<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 July 31, 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,
West Palm Beach, Florida 33401
(address of principal executive offices) (Zip Code)
(561) 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 September 9, 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 - July 31, 1996
and October 31, 1995 3
Condensed Consolidated Statements of Operations - Three
months and nine months ended July 31, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows - Nine
months ended July 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements -
July 31, 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
<TABLE>
<CAPTION>
July 31, 1996 October 31,
1995
(unaudited) (audited)
---------------- ----------------
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 1,230,118 $ 2,952,239
Investments, net 566,250 571,875
Accounts receivable, net 9,758,910 10,529,124
Inventories 3,075,588 3,535,622
Prepaid expenses and other 1,235,855 831,908
Deferred income taxes --- 151,879
---------------- ---------------
Total current assets 15,866,721 18,572,647
Property and equipment, net 6,752,240 6,119,608
Other assets:
Deferred income taxes 439,405 331,739
Investment in Latin American subsidiary 2,005,427 ---
Goodwill and contractual rights, net 6,004,596 7,203,761
Other 357,927 254,461
--------------- ---------------
Total other assets 8,807,355 7,789,961
--------------- ---------------
Total assets $ 31,426,316 $ 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
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
July 31, 1996 October 31,1995
(unaudited) (audited)
---------------- ----------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term $ 1,266,694 $ 2,222,369
Lines of credit 4,538,437 3,220,000
Notes payable - other 1,869,049 ---
Notes payable to shareholders/directors 1,557,976 1,557,976
Accounts payable 2,902,482 3,446,123
Accrued expenses 1,210,476 728,282
--------------- ---------------
Total current liabilities 13,345,114 11,174,750
Deferred income taxes 479,486 ---
Long-term debt, excluding current portio 3,091,008 3,033,000
--------------- ---------------
Total liabilities 16,915,608 14,207,750
--------------- ---------------
Minority interest --- 807,955
Commitments and contingencies
Shareholders' equity:
Common stock, $.001 par value,
authorized 25,000,000 shares; issued
and outstanding 8,203,212 shares in
1996; 8,193,212 in 1995 8,203 8,193
Additional paid-in capital 12,800,222 12,790,196
Unrealized loss on investments, net (58,750) (53,125)
Retained earnings 1,761,033 4,721,247
--------------- --------------
Total shareholders' equity 14,510,708 17,466,511
--------------- --------------
Total liabilities and
shareholders' equity $ 31,426,316 $ 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 nine months
ended July 31, ended July 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
DOMESTIC OPERATIONS:
Revenues $11,086,195 $ 7,747,739 $32,909,252 $23,032,053
Costs and expenses:
Costs of revenues 8,710,997 6,495,637 26,569,708 18,742,175
General and administrative 1,498,359 732,695 3,753,235 3,037,529
Depreciation and
amortization 534,017 410,782 1,399,051 1,090,757
------------ ----------- ----------- -----------
Total costs and expenses 10,743,373 7,639,114 31,721,994 22,870,461
------------ ----------- ----------- -----------
Domestic operating income 342,822 108,625 1,187,258 161,592
LATIN AMERICAN OPERATIONS:
Revenues 774,045 1,265,879 3,121,658 1,840,037
Costs and expenses:
Costs of revenues 441,670 503,337 1,716,077 965,061
General and administrative 245,784 520,971 1,113,420 1,111,421
Depreciation and
amortization 110,140 119,024 347,860 348,262
Special charges:
Foreign currency and
devaluation losses 18,869 31,820 1,508,556 (39,300)
Write-off of goodwill --- --- 920,551 ---
Provision for restructuring --- --- 1,512,534 ---
Minority interest 101,039 68,875 (781,408) (28,002)
----------- ----------- ----------- ----------
Total costs and expenses 917,502 1,244,027 6,337,590 2,357,442
----------- ----------- ----------- ----------
Latin American operating
income (loss) (143,457) 21,852 (3,215,932) (517,405)
----------- ----------- ----------- ----------
Total income (loss) from
operations 199,365 130,477 (2,028,674) (355,813)
Interest expense (293,583) (194,703) (828,500) (805,904)
Interest and other
income, net 44,222 177,199 181,098 500,779
Realized loss on
investments --- (100,379) --- (100,379)
----------- ----------- ----------- ----------
Total other income(expense) (249,361) (117,883) (647,402) (405,504)
Income (loss) before
income taxes (49,996) 12,594 (2,676,076) (761,317)
----------- ----------- ----------- ----------
Income tax (benefit) expense (187,262) (147,851) 282,412 (147,851)
----------- ----------- ----------- ----------
Net income (loss) $ 137,266 $ 160,445 $(2,958,488) $(613,466)
=========== =========== =========== ==========
Income (loss) per common
share and common equivalent
share $ 0.02 $ 0.02 $ (0.35) $ (0.07)
=========== =========== =========== ==========
Weighted average shares
outstanding:
Primary and fully diluted 8,362,305 8,361,654 8,355,804 8,274,904
=========== =========== =========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
-----------------------------------
For the nine months ended July 31,
1996 1995
---------------- ----------------
<S> <C> <C>
Operating Activities:
Net loss $ (2,958,488) $ (613,466)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 1,746,911 1,439,019
Deferred income taxes 345,599 (69,550)
Translation/transaction losses 18,869 ---
Minority interest (781,408) 28,002
Loss on sale of investments --- 100,379
Allowance for unrealized loss --- 91,950
Changes in assets and liabilities,
net of effects from the acquisition
Decrease in accounts receivable 2,180,786 2,318,831
Decrease (increase) in inventories 506,878 (546,875)
Increase in prepaid expenses and other (403,947) (832,805)
(Increase) decrease in other assets (33,623) 20,708
Decrease in accounts payable and
accrued expenses (881,731) (1,206,590)
Decrease in net assets of Latin
American operations 726,777 ---
Decrease in income taxes payable (78,301) ---
--------------- ----------------
Net cash provided by operating
activities 466,623 651,302
--------------- ---------------
Cash flows from investing activities:
Purchase of investments, restricted --- 2,263,933
Loans to a former director --- (300,000)
Purchases of property and equipment (1,869,104) (1,507,707)
--------------- ----------------
Net cash provided by (used in)
investing activities (1,869,104) 456,226
--------------- ----------------
Cash flows from financing activities:
Net borrowings under lines of credit 445,000 ---
Proceeds from long-term debt 105,000 744,340
Proceeds from shareholder loans 500,000 ---
Payments on shareholder loans (500,000) ---
Payments on long-term debt (809,945) (3,671,534)
Proceeds from exercise of warrants --- 335,235
Distributions to minority interests (26,547) (476,318)
--------------- ----------------
Net cash used in financing activities (286,492) (3,068,277)
--------------- ----------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
ABLE TELCOM HOLDING CORP.
AND SUBSIDIAIRES
Condensed Consolidated Statements of Cash Flows (Continued)
(unaudited)
<TABLE>
<CAPTION>
----------------------------------
For the nine months ended July 31,
1996 1995
---------------- ----------------
<S> <C> <C>
Effect of exchange rate changes on cash
and equivalents (33,148) ---
Decrease in cash and equivalents (1,722,121) (1,960,749)
Cash and equivalents at beginning of
the period 2,952,239 3,432,349
--------------- --------------
Cash and equivalents at end of the
period $ 1,230,118 $ 1,471,600
=============== ==============
Supplemental disclosures of cash flow
information:
Non-cash transactions affecting
operating, investing and financing
activities:
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 $ 828,500 $ 688,407
=============== ==============
Income taxes paid $ -0- $ -0-
=============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>8
ABLE TELCOM HOLDING CORP
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
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 nine
months ended July 31, 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 period ended July 31, 1995 have
been reclassified to conform with the current presentation.
2. Inventories
The components of inventory consist of the following:
July 31 October 31,
1996 1995
Raw materials $ 1,559,245 $ 1,719,338
Committed inventory 1,516,343 1,816,284
------------ -------------
$ 3,075,588 $ 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
<PAGE> 9
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
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.
The proforma unaudited results of operations for the three
months and nine months ended July 31, 1996 and 1995, assuming
consummation of the purchase at the beginning of the
respective periods, are as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended July 31, ended July 31,
1996 1995 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues 11,860,240 11,212,358 37,173,878 33,878,035
Net income (loss) 137,266 (249,100) (2,855,305) (609,069)
Net income (loss) per
common share and common
equivalent share 0.02 (0.03) (0.34) (0.07)
</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 (27/10%). 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 were amended effective April 30, 1996,
requiring, among other conditions, that the Company maintain
certain tangible net worth, funded debt, and debt service
amounts.
In addition to the Credit Facility, the Company incurred and
assumed additional debt in connection with the acquisition of
Connell.
At July 31, 1996, the Company's borrowings consist of the following:
<PAGE> 10
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statments
July 31, 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 (8 1/4 % at July 31, 1996);
secured by certain accounts receivable,
inventory and equipment $ 4,386,437
Bank line of credit ($200,000 maximum limit);
due February 28, 1997; interest payable
monthly at prime (8 1/4% at July 31, 1996) plus
1/2%; secured by certain accounts receivable 152,000
------------
$ 4,538,437
============
Motes Payable - Other:
Note payable issued in connection with
acquisition; principal and accrued interest
at 9% per annum due January 2, 1997;
collateralized by certain accounts
receivable, equipment and capital stock of
the subsidiary acquired $ 1,869,049
============
Notes payable to Shareholders/Directors:
Notes payable to shareholders; personally
guaranteed by a shareholder/director of the
Company $ 1,307,976
Note payable to a director; principal and
accrued interest at prime (8 1/4% at July 31,
1996) plus 1% due August 31, 1996 250,000
-------------
$ 1,557,976
=============
Long-Term Debt:
Term loan payable to bank; payable in monthly
installments of $45,833 plus interest at
prime (8 1/4% on July 31, 1996) through December
1, 2000; collateralized by certain accounts
receivable, inventory and equipment $ 2,429,169
Term loan payable to bank; payable in monthly
installments of $34,722 plus interest at
prime (8 1/4% at July 31, 1996) through December
1, 1998; collateralized by certain accounts
receivable, inventory and equipment 1,006,946
Term loans payable to bank; payable in monthly
installments totaling $39,699 plus interest
at prime (8 1/4% at July 31, 1996) plus 1/2%;
through June 30, 1997; collateralized by
certain equipment 528,715
Term loans payable to banks; payable in monthly
installments totaling $3,539 plus interest
ranging from 8 3/4% to 14.9%; through March
1999, collateralized by certain equipment 99,308
Mortgage note payable to bank; payable in
monthly installments totaling $1,604 plus
interest at prime (8 1/4% at July 31, 1996) plus
1/2%; collateralized by land and building with
a carrying value of approximately $440,000 as
of July 31, 1996 293,564
-------------
Total long-term debt 4,357,702
Less current portion 1,266,694
-------------
Long-term debt, excluding current portion $ 3,091,008
=============
</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 July 31, 1996 and
October 31, 1995.
<PAGE> 11
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
5. Litigation
The Company is involved in various claims and legal actions
arising in the ordinary course of business and in connection
with certain notes payable. 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 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 July 31, 1996. Net assets for these
operations were $5,064,406 at October 31, 1995.
Operating results for Latin American operations for the nine
months ended July 31, 1996 include special charges, recorded
as of April 30, 1996, which represent 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 which represents the write-down of various
investments and accounts receivable to net realizable value.
In addition, income tax expense includes a $235,674 write-
down of certain deferred tax assets relating to Latin
American operations.
The special charges, including the write-down of deferred tax
assets, totaling $3,120,570 for the nine months ended July
31, 1996, net of minority interest, reduced primary earnings
per share by $.37
In April 1996, the Venezuelan government ceased
implementation of foreign currency exchange control
restrictions and the fixing of statutory exchange rates.
These 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 nine months ended July 31, 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 nine months
ended July 31, ended July 31,
1996 1995 1996 1995
--------- --------- --------- ---------
<TABLE>
<S> <C> <C> <C> <C>
DOMESTIC OPERATIONS:
Revenues 100.00% 100.00% 100.00% 100.00%
Costs of revenues 78.58 83.84 80.74 81.37
General and administrative 13.52 9.46 11.40 13.19
Depreciation and
amortization 4.81 5.30 4.25 4.74
------- ------- ------- -------
Domestic operating income 3.09 1.40 3.61 .70
LATIN AMERICAN OPERATIONS:
Revenues 100.00% 100.00% 100.00% 100.00%
Costs and expenses 57.06 39.76 54.97 52.45
General and administrative 31.75 41.15 35.67 60.40
Depreciation and
amortization 14.23 9.40 11.14 18.93
Special charges 15.49 7.95 101.23 (3.66)
------- ------- ------- -------
Latin American operating
income (18.53) 1.74 (103.01) (28.12)
</TABLE>
Overview
- --------
Consolidated net income for the three month period was $137,266 or
$.02 per share compared to income of $160,445 or $.02 per share in
1995. For the nine months ended July 31, 1996, the consolidated
net loss was $(2,958,488) or $(.35) per share compared to a net
loss of $(613,466) or $(.07) for the comparable period in 1995.
The activities discussed below represent the primary factors
impacting operating results during fiscal year 1996.
During the first quarter of 1996, the Company acquired the 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 governmental
municipalities. The acquisition provided the Company $8,597,719 of
additional revenue since the acquisition date of December 8, 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 nine months ended July 31, 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. In addition, the income tax provision includes a
$235,674 write-down of certain deferred tax assets relating to the
Latin American operations. After recording special charges
associated with the restructuring plan, totaling approximately
$3,120,530, net of minority interest, Latin American operations
reported a loss of $(3,215,932) for the nine months ended July 31,
1996 compared with a loss of $(517,405) for the same period in the
prior year.
During April 1996, the Venezuelan government ceased its foreign
currency exchange control restrictions and the fixing of statutory
exchange rates. These economic policies have had a significant
adverse impact on the Company's operating results since going into
effect in June of 1994. Since lifting the restrictions, there has
been no significant change in currency exchange rates.
Consequently, there were no material translation losses during the
third quarter ended July 31, 1996.
During the third quarter of 1996, the Company commenced the start-
up of an operation to provide wireless communication services to
targeted customers in localized geographic areas. This business,
to date, has incurred only marketing costs to develop an existing
subscriber base in its areas of operations. The Company does not
expect significant revenues from this operation in the near
future.
Domestic Operations
- -------------------
Domestic revenues for the three month period ended July 31, 1996
increased $3,338,456 to $11,086,195 compared to revenues of
$7,747,739 for the three month period in 1995. Revenues for the
year to date were $32,909,252 in 1996 compared to revenues of
$23,032,053 in 1995.
The acquisition of Connell accounted for $3,242,237 and $8,597,719
of the revenue increase for the three month and nine month periods
of 1996, respectively. The balance of the increase during both
periods in 1996 represents internal growth primarily from existing
domestic telecommunication operations.
Cost of revenues for the third quarter of 1996 improved to 79% of
revenues from to 84% of revenue for the same period in 1995
primarily reflecting improved labor productivity within the
Company's telecommunication services division. For the nine months
ended July 31, 1996 and 1995, cost of revenues were 81% of
domestic revenues.
General and administrative expenses during the third quarter
increased $765,664 from $732,695 in 1995 to $1,498,359 in 1996.
Approximately $305,000 of the increase reflects the acquisition of
Connell. The balance of the increase primarily reflects costs
incurred in connection with the start-up of the Company's wireless
communication operation. This start-up operation is not expected
to provide the Company significant revenues during the next fiscal
year and will continue to incur marketing costs associated with
developing the subscriber base in its operating areas.
<PAGE> 14
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
In addition, during the third quarter of 1996, the Company
invested approximately $80,000 to enhance billing and inventory
control systems which are expected to significantly improve cash
flows within certain of its subsidiaries.
For the nine months ended July 31, 1996 general and administrative
expenses increased $715,706 from $3,037,529 in 1995 to $3,753,235
in 1996 primarily reflecting the acquisition of Connell, and the
aforementioned factors.
During the third quarter 1996, domestic operating income increased
$234,197 to $342,822 from operating income of $108,625 during the
comparable quarter of 1995. Furthermore, domestic operating
income increased significantly for the nine months ended July 31,
1996 to $1,187,258 compared to $161,592 for the prior year. The
improvement during 1996 is principally due to the larger revenue
base achieved through the acquisition of Connell. However,
domestic operating income during the third quarter of 1996 was
adversely impacted by management turnover within the Company's
traffic management division, start-up costs associated with the
Company's wireless communications operation, and enhancements to
financial control systems.
Latin American Operations
- -------------------------
Revenues during the third quarter of 1996 of $774,045 were
significantly below 1995 levels of $1,265,879. Year to date
revenues as of July 31, 1996 were $3,121,658 versus $1,840,037 in
1995. The change in revenue levels between periods primarily
reflects volatility in the level of capital spending by the
Company's principal customer in Venezuela.
Cost and expenses in the aggregate for the three months ended July
31, 1996 as a percent of revenue remained relatively constant with
1995 levels. General and administrative expenses decreased in
relation to the third quarter of 1995 due to the recovery of
certain accounts receivable previously written off.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents totaled $1,230,118 at July 31, 1996
compared to $2,952,239 at October 31, 1995. The decrease is due
primarily to the repayment of long term debt of $809,945 and a
loan from a shareholder of $250,000. The Company also paid cash
of $1,869,104 for the purchase of equipment required for new
business and for the replacement of inefficient equipment.
Capital expenditures were funded principally from beginning cash
amounts and cash flow from operations of $466,623. In December
1995, the Company acquired the common stock of Connell 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. The $1,869,049 note owed to the seller is due January,
1997.
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 the
Company's future growth. The covenants to the credit facility
were amended effective April 30, 1996. These covenants require,
among other conditions, that the Company maintain certain tangible
net worth, funded debt and debt service amounts.
<PAGE> 15
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
The Company currently has available approximately $5,393,049 of
working capital consisting of cash of $1,230,118, unused lines of
credit of $1,662,931 and a unused equipment facility of
$2,500,000. The Company expects that such working capital will be
sufficient to meet its near term operating requirements.
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 July
31, 1996 and October 31, 1995.
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
No reports on Form 8-K have been filed
during the quarter ended July 31, 1996.
<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 September 18, 1996
------------------------------------------- ------------------
William J. Mercurio, President, Cheif Date
Executive Officer and Cheif Financial Officer
By: /s/ DANIEL L. OSBORNE September 18, 1996
------------------------------------------- ------------------
Daniel L. Osborne, Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ABLE TELCOM FOR THE QUARTER ENDED JULY 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 1,230,118
<SECURITIES> 566,250
<RECEIVABLES> 9,758,910
<ALLOWANCES> 0
<INVENTORY> 3,075,588
<CURRENT-ASSETS> 15,866,721
<PP&E> 6,752,240
<DEPRECIATION> 0
<TOTAL-ASSETS> 31,426,316
<CURRENT-LIABILITIES> 13,345,114
<BONDS> 0
0
0
<COMMON> 8,203
<OTHER-SE> 14,502,505
<TOTAL-LIABILITY-AND-EQUITY> 31,426,316
<SALES> 0
<TOTAL-REVENUES> 11,860,240
<CGS> 0
<TOTAL-COSTS> 9,152,667
<OTHER-EXPENSES> 2,508,208
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293,583
<INCOME-PRETAX> (49,996)
<INCOME-TAX> (187,262)
<INCOME-CONTINUING> 137,266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,266
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
