and Restated Bylaws for the Company dated
November 7, 1997.
4.1 Specimen certificate for the Common Stock of the Company
(incorporated by reference from Exhibit 4.1 to the Company's
Registration Statement on Form S-1 filed March 5, 1997, as
amended, File No. 333-22801).
+27.1 Financial Data Schedule.
- -------------------------
+ Filed herewith.
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(b) Reports on Form 8-K
Current report on Form 8-K dated as of October 2, 1997, and filed
October 7, 1997, regarding the sale of the Company's interest in Kenwood
System Group.
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IWL COMMUNICATIONS, INCORPORATED
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.
IWL COMMUNICATIONS, INCORPORATED
Date: February 13, 1998 By: /s/ Richard H. Roberson
--------------------------------------
Richard H. Roberson
Chief Financial Officer and Director
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
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AMENDED AND RESTATED BYLAWS
OF
IWL COMMUNICATIONS, INCORPORATED
(THE "CORPORATION")
ARTICLE I.
OFFICES
Section 1.01. PRINCIPAL OFFICE. The principal business office of the
Corporation shall be at 12000 Aerospace Avenue, Suite 200, Houston, Texas
77034.
Section 1.02. OTHER OFFICES. The Corporation may also have offices at
such other places, both within and without the State of Texas, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. PLACE OF MEETINGS. Meetings of shareholders for all
purposes may be held at such time and place, within or without the State of
Texas, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.02. ANNUAL MEETING. An annual meeting of the shareholders,
commencing with the year 1997, shall be held in each year on a date to be
determined by the Board of Directors, at which meeting the shareholders shall
elect a Board of Directors, and transact such other business as may properly be
brought before the meeting.
Section 2.03. LIST OF SHAREHOLDERS. The officer or agent having charge of
the share transfer records shall make, at least ten (10) days before each
meeting of the shareholders, a complete list of the shareholders entitled to
vote at said meeting, arranged in alphabetical order with the address of and the
number of voting shares held by each, which list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office or
principal place of business of the Corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such
list shall be produced and kept open at the time and place of the meeting during
the whole time thereof, and shall be subject to the inspection of any
shareholder who may be present. The original share transfer records shall be
prima facie evidence as to the shareholders who are entitled to examine such
list or transfer records or to vote at any such meeting of shareholders.
Section 2.04. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation or by these Bylaws, may be called by the Chief
Executive Officer, the President, the Board of Directors, or the holders of not
less than ten percent (10%) of all shares entitled to vote at the meetings.
Business transacted at all special meetings shall be confined to the purposes
stated in the notice of the meeting.
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Section 2.05. NOTICE. Written or printed notice stating the place, day
and hour of the meeting, and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
(10) nor more than sixty (60) days before the date of the meeting, either
personally or by mail by or at the direction of the Chief Executive Officer, the
President, the Secretary or the officer or person calling the meeting, to each
shareholder entitled to vote at the meeting; provided, however, in the event of
a merger or consolidation, such notice shall be delivered not less than twenty
(20) days before the meeting.
Section 2.06. QUORUM. Unless otherwise provided in the Articles of
Incorporation, a quorum shall be present at a meeting of shareholders if the
holders of a majority of the shares entitled to vote are represented at the
meeting in person or by proxy. Unless otherwise provided in the Articles of
Incorporation or these Bylaws, once a quorum is present at a meeting of
shareholders, the shareholders represented in person or by proxy at the meeting
may conduct such business as may be properly brought before the meeting until it
is adjourned, and the subsequent withdrawal from the meeting of any shareholder
or the refusal of any shareholder represented in person or by proxy to vote
shall not affect the presence of a quorum at the meeting. Unless otherwise
provided in the Articles of Incorporation, the shareholders represented in
person or by proxy at a meeting of shareholders at which a quorum is not present
may adjourn the meeting until such time and to such place as may be determined
by a vote of the holders of a majority of the shares represented in person or by
proxy at that meeting.
Section 2.07. VOTING ON MATTERS OTHER THAN THE ELECTION OF DIRECTORS.
With respect to any matter other than the election of directors or a matter for
which the affirmative vote of the holders of a specified portion of the shares
entitled to vote is required by law, the affirmative vote of the holders of a
majority of the shares entitled to vote on that matter and represented in person
or by proxy at a meeting of shareholders at which a quorum is present shall be
the act of the shareholders unless otherwise provided in the Articles of
Incorporation or these Bylaws.
Section 2.08. VOTING IN THE ELECTION OF DIRECTORS. Directors shall be
elected by a plurality of the votes cast by the holders of shares entitled to
vote in the election of directors at a meeting of shareholders at which a quorum
is present unless otherwise provided in the Articles of Incorporation or these
Bylaws.
Section 2.09. VOTING PROCEDURE. Each outstanding share of common stock
shall be entitled to one (1) vote on each matter submitted to a vote at a
meeting of shareholders, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the Articles of
Incorporation. At any meeting of the shareholders, every shareholder having the
right to vote shall be entitled to vote either in person or by proxy executed in
writing subscribed by the shareholder. A telegram, telex, cablegram or similar
transmission by the shareholder, or a photographic, photostatic, facsimile or
similar reproduction of a writing executed by the shareholder shall be treated
as an execution in writing for purposes of this section. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. Each proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable and the proxy is coupled with
an interest.
Section 2.10. ACTION WITHOUT A MEETING. Except as otherwise provided
below, any action required or permitted to be taken at a meeting of the
shareholders of the Corporation may be taken without a meeting if a consent in
writing setting forth the action so taken shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof, and
such consent shall have the same force and effect as a unanimous vote of the
shareholders.
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The Articles of Incorporation may provide that any action required by the
Texas Business Corporation Act to be taken at any annual or special meeting of
shareholders, or any action that may be taken at any annual or special meeting
of shareholders, may be taken without a meeting, without prior notice, and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holder or holders of shares having not less than
the minimum number of votes that would be necessary to take such action at a
meeting at which the holders of all shares entitled to vote on the action were
present and voted. If the Articles of Incorporation make such a provision, then
such written consent shall bear the date of signature of each shareholder who
signs the consent. No written consent shall be effective to take the action
that is the subject of the consent unless, within sixty (60) days after the date
of the earliest dated consent delivered to the Corporation in the manner
required by the Texas Business Corporation Act, a consent or consents signed by
the holder or holders of shares having not less than the minimum number of votes
that would be necessary to take the action that is the subject of the consent
are delivered to the Corporation by delivery to its registered office, its
principal place of business, or an officer or agent of the Corporation having
custody of the books in which proceedings of meetings of shareholders are
recorded. Delivery shall be by hand or certified or registered mail, return
receipt requested. Delivery to the Corporation's principal place of business
shall be addressed to the president or principal executive officer of the
Corporation.
A telegram, telex, cablegram, or similar transmission by a shareholder, or
a photographic, photostatic, facsimile or similar reproduction of a writing
signed by a shareholder shall be regarded as signed by the shareholder for
purposes of this section. Prompt notice of the taking of any action by
shareholders without a meeting by less than unanimous written consent shall be
given to those shareholders who did not consent in writing to the action.
Section 2.11. TELEPHONE MEETINGS. Subject to applicable notice provisions
and unless otherwise restricted by the Articles of Incorporation, shareholders
may participate in and hold a meeting by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in such meeting shall
constitute presence in person at such meeting, except where a person's
participation is for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE III.
DIRECTORS
Section 3.01. MANAGEMENT. The powers of the Corporation shall be
exercised by or under the authority of, and the business affairs of the
Corporation shall be managed under the direction of the Board of Directors that
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
Bylaws directed or required to be exercised or done by the shareholders. The
Board of Directors shall keep regular minutes of its proceedings.
Section 3.02. NUMBER; ELECTION. The directors of the Corporation shall
consist of not less than one (1) director, as determined from time to time by
resolution of the shareholders or the Board of Directors of the Corporation.
Directors need not be shareholders or residents of the State of Texas. The
directors shall be elected at the annual meeting of the shareholders by the
holders of shares entitled to vote in the election of directors and, except as
hereinafter provided, each director
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elected shall hold office for the term for which such director is elected and
until such director's successor shall have been elected and shall qualify.
Section 3.03. CHANGE IN NUMBER. The number of directors may be increased
or decreased from time to time by resolution of the shareholders or the Board of
Directors of the Corporation, but no decrease shall have the effect of
shortening the term of any incumbent director.
Section 3.04. ELECTION OF DIRECTORS. Directors shall be elected by a
plurality of the votes cast by the holders of shares entitled to vote in the
election of directors at a meeting of shareholders at which a quorum is present
unless otherwise provided in the Articles of Incorporation or these Bylaws. At
every election of directors, each shareholder shall have the right to vote in
person or by proxy the number of voting shares owned by such shareholder for as
many persons as there are directors to be elected and for whose election such
shareholder has a right to vote. Cumulative voting shall be prohibited.
Section 3.05. PLACE OF MEETINGS. The directors of the Corporation may
hold their meetings, both regular and special, either inside or outside of the
State of Texas.
Section 3.06. FIRST MEETINGS. The first meeting of each newly elected
Board shall be held without further notice immediately following the annual
meeting of shareholders, and at the same place, unless by unanimous consent of
the directors then elected and serving, such time or place shall be changed.
Section 3.07. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board.
Section 3.08. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chief Executive Officer or the President on three
(3) days' notice to each director, either personally or by mail or by telegram
and shall be called by the Chief Executive Officer or the President or any
officer in like manner and on like notice on the written request of two (2) or
more of the directors. Except as may be otherwise expressly provided by law or
by the Articles of Incorporation or by these Bylaws, neither the business to be
transacted at nor the purpose of any special meeting need be specified in a
notice or waiver of notice of such meeting.
Section 3.09. QUORUM. At all meetings of the Board of Directors, the
presence of a majority of the number of the directors fixed by or in the manner
provided in the Articles of Incorporation or these Bylaws shall constitute a
quorum for the transaction of business unless a greater number is required by
law, the Articles of Incorporation or the Bylaws. The act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors unless the act of a greater number is required by law,
the Articles of Incorporation or by these Bylaws. If a quorum shall not be
present at any meeting of directors, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 3.10. REMOVAL. At any meeting of the shareholders called
expressly for such purpose, any director or the entire Board of Directors may be
removed either with or without cause by the affirmative vote of the holders of a
majority of the shares entitled to vote at an election of such directors.
Section 3.11. VOTE OF DIRECTORS TO FILL VACANCY. Any vacancy occurring in
the initial Board of Directors before the issuance of shares may be filled by
the affirmative vote or written consent of
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a majority of the incorporators or by the affirmative vote of a majority of
the remaining directors though less than a quorum of the Board of Directors.
Any vacancy subsequently occurring in the Board of Directors after the
issuance of shares may be filled in accordance with Section 3.12 of this
Article III or may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors. A
director elected to fill a vacancy shall be elected for the unexpired term of
such director's predecessor in office. A directorship to be filled by reason
of an increase in the number of directors may be filled in accordance with
Section 3.12 of this Article III or, subject only to any limitations then
contained in the Texas Business Corporation Act relating to the number of
directors that may be elected by the Board of Directors to fill newly-created
directorships, may be filled by the Board of Directors for a term of office
continuing only until the next election of one (1) or more directors by the
shareholders.
Section 3.12. VOTE OF SHAREHOLDERS TO FILL VACANCY. Any vacancy occurring
in the Board of Directors or any directorship to be filled by reason of an
increase in the number of directors may be filled by election at any annual or
special meeting of shareholders called for that purpose.
Section 3.13. ACTION WITHOUT MEETING; TELEPHONE MEETINGS. Unless
otherwise restricted by the Articles of Incorporation or these Bylaws, any
action required or permitted to be taken at a meeting of the Board of Directors
or of any committee designated by the Board of Directors may be taken without a
meeting if a consent in writing, setting forth the action so taken is signed by
all the members of the Board of Directors or committee, as the case may be.
Such consent shall have the same force and effect as a unanimous vote at a
meeting and may be stated as such in any document or instrument filed with the
Secretary of State. Subject to applicable notice provisions and unless
otherwise restricted by the Articles of Incorporation or these Bylaws, members
of the Board of Directors or members of any committee designated by the Board of
Directors may participate in and hold a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in such meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Section 3.14. CHAIR OF THE BOARD. The Board of Directors may elect a
Chair of the Board to preside at their meetings and perform such other duties as
the Board may from time to time assign to the Chair.
Section 3.15. COMPENSATION. Directors, as such, shall not receive any
stated salary for their services, but, by resolution of the Board a fixed sum
and expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of the Board; provided that nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of any committee
designated by the Board may, by resolution of the Board of Directors, be allowed
like compensation for attending committee meetings.
Section 3.16. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, may designate from among its
members one (1) or more committees, each of which shall be comprised of one (1)
or more of its members and may designate one (1) or more of its members as
alternate members of any committee, who may, subject to any limitations imposed
by the Board of Directors, replace absent or disqualified members at any meeting
of that committee. Any such committee, except to the extent provided in said
resolution, shall have and may exercise all of the authority of the Board of
Directors in the management of the business and affairs of the Corporation,
except where action of the full Board of Directors is required by law or by
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the Articles of Incorporation. Any member of the committees may be removed by
the Board of Directors by the affirmative vote of a majority of the Board of
Directors, whenever in its judgment the best interests of the Corporation will
be served thereby. The committees shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
ARTICLE IV.
NOTICES
Section 4.01. METHOD. Whenever by statute, the Articles of Incorporation
or these Bylaws, notice is required to be given to any director or shareholder,
and no provision is made as to how such notice shall be given, it shall not be
construed to mean personal notice, but any such notice may be given in writing,
either personally or by mail, postage prepaid, addressed to such director or
shareholder at such address as appears on the share transfer records of the
Corporation or in any other method permitted by law. Any notice required or
permitted to be given by mail shall be deemed to be given at the time when the
same shall be thus deposited in the United States mail as aforesaid.
Section 4.02. WAIVER. Whenever any notice is required to be given to any
shareholder or director of the Corporation by law, the Articles of Incorporation
or these Bylaws, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated in such notice,
shall be deemed equivalent to the giving of such notice. Attendance of a
shareholder or director at a meeting shall constitute a waiver of notice of such
meeting, except where a shareholder or director attends for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened. Consent in writing by a shareholder or
director to any action taken or resolution adopted by the shareholders or
directors of the Corporation shall constitute a waiver of any and all notices
required to be given in connection with such action or resolution.
ARTICLE V.
OFFICERS
Section 5.01. OFFICERS. The officers of the Corporation shall be elected
by the Board of Directors and shall be at least a President and a Secretary.
The Board of Directors may also choose a Chair of the Board, a Chief Executive
Officer, a Treasurer, and one (1) or more Executive Vice Presidents, Senior Vice
Presidents, Vice Presidents, Assistant Vice Presidents, Assistant Secretaries,
Assistant Treasurers, or such other officers as the Board of Directors shall
elect. Any two or more offices may be held by the same person.
Section 5.02. ELECTION. The Board of Directors at its first meeting after
each annual meeting of shareholders shall choose a President and a Secretary and
may choose a Chair of the Board, a Chief Executive Officer, a Treasurer and one
(1) or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents,
Assistant Vice Presidents, Assistant Secretaries or Assistant Treasurers, none
of whom need be a member of the Board of Directors, a shareholder or a resident
of the State of Texas. The Board of Directors may appoint such other officers
and agents as it shall deem necessary, who shall be appointed for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors.
Section 5.03. COMPENSATION. The compensation of all officers and agents
of the Corporation shall be fixed by the Board of Directors.
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Section 5.04. REMOVAL AND VACANCIES. Each officer of the Corporation
shall hold office until such officer's successor is chosen and qualified in such
officer's stead or until such officer's death or until such officer's
resignation or removal from office. Any officer or agent or member of a
committee elected or appointed by the Board of Directors may be removed by a
majority of the members of the Board of Directors represented at a meeting of
the Board of Directors at which a quorum is represented, whenever in its
judgment the best interests of the Corporation will be served thereby; but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. If the office of any officer becomes vacant for any reason, the
vacancy may be filled by the Board of Directors.
Section 5.05. CHIEF EXECUTIVE OFFICER. The Board of Directors may, but
shall not be required to, elect a Chief Executive Officer. If so elected, the
Chief Executive Officer shall preside at all meetings of the shareholders and
the Board of Directors unless the Board shall choose to elect a Chair of the
Board, in which event the Chief Executive Officer shall preside at shareholders'
and Board of Directors' meetings in the absence of the Chair of the Board of
Directors. The Chief Executive Officer shall have general and active management
of the business and affairs of the Corporation, shall see that all orders and
resolutions of the Board are carried into effect, and shall perform such other
duties as the Board of Directors shall prescribe. Such duties shall be
performed by the President of the Corporation if the Board of Directors does not
elect a Chief Executive Officer.
Section 5.06. PRESIDENT. The President shall preside at all meetings of
the shareholders and the Board of Directors unless the Board shall choose to
elect a Chair of the Board or a Chief Executive Officer, in which event the
President shall preside at shareholders' and Board of Directors' meetings in the
absence of the Chair of the Board of Directors or the Chief Executive Officer,
as the case may be. The President shall have general and active management of
the day-to-day operations of the Corporation and such other duties as the Board
of Directors or the Chief Executive Officer shall prescribe.
Section 5.07. VICE PRESIDENTS. Each Vice President shall have only such
powers and perform only such duties as the Board of Directors may from time to
time prescribe or as the Chief Executive Officer or the President may from time
to time delegate to such Vice President.
Section 5.08. SECRETARY. The Secretary shall attend all sessions of the
Board of Directors and all meetings of the shareholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee when required. The Secretary
shall give, or cause to be given, notice of all meetings of the shareholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or the Chief Executive Officer or
the President, under whose supervision the Secretary shall be. The Secretary
shall keep in safe custody the seal of the Corporation and affix the same to any
instrument requiring it, and, when so affixed, it shall be attested by the
Secretary's signature or by the signature of the Treasurer or an Assistant
Secretary.
Section 5.09. ASSISTANT SECRETARIES. Each Assistant Secretary shall have
only such powers and perform only such duties as the Board of Directors may from
time to time prescribe or as the Chief Executive Officer or the President may
from time to time delegate.
Section 5.10. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking
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proper vouchers for such disbursements, and shall render to the Chief
Executive Officer or the President and directors, at the regular meetings of
the Board, or whenever they may require it, an account of all the Treasurer's
transactions as Treasurer and of the financial condition of the Corporation,
and shall perform such other duties as the Board of Directors may prescribe.
If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such form in such sum, and with surety or sureties as
shall be satisfactory to the Board for the faithful performance of the duties
of the Treasurer's office and for the restoration to the Corporation, in case
of the Treasurer's death, resignation, retirement or removal from office, of
all books, papers, vouchers, money, and other property of whatever kind in the
Treasurer's possession or under the Treasurer's control belonging to the
Corporation.
Section 5.11. ASSISTANT TREASURERS. Each Assistant Treasurer shall have
only such powers and perform only such duties as the Board of Directors may from
time to time prescribe.
ARTICLE VI.
CERTIFICATES REPRESENTING SHARES
Section 6.01. CERTIFICATES. Certificates in such form as may be
determined by the Board of Directors shall be delivered representing all shares
to which shareholders are entitled. Such certificates shall be consecutively
numbered and shall be entered in the books of the Corporation as they are
issued. Each certificate shall state on the face thereof the holder's name, the
number and class of shares, and the par value of such shares or a statement that
such shares are without par value. They shall be signed by the Chief Executive
Officer, the President or a Vice President and the Secretary or an Assistant
Secretary and may be sealed with the seal of the Corporation or a facsimile
thereof. If any certificate is countersigned by a transfer agent, or an
assistant transfer agent or registered by a registrar, other than the
Corporation or an employee of the Corporation, the signature of any such officer
may be facsimile. Shares may not be issued until the full amount of the
consideration, fixed as provided by law, has been paid.
Section 6.02. LOST CERTIFICATES. The Board of Directors may direct a new
certificate representing shares to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost or destroyed. When authorizing such issue of a new
certificate, the Board of Directors, in its discretion and as a condition
precedent to the issuance thereof, may require the owner of such lost or
destroyed certificate, or such owner's legal representative, to advertise the
same in such manner as it shall require and/or give the Corporation a bond in
such form, in such sum, and with such surety or sureties as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost or destroyed.
Section 6.03. TRANSFER OF SHARES. Except as is otherwise provided in
these Bylaws, shares of stock shall be transferable only on the books of the
Corporation by the holder thereof in person or by such holder's duly authorized
attorney. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate representing shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation or the transfer agent of the Corporation to issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 6.04. REGISTERED SHAREHOLDERS. Unless otherwise provided by
statute, the Corporation may regard the person in whose name any shares issued
by the Corporation are
8
<PAGE>
registered in the share transfer records of the Corporation at any particular
time (including, without limitation as of a record date fixed pursuant to
Sections 6.05 and 6.06) as the owner of those shares at that time for purposes
of voting those shares, receiving distributions thereon or notices in respect
thereof, transferring those shares, exercising rights of dissent with respect
to those shares, exercising or waiving any preemptive right with respect to
those shares, entering into agreements with respect to those shares in
accordance with the Texas Business Corporation Act or giving proxies with
respect to those shares. Neither the Corporation nor any of its officers,
directors, employees or agents shall be liable for regarding that person as
the owner of those shares at that time for those purposes, regardless of
whether that person possesses a certificate for those shares.
Section 6.05. FIXING RECORD DATE FOR MATTERS OTHER THAN CONSENTS TO
ACTION. For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive a distribution by the Corporation (other than a distribution involving a
purchase or redemption by the Corporation of any of its own shares) or a share
dividend, or in order to make a determination of shareholders for any other
proper purpose (other than determining shareholders entitled to consent to
action by shareholders proposed to be taken without a meeting of shareholders),
the Board of Directors may provide that the share transfer records shall be
closed for a stated period but not to exceed, in any case, sixty (60) days. If
the share transfer records shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
records shall be closed for at least ten (10) days immediately preceding such
meeting. In lieu of closing the share transfer records, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than sixty (60) days, and, in
the case of a meeting of shareholders, not less than ten (10) days, prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. If the share transfer records are not closed and no record date
is fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders, or shareholders entitled to receive a distribution
(other than a distribution involving a purchase or redemption by the Corporation
of any of its own shares) or a share dividend, the date on which such notice of
the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such distribution or share dividend is adopted, as the case
may be, shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section, such determination shall apply to any
adjournment thereof, except where the determination has been made through the
closing of the share transfer records and the stated period of closing has
expired.
Section 6.06. FIXING RECORD DATE FOR CONSENTS TO ACTION. Unless a record
date shall have previously been fixed or determined pursuant to this Article VI,
whenever action by shareholders is proposed to be taken by consent in writing
without a meeting of shareholders, the Board of Directors may fix a record date
for the purpose of determining shareholders entitled to consent to that action,
which record date shall not precede, and shall not be more than ten (10) days
after, the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors and the prior action of the Board of Directors is not required by the
Texas Business Corporation Act, the record date for determining shareholders
entitled to consent to action in writing without a meeting shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office, its principal place of business, or an officer or agent of
the Corporation having custody of the books in which proceedings of meetings of
shareholders are recorded. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Corporation's
principal place of business shall be addressed to the President or the principal
executive officer of the Corporation. If no record date shall have been affixed
by the Board of Directors and prior action of the Board of Directors is required
by statute, the record date for
9
<PAGE>
determining shareholders entitled to consent to action in writing without a
meeting shall be at the close of business on the date on which the Board of
Directors adopts resolution taking such prior action.
Section 6.07. DISTRIBUTION HELD IN SUSPENSE. Distributions made by the
Corporation, including those that were payable but not paid to a holder of
shares or to such holder's heirs, successors or assigns, and have been held in
suspense by the Corporation or were paid or delivered by it into an escrow
account or to a trustee or custodian, shall be payable by the Corporation,
escrow agent, trustee or custodian to the holder of the shares as of the record
date determined for that distribution as provided in Section 6.05, or to such
holder's heirs, successors or assigns.
Section 6.08. JOINT OWNERS OF SHARES. When shares are registered on the
books of the Corporation in the names of two (2) or more persons as joint owners
with the right of survivorship, after the death of a joint owner and before the
time that the Corporation receives actual written notice that parties other than
the surviving joint owner or owners claim an interest in the shares or any
distributions thereon, the Corporation may record on its books and otherwise
effect the transfer of those shares to any person, firm, or Corporation
(including that surviving joint owner individually) and pay any distributions
made in respect of those shares, in each case as if the surviving joint owner or
owners were the absolute owners of the shares. The Corporation permitting such
a transfer by and making any distribution to such a surviving joint owner or
owners before the receipt of written notice from other parties claiming an
interest in those shares or distributions is discharged from all liability for
the transfer or payment so made; provided, however, that the discharge of the
Corporation from liability and the transfer of full legal and equitable title of
the shares in no way affects, reduces, or limits any cause of action existing in
favor of any owner of an interest in those shares or distributions against the
surviving owner or owners.
ARTICLE VII.
GENERAL PROVISIONS
Section 7.01. DISTRIBUTIONS. Distributions upon the outstanding shares of
the Corporation, subject to the provisions of the Articles of Incorporation, may
be declared by the Board of Directors at any regular or special meeting.
Distributions may be paid in cash, in property or in shares of the Corporation,
subject to the provisions of the statutes and the Articles of Incorporation.
Section 7.02. RESERVES. There may be created by resolution of the Board
of Directors out of the surplus of the Corporation such reserve or reserves as
the directors from time to time, in their discretion, think proper to provide
for contingencies, or to equalize distributions, or to repair or maintain any
property of the Corporation, or for such other purposes as the Board of
Directors shall think beneficial to the Corporation, and the Board of Directors
may modify or abolish any such reserve in the manner in which it was created.
Section 7.03. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 7.04. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
10
<PAGE>
Section 7.05. SEAL. The corporate seal shall be kept in the safe custody
of the Secretary of the Corporation and shall have inscribed thereon the name of
the Corporation and may be in such form as the Board of Directors may determine.
Said seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7.06. INDEMNIFICATION. The Corporation shall have the authority
to and shall indemnify and advance expenses to the directors, officers,
employees, agents of the Corporation or any other persons serving at the request
of the Corporation in such capacities in a manner and to the maximum extent
permitted by applicable state or federal law. The Corporation may purchase and
maintain liability insurance or make other arrangements for such obligations to
the extent permitted by the Texas Business Corporation Act.
Section 7.07. TRANSACTIONS WITH DIRECTORS AND OFFICERS. No contract or
transaction between the Corporation and one (1) or more of its directors or
officers, or between the Corporation and any other Corporation, partnership,
association, or other organization in which one (1) or more of its directors or
officers are directors or officers or have a financial interest, shall be void
or voidable solely for this reason, solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof that authorizes the contract or transaction, or solely because his, her,
its or their votes are counted for such purpose, if:
(1) The material facts as to such person's relationship or interest
and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or
committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or
(2) The material facts as to such person's relationship or interest
and as to the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof, or the shareholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee that authorizes
the contract or transaction.
Section 7.08. AMENDMENTS. The Board of Directors may amend or repeal the
Bylaws of the Corporation or adopt new Bylaws, unless: (1) the Articles of
Incorporation or the Texas Business Corporation Act reserves the power
exclusively to the shareholders in whole or part; or (2) the shareholders in
amending, repealing or adopting a particular bylaw expressly provide that the
Board of Directors may not amend or repeal that bylaw. Unless the Articles of
Incorporation or a bylaw adopted by the shareholders provides otherwise as to
all or some portion of the Bylaws, the shareholders may amend, repeal or adopt
the Bylaws even though the Bylaws may also be amended, repealed or adopted by
the Board of Directors.
Section 7.09. TABLE OF CONTENTS; HEADINGS. The Table of Contents and
headings used in these Bylaws have been inserted for convenience only and do not
constitute matters to be construed in interpretation.
11
<PAGE>
CERTIFICATE BY SECRETARY
The undersigned, being the Secretary of the Corporation, hereby certifies
that the foregoing code of Bylaws was duly adopted by the directors of said
Corporation effective on May 5, 1997.
/S/ Richard H. Roberson
Richard H. Roberson, Secretary
12
<PAGE>
AMENDMENT TO THE BYLAWS
OF
IWL COMMUNICATIONS, INCORPORATED
(the "Corporation")
The following Amendment to the Bylaws was adopted by the Board of Directors
of the Corporation as of November 7, 1997.
RESOLVED, that a new bylaw designated as Section 7.10 be added to the
Bylaws of the Corporation to read in its entirety as follows:
"Section 7.10 BUSINESS COMBINATION LAW. The Corporation
hereby expressly elects not to be governed by Part Thirteen
(the Business Combination Law) of the Texas Business
Corporation Act."
RESOLVED FURTHER, that all other provisions of the Bylaws shall continue as
previously adopted.
/s/ Richard H. Roberson
------------------------------
Richard H. Roberson, Secretary
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,316
<SECURITIES> 0
<RECEIVABLES> 6,612
<ALLOWANCES> 128
<INVENTORY> 4,490
<CURRENT-ASSETS> 15,204
<PP&E> 16,894
<DEPRECIATION> 6,039
<TOTAL-ASSETS> 26,371
<CURRENT-LIABILITIES> 5,515
<BONDS> 8,604
0
0
<COMMON> 38
<OTHER-SE> 12,215
<TOTAL-LIABILITY-AND-EQUITY> 26,371
<SALES> 0
<TOTAL-REVENUES> 12,055
<CGS> 6,557
<TOTAL-COSTS> 11,169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218
<INCOME-PRETAX> 778
<INCOME-TAX> 270
<INCOME-CONTINUING> 508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 508
<EPS-PRIMARY> .14
<EPS-DILUTED> .13
</TABLE>
