<PAGE> 1
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 AND
EXCHANGE ACT OF 1934.
For the quarterly period ended April 30, 1996.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
For the transition period from ______________ to _____________.
Commission File Number: 0-21986
ABLE TELCOM HOLDING CORP.
(exact name of registrant as specified in its charter)
Florida 65-0013218
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1601 Forum Place, Suite 1110, 33401
West Palm Beach, Florida (Zip Code)
(address of principal executive offices)
(407) 688-0400
(Registrant's telephone number, including area code)
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__
As of June 14, 1996, there were 8,203,212 shares, par value $.001 per share,
of the Registrant's Common Stock outstanding.
<PAGE> 2
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
INDEX
-----
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Page Number
-----------
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - April 30, 1996 and
October 31, 1995 3
Condensed Consolidated Statements of Operations - Three months
and six months ended April 30, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows - Six months
ended April 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements - April 30,
1996 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE 3>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
April 30, 1996 October 31, 1995
Assets (unaudited) (audited)
- ------ ---------------- ----------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 2,085,177 $ 2,952,239
Investments, net 559,375 571,875
Accounts receivable, net 10,090,422 10,529,124
Inventories 2,785,024 3,535,622
Prepaid expenses and other 1,219,962 831,908
Deferred income taxes 37,0457 151,879
-------------- -------------
Total current assets 16,777,417 18,572,647
Property and equipment, net 6,376,545 6,119,608
Other assets:
Deferred income taxes --- 331,739
Investment in Latin American subsidiary 2,095,025 ---
Goodwill and contractual rights, net 6,089,311 7,203,761
Other 411,018 254,461
-------------- -------------
Total other assets 8,595,354 7,789,961
-------------- -------------
Total assets $ 31,749,316 $ 32,482,216
============== =============
</TABLE>
Note: The balance sheet at October 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to accompanying condensed consolidated financial statements.
<PAGE> 4
Condensed Consolidate Balance Sheets (Continued)
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Continued)
(unaudited)
<TABLE>
<CAPTION>
April 30, 1996 October 31, 1995
Liabilities and Shareholders' Equity (unaudited) (audited)
---------------- ----------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 1,588,360 $ 2,222,369
Lines of credit 4,638,153 3,220,000
Notes payable - other 1,869,049 ---
Notes payable to shareholders/directors 1,807,976 1,557,976
Accounts payable 3,017,249 3,446,123
Accrued expenses 1,412,324 728,282
-------------- -------------
Total current liabilities 14,333,111 11,174,750
Deferred income taxes 239,449 ---
Long-term debt, excluding current portion 2,775,522 3,033,000
-------------- -------------
Total liabilities 17,348,082 14,207,750
Minority interest --- 807,955
Shareholders' equity:
Common stock, $.001 par value, authorized
25,000,000 shares; issued and outstanding
8,203,212 shares in 1996; 8,193,212
shares in 1996 and 1995 8,203 8,193
Additional paid-in capital 12,833,286 12,790,196
Unrealized loss on investments, net (65,625) (53,125)
Retained earnings 1,625,370 4,721,247
-------------- ------------
Total shareholders' equity 14,401,234 17,466,511
-------------- ------------
Total liabilities and shareholders' equity $ 31,749,316 $ 32,482,216
============== ============
</TABLE>
Note: The balance sheet at October 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------
For the three months For the six months
ended April 30, ended April 30,
1996 1995 1996 1995
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
DOMESTIC OPERATIONS:
Revenues $11,578,375 $ 7,624,773 $21,823,057 $15,284,314
---------- --------- ---------- ----------
Costs and expenses:
Costs of revenues 9,043,309 6,143,476 17,858,711 12,246,538
General and administrative 1,244,933 1,130,899 2,254,876 2,304,834
Depreciation and amortization 420,580 337,646 865,034 679,975
---------- ---------- ---------- ----------
Total costs and expenses 10,708,822 7,612,021 20,978,621 15,231,347
Domestic operating income 754,508 347,688 844,436 52,967
LATIN AMERICAN OPERATIONS:
Revenues $ 1,128,965 $ 274,010 $ 2,347,613 $ 574,158
---------- --------- ---------- ----------
Costs and expenses:
Costs of revenues 662,985 157 045 1,274,407 461,724
General and administrative 426,623 202,861 867,636 590,450
Depreciation and amortization 118,816 122,804 237,720 229,238
---------- ---------- ---------- ----------
Special charges:
Foreign currency and
devaluation losses 479,895 (55,529) 1,489,687 (71,120)
Write off of goodwill 920,551 --- 920,551 ---
Provision for restructuring 2,004,304 --- 1,748,208 ---
Minority interest (635,087) (53,604) (882,447) (96,877)
---------- --------- ---------- ----------
Total costs and expenses 3,978,087 373,577 5,655,762 1,113,415
---------- --------- ---------- ----------
Latin American operating loss 2,849,122 (99,567) (3,308,149) (539,257)
---------- --------- ---------- ----------
Total income (loss) from operations (2,094,614) 248,101 (2,463,713) (486,290)
Interest expense 297,213 331,023 534,917 611,201
Interest and other income 63,076 197,367 136,876 323,580
---------- --------- ---------- ----------
Income (loss) before income taxes (2,328,751) 114,445 (2,861,754) (773,911)
Income tax expense 233,610 46,258 234,000 ---
---------- --------- ---------- ----------
Net income (loss) (2,562,361) 68,187 (3,095,754) (773,911)
========== ========= ========== ==========
Loss per common share and common
equivalent share $ (.31) $ (.01) $ (.37) $ (.09)
========== ========= ========= ==========
Weighted average shares
outstanding:
Primary and fully diluted 8,355,835 8,321,534 8,356,273 8,323,803
========== ========= ========= ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the six months ended April 30,
--------------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
Operating Activities:
Net loss $ (3,095,754) $ (773,911)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 1,102,754 909,213
Deferred income taxes 478,861 (69,550)
Loss on disposal of property --- 5,560
Translation/transaction losses 479,895 ---
Minority interest (635,087) ---
Changes in assets and liabilities, net
of effects from the acquisition of H.C.
Connell, Inc.
Decrease in accounts receivable 2,196,634 1,979,813
Decrease (increase) in inventories 757,565 (56,549)
Increase in prepaid expenses and other (320,650) (347,424)
Decrease in investments --- (85,913)
Decrease (increase) in other assets (44,502) 33,994
Decrease in accounts payable
and accrued expenses (533,544) (861,389)
Decrease in net assets of Latin American
operations 429,215 ---
Decrease in income taxes payable --- (78,301)
--------- ---------
Net cash provided by
operating activities 815,387 655,543
--------- ---------
Investing Activities:
Business acquisition (601,617) ---
Purchases of property and equipment (1,078,755) (1,203,196)
--------- ---------
Net cash used in investing activities (1,680,372) (1,203,196)
Financing Activities:
Net borrowings under lines of credit 445,000 19,000
Borrowings from shareholders/directors 500,000 28,000
Repayments to shareholders/directors (250,000) 458,744
Proceeds from long-term debt 48,810 ---
Payments on long-term debt (459,260) (735,181)
Proceeds from exercise of warrants --- 125,000
Distributions to minority interests (172,868) (432,951)
--------- --------
Net cash provided by financing
activities 111,682 (537,388)
--------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows (Continued)
(unaudited)
<TABLE>
<CAPTION>
For the six months ended April 30,
-----------------------------------
1996 1995
--------------- --------------
<S> <C> <C>
Effect of exchange rate changes on cash
and equivalents (113,759) ---
--------- ----------
Decrease in cash and equivalents (867,062) (1,085,041)
Cash and equivalents at beginning of year 2,952,239 3,432,349
--------- ----------
Cash and equivalents at end of year $ 2,085,177 $ 2,347,308
========= ==========
Supplemental disclosures of cash
flow information:
Non-cash transactions affecting
operating, investing and financing
activities:
Operating activities:
Increase in the value of investments,
restricted net of tax effect $ 12,500 $ 23,153
========= ==========
Investing and Financing activities:
Conversion of notes payable to
shareholders to common stock $ --- $ 1,500,000
======== ==========
Liabilities assumed in conjunction
with acquisition:
Fair value of assets acquired $ 4,201,427
Stock issued in connection with
financing acquisition 43,100 ---
Note payable issued to Sellers/
directors (2,369,049) ---
----------- ----------
Liabilities assumed $ 1,875,478 $ ---
=========== ==========
Interest paid $ 447,937 $ 526,204
=========== ==========
Income taxes paid, net of refunds $ 0 $ 0
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 8
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required for complete financial statements. In the
opinion of management, all adjustments necessary for a fair presentation of
the results for the interim periods presented have been included. Such
adjustments consist of normal recurring accruals and those adjustments
recorded to reflect the impact of currency devaluations on the Company's
operations in Venezuela, a provision for restructuring Latin American
operations and the write off of certain goodwill and contractual rights.
These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with those used in
the preparation of the Company's Annual Report on Form 10-K for the year ended
October 31, 1995. Operating results for the three and six months ended April
30, 1996 are not necessarily indicative of the results that may be expected
for the year ended October 31, 1996.
It is recommended that the accompanying condensed consolidated financial
statements be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's 1995 Annual Report on Form 10-K.
Certain items in the condensed consolidated financial statements for the
interim periods ended April 30, 1995 have been reclassified to conform with
the current presentation.
2. Inventories
The components of inventory consist of the following:
[S] [C] [C]
April 30, October 31,
1996 1995
------------ -----------
Raw materials $ 1,445,071 $ 1,719,338
Committed inventory 1,339,953 1,816,284
------------ -----------
$ 2,785,024 $ 3,535,622
============ ===========
3. Acquisition
On December 8, 1995, the Company, through a wholly owned subsidiary, acquired
all of the outstanding Common Stock of H.C. Connell, Inc. ("Connell"). Connell
provides outside plant telecommunication services to local telephone operators
and also provides power and other utility services to major electric and water
companies as well as various government municipalities. The purchase price,
adjusted from closing to $2,369,049, was paid by issuing promissory notes
totaling $1,869,049 to the seller and with loan proceeds of $500,000 from
directors of the Company. The acquisition was accounted for using the purchase
method of accounting.
<PAGE> 9
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
The proforma unaudited results of operations for the three months and six
months ended April 30, 1996 and 1995, assuming consummation of the purchase at
the beginning of the respective periods, are as follows:
<TABLE>
<CAPTION>
Three months Six months
ended April 30, ended April 30,
------------------------ ----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $12,592,295 $11,696,517 $25,313,648 $22,665,675
Net income (loss) (2,562,361) 366,644 (2,992,571) (359,969)
Net income (loss) per
common share and common
equivalent share $ (.31) $ .04 $ (.36) $ (.04)
</TABLE>
4. Borrowings
Effective November 29, 1995, the Company entered into a Term Loan and Revolving
Line of Credit Facility with a new lender (the "Lender") totaling $12,500,000
(the "Credit Facility"). The Credit Facility is comprised of the following
components: (i) a $6,000,000 revolving line of credit (the "Line of Credit"),
(ii) a $2,500,000 equipment loan facility (the "Equipment Loan Facility"),
(iii) a 60-month Term A loan in the amount of $2,750,000 (the "Term A
Loan"), and (iv) a 36-month Term B loan in the amount of $1,250,000 (the
"Term B Loan"). The Line of Credit, the Term A Loan and the Term B Loan are
each evidenced by separate promissory notes with varying maturities and are
secured by certain accounts receivable, inventory and equipment. Each loan
accrues interest at either the Lender's prime rate or, at the Company's
election, the one (1) month LIBOR rate plus two and seven tenths percent
(2 7/10%). Proceeds from the Term A, Term B and a portion of the proceeds from
the credit line were used to refinance certain existing debt of the Company.
The balance of the Line of Credit will be used by the Company for its working
capital needs. The Credit Facility contains covenants, which require, among
other conditions, that the Company maintain certain tangible net worth, funded
debt, and debt service amounts. At April 30, 1996, the Company was not in
compliance with these covenants; however, the Company obtained a limited
waiver on the covenants from the Lender effective through July 31, 1997.
In addition to the Credit Facility, the Company incurred and assumed additional
debt in connection with the acquisition of Connell.
At April 30, 1996, the Company's borrowings consist of the following:
April 30, 1996
--------------
<TABLE>
<S> <C>
Lines of Credit:
Bank line of credit ($6,000,000 maximum limit), due
February 28, 1997; interest payable monthly at prime
(81/4 % at April 30, 1996); secured by certain accounts
receivable, inventory and equipment $ 4,486,153
Bank line of credit ($200,000 maximum limit); due June
30, 1996; interest payable monthly at prime (81/4% at
April 30, 1996) plus 1/2%; secured by certain accounts
receivable 152,000
----------
$ 4,638,153
==========
</TABLE>
<PAGE> 10
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
<TABLE>
April 30, 1996
--------------
<S> <C>
Notes Payable Other:
Note payable issued in connection with acquisition;
principal and accrued interest at 6% per annum due
June 8, 1996; collateralized by capital stock of the
subsidiary acquired $ 1,619,049
Note payable issued in connection with acquisition;
principal and accrued interest at prime (81/4% at April
30, 1996) plus 1% due June 8, 1996, collateralized by
capital stock of the subsidiary acquired 250,000
---------
$ 1,869,049
=========
Notes payable to Shareholders/Directors:
Notes payable to shareholders; personally guaranteed
by a shareholder/director of the Company $ 1,307,976
Notes payable to directors; principal and accrued
interest at prime (81/4% at April 30, 1996) plus 1%
due June 30, 1996; secured by certain accounts
receivable 500,000
---------
$ 1,807,976
=========
Long-Term Debt:
Term loan payable to bank; payable in monthly
installments of $45,833 plus interest at prime (81/4%
on April 30, 1996) through December 1, 2000;
collateralized by certain accounts receivable,
inventory and equipment $ 2,566,668
Term loan payable to bank; payable in monthly
installments of $34,722 plus interest at prime (81/4%
at April 30, 1996) through December 1, 1998;
collateralized by certain accounts receivable,
inventory and equipment 1,111,112
Term loans payable to bank; payable in monthly
installments totaling $39,917 plus interest at prime
(81/4% at April 30, 1996) plus 1/2%; through June 30,
1997; collateralized by certain equipment 340,116
Term loan payable to bank; payable in monthly
installments of $1,200 plus interest of 81/4% through
March 1999, collateralized by certain equipment. 47,610
Mortgage note payable to bank; payable in monthly
installments totaling $1,604 plus interest at prime
(81/4% at April 30, 1996) plus 1/2%; collateralized by
land and building with a carrying value of
approximately $440,000 as of April 30, 1996 298,376
---------
Total long-term debt 4,363,882
Less current portion (1,588,360)
---------
Long-term debt, excluding current portion $ 2,775,522
=========
</TABLE>
The Company is currently involved in a legal action with respect to the amount
owed and other terms relating to certain of the notes payable to
shareholders/directors totaling $1,307,976, issued in connection with the
acquisition of Transportation Safety Contractors, Inc. in June 1994. Said notes
are classified as "current" in the accompanying consolidated balance sheets at
April 30, 1996 and October 31, 1995.
Subsequent to April 30, 1996, the Company negotiated an amendment of the terms
relating to the notes totaling $1,869,049 issued in connection with the
acquisition of Connell. The amended note accrues interest at the rate of 9% per
annum, is due January 2, 1997, and is collateralized by certain accounts
receivable, equipment and capital stock of the subsidiary acquired.
<PAGE> 11
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
5. Litigation
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position.
6. Latin American Operations
Effective April 30, 1996, the Company's board of directors approved recording
the impact of a reorganization plan pursuant to which ownership of certain of
the Company's Latin American operations and joint venture arrangements will be
restructured. In reaching its decision to reorganize, the Company expects to
increase overall operating income by divesting or scaling back those
operations which have not met profitability expectations and by mitigating
the uncertainties associated with foreign currency exchange risk in the
region. In connection with the reorganization , the consolidated financial
statements of the Company have been reclassified to report separately the net
assets and operating results of Latin American operations.
Net assets of the businesses to be restructured , consisting primarily of
accounts receivable, real estate and machinery and equipment have been
transferred to a wholly-owned subsidiary at their estimated net realizable
value and are classified as investment in Latin American subsidiary in the
accompanying balance sheet at April 30, 1996. Net assets for these operations
were $5,064,406 at October 31, 1995.
Operating results for Latin American operations for the six months ended
April 30, 1996 include the impact of major currency devaluations experienced
in Venezuela during fiscal year 1996, a non -cash charge relating to the
write-off of certain goodwill and contractual rights and a provision for
restructuring. Such provision for the three months ended April 30, 1996
consists of a $1,256,149 write-down of various investments, accounts
receivable and deferred tax assets to net realizable value and a $748,155
accrual for expenses to be incurred during the reorganization period.
The special charges totaling $2,766,357 for the three months ended April 30,
1996 and $3,259,886 for the six month period, net of minority interest,
reduced primary earnings per share by $0.33 and $0.39, respectively.
In April 1996, the Venezuelan government ceased implementation of foreign
currency exchange control restrictions and the fixing of statutory exchange
rates. Such economic policies have had a significant adverse impact on the
Company's Venezuelan operations since going into effect in June 1994.
<PAGE> 12
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis relates to the Company's financial
condition and results of operations for the three months and six months ended
April 30, 1996 and 1995. This information should be read in conjunction with
the Company's Condensed Consolidated Financial Statements and related notes
appearing elsewhere in this document.
Analysis of Operating Income
- ----------------------------
For the three months For the six months
ended April 30, ended April 30,
------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1996 1995 1996 1995
-------- -------- -------- --------
DOMESTIC OPERATIONS:
Revenues 100.00% 100.00% 100.00% 100.00%
------ ------ ------ ------
Costs of revenues 78.89% 77.18% 81.83% 80.12%
General and administrative 10.86 14.21 10.33 15.08
Depreciation and amortization 3.67 4.24 3.96 4.45
Domestic operating income 6.58 4.37 3.88 .35
LATIN AMERICAN OPERATIONS:
Revenues 100.00% 100.00% 100.00% 100.00%
------ ------ ------ ------
Costs of revenues 58.73% 57.31% 54.29% 80.42%
General and administrative 37.79 74.03 36.96 102.84
Depreciation and amortization 10.52 44.82 10.13 39.93
Special charges 245.33 (39.81) 139.55 (29.26)
Latin American
operating income (252.37) (36.35) (140.93) (93.93)
</TABLE>
Overview
- --------
Domestic operating income more than doubled during the second quarter ended
April 30, 1996 to $754,508 from $347,668 during the comparable quarter of 1995.
Domestic operating income also increased significantly for the six months ended
April 30, 1996 to $844,436 compared to $52,967 for the same period in 1995. The
improvement is principally due to a larger revenue base achieved principally
through the acquisition of H.C. Connell, Inc. ("Connell") in December 1995
coupled with efficiencies which significantly reduced the level of general
and administrative expenses.
After recording special charges totaling $2,766,357, net of minority interest,
associated with a restructuring plan during the quarter, Latin American
operations reported a loss of $(2,849,122) for the three months ended April 30,
1996 compared with a loss of $(99,567) for the same period in the prior year.
Year to date for 1996, the loss from Latin American operations was $(3,308,149)
compared to $(539,257) in 1995.
Consolidated net loss for the three month period was $(2,562,361) or $(.31) per
share compared to income of $68,187 or $.01 per share in 1995. For the six
months ended April 30, 1996 , consolidated net loss was $(3,095,754) or $(.37)
per share compared to a net loss of $(773,911) or $(.09) for the comparable
period in 1995.
<PAGE> 13
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
During the second quarter of 1996, the Company approved a reorganization plan
under which ownership of certain of the Company's Latin American operations and
joint venture arrangements will be restructured. The Company expects to increase
overall operating income by divesting or scaling back those operations which
have not met profitability expectations and by mitigating the uncertainties
associated with foreign currency exchange risk in the region. As a result, the
Company has classified as special charges for the six months ended April 30,
1996, (a) the impact of major currency devaluations experienced in Venezuela
during fiscal year 1996; (b) a non-cash charge relating to the write-off of
certain goodwill and contractual rights and (c) a provision for restructuring.
Such provision for the three months ended April 30, 1996 consists of a
$1,256,149 write-down of various investments, accounts receivable and deferred
tax assets to net realizable value and a $748,155 accrual for expenses to be
incurred during the reorganization period.
During April 1996, the Venezuelan government ceased implementation of foreign
currency exchange control restrictions and the fixing of statutory exchange
rates. Such economic policies have had a significant adverse impact on the
Company's operating results since going into effect in June of 1994.
Domestic Operations
- -------------------
Domestic revenues for the three month period ended April 30, 1996 increased 44%
to $11,463,330 up $3,503,641 compared to revenues of $7,959,689 for the three
month period in 1995. Revenues from domestic operations for the year to date
were $21,823,057 representing an increase of $6,538,743 or 43% compared to
revenues of $15,284,314 for the comparable period in 1995. Approximately 82% of
the 1996 revenue increase is due to the acquisition of Connell. The remaining
increase is a result of overall growth in the Company's domestic
telecommunication services business prompted principally by the recent
deregulation of the communications industry. However, revenues were lower
than expected, due to the severe weather conditions experienced in the Company's
operating areas during the first quarter of 1996 and during February of the
Company's second quarter.
The Company expects that its backlog of work not completed as planned during the
first six months of its fiscal year will be deferred to subsequent quarters of
1996.
Cost of revenues for the second quarter of 1996 represents 79% of revenues
compared to 77% for the same period in 1995. For the six months ended April 30,
1996 , cost of revenues were 82% of domestic revenues compared to 80% for the
first six months of 1995. This softness in gross margins during 1996 primarily
reflects a decrease in labor productivity in certain operating areas associated
with efforts to work during inclement weather.
General and administrative expenses reflect a significant decline as a
percentage of revenues as a result of the Company's efforts to enhance
financial controls and the implementation of a cost containment program.
General and administrative expenses as a percentage of revenues were
approximately 11% for the three and six month period ended April 30, 1996
compared to 15% during the same periods in 1995.
Latin American Operations
- -------------------------
Revenues from Latin American operations increased to nearly break-even levels
during 1996 to $1,128,965 during the first three months compared to $274,010 for
the comparable period in 1995. Year to date revenues as of April 30, 1996 were
$2,347,613 versus $574,158 during the first six months of 1995. This increase
reflects increased capital spending by the Company's principal customer in
Venezuela.
<PAGE> 14
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Costs of revenues during the second quarter of 1996 remained relatively stable
at approximately 58% of revenues compared with the comparable period in 1995.
Cost of revenues for the six month period ended April 30, 1996 improved
significantly to 54% of revenues compared with 80% in the prior year primarily
as a result of inefficiencies in the first quarter of 1995 associated with a
general lack of business during a holiday season.
General and administrative expenses decreased dramatically to 38% of revenues
during the three months ended April 30, 1996 compared to 74% of revenues for
the same period in 1995. For the six month periods, general and administrative
expenses were 74% and 103% of revenues in 1996 and 1995, respectively. The
significant improvement reflects the ability of the Company to develop a greater
revenue base while maintaining general and administrative expenses at a
relatively fixed level.
Depreciation and amortization remained stable throughout the periods presented
for 1995 and 1996 at approximately $120,000 for the quarterly periods and
$235,000 for the six month periods. The substantial improvement during 1996
in depreciation as a percent of revenue from 1995 levels reflects significantly
underutilized equipment during 1995. The Company is currently operating at
approximately 40% capacity.
Liquidity and Capital Resources
Cash and cash equivalents totaled $2,085,177 at April 30, 1996 compared to
$2,952,239 at October 31, 1995. The decrease is due primarily to the repayment
of long term debt of $459,260 and a loan from a shareholder of $250,000. The
Company also paid cash of approximately $1.1 million for the purchase of
equipment required for new business and for the replacement of inefficient
equipment. Such capital expenditures were principally funded by cash flow
from operations of approximately $815,000. In December 1995 the Company
acquired H.C. Connell Inc., for $2,369,049.
The acquisition was funded by the issuance of notes to the seller totaling
$1,869,049 and by loans from directors of $500,000.
As discussed in Note 4 in the Notes to the Condensed Consolidated Financial
Statements, on November 29, 1995, the Company entered into a $12.5 million
credit facility (the "Credit Facility") comprised of a $6,000,000 revolving
line of credit that expires in February 1997; a $2,500,000 equipment loan
facility to be secured by new or used equipment purchased; a 60-month Term A
loan in the amount of $2,750,000; and a 36-month Term B loan in the amount of
$1,250,000. Proceeds from the term loans and a portion of the credit line
were used to refinance existing debt of the Company, excluding loans from
shareholders/directors. The balance of the line of credit and the equipment
facility will be used to fund growth. At April 30, 1996, the Company was in
violation of various covenants associated with the loan. However, the Company
obtained a limited waiver on the covenants from the lender effective through
July 31, 1997.
The Company is currently involved in a legal action with respect to the amount
owed and other terms relating to certain of the notes payable to shareholders
totaling $1,307,976, issued in connection with the acquisition of Transportation
Safety Contractors, Inc. in June 1994. Said notes are classified as "current"
in the accompanying consolidated balance sheets at April 30, 1996 and October
31, 1995.
Subsequent to April 30, 1996, the Company negotiated an amendment of the terms
relating to the notes totaling $1,869,049 issued in connection with the
acquisition of Connell. The amended note is collateralized by certain accounts
receivable, equipment and capital stock of the subsidiary acquired and is due
January 1997.
The Company currently has available approximately $5,947,024 of working capital
consisting of cash of $2,085,177, lines of credit of $1,361,847 and unused
equipment facilities of $2,500,000. The Company expects such working capital
will be sufficient to meet its near term operating requirements.
<PAGE> 15
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Part II - Other Information
Items 1 - 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none applicable
(b) Reports on Form 8-K
A report filed on Form 8-K dated December 22, 1995 was filed
under Item 2 for the acquisition of H. C. Connell, Inc. and
Item 5 for the refinancing loan consolidating the Company's
debt.
A report on Form 8-K/A-1 was filed under Item 2 on February
20, 1996 presenting the required financial and proforma
information relating to the acquisition of H.C. Connell,
Inc.
A report on Form 8-K was filed March 18, 1996 under Item 5
relating to the resignation of certain directors of the
Company.
<PAGE> 16
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Able Telcom Holding Corp.
(Registrant)
By: /s/ William J. Mercurio June 19, 1996
-------------------------------------------------------------
William J. Mercurio, President and CEO Date
By: /s/ William D. Callahan June 19, 1996
-------------------------------------------------------------
William D. Callahan, Chief Financial Officer Date
By: /s/ Daniel L. Osborne June 19, 1996
-------------------------------------------------------------
Daniel L. Osborne, Chief Accounting Officer Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ABLE TELCOM FOR THE QUARTER ENDED APRIL 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1995
<PERIOD-END> FEB-28-1996
<CASH> 2,085,177
<SECURITIES> 559,375
<RECEIVABLES> 10,090,422
<ALLOWANCES> 0
<INVENTORY> 2,785,024
<CURRENT-ASSETS> 16,777,417
<PP&E> 6,376,545
<DEPRECIATION> 0
<TOTAL-ASSETS> 31,749,316
<CURRENT-LIABILITIES> 14,333,111
<BONDS> 0
0
0
<COMMON> 8,203
<OTHER-SE> 14,393,031
<TOTAL-LIABILITY-AND-EQUITY> 31,749,316
<SALES> 0
<TOTAL-REVENUES> 12,592,295
<CGS> 0
<TOTAL-COSTS> 9,706,294
<OTHER-EXPENSES> 4,980,615
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297,213
<INCOME-PRETAX> (2,328,751)
<INCOME-TAX> (233,610)
<INCOME-CONTINUING> (2,562,361)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,562,361)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
