<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________________ TO __________________
COMMISSION FILE NUMBER: 0-31341
VIASOURCE COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
---------------
NEW JERSEY 22-2966853
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
200 EAST BROWARD BOULEVARD, SUITE 2100
FORT LAUDERDALE, FLORIDA 33301
800-683-0253
(Address, including zip code and telephone number, including
area code, of Registrant's principal executive offices)
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days [ ] Yes [X] No
The number of shares of common stock outstanding as of
November 6, 2000 was 45,146,536
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of January 1, 2000 and
September 30, 2000 (unaudited) 2
Consolidated Statements of Operations for the Three and Nine Months Ended
October 2, 1999 and September 30, 2000 (unaudited) 3
Consolidated Statements of Cash Flows for the Nine Months Ended
October 2, 1999 and September 30, 2000 (unaudited) 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management Discussion and Analysis of Financial Condition and Results
of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
PART II OTHER INFORMATION 22
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIASOURCE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 1, September 30,
2000 2000
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................. $ 6,257,290 $ 18,776,635
Restricted cash ........................................................... 550,000 1,345,861
Accounts receivable, net .................................................. 15,097,378 35,045,670
Supply inventory .......................................................... 1,064,554 5,579,390
Prepaid expenses and other ................................................ 1,875,541 6,572,976
------------- -------------
Total current assets .............................................. 24,844,763 67,320,532
------------- -------------
PROPERTY AND EQUIPMENT, net ................................................. 7,660,278 17,492,585
GOODWILL AND OTHER INTANGIBLES, net ......................................... 32,617,953 153,197,262
OTHER ASSETS ................................................................ 2,058,894 3,038,756
------------- -------------
$ 67,181,888 $ 241,049,135
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ......................................... $ 1,249,764 $ 1,406,250
Accounts payable .......................................................... 2,658,910 16,198,393
Accrued expenses .......................................................... 8,238,252 15,519,513
Deferred revenue .......................................................... 748,468 9,974,168
------------- -------------
Total current liabilities ......................................... 12,895,394 43,098,324
------------- -------------
LONG-TERM DEBT .............................................................. 20,927,108 52,643,061
DEFERRED REVENUE ............................................................ 705,139 706,658
DEFERRED TAX LIABILITY ...................................................... 178,344 163,043
REDEEMABLE COMMON STOCK AND WARRANTS
(Redemption value of $5,826,842 and $0
at January 1, 2000 and September 30, 2000) ................................ 5,826,842 0
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 15,000,000 shares authorized, no shares issued
and outstanding
Common stock, no par value, 115,000,000 shares authorized,
29,617,924 and 45,475,869 shares issued
and 27,264,983 and 42,431,895 outstanding ................................ 31,479,212 165,054,442
Common stock purchase warrants ........................................... 250,000 0
Deferred compensation .................................................... (3,278,153) (942,919)
Accumulated other comprehensive income ................................... 160,905 (11,337)
Retained earnings (accumulated deficit) .................................. 2,037,097 (15,662,137)
Treasury stock, 2,352,941 and 3,043,974 shares at cost ................... (4,000,000) (4,000,000)
------------- -------------
Total shareholders' equity ........................................ 26,649,061 144,438,049
------------- -------------
$ 67,181,888 $ 241,049,135
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 4
VIASOURCE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- -----------------------------------
October 2, September 30, October 2, September 30,
1999 2000 1999 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES ..................... $ 19,504,476 $ 61,335,514 $ 36,889,179 $ 135,725,761
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Cost of revenues ........... 15,617,721 54,639,798 29,388,253 120,631,764
Selling, general and
administrative ........... 2,391,253 8,688,396 4,056,628 17,890,057
Depreciation and
amortization ............. 814,080 5,159,297 1,482,462 9,189,054
Special compensation
charges* .................. 0 146,655 315,000 2,160,519
Recapitalization costs ..... 85,314 0 1,108,314 0
------------- ------------- ------------- -------------
Total operating expenses ... 18,908,368 68,634,146 36,350,657 149,871,394
------------- ------------- ------------- -------------
Income (loss) from operations 596,108 (7,298,632) 538,522 (14,145,633)
------------- ------------- ------------- -------------
INTEREST INCOME .............. 19,788 211,502 19,788 259,297
INTEREST EXPENSE ............. 606,749 1,898,295 684,783 3,712,537
------------- ------------- ------------- -------------
Income (loss) before income
taxes ..................... 9,147 (8,985,425) (126,473) (17,598,873)
INCOME TAX PROVISION ......... 121,953 100,361 582,344 100,361
------------- ------------- ------------- -------------
NET LOSS ..................... $ (112,806) $ (9,085,786) $ (708,817) $ (17,699,234)
============= ============= ============= =============
Basis and Diluted net loss
per shares ................. $ (0.01) $ (0.25) $ (0.04) $ (0.57)
============= ============= ============= =============
</TABLE>
-------------
* Special compensation charges consist of $0 and $0, $4,348 and $142,307, $0
and $315,000, and $64,055 and $2,096,464 of cost of revenues and selling,
general and administrative expenses for the three and nine months ended
October 2, 1999 and September 30, 2000, respectively.
The accompanying notes are an integral part of these statements.
3
<PAGE> 5
VIASOURCE COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
---------------------------------
October 2, September 30,
1999 2000
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................... $ (708,817) $(17,699,234)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization .................. 1,482,462 9,189,054
Amortization of deferred compensation .......... 0 1,868,309
Amortization of debt issuance costs ............ 308,903 310,940
Provision for deferred taxes (benefit) ......... (434,281) (4,103,461)
Stock compensation expense ..................... 315,000 292,210
Changes in operating assets and liabilities, net
of affect of business acquisitions:
Accounts receivable .......................... (4,361,911) (6,210,361)
Supply inventory ............................. (149,121) (2,078,477)
Prepaid expenses and other ................... 498,118 (112,042)
Accounts payable ............................. 2,405,685 (774,839)
Accrued expenses and deferred revenue ........ 1,294,606 7,858,228
------------ ------------
Net cash provided by (used in) operating
activities ........................... 650,644 (11,458,673)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment .............. (1,532,889) (7,378,247)
Business acquisitions, net of cash acquired ...... (9,257,592) (1,576,236)
------------ ------------
Net cash used in investing activities .. (10,790,481) (8,954,483)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ..................... 22,697,930 13,973,308
Repayments on long-term debt ..................... (6,297,484) (15,758,951)
Increase in restricted cash ...................... (550,000) (795,861)
Purchase of treasury stock........................ (4,007,057) 0
Proceeds from sale of common stock, net .......... 4,907,507 35,489,305
Proceeds from exercise of stock options .......... 0 24,700
------------ ------------
Net cash provided by financing
activities ........................... 16,750,896 32,932,501
------------ ------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS ...................................... 6,611,059 12,519,345
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..... 877,029 6,257,290
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........... $ 7,488,088 $ 18,776,635
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 6
VIASOURCE COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE THREE AND NINE MONTHS ENDED
OCTOBER 2, 1999 AND SEPTEMBER 30, 2000 IS UNAUDITED)
1. BACKGROUND
Viasource Communications, Inc. and its subsidiaries ("Viasource" or the
"Company") is a nationwide enabler of broadband technologies to residential and
commercial consumers. As a technology-neutral enabler, the Company offers
comprehensive network integration services to providers in the cable,
telecommunications, satellite and wireless industries. Viasource provides
installation, integration, fulfillment, and long-term maintenance and support
services for broadband video, voice and data technologies.
On June 14, 1999, the Company effected a recapitalization whereby Crest
Communication Partners L.P. ("Crest") and two other financial investors acquired
6,470,588 shares of common stock for $11 million directly from the then
Company's shareholders on a pro rata basis. Crest then provided the Company $5
million of bridge equity financing which was convertible into 2,941,176 shares
of common stock and bore interest at a rate of 10%. The proceeds from the bridge
equity financing were used by the Company to redeem 2,352,941 shares of common
stock for a purchase price of $4 million from the shareholders on a pro rata
basis with the remaining $1 million of proceeds used as working capital. In
connection with the bridge equity financing, Crest received a warrant to
purchase 147,059 shares of common stock at $.02 per share. The $5 million bridge
equity financing was repaid on September 7, 1999 when the Company sold 2,941,176
shares of common stock at $1.70 per share to three new financial investors. Upon
completion of the recapitalization transaction described above, including taking
into consideration the shares and warrants used in the bridge equity financing,
the new investor group held 76.5% of the voting equity and the remaining 23.5%
of common stock was retained by the pre-recapitalization Company shareholders.
The Company incurred $1.1 million of recapitalization costs, which were charged
to the Consolidated Statement of Operations during 1999. In July 1999, the
Company changed its name from The RTK Group, Inc. to Viasource Communications,
Inc.
The Company has grown through a number of acquisitions and has a limited
history of operating as a combined company. In fiscal 1999, the Company acquired
two businesses and in the second quarter of fiscal 2000 the Company acquired
four businesses. All these businesses had been operating independently and the
Company may not be able to integrate or successfully manage the combined
companies. In addition, the Company is dependent on a significant portion of its
revenues from a limited number of customers. In fiscal 1999 and the first three
quarters of fiscal 2000, the Company incurred losses and experienced negative
cash flows for fiscal 1999 and for the first half of fiscal 2000. The second
quarter acquisitions resulted in the Company incurring additional debt and will
require additional cash to fund operations. In May and July 2000, the Company
executed an amendment and received a waiver, to its Term Note and Revolving
Credit Facilities. In addition, in August 2000, the Company renegotiated the
terms of these facilities
On August 18, 2000, the Company completed its initial public offering in
which it sold 5,000,000 shares of common stock for $8.00 a share for gross
proceeds of $40 million. In September 2000, the underwriters exercised an over
allotment option to sell 750,000 shares for $8.00 a share for gross proceeds of
$6 million. The Company received $3 million of proceeds from the over allotment
and a selling shareholder received the remaining proceeds. The costs associated
with the initial public offering were $7.5 million. The proceeds from the
offering were used for general corporate purposes, and the repayment of the
following indebtedness:
o $4.8 million of notes the Company issued to shareholders in the
acquisitions of Telecrafter and D.S. Cable,
o $5.1 million of other indebtedness assumed in the acquisition of
TeleCore, and
o $1.5 million of other indebtedness.
The Company has approximately $21.8 million of notes outstanding, which
were issued, to shareholders in the Company's acquisition of TeleCore, Excalibur
and Service Cable. These notes bear interest at 9% and are payable in the fourth
quarter of fiscal 2001.
5
<PAGE> 7
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Viasource
Communications, Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
FISCAL YEAR
The Company operates on a 52/53 week fiscal year ending on the last Saturday
nearest December 31.
INTERIM FINANCIAL STATEMENTS
The financial statements as of September 30, 2000 and for the three and nine
months ended October 2, 1999 and September 30, 2000 are unaudited and, in the
opinion of management of the Company, include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
results for those interim periods. The results of operations for the three and
nine months ended September 30, 2000 are not necessarily indicative of the
results to be expected for the full year.
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 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
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues are generally recognized as services are performed. One of the
Company's satellite installation customers, beginning in 1999, paid the Company
a portion of its fees subject to a chargeback. The Company has not accumulated
sufficient client specific historical data to date to reliably estimate the
amount of potential chargebacks. Accordingly, as required under the Securities
and Exchange Commission Staff Accounting Bulletin ("SAB") No. 101 -- Revenue
Recognition in Financial Statements, the Company records these amounts subject
to chargeback as deferred revenue and records revenue as the right of chargeback
expires. To date, the amount of chargebacks has been $326,100.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. At January 1, 2000 and
September 30, 2000, cash and cash equivalents include cash on hand, cash in the
bank, money market accounts and various government bonds with seven-day reset
features.
NET INCOME (LOSS) PER SHARE
The Company has presented basic and diluted net loss per share pursuant to
SFAS No. 128, "EARNINGS PER SHARE". Basic net loss per share has been computed
by dividing net loss by the weighted-average number of shares of common stock
outstanding during the period. Diluted net loss per share includes the effect,
if any, from the potential exercise or conversion of securities, such as stock
options, which would result in the issuance of shares of common stock to the
extent they are dilutive.
Pro forma basic and diluted net loss per share, as presented in the
accompanying consolidated statements of operations, has been computed for the
three and nine months ended October 2, 1999 and September 30, 2000. Pro forma
diluted net loss per share is the same as basic net loss per share for the three
and nine months ended October 2, 1999 and September 30, 2000 as no additional
shares for the potential dilution from the exercise of common stock options are
included since the result is anti-dilutive due to the Company's pro forma
losses.
6
<PAGE> 8
The following table presents the calculation of basic and diluted net loss
per share and pro forma basic and diluted net loss per share (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ---------------------------------
October 2, September 30, October 2, September 30,
1999 2000 1999 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss ................... $ (112,806) $ (9,085,786) $ (708,817) $(17,699,234)
============ ============ ============ ============
Basic and diluted:
Weighted-average shares
used in computing basic
and diluted net
loss per share ........ 20,109,143 37,290,568 19,514,132 30,927,365
============ ============ ============ ============
Basic and diluted net
loss) per share .......... $ (0.01) $ (0.24) $ (0.04) $ (0.57)
============ ============ ============ ============
Pro forma:
Shares used above .......... 20,109,143 37,290,568 19,514,132 30,927,365
------------ ------------ ------------ ------------
Pro forma adjustment for
shares issued to owners of
1999 Acquisitions and 2000 14,320,599 0 20,949,456 6,031,297
Acquisitions
Pro forma adjustment to
reflect the
weighted-average effect
of assumed conversion
of warrants ........... 1,017,586 536,755 1,017,586 857,316
------------ ------------ ------------ ------------
Shares used in computing pro
forma basic and diluted
net loss per share ....... 35,447,328 37,827,323 41,471,174 37,815,978
============ ============ ============ ============
Pro forma basic and diluted
net loss per share ....... $ (0.09) $ (0.25) $ (0.26) $ (1.07)
============ ============ ============ ============
</TABLE>
STOCK SPLIT
On August 14, 2000, the Company affected a 0.588-for-1 reverse stock split
of each outstanding share of common and preferred stock. All share, stock option
and warrant data have been restated to reflect the reverse stock split.
3. ACQUISITIONS
On July 23, 1999, the Company acquired Communication Resources Incorporated
("CRI") whereby the outstanding shares of CRI common stock were exchanged for
10,283,658 shares of Viasource common stock valued at $17.5 million or $1.70 per
share and 1,951,929 shares of Viasource common stock valued at $4.3 million,
subject to a put agreement. Commencing on the closing date of the acquisition
transaction, the $1.70 per share fair value estimate was based on the June 14,
1999 Viasource recapitalization, whereby the pre-recapitalization shareholders
received $1.70 per share for shares sold on that date and the price paid by the
new investors in September 1999. In addition, the outstanding CRI options to
purchase shares of CRI common stock were exchanged for options to purchase
149,156 shares of Viasource common stock valued at $147,696. Transaction costs
related to this merger amounted to $246,236. The acquisition was accounted for
as a purchase. An allocation of the purchase price resulted in $18.7 million of
excess purchase price over the estimated fair value of the net tangible assets
acquired of $3.6 million. A preliminary analysis resulted in the excess purchase
price being assigned to intangible assets consisting of $1 million for
agreements not-to-compete, $1.5 million for tradenames, $570,000 for trained
workforce, $12.1 million for customer relationships and $3.5 million for
goodwill. Intangible assets are amortized on a straight-line basis over their
estimated useful lives of 3 to 4 years for agreements not-to-compete, 20 years
for tradenames, 7.5 years for trained workforce, 20 years for customer
relationships and 20 years for goodwill.
The Company and one of the CRI selling shareholders entered into a put
agreement, whereby the selling shareholder had the right to put back to the
Company and one of the other CRI selling shareholders 1,951,929 shares of common
stock at $2.23 per share. The put option and the underlying shares have been
classified as redeemable common stock in the accompanying consolidated balance
sheets as of January 1, 2000.
On January 3, 2000, the selling shareholder put to the Company 691,033
shares of common stock in accordance with the July 23, 1999 put agreement at
$2.23 per share. In consideration for these shares, the Company issued a $1.5
million Secured Subordinated Promissory Note which was repaid upon the initial
public offering. The Company accounted for the share repurchase as an increase
to treasury stock outstanding in the first quarter of fiscal 2000. In addition,
7
<PAGE> 9
on January 3, 2000, the selling shareholder put to the existing shareholder
1,260,896 shares of common stock in accordance with the July 23, 1999 put
agreement at $2.23 per share. Since the put right on these shares is now
terminated, the value of these shares were reclassified from redeemable common
stock to common stock in the first quarter of fiscal 2000.
In connection with the CRI acquisition, the Company assumed an earn-out
contingency, which was resolved in August 2000 and resulted in the issuance of
an additional 66,294 shares of common stock valued at $9.00 for $596,646.
On September 7, 1999, the Company acquired substantially all of the assets
(and assumed substantially all of the liabilities) of Nassau Communications,
Inc. d/b/a Telecrafter Services Corporation ("Telecrafter") for $18.2 million,
including transaction costs. The purchase price consisted of $10.5 million in
cash, $3.0 million in seller notes and 2,647,059 shares of common stock valued
at $1.70 per share, or $4.5 million. The $1.70 per share value was based on the
price paid by the new investors in September 1999. Based on a preliminary
allocation of the purchase price, the application of the purchase method of
accounting resulted in $14.6 million of excess purchase price over the estimated
fair value of the net tangible assets acquired of $3.9 million. An analysis
resulted in the excess purchase price being assigned to intangible assets
consisting of $1.2 million for the agreement not-to-compete, $1.1 million for
tradenames, $470,000 for trained workforce, $10.5 million for customer
relationships and $1.3 million for goodwill. Intangible assets are amortized on
a straight-line basis over their estimated useful lives of 5 years for the
agreement not-to-compete, 20 years for tradenames, 7.5 years for trained
workforce, 20 years for customer relationships and 20 years for goodwill.
On April 18, 2000, the Company acquired substantially all of the assets (and
assumed substantially all of the liabilities) of D.S. Cable TV Contractors, Inc.
("D.S. Cable") for approximately $5.9 million, including transaction costs. The
purchase price consisted of $1.5 million in cash, $750,000 in seller notes, and
387,735 shares of common stock valued at $9.00 per share or $3.5 million and
transaction costs. Based on a preliminary allocation of the purchase price, the
application of the purchase method of accounting resulted in $5.0 million of
excess purchase price over the estimated fair value of the net tangible assets
acquired of $871,490. A preliminary analysis resulted in the excess purchase
price being assigned to intangible assets consisting of $320,000 for the
agreement not-to-compete, $470,000 for tradenames, $300,000 for trained
workforce, $3.4 million for customer relationships and $544,897 for goodwill.
Intangible assets are amortized on a straight-line basis over their estimated
useful lives of 6 years for the agreement not-to-compete, 20 years for
tradenames, 7.5 years for trained workforce, 20 years for customer relationships
and 20 years for goodwill.
On May 4, 2000, the Company acquired substantially all of the assets (and
assumed substantially all of the liabilities) of Service Cable Electric, Inc.
and Service Cable Corporation ("Service Cable") for approximately $6.2 million,
including transaction costs. The purchase price consisted of $980,000 in cash,
$2.0 million in seller notes, 329,412 shares of common stock valued at $9.00 per
share, or 2,964,708, options to purchase common stock with a fair value of
$189,374 and transaction costs. Based on a preliminary allocation of the
purchase price, the application of the purchase method of accounting resulted in
$6 million of excess purchase price over the estimated fair value of the net
tangible assets acquired of $177,852. A preliminary analysis resulted in the
excess purchase price being assigned to intangible assets consisting of $310,000
for the agreement not-to-compete, $450,000 for tradenames, $500,000 for trained
workforce, $4.1 million for customer relationships and $676,044 for goodwill.
Intangible assets are amortized on a straight-line basis over their estimated
useful lives of 6 years for the agreement not-to-compete, 20 years for
tradenames, 7.5 years for trained workforce, 20 years for customer relationships
and 20 years for goodwill.
On June 1, 2000, the Company acquired all of the outstanding stock of
Excalibur Cable Communications, Ltd. ("Excalibur") for approximately $25.4
million (subject to certain post-closing adjustments), including transaction
costs. The purchase price consisted of $4 million in cash, $4 million in seller
notes and 1,882,353 shares of common stock valued at $9.00 per share or, $16.9
million plus transaction costs. Based on a preliminary allocation of the
purchase price, the application of the purchase method of accounting resulted in
approximately $22.5 million of excess purchase price over the estimated fair
value of the net tangible assets acquired of $3.6 million. A preliminary
analysis resulted in the excess purchase price being assigned to intangible
assets consisting of $1.2 million for the agreement not-to-compete, $1.6 million
for tradenames, $1.3 million for trained workforce, $16.3 million for customer
relationships and $1.4 million for goodwill. Intangible assets are amortized on
a straight-line basis over their estimated useful lives of 3 to 6 years for the
agreement not-to-compete, 20 years for tradenames, 7.5 years for trained
workforce, 20 years for customer relationships and 20 years for goodwill.
On June 1, 2000, the Company acquired all of the outstanding stock of
TeleCore, Inc. ("TeleCore") for approximately $86.8 million, including
transaction costs. The purchase price consisted of $16.9 million in seller
notes, 6,785,024 shares of common and preferred stock valued at $9.00 per share,
or $61.1 million, options to purchase common stock valued at $8.5 million, plus
transaction costs. Based on a preliminary allocation of the purchase price, the
application of the purchase
8
<PAGE> 10
method of accounting resulted in approximately $92.1 million of excess purchase
price over the estimated fair value of the net deficit acquired of $5.4 million.
A preliminary analysis resulted in the excess purchase price being assigned to
intangible assets consisting of $16.5 for the agreements not-to-compete, $4
million for tradenames, $3.4 million for trained workforce, $48 million for
customer relationships and $20 million for goodwill. Intangible assets are
amortized on a straight-line basis over their estimated useful lives of 6 years
for the agreements not-to-compete, 10 years for tradenames, 7.5 years for
trained workforce, 10 years for customer relationships and 10 years for
goodwill.
The following pro forma summary combines the consolidated results of
operations of Viasource, CRI, Telecrafter, D.S. Cable, Service Cable, Excalibur
and TeleCore as if the transactions had occurred as of the beginning of the year
presented after giving effect to certain adjustments including amortization of
the purchase price in excess of the net tangible assets acquired and interest
expense. This pro forma summary is not necessarily indicative of the results of
operations that would have occurred if Viasource, CRI, Telecrafter, D.S. Cable,
Service Cable, Excalibur and TeleCore had been combined during such periods.
Moreover, the pro forma summary is not intended to be indicative of the results
of operations to be attained in the future (unaudited).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- -----------------------------------
October 2, September 30, October 2, September 30,
1999 2000 1999 2000
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue ............. $ 35,570,404 $61,335,514 $ 93,870,457 $ 170,535,309
============ =========== ============= =============
Operating loss ...... $ (1,495,397) $(7,298,632) $ (6,824,577) $ (34,760,707)
============ =========== ============= =============
Net loss ............ $ (3,335,590) $(9,085,786) $ (10,801,074) $ (40,597,986)
============ =========== ============= =============
Basic and diluted net
loss per share .... $ (.09) $ (0.25) $ (0.26) $ (1.07)
============ =========== ============= =============
</TABLE>
9
<PAGE> 11
4. SUPPLEMENTAL CASH FLOW INFORMATION
For the nine months ended October 2, 1999 and September 30, 2000, the
Company made interest payments of $230,005 and $3.1 million, respectively,
and paid income taxes of $274,534 and $162,537, respectively.
The following table displays the net non-cash assets that were acquired
during the nine months ended October 2, 1999, as a result of the business
acquisitions, described elsewhere within:
<TABLE>
<CAPTION>
CRI Telecrafter Total
------------ ------------ ------------
<S> <C> <C> <C>
Non-cash assets (liabilities):
Current assets ........................... $ 4,013,025 $ 3,689,141 $ 7,702,166
Property and equipment ................... 1,541,039 299,503 1,840,542
Other assets ............................. 597,339 20,812 618,151
Goodwill and other intangibles ........... 18,669,966 14,608,065 33,278,031
Current liabilities ...................... (1,412,720) (2,523,542) (3,936,262)
Debt ..................................... (674,754) (93,422) (768,176)
------------ ------------ ------------
Net noncash assets acquired .............. 22,733,895 16,000,557 38,734,452
Less: Common stock issued ................ (17,482,218) (4,500,000) (21,982,218)
Put option issued .................. (4,346,946) -- (4,346,946)
Options issued ..................... (147,696) -- (147,696)
Notes payable to sellers of business -- (3,000,000) (3,000,000)
------------ ------------ ------------
Cash paid for business acquisitions, net . $ 757,035 $ 8,500,557 $ 9,257,592
============ ============ ============
</TABLE>
The following table displays the net non-cash assets that were acquired
during the nine months ended September 30, 2000, as a result of the business
acquisitions, described elsewhere within:
<TABLE>
<CAPTION>
Service
DS Cable Cable Excalibur Telecore Total
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Non-cash assets (liabilities):
Current assets ................. $ 424,441 $ 1,452,859 $ 9,989,932 $ 5,938,622 $ 17,805,854
Property and equipment ......... 404,466 118,313 1,711,009 3,280,233 5,514,021
Other assets ................... 58,324 -- 156,101 215,313 429,738
Goodwill and other intangibles . 5,035,581 6,010,134 22,501,765 92,234,728 125,782,208
Current liabilities ............ (462,384) (1,505,591) (13,435,938) (7,559,792) (22,963,705)
Debt ........................... 0 0 (764,410) (7,548,259) (8,312,669)
------------- ------------- ------------- ------------- -------------
Net noncash assets acquired .... 5,460,428 6,075,715 20,158,459 86,560,845 118,255,447
Less: Common and preferred stock
issued ....................... (3,489,615) (2,964,708) (16,941,177) (61,065,216) (84,460,716)
Options issued ........... 0 (189,374) 0 (8,452,640) (8,642,014)
Notes payable to sellers
of business ............. (750,000) (1,960,000) (4,000,000) (16,866,481) (23,576,481)
------------- ------------- ------------- ------------- -------------
Cash paid for business
acquisitions, net ............ $ 1,220,813 $ 961,633 $ (782,718) $ 176,508 $ 1,576,236
============= ============= ============= ============= =============
</TABLE>
10
<PAGE> 12
5. LONG TERM DEBT
<TABLE>
<CAPTION>
January 1, 2000 September 30, 2000
--------------- ------------------
<S> <C> <C>
Revolving line of credit up to $25,000,000 due on September 7, 2004 bearing
interest at prime plus 2.25% or LIBOR plus 3.5% payable
quarterly through September 7, 2004. At September 30, 2000 the
interest rate was 9.38% ....................................................... $ 0 $ 16,531,006
Term note with bank, principal payable in quarterly installments of $468,750
commencing on December 31, 2000, increasing to $937,500 on December 31, 2001
and increasing to $1,406,250 on December 31, 2003; bearing interest at
prime plus 3.75% or LIBOR plus 5.00% payable quarterly, through
September 7, 2004, when all remaining principal and interest is due and
payable. At January 1, 2000 and September 30, 2000, the interest rate was
10.96% and 9.38% ........................................................... 15,000,000 15,000,000
Subordinated note payable to stockholders, with variable principal
payments through December 2001 ............................................. 3,000,000 21,796,607
Term notes with variable principal payments over a term of 36 to 48
months plus interest ranging from 7.50% to 8.50% ........................... 868,205 0
Equipment line of credit up to $2,000,000 due on March 31, 2000, plus
interest at the bank's prime rate less 1/2 of one percent (8.00% at
January 1, 2000) ........................................................... 1,595,000 0
Revolving line of credit up to $1,500,000 due on March 31, 2000, plus
interest at the bank's prime rate less 1/2 of one percent (8.00% at
January 1, 2000) ........................................................... 1,000,000 0
Three-year term note with 36 equal monthly principal payments plus
interest at the bank's prime rate plus 1/2 of one percent ( 9.00% at
January 1, 2000, respectively) .............................................. 204,167 0
Three-year term note with 36 equal monthly principal payments plus
interest at the bank's prime rate less 1/2 of one percent (8.00% and
9.00% of January 1, 2000 and September 30, 2000, respectively) ............. 173,333 0
Capital lease obligations ..................................................... 336,167 721,698
------------ ------------
22,176,872 54,049,311
Less-- Current maturities ..................................................... (1,249,764) (1,406,250)
------------ ------------
$ 20,927,108 $ 52,643,061
============ ============
</TABLE>
In March 2000, the Company entered into a new additional $15 million
Revolving Credit Facility (the "Revolver"), which matures on September 7, 2004
with the same lender as the $15 million Credit Agreement relating to the
acquisition of Telecrafter ("Term Note"). The Revolver provides for a $12
million working capital facility and a sub-facility of up to $3 million for
letters of credit. The Revolver bears interest, at the Company's option, at
prime plus 2.25% or LIBOR plus 3.50% and requires an annual commitment fee of
0.50% on the unused portion of the Revolver. The Revolver contains the same
financial and non-financial covenants as the Term Note. Together the Term Note
and Revolver are refered to as the "Term Note and Revolving Credit Facility". On
May 31, 2000, the Company executed an amendment to the Term Note and Revolving
Credit Facility, which changed its financial covenants. In July 2000, the lender
waived compliance with certain covenants for the second quarter of 2000 and
revised the covenants prospectively. As of September 30, 2000 the Company is in
compliance with the revised covenants. On August 15, 2000, the Company entered
into an amendment on the revolver to increase the available borrowing capacity
to $25 million including the sub-facility of up to $3 million for letters of
credit. The initial borrowings on the Revolver were used to repay the certain
borrowings classified as the Bank Facility, as well as a portion of the Term
Note. As of September 30, 2000, the outstanding balance on the Revolver was
$16.5 million.
6. WARRANTS
On June 14, 1999, the Company granted warrants to purchase 147,059 shares of
the Company's common stock at $.02 per share in connection with a $5 million
bridge financing. These warrants were valued at their estimated fair value of
$250,000 and recorded as debt issue cost. The fair value of $1.70 per share of
the underlying common stock equaled the $1.70 per share price paid to redeem the
Viasource shareholders in June 1999 and the price paid by the new investors in
September 1999. In connection with the repayment of the bridge financing on
September 7, 1999, the remaining unamortized debt issue costs were recorded as
interest expense. These warrants were converted into common stock upon
completion of the initial public offering.
On September 7, 1999, the Company granted warrants to purchase 870,538
shares of common stock at $ .02 per share in connection with sale of Common
stock and the $15 million Term Note. These warrants were valued at their
estimated fair value of $1.5 million using the Black-Scholes pricing model with
the following assumptions: dividend yield of zero, risk free interest rate of
6.0%, volatility
11
<PAGE> 13
factor of the expected market price of the Company's common stock of 70% and
the contractual term of the warrants of ten years. These warrants were converted
into common stock upon the completion of the initial public offering.
7. SUBSEQUENT EVENTS
In November 2000, the Company announced that they have signed a letter of
intent with DIRECTV that extends the term of its current agreement to five
years and otherwise proposes to expand the existing relationship between the
Company and DIRECTV.
8. SEGMENTS
The Company follows SFAS No. 131, "DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION." The Company classifies its operations into
four segments: Cable Services, Telephony and Internet, Satellite and Wireless
Services and Premise Networking Services. The operating segments are managed
separately because each operating segment represents a strategic business unit
that offers different services. The business segments are described in further
detail below:
The Cable Segment provides traditional and advanced cable installation,
disconnects, equipment recovery, collection and system audit services.
The Telephony and Internet Segment includes installation and maintenance of
DSL services, cable telephony and high-speed data services and other broadband
services, as well as traditional telephony services for commercial and
residential consumers.
The Satellite and Wireless Segment includes installation, equipment
conversion and maintenance services of direct broadcast satellite and other
wireless technologies.
The Premise Networking Segment includes installation and maintenance of
local area and wide area networking services and other communication systems for
commercial and residential consumers and staffing services provided to various
providers.
Corporate operations include senior management activities, professional
services and headquarters' facility and support and employee benefit costs.
Business segment information (unaudited) is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ -------------------------------
October 2, September 30, October 2, September 30,
1999 2000 1999 2000
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
REVENUES ...............
Cable ................ $ 14,669 $ 24,349 $ 27,069 $ 64,962
Telephony and Internet 2,427 14,252 5,172 29,353
Satellite and Wireless 2,244 18,294 4,306 35,297
Premise Networking ... 164 4,441 342 6,114
--------- --------- --------- ---------
$ 19,504 $ 61,336 $ 36,889 $ 135,726
========= ========= ========= =========
OPERATING INCOME (LOSS)
Cable ................ $ 648 $ 622 $ 2,009 $ 2,557
Telephony and Internet 399 (4,334) 1,236 (4,054)
Satellite and Wireless (67) (2,785) (208) (6,556)
Premise Networking ... 1 (739) 3 (464)
Corporate Expense (1) (385) (62) (2,501) (5,629)
--------- --------- --------- ---------
$ 596 $ (7,298) $ 539 $ (14,146)
========= ========= ========= =========
</TABLE>
(1) Includes recapitalization costs of $85,314 for the three months ended
October 2, 1999 and $146,655 for special compensation charges for the three
months ended September 30, 2000, special compensation charges of $315,000
and recapitalization costs of $1.1 million for the nine months ended
October 2, 1999 and special compensation charges of $2.2 million for the
nine months ended September 30, 2000.
12
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SOME OF THE STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS REGARDING
VIASOURCE'S BUSINESS STRATEGY AND EXPECTATIONS, PLANS FOR GROWTH AND BUSINESS
RELATIONSHIPS, ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, WHICH COULD CAUSE VIASOURCE'S
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH STATEMENTS.
FACTORS THAT COULD CAUSE SUCH RESULTS TO DIFFER INCLUDE VIASOURCE'S LIMITED
OPERATING HISTORY, COMPETITIVE PRICING PRESSURES IN VIASOURCE'S INDUSTRY,
PROVISIONS IN VIASOURCE'S AGREEMENTS WITH CLIENTS THAT PERMIT CANCELLATION ON
SHORT NOTICE AND OTHER FACTORS DISCUSSED IN VIASOURCE'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION ("SEC"), INCLUDING THE "RISK FACTORS" SECTION
OF VIASOURCE'S FINAL PROSPECTUS DATED AUGUST 18, 2000. VIASOURCE DOES NOT ASSUME
ANY OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.
OVERVIEW
We derive revenues from providing installation, integration, fulfillment,
and long-term maintenance and support services to broadband service providers on
both a residential and commercial basis and also design, install and maintain
LANs/WANs and other network applications on a commercial and residential basis.
Each of our target market segments is experiencing rapid growth and changes
in technology. To capitalize on these opportunities, broadband service providers
are making significant investments to build and upgrade its networks to enable
them to rapidly deploy advanced technologies such as high-speed Internet access,
digital video and telephony to consumers. These providers are implementing these
strategies in order to maximize its revenue per end-user and return on
investments and maintain or gain competitive advantages.
We operate in four reportable segments:
o CABLE, which includes traditional and advanced cable installation,
disconnect, equipment recovery, account collection and system audit
services,
o TELEPHONY AND INTERNET, which includes installation and maintenance of
digital subscriber line, or DSL, services, cable telephony and high-speed
data services and other broadband services, as well as traditional
telephony services for commercial and residential consumers,
o SATELLITE AND WIRELESS, which includes installation, equipment conversion
and maintenance services for direct broadcast satellite, or DBS, and
other wireless technologies, and
o PREMISE NETWORKING AND OTHER, which includes design, installation and
maintenance of LANs/WANs and other network applications for commercial
and residential consumers and staffing services provided to various
providers.
We provide services to our clients pursuant to service contracts, most of
which permit cancellation on short notice. Under the terms of such contracts,
the client can typically terminate the contract with 30 to 90 days prior written
notice. Historically, these service contracts have been awarded through a
competitive bidding process, but recently it has experienced trends toward
securing such contracts by negotiations. These service contracts provide for
payment based on the installations or other services we provide. Revenues are
generally recognized as services are performed. Since June 1999, a portion of
revenues derived from the provision of certain services to DIRECTV, to convert
PRIMESTAR customers to DIRECTV's technology platform, has been subject to
potential chargebacks. To date, the amount of the chargebacks has not been
significant. We have not accumulated sufficient client specific historical data
to date to reliably estimate the amount of potential chargebacks. Accordingly,
as required under the Staff Accounting Bulletin No. 101 -- Revenue Recognition
in Financial Statements, it recorded these amounts subject to chargeback as
deferred revenue and record revenue as the right of chargeback expires.
We have derived a significant amount of its revenues from a limited number
of clients. DIRECTV, AT&T, Time Warner, Northpoint and Covad amounting to
approximately 74% of our revenues for the three and nine months ended September
30, 2000.
Cost of revenues includes all direct costs of providing services under our
contracts, other than depreciation on vehicles and equipment owned or utilized
by us under capital leases. Cost of revenues is our principal expense and it
consists mostly of
13
<PAGE> 15
labor-related expenses. The cost of revenues includes all costs of field service
technicians, supervisory and quality control personnel, subcontractor costs, all
costs related to the operation and maintenance of vehicles and equipment, cost
of materials not supplied by the client, field office occupancy costs and
insurance costs.
Typically, our newly hired field technicians attend various company
developed and company sponsored technical and safety training courses during the
initial 30 days of employment. We also provide a variety of continuing education
programs designed to assist our employees in maintaining technical competence
and professional certifications. Costs associated with operating and maintaining
safety and training centers, including educational training and safety manuals,
materials and supplies, occupancy costs and staffing costs, are charged to cost
of revenues.
Selling, general and administrative costs include all costs of executive
personnel, certain clerical and administrative support personnel, occupancy
costs, travel and entertainment costs and accounting, legal, consulting and
other professional fees.
Depreciation and amortization expenses include depreciation of property and
equipment and amortization of goodwill and other intangibles. As a result of our
acquisitions in fiscal 1999 and in the second quarter of fiscal 2000, total
goodwill and other intangibles will be approximately $159 million. The goodwill
and other intangibles will be amortized over periods ranging from 3 to 20 years
with a weighted average life of 11 years.
Special compensation charges include non-recurring, non-cash compensation
charges associated with the amortization of unearned compensation related to
certain stock and stock option grants issued during fiscal 1999 and the first
six months of fiscal 2000 to certain employees and consultants for services
rendered to us.
We have included EBITDA in our Management's Discussion and Analysis of
Financial Condition and Results of Operations. We have presented EBITDA to
enhance your understanding of our operating results. EBITDA consists of net
income (loss) excluding net interest, taxes, depreciation and amortization.
EBITDA is provided because it is an important measure of financial performance
commonly used in the telecommunications industry to determine the value of
companies within the industry and to define standards for borrowing from
institutional lenders. You should not construe EBITDA as an alternative to
operating income as an indicator of our operating performance or as an
alternative to cash flows from operating activities as a measure of our
liquidity, determined in accordance with generally accepted accounting
principles. We may calculate EBITDA differently than other companies.
For the three months ended September 30, 2000, EBITDA was a negative $2.1
million, a decrease of $3.5 million as compared to EBITDA of $1.4 million in the
three months ended October 2, 1999. The decrease was primarily related to the
$3.7 million of deferred revenue associated with our DIRECTV conversion program.
For the nine months ended September 30, 2000, EBITDA was a negative $5.0
million, a decrease of $7.0 million as compared to EBITDA of $2.0 million in the
nine months ended October 2, 1999. The decrease was due to the non-recurring
special compensation charges of $2.2 million and the effect of $9.1 million of
deferred revenue associated with our DIRECTV conversion program.
HISTORY AND RECENT ACQUISITIONS
In June 1999, we effected a recapitalization in connection with an investor
group led by Crest Communications, which purchased a controlling interest in
Viasource from the shareholders. We incurred $1.1 million of non-recurring
transaction related expenses, principally for professional fees associated with
the recapitalization.
We have enhanced our growth through selective, strategic acquisitions that
have served to broaden our geographic reach or expand our presence in existing
markets, expand our technological capabilities and allow us to reach new
clients.
On July 23, 1999, we acquired all of the outstanding common stock of
Communication Resources in exchange for approximately $17.5 million of our
common stock and an additional $4.3 million of common stock that was subject to
an agreement with one of the former shareholders of Communication Resources
which gave him the right to put the shares to us and one of our shareholders. On
January 3, 2000, he exercised his right to put 691,033 of the shares back to us.
In consideration for these shares, we issued a $1.5 million promissory note,
which was repaid upon completion of our initial public offering. In connection
with this acquisition, we assumed an earn-out contingency, which was resolved in
August 2000 and resulted in the issuance of an additional 66,294 shares of our
common stock in the third quarter of fiscal 2000.
14
<PAGE> 16
On September 7, 1999, we acquired substantially all of the assets and
assumed substantially all of the liabilities of Telecrafter for approximately
$18.2 million, which we paid in a combination of cash, common stock and a
promissory note.
On April 21, 2000, we acquired substantially all of the assets and assumed
substantially all of the liabilities of D.S. Cable for approximately $5.9
million, which we paid in a combination of cash, common stock and a promissory
note.
On May 4, 2000, we acquired substantially all of the assets and assumed
substantially all of the liabilities of Service Cable for approximately $6.2
million, which we paid in a combination of cash, common stock, options and a
promissory note.
On June 1, 2000, we acquired TeleCore for approximately $86.8 million, which
we paid in a combination of cash, common stock, preferred stock, options and a
promissory note.
On June 1, 2000, we acquired Excalibur for approximately $25.4 million,
which we paid in a combination of cash, common stock and a promissory note
RESULTS OF OPERATIONS
The following table presents certain unaudited operating and other financial
data for the three and nine months ended October 2, 1999 and September 30, 2000:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
October 2, September 30, October 2, September 30,
1999 (1) 2000 1999 (1) 2000 (2)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues ................................. $ 19,504,476 $ 61,335,514 $ 36,889,179 $ 135,725,761
------------- ------------- ------------- -------------
Operating expenses:
Cost of revenues .................... 15,617,721 54,639,798 29,388,253 120,631,764
Selling, general and administrative . 2,391,253 8,688,396 4,056,628 17,890,057
Depreciation and amortization ....... 814,080 5,159,297 1,482,462 9,189,054
Special compensation charges ........ 0 146,655 315,000 2,160,519
Recapitalization costs .............. 85,314 0 1,108,314 0
------------- ------------- ------------- -------------
Total operating expenses ......... 18,908,368 68,634,146 36,350,657 149,871,394
------------- ------------- ------------- -------------
Income (loss) from operations ............ 596,108 (7,298,632) 538,522 (14,145,633)
Interest income .......................... 19,788 211,502 19,788 259,297
Interest expense ......................... 606,749 1,898,295 684,783 3,712,537
------------- ------------- ------------- -------------
Income (loss) before income taxes ........ 9,147 (8,985,425) (126,473) (17,598,873)
Income tax provision ..................... 121,953 100,361 582,344 100,361
------------- ------------- ------------- -------------
Net loss ................................. $ (112,806) $ (9,085,786) $ (708,817) $ (17,699,234)
============= ============= ============= =============
OTHER FINANCIAL DATA:
EBITDA ................................... $ 1,410,188 $ (2,139,335) $ 2,020,984 $ (4,956,579)
Capital Expenditures ..................... 215,988 3,551,056 1,532,889 7,378,247
============= ============= ============= =============
Cash flows provided by (used in) operating
activities ............................ (960,526) (10,665,374) 650,644 (11,458,673)
============= ============= ============= =============
Cash flows from investing activities ..... (9,473,580) (3,551,056) (10,790,481) (8,954,483)
============= ============= ============= =============
Cash flows provided by financing
activities ............................ 15,859,725 24,808,466 16,750,896 32,932,501
============= ============= ============= =============
</TABLE>
------------------------------
(1) Includes the results of Communication Resources from July 23, 1999 and
Telecrafter from September 7, 1999, their respective acquisition dates.
15
<PAGE> 17
(2) Includes the results of D.S. Cable from April 21, 2000, Service Cable from
May 4, 2000, Excalibur from June 1, 2000 and TeleCore from June 1, 2000,
their respective acquisition dates.
The following table presents certain selected financial data for our
operating segments, as well as our corporate expenses (which include certain
financing costs, employee benefit costs and other selling, general and
administrative expenses), for the three and nine month periods ended October 2,
1999 and September 30, 2000 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ----------------------------
October 2, September 30, October 2, September 30,
1999(1) 2000 1999(1) 2000(2)
--------- ------------- --------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Cable .................. $ 14,669 $ 24,349 $ 27,069 $ 64,962
Telephony and Internet . 2,427 14,252 5,172 29,353
Satellite and Wireless . 2,244 18,294 4,306 35,297
Premise Networking ..... 164 4,441 342 6,114
--------- --------- --------- ---------
Total ............ $ 19,504 $ 61,336 $ 36,889 $ 135,726
========= ========= ========= =========
INCOME (LOSS) FROM OPERATIONS
Cable .................. $ 648 $ 622 $ 2,009 $ 2,557
Telephony and Internet . 399 (4,334) 1,236 (4,054)
Satellite and Wireless . (67) (2,785) (208) (6,556)
Premise Networking ..... 1 (739) 3 (464)
Corporate Expense ...... (385) (62) (2,501) (5,629)
--------- --------- --------- ---------
Total ............ $ 596 $ (7,298) $ 539 $ (14,146)
========= ========= ========= =========
</TABLE>
------------------------------
(1) Includes the results of Communication Resources from July 23, 1999 and
Telecrafter from September 7, 1999, their respective acquisition dates.
(2) Includes the results of D.S. Cable from April 21, 2000, Service Cable from
May 4, 2000, Excalibur from June 1, 2000 and TeleCore from June 1, 2000,
their respective dates of acquisition.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
OCTOBER 2, 1999
REVENUES. Total revenues for the three months ended September 30, 2000 were
$61.3 million, an increase of $41.8 million, as compared to total revenues of
$19.5 million for the three months ended October 2, 1999. Of this increase,
$19.1 million, or 42%, was attributable to the companies acquired in fiscal 1999
and $22.4 million, or 46%, is attributable to companies acquired in fiscal 2000.
In the three months ended September 30, 2000, we recognized $24.3 million of
revenue from our Cable segment, as compared to $14.7 million in the prior
period. This increase resulted primarily from revenues contributed by acquired
companies of $13.7 million. Cable revenues represented 40% of our total revenue
in the three months ended September 30, 2000 as compared to 75% of our total
revenue in the three months ended October 2, 1999. We recognized $14.3 million
of revenues for the three months ended September 30, 2000 from our Telephony and
Internet segment, as compared to $2.4 million for the three months ended October
2, 1999. This increase resulted primarily from increased consumer demand for
broadband services, high-speed data and Internet access and cable telephony.
Telephony and Internet revenues represented 23% of our total revenue in the
three months ended September 30, 2000 as compared to 12% of our total revenue in
the three months ended October 2, 1999.
We recognized $18.3 million of revenues in the three months ended September
30, 2000 from Satellite and Wireless, as compared to $2.2 million in the three
months ended October 2, 1999. The companies we acquired contributed $17.6
million of revenues to this segment in the three months ended September 30,
2000. Satellite and Wireless revenues represented 30% of our total revenue in
the
16
<PAGE> 18
three months ended September 30, 2000 as compared to 12% of our total revenue in
the three months ended October 2, 1999. After our DBS client, DIRECTV, completed
its acquisition of PRIMESTAR in 1999, it initiated a conversion of PRIMESTAR's
customers to its own technology platform. As a result, we have experienced
increased demand for our services related to this program, contributing to
growth in revenues in the three months ended September 30, 2000. The conversion
program was substantially completed as of September 30, 2000. As of September
30, 2000, $10.7 million of our revenues derived from this conversion program are
subject to potential chargebacks, and are recorded as deferred revenue. We will
recognize these amounts as revenues as the right of chargeback expires over a
period of 16 months.
COST OF REVENUES. Cost of revenues for the three months ended September 30,
2000 was $54.6 million, an increase of $39.0 million, as compared to cost of
revenues of $15.6 million in the three months ended October 2, 1999. The
increased cost of revenues for the three months ended September 30, 2000
reflects costs associated with conversion services performed for DIRECTV and
higher direct costs of services related to the acquired companies. Also, during
the three months ended September 30, 2000, the Company signed an agreement with
DIRECTV to extend the terms of their current service agreements with DIRECTV to
five years. During the quarter we incurred approximately $1.8 million in costs
to maintain our infrastructure and workforce in anticipation of this alliance.
The above increases in costs were partially offset by higher margins in our
Telephony and Internet segment due to improved pricing and labor and equipment
utilization.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the three months ended September 30, 2000 were $8.7 million, an
increase of $6.3 million as compared to an expense of $2.4 million in the three
months ended October 2, 1999. Of this increase, the companies acquired in fiscal
1999 contributed $1.1 million, or 17%, and companies we acquired in fiscal 2000
contributed $5.1 million or 81%.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses for
the three months ended September 30, 2000 were $5.1 million, an increase of $4.3
million as compared to depreciation and amortization expenses of $814 thousand
in the three months ended October 2, 1999. The increase reflects $1.0 million of
additional depreciation resulting from capital expenditures incurred in the
ordinary course of business and assets acquired in the acquisitions completed in
fiscal 1999 and 2000 and $3.7 million of amortization of goodwill and other
intangible assets related to these acquisitions. As a result of our acquisitions
in 1999 and the second quarter of 2000, total goodwill and other intangibles
will be approximately $159 million. The goodwill and other intangibles will be
amortized over periods ranging from 3 to 20 years with a weighted average life
of 11 years.
SPECIAL COMPENSATION CHARGES. During the three months ended September 30,
2000, we incurred non-cash, special compensation charges of $147 thousand
compared to $0 for the same period in fiscal 1999. These arose as a result of
certain stock option grants we made to employees, and represent the difference
between the option exercise price and the deemed fair value of our common stock
on the date that the options were granted.
OPERATING INCOME (LOSS). For the three months ended September 30, 2000, we
recognized an operating loss of $7.3 million, as compared to operating income of
$596 thousand for the three months ended October 2, 1999. Included in the
operating loss for the three months ended September 30, 2000 is the effect of
$3.7 million of deferred revenue associated with our DIRECTV/Primestar
conversion project, $1.8 million of costs associated with the DIRECTV strategic
alliance agreement, as well as start up costs associated with various broadband
initiative. We are required to defer this revenue under Staff Accounting
Bulletin No. 101 because we have not accumulated sufficient client specific data
to reliably estimate the amount of potential chargebacks. To date, the amount of
chargebacks has been $326 thousand.
Operating income from Cable was $622 thousand for the three months ended
September 30, 2000 as compared to $648 thousand for the three months ended
October 2, 1999. Telephony and Internet operating loss was $4.3 million in the
three months ended September 30, 2000 as compared to operating income of $399
thousand in the three months ended October 2, 1999.
The operating loss from Satellite and Wireless was $67 thousand in the three
months ended September 30, 2000, as compared to an operating loss of $2.8
million in the three months ended October 2, 1999. We have experienced lower
operating margins in our Satellite and Wireless segment because we have deferred
a portion of the revenues derived from DIRECTV's conversion program without a
corresponding deferral of the infrastructure and service costs of the segment.
INTEREST EXPENSE. For the three months ended September 30, 2000, interest
expense was $1.9 million, an increase of $1.3 million, as compared to interest
expense of $607 thousand in the three months ended October 2, 1999. The
increased interest expense was due to higher debt levels and the amortization of
direct financing transaction costs and fees.
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<PAGE> 19
INCOME TAX PROVISION (BENEFIT). For the three months ended September 30,
2000 a $100 thousand tax provision was recorded. Our effective tax rate will
differ from the federal statutory tax rate due to the amortization of goodwill
and other intangible assets that do not provide a tax benefit, non-deductible
reorganization costs and certain other business expenses that are not deductible
for tax purposes and state income taxes.
NET INCOME (LOSS). We recognized a net loss of $9.1 million for the three
months ended September 30, 2000, as compared to a net loss of $113 thousand in
the three months ended October 2, 1999.
EBITDA. For the three months ended September 30, 2000, EBITDA was negative
$2.1 million, a decrease of $3.5 million as compared to EBITDA of $1.4 million
in the three months ended October 2, 1999. The decrease was primarily in the
effect of $3.7 million of deferred revenue associated with our DIRECTV
conversion program.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED OCTOBER
2, 1999
REVENUES. Total revenues for the nine months ended September 30, 2000 were
$135.7 million, an increase of $98.8 million, as compared to total revenues of
$36.9 million for the nine months ended October 2, 1999. Of this increase, $56.0
million, or 57%, was attributable to the companies acquired in fiscal 1999 and
$34.0 million, or 34%, is attributable to companies acquired in fiscal 2000
In the nine months ended September 30, 2000, we recognized $65.0 million of
revenue from our Cable segment, as compared to $27.1 million in the prior year.
This increase resulted primarily from revenues contributed by acquired companies
of $44.2 million. Cable revenues represented 48% of our total revenue in the
nine months ended September 30, 2000 as compared to 73% of our total revenue in
the nine months ended October 2, 1999. We recognized $29.3 million of revenues
for the nine months ended September 30, 2000 from our Telephony and Internet
segment, as compared to $5.2 million for the nine months ended October 2, 1999.
This increase resulted primarily from increased consumer demand for broadband
services, high-speed data and Internet access and cable telephony. Telephony and
Internet revenues represented 22% of our total revenue in the nine months ended
September 30, 2000 as compared to 14% of our total revenue in the nine months
ended October 2, 1999.
We recognized $35.3 million of revenues in the nine months ended September
30, 2000 from Satellite and Wireless, as compared to $4.3 million in the nine
months ended October 2, 1999. The companies we acquired contributed $29.9
million of revenues to this segment in the nine months ended September 30, 2000.
Satellite and Wireless revenues represented 26% of our total revenue in the nine
months ended September 30, 2000 as compared to 12% of our total revenue in the
nine months ended October 2, 1999. After our DBS client, DIRECTV, completed its
acquisition of PRIMESTAR in 1999, it initiated a conversion of PRIMESTAR's
customers to its own technology platform. As a result, we have experienced
increased demand for our services related to this conversion program,
contributing to growth in revenues in the nine months was substantially
completed on September 30, 2000. This conversion program was completed on
September 30, 2000. As of September 30, 2000, $10.7 million of our revenues
derived from this conversion program are subject to potential chargebacks, and
are recorded as deferred revenue. We will recognize these amounts as revenues as
the right of chargeback expires over a period of 16 months.
COST OF REVENUES. Cost of revenues for the nine months ended September 30,
2000 was $120.6 million, an increase of $91.2 million, as compared to cost of
revenues of $29.4 million in the nine months ended October 2, 1999. The
increased cost of revenues for the nine months ended September 30, 2000 reflects
costs associated with conversion services performed for DIRECTV and higher
direct costs of services related to the acquired companies, partially offset by
higher margins in our Telephony and Internet segment due to improved pricing and
labor and equipment utilization.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the nine months ended September 30, 2000 were $17.9 million, an
increase of $13.8 million as compared to an expense of $4.1 million in the nine
months ended October 2, 1999. Of this increase, the companies acquired in fiscal
1999 contributed $4.0 million, or 30%, companies we acquired in fiscal 2000
contributed $6.8 million or 49% and the investment in infrastructure and
personnel to support our continued growth contributed $3.0 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for the
nine months ended September 30, 2000 was $9.2 million, an increase of $7.7
million as compared to depreciation and amortization expense of $1.5 million in
the nine months ended October 2, 1999. The increase reflects $2.1 million of
additional depreciation resulting from capital expenditures incurred in the
ordinary course of business and assets acquired in the acquisitions completed in
fiscal 1999 and 2000 and $5.9 million of amortization of goodwill and other
intangible assets related to these acquisitions.
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<PAGE> 20
SPECIAL COMPENSATION CHARGES. During the nine months ended September 30,
2000, we incurred non-cash, special compensation charges of $2.2 million of
which $64 thousand and $2.1 million related to cost of revenues and selling,
general and administrative expenses, respectively. These arose as a result of
certain stock option grants we made to employees and consultants, and represent
the difference between the option exercise price and the deemed fair value of
our common stock on the date that the options were granted.
OPERATING INCOME (LOSS). For the nine months ended September 30, 2000, we
recognized an operating loss of $14.1 million, as compared to operating income
of $539 thousand for the nine months ended October 2, 1999. If we had not
incurred the special compensation charge of $2.2 million for the nine months
ended September 30, 2000, we would have recognized an operating loss of $11.9
million. Included in the operating loss for the nine months ended September 30,
2000 is the effect of $9.1 million of deferred revenue associated with our
DIRECTV conversion program.
Operating income from Cable was $2.6 million for the nine months ended
September 30, 2000 as compared to $2.0 million for the nine months ended October
2, 1999. Telephony and Internet operating loss was $4.1 million in the nine
months ended September 30, 2000 as compared to operating income of $1.2 million
in the nine months ended October 2, 1999.
The operating loss from Satellite and Wireless was $6.6 million in the nine
months ended September 30, 2000, as compared to an operating loss of $208
thousand in the nine months ended October 2, 1999. We have experienced lower
operating margins in our Satellite and Wireless segment because we have deferred
$9.1 million of the revenues derived from DIRECTV's conversion program without a
corresponding deferral of the infrastructure and service costs of the segment.
INTEREST EXPENSE. For the nine months ended September 30, 2000, interest
expense was $3.7 million, an increase of $3.0 million, as compared to interest
expense of $685 thousand in the nine months ended October 2, 1999. The increased
interest expense was due to higher debt levels and the amortization of direct
financing transaction costs and fees.
INCOME TAX PROVISION (BENEFIT). For the nine months ended September 30, 2000
a $100 thousand tax provision was recorded. Our effective tax rate will differ
from the federal statutory tax rate due to the amortization of goodwill and
other intangible assets, non-deductible recapitalization costs, that do not
provide a tax benefit, and certain other business expenses that are not
deductible for tax purposes and state income taxes.
NET INCOME (LOSS). We recognized a net loss of $17.7 million for the nine
months ended September 30, 2000, as compared to a net loss of $709 thousand for
the nine months ended October 2, 1999.
EBITDA. For the nine months ended September 30, 2000, EBITDA was negative
$5.0 million, a decrease of $7.0 million as compared to EBITDA of $2.0 million
in the nine months ended October 2, 1999. The decrease was primarily due to the
non-recurring special compensation charges of $2.2 million. Included in our
negative EBITDA for the nine months ended September 30, 2000 is the effect of
$9.1 million of deferred revenue associated with our DIRECTV conversion program.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our working capital requirements, capital expenditures and
acquisitions to date through a combination of internally generated funds,
operating and capital lease financing arrangements, long-term revolving credit
and term note facilities and private equity contributions. We intend to continue
to finance these expenditures through internally generated funds, long-term
credit facilities and equity financings, including the proceeds from our initial
public offering.
We invest capital in our infrastructure, including our vehicles and
equipment, to support contractual commitments to our clients. We have pursued a
business strategy to date that includes selective, strategic acquisitions and
will continue to do so if and to the extent we identify opportunities at
attractive valuations and to the extent that we are able to finance such
acquisitions.
In September 1999, we entered into a subordinated credit agreement with
General Electric Capital Corporation, which provided for initial borrowings of
$15.0 million under a Term Note. This facility, which matures on September 7,
2004, bears interest at 4% over LIBOR or 2.75% over the prime rate, at our
option. The facility is secured by all of our assets, including the stock of our
subsidiaries. We incurred financing costs of approximately $1.7 million in
connection with the Term Note, which costs include the value of warrants we
issued and are being amortized using the effective interest rate method over the
life of the Term Note. The proceeds from the term note were used to fund the
$10.5 million cash consideration in our acquisition of Telecrafter, to repay
debt and to fund
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<PAGE> 21
general working capital needs. On August 17, 2000, General Electric Capital
Corporation waived the requirement that we repay the subordinated facility upon
completion of our public offering.
In March 2000, we entered into our current $15.0 million senior revolving
credit facility with General Electric Capital Corporation. This facility, which
matures on September 7, 2004, includes a $12.0 million revolving credit facility
and a sub-facility of up to $3.0 million for letters of credit, and is secured
by all of our assets, including the stock of our subsidiaries. We are required
to pay an annual non-utilization fee equal to 0.50% of the unused portion of the
facility. The initial borrowings of $5.2 million under this facility were used
to repay all outstanding principal amounts under previous senior bank credit
facilities and bank equipment loans. Additionally, we borrowed approximately
$6.5 million under this facility in connection with our recent acquisitions of
TeleCore, Excalibur, D.S. Cable and Service Cable. In connection with our recent
acquisitions, on May 31, 2000, we amended our subordinated credit agreement and
senior revolving facility, which changed certain of the financial covenants. On
August 15, 2000, we entered into an amendment to our revolving credit facility
to increase our available borrowing capacity to $25 million, including the
sub-facility of up to $3.0 million for letters of credit. The amendment also
effected changes to certain of the financial covenants in our revolving credit
facility, to reflect our operating position after giving effect to our recent
acquisitions. Our lender has waived compliance with these covenants for the
second quarter of 2000 and revised the covenants prospectively. We agreed to pay
Crest Communications a cash fee of $100,000 as compensation for providing this
commitment to General Electric Capital Corporation. Our revolving credit
facility, as amended, bears interest at rates that are adjusted quarterly, based
on our leverage ratios for the most recent trailing four quarters. Depending on
our leverage ratios, the facility would bear interest at (i) 3.5% over LIBOR or
2.25% over the greater of prime rate or the federal funds rate plus 0.50%, or
(ii) if our leverage ratios do not exceed certain thresholds, 2.75% over LIBOR
or 1.50% over the greater of prime rate or the federal funds rate plus 0.50%.
The facility is secured by all of our assets, including the stock of our
subsidiaries.
On August 18, 2000, we completed our initial public offering in which we
sold 5,000,000 shares of common stock for $8.00 a share in gross proceeds
totaling $40 million. In addition, in September 2000 the underwriters exercised
an over allotment option to sell $750,000 shares for $8.00 a share in gross
proceeds totaling $6 million. We received $3 million of proceeds from the
over-allotment and a selling shareholder received the remaining proceeds. The
costs associated with the initial public offering were $7.5 million. The
proceeds from the offering were used for general corporate purposes and the
repayment of the following indebtedness:
o $4.8 million of notes we issued to shareholders in the acquisitions of
Telecrafter and D.S. Cable, which we are required to repay upon
completion of this offering,
o $5.1 million of other indebtedness assumed in the acquisition of
TeleCore, and
o $1.5 million of other indebtedness.
We have approximately $8.5 million available for future borrowings, including
approximately $3.0 million available for letters of credit under our revolving
credit facility. While we have no specific plans to borrow additional amounts
under our revolving credit facility, we will draw on it as needed to fund our
operations in the ordinary course of business. We have outstanding approximately
$21.8 million of notes we issued to shareholders in our recent acquisitions of
TeleCore, Excalibur and Service Cable. These notes bear interest at 9% and are
payable in the fourth quarter of fiscal 2001.
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Our activity from operating, investing and financing activities is as follows:
<TABLE>
<CAPTION>
October 2, September 30,
1999 2000
------------ ------------
<S> <C> <C>
Net cash provided by (used in) operating activities $ 650,644 $(11,458,673)
Net cash used in investing activities (10,790,481) (8,954,483)
Net cash provided by financing activities 16,750,896 32,932,501
------------ ------------
Net increase in cash and cash equivalents $ 6,611,059 $ 12,519,345
============ ============
</TABLE>
Net cash used in operating activities includes a net loss of $17.7
million for the nine months ended September 30, 2000, offset by non-cash costs
for depreciation and amortization of $9.2 million and $2.2 million for special
compensation charges. Net cash provided by operating activities includes a net
loss of $708 thousand for the nine months ended October 2, 1999, offset by
non-cash costs for depreciation and amortization of $1.5 million and $315
thousand for special compensation charges.
For the nine months ended September 30, 2000, investing activities
primarily related to the acquisitions of four entities in the second quarter of
2000 and the purchases of equipment, primarily vehicles and equipment used in
the ordinary course of business. Investing activities for the nine months ended
October 2, 1999, related to the two acquisitions during the period and the
purchase of vehicles and equipment used in the ordinary course of business.
Net cash provided by financing activities for the nine months ended
September 30, 2000 consisted of the proceeds from the initial public offering of
$35.5 million offset by the net repayment of debt. Net cash provided by
financing activities for the nine months ended October 2, 1999 relate primarily
to the net borrowings of debt relating to the $15 million term note with General
Electric Capital Corporation, sales of common stock, offset by repayment of debt
and purchases of treasury stock.
We expect that our capital resources, together with existing cash and cash
equivalents, will be sufficient to meet our financial obligations at our current
levels of business. Our need for additional capital is dependent on our future
results and cash flows including our debt repayment requirements and borrowing
availability. Our future operating results and cash flows may be affected by a
number of factors including our success in securing future service contracts,
integrating existing and future acquisitions and managing controllable costs. We
may be required to seek additional financing through public or private equity or
debt financings, or combinations thereof. There can be no assurances that such
additional financings will be available on terms acceptable to us.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in quantitative and qualitative market
risk from the disclosure on page 39 of the S-1 Registration Statement which is
incorporated hereby reference.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are currently not involved in any legal proceedings that either
individually or in the aggregate, will have a material adverse effect
on our business, financial condition and results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None
(b) None
(c) None
(d) On August 18, 2000, we completed our initial public offering;
whereby we sold 5,000,000 shares of common stock for $8.00 a share for gross
proceeds of $40 million. In addition, in September 2000, an over allotment of
750,000 shares was sold for $8.00 a share for gross proceeds of $6 million. We
received $3 million of proceeds from the over allotment and a selling
shareholder received the remaining proceeds. The costs associated with the
initial public offering were $7.5 million. The use of proceeds from the offering
were used for general corporate purposes, and the following debt was repaid:
o $4.8 million of notes we issued to shareholders in our recent
acquisitions of Telecrafter and D.S. Cable, which we are required to
repay upon completion of this offering,
o $5.1 million of other indebtedness assumed in our acquisition of
TeleCore, and
o $1.5 million of other indebtedness.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits
Summary Financial Information
b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized:
Viasource Communications, Inc.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ CRAIG A. RUSSEY Craig A. Russey November 14, 2000
----------------------------------------------- (President and Director Principal
Executive Officer)
/S/ DOUGLAS J. BETLACH Douglas J. Betlach November 14, 2000
----------------------------------------------- Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial and
Accounting Officer)
</TABLE>
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