<PAGE>
The following items were the subject of a
Form 12b-25 and are included herein: Item 6
and Item 7.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A-2
(Amendment No. 2)
[ ] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED __________________
OR
[X] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from March 1, 1998 to September 30, 1998.
COMMISSION FILE NO. 1-132963
WESTOWER CORPORATION
(Name of small business issuer in its charter)
WASHINGTON 91-1825860
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7001 NE 40th Ave.
Vancouver, Washington 98661
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (360) 750-9355
SECURITIES REGISTERED UNDER SECTION 12 (b) OF THE EXCHANGE ACT:
<PAGE>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
____________ ____________
Common Stock, $.01 par value American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE EXCHANGE ACT:
NONE
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 Company was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes /X/ No / /
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this Form 10-KSB, and no disclosure will be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. / /
The issuer's revenues for the seven months ended September 30, 1998 were
$31,944,000.
The approximate aggregate market value of voting stock held by non-affiliates,
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of January 19, 1999, was $125,749,000.
The number of shares of common stock outstanding as of January 19, 1999, was
8,254,660.
Purpose of Amendment: to include Items 6 and 7 of Part II and to amend Item 13
of Part III.
2
<PAGE>
PART II
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Item and other items in this Report include "forward-looking" information
as that term is defined in the Private Securities Litigation Reform Act of 1995
or by the Securities and Exchange Commission in its rules, regulations and
releases. The Company cautions investors that any such statements made by the
Company are not guarantees of future performance and that known and unknown
risks, uncertainties, and other factors including those risk factors identified
elsewhere in this Report may cause actual results to differ materially from
those forward-looking statements. The Company does not undertake to update or
revise its forward-looking statements publicly even if experience or future
changes make it clear that any projected results expressed or implied herein
will not be realized.
The following should be read in connection with the Company's Financial
Statements and related notes thereto.
RESULTS OF OPERATIONS
Westower Corporation and subsidiaries (the "Company" or "Westower") designs,
builds and maintains wireless communication transmitting and receiving
facilities for providers of wireless communication services. The Company also
owns and leases wireless communication towers to wireless communication service
providers.
The following table presents, as a percentage of net revenues, certain financial
data for the Company for the periods indicated:
<TABLE>
<CAPTION>
Seven Months Ended Fiscal Year Ended
September 30 February 28
-------------------- --------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
----- ----- ----- -----
Contract revenues 100.0% 100.0% 100.0% 100.0%
Costs of revenues 74.7 73.4 70.8 73.6
Gross profit 25.3 26.6 29.2 26.4
Selling, general and
administrative expenses 15.5 11.9 17.4 17.0
Depreciation and amortization 1.8 .8 1.1 .6
Merger expenses 1.0 - - -
Operating income 7.0 13.9 10.7 8.8
Other income - - .3 .1
Interest income .4 .2 .3 .2
Interest and financing expense 2.4 .1 .3 .2
Income before tax 5.0 14.0 11.0 8.9
Income tax 1.1 5.0 3.9 1.5
Net income 3.9 9.0 7.1 7.4
</TABLE>
The Company was a private corporation until its initial public offering, which
was completed on October 15, 1997. Since then, and prior to September 30, 1998,
the Company completed eleven acquisitions, three of which were accounted for as
pooling-of-interests. The financial statements and the following
-3-
<PAGE>
discussion of operations reflect the pooled transactions as if these companies
were part of the Company for all periods presented.
On October 27, 1998, the Company changed its fiscal year end from February 28 to
September 30. Accordingly, the financial results for the seven month period
from March 1, 1998 to September 30, 1998 (the "Transition Period") have been
presented, and the unaudited financial results for the seven month period from
March 1, 1997 to September 30, 1997 have been included for comparative purposes.
Comparison of the Seven Month Periods Ended September 30, 1998 and 1997
(unaudited).
Revenues for the seven months ended September 30, 1998 increased $9,075,000 or
40% compared to the comparable period in 1997. Approximately 52% of the increase
is due to strong demand for the Company's services in certain geographic areas,
including the southeastern United States. Acquisitions accounted for by the
purchase method contributed approximately 48% of the increase.
Costs of revenues for the seven months ended September 30, 1998 increased
$7,080,000 or 42% compared to the comparable period in 1997. Costs of revenues,
as a percentage of sales, increased to 74.7% from 73.4%, due to more competitive
bidding environments. Approximately 94% of the increase is due to the increase
in sales; 6% reflects the increase in the costs of revenues percentage.
Gross profit for the seven months ended September 30, 1998 increased $1,995,000
or 33% from the same period in 1997. The increase is attributable to the
increase in revenues explained above, partially offset by the increase in the
costs of revenues percentage.
Selling, general and administrative expenses for the seven months ended
September 30, 1998 increased $2,238,000 or 82% from the same period in 1997. The
increase is attributable to increased fees and costs associated with being a
public company and increased staffing designed to enable the Company to become a
significant tower owner and operator.
Depreciation and amortization for the seven months ended September 30, 1998
increased $391,000 or 209% from the same period in 1997. The increase is
attributable to amortization of intangible assets ($182,000) and an increase in
depreciation reflecting greater equipment and communications towers ($209,000).
Merger-related expenses were $327,000 for the seven months ended September 30,
1998, as compared to none in the seven months ended September 30, 1997. These
expenses represent professional fees and other costs incurred to complete
business combinations accounted for using the pooling-of-interests method.
Operating income for the seven months ended September 30, 1998 decreased
$961,000 or 30% compared to the same period in 1997. The decrease is due to
increased selling, general and administrative expenses, depreciation and
amortization, and merger expenses as discussed above.
Interest and related financing costs, consisting of the amortization of a
commitment fee of $116,000, amortization of a conversion feature of $124,000,
amortization of deferred financing charges of $113,000, amortization of original
issue discount of $27,000 and interest expense of $391,000 for the seven months
ended September 30, 1998, increased $739,000 or 2309% from the same period in
1997. The increase is due to interest and costs related to the issuance of
convertible subordinated debt and obtaining a $75 million credit facility (See
"Liquidity and Capital Resources").
Income taxes for the seven months ended September 30, 1998 decreased $790,000 or
69% compared to the same period in 1997. The decrease is attributable to
reduced income, and a decrease in the effective tax rate from 36% to 22%. The
decrease in the effective tax rate is primarily due to income directly
-4-
<PAGE>
taxable to former S Corporation shareholders of companies acquired during the
Transition Period that were accounted for under the pooling-of-interests method.
Net income for the seven months ended September 30, 1998 decreased $823,000 or
40% compared to the same period in 1997. The decrease is a result of the items
discussed above, such as increased revenues offset by increased selling, general
and administrative expenses, depreciation and amortization, merger expenses, and
interest costs.
Revenue and expenses of approximately $170,000 and $25,000, respectively,
associated with tower ownership have been included in contract revenues and
costs of revenues.
Comparison of the Fiscal Years Ended February 28, 1998 and 1997
Revenues for the year ended February 28, 1998 decreased $4,429,000 or 10%
compared to fiscal 1997. The decrease is primarily attributable to a
$12,236,000 decrease in the southeastern United States, primarily reflecting the
end of a major build by one customer, offset by increases throughout the rest of
the United States and Canada.
Costs of revenues for the year ended February 28, 1998 decreased $4,428,000 or
13% compared to fiscal 1997. Costs of revenues, as a percentage of sales,
decreased to 70.8% from 73.6%, due to less competitive bidding environments.
Gross profit for the year ended February 28, 1998 was virtually unchanged from
fiscal 1997; the difference is approximately $1,000. The lack of significant
change is due to the $4,429,000 decrease in revenues offset by the $4,428,000
decrease in costs of revenues, both of which are explained above.
Selling, general and administrative expenses for the year ended February 28,
1998 decreased $596,000 or 8% from fiscal 1997. In fiscal 1997, tax motivated
bonuses of $956,000 were paid to the senior officers. No such bonuses were paid
in 1998. Adjusted for the bonuses, the selling, general and administrative
expenses increased $360,000 and this reflects increased staffing associated with
being a public company and positioning the Company to be a significant owner and
operator of towers.
Depreciation and amortization for the year ended February 28, 1998 increased
$205,000 or 76% from fiscal 1997. The increase is consistent with an increase
in the Company's equipment.
Operating income for the year ended February 28, 1998 increased $390,000 or 10%
from fiscal 1997. This increase is a result of decreased selling, general and
administrative expenses and improved profit margin percentage, offset by
decreased sales and increased depreciation and amortization.
Other income increased by $94,000 for the year ended February 28, 1998 from the
comparable period as a result of interest income on the proceeds from the
Company's initial public offering and gains on the sale of property, offset by
interest expense from prior borrowings.
Income taxes for the year ended February 28, 1998 increased $997,000 or 157%
from fiscal 1997. The increase is attributable to the increase in operating
income and an increase in the effective tax rate from 16% to 36% which was a
result of increased taxable income in Canada and less income taxed directly to
former S Corporation shareholders of acquired companies accounted for using the
pooling-of-interests method.
-5-
<PAGE>
Net income for the year ended February 28, 1998 decreased $494,000 or 14% from
fiscal 1997 reflecting the decrease in revenues, increased depreciation and
amortization, and higher tax rate, partially offset by the improved gross profit
percentage and decreased selling, general and administrative expenses.
Liquidity and Capital Resources
At September 30, 1998, the Company had cash of $9,331,000, an increase from
February 28, 1998, of $2,125,000. Working capital was $14,650,000.
The Company used $4,138,000 of cash in its operations during the Transition
Period. Net income plus non-cash operating expenses was $2,427,000, and
$6,565,000 is reflected in the changes in non-cash operating assets and
liabilities. During the Transition Period, the Company used cash of $6,348,000,
net of acquired cash, to acquire businesses, and $1,657,000 to purchase property
and equipment.
During the year ended February 28, 1998, the Company sold 1,200,000 Units in its
initial public offering of securities and received net proceeds of approximately
$7,493,000. Each unit consisted of one share of common stock and one warrant to
purchase a share of common stock for $9.00. During the seven months ended
September 30, 1998, 559,000 warrants were exercised resulting in net proceeds of
$4,788,000. Subsequent to September 30, 1998, nearly all of the remaining
warrants were exercised resulting in net proceeds of $7,371,000.
In May 1998, the Company sold $15,000,000 principal amount of 7% subordinated
convertible notes ("Subordinated Debt"). Net proceeds were $14,850,000. The
notes are convertible into 599,281 shares of Common Stock at $25.03 per share
until April 30, 2007. In connection with the Subordinated Debt, the Company
granted warrants to purchase 40,000 shares of Common Stock at $23 per share
until April 30, 2007. The Company has used the proceeds to purchase and build
communications towers for lease to others, and to acquire other enterprises.
On June 9, 1998, the Company signed a credit agreement with BankBoston, N.A.
whereby BankBoston, N.A. committed to providing $75,000,000 principal amount of
senior secured revolving credit (the "Credit Facility"). The Credit Facility
allows the Company to purchase or construct communications towers for use by
third parties. The Company's ability to utilize the Credit Facility is
determined by, among other criteria, its cash flows generated from operations
and from tower leasing. Subsequent to September 30, 1998, the Company has
borrowed $24 million under the Credit Facility.
The Company's future cash requirements for fiscal 1999 and beyond will depend
primarily upon the level of wireless infrastructure building and implementation
undertaken by the Company, the level of working capital needed to generate the
revenues associated with such business plan, and acquisition opportunities. The
Company believes that revenues from operations, amounts available under
Subordinated Debt and the Credit Facility noted above and other capital
resources available to the Company will be adequate to satisfy its working
capital requirements for at least the next twelve months.
To date, the Company has derived substantially all of its revenues from sales in
the United States and Canada, and inflation has not had a significant effect on
the Company's business. The Company does not currently expect inflation to
adversely affect it in the future unless inflation increases significantly in
the United States or Canada. To date, the Company's activities in Brazil have
been denominated in Canadian currency.
On November 10, 1998 the Company completed the acquisition of Summit
Communications, LLC ("Summit"), a Mississippi limited liability company which
engages in operations similar to those of the
-6-
<PAGE>
Company. The merger was effected by exchanging 200,000 shares of common stock
valued at approximately $4.1 million, $4.4 million in cash, and the assumption
of certain liabilities, for all membership interests in Summit. The former
members of Summit may also receive an additional 100,000 shares of common stock,
based on certain performance criteria during the three years following the date
of acquisition. The acquisition was accounted for using the purchase method for
business combinations, resulting in goodwill of approximately $6.8 million.
On October 30, 1998, the Company completed the acquisition of Teletronics
Management Services, Inc. ("Teletronics"). The acquisition was effected by
exchanging 188,076 shares of common stock valued at approximately $4 million,
$1 million in cash, and the assumption of certain liabilities, including
distributions payable to former shareholders in the amount of $800,000, for all
outstanding shares of Teletronics. The acquisition was accounted for using the
purchase method for business combinations, resulting in goodwill of
approximately $4.7 million.
On October 22, 1998, the Company exercised a right to acquire certain
communications towers for $9.2 million, subject to regulatory approval.
The Company is currently in negotiation with certain tower construction
companies concerning acquisition by Westower. The Company is also in
negotiation with certain third parties concerning the acquisition of wireless
communication towers, and with a financial institution to arrange financing for
the wireless communication tower purchases, should the negotiations conclude
successfully. None of the negotiations are finalized and there is no assurance
that the Company will be successful in concluding these negotiations, or if the
Company is successful, that the acquisitions will not be dilutive to existing
shareholders.
Year 2000 Compliance
The Company is aware of the issues associated with the year 2000 as it relates
to information systems. In September 1998, independent consultants completed a
review of the Company's software and hardware. Pursuant to recommendations made
by the consultants, the Company replaced a few personal computers. The Company's
total expenditure to date for Year 2000 compliance is less than $50,000. The
Year 2000 is not expected to have a material impact on the Company's current
information systems because its current software is either already Year 2000
compliant or required changes are not expected to be significant. The Company
has not conducted a survey of its customers or vendors to ascertain their year
2000 readiness. Based on the nature of the Company's business, and the existence
of alternate vendors, however, the Company anticipates that it is not likely to
experience material business interruption due to the potential adverse impact of
the Year 2000 on its vendors. As a result, the Company does not anticipate that
incremental expenditures to address Year 2000 compliance will be material to the
Company's liquidity, financial position or results of operations over the next
few years.
Accounting Standards
In June 1998, the Financial Accounting Standard Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. Among other
provisions, SFAS No. 133 requires that entities recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. Gains and losses resulting from changes in the
fair values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. SFAS No. 133
becomes effective for the Company beginning October 1, 1999. The Company is
currently assessing the impact, if any, to its financial position or results of
operations.
-7-
<PAGE>
Item 7. FINANCIAL STATEMENTS
Report of Independent Accountants
To the Board of Directors and Stockholders
Westower Corporation
In our opinion, based upon our audit, the accompanying consolidated balance
sheet and the related consolidated statements of income, of stockholders'
equity, and of cash flows present fairly, in all material respects, the
financial position of Westower Corporation and its subsidiaries at September 30,
1998, and the results of their operations and their cash flows for the seven
months ended September 30, 1998 in conformity with generally accepted accounting
principles. 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 audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above. The financial statements of Westower Corporation for the years ended
February 28, 1998 and 1997 were audited by other independent accountants whose
report dated April 14, 1998, except for the third paragraph in Note 3, as to
which the date is May 31, 1998 and the fourth paragraph in Note 3, as to which
the date is October 23, 1998, expressed an unqualified opinion on those
statements.
/s/ PricewaterhouseCoopers LLP
Seattle, Washington
February 4, 1999
8
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
Westower Corporation
We have audited the accompanying consolidated balance sheet of Westower
Corporation and Subsidiaries as of February 28, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity, 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 did not audit the financial
statements of MJA Communications Corporation, which are included in the
financial statements of Westower Corporation as discussed in Note 3 to the
financial statements, and which statements reflect total assets constituting 16%
and 56% of consolidated total assets as of February 28, 1998 and 1997 and total
revenues constituting 33% and 57% of consolidated total revenues for the years
then ended, respectively. Those statements were audited by other auditors, whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for MJA Communications Corporation, is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Westower Corporation
and Subsidiaries as of February 28, 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.
/s/ MOSS ADAMS LLP
Bellingham, Washington
April 14, 1998, except for the third paragraph
in Note 3, as to which the date is
May 31, 1998, and the fourth paragraph in
Note 3, as to which the date is
October 23, 1998
9
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholder of
MJA Communications Corp.
Palm Beach Gardens, Florida
We have audited the balance sheet of MJA Communications Corp. as of December 31,
1997 and 1996, and the related statements of income and retained earnings, and
cash flows for the years then ended (not separately presented herein). 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 MJA Communications Corp. as of
December 31, 1997 and 1996, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ LAMN, KRIELOW, DYTRYCH & DARLING
Certified Public Accountants
February 11, 1998, except for Note 4, as to which the date is August 12, 1998
10
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1998, February 28, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
September 30, February 28, February 28,
1998 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 9,331,000 $ 7,206,000 $ 7,131,000
Accounts receivable, net 13,289,000 7,112,000 4,905,000
Costs and estimated earnings in excess of
billings on uncompleted contracts 5,078,000 2,143,000 938,000
Inventory 2,151,000 1,140,000 201,000
Related party advances and receivables 956,000 831,000 -
Income tax receivable 220,000 - -
Other current assets 1,203,000 125,000 63,000
----------- ----------- -----------
Total current assets 32,228,000 18,557,000 13,238,000
PROPERTY AND EQUIPMENT, net 7,574,000 4,321,000 2,707,000
INTANGIBLE ASSETS, net 19,721,000 2,088,000 -
OTHER ASSETS 2,771,000 91,000 58,000
----------- ----------- -----------
TOTAL ASSETS $62,294,000 $25,057,000 $16,003,000
=========== =========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C> <C>
Trade accounts payable $ 7,053,000 $ 4,445,000 $ 4,980,000
Other current liabilities 2,810,000 929,000 275,000
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,435,000 1,745,000 3,850,000
Income taxes payable 2,116,000 1,652,000 155,000
Deferred income taxes 428,000 534,000 580,000
Stockholder advances and notes payable to related parties 228,000 2,044,000 672,000
Note payable 1,089,000 147,000 208,000
Current portion of long-term debt
and capital lease obligations 2,419,000 502,000 610,000
----------- ----------- ------------
Total current liabilities 17,578,000 11,998,000 11,330,000
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, excluding current portion 14,991,000 292,000 212,000
DEFERRED INCOME TAXES 2,962,000 48,000 27,000
----------- ----------- ------------
Total liabilities 35,531,000 12,338,000 11,569,000
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST - - 40,000
----------- ----------- ------------
REDEEMABLE PREFERRED STOCK - - 450,000
----------- ----------- ------------
STOCKHOLDERS' EQUITY
Common stock ($.01 par value, 10,000,000 shares authorized,
7,047,000, 6,117,000 and 4,776,000 shares issued and
outstanding at September 30, 1998, and February 28,
1998 and 1997, respectively) 70,000 61,000 48,000
Additional paid-in-capital 22,610,000 8,672,000 (48,000)
Accumulated other comprehensive income (loss) (581,000) (67,000) 27,000
Retained earnings 4,664,000 4,053,000 3,917,000
----------- ----------- ------------
Total stockholders' equity 26,763,000 12,719,000 3,944,000
----------- ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $62,294,000 $25,057,000 $16,003,000
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Seven Months Ended September 30, 1998 and 1997 (Unaudited)
Years Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
(Unaudited)
Seven Months Seven Months
Ended Ended Year Ended Year Ended
September 30, September 30, February 28, February 28,
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
CONTRACT AND OTHER
REVENUES EARNED
$31,944,000 $22,869,000 $41,662,000 $46,091,000
COSTS OF REVENUES EARNED (exclusive of
depreciation and amortization shown below) 23,858,000 16,778,000 29,508,000 33,936,000
----------- ----------- ----------- ------------
Gross profit 8,086,000 6,091,000 12,154,000 12,155,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,958,000 2,720,000 7,236,000 7,832,000
DEPRECIATION AND AMORTIZATION 578,000 187,000 473,000 268,000
MERGER RELATED EXPENSES 327,000 - - -
----------- ----------- ----------- ------------
OPERATING INCOME 2,223,000 3,184,000 4,445,000 4,055,000
OTHER INCOME (EXPENSE)
Other income (expense) (2,000) - 126,000 32,000
Interest income 130,000 41,000 127,000 70,000
Interest and financing expense (771,000) (32,000) (129,000) (72,000)
----------- ----------- ----------- ------------
Total other income (expense) (643,000) 9,000 124,000 30,000
----------- ----------- ----------- ------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,580,000 3,193,000 4,569,000 4,085,000
MINORITY INTEREST - - - (19,000)
----------- ----------- ----------- ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,580,000 3,193,000 4,569,000 4,066,000
PROVISION FOR INCOME TAXES 351,000 1,141,000 1,633,000 636,000
----------- ----------- ----------- ------------
NET INCOME $1,229,000 $2,052,000 $2,936,000 $3,430,000
=========== =========== =========== ============
EARNINGS PER SHARE:
BASIC EARNINGS $.19 $.43 $.56 $.72
==== ==== ==== ====
DILUTED EARNINGS $.16 $.43 $.52 $.72
==== ==== ==== ====
PRO FORMA EARNINGS PER SHARE:
BASIC EARNINGS $.12 $.37 $.53 $.53
==== ==== ==== ====
DILUTED EARNINGS $.10 $.37 $.50 $.53
==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
September 30, 1998 and February 28, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other Com- Com-
------------------- Paid-in Retained prehensive prehensive
Shares Amount Capital Earnings Income (loss) Income Total
------ ------ ------- -------- ------------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, February 29, 1996 4,776,000 $ 48,000 $ (48,000) $ 870,000 $ 29,000 $ 899,000
Net income 3,430,000 $ 3,430,000
Foreign currency translation
adjustment (2,000) (2,000)
----------
Total comprehensive income $3,428,000 3,428,000
==========
Distributions of earnings to
S corporation stockholders of
acquired subsidiary prior
to acquisition (383,000) (383,000)
---------- ---------- ----------- ------------ ----------- -----------
BALANCE, February 28, 1997 4,776,000 48,000 (48,000) 3,917,000 27,000 3,944,000
Net income 2,936,000 $ 2,936,000
Foreign currency translation
adjustment (94,000) (94,000)
------------
Total comprehensive income $2,842,000 2,842,000
============
Stock issuances 1,341,000 13,000 8,699,000 8,712,000
Stock compensation expense 21,000 21,000
Distributions of earnings to
S corporation stockholders
of acquired subsidiary prior
to acquisition (2,800,000) (2,800,000)
---------- ---------- ----------- ------------ ----------- -----------
BALANCE, February 28, 1998 6,117,000 61,000 8,672,000 4,053,000 (67,000) 12,719,000
Net income 1,229,000 $ 1,229,000
Foreign currency translation
adjustment (514,000) (514,000)
-----------
Total comprehensive income $ 715,000 715,000
===========
Adjustment to conform fiscal year
ends of acquired subsidiaries 438,000 438,000
Proceeds from warrants exercised 559,000 6,000 4,782,000 4,788,000
Proceeds from stock options
exercised and related tax benefit 35,000 556,000 556,000
Stock issuances for business
acquisitions 336,000 3,000 8,097,000 8,100,000
Value ascribed to conversion
feature and warrants of
convertible debt, net of
deferred taxes 468,000 468,000
Stock compensation expense 35,000 35,000
Distributions of earnings and for taxes
to stockholders of acquired subsidiaries
prior to acquisition (1,056,000) (1,056,000)
---------- --------- ----------- ------------ ----------- -----------
BALANCE, September 30,
1998 7,047,000 $ 70,000 $22,610,000 $ 4,664,000 $ (581,000) $26,763,000
========== ========== =========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Seven Months Ended September 30, 1998 and 1997 (Unaudited)
Years Ended February 28, 1998 and 1997
<TABLE>
<CAPTION>
(Unaudited)
Seven Months Seven Months
Ended Ended Year Ended Year Ended
September 30, September 30, February 28, February 28,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FROM OPERATING ACTIVITIES
Net income $ 1,229,000 $ 2,052,000 $ 2,936,000 $ 3,430,000
Adjustments to reconcile net income to
net cash from operating activities
Depreciation and amortization 578,000 187,000 473,000 268,000
Provision for bad debt 221,000 - - -
Deferred income taxes 367,000 (209,000) (41,000) 433,000
Non-cash interest and financing expense 264,000 - - -
Gain on sale of assets - - (125,000) -
Stock-based compensation 35,000 - 56,000 -
Earnings from equity investment (46,000) - - -
Minority interest - (40,000) - 19,000
Changes in operating assets and liabilities,
net of effect of acquisitions
Accounts receivable (1,603,000) (1,962,000) (1,484,000) (1,402,000)
Costs and estimated earnings in excess
of billings on uncompleted contracts (1,350,000) (238,000) (1,200,000) (545,000)
Inventory and other current assets (990,000) - (938,000) (143,000)
Other assets 135,000 (597,000) (5,000) (93,000)
Trade accounts payable (2,265,000) (810,000) (933,000) 3,387,000
Billings in excess of costs and estimated
earnings on uncompleted contracts (963,000) (3,156,000) (2,105,000) 2,380,000
Other current liabilities 6,000 (198,000) 648,000 79,000
Income taxes payable 244,000 (155,000) 1,354,000 147,000
------------- ------------ ------------ ------------
Net cash flows (used) provided
by operating activities (4,138,000) (5,126,000) (1,364,000) 7,960,000
------------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisitions, net of cash acquired (6,348,000) - (1,467,000) -
Sales of property and equipment - - 444,000 -
Purchases of property and equipment (1,657,000) (455,000) (1,692,000) (1,245,000)
------------- ------------ ------------ ------------
Net cash flows used by
investing activities (8,005,000) (455,000) (2,715,000) (1,245,000)
------------- ------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock issuances, net - - 7,493,000 -
Proceeds from stock warrant and option exercises, net 5,002,000 - - -
Redemption of preferred stock - (300,000) (450,000) -
Principal payments on long-term debt (392,000) (227,000) (326,000) (389,000)
Distributions to stockholders (1,056,000) - (2,800,000) (383,000)
Advances to related parties (65,000) (384,000) (196,000) -
Advances from related parties 34,000 1,117,000 457,000 -
Repayments to related parties (1,816,000) - - (480,000)
Borrowings (repayments) on line of credit, net (88,000) (85,000) (57,000) 207,000
Additions to financing costs (2,368,000) - - -
Proceeds from debt incurred 15,256,000 104,000 104,000 555,000
------------- ------------ ------------- -------------
Net cash flows provided (used)
by financing activities 14,507,000 225,000 4,225,000 (490,000)
------------- ------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Seven Months Ended September 30, 1998 and 1997 (Unaudited)
Years Ended February 28, 1998 and 1997
<TABLE>
<S> <C> <C> <C> <C>
EFFECT OF CHANGES IN
EXCHANGE RATES (239,000) (27,000) (71,000) -
----------- ----------- ------------ ------------
NET INCREASE IN CASH 2,125,000 (5,383,000) 75,000 6,225,000
CASH AND CASH EQUIVALENTS,
beginning of period 7,206,000 7,131,000 7,131,000 906,000
----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS,
end of period $ 9,331,000 1,748,000 $ 7,206,000 $ 7,131,000
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 1 - Organization
Westower Corporation (the "Company") was incorporated in Washington state
in June 1997 for the purpose of acquiring Westower Holdings Ltd. and its
wholly-owned subsidiaries, Westower Communications Ltd. and Westower
Communications, Inc. In connection with an initial public offering on
October 15, 1997, the Company raised approximately $7.5 million in net cash
proceeds. Proceeds have been used in part to acquire the assets and
operations of other businesses.
The Company is successor to operations begun in 1990 by Westower
Communications Ltd. It designs, builds and maintains wireless communication
transmitting and receiving facilities for providers of wireless
communication services. The Company also owns and leases wireless
communication towers to wireless communication providers. Principal
operations are located in the Pacific Northwest, including the Canadian
provinces of British Columbia and Alberta, and the Southeastern and
Southwestern United States. Other operations extend throughout the Western
United States and into Eastern Canada.
On October 27, 1998, the Company changed its fiscal year-end from February
28 to September 30, resulting in a seven month reporting period from March
1, 1998 to September 30, 1998 (the "Transition Period").
Note 2 - Summary Of Significant Accounting Policies
(a) Consolidation -- The consolidated financial statements include the
accounts of the Company and its wholly owned domestic and Canadian
subsidiaries
Investments in subsidiaries in which the Company exercises significant
influence but which it does not control are accounted for using the equity
method. At September 30, 1998, the Company has an equity investment in a
joint venture which engages in operations in Brazil that are similar to
those of the Company, in which it has an economic ownership interest of 60
percent. Revenues and associated expenses are transacted in Canadian
dollars. As of September 30, 1998, the Company's investment totaled
$217,000, which has been included in other assets, and the Company's equity
earnings from this investment during the Transition Period totaled $46,000,
which has been included in contract and other revenues earned.
All material intercompany accounts and transactions have been eliminated in
consolidation.
(b) Use of Estimates -- 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 consolidated financial statements. Examples of estimates
subject to possible revision based upon the outcome of future events
include costs and estimated earnings on uncompleted contracts, depreciation
of property and equipment, accrued income tax liabilities, and purchase
price allocations for acquisitions. Actual results could differ from those
estimates.
(c) Contract and Other Revenue and Cost Recognition -- Revenue from fixed-
price construction contracts is recognized using the percentage-of-
completion method based on cost incurred to total estimated cost. Revenue
from contracts based upon time and materials is recognized based upon hours
worked and materials consumed. Most of the Company's contracts are short-
term and are completed in two to three months. Contract costs include all
direct material and labor costs and those indirect costs related to
contract performance. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
16
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 2 - Summary of Significant Accounting Policies (Continued)
Costs and estimated earnings in excess of billings on uncompleted contracts
represents revenues recognized in excess of amounts billed. Billings in
excess of costs and estimated earnings on uncompleted contracts represents
billings in excess of revenues earned.
The Company owns wireless communication towers which it leases to third
parties. Revenues are recognized on a monthly basis over the term of the
leasing agreement. Revenues and cost of services of approximately $170,000
and $25,000, respectively, have been included in contract and other
revenues earned and cost of revenues earned, respectively, in the
Transition Period.
(d) Cash and Cash Equivalents -- Cash and cash equivalents consist of cash
in banks and money market investments on deposit with major Canadian and
U.S. financial institutions. Investments with maturities of three months or
less when purchased are considered cash equivalents.
(e) Inventory -- Inventory consists of construction parts and supplies and
is stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method.
(f) Property and Equipment -- Property and equipment is recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives by major asset category
are as follows: buildings 10 - 25 years; furniture, fixtures and
equipment - 3 to 10 years; wireless communication towers - 20 years;
vehicles - 5 years. Gains or losses on the dispositions of assets are
recorded at the time of disposition. The costs of normal repairs and
maintenance are charged to expense as incurred.
(g) Capitalized Software -- Purchased software is capitalized at cost and
amortized over its estimated useful life of 3 years.
(h) Intangible Assets -- Business acquisition costs are allocated to the
tangible and identifiable intangible assets that are acquired. Business
acquisition costs allocated to contracts to purchase wireless communication
towers are amortized over a 20 year period upon acquisition of the wireless
communication towers, and costs allocated to non-compete agreements are
amortized over the term of the agreements, which are generally 5 years. The
excess of the aggregate purchase price over the fair value of the net
assets acquired and identifiable intangible assets acquired is recorded as
goodwill. Goodwill is amortized over a 20 year period. The Company
amortizes its intangible assets using the straight line method.
(i) Financing Costs -- Direct costs associated with obtaining debt
financing are deferred and are amortized over the term of the debt using
the effective interest method. Direct costs of obtaining commitments for
financing are deferred and charged to expense over the term of the
commitments. Direct costs associated with obtaining equity financing are
charged to additional paid-in capital as the related funds are raised.
Deferred financing costs totaled $2.4 million at September 30, 1998, which
has been included in other assets. Accumulated amortization of deferred
financing costs totaled $113,000 at September 30, 1998.
(j) Valuation of Long-Lived Assets -- The Company periodically reviews its
long-lived assets and certain identifiable intangible assets, including
goodwill, whenever events or changes in circumstance indicate that the
carrying amount of an asset may be impaired and not recoverable.
Adjustments are made if the sum of the expected future undiscounted
operating cash flows is less than the carrying value of the asset.
(k) Income Taxes -- The Company accounts for income taxes under the
liability method. Deferred taxes are recognized for temporary differences
between the basis of assets and liabilities for financial statement and
income tax purposes at the enacted tax rates. The significant differences
relate primarily to the timing and recognition of
17
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 2 - Summary of Significant Accounting Policies (Continued)
depreciation, amortization and basis differences arising from acquisitions
related to long-lived assets, profit on uncompleted contracts,
amortization of financing costs and bad debt expense. Deferred tax amounts
represent the future tax consequences of those differences, which will
either be deductible or taxable when the assets and liabilities are
recovered or settled. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amounts expected to be
realized. The Company files a consolidated federal income tax return in
the United States. The Company files separate tax returns for each of its
Canadian subsidiaries in Canada. Additionally, certain of the Company's
operations are subject to provincial income taxes in Canada and state
income taxes in the United States.
(l) Foreign Currency Translation -- All asset and liability accounts of
Canadian operations are translated into U.S. dollars at current exchange
rates. Revenues and expenses are translated using the average exchange
rate during the period. Foreign currency translation adjustments are
reported as a component of comprehensive income and stockholders' equity
in the consolidated balance sheet. Gains and losses resulting from foreign
currency transactions are included in income currently.
(m) Earnings Per Share and Change in Accounting Policy -- During the
fiscal year ended February 28, 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. The new
standard supersedes Accounting Principles Board (APB) No. 15, Earnings Per
Share, and establishes standards for computing and presenting earnings per
share. Prior years have been restated to conform with the new
requirements.
Basic earnings per share amounts are computed based on the weighted
average number of shares outstanding during the period after giving
retroactive effect to stock dividends and stock splits. Diluted earnings
per share amounts are computed by determining the number of additional
shares that are deemed outstanding from stock options and warrants, using
the treasury stock method, and convertible debentures.
(n) Segment Information -- In the Transition Period, the Company adopted
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 supersedes SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise, replacing the "industry segment"
approach with the "management" approach. The management approach
designates the internal organization that is used by management for making
operating decisions and assessing performance as the source of the
Company's reportable segments. SFAS No. 131 also requires disclosures
about products and services, geographic areas, and major customers. The
adoption of SFAS No. 131 did not significantly affect the disclosure of
segment information previously reported (see "Segment Information" note).
(o) New Accounting Standards -- In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. Among other provisions, SFAS No. 133 requires that
entities recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair
value. Gains and losses resulting from changes in the fair values of those
derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. This Statement becomes
effective beginning October 1, 1999, for the Company. The Company is
currently assessing the impact, if any, to its financial position or
results of operations.
(p) Interim Financial Data (Unaudited) -- As discussed in Note 1, on
October 27, 1998 the Company changed its fiscal year end to September 30
from February 28. The information presented for the seven months ended
September 30, 1997 is unaudited. The accompanying unaudited financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with Rule 10-
01 of Regulation S-X. 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 necessary for a fair presentation of results
of the interim period have been made and such adjustments were of a normal
and recurring nature. The results of operations and cash flows for the
seven months ended September 30, 1997 are not necessarily indicative of
the results that were reported for the entire fiscal year ending February
28, 1998.
18
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 3 Mergers and Acquisitions
MERGERS -
Westower Holdings Ltd.
Concurrent with its incorporation in June 1997, the Company completed a merger
with Westower Holdings Ltd. by issuing 3,000,000 shares of common stock in
exchange for all outstanding common stock of Westower Holdings Ltd. Westower
Holdings Ltd. is a Wyoming corporation that owns all outstanding common stock of
Westower Communications Ltd. and Westower Communications, Inc. The merger
qualified as a tax-free exchange and is accounted for in a manner similar to a
pooling-of-interests.
WTC Holdings, Inc. and Western Telecom Construction Ltd
Effective October 28, 1997, the Company completed a merger with WTC Holdings,
Inc. (formerly 411677 Alberta Ltd.) and its wholly owned subsidiary, Western
Telecom Construction Ltd., (collectively, "Western Telecom"). WTC Holdings, Inc.
was wholly-owned by a relative of a significant stockholder and a director of
Westower Corporation. WTC Holdings, Inc. is a Wyoming corporation, and Western
Telecom Construction Ltd. is a Canadian corporation. Western Telecom engages in
operations similar to those of the Company. The merger was effected by
exchanging 835,000 shares of common stock for all outstanding common stock of
Western Telecom. The merger qualified as a tax-free exchange and has been
accounted for using the pooling-of-interests method for business combinations.
Accordingly, the consolidated financial statements for the Transition Period and
fiscal years ended February 28, 1998 and 1997 have been restated to include the
combined financial position, results of operations, and cash flows of Western
Telecom.
MJA Communications Corporation
Effective May 29, 1998, the Company completed a merger with MJA Communications
Corporation ("MJA"). MJA is a Florida corporation which engages in operations
similar to those of the Company. In connection with the merger, MJA's tax status
was changed from an S corporation to a C corporation. The merger was effected by
exchanging 397,000 shares of common stock for all outstanding common stock of
MJA. The merger qualified as a tax-free exchange and has been accounted for
using the pooling-of-interests method for business combinations. Accordingly,
the consolidated financial statements for the Transition Period and fiscal years
ended February 28, 1998 and 1997 have been restated to include the combined
financial position, results of operations, and cash flows of MJA.
Standby Services, Inc.
Effective August 31, 1998, the Company completed a merger with Standby Services,
Inc. ("Standby"). Standby is a Texas corporation which engages in operations
similar to those of the Company. In connection with the merger, Standby's tax
status was changed from an S corporation to a C corporation. The merger was
effected by exchanging 544,000 shares of common stock for all outstanding common
stock of Standby. The merger qualified as a tax-free exchange and has been
accounted for using the pooling-of-interests method for business combinations.
Accordingly, the consolidated financial statements for the Transition Period and
fiscal years ended February 28, 1998 and 1997 have been restated to include the
combined financial position, results of operations, and cash flows of Standby.
Prior to the respective mergers, Western Telecom had a fiscal year-end of
January 31, and MJA and Standby each had a fiscal year end of December 31. In
recording the business combinations, the fiscal years ended 1998 and 1997
financial statements have not been restated to conform with Westower
Corporation's previous fiscal year end of February 28, as the effect on the
consolidated financial statements is not material. As a result of Western
Telecom, MJA and Standby having a different
19
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 3 Mergers and Acquisitions (Continued)
fiscal year end and the change in the Company's fiscal year end, Western Telecom
and MJA and Standby's results of operations for the respective one and two-month
periods ended February 28, 1998 have been excluded from the reported results of
operations in the Transition Period and, therefore, have been presented as an
adjustment to the Company's consolidated statement of stockholders' equity for
the Transition Period.
Summarized results of operations for the separate companies and combined amounts
included in the consolidated financial statements, net of intercompany
transactions, are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Seven Months Seven Months
Ended Ended Year Ended Year Ended
September 30, September 30, February 28, February 28,
1998 1997 1998 1997
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Contract and other revenues earned
Westower Corporation and subsidiaries,
including entities acquired $11,450,000 $ 8,652,000 $16,156,000 $10,415,000
MJA 10,824,000 8,418,000 13,929,000 26,164,000
Western Telecom 5,341,000 3,035,000 7,027,000 5,001,000
Standby 4,329,000 2,764,000 4,550,000 4,511,000
----------- ----------- ----------- -----------
$31,944,000 $22,869,000 $41,662,000 $46,091,000
=========== =========== =========== ===========
Net income (Loss)
Westower Corporation and subsidiaries,
including entities acquired $ (816,000) $ 784,000 $ 975,000 $ 815,000
MJA 513,000 195,000 527,000 2,617,000
Western Telecom 387,000 442,000 1,475,000 364,000
Standby 1,145,000 631,000 (41,000) (366,000)
----------- ----------- ----------- -----------
$ 1,229,000 $ 2,052,000 $ 2,936,000 $ 3,430,000
=========== =========== =========== ===========
</TABLE>
The following pro forma net income and basic diluted earnings per share are
presented as if the Company had been required to provide for income taxes that
were previously taxable to the former shareholders of the merged entities that
were previously S corporations.
<TABLE>
<CAPTION>
(Unaudited)
Seven Months Seven Months
Ended Ended Year Ended Year Ended
September 30, September 30, February 28, February 28,
1998 1997 1998 1997
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income as reported $1,229,000 $2,052,000 $2,936,000 $3,430,000
Pro forma adjustment for income taxes of
acquired entities previously filing as
S corporations (454,000) (281,000) (165,000) (890,000)
---------- ---------- ---------- ------------
Pro forma net income $ 775,000 $1,771,000 $2,771,000 $2,540,000
========== ========== ========== ============
Pro forma basic earnings per share $.12 $.37 $.53 $.53
==== ==== ==== ====
Pro forma diluted earnings per share $.10 $.37 $.50 $.53
==== ==== ==== ====
</TABLE>
ACQUISITIONS -
20
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 3 Mergers and Acquisitions (Continued)
The following acquisitions have been accounted for using the purchase method of
accounting for business combinations and, accordingly, the operating results of
the acquired companies have been included in the Company's consolidated
financial statements from the date of acquisition.
Acquisitions from November 1, 1997 to February 28, 1998
On dates ranging between November 1, 1997 and January 17, 1998, the Company
acquired all outstanding shares of common stock of National Tower Service Ltd.,
501053 B.C. Ltd., and the minority interest in WTC Leasing Ltd. which are
Canadian corporations with operations similar to those of the Company.
Additionally, on January 17, 1998 the Company acquired the assets, principally
communication towers, of Ralph's Radio, Inc. and 344813 Alberta Ltd. The
aggregate purchase price of these transactions totaled approximately $2.7
million which consisted of $1.5 million in cash and the issuance of 134,000
shares of common stock valued at approximately $1.2 million, based on the
publicly traded price.
Jovin Communications, Inc. and Acier Filteau, Inc.
On June 12, 1998 the Company completed the acquisitions of Jovin Communications,
Inc. ("Jovin") and Acier Filteau, Inc. ("Acier"), both Montreal, Quebec (Canada)
corporations which engage in operations similar to those of the Company. The
acquisitions were effected by exchanging shares of common stock of the Company
and shares of a separate class of common stock of an acquisition subsidiary,
with rights identical to those of the Company's common stock, aggregating
118,000 shares in total and valued at approximately $2.8 million, based on the
publicly traded price, and the assumption of certain obligations of Jovin and
Acier, for all outstanding common shares of Jovin and Acier.
Cord Communications, Incorporated
On August 31, 1998 the Company completed the acquisition of Cord Communications,
Incorporated ("Cord"), a California corporation which engages in operations
similar to those of the Company. The acquisition was effected by exchanging
218,000 shares of common stock valued at approximately $5.2 million, based on
the publicly traded price, $5 million in cash and the assumption of certain
obligations of Cord for all outstanding common shares of Cord. The former
stockholders of Cord may also receive an additional 348,000 shares of common
stock, based on the attainment of certain performance measures of Cord during
the twelve month period following the date of acquisition. Additional shares of
common stock will be recorded as an adjustment of the purchase price and will
increase recorded goodwill.
CNG Communications, Inc.
On September 28, 1998, the Company completed the acquisition of CNG
Communications, Inc. ("CNG") for approximately $1.7 million in cash and the
assumption of certain obligations of CNG. The former shareholder of CNG may also
receive up to an additional $3 million in cash pending the successful
acquisition of certain wireless communication towers under an existing contract
held by CNG. As part of the acquisition, the Company assumed certain liabilities
of CNG, including convertible debentures, outstanding warrants and the
termination costs relating to a financing agreement with a third party
investment banker. The Company entered into a settlement agreement with the
above parties that resulted in an aggregate payment of $3.25 million to the
convertible debenture holders, which included principal and interest, and the
third party investment banker. On October 22, 1998, the Company exercised its
right to acquire the wireless communication towers under contract at an exercise
price of $9.2 million. The consummation of the acquisition of the communication
towers is subject to regulatory approval.
21
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 3 Mergers and Acquisitions (Continued)
The following is a summary of all consideration exchanged for acquisitions that
were accounted for as purchases:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended
September 30, February 28,
1998 1998
------------- ------------
<S> <C> <C>
Shares issued 336,000 134,000
Value of shares $ 8,100,000 $1,184,000
Cash 6,672,000 1,467,000
----------- ----------
Total purchase price $14,772,000 $2,651,000
=========== ==========
</TABLE>
The assets and liabilities of the acquired entities were recorded at their
estimated fair market values at the dates of acquisition. The initial
allocations of fair market values are preliminary subject to adjustments during
the first year following the acquisition. The initial allocations were as
follows:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended
September 30, February 28,
1998 1998
------------- ----------
<S> <C> <C>
Non-compete agreements $ 219,000 $ -
Tangible assets 11,034,000 1,437,000
Communication tower purchase contracts 5,661,000 -
Goodwill 12,507,000 2,104,000
Liabilities assumed and deferred tax liabilities (14,649,000) (890,000)
------------ -----------
Total purchase price $ 14,772,000 $ 2,651,000
============ ===========
</TABLE>
The results of operations of these businesses have been included in the
Company's consolidated financial statements from their respective acquisition
dates. The following summarizes the unaudited pro forma results of operations,
on a combined basis, as if the acquisitions had been consummated as of the
beginning of each of the periods presented, after including the impact of
certain adjustments such as amortization of intangible assets and income tax
effects:
<TABLE>
<CAPTION>
(Unaudited)
Seven Months (Unaudited)
Ended Year Ended
September 30, February 28,
1998 1998
------------ -----------
<S> <C> <C>
Contract and other revenues earned $43,273,000 $72,720,000
Pro forma net income $ 140,000 $ 4,323,000
Pro forma basic earnings per share $ .02 $ 0.82
Pro forma diluted earnings per share $ .02 $ 0.77
</TABLE>
22
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 3 Mergers and Acquisitions (Continued)
The unaudited pro forma results are not necessarily indicative of the results of
operations which would actually have been reported had the acquisitions been
completed prior to the beginning of the periods presented. In addition, they are
not intended to be indicative of future results.
Note 4 Uncompleted Contract
Costs, estimated earnings and billings on uncompleted contracts are summarized
as follows:
<TABLE>
<CAPTION>
September 30, February 28, February 28,
1998 1998 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Costs incurred on uncompleted contracts $ 15,461,000 $ 12,111,000 $ 15,356,000
Estimated earnings 3,212,000 5,084,000 3,516,000
Less billings to date (15,030,000) (16,797,000) (21,784,000)
------------ ------------ ------------
Total $ 3,643,000 $ 398,000 $ (2,912,000)
============ ============ ============
Presentation in the accompanying balance sheet:
Costs and estimated earnings in excess of billings
on uncompleted contracts $ 5,078,000 $ 2,143,000 $ 938,000
Billings in excess of costs and estimated earnings
on uncompleted contracts (1,435,000) (1,745,000) (3,850,000)
------------ ------------ ------------
Total $ 3,643,000 $ 398,000 $ (2,912,000)
============ ============ ============
</TABLE>
Note 5 Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30, February 28, February 28,
1998 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Buildings $ 1,795,000 $ 1,507,000 $ 550,000
Vehicles 2,540,000 1,497,000 737,000
Equipment 1,580,000 743,000 381,000
Communication towers 1,401,000 620,000 387,000
Furniture and fixtures 943,000 634,000 380,000
Leasehold improvements 81,000 73,000 27,000
------------ ------------ ------------
8,340,000 5,074,000 2,462,000
Less accumulated depreciation (1,562,000) (1,458,000) (688,000)
------------ ------------ ------------
6,778,000 3,616,000 1,774,000
Land 796,000 705,000 933,000
------------ ------------ ------------
$ 7,574,000 $ 4,321,000 $ 2,707,000
============ ============ ============
</TABLE>
23
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 5 Property and Equipment (Continued)
Depreciation expense on property and equipment in the Transition Period and in
the fiscal years ended February 28, 1998 and 1997 was $396,000, $457,000 and
$262,000, respectively.
Note 6 Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
September 30, February 28,
1998 1998
------------- ------------
<S> <C> <C>
Goodwill $14,039,000 $2,104,000
Communication tower purchase contracts 5,661,000 -
Non-compete agreements 219,000 -
----------- ----------
19,919,000 2,104,000
Less accumulated amortization (198,000) (16,000)
----------- ----------
$19,721,000 $2,088,000
=========== ==========
</TABLE>
Amortization expense on intangible assets in the Transition Period and in the
fiscal year ended February 28, 1998 was $182,000 and $16,000, respectively.
There were no intangible assets as of February 28, 1997.
Note 7 Notes Payable
Note Payable to Finance Company
At September 30, 1998, through one of its acquired subsidiaries, the Company had
a $2.5 million line of credit facility with a finance company, secured by
accounts receivable, inventory, property and equipment, cash and cash
equivalents. At September 30, 1998 the outstanding balance was $1.09 million,
which was repaid in October 1998, and the line of credit was cancelled.
Notes Payable to Bank
At February 28, 1998, the Company had a line of credit facility with a Canadian
bank that allowed for borrowings at the bank's prime rate plus .75%. The line
was collateralized by essentially all assets of Western Telecom Construction
Ltd. and was cancelled in May 1998.
24
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 8 - Long Term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations consist of the following:
<TABLE>
<CAPTION>
September 30, February 28, February 28,
1998 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Convertible Note, interest at 7%, due April 30,
2007, quarterly interest payments through April 2005,
quarterly reductions thereafter, see further description
below. $14,154,000 $- $-
Convertible notes of acquired subsidiary, interest at rates ranging from 12% to
14%, repaid in December 1998 (see Note 3). 1,882,000 - -
Notes payable to various Canadian banks repaid in full during the Transition
Period and 1998, due on demand or in aggregate monthly installments of $8,200
including interest, collateralized by assets and an assignment of lease revenue. - 263,000 480,000
Notes payable to various U.S. and Canadian banks, repaid in full during the
transition period, due in aggregate monthly installments of $7,800, including
interest at rates ranging from 7.5% to 11.25% through June 2002, collateralized
by property, plant and equipment. - 129,000 222,000
Vehicle purchase contracts and other notes payable with U.S. and Canadian finance
corporations, aggregate monthly installments of $30,000, including interest at
rates up to 11.15%, payments due through December 2001, collateralized by
vehicles and real property. 781,000 192,000 86,000
Capital lease obligations to U.S. and Canadian lessors, due in aggregate monthly
installments of $19,000 through August 2003, collateralized by leased equipment. 593,000 210,000 34,000
----------- ----------- ------------
Total debt 17,410,000 794,000 822,000
Less current portion (2,419,000) (502,000) (610,000)
----------- ----------- ------------
Long-term portion $14,991,000 $ 292,000 $ 212,000
=========== =========== ============
Long-term debt and capital lease obligations mature as follows:
Year Ending
September 30,
-----------------------
1999 $ 2,419,000
2000 452,000
2001 225,000
2002 98,000
2003 62,000
Thereafter 14,154,000
-----------
$17,410,000
===========
</TABLE>
25
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 8 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued)
Convertible Note
In June 1998, the Company received $14.85 million of net proceeds from the
issuance in a private placement of $15 million of 7% convertible senior
subordinated debt (the "Convertible Debt") and warrants to purchase 40,000
shares of common stock. The Convertible Debt was immediately convertible at a
ratio of $25.03 per share of common stock and the warrant provides for purchase
of shares at $23.00 per share of common stock at the holder's option. The
purchase agreement provides for an adjustment of the conversion amount for the
subordinated debt and warrant exercise price for any stock dividends, splits and
other changes as defined in the respective agreements, so as to preserve the
Convertible Debt holder's relative rights. The conversion ratio and warrant
exercise price per common share were less than the fair value of the Company's
common stock at the date of issuance. The value of the conversion features was
approximately $124,000 and was immediately charged to interest expense and
increased additional paid-in capital. The value ascribed to the warrants of
approximately $723,000, was reflected as both a debt discount and an increase in
additional paid-in capital. The debt discount is accounted for as a component of
interest expense using the effective interest rate method.
The Convertible Debt requires quarterly interest payments through April 30,
2005, when the Company will be required to make principal payments of $3 million
each April 30 and October 31 thereafter through the final maturity date, April
30, 2007. The Company may begin making optional prepayments of the Convertible
Debt beginning May 30, 2000 subject to a certain minimum trading price of the
Company's common stock commencing on or after April 30, 2000. The Company is
subject to various affirmative and negative covenants contained in the
agreement, including minimum net worth and earnings requirements, and
limitations on additional indebtedness, asset disposals and asset additions. The
agreement required the holder of the Convertible Debt to consent to
subordination of the obligation to senior bank indebtedness discussed below. On
September 30, 1998, the Company was in compliance with all covenants with the
exception of a certain indebtedness covenant, which was cured subsequent to
September 30, 1998. The Company has received a waiver from the note holder
waiving the right to demand repayment of the note as a result of this violation.
Credit Facility
Under the terms of a revolving credit facility (the "Credit Facility"), dated
June 9, 1998 and expiring April 25, 2005, with a consortium of U.S. and non-U.S.
banks, the Company may borrow up to $75 million. The Credit Facility provides
for interest only payments through August 30, 2000, with escalating principal
reductions each three months from that date through maturity. Borrowings under
the Credit Facility bear interest at optional rates as specified in the
agreement, subject to the Company's election at the borrowing date. The Company
is also required to pay quarterly commitment fees of .5% on the average undrawn
balance of the Credit Facility, which is included as a component of interest
expense. There were no borrowings under the Credit Facility at September 30,
1998. Subsequent to year end, the Company has drawn approximately $24 million on
the Credit Facility to finance business acquisitions, including the repayment of
acquired subsidiary debt, and to fund operations. Covenants of the Credit
Facility require the Company to maintain certain debt-to-earnings and interest
coverage ratios. Other provisions limit capital expenditures, subsidiary
indebtedness and require certain minimum levels of earnings and net worth. On
September 30, 1998, the Company was in compliance with all covenants with the
exception of a certain indebtedness covenant, which was cured subsequent to
September 30, 1998. The Company has received a waiver from the lenders waiving
their right to demand repayment of the Credit Facility as a result of this
violation.
26
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 9 - INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended Year Ended
September 30, February 28, February 28,
1998 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Current
U.S. federal and state $ 98,000 $ 272,000 $133,000
Canadian federal and provincial 767,000 1,402,000 70,000
--------- ---------- --------
865,000 1,674,000 203,000
--------- ---------- --------
Deferred
U.S. federal and state $ (20,000) $ - $ (2,000)
Canadian federal and provincial (494,000) (41,000) 435,000
--------- ---------- --------
(514,000) (41,000) 433,000
--------- ---------- --------
Total $ 351,000 $1,633,000 $636,000
========= ========== ========
</TABLE>
The total tax provision differs from the amount computed using the U.S. federal
statutory income tax rates as follows:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended Year Ended
September 30, February 28, February 28,
1998 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Pretax net income $1,580,000 $4,569,000 $4,066,000
U.S. statutory rates 34% 34% 34%
Tax at statutory rates 537,000 1,553,000 1,382,000
Income taxable to S Corporation shareholders (454,000) (165,000) (890,000)
Effect of change in tax status - - 125,000
Non deductible expenses 185,000 - -
U.S. state income taxes, net of federal tax benefit 5,000 - 8,000
Excess income tax payable in foreign jurisdictions 78,000 245,000 11,000
---------- ---------- ----------
$ 351,000 $1,633,000 $ 636,000
========== ========== ==========
</TABLE>
Undistributed earnings of the Company's Canadian subsidiaries amounted to
approximately $5.7 million at September 30, 1998. Essentially all of those
earnings are considered to be indefinitely reinvested and, accordingly, no
provision for U.S. federal and state income taxes has been provided thereon.
Upon distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to both U.S. income taxes, net of foreign tax credits,
and withholding taxes payable in Canada.
27
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 9 - INCOME TAXES (Continued)
The tax effects of temporary differences that give rise to deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
September 30, February 28, February 28,
1998 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Current
Assets:
Allowance for doubtful accounts $ (51,000) $ - $ -
Liabilities:
Deferred taxable income on uncompleted contracts 479,000 534,000 580,000
---------- -------- --------
$ 428,000 $534,000 $580,000
========== ======== ========
Noncurrent
Liabilities:
Depreciation, amortization and basis differences
arising from acquisitions $2,626,000 $ 48,000 $ 27,000
Amortization of debt discount 322,000 - -
Other 14,000 - -
---------- -------- --------
$2,962,000 $ 48,000 $ 27,000
========== ======== ========
</TABLE>
NOTE 10 - EARNINGS PER SHARE
The numerators and denominators of basic and fully diluted earnings per share
are as follows:
<TABLE>
<CAPTION>
(Unaudited)
Seven Months Seven Months
Ended Ended Year Ended Year Ended
September 30, September 30, February 28, February 28,
1998 1997 1998 1997
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Numerator - Net income as reported $1,229,000 $2,052,000 $2,936,000 $3,430,000
========== ========== ========== ==========
Denominator - Weighted average number of
shares outstanding
Basic weighted average
number of shares 6,531,000 4,776,000 5,263,000 4,776,000
Effect of dilutive stock
options and warrants 1,105,000 - 331,000 -
---------- ---------- ---------- -----------
Diluted weighted average
number of shares 7,636,000 4,776,000 5,594,000 4,776,000
========== ========== ========== ==========
</TABLE>
At September 30, 1998, 342,000 weighted-average shares associated with the
Convertible Debt discussed in Note 8 were excluded from the computation of
diluted earnings per share for the Transition Period because their inclusion
would have had an anti-dilutive effect on earnings per share. All other
potential common shares have been included in the diluted earnings per share
calculation. All potential common shares were included in the calculation of
diluted earnings per share for the years ended February 28, 1998 and 1997.
28
<PAGE>
WESTTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 11 - STOCKHOLDERS' EQUITY
Redeemable Preferred Stock
During the year ended February 28, 1998, the Company merged with WTC Holdings
Ltd. and its wholly-owned subsidiary, Western Telecom Construction Ltd.
(collectively, "Western Telecom"). The merger was accounted for as a pooling-of-
interests and the February 28, 1997 financial statements have been restated to
include the accounts of Western Telecom. In February 1994, Western Telecom
issued 467 shares of Class A redeemable preferred stock. The preferred stock
ranked in priority to common stock in the event of liquidation, dissolution or
winding up of the affairs of Western Telecom. The shares also contain stated
redemption values and rights to 5% noncumulative dividends when declared by the
Board of Directors. There were no unpaid dividends at February 28, 1998 and
1997. The preferred stock has no voting rights.
The shares have been reflected at their total redemption price of $450,000 in
the February 28, 1997 balance sheet. During the year ended February 28, 1998,
the Company redeemed all outstanding shares.
Common Stock
The Company has a single class of $0.01 par value common stock. Authorized
shares total 10 million, of which 2,580,000 have been registered on Form SB-2
with the Securities and Exchange Commission under the Securities Act of 1933. A
total of 1,200,000 of the registered securities were sold in connection with an
initial public offering on October 15, 1997. Proceeds from the offering totaled
$7.5 million, net of $485,000 of underwriting costs.
As disclosed in Note 3, an additional 1,277,000 shares were issued in connection
with various business combinations during the Transition Period and an
additional 3,969,000 shares were issued in the fiscal year ended February 28,
1998. During the fiscal year ended February 28, 1998, a total of 7,000 shares
were issued as stock awards to employees of the Company and acquired businesses
as incentive to remain in the employ of the Company.
Stock Warrants
In connection with its initial public offering in October 1997, the Company
issued stock warrants to purchase 1,380,000 shares of common stock of the
Company with an exercise price of $9.00 per share. The warrants contained a
provision whereby the Company could call for redemption of the warrants if the
closing price of the Company's common stock equaled or exceeded $15.00 for ten
consecutive days. During the Transition Period, 559,000 warrants to purchase
559,000 shares of common stock were tendered for exercise with aggregate
proceeds of $4.79 million to the Company, net of commissions and related
expenses of $243,000. On September 29, 1998, the Company exercised its right to
call the remaining warrants, with a redemption date of October 30, 1998.
Subsequent to September 30, 1998 and prior to the redemption date, 819,000
warrants were tendered for conversion with gross proceeds of $7.37 million,
resulting in the cancellation of the remaining warrants which were not tendered.
29
<PAGE>
WESTTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 12 - STOCK OPTIONS
The Company has two stock option plans that provide for the granting of stock
options to certain officers, employees, directors and consultants of the Company
and its subsidiaries. These options generally vest over a period of three years
from the date of grant (as determined by the Company's Compensation Committee)
and have a maximum exercise term of ten years from the date of grant. The 1998
Stock Incentive Compensation Plan ("the 1998 Plan") is the only plan with stock
option awards currently available for grant; a prior plan has stock options
exercisable at September 30, 1998 to purchase up to 400,000 shares of common
stock. The Company is authorized to grant options for up to ten percent of the
issued shares of common stock under the 1998 Plan. A summary of awards granted
under the plans and under other grants of stock options is as follows for the
Transition Period and for the fiscal year ended February 28, 1998:
<TABLE>
<CAPTION>
Seven Months Ended Year Ended
September 30, 1998 February 28, 1998
---------------------------- -----------------------------
Weighted- Weighted-
Number of Average Number of Average
Shares Exercise Price Shares Exercise Price
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Options outstanding at
beginning of year 592,000 $ 7.78 - $ -
Options granted 121,500 18.63 592,000 7.78
Options exercised 37,000 7.80 - -
Options forfeited - - - -
------- ---- ------- ----
Options outstanding at
end of year 676,500 $ 9.87 592,000 $ 7.78
======= ==== ======= ====
Options exercisable at
end of year 125,500 $ 7.85 105,000 $ 8.07
======= ==== ======= ====
</TABLE>
A summary of stock options outstanding as of September 30, 1998 is as follows:
<TABLE>
<CAPTION>
Number Weighted-Average Number Weighted-
Range of Outstanding at Remaining Weighted- Exercisable at Average
Exercise September 30, Contractual Average September 30, Exercise
Prices 1998 Life Exercise Price 1998 Price
- -------------- --------------- ------------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
$13.40 to 26.00 137,000 4.8 years $18.60 - $ -
7.50 to 8.25 525,000 3.6 years 7.24 123,300 7.99
1.00 4,500 3.4 years 1.00 1,500 1.00
.01 10,000 3.6 years 0.01 700 0.01
</TABLE>
The Company applies the accounting provisions of APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations for its stock-based
plans. Accordingly, costs for employee stock options or issuance of shares is
measured as the excess, if any, of the fair value of the Company's common stock
at the measurement date over the amount the employee must pay to acquire the
stock. The cost is recognized ratably by the Company as compensation expense
over the vesting period. The expense for the Transition Period and for the
fiscal year ended February 28, 1998 was $35,000 and $21,000, respectively.
30
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 12 - STOCK OPTIONS (Continued)
The Company adopted the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), which was effective as of January 1,
1996. The fair value of each option was estimated on the date of grant using the
Black-Scholes option pricing model and the following assumptions:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended
September 30, February 28,
1998 1998
------------- -------------
<S> <C> <C>
Risk-free interest rate 4.75% 6.38%
Expected Life 2.7 years 2.7 years
Expected volatility 70% 29%
Expected dividend yield 0% 0%
</TABLE>
Had the Company elected to recognize compensation expense as provided for by
SFAS No. 123, the Company's net income amounts on a pro forma basis for the
Transition Period and the fiscal year ended February 28, 1998 would have been as
follows:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended
September 30, February 28,
1998 1998
------------- ------------
<S> <C> <C>
Pro forma net income adjusted $838,000 $2,721,000
======== ==========
Pro forma basic earnings per share $ 0.13 $ 0.52
======== ==========
Pro forma diluted earning per share $ 0.11 $ 0.49
======== ==========
</TABLE>
The weighted average fair values per share at the date of grant for options
granted during the Transition Period and the year ended February 28, 1998 were
as follows:
<TABLE>
<CAPTION>
Seven Months
Ended Year Ended
September 30, February 28,
1998 1998
------------- -------------
<S> <C> <C>
Options with exercise prices less than the fair value
of the stock at the date of grant 19,100 39,500
- weighted average fair value $ 12.00 $ 6.00
Options with exercise prices equal to the fair value
of the stock at the date of grant 102,400 311,500
- weighted average fair value $ 9.00 $ 1.25
Options with exercise prices greater than the fair value
of the stock at the date of grant - 241,000
- weighted average fair value - $ .50
</TABLE>
31
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
September 30, February 28, February 28,
1998 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Cash paid for interest $ 312,000 $ 107,000 $80,000
Cash paid for income taxes 280,000 177,000 77,000
Non-cash transactions -
Stock issuances for business acquisitions 8,100,000 1,184,000
</TABLE>
NOTE 14 - RETIREMENT PLAN
The Company's subsidiary, Westower Communications Inc., adopted a defined
contribution retirement plan, effective January 1, 1997. The plan contains
certain participation criteria and allows for both employee and employer
discretionary contributions. The total Company funded discretionary contribution
for the fiscal years ended February 28, 1998 and 1997 was $52,000 and $46,000,
respectively. There were no employer contributions during the Transition Period.
NOTE 15 - RELATED PARTY TRANSACTIONS
Advance to Related Parties
During the fiscal year ended February 28, 1998, the Company advanced $119,000 to
a Canadian corporation owned by certain stockholders of Westower Corporation.
Proceeds were used by the corporation to purchase facilities leased by two of
the Company's subsidiaries. The advance was repaid during the Transition Period.
The Company also advanced $77,000 to several stockholders during the fiscal year
ended February 28, 1998 which was repaid during the Transition Period. At
September 30, 1998, related party advances included $379,000 of unsecured non-
interest bearing shareholder loans made by subsidiaries, prior to acquisition,
during the Transition Period which are expected to be paid in full subsequent to
September 30, 1998. At September 30, 1998, the Company had a $65,000 receivable
from a former shareholder of an acquired S corporation. The acquired S
corporation made a distribution to the shareholder, prior to the combination, in
an amount to meet the shareholder's estimated tax obligation. Subsequent to the
combination, it was determined that the tax liability was approximately $65,000
overestimated, and accordingly, a receivable for the excess distribution has
been recorded. The Company expects to collect this amount in full subsequent to
September 30, 1998.
Note Receivable
At September 30, 1998, the Company had a note receivable for $495,000, plus
accrued interest of $17,000, from an organization with which it shares a common
director. The note bears interest at 12% and is collateralized by warrants to
purchase shares of the Company's common stock, and is due on demand.
Management Services and Accounts Payable
In prior years the Company received consulting services from Westower Consulting
Ltd., a Canadian corporation owned by a stockholder of Westower Corporation.
Charges for these services were $126,000 and $94,000 in the fiscal years ended
February 28, 1998 and 1997, respectively. Included in trade accounts payable at
February 28, 1998 is $39,000 due to Westower Consulting Ltd. Fees billed by
related entities generally do not continue subsequent to acquisition by the
Company as the related services are performed by employees and officers of the
Company.
32
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
Note 15 - Related Party Transactions (Continued)
Notes and Advances Payable to Related Parties
Notes and advances payable to related parties consist of the following:
<TABLE>
<CAPTION>
September 30, February 28, February 28,
1998 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Current
Unsecured advances and notes payable to stockholders
and officers, paid in full during the Transition Period - 871,000 -
Unsecured advances payable to officers and
stockholders, in Canadian dollars, with no
stated interest rate and no specific
repayment terms, paid in full during the
Transition Period. - 173,000 -
Unsecured advances payable to officers and
stockholders, with no stated interest rate,
and no specific repayment terms. 228,000
Unsecured notes payable to officers and stockholders,
paid in full during the Transition Period. - 1,000,000 672,000
-------- ---------- --------
$228,000 $2,044,000 $672,000
======== ========== ========
</TABLE>
The advances shown in the table above at February 28, 1998 and 1997,
respectively, were previously recorded as long-term and were repaid shortly
after the end of the previous reporting periods. The current classification is
consistent with actual events.
Facility Leases
Two subsidiaries acquired during the fiscal year ended February 28, 1998, 501053
B.C. Ltd. and National Tower Service Ltd., lease their operating facilities, on
a month-to-month basis, from Canadian corporations owned by certain stockholders
of Westower Corporation. Lease payments made during the Transition Period were
$39,000 and there were no significant lease payments made to the stockholders
during the fiscal year ended February 28, 1998.
NOTE 16 - COMMITMENTS AND CONTINGENCY
The Company leases operating facilities, office equipment and vehicles under
noncancelable operating lease agreements. Future minimum lease payments are as
follows:
<TABLE>
<CAPTION>
Year ending
September 30:
---------------
<S> <C>
1999 $ 607,000
2000 348,000
2001 203,000
2002 67,000
2003 63,000
Thereafter 52,000
----------
Total $1,340,000
==========
</TABLE>
Rent and lease expenses were $632,000, $259,000 and $224,000 for the Transition
Period and for the fiscal years ended February 28, 1998 and 1997, respectively.
33
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 16 - COMMITMENTS AND CONTINGENCY (Continued)
Litigation
The Company is subject to lawsuits and other legal claims in the normal course
of its operations. Management believes that the resolution of any such lawsuits
and legal claims, if any, will not have a material impact on the Company's
financial position, results of operations or cash flows.
NOTE 17 - CREDIT RISK AND BUSINESS CONCENTRATIONS
Financial instruments that potentially subject the Company to concentrations of
credit consist primarily of cash, cash equivalents and trade accounts
receivable. The Company places its temporary cash investments with a major
financial institution. At times, deposits with any one institution may exceed
federally insured limits. The Company extends credit to customers based on
evaluation of customer's financial condition and credit history. Collateral is
generally not required. Customers include large Canadian and U.S. companies
concentrated in the telecommunications industry.
Contract revenues from two customers accounted for 29% of revenues during the
fiscal year ended February 28, 1998, and one customer accounted for 56% of
revenues during the fiscal year ended February 28, 1997. Accounts receivable
from two customers comprise 48% of accounts receivable at February 28, 1998 and
one customer accounted for 39% of accounts receivable at February 28, 1997.
There were no customers who accounted for greater than 10% of sales for the
Transition Period and there were no customers with accounts receivable
representing 10% or more of the total accounts receivable at September 30, 1998.
Management expects that sales to relatively few customers will continue to
account for a high percentage of its revenues into the foreseeable future and
believes the Company's financial results depend in significant part upon the
success of these customers. Although the composition of the group comprising the
Company's largest customers may vary from period to period, the loss of a
significant customer or reduction in orders by any significant customers,
including reductions due to market, economic or competitive conditions in the
wireless communications industry, may have an adverse effect on the Company's
business, financial condition and results of operations.
NOTE 18 - SEGMENT INFORMATION
The Company's operations are comprised of a number of communication tower
construction entities that were recently acquired. While management assesses the
operating results of each of these entities separately, as these entities and
its existing operations exhibit similar financial performance and have similar
economic characteristics, they have been aggregated as one segment.
The following table summarizes contract and other revenues and long-lived assets
related to the respective countries in which the Company operates.
<TABLE>
<CAPTION>
September 30, 1998
-------------------------------------------
Total United States Canada
----------- ------------- -----------
<S> <C> <C> <C>
Contract and Other Revenues $31,944,000 $19,982,000 $11,962,000
Long-lived Assets $ 7,574,000 $ 3,729,000 $ 3,845,000
<CAPTION>
February 28, 1998
------------------------------------------
Total United States Canada
----------- ------------- -----------
<S> <C> <C> <C>
Contract and Other Revenues $41,662,000 $22,160,000 $19,502,000
Long-lived Assets $ 4,321,000 $ 1,196,000 $ 3,125,000
</TABLE>
34
<PAGE>
WESTOWER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998 and February 28, 1998 and 1997
NOTE 18 - SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
February 28, 1997
----------------------------------------
Total United States Canada
----------- ------------- ----------
<S> <C> <C> <C>
Contract and Other Revenues $46,091,000 $39,177,000 $6,914,000
Long-lived Assets $ 2,707,000 $ 1,000,000 $1,707,000
</TABLE>
Long-lived assets are comprised of property, plant and equipment and excludes
intangible assets.
NOTE 19 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of cash and cash equivalents, trade accounts receivable and
payable, and other current liabilities approximate their carrying amounts. The
fair values of advances to and from related parties approximate their fair value
due to the short term nature of the instruments. The fair values of long-term
debt, which are based on the present values of the underlying cash flows
discounted at the Company's incremental borrowing rates, are as follows:
<TABLE>
<CAPTION>
September 30, February 28, February 28,
1998 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Long-term debt $19,446,000 $794,000 $822,000
</TABLE>
NOTE 20 - SUBSEQUENT EVENTS
On November 10, 1998 the Company completed the acquisition of Summit
Communications, LLC ("Summit"), a Mississippi limited liability company which
engages in operations similar to those of the Company. The merger was effected
by exchanging 200,000 shares of common stock valued at approximately $4.1
million, based on the publicly traded price, $4.4 million in cash, and the
assumption of certain liabilities, for all membership interests in Summit. The
former members of Summit may also receive an additional 100,000 shares of common
stock, based on certain performance criteria during the three years following
the date of acquisition. The acquisition was accounted for using the purchase
method for business combinations resulting in goodwill of approximately $6.8
million.
On October 30, 1998 the Company completed the acquisition of Teletronics
Management Services, Inc. ("Teletronics"). The acquisition was effected by
exchanging 188,000 shares of common stock valued at approximately $4 million,
based on the publicly traded price, $1 million in cash, and the assumption of
certain liabilities, including distributions payable to former shareholders in
the amount of $800,000, for all outstanding shares of Teletronics. The
acquisition was accounted for using the purchase method for business
combinations resulting in goodwill of approximately $4.7 million.
The Company is currently in negotiations with certain tower construction
companies concerning acquisition by Westower. The Company is also in
negotiations with certain third parties concerning the acquisition of wireless
communication towers, and with a financial institution to arrange financing for
the wireless communication tower purchases, should the negotiations conclude
successfully. None of the negotiations are finalized and there is no assurance
that the Company will be successful in concluding these negotiations, or if the
Company is successful, that the acquisitions will not be dilutive to existing
shareholders.
35
<PAGE>
PART III
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
Exhibit Description of Exhibit
2.1 Stock Purchase Agreement, dated May 7, 1998, relating to the
acquisition of WTC Holdings Inc., formerly known as 411677 Alberta
Ltd., by the Company. (Incorporated by reference to Exhibit No. 2.1 of
the Company's Current Report on Form 8-K dated May 22, 1998.)
2.2 Share Exchange Agreement, dated as of May 29, 1998, by and among the
Company, MJA Communications Corp. and the stockholders of MJA
Communications Corp. (Incorporated by reference to Exhibit No. 2.1 of
the Company's Current Report on Form 8-K dated June 12, 1998.)
2.3 Agreement and Plan of Merger, dated as of August 31, 1998, among the
Company, Cord Communications Incorporated, Cord Acquisition Co., Mark
Buechley, Seth Buechley and Mark Reed. (Incorporated by reference to
Exhibit No. 2.1 of the Company's Current Report on Form 8-K dated
September 15, 1998.)
2.4 Share Exchange Agreement, dated as of August 31, 1998, between the
Company and Tom T. Cunningham, sole shareholder of Standby Services,
Inc. (Incorporated by reference to Exhibit No. 2.1 of the Company's
Current Report on Form 8-K dated September 15, 1998.)
2.5 Agreement of Merger, dated as of September 17, 1998, among the
Company, Westower CNG Acquisition Company, CNG Communications, Inc.
and Paul Bishop. (Incorporated by reference to Exhibit No. 99 of the
Company's Current Report on Form 8-K dated October 7, 1998.)
2.6 Agreement and Plan of Merger, dated as of October 23, 1998, among the
Company, Westower Teletronics Acquisition Corp., Teletronics
Management Services, Inc. and the Shareholders of Teletronics
Management Services, Inc. (Incorporated by reference to Exhibit No. 99
of the Company's Current Report on Form 8-K dated November 12, 1998.)
2.7 Agreement and Plan of Merger, dated as of November 10, 1998, among the
Company, Westower Summit Acquisition, LLC, Summit Communications, LLC
and the Members of Summit Communications, LLC. (Incorporated by
reference to Exhibit No. 2.1 of the Company's Current Report on Form
8-K dated November 20, 1998.)
3.1 Articles of Incorporation.*
3.2 Amended Bylaws, as in effect since August 20, 1998.*
4.1 Form of Underwriters' Warrant Agreement by and between the Company and
National Securities Corporation, as representative for several
underwriters. (Incorporated by reference to Exhibit No. 1.2 of the
Company's Registration Statement on Form SB-2 (File No. 333-32963).)
10.1 1997 Stock Compensation Plan. (Incorporated by reference to Exhibit
99.1 of the Company's Registration Statement on Form S-8 (File No.
333-65337).)
10.2 1998 Stock Incentive Compensation Plan. (Incorporated by reference to
Exhibit 99.2 of the Company's Registration Statement on Form S-8 (File
No. 333-65337).)
10.3 Purchase Agreement between the Company and BET Associates, L.P. dated
as of May 11, 1998, relating to $15,000,000 7% Convertible Senior
Subordinated Notes due April 30, 2007 and warrants to purchase 40,000
shares of Common Stock. (Incorporated by reference to Exhibit No. 10.2
of the Company's Form 10-KSB for the fiscal year ended February 28,
1998.)
10.4 Credit Agreement, dated June 9, 1998, with BankBoston, N.A. and
BankBoston Securities Inc.*
10.5 Employment Agreement, dated May 29, 1998, by and between the Company
and Michael J. Anderson. (Incorporated by reference to Exhibit No.
2.3 of the Company's Current Report on Form 8-K dated June 12, 1998.)
10.6 Employment Agreement, dated August 31, 1998, by and between Cord
Communications, Inc. and Seth Buechley. (Incorporated by reference to
Exhibit No. 2.3 of the Company's Current Report on Form 8-K dated
September 15, 1998.)
10.7 Employment Agreement, dated August 31, 1998, by and between Standby
Services, Inc. and Tom T. Cunningham. (Incorporated by reference to
Exhibit No. 2.3 of the Company's Current Report on Form 8-K dated
September 15, 1998.)
16 Letter Regarding change in Certifying Accountants. (Incorporated by
reference to Exhibit No. 16 to the Company's Current Report on Form 8-
K dated November 4, 1998.)
21 Subsidiaries of the Company.*
23.1 Consent of PricewaterhouseCoopers LLP. (Filed herewith.)
23.2 Consent of Moss Adams LLP. (Filed herewith.)
23.3 Consent of Lamn, Krielow, Dytrych & Darling. (Filed herewith.)
27 Financial Data Schedule. (Filed herewith.)
- -------------
* Previously filed.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WESTOWER CORPORATION
By: /s/ Peter Lucas
----------------------------------------
Peter Lucas
Chief Financial Officer,
Secretary and Treasurer
Date: February 9, 1999
<PAGE>
EXHIBIT INDEX
Exhibit Description of Exhibit
2.1 Stock Purchase Agreement, dated May 7, 1998, relating to the
acquisition of WTC Holdings Inc., formerly known as 411677 Alberta
Ltd., by the Company. (Incorporated by reference to Exhibit No. 2.1 of
the Company's Current Report on Form 8-K dated May 22, 1998.)
2.2 Share Exchange Agreement, dated as of May 29, 1998, by and among the
Company, MJA Communications Corp. and the stockholders of MJA
Communications Corp. (Incorporated by reference to Exhibit No. 2.1 of
the Company's Current Report on Form 8-K dated June 12, 1998.)
2.3 Agreement and Plan of Merger, dated as of August 31, 1998, among the
Company, Cord Communications Incorporated, Cord Acquisition Co., Mark
Buechley, Seth Buechley and Mark Reed. (Incorporated by reference to
Exhibit No. 2.1 of the Company's Current Report on Form 8-K dated
September 15, 1998.)
2.4 Share Exchange Agreement, dated as of August 31, 1998, between the
Company and Tom T. Cunningham, sole shareholder of Standby Services,
Inc. (Incorporated by reference to Exhibit No. 2.1 of the Company's
Current Report on Form 8-K dated September 15, 1998.)
2.5 Agreement of Merger, dated as of September 17, 1998, among the
Company, Westower CNG Acquisition Company, CNG Communications, Inc.
and Paul Bishop. (Incorporated by reference to Exhibit No. 99 of the
Company's Current Report on Form 8-K dated October 7, 1998.)
2.6 Agreement and Plan of Merger, dated as of October 23, 1998, among the
Company, Westower Teletronics Acquisition Corp., Teletronics
Management Services, Inc. and the Shareholders of Teletronics
Management Services, Inc. (Incorporated by reference to Exhibit No. 99
of the Company's Current Report on Form 8-K dated November 12, 1998.)
2.7 Agreement and Plan of Merger, dated as of November 10, 1998, among the
Company, Westower Summit Acquisition, LLC, Summit Communications, LLC
and the Members of Summit Communications, LLC. (Incorporated by
reference to Exhibit No. 2.1 of the Company's Current Report on Form
8-K dated November 20, 1998.)
3.1 Articles of Incorporation.*
3.2 Amended Bylaws, as in effect since August 20, 1998.*
4.1 Form of Underwriters' Warrant Agreement by and between the Company and
National Securities Corporation, as representative for several
underwriters. (Incorporated by reference to Exhibit No. 1.2 of the
Company's Registration Statement on Form SB-2 (File No. 333-32963).)
<PAGE>
10.1 1997 Stock Compensation Plan. (Incorporated by reference to Exhibit
99.1 of the Company's Registration Statement on Form S-8 (File No.
333-65337).)
10.2 1998 Stock Incentive Compensation Plan. (Incorporated by reference to
Exhibit 99.2 of the Company's Registration Statement on Form S-8 (File
No. 333-65337).)
10.3 Purchase Agreement between the Company and BET Associates, L.P. dated
as of May 11, 1998, relating to $15,000,000 7% Convertible Senior
Subordinated Notes due April 30, 2007 and warrants to purchase 40,000
shares of Common Stock. (Incorporated by reference to Exhibit No. 10.2
of the Company's Form 10-KSB for the fiscal year ended February 28,
1998.)
10.4 Credit Agreement, dated June 9, 1998, with BankBoston, N.A. and
BankBoston Securities Inc.*
10.5 Employment Agreement, dated May 29, 1998, by and between the Company
and Michael J. Anderson. (Incorporated by reference to Exhibit No.
2.3 of the Company's Current Report on Form 8-K dated June 12, 1998.)
10.6 Employment Agreement, dated August 31, 1998, by and between Cord
Communications, Inc. and Seth Buechley. (Incorporated by reference to
Exhibit No. 2.3 of the Company's Current Report on Form 8-K dated
September 15, 1998.)
10.7 Employment Agreement, dated August 31, 1998, by and between Standby
Services, Inc. and Tom T. Cunningham. (Incorporated by reference to
Exhibit No. 2.3 of the Company's Current Report on Form 8-K dated
September 15, 1998.)
16 Letter Regarding change in Certifying Accountants. (Incorporated by
reference to Exhibit No. 16 to the Company's Current Report on Form 8-
K dated November 4, 1998.)
21 Subsidiaries of the Company.*
23.1 Consent of PricewaterhouseCoopers LLP. (Filed herewith.)
23.2 Consent of Moss Adams LLP. (Filed herewith.)
23.3 Consent of Lamn, Krielow, Dytrych & Darling. (Filed herewith.)
27 Financial Data Schedule. (Filed herewith.)
- -------------
* Previously filed.
<PAGE>
EXHIBIT 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration Statement of
Westower Corporation on Form S-8 (File No.3333-65337) of our report dated
February 4, 1999, on our audit of the consolidated financial statements of
Westower Corporation and its subsidiaries as of September 30, 1998 and the seven
months ended September 30, 1998 which report is included in this Amendment No. 2
on Form 10-KSB/A to the Transition Report on Form 10-KSB as filed on January 25,
1999.
/s/ PricewaterhouseCoopers LLP
Seattle Washington
February 8, 1999
<PAGE>
EXHIBIT 23.2
Consent of Moss Adams LLP
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 April 14, 1998, except for the third paragraph in Note 3, as to which the
date is May 31, 1998 and the fourth paragraph in Note 3, as to which the date is
October 23, 1998, relating to the financial statements of Westower Corporation
appearing in the Amendment No. 2 on Form 10-KSB/A to the Transition Report on
Form 10-KSB dated January 25, 1999, of Westower Corporation.
/s/ Moss Adams LLP
Bellingham, Washington
February 9, 1999
<PAGE>
EXHIBIT 23.3
Consent of Lamn, Krielow, Dytrych & Darling
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 February 11, 1998, except for Note 4, as to which the date is August 12,
1998, relating to the financial statements of MJA Communications Corp. appearing
in the Amendment No. 2 on Form 10-KSB/A to the Transition Report on Form 10-KSB
dated January 25, 1999, of Westower Corporation.
/s/ LAMN, KRIELOW, DYTRYCH & DARLING
Certified Public Accountants
February 8, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF WESTOWER CORPORATION FOR THE SEVEN
MONTH TRANSITION PERIOD ENDED SEPTEMBER 30, 1998 AND CONSTITUTES A RESTATED
FINANCIAL DATA SCHEDULE WITH RESPECT TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED FEBRUARY 28, 1998 AND 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 7-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1998<F1> FEB-28-1998<F1> FEB-28-1997<F1>
<PERIOD-START> MAR-01-1998 MAR-01-1997 MAR-01-1996
<PERIOD-END> SEP-30-1998 FEB-28-1998 FEB-28-1997
<CASH> 9,331 7,206 7,131
<SECURITIES> 0 0 0
<RECEIVABLES> 13,289 7,112 4,905
<ALLOWANCES> 0 0 0
<INVENTORY> 2,151 1,140 201
<CURRENT-ASSETS> 32,228 18,557 13,238
<PP&E> 9,136 5,779 3,395
<DEPRECIATION> 1,562 1,458 688
<TOTAL-ASSETS> 62,294 25,057 16,003
<CURRENT-LIABILITIES> 17,578 11,998 11,330
<BONDS> 17,410 794 822
0 0 0
0 0 450
<COMMON> 70 61 48
<OTHER-SE> 26,693<F2> 12,658<F3> 3,896<F4>
<TOTAL-LIABILITY-AND-EQUITY> 62,294 25,057 16,003
<SALES> 0 0 0
<TOTAL-REVENUES> 31,944 41,662 46,091
<CGS> 0 0 0
<TOTAL-COSTS> 23,858 29,508 33,936
<OTHER-EXPENSES> 5,863 7,709 8,100
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 771 129 72
<INCOME-PRETAX> 1,580 4,569 4,085
<INCOME-TAX> 351 1,633 636
<INCOME-CONTINUING> 1,229 2,936 3,430
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,229 2,936 3,430
<EPS-PRIMARY> 0.19 0.56 0.72
<EPS-DILUTED> 0.16 0.52 0.72
<FN>
<F1>The summary financial information contained in this schedule has been
restated to reflect the acquisitions during the Transition Period ended
September 30, 1998 of MJA Communications Corp. and Standby Services, Inc. which
were accounted for as poolings-of-interests.
<F2>Other equity of $26,693,000 at September 30, 1998 is comprised of Additional
paid-in Capital of $22,610,000, Accumulated Other Comprehensive Income of
$(581,000) and Retained Earnings of $4,664,000.
<F3>Other equity of $12,658,000 at February 28, 1998 is comprised of Additional
paid-in Capital of $8,672,000, Accumulated Other Comprehensive Income of
$(67,000) and Retained Earnings of $4,053,000.
<F4>Other equity of $3,896,000 at February 28, 1997 is comprised of Additional
paid-in Capital of $(48,000), Accumulated Other Comprehensive Income of $27,000
and Retained Earnings of $3,917,000.
</FN>
</TABLE>
