U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from________________to_______________
COMMISSION FILE NUMBER 1-132963
WESTOWER CORPORATION
(Name of small business issuer in its charter)
WASHINGTON
(State or jurisdiction of
Incorporation or Organization)
1623 91-1825860
(Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)
Westower Corporation
7001 NE 40th Avenue
Vancouver, Washington 98661
(360) 750-9355
(Address and telephone number of principal executive
offices and principal place of business)
Check whether the issuer:
(1) filed all reports required to be filed by Section 13 or 15 (d) of the
Exchange Act 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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes common
equity, as of the latest practicable date:
5,938,407 as of June 30,1998
<PAGE>
WESTOWER COPORATION
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATMENTS
Consolidated Balance Sheets of Westower Corporation
at May 31, 1997 and 1998 (unaudited) 3
Consolidated Statements of Income of Westower Corporation for
the three month periods ended May 31, 1997 and 1998 ( unaudited ) 4
Consolidated Statements of Cash Flows of Westower Corporation for
the three month periods ended May 31, 1997 and 1998 (unaudited ) 5
Notes to the Consolidated Financial Statements of
Westower Corporation as of May 31,1997 and 1998 ( unaudited ) 6
ITEM 2 - MANAGEMNET'S DISSCUSSIONS AND ANALYSIS OR PLAN OF OPERATION 7
PART II - OTHER INFORMATION 8
ITEM 1 - LEGAL PROCEEDINGS
ITEM 2 - CHANGES IN SECURITIES
ITEM 3 - DEFAULTS UPON SENIOR SECURITES
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5 - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
WESTOWER CORPORATION
CONSOLIDATED BALANCE SHEETS
May 31, 1997 and 1998
<TABLE>
<CAPTION>
( Unaudited )
1997 1998
--------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,893,000 $ 21,569,000
Account receivable, net 5,016,000 9,035,000
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,641,000 1,649,000
Inventory (Note 2) 242,000 2,127,000
------------- -----------
Total Current Assets 8,792,000 34,380,000
PROPERTY AND EQUIPMENT, net 1,959,000 4,238,000
GOODWILL 2,064,000
OTHER ASSETS 64,000 859,000
-------------- -------------
TOTAL ASSETS $ 10,815,000 $ 41,541,000
============= =============
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable $ 3,657,000 $ 5,444,000
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,415,000 1,348,000
Other current liabilities 245,000 280,000
Income taxes payable 137,000 1,816,000
Deferred income taxes 569,000 534,000
Note payable to bank - 150,000
Current portion of long-term debt 257,000 343,000
-------
Total current liabilities 7,280,000 9,915,000
LONG-TERM DEBT, net of current portion 180,000 187,000
DEFERRED INCOME TAXES - 48,000
SUBORDINATED CONVERTIBLE NOTES - 15,000,000
ADVANCES FROM RELATED PARTIES 1,594,000 -
--------------- -------------
Total liabilities 9,054,000 25,150,000
--------------- -------------
REDEEMABLE PREFERRED STOCK 450,000 -
--------------- -------------
STOCKHOLDERS' EQUITY
Common stock 42,000 12,022,000
Foreign currency translation adjustments - (67,000)
Retained earnings 1,269,000 4,436,000
--------------- -------------
Total stockholders' equity 1,311,000 16,391,000
--------------- -------------
TOTAL LIABILITIES AND STOCK
HOLDERS' EQUITY $ 10,815,000 $ 41,514,000
============ =============
</TABLE>
WESTOWER CORPORATION
CONSOLDIATED STAEMENTS OF INCOME
( Unaudited )
<TABLE>
<CAPTION>
For the Three Months Ended
May 31,
1997 1998
-------------------- --------
<S> <C> <C>
Revenues Earned $ 8,948,000 $ 11,166,000
Cost of Revenues Earned 6,654,000 8,599,000
------------- -------------
Gross Profit 2,294,000 2,567,000
Selling, General and Administrative
Expenses 1,335,000 1,357,000
----------- ----------
Operating Income $ 959,000 $ 1,210,000
Other Income ( Expense )
Interest expense (26,000) (17,000)
Interest income - 75,000
-------------------- ----------
Income Before Income Taxes 933,000 1,268,000
Income Taxes 349,000 444,000
--------------- ----------
Net Income $ 584,000 $ 824,000
============ ============
Basic Earnings per Share $ .14 $ .15
=============== ===============
Diluted Earnings per Share n.a. $ .13
=============== ===============
Weighted Average Common Shares 4,232,000 5,659,000
============== ==============
Weighted Average Common Shares
plus Dilutive Potential n.a. 6,587,000
</TABLE>
WESTOWER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended May 31, 1997 and 1998 ( Unaudited
)
<TABLE>
<CAPTION>
1997 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 584,000 $ 824,000
Depreciation and amortization 59,000 62,000
Net change in non-cash operating
assets and liabilities 1,079,000 (3,243,000)
------------- -------------
Net cash flows from operating activities 1,722,000 (2,357,000)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITES
Purchase of property and equipment (169,000) (435,000)
------------- -------------
Net cash flows from investing activities (169,000) (435,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITES
Principal payments on long-term debt (168,000) (51,000)
Net proceeds on exercise of warrants - 3,290,000
Net proceeds on sale of convertible
subordinated notes - 14,850,000
------------- -------------
Net cash flows from financing activities (168,000) 18,089,000
------------- -------------
NET INCREASE IN CASH 1,385,000 15,297,000
CASH - Beginning of Period 508,000 6,272,000
--------------- --------------
CASH - End of Period $ 1,893,000 $ 21,569,000
============= =============
SUPPLEMENTAL DISCLOSURE
Interest Paid $ 11,000 $ 17,000
Taxes Paid $ 38,000 $ 280,000
</TABLE>
<PAGE>
WESTOWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1997 and 1998
( Unaudited )
Note 1 - Basis of Presentation
The consolidated financial statements and notes thereto at May 31, 1997 and 1998
and for the three month periods ended May 31, 1997 and 1998 reflect the
acquisition of Western Telecom Construction Ltd., an Alberta corporation and the
acquisition of MJA Communications Corp., a Florida corporation. Both companies
design, fabricate and construct wireless transmitting and receiving facilities
and shelters for communications equipment. The Company issued 835,000 shares of
its common stock for all the common shares of Western Telecom Construction Ltd.
and 397,023 shares of its common stock for all of the common shares of MJA
Communications Corp. Both acquisitions were structured as mergers and accounted
for as pooling of interests. Accordingly, the consolidated financial statements
and notes thereto at May 31, 1997 and 1998, and for three month periods ended
May 31, 1997 and 1998 are presented as if the acquisition of Western Telecom
Construction Ltd. and MJA Communications Corp. had occurred at the at the
beginning of all periods presented.
The notes to the consolidated financial statements do not present all
disclosures required under generally accepted accounting principles, but
instead, as permitted by the Securities and Exchange Commission regulations,
presume that user of the interim financial statements have read or have access
to the February 28, 1998 audited consolidated financial statements and that the
adequacy of additional disclosure needed for a fair presentation may be
determined in that context. The financial information included herein reflects
all adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary to a fair presentation of the results for
interim periods. The results of operations for the three month periods ended May
31, 1997 and 1998 respectively are not necessarily indicative of the results to
be expected for the full year. Note 2 - Inventory
Inventory is stated at the lower of cost and estimated net realizable value
using the first-in, first-out method. Inventory consists of materials purchased
for future construction not associated with specific jobs.
Note 3 - Common Stock
On October 15, 1997, the Company issued 1,200,000 shares of common stock and
1,380,000 warrants to purchase common stock in a public offering. The Company
received proceeds, net of costs, of $7,524,585. During the three month ended May
31, 1998 , the Company received proceeds of $3,289,788 on the exercise of 365,
532 warrants.
<PAGE>
WESTOWER CORPORATION
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED MAY 31, 1997 AND 1998
Results for the three month periods ended May 31, 1997 and 1998, include the
results for Western Telecom Construction Ltd. and MJA Communications Corp., both
acquisitions accounted for using the pooling-of-interests method.
Revenues for the first quarter increased $2,218,000 or 25% compared to the first
quarter in the previous year. Approximately 40% of the increase is attributable
to strong demand for the Company's services in some geographic areas including
the Southeastern U.S. and Alberta, Canada, offset by weaker demand in such areas
as the Northwestern U.S. Acquisitions accounted for by the purchase method
completed in late fiscal 1998, contributed to approximately 60% of the increase.
Gross profit for the quarter ended May 31, 1998 increased $273,000 or 12% from
the comparable quarter. The increase is attributable to the 25% increase in
sales partially offset by a decline in gross profit margins from 25.6% in 1997
to 23.0% in 1998. The decline in gross profit margin is attributable to
increased price competition in the Northwestern region of the U.S. and Ontario,
Canada.
Selling, general and administrative expenses for the quarter ended May 31, 1998
were approximately the same as in the comparable quarter. As a percentage of
sales, these expenses were 14.9 % in 1997 and 12.1% in 1998. The small increase
of $22,000 reflects increased staffing to manage growth and to enable the
Company to own communications towers and lease space on these towers to third
parties, offset by a reduction in salaries and bonuses paid to principal
officers in prior years.
Operating income improved $251,000 or 26% in the quarter ended May 31,1998
compared to the quarter ended May 31, 1997. The increase is attributable to the
increase in revenues offset somewhat by the decrease in gross profit margins.
Net income increased 41% in the quarter ended May 31, 1998, to $824,000 from the
comparable period. The increase is attributable to the increase in sales, stable
selling, general and administrative expenses, offset by reduced gross profit
margin.
During the three months ended May 31, 1998, the Company owned twelve
communications towers that are leased to a telephone company (currently, 22
towers). Revenue and expenses associated with this activity have been included
in contract revenues and costs.
<PAGE>
WESTOWER CORPORATION
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITES
None
ITEM 4 - SUMBISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibits None
Reports on Form 8-K
During the three months ended May 31, 1998, the Company filed
Form 8-K which described the acquisition of WTC Holding Inc.,
the parent of Western Telecom Construction Ltd.
Signature: ____________________________________________________________
Signature: ____________________________________________ _______________
Signature: ____________________________________________________________
Westower Corporation
Registrant
Date: ________________________________________________________
