<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 31, 1998
------------------------
WESTOWER CORPORATION
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
WASHINGTON 333-32963 91-1825860
---------------------------------------------------------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
7001 N.E. 40TH AVENUE, VANCOUVER, WASHINGTON 98661
---------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (360) 750-9355
--------------
- -----------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS.
The following section is included for incorporation by reference into
Westower Corporation's Registration Statement on Form S-8 (Registration No. 333-
65337):
Experts
The financial statements of CORD Communications, Inc. for the fiscal
year ended June 30, 1998, included in Westower Corporation's Form 8-K/A
Amendment No. 1 to its Current Report on Form 8-K dated September 15, 1998, are
incorporated by reference herein in reliance on the consent of Moss Adams LLP,
independent auditors, given on the authority of said firm as experts in auditing
and accounting.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
On August 31, 1998, Westower Corporation (the "Company") completed the
acquisition of CORD Communications, Inc., a California corporation ("Cord"),
pursuant to an Agreement and Plan of Merger with Cord, Cord's stockholders Mark
Buechley, Seth Buechley and Mark Reed, and Cord Acquisition Co., a Washington
corporation and a wholly-owned subsidiary of the Company. Included below are
certain financial statements and pro forma information of Cord.
(a) Financial statements of CORD Communications, Inc.
Audited financial statements for June 30, 1998:
CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of operations 3
Statements of changes in stockholders' equity (deficit) 4
Statements of cash flows 5
Notes to financial statements 6-15
</TABLE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
CORD Communications, Inc.
We have audited the accompanying balance sheets of CORD Communications, Inc. as
of June 30, 1998 and 1997, and the related statements of operations, changes in
stockholders' equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An Audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CORD Communications, Inc. as of
June 30, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
As described in note 13 to the financial statements, the Company was sold
subsequent to June 30, 1998.
Beaverton Oregon
October 21, 1998
1
<PAGE>
CORD COMMUNICATIONS, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1998 1997
------------ -----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 27,730 $ 913,514
Accounts receivable - trade, (net of allowance) 1,951,901 2,452,205
Costs and estimated earnings in excess of billings on
uncompleted contracts 151,817 735,634
Unbilled amounts on completed contracts 175,209 394,502
Accrued interest receivable 14,410 7,744
Employee advances 1,471 5,961
Refundable income taxes 440,320 -
Prepaid expenses 43,392 11,069
------------ -----------
Total current assets 2,806,250 4,520,629
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION 401,834 399,218
OTHER ASSETS 42,949 39,749
------------ -----------
Total assets $ 3,251,033 $ 4,959,596
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable - trade $ 1,459,981 $ 1,247,921
Note payable 500,000 155,000
Notes payable - stockholder and related party - 87,402
Current portion, long-term debt and capital lease oligations 38,897 48,474
Accrued wages and payroll taxes 243,426 193,051
Other accrued liabilities 83,562 17,832
Billings in excess of costs and estimated earnings on
uncompleted contracts 443,185 69,352
Income taxes payable - 547,000
Deferred income taxes 194,800 841,478
------------ -----------
Total current liabilities 2,963,851 3,207,510
------------ -----------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 53,766 86,121
------------ -----------
DEFERRED INCOME TAXES 260,700 -
------------ -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $1 par value, 1,000,000 shares authorized,
2,000 shares issued, 873 shares outstanding 873 873
Additional paid-in-capital 350,878 350,878
Retained earnings (deficit) (318,437) 1,374,812
Note receivable - stock subscription (60,598) (60,598)
------------ -----------
Total stockholders' equity (deficit) (27,284) 1,665,965
------------ -----------
Total liabilities and stockholders' equity $ 3,251,033 $ 4,959,596
============ ===========
</TABLE>
See accompanying notes. 2
- --------------------------------------------------------------------------------
<PAGE>
CORD COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
1998 1997
-------------------------- --------------------------
AMOUNT PERCENT AMOUNT PERCENT
------------ ---------- ------------- ---------
<S> <C> <C> <C> <C>
CONTRACT REVENUES $ 11,010,207 100.00% $ 15,902,768 100.00%
COST OF CONTRACTS
Subcontractor 3,642,346 33.08 3,522,513 22.15
Labor 2,754,248 25.02 3,672,345 23.09
Materials and supplies 1,532,546 13.92 2,008,403 12.63
Equipment costs and rental 615,980 5.59 867,399 5.45
Other 805,431 7.32 875,529 5.51
------------ ---------- ------------- ---------
Total cost of contracts 9,350,551 84.93 10,946,189 68.83
GROSS PROFIT 1,659,656 15.07 4,956,579 31.17
GENERAL AND ADMINISTRATIVE
EXPENSES 4,157,468 37.76 1,916,076 12.05
------------ ---------- ------------- ---------
OPERATING INCOME (LOSS) (2,497,812) (22.69) 3,040,503 19.12
OTHER INCOME (EXPENSES)
Interest income 10,887 0.10 8,044 0.05
Interest expense (41,521) (0.38) (100,982) (0.63)
Other 37,088 0.34 18,826 0.12
------------ ---------- ------------- ---------
Total other income (expenses) 6,454 0.06 (74,112) (0.46)
INCOME (LOSS) BEFORE INCOME TAXES (2,491,358) (22.63) 2,966,391 18.66
PROVISION FOR INCOME TAXES (798,109) (7.25) 1,339,829 8.43
------------ ---------- ------------- ---------
NET (LOSS) INCOME $ (1,693,249) (15.38) $ 1,626,562 10.23%
============ ========== ============= =========
</TABLE>
See accompanying notes 3
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CORD COMMUNICATIONS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
- ---------------------------------------------------------------------------------------------------------------
NOTE
COMMON STOCK ADDITIONAL RETAINED RECEIVABLE
-------------------
PAID-IN EARNINGS STOCK
SHARES AMOUNT CAPITAL (DEFICIT) SUBSCRIPTION TOTAL
------ ------ ---------- --------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1996 873 $873 $350,878 $ (251,750) $(80,207) $ 19,794
Receipts on note receivable
stock subscription - - - - 19,609 19,609
Net income for the year - - - 1,626,562 - 1,626,562
--- ---- -------- ----------- -------- -----------
BALANCE, June 30, 1997 873 873 350,878 1,374,812 (60,598) 1,665,965
--- ---- -------- ----------- -------- -----------
Loss for the year - - - (1,693,249) - (1,693,249)
--- ---- -------- ----------- -------- -----------
BALANCE, June 30, 1998 873 $873 $350,878 $ (318,437) $(60,598) $ (27,284)
=== ==== ======== =========== ======== ===========
See accompanying notes. 4
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CORD COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,693,249) $ 1,626,562
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization 131,561 73,507
Deferred income taxes (385,978) 780,000
Gain (loss) on sale of fixed assets 10,436 (4,284)
Changes in certain operating assets and liabilities:
Accounts receivable - trade 500,304 (1,716,878)
Costs and estimated earnings in excess of billings 583,817 (662,048)
Unbilled amounts on completed contracts 219,293 (394,502)
Accrued interest receivable (6,666) 3,466
Employee advances 4,490 (4,976)
Refundable income taxes (440,320) -
Prepaid expenses (32,323) (16)
Other assets (3,200) (26,074)
Accounts payable - trade 212,060 875,528
Accrued wages and payroll taxes 50,375 143,130
Other accrued liabilities 65,730 (1,702)
Billings in excess of costs and estimated earnings 373,833 (65,560)
Income taxes payable (547,000) 542,654
---------- ----------
Net cash from operating activities (956,837) 1,168,807
---------- ----------
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Decrease (increase) in note receivable - stock subscription - 19,609
Proceeds from sale of equipment 2,800 -
Purchase of property and equipment (147,413) (290,046)
---------- ----------
Net cash from investing activities (144,613) (270,437)
---------- ----------
CASH FLOWS RELATED TO FINANCING ACTIVITIES
Proceeds from issuance of long-term debt and capital lease obligation 8,000 123,620
Principal payments on long-term debt and capital lease obligations (49,932) (60,481)
Proceeds from stockholder loans - 6,767
Principal payments on stockholder loans (87,402) -
Net change in notes payable 345,000 (110,000)
---------- ----------
Net cash from financing activities 215,666 (40,094)
---------- ----------
NET (DECREASE) INCREASE IN CASH (885,784) 858,276
CASH AND CASH EQUIVALENTS, beginning of year 913,514 55,238
---------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 27,730 $ 913,514
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid $ 41,521 $ 100,982
========== ==========
Interest received $ 4,221 $ 11,510
========== ==========
Income taxes paid $ 575,188 $ 505
========== ==========
</TABLE>
See accompanying notes. 5
- --------------------------------------------------------------------------------
<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - CORD Communications, Inc. was incorporated in July
1994 in the state of California. The Company constructs cellular
communication sites, underground and overhead telephone and utility lines,
and commercial tenant improvements. In addition, they perform site
acquisition and lease negotiations, and provide land use planning services.
The Company operates primarily in California, Washington, and Oregon.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. At June
30, 1997, cash and cash equivalents that exceeded the FDIC insurance limits
were $711,410.
ACCOUNTING RECEIVABLE - In the normal course of business, the Company
extends credit to customers, principally with customers located in
California, Washington, and Oregon. Collectibility of accounts receivable
is periodically assessed by management. This assessment provides the basis
for any allowance for doubtful accounts and related bad debt expense. An
allowance of $83,000 was considered necessary by management at June 30,
1998. No allowance for doubtful accounts was considered necessary by
management as of June, 30 1997. A concentration of credit risk exists in
connection with the Company's trade customers due to the proximity of
location and services provided. As of June 30, 1998 and 1997, the Company
had accounts receivable balances of $1,951,901 and $2,452,205, which were
exposed to the concentration of credit risk. Credit risk related to
contract receivables is minimized by the Company's rights under lien laws
on contracts subject to those laws.
REVENUE AND COST RECOGNITION - Revenues from fixed-price construction
contracts are recognized on the percentage of completion method, measured
on the basis of cost incurred to date to total estimated cost for each
contract. Because of inherent uncertainties in estimating cost to complete,
it is at least reasonably possible that the estimates used will change in
the near term.
Contract costs include all direct material, equipment and labor costs,
subcontract costs and those indirect costs related to contract performance,
such as supplies, travel and per diem costs. General and administrative
costs are charged to expense as incurred. Provisions for estimated losses
on uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and estimated
profitability, including those arising from final contract settlements, may
result in revisions to costs and income and are recognized in the period in
which the revisions are determined. Claims are generally included in
contract revenues when settled.
6
- --------------------------------------------------------------------------------
<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
The asset, "Cost and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in advance of
amounts billed. The liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in advance of
revenues recognized.
Property and Equipment - Property and equipment is carried at cost and is
depreciated on the straight-line method over the estimated useful lives of
the assets.
Vehicles 5 years
Office furniture and equipment 3 to 7 years
Construction equipment 5 to 7 years
Leasehold improvements 3 years
Property and equipment consisted of the following at June 30, 1998 and
1997, respectively:
<TABLE>
<CAPTION>
June 30,
--------------------------
1998 1998
---------- ----------
<S> <C> <C>
Vehicles $ 342,782 $ 257,864
Office furniture and equipment 183,760 137,735
Construction equipment 119,028 112,648
Leasehold improvements 19,361 19,361
---------- ----------
664,931 545,608
Less accumulated depreciation (263,097) (146,390)
---------- ----------
$ 401,834 $ 399,218
========== ==========
</TABLE>
The cost and related accumulated depreciation of assets sold or disposed
are removed from the accounts, and any resulting gain or loss is included
in operations. Repairs and maintenance expenditures are expensed as
incurred.
INCOME TAXES - Income taxes are provided for the tax effects of
transactions reported in the financial statements, and consist of taxes
currently due plus deferred taxes related primarily to different methods of
accounting for depreciation and the use of the cash method for income tax
purposes. The deferred taxes represent the future tax return consequences
of those differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled.
7
- --------------------------------------------------------------------------------
<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Use of estimates in preparation of financial statements - The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates. Significant
estimates used in preparing these financial statements include estimated
costs to complete which have a direct effect on gross profit.
Valuation of long lived assets and change in accounting policy - The
Company periodically reviews long-lived assets and certain identifiable
intangibles whenever events of changes in circumstance indicate that the
carrying amount of an asset may not be recoverable. There will be no
provisions for impairment during 1998 or 1997.
NOTE 2 - NOTE PAYABLE
The Company has a line of credit with South Umpqua State Bank, which bears
interest at the Wall Street Journal's published prime rate plus 1%. The
Company may borrow up to $1,000,000 under the terms of the line of credit.
The note is collateralized by equipment, intangible assets, chattel paper
accounts, equipment, and general intangibles. The note payable is also
personally guaranteed by the stockholders of the Company. Borrowing on the
line is limited to 70% of receivables less than 90 days old, less retainage
receivables. The line of credit was scheduled to expire on February 1,
1999, however, the note was paid off on September 1, 1998 (see Note 13).
8
- --------------------------------------------------------------------------------
<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
<TABLE>
<CAPTION>
JUNE 30
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Notes payable to Ford Motor Credit Corp. with
interest from 9.75% to 10.25%, payable in
monthly installments of $1,149, including
interest, maturing from 1999 through 2001,
collateralized by vehicles $ 25,798 $ 36,431
Notes payable to South Umpqua State Bank with
interest from 8.48% to 10.75%, payable in
monthly installments of $1,950, including
interest maturing from 1998 through 2001,
collateralized by vehicles 21,968 36,074
Note payable to Damerow Ford with interest at
8.65%, payable in monthly installments of
$646, including interest, maturing in 2001,
collateralized by a vehicle 21,349 26,950
Note payable on equipment with interest from
1.9%, to 11.5% payable in monthly installments
of $1,716, including interest, maturing in 1998
through 2001, collateralized by equipment 11,518 28,068
Capital lease obligations for equipment, payable
in monthly installments of $608, including
interest, imputed from 15.29% to 20.92% maturing
in 1999 through 2001, collateralized by equipment 12,030 7,072
---------- ----------
92,663 134,595
Less current portion (38,897) (48,474)
---------- ----------
Long-term portion $ 53,766 $ 86,121
========== ==========
</TABLE>
Future maturities of long-term debt are as follows:
Year ending Amount
June 30 Maturing
----------- ---------
1999 $ 38,897
2000 27,571
2001 22,396
2002 3,743
2003 56
---------
$ 92,663
=========
9
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<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4 - OPERATING LEASE COMMITMENTS
The Company leases office and storage space, vehicles, and communication
analyzing equipment under non-cancelable operating leases expiring on
various dates through February 2000. Total rental payments amounted to
$229,482 and $109,964 for the years ended June 30, 1998 and 1997,
respectively.
Future minimum rental commitments under non-cancelable leases payable over
the remaining lives of the leases are:
Minimum
Year ending Lease
June 30, Payments
-------- --------
1999 $ 73,793
2000 7,098
---------
$ 80,891
=========
NOTE 5 - COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
The Company has recorded the following costs and estimated earnings on
contracts in progress:
June 30,
-------------------------
1998 1997
----------- -----------
Costs incurred on contracts in progress $1,506,191 $ 1,563,604
Estimated earnings 402,937 807,434
Revenue recognized to date 1,909,128 2,371,038
Less billings to date (2,200,496) (1,704,756)
----------- -----------
$ (291,368) $ 666,282
=========== ===========
10
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<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
(CONTINUED)
Included in the accompanying balance sheet under the following captions:
<TABLE>
<CAPTION>
JUNE 30,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Costs and estimated earnings in excess of
billings on contracts in progress $ 151,817 $ 735,634
Billings in excess of costs and estimated
earnings on contracts in progress (443,185) (69,352)
---------- ----------
$ (291,368) $ 66,282
========== ==========
</TABLE>
NOTE 6 - CONTRACT BACKLOG
The following schedule summarizes changes in backlog on contracts during
the year ended June 30, 1998 and 1997, Backlog represents the amount of gross
revenue the Company expects to realize from work to be performed on contracts in
progress at year-end.
<TABLE>
<CAPTION>
JUNE 30,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Backlog balance, beginning of year $ 1,279,115 $ 2,568,957
New contracts during the year 10,571,539 14,612,926
----------- -----------
11,850,654 17,181,883
Less: contract revenue earned during the year (11,010,207) (15,902,768)
----------- -----------
Backlog balance, end of year $ (840,447) $ 1,279,115
=========== ===========
</TABLE>
11
- --------------------------------------------------------------------------------
<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
June 30,
-------------------------
1998 1997
----------- ------------
<S> <C> <C>
Current
Federal $ (404,249) $ 426,013
State (7,883) 133,816
---------- ------------
(412,132) 559,829
---------- ------------
Deferred
Federal (308,781) 624,000
State (77,196) 156,000
---------- ------------
(385,977) 780,000
---------- ------------
$ (798,109) $ (1,339,829)
========== ============
</TABLE>
The difference between the actual income tax provision (benefit) and the
tax provision (benefit) computed by applying the statutory federal rate to
income (loss) before taxes is attributable to the following:
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------
1998 1997
----------------------- ---------------------
Amount % Amount %
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Federal statutory income tax
provision (benefit) $ (847,052) (34.0%) $ 1,008,573 34.0%
State statutory income tax
provision (benefit) (211,766) ( 8.5%) 252,143 8.5%
Carryback of net operating losses (NOL)
in years with rates different than
statutory rates 13,300 0.5% - -
Change in valuation allowance for
deferred taxes 283,370 11.4% - -
Other (35,951) ( 1.4%) 79,113 2.7%
--------- --------- ---------- --------
Actual income tax provision (benefit) $ (798,109) (32.0%) $ 1,339,829 45.2%
========= ========= ========== ========
</TABLE>
12
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<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES (CONTINUED)
The composition of the deferred income tax assets and liabilities at June
30, 1998 and 1997 are:
<TABLE>
<CAPTION>
June 30,
---------------------------
1998 1997
---------- ------------
<S> <C> <C>
Current deferred tax assets
Differences in basis in assets
due to cash method used for income
taxes $ - $ 751,789
Bad debts, vacation accrual and other 115,100 -
Tax benefit of net operating loss
carryforwards 283,370 -
Valuation allowance (283,370) -
---------- ------------
115,100 751,789
---------- ------------
Current deferred tax liabilities
Differences in basis in liabilities
due to cash method used for income
taxes - (1,593,267)
Difference in revenue recognized on
uncompleted contracts (171,300) -
Deferral of taxes from conversion from
cash to accrual completed contract (134,500) -
Other (4,100) -
---------- ------------
(309,900) (1,593,267)
---------- ------------
Net current deferred tax liabilities $ (194,800) $ (841,478)
========== ============
Non-current deferred tax assets
Capitalization differences between
financial and tax accounting $ 9,000 $ 1,266
Other 19,300 -
---------- ------------
28,300 1,266
---------- ------------
Non-current deferred tax liabilities
Deferral of taxes from conversion from
cash to accrual completed contract (269,000) -
Depreciation differences between
financial and tax accounting (20,000) (1,266)
---------- ------------
(289,000) (1,266)
---------- ------------
Net non-current deferred tax liabilities $ (260,700) $ -
========== ============
</TABLE>
The Company's net operating loss carryforward will expire in 2013.
13
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<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8 - BOND GUARANTEES
Most of the Company's business activities are performed under contract
agreements with customers which require bond guarantees from an independent
surety company. As is customary in the construction industry, the Company
has pledged all of its assets in order to indemnify the surety company
against losses under these bond guarantees.
NOTE 9 - RELATED PARTY TRANSACTIONS
During the year ended June 30, 1996, the Company bought back 418 shares of
its stock which were owned by a principal stockholder. The buy-back of
stock was accomplished by providing an unsecured promissory note for
$138,063 payable upon demand, which accrued interest at the rate of 10% per
annum. During the year ended June 30, 1998, the Company paid the remaining
principal balance outstanding at June 30, 1997 of $87,402.
The Company leases equipment from a principal stockholder. Lease payments
for the years ended June 30, 1998 and 1997 were $57,600 and $78,920,
respectively. Amounts included in accounts payable that were due to the
stockholder for equipment rental were $0 and $22,200 at June 30, 1998 and
1997, respectively.
On June 30 1995, the Company had an outstanding unsecured note receivable
from a stockholder which it had received in exchange for the issuance of
common stock. The note is payable upon demand and accrues interest at the
rate of 10% per annum. The Company received payments of principal and
interest of $0 and $30,820 at June 30, 1998 and 1997, respectively. The
remaining principal balance owed the Company at June 30, 1998 and 1997 was
$60,598. The Company's accrued interest balance at June 30, 1998 and 1997
was $14,410 and $7,744, respectively.
NOTE 10 - DEFINED CONTRIBUTION PENSION PLAN
Effective January 1997, the Company adopted a 401(k) retirement plan that
covers all employees who have completed one year of service and are at
least 21 years of age. The Company's contributions, which are
discretionary, are allocated to participants based on a percentage of
wages, Participants may also make elective contributions. Employer pension
expense for the year ended June 30, 1998 and 1997 totaled $28,409 and $0,
respectively.
15
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<PAGE>
CORD COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash, accounts receivable, accounts payable, and other current
liabilities - At June 30, 1998, carrying amounts of these financial
instruments approximate fair value because of their short maturities.
Long term debt and capital lease obligations - At June 30, 1998, estimated
fair value of long-term debt approximates the carrying amount of $92,663,
based on current rates offered in similar debt.
NOTE 12 - YEAR 2000 COMPLIANCE
The Company is conducting a review of its computer and other systems to
identify those areas that could be affected by the "Year 2000" issue and is
developing an implementation plan to resolve the issue. The Company is
currently working with consulting who believe, with modifications to
existing software and converting to new software hardware, the Year 2000
problem will not pose significant operational problems and is not
anticipated to be material to its financial position or results of
operations in any given year.
NOTE 13 - SUBSEQUENT EVENTS
On September 1, 1998, the Company's line of credit was paid in full and
canceled.
On August 31, 1998, the stockholders of CORD Communications sold all of the
outstanding shares of stock to Westower Corporation in exchange for
$5,000,000 in cash and 217,312 shares of Westower stock. The stockholders
can receive 347,826 additional shares contingent on the performance of CORD
Communications during the twelve months following the purchase. The
purchase agreement also provides that Westower will supply CORD's need for
additional working capital during the twelve months following the purchase.
Westower is a larger cellular tower contractor and operator, and is
planning to bring its additional marketing, operational and capital
resources to CORD Communications in order to grow and enhance the Company's
business activities.
15
- --------------------------------------------------------------------------------
<PAGE>
(b) Pro forma financial information.
The unaudited pro forma condensed combined statement of income for the year
ended February 28, 1998 and the six months ended August 31, 1998 combine
historical statements of operations for the Company and Cord as if the
acquisitions had occurred on March 1, 1997.
The unaudited pro forma condensed combined statement of income for the six
months ended August 31, 1998 combines historical financial information of the
Company for the six months ended August 31, 1998 and Cord for the six months
ended June 30, 1998. The unaudited pro forma condensed combined statement of
income for the year ended February 28, 1998 combines historical financial
information of the Company for the year ended February 28, 1998 and Cord for the
year ended December 31, 1997. As the most recent fiscal year end of Cord is June
30, 1998, for the purpose of the pro forma presentation, adjustments were made
to present Cord's results of operations on a calendar year basis, which differs
from the Company's by less than 93 days. These adjustments included combining
the six months of operations ended December 31, 1997 (which were reviewed by
Cord's independent auditors) with the internally prepared six months of
operations ended June 30, 1997. Note that both of the aforementioned periods are
included in Cord's audited financial statements contained elsewhere herein. The
acquisition of Cord was completed on August 31, 1998 and the transaction is
reflected in the Company's Form 10-QSB filed on October 15, 1998. Accordingly,
no pro forma balance sheet has been provided as of August 31, 1998.
The business of these entities is subject to seasonal fluctuations and,
therefore, the results of operations for periods less than twelve months may not
be indicative of annual results. The pro forma financial statements are not
necessarily indicative of the financial position or results of operations which
would actually have been reported had the transaction been consummated on March
1, 1997 or which may be reported in the future. Actual results for the six
months ended August 31, 1998 have been reported on the Company's Form 10QSB
filed on October 15, 1998.
The pro forma data should be read in conjunction with the notes to unaudited pro
forma condensed combined financial information and the historical financial
statements and notes thereto of Cord contained elsewhere herein.
1. Unaudited Condensed Combined Pro Forma Statement of Income for the year
ended February 28, 1998:
WESTOWER CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
HISTORICAL
WESTOWER CORD PRO FORMA PRO FORMA
CORPORATION COMMUNICATIONS ADJUSTMENTS COMBINED
------------------------------------------------ --------------
<S> <C> <C> <C> <C>
CONTRACT REVENUES EARNED 37,112,000 16,541,000 53,653,000
COSTS OF REVENUES EARNED 27,474,000 12,444,000 39,918,000
------------------------------------------------ --------------
Gross profit 9,638,000 4,097,000 0 13,735,000
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 5,174,000 2,383,000 500,000 1 7,887,000
(170,000) 2
------------------------------------------------ --------------
OPERATING INCOME 4,464,000 1,714,000 (330,000) 5,848,000
OTHER INCOME(EXPENSE)
Gain on sale of assets 125,000 125,000
Other 39,000
Interest income 114,000 15,000 129,000
Interest expense (93,000) (100,000) (193,000)
------------------------------------------------ --------------
146,000 (46,000) 0 61,000
------------------------------------------------ --------------
INCOME BEFORE INCOME TAXES 4,610,000 1,668,000 (330,000) 5,909,000
INCOME TAXES 1,633,000 1,575,000 (1,140,000) 3 2,068,000
------------------------------------------------ --------------
NET INCOME 2,977,000 93,000 810,000 3,841,000
================================================ ==============
Basic earnings per share 0.63 n/a 0.78
================================================ ==============
Diluted earnings per share 0.59 n/a 0.73
================================================ ==============
Shares of common stock used in
computing earnings per share:
Basic 4,720,000 217,000 4 4,937,000
================================================ ==============
Diluted 5,051,000 217,000 4 5,268,000
================================================ ==============
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED FEBRUARY 28, 1998
1 To reflect amortization of intangible assets resulting from the
application of purchase accounting, producing goodwill of
approximately $10,000,000. For amortization purposes, the Company has
used a useful life of 20 years.
2 Contractual reductions in historical compensation of former owners of
Cord.
3 Estimated adjustment to reflect income taxes at effective rate.
4 Represents shares of Westower common stock issued in connection with
the acquisition of Cord as if the shares had been outstanding for the
entire period.
2. Unaudited Condensed Combined Pro Forma Statement of Income for the
period ended August 31, 1998:
<PAGE>
WESTOVER CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
WESTOVER CORD PRO FORMA PRO FORMA
CORPORATION COMMUNICATIONS ADJUSTMENTS COMBINED
----------------------------------------------------- ----------------
<S> <C> <C> <C> <C>
CONTRACT REVENUES EARNED 38,671,000 4,498,000 43,369,000
COSTS OF REVENUES EARNED 29,536,000 3,840,000 33,376,000
----------------------------------------------------- ----------------
GROSS PROFIT 9,135,000 858,000 0 9,993,000
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 5,511,000 2,860,000 250,000 1 8,536,000
(85,000) 2
----------------------------------------------------- ----------------
OPERATING INCOME 3,624,000 (2,002,000) (165,000) 1,457,000
OTHER INCOME(EXPENSE)
Other 17,000 17,000
Interest income 244,000 3,000 247,000
Interest expense (263,000) (25,000) (288,000)
----------------------------------------------------- ----------------
(19,000) (5,000) 0 (24,000)
----------------------------------------------------- ----------------
INCOME BEFORE INCOME TAXES 3,605,000 (2,007,000) (165,000) 1,433,000
INCOME TAXES 1,262,000 (555,000) (211,000) 3 496,000
----------------------------------------------------- ----------------
NET INCOME 2,343,000 (1,452,000) 46,000 937,000
===================================================== ================
BASIC EARNINGS PER SHARE 0.38 n/a 0.15
===================================================== ================
DILUTED EARNINGS PER SHARE 0.33 n/a 0.13
===================================================== ================
Shares of common stock used in
computing earnings per share:
Basic 6,123,000 217,000 4 6,340,000
===================================================== ================
Diluted 7,117,000 217,000 4 7,334,000
===================================================== ================
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED AUGUST 31, 1998
1 To reflect amortization of intangible assets resulting from the application
of purchase accounting, producing goodwill of approximately $10,000,000.
For amortization purposes, the Company has used a useful life of 20 years.
2 Contractual reductions in historical compensation of former owners of Cord.
3 Estimated adjustment to reflect income taxes at effective rate.
4 Represents shares of Westower common stock issued in connection with the
acquisition of Cord as if the shares had been outstanding for the entire
period.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of August 31, 1998, among Cord
Communications Incorporated, Cord Acquisition Co., Mark Buechley, Seth
Buechley, Mark Reed and Westower Corporation.*
2.2 Registration Rights Agreement, dated as of August 31, 1998, among
Westower Corporation and Mark Buechley, Seth Buechley and Mark Reed.*
2.3 Employment Agreement, dated as of August 31, 1998, between Cord
Acquisition Co. and Mark Buechley.*
2.4 Employment Agreement, dated as of August 31, 1998, between Cord
Acquisition Co. and Seth Buechley.*
2.5 Consent of Independent Auditor.
________________
* Previously filed.
<PAGE>
SIGNATURE
---------
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 hereunto duly authorized.
WESTOWER CORPORATION
Date: November 16, 1998 By: /s/ Peter Lucas
---------------------------------
Peter Lucas, Senior Vice President,
Chief Financial Officer, Treasurer
and Secretary
<PAGE>
Exhibit Index
-------------
Exhibits
- --------
2.1 Agreement and Plan of Merger, dated as of August 31, 1998, among Cord
Communications Incorporated, Cord Acquisition Co., Mark Buechley, Seth
Buechley, Mark Reed and Westower Corporation.*
2.2 Registration Rights Agreement, dated as of August 31, 1998, among Westower
Corporation and Mark Buechley, Seth Buechley and Mark Reed.*
2.3 Employment Agreement, dated as of August 31, 1998, between Cord Acquisition
Co. and Mark Buechley.*
2.4 Employment Agreement, dated as of August 31, 1998, between Cord Acquisition
Co. and Seth Buechley.*
23.1 Consent of Independent Auditor.
__________
* Previously filed.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
of Westower Corporation on Form S-8 (Registration No. 3333-65337) of our report
dated October 21, 1998, relating to the financial statements of CORD
Communications Incorporated appearing in this Amendment No. 1 on Form 8-K/A to
the Current Report on Form 8-K dated September 15, 1998 of Westower Corporation.
Beaverton, Oregon
November 13, 1998
