<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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August 26, 1998
(DATE OF EARLIEST EVENT REPORTED)
CAPROCK COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in its Charter)
Texas 0-24581 75-2765572
------------------ ------------------ ----------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
Two Galleria Tower
13455 Noel Road, Suite 1925
Dallas, TX 75240
(Address of Principal Executive Offices)
(972) 982-9500
Registrant's Telephone Number, including area code
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2: ACQUISITIONS OR DISPOSITIONS OF ASSETS
On August 26, 1998, CapRock Communications Corp. (formerly known
as IWL Holdings Corp.), a Texas corporation ("Holdings"), announced
that it had completed the mergers and plan of exchange pursuant to the
Agreement and Plan of Merger and Plan of Exchange dated as of February
16, 1998, as amended (the "Merger Agreement"), by and among Holdings,
CapRock Telecommunications Corp., a Texas corporation (formerly
known as CapRock Communications Corp.) ("Telecommunications"), IWL
Communications, Incorporated, a Texas corporation ("IWL"), IWL
Acquisition Corp., a Texas corporation ("I-Sub"), CapRock
Acquisition Corp., a Texas corporation ("C-Sub"), and CapRock Fiber
Network, Ltd., a Texas limited partnership (the "Partnership").
Pursuant to the Merger Agreement, on August 26, 1998, I-Sub was
merged with and into Telecommunications, with each of IWL and
Telecommunications being the surviving corporations of such mergers
(the "Mergers"). In addition, on such date the interests in the
Partnership were exchanged ("Interest Exchange" and, together with
the Mergers, the "Transaction") for shares of $.01 par value common
stock of Holdings ("Holdings Common Stock"). At the effective time
of the Mergers and the Interest Exchange, all previously
outstanding shares of IWL common stock ceased to exist, and each
such share was converted into and became exchangeable for one share
of Holdings Common Stock, and all previously outstanding shares of
Telecommunications common stock ceased to exist, and each such
share was converted into and became exchangeable for 1.789030878
shares of Holdings Common Stock and each one percent (1%) of the
Partnership Interests issued and outstanding was exchanged for
63,194.54 shares of Holdings Common Stock. The Mergers and the
Interest Exchange will be accounted for as a pooling of interests.
Reference is made to the joint Press Release of Holdings and IWL,
dated August 26, 1998, which is attached hereto as an exhibit and is
incorporated herein by reference.
The aggregate merger consideration for the Transaction consisted
of (i) approximately 4.5 million shares of Holdings Common Stock
(including shares of Holdings Common Stock reserved for issuance upon
the exercise of stock options of IWL assumed by Holdings) to be issued
to holders of IWL common stock and IWL options and warrants (upon
exercise thereof), (ii) approximately 19.0 million shares of Holdings
Common Stock (including shares of Holdings Common Stock reserved for
issuance upon the exercise of stock options of Telecommunications
assumed by Holdings) to be issued to holders of Telecommunications
common stock and Telecommunications options (upon exercise thereof),
and (iii) approximately 6.3 million shares of Holdings Common Stock
to be issued to the holders of Partnership Interests.
Upon completion of the Mergers and the Interest Exchange, the
former executive officers and directors of Telecommunications will
beneficially own more than fifty percent (50%) of the issued and
outstanding shares of Holdings Common Stock.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Audited consolidated financial statements (with notes thereto) of
IWL and its subsidiaries for the periods prescribed are incorporated
herein by reference to pages F-28 through F-54 of the Holdings'
Registration Statement on Form S-4, Registration Number 333-57365 (the
"Registration Statement").
1
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Unaudited consolidated financial statements (with notes thereto)
of IWL and its subsidiaries for the prescribed interim periods are
incorporated herein by reference to pages 3 through 6 of IWL's
Quarterly Report on Form 10-Q for the period ended June 30, 1998.
Audited financial statements (with notes thereto) of
Telecommunications for the periods prescribed are incorporated herein
by reference to pages F-1 through F-15 of the Registration Statement.
Unaudited financial statements (with notes thereto) of
Telecommunications for the prescribed interim periods are incorporated
herein by reference to pages 3 through 7 of Exhibit 99.1 of Holdings'
Quarterly Report on Form 10-Q for the period ended June 30, 1998.
Audited financial statements (with notes thereto) of the
Partnership for the periods prescribed are incorporated herein by
reference to pages F-16 through F-27 of the Registration Statement.
Unaudited financial statements (with notes thereto) of the
Partnership for the prescribed interim periods are incorporated herein
by reference to pages 3 through 7 of Exhibit 99.2 of Holdings'
Quarterly Report on Form 10-Q for the period ended June 30, 1998.
Audited balance sheet (with notes thereto) of Holdings for the
period prescribed is incorporated herein by reference to pages F-55
through F-57 of the Registration Statement.
Unaudited balance sheet (with notes thereto) of Holdings for the
prescribed interim period is incorporated herein by reference to pages
3 through 5 of Holdings' Quarterly Report on Form 10-Q for the period
ended June 30, 1998.
2
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(B) PRO FORMA FINANCIAL INFORMATION
Unaudited pro forma combined financial statements (with notes
thereto) of Holdings, giving effect to the Mergers and the Interest
Exchange under the pooling of interests accounting method, are
incorporated herein by reference to pages 93 through 99 of
Holdings' Registration Statement.
In addition, unaudited pro forma combined financial statements
(with notes thereto) of Holdings as of and for the six months ended
June 30, 1998 are contained herein and set forth below:
CAPROCK COMMUNICATIONS CORP.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------------- -------------------------------
IWL Telecommunications Partnership Adjustments Combined
---------- ------------------- ------------ ----------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Telecommunications services $ 7,135 $ 32,416 $ 1,196 $ (193) (d) $ 40,554
Network construction services - - 1,355 - 1,355
Projects and other 9,510 - - - 9,510
-------- --------- ---------- ---------- --------
Total revenues 16,645 32,416 2,551 (193) 51,419
Cost of services:
Cost of telecommunication services 10,014 23,910 13 (17) (d) 33,920
Cost of network construction services - - 114 - 114
-------- --------- ---------- ---------- --------
Gross Profit 6,631 8,506 2,424 (176) 17,385
Operating costs and expenses:
Selling, general and administrative 4,590 4,943 204 (176) (d) 9,561
Depreciation and amortization 1,369 484 396 - 2,249
-------- --------- ---------- ---------- --------
Total operating costs and expenses 5,959 5,427 600 (176) 11,810
-------- --------- ---------- ---------- --------
Operating income 672 3,079 1,824 - 5,575
Interest expense, net (351) (159) (409) - (919)
Other income 105 - - - 105
-------- --------- ---------- ---------- --------
Income before income taxes 426 2,920 1,415 - 4,761
Income taxes 209 1,134 545 - 1,888
-------- --------- ---------- ---------- --------
Net income $ 217 $ 1,786 $ 870 $ - $ 2,873
-------- --------- ---------- ---------- --------
-------- --------- ---------- ---------- --------
Earnings per common share:
Basic $ 0.06 $ 0.17 $ - $ - $ 0.10
Diluted $ 0.05 $ 0.17 $ - $ - $ 0.10
Weighted average shares outstanding:
Basic 3,926 10,399 - 14,524 28,849
Diluted 4,225 10,576 - 14,664 29,465
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
3
<PAGE>
CAPROCK COMMUNICATIONS CORP.
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------------- -------------------------------
IWL Telecommunications Partnership Adjustments Combined
---------- ------------------- ------------ ----------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Telecommunications services $ 3,537 $ 20,128 $ 845 $ - $ 24,510
Projects and other 8,215 - - 8,215
Product resales 2,945 - - 2,945
-------- --------- ---------- ---------- --------
Total revenues 14,697 20,128 845 - 35,670
Cost of services:
Cost of telecommunication services 7,705 15,770 8 - 23,483
Cost of product resales 2,346 - - - 2,346
-------- --------- ---------- ---------- --------
Gross Profit 4,646 4,358 837 - 9,841
Operating costs and expenses:
Selling, general and administrative 3,110 3,216 140 - 6,466
Depreciation and amortization 768 303 348 - 1,419
-------- --------- ---------- ---------- --------
Total operating costs and expenses 3,878 3,519 488 - 7,885
-------- --------- ---------- ---------- --------
Operating income 768 839 349 - 1,956
Interest expense, net (300) (168) (370) - (838)
Other income 109 - - - 109
-------- --------- ---------- ---------- --------
Income before income taxes 577 671 (21) - 1,227
Income tax expense 148 242 - (8) (b) 382
-------- --------- ---------- ---------- --------
Net income (loss) $ 429 $ 429 $ (21) $ 8 $ 845
-------- --------- ---------- ---------- --------
-------- --------- ---------- ---------- --------
Earnings per common share:
Basic $ 0.18 $ 0.04 $ - $ - $ 0.03
Diluted $ 0.18 $ 0.04 $ - $ - $ 0.03
Weighted average shares outstanding:
Basic 2,372 10,399 - 14,524 27,295
Diluted 2,435 10,399 - 14,524 27,358
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
4
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CAPROCK COMMUNICATIONS CORP.
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 1998
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------------------------------------------- ------------------------
IWL Communications Telecommunications Partnership Adjustments Combined
------------ -------------- ------------------ ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 359 $ 2 $ 2 $ 378 $ $ 741
Accounts receivable, net 6,952 - 10,284 39 17,275
Due from affiliate 1,250 (1,250) (d) -
Costs and estimated earnings in
excess of billings - - 1,355 1,355
Inventory 1,093 - - - 1,093
Prepaid expenses and other 463 - 1,000 4 1,467
Deferred merger costs 597 - 56 - (653)(c) -
Deferred income taxes 276 - 88 - 364
----------- ------------- ---------- ---------- -------- --------
Total current assets 9,740 2 12,680 1,776 (1,903) 22,295
Property, plant and equipment, net 17,320 - 4,739 11,894 33,953
Other assets 2,668 - 424 54 - 3,146
----------- ------------- ---------- ---------- -------- --------
Total assets $ 29,728 $ 2 $ 17,843 $ 13,724 $ (1,903) $ 59,394
----------- ------------- ---------- ---------- -------- --------
----------- ------------- ---------- ---------- -------- --------
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 10,131 $ - $ 304 $ 8,877 $ $ 19,312
Due to affiliate - - 1,250 (1,250) (d) -
Bank line of credit - - 2,602 - 2,602
Accounts payable and accrued expenses 3,457 - 9,658 1,916 1,750 (c) 16,781
Accrued committment and guarantor fees - - - 431 431
Customer deposits 23 - - - 23
Current installments under capital
lease - - 254 - 254
Income taxes payable 183 - - 375 558
Unearned revenue 9 - 156 162 - 327
----------- ------------- ---------- ---------- -------- --------
Total current liabilities 13,803 - 12,974 13,011 500 40,288
Long-term debt 1,456 - - - 1,456
Deferred income taxes 441 - 530 170 1,141
Obiligations under capital lease - - 265 - - 265
----------- ------------- ---------- ---------- -------- --------
Total liabilities 15,700 - 13,769 13,181 500 43,150
Stockholders' equity
Common stock 40 - 1,458 - (1,209) (a) 289
Additional paid-in capital 9,237 2 - - 1,209 (a) 10,448
Retained earnings 4,744 - 2,970 543 (2,403) (c) 5,854
Translation adjustment 7 - - - - 7
Unearned compensation - - (354) - - (354)
----------- ------------- ---------- ---------- -------- -------
Total stockholders' equity 14,028 2 4,074 543 - 16,244
----------- ------------- ---------- ---------- -------- -------
Total liabilities and stockholders'
equity $ 29,728 $ 2 $ 17,843 $ 13,724 $ (1,903) $ 59,394
----------- ------------- ---------- ---------- -------- -------
----------- ------------- ---------- ---------- -------- -------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
5
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NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(a) The Merger Agreement, as amended, was entered into on February 16, 1998, by
IWL, Telecommunications, the Partnership and Holdings and other
subsidiaries created to facilitate the Transaction. Under terms of the
Merger Agreement, at the effective time of the Mergers and the Interest
Exchange, each share of IWL common stock was converted into and became
exchangable for one share of Holdings Common Stock, each share of
Telecommunications common stock was converted into and became exchangable
for 1.789030878 shares of Holdings Common Stock and each one percent (1%)
of the Partnership Interests in the Partnership was exchanged for 63,194.54
shares of Holdings Common Stock. The following table detail issuances in
connection with the Transaction as if the Transaction had occurred on June
30, 1998.
<TABLE>
<CAPTION>
Number of
Common shares Exchange Holdings
outstanding ratio common shares
-------------- ------------ -------------
<S> <C> <C> <C>
Holdings Common Shares to be issued to
the shareholders of Telecommunications 10,398,954 1.789030878 18,604,050
Holdings Common Shares to be issued to
the Partners of the Partnership 6,319,454
Holdings Common Shares to be issued to
the shareholders of IWL 3,986,718 1.0 3,986,718
----------
Total Holdings Common Shares outstanding
after completion of the Transaction 28,910,222
----------
----------
</TABLE>
The number of shares of Holdings Common Stock were determined at the
effective time of the Transaction, based on the number of shares of IWL and
Telecommunications common stock outstanding and the number of Partnership
Interests that were validly tendered to and accepted by Holdings. The
adjustments to the balance sheet as of June 30, 1998 result in the
recapitalization of Holdings.
(b) The net adjustments to tax expense for the Partnership for the Six Months
Ended June 30, 1997 and the Three Months Ended June 30, 1997 included in
the pro forma adjustments were estimated at 38%. These adjustments were
made to reflect the tax expense and the deferred tax assets and liabilities
that would have been recorded if the Partnership had been taxed as a C
Corporation for those periods. Effective January 1, 1998, the Partnership
elected to be taxed as a corporation.
(c) The costs of the transaction have been estimated as approximately $2.4
million, consisting of fees for investment bankers, attorneys, accountants,
financial printing and other related charges. Approximately $653,000 of
the estimated transaction costs have been accrued as of June 30, 1998. The
remaining transaction costs estimated as $1.8 million have been included as
an adjustment to the pro forma condensed combined balance sheet as if the
Transaction occurred on June 30, 1998 and the pro forma combined condensed
statement of operations for all periods presented exclude the effects of
these costs. Such costs will be expensed in August 1998 at the
consummation of the transaction.
(d) To remove the effect of intercompany transactions. The intercompany
transactions consist of the following:
(i) Due to affiliates - $1,250,000 as of June 30, 1998.
(ii) Eliminate intercompany revenue and related cost of sales totaling
approximately $17,000 for the Three Months Ended June 30, 1998.
(iii) Eliminate intercompany fee from Telecommunications for
administrative and management services for the Partnership. Such
fees total approximately $176,000 for the Three Months Ended June
30, 1998 and were immaterial for previous periods.
6
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(C) EXHIBITS
2.1 Agreement and Plan of Merger and Plan of Exchange dated as
of February 16, 1998, as amended, by and among I-Sub, C-Sub,
the Partnership, IWL, Holdings and Telecommunications (filed
as Appendix I to the Registration Statement, and
incorporated herein by reference).
99.1 Joint Press Release of Holdings and IWL, dated August 26,
1998.
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned hereunto duly authorized.
CAPROCK COMMUNICATIONS CORP.
By: /s/ Jere W. Thompson, Jr.
---------------------------
Jere W. Thompson, Jr.
Chief Executive Officer
Dated: August 27, 1998
8
<PAGE>
Exhibit Index
DESCRIPTION
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.1 Agreement and Plan of Merger and Plan of Exchange dated as of February
16, 1998, as amended, by and among I-Sub, C-Sub, the Partnership, IWL,
Holdings and Telecommunications (filed as Appendix I to the
Registration Statement, and incorporated herein by reference).
99.1 Joint Press Release of Holdings and IWL, dated August 26, 1998.
</TABLE>
9
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CAPROCK COMMUNICATIONS CORP.
CONTACT: Kevin W. McAleer
972/788-4800
IWL COMMUNICATIONS, INCORPORATED
CONTACT: Karen Beuchaw
281/482-0289
FOR IMMEDIATE RELEASE
August 26, 1998
CAPROCK COMMUNICATIONS CORP.
AND IWL COMMUNICATIONS, INCORPORATED
COMPLETE MERGER AND PLAN OF EXCHANGE
DALLAS - CapRock Communications Corp. (NASDAQ: CPRK) ("Company") and IWL
Communications, Incorporated (NASDAQ: IWLC)("IWL") today jointly announced
that the merger and plan of exchange with CapRock Telecommunications Corp.
("Telecommunications"), IWL and the partners of CapRock Fiber Network, Ltd.
("Partnership") have been completed. On August 24, 1998, shareholders from
Telecommunications and IWL approved the merger, and on August 26, 1998 the
mergers and the interest exchange with all of the partners of the Partnership
were completed ("Combination").
The consummation of the Combination also allows for the net proceeds
being held in escrow from the $150 million Rule 144A offering completed on
July 16, 1998 to be released to the Company.
The Company is a regional facilities-based integrated communications
provider offering local, long distance, Internet, data and private line
services to small and medium-sized businesses. The Company also provides
switched and dedicated access, regional and international long distance,
private lines and dark fiber to carrier customers. The Company is building a
4,300 miles advanced fiber network throughout Texas, Louisiana, Arkansas and
Oklahoma with approximately 850 miles estimated to be completed by December
1998.
Certain information contained herein contains forward-looking statements
(as defined in the Private Securities Litigation Reform Act of 1995)
regarding future events or the future financial performance of the Company,
and are subject to a number of risks and other factors which could cause the
actual results of the Company to differ materially from those contained in
and anticipated by the forward-looking statements. Among such factors are:
the ability to service substantial indebtedness and to comply with the
restrictive covenants associated therewith, the ability of the Company to
manage rapid change and to integrate the business of three companies and
achieve the benefits of the Combination, the Company's ability to fund the
significant capital requirements, risks related to
<PAGE>
building a fiber network, risks associated with the development of
accounting, billing, customer service and management information systems,
competition and technological advances, dependence on other long distance and
local carriers, dependence on key personnel, risks associated with industry
concentration, and dependence on major customers and suppliers, risks
associated with international operations, risks of government regulation,
risks of possible service interruptions and natural disasters, risks
associated with being an Internet service provider, risks of obtaining and
maintaining rights of way for the fiber network, risks associated with
variability of operating results, risks relating to ownership or proprietary
rights, risks associated with the Year 2000 issues, and risks associated with
general business and economic conditions. The forward-looking statements
contained herein are necessarily dependent upon assumptions, estimates and
data that may be incorrect or imprecise. Accordingly, any forward-looking
statements included herein do not purport to be predictions of future events
or circumstances and may not be realized.
SOURCE IWL Communications, Inc.
08/27/98
/CONTACT: Karen L. Beuchaw of IWL Communications, Incorporated,
281-482-0289; or Kevin W. McAleer of CapRock Communications. 972-788-4800/
/Company News On-Call: http://www.prnewswire.com or fax. 800-758-5804.
ext. 122396/
/Web site: http://www.iwlc.com/
(IWLC CPRK)
