<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date Of Report (Date of earliest event reported): June 28, 1999
--------------
Building One Services Corporation
- -------------------------------------------------------------------------------
(Exact name of registrant specified in Charter)
Delaware 000-23421 52-2054952
- -------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
- -------------------------------------------------------------------------------
800 Connecticut Avenue, N.W., Suite 1111, Washington, DC 20006
- -------------------------------------------------------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone, including area code: 202/261-6000
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Building One Services Corporation (the "Company") is filing the financial
statements for Regency Electric Company, Inc. as of December 31, 1997 and 1996
and for the three year period ended December 31, 1997. These financial
statements are attached hereto as Exhibit 99.1.
(c) Exhibits.
99.1 Financial Statements for Regency Electric Company, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BUILDING ONE SERVICES CORPORATION
Dated: June 28, 1999 By: /s/ Joseph M. Ivey
---------------------------------
Joseph M. Ivey
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
99.1 Financial Statements for Regency Electric Company, Inc.
<PAGE>
Exhibit 99.1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholder
Regency Electric Company, Inc.
We have audited the accompanying consolidated balance sheets of Regency
Electric Company, Inc. (an S corporation) and subsidiaries, as of December 31,
1997 and 1996, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for each of the three years ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Regency Electric Company, Inc. and subsidiaries, as of December 31, 1997
and 1996 and the results of operations and cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Harbeson Beckerleg & Fletcher
Harbeson Beckerleg & Fletcher
Jacksonville, Florida
February 18, 1998
1
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
----------------------- -----------
1996 1997 1998
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 6,688,354 $11,337,758 $15,002,062
Short-term investments................... 4,511,541 3,726,007 3,918,438
Contract receivables (Note 2)............ 11,392,358 16,692,180 13,293,712
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note
3)...................................... 1,821,958 1,798,759 2,259,038
Deposits................................. 300,000 -- --
Prepaid expenses and other current
assets.................................. 200,156 282,202 330,653
----------- ----------- -----------
Total current assets................... 24,914,367 33,836,906 34,803,903
Property and equipment, less accumulated
depreciation (Note 4)..................... 243,501 3,513,029 3,467,252
----------- ----------- -----------
$25,157,868 $37,349,935 $38,271,155
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Notes payable, due within one year (Note
5)...................................... $ 1,000 $ 1,000 $ --
Accounts payable......................... 2,300,601 3,218,620 3,803,910
Accrued expenses......................... 1,682,130 1,208,867 2,714,353
Minority interest in joint venture (Note
1)......................................
Billings in excess of costs and estimated
earnings on uncompleted contracts
(Note 3)................................ 5,750,211 10,282,005 7,846,055
----------- ----------- -----------
Total current liabilities.............. 9,733,942 14,710,492 14,364,318
Stockholder's equity:
Common stock, $.01 par value, 10,000
shares authorized, issued and
outstanding............................. 70 100 100
Additional paid-in capital............... 1,358,800 1,358,800 1,358,800
Retained earnings........................ 14,065,056 21,280,543 22,547,937
----------- ----------- -----------
Total stockholder's equity............. 15,423,926 22,639,443 23,906,837
----------- ----------- -----------
$25,157,868 $37,349,935 $38,271,155
=========== =========== ===========
</TABLE>
See Independent Auditor's Report and Notes to Financial Statements.
2
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Contract revenues earned
and contract
assignments............ $78,460,352 $64,412,229 $66,161,538 $14,405,500 $21,307,430
Contract assignments
(Note 1)............... (4,767,843) (4,099,877) (5,878,594) (1,940,134) (856,120)
----------- ----------- ----------- ----------- -----------
Contract revenues
earned................. 73,692,509 60,312,352 60,282,944 12,465,366 20,451,310
Cost of revenues
earned................. (57,040,513) (43,688,707) (44,338,484) (8,964,767) (15,300,594)
----------- ----------- ----------- ----------- -----------
Gross profit.......... 16,651,996 16,623,645 15,944,460 3,500,599 5,150,716
Selling, general and
administrative
expenses............... (7,550,412) (7,080,475) (7,162,763) (1,948,568) (2,095,422)
Other income (expense):
Interest and other.... 415,761 851,256 1,296,003 272,656 355,046
Minority interest in
joint venture........ (103,062) (58,546) -- -- --
----------- ----------- ----------- ----------- -----------
Net income.............. $ 9,414,283 $10,335,880 $10,077,700 $ 1,824,687 $ 3,410,340
=========== =========== =========== =========== ===========
</TABLE>
See Independent Auditor's Report and Notes to Financial Statements.
3
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1997 and 1996
and the Three Months Ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
Retained Earnings
------------------------------------
Additional Accumulated Tax Timing
Common Paid-in Adjustments Differences
Stock Capital Account and Other Total
------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1994 $ 60 $ 300,000 $ 4,005,554 $ 31,963 $ 4,037,517
Capital contribution.. -- 500,000 -- -- --
Taxable income........ -- -- 10,033,645 -- 10,033,645
Tax deferred income... -- -- -- (604,334) (604,334)
Nondeductible
expenses............. -- -- (15,028) -- (15,028)
Dividends............. -- -- (3,737,586) 283,016 (3,454,570)
Other stockholder
distributions........ -- (300,000) -- -- --
---- ---------- ----------- --------- -----------
Balance, December 31,
1995 60 500,000 10,286,585 (289,355) 9,997,230
Issuance of common
stock................ 10 -- -- -- --
Capital contribution.. -- 858,800 -- -- --
Taxable income........ -- -- 10,561,335 -- 10,561,335
Tax deferred income... -- -- -- (290,341) (290,341)
Nondeductible
expenses............. -- -- (13,668) -- (13,668)
Dividends............. -- -- (6,268,054) -- (6,268,054)
Nontaxable income..... -- -- -- 78,554 78,554
---- ---------- ----------- --------- -----------
Balance, December 31,
1996 70 1,358,800 14,566,198 (501,142) 14,065,056
S corporation parent
election............. 30 -- -- -- --
Taxable income........ -- -- 8,489,798 -- 8,489,798
Tax deferred income... -- -- -- 1,310,037 1,310,037
Nondeductible
expenses............. -- -- (8,732) -- (8,732)
Dividends............. -- -- (2,727,264) -- (2,727,264)
Nontaxable income..... -- -- -- 151,648 151,648
---- ---------- ----------- --------- -----------
Balance, December 31,
1997 100 1,358,800 20,320,000 960,543 21,280,543
Net income
(unaudited).......... -- -- 3,410,340 -- 3,410,340
Dividends
(unaudited).......... -- -- (2,142,946) -- (2,142,946)
---- ---------- ----------- --------- -----------
Balance, March 31, 1998
(unaudited) $100 $1,358,800 $21,587,394 $ 960,543 $22,547,937
==== ========== =========== ========= ===========
</TABLE>
See Independent Auditor's Report and Notes to Financial Statements.
4
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
cash and cash
equivalents
Cash flow from operating
activities:
Cash received from
customers............ $71,209,047 $60,136,320 $59,538,115 $12,516,558 $20,953,549
Cash paid to
subcontractors,
suppliers and
employees............ (58,854,858) (54,188,057) (50,909,563) (10,605,680) (15,295,225)
Interest and other
income............... 277,941 508,284 648,637 272,656 355,046
Interest paid......... (100,988) (5,332) (29,234) -- --
----------- ----------- ----------- ----------- -----------
Cash from operating
activities......... 12,531,142 6,451,215 9,247,955 2,183,534 6,013,370
----------- ----------- ----------- ----------- -----------
Cash flow from investing
activities:
Sales (purchases) of
short-term
investments, net..... (699,717) (3,651,725) 1,253,389 2,280,185 (192,431)
Purchase of
equipment............ (1,313,961) (357,691) (4,635,460) (10,602) (12,689)
Deposit on airplane... -- (300,000) 300,000 -- --
Sale of equipment..... 174,859 1,639,108 1,359,500 -- --
----------- ----------- ----------- ----------- -----------
Cash (for) from
investing
activities......... (1,808,819) (2,670,308) (1,722,571) 2,269,583 (205,120)
----------- ----------- ----------- ----------- -----------
Cash flow from financing
activities:
Dividends paid........ (3,454,570) (6,268,054) (2,876,010) (928,276) (2,142,946)
Capital contribution.. 500,000 858,800 -- -- --
Distribution to
minority partner..... (54,603) (223,389) -- -- --
Issuance of common
stock................ -- 10 -- --
S corporation parent
election............. -- -- 30 30 --
Other stockholder
distributions........ (300,000) -- -- -- --
Repayment of debt..... -- (1,000)
----------- ----------- ----------- ----------- -----------
Cash used for
financing
activities......... (3,309,173) (5,632,633) (2,875,980) (928,246) (2,143,946)
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents............ 7,413,150 (1,851,726) 4,649,404 3,524,871 3,664,304
Cash and cash
equivalents:
Beginning of period... 1,126,930 8,540,080 6,688,354 6,688,354 11,337,758
----------- ----------- ----------- ----------- -----------
End of period......... $ 8,540,080 $ 6,688,354 $11,337,758 $10,213,225 $15,002,062
=========== =========== =========== =========== ===========
Reconciliation of net
income to cash provided
by (used for) operating
activities
Net income.............. $ 9,414,283 $10,335,880 $10,077,700 $ 1,824,687 $ 3,410,340
Adjustments:
Depreciation.......... 172,390 126,525 185,953 31,385 58,466
Gain on sale of fixed
assets............... (137,101) (153,592) (179,521) -- --
Gain on short-term
investments.......... (719) (189,380) (467,845) -- --
Minority interest in
joint venture........ 103,062 58,546 -- -- --
Changes in:
Contract receivables
and related
billings vs.
earnings........... (2,483,462) (176,032) (744,829) 59,192 502,239
Prepaids and other
assets............. 194,422 (7,247) (82,046) (143,804) (48,451)
Accounts payable and
accrued expenses... 5,268,267 (3,543,485) 458,543 420,074 2,090,776
Notes Receivable.... -- -- -- (8,000) --
----------- ----------- ----------- ----------- -----------
$12,531,142 $ 6,451,215 $ 9,247,955 $ 2,183,534 $ 6,013,370
=========== =========== =========== =========== ===========
</TABLE>
Supplemental information
In 1995, long-term debt of $976,677 was paid using the proceeds from the sale
of an airplane.
See Independent Auditor's Report and Notes to Financial Statements.
5
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995 and March 31, 1998 (unaudited)
Note 1--Significant Accounting Policies:
Basis of Presentation
The consolidated statements include Regency Electric Company, Inc. (REC),
Regency Electric Company Jacksonville Office, Inc. (REC Jacksonville), Regency
Electric Company Atlanta Office, Inc. (REC Atlanta), Regency Electric Company
Orlando Office, Inc. (REC Orlando), Regency Electric Company Charlotte Office,
Inc. (REC Charlotte), Regency Electric Company Projects Group, Inc. (REC
Proj.) and Regency Aviation Company, Inc. (RAC). All significant intercompany
accounts and transactions have been eliminated. In 1993, REC Orlando entered
into a joint venture agreement and became a 90% partner in Regency/Zap
Electrical Construction Team, a Joint Venture (Joint Venture). The sole
contract of the Joint Venture was completed during 1996 and the Joint Venture
was liquidated
REC became an S corporation parent effective January 1, 1997 when the
company's shareholder contributed the stock of the other entities and they
elected to become qualified S corporation subsidiaries. Consolidated financial
statements have been prepared as if the entities had always been parent and
subsidiary entities.
Unaudited Interim Financial Statement Information
In connection with the subsequent business combination agreement and related
Securities and Exchange Commission filing requirements, the management of the
Company has included unaudited interim financial statement information. In the
opinion of management, the Company has made all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the financial
condition of the Company as of March 31, 1998 and the results of operations
and cash flows for the three months ended March 31, 1998 and 1997, and the
statements of stockholder's equity as of and for the three months ended March
31, 1998, as presented in the accompanying unaudited interim financial
statements information.
Company's Activities and Operating Cycle
The companies are engaged in the construction industry as electrical
contractors, with the exception of RAC which provides aviation services to the
companies. The work is performed under fixed-price, cost plus and fixed-fee
contracts.
The length of the companies' contracts vary, but typically do not extend
beyond 18-24 months. Assets and liabilities are classified as current and
noncurrent because the contract-related items in the balance sheet have
realization and liquidation periods within the operating cycle.
Accounting Estimates
The financial statements include various estimates and assumptions by
management that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period.
Revenue and Cost Recognition
Revenues from fixed-price construction contracts are recognized on the
percentage-of-completion method, measured by the cost-to-cost method.
Contract assignments include material or equipment furnished to the
contractor by the owner in which the contractor assumes all obligations,
liabilities and responsibilities for the material or equipment including but
not limited to the following: risk of loss, cost of unloading, handling,
maintenance, insuring, storing, securing, protecting, installing, starting-up,
checking-out, and safeguarding such material and equipment.
6
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995 and March 31, 1998 (unaudited)
Contracts and costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs, and depreciation costs. Selling, general and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Changes in job performance, job conditions, and
estimated profitability, including those arising from contract penalty
provisions, and final contract settlements may result in revisions to costs
and income and are recognized in the period in which the revisions are
determined. Profit incentives are included in revenues when their realization
is reasonably assured. Additional contract revenue relating to claims is
recognized only when realization is probable and the amount can be reliably
estimated.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the companies consider all
highly liquid investments with original maturities of three months or less to
be cash equivalents.
Short-Term Investments
The companies consider all short-term investments to be trading securities
as defined by SFAS 115 and as such are reported at fair value.
Property and Equipment
Depreciation and amortization are provided principally on the straight-line
method over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
Useful
Classification Lives
-------------- ---------
<S> <C>
Construction equipment.......................................... 3-5 years
Transportation equipment........................................ 3-5 years
Trailers........................................................ 5 years
Office furniture and equipment.................................. 3-5 years
Leasehold improvements.......................................... 2-5 years
</TABLE>
Income Taxes
The company, with the consent of its shareholder, elected under the Internal
Revenue Code to be an S corporation. In lieu of Federal corporation income
taxes, the shareholder will be taxed on the Company's taxable income. The
Companies pay state income taxes on behalf of the stockholder. Those payments
are reflected as dividends in the financial statements as the income tax is
paid.
Stock Appreciation Rights
Effective January 1, 1998 the Company adopted a Stock Appreciation Rights
Plan (the Plan) to reward personnel whose services are important to the
Company. The Plan provides that the award of Stock Appreciation Rights (SARs)
may be paid in cash or the issue of non-voting stock. The maximum number of
SARs outstanding at any time is 5,000. The SARs may have a fixed maturity date
of not less than twelve (12) months nor more than ten (10) years, however,
they will immediately mature and become payable upon a change in control of
the Company. Upon the maturity date an employee shall be entitled to receive
an amount equal to the sum of the excess of the fair market value over the
"Basis Value." On January 1, 1998 approximately 3,650 SARs were
7
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995 and March 31, 1998 (unaudited)
outstanding with a "Basis Value" of $4,437. This value was based on a
professional appraisal of the Company as of December 31, 1997, therefore,
there has been no compensation recorded to date under the Plan.
Note 2--Contract Receivables:
Contract receivables are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Completed contracts.................. $ 112,526 $ 150,790 $ 369,234
Contracts in progress................ 13,038,496 8,040,244 13,763,133
Retained............................. 2,848,733 3,201,324 2,559,813
----------- ----------- -----------
$15,999,755 $11,392,358 $16,692,180
=========== =========== ===========
</TABLE>
All amounts are expected to be collected within one year.
Note 3--Costs and Estimated Earnings on Uncompleted Contracts:
Costs and estimated earnings on uncompleted contracts are summarized as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1995 1996 1997
-------------- ------------ ------------
<S> <C> <C> <C>
Costs incurred on uncompleted
contracts................... $ 81,329,796 $ 73,300,607 $ 69,436,470
Estimated earnings........... 22,669,819 21,301,733 20,137,303
Less-billings to date........ (112,711,297) (98,530,593) (98,057,019)
-------------- ------------ ------------
$ (8,711,682) $ (3,928,253) $ (8,483,246)
============== ============ ============
Included in accompanying
balance sheets under the
following captions:
Costs and estimated earnings
in excess of billings on
uncompleted contracts....... $ 524,553 $ 1,821,958 $ 1,798,759
Billings in excess of costs
and estimated earnings on
uncompleted contracts....... (9,236,235) (5,750,211) (10,282,005)
-------------- ------------ ------------
$ (8,711,682) $ (3,928,253) $ (8,483,246)
============== ============ ============
</TABLE>
Note 4--Property and Equipment:
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1996 1997
---------- --------- ----------
<S> <C> <C> <C>
Construction equipment................. $ 209,758 $ 231,854 $ 231,854
Transportation equipment............... 1,319,532 87,561 3,468,034
Office furniture and equipment......... 260,986 313,578 351,004
Leasehold improvements................. 117,653 117,653 147,759
---------- --------- ----------
1,907,929 750,646 4,198,651
Less-accumulated depreciation.......... (410,078) (507,145) (685,622)
---------- --------- ----------
$1,497,851 $ 243,501 $3,513,029
========== ========= ==========
</TABLE>
Depreciation expense was $185,953 in 1997, $126,525 in 1996 and $172,390 in
1995.
8
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995 and March 31, 1998 (unaudited)
Note 5--Notes Payable:
The Company has $4,000,000 in various credit facilities available at
December 31, 1997. These facilities include (a) an unsecured $2,000,000 line
of credit, (b) an irrevocable standby letter of credit of $450,000 and (c)
$1,550,000 credit availability. The line of credit, due June 30, 1998, had an
outstanding balance of $1,000 at December 31, 1997 and 1996. The line of
credit provides for borrowings of up to $2,000,000 at the prime rate. The
credit facilities are guaranteed by all of the combined companies and are also
personally guaranteed up to $2,000,000 by Alan J. Green.
The Company has an irrevocable standby letter of credit of $450,000 at
December 31, 1997, which guarantees the Company's payment of workers'
compensation insurance claims.
Additionally, the Company has $1,550,000 of additional credit availability
at December 31, 1997 under an Advised Guidance Line. The option to obtain the
additional credit has not been exercised as of December 31, 1997.
Note 6--Commitments and Contingencies:
Litigation
The Company may be a party to various claims, complaints and disputed
amounts arising in the normal course of its construction activities. In the
opinion of management such matters involve such amounts that the unfavorable
disposition would not have a material affect on the financial position of the
Company.
Lease Commitments
The assets utilized under operating lease arrangements in various operations
are as follows: office facilities, warehouse, office equipment and
transportation equipment.
The following is a schedule of minimum lease commitments outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Year Ending
December 31,
-------------
<S> <C>
1998............................................................ $481,345
1999............................................................ 365,237
2000............................................................ 101,776
2001............................................................ 14,421
--------
$962,779
========
</TABLE>
Lease expense under operating leases was $506,018 in 1997, $497,543 in 1996
and $393,848 in 1995.
Note 7--Backlog:
The following schedule shows a reconciliation of backlog representing signed
contracts in existence at December 31, 1997 and 1996
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1996.................................. $ 67,306,941
Contract adjustments and new contracts...................... 51,171,503
------------
118,478,444
Less contract revenue earned................................ (60,042,333)
------------
Balance, December 31, 1997.................................. $ 58,436,111
============
</TABLE>
9
<PAGE>
REGENCY ELECTRIC COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, 1996 and 1995 and March 31, 1998 (unaudited)
Contract adjustments include owner purchased materials of $5,878,594 in 1997
and $4,099,877 in 1996 (Note 1).
Note 8--Profit Sharing Plan:
The Companies all participate in a 401(k) profit sharing plan covering
substantially all employees. The plan became effective January 1, 1990.
Employer's contributions charged to earnings were $87,866 in 1997, $56,077 in
1996 and $46,916 in 1995.
Note 9--Risks and Uncertainties:
The companies are subject to a concentration of credit risk on accounts
receivable balances (Note 2) since business operations are limited to a
specific industry and geographical area. To limit these risks, it is the
companies' policy to obtain references on potential customers and contractors
prior to granting credit.
At times, cash balances held at financial institutions were in excess of FDIC
insurance limits. The companies place temporary cash investments with high-
credit, quality financial institutions. The companies believe no significant
concentration of credit risk exists with respect to these cash investments.
10
