SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A-3
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of earliest event reported: May 30, 1997 (Amending Form 8-K filed on
December 21, 1995 to report event on
December 8, 1995)
Able Telcom Holding Corp.
(Exact name of registrant as specified in charter)
Florida 0-21986 65-0013218
(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification no.)
1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (561) 688-0400
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
Thefollowing financial statements are filed as part of this Form
8-K/A-3:
Financial Statements of H. C. Connell, Inc.
Report of Independent Auditors
Restated Balance Sheets as of June 30, 1995 and 1994
Restated Statements of Income and Retained Earnings for the years
ended June 30, 1995 and 1994
Restated Statements of Cash Flows for the years ended June 30,
1995 and 1994
Restated Notes to Financial Statements
Report of Independent Auditors
Restated Balance Sheets as of June 30, 1994 and 1993
Restated Statements of Income and Retained Earnings for the years
ended June 30, 1994 and 1993
Restated Statements of Cash Flows for the years ended June 30,
1994 and 1993
Restated Notes to Financial Statements
The following financial statements were filed with the Company's
Current Report on Form 8-K/A-2 dated MAy 6, 1997 (amending Current
Report on Form 8-K dated December 21, 1995 reporting an event that
occurred on December 8, 1995).
Condensed Financial Statements (unaudited):
Condensed Balance Sheets as at November 30, 1995 and 1994
Condensed Statements of Operations for the five months ended
November 30, 1995 and 1994
Condensed Statements of Cash Flows for the five months ended
November 30, 1995 and 1994
Notes to Condensed Financial Statements
(b) Pro Forma Financial Information.
Pro Forma Financial Information related to the transaction reported
herein filed with the Company's Current Report on Form 8-K/A-1 dated
February 20, 1996 (Amending form 8K dated December 21, 1995,
reporting event that occurred on December 8, 1995).
<PAGE>
(c) Exhibits. The following exhibits are incorporated by reference herein.
<TABLE>
<S> <C> <C>
Exhibit No. Description Method of Filing
--------------------------------------------------------------------------
10.1 Stock Purchase Agreement between the Filed with the
Registrant and H.C.and Lois A. Connell, Company's Current
dated November 6, 1995. Report on Form 8-K
dated December 21,1995
10.2 Amendment to Stock Purchase Agreement Filed with the
between the Registrant and H.C.and Lois Company's Current
A. Connell, dated December 8, 1995. Report on Form 8-K
dated December 21,1995
10.3 Consulting Agreement between the Filed with the
Registrant and H.C.Connell,dated December Company's Current
1, 1995 Report on Form 8-K
dated December 21,1995
10.8 Term Loan and Revolving Line of Credit Filed with the
Facility between the Registrant and Company's Current
SunTrust Bank, South Florida N.A. Report on Form 8-K
effective as of November 29, 1995. dated December 21,1995
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABLE TELCOM HOLDING CORP.
By:/s/ William J. Mercurio
--------------------------
William J. Mercurio
President,Chief Executive Officer
Dated: May 30, 1997
<PAGE>
Exhibit Index
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------
Exhibit No. Description Method of Filing
--------------------------------------------------------------------------
10.1 Stock Purchase Agreement between the Filed with the
Registrant and H.C.and Lois A. Connell, Company's Current
dated November 6, 1995. Report on Form 8-K
dated December 21,1995
10.2 Amendment to Stock Purchase Agreement Filed with the
between the Registrant and H.C.and Lois Company's Current
A. Connell, dated December 8, 1995. Report on Form 8-K
dated December 21,1995
10.3 Consulting Agreement between the Filed with the
Registrant and H.C.Connell,dated December Company's Current
1, 1995 Report on Form 8-K
dated December 21,1995
10.8 Term Loan and Revolving Line of Credit Filed with the
Facility between the Registrant and Company's Current
SunTrust Bank, South Florida N.A. Report on Form 8-K
effective as of November 29, 1995. dated December 21,1995
</TABLE>
<PAGE>
H. C. CONNELL, INC.
LEESBURG, FLORIDA
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995 AND 1994
<PAGE>
H. C. CONNELL, INC.
INDEX TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
Independent Auditor's Report ............................1
Balance Sheets ..........................................2
Statements of Income and Retained Earnings ..............4
Statements of Cash Flows ................................5
Notes to Financial Statements ...........................7
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
October 11, 1995, except for
Note 7, as to which the date
is May 19, 1997
To the Director and Stockholders
H. C. Connell, Inc.
Leesburg, Florida
We have audited the accompanying balance sheets of H. C. Connell, Inc. as of
June 30, 1995 and 1994, and the related statements of income and retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of H. C. Connell, Inc. as of June
30, 1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Shumacker, Johnston & Ross, PA
<PAGE>
H. C. CONNELL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30,
1995 1994
(Restated) (Restated)
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 283,440 $ 461,837
Cash with Fiscal Agent (Note 7) 25,000 25,000
Receivables:
Accounts 1,413,255 1,365,707
Retainages - 91,801
Employee Loans 520 1,728
Deferred Income Taxes 46,300 20,900
Cost and Estimated Earnings in
Excess of Billings on Uncompleted
Contracts (Note 3) 97,570 162,833
---------- ----------
Total Current Assets 1,866,085 2,129,806
PROPERTY AND EQUIPMENT:
Building and Improvements 118,856 116,719
Furniture and Office Equipment 46,883 76,451
Construction Equipment 3,629,626 3,159,116
Vehicles and Trailers 1,684,171 1,195,390
---------- ----------
5,479,536 4,547,676
Less Accumulated Depreciation (3,373,137) (3,083,991)
---------- ----------
Net Property and Equipment 2,106,399 1,463,685
OTHER ASSETS:
Stockholder Loan (Note 6) 1,539 2,010
Deferred Expenses 17,911 20,107
Security Deposits 1,400 500
---------- ----------
Total Other Assets 20,850 22,617
Total Assets $3,993,334 $3,616,108
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,
1995 1994
(Restated) (Restated)
--------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 310,271 $ 451,671
Retainage Payable - 89,522
Accrued Payroll and Vacation 120,452 164,539
Workers Compensation Claims
Disposition Liability (Note 7) 121,000 54,000
Accrued Taxes 41,670 85,801
Dividend Payable 12,500 10,000
Bank Line of Credit (Note 2) 100,000 111,935
Billings in Excess of Costs and
Estimated Earnings on Uncompleted
Contracts (Note 3) - 18,904
Current Portion of Long-Term Debt
(Note 2) 430,121 182,868
---------- ----------
Total Current Liabilities 1,136,014 1,169,240
LONG-TERM DEBT (Note 2) 244,008 34,627
DEFERRED INCOME TAXES 264,800 219,000
-------- --------
Total Liabilities 1,644,822 1,422,867
STOCKHOLDERS' EQUITY:
Common Stock, $1 Par value,
10,000 shares authorized,
issued and outstanding 10,000 10,000
Retained Earnings 2,338,512 2,183,241
---------- ----------
Total Stockholders' Equity 2,348,512 2,193,241
---------- ----------
Total Liabilities and Stock-
holders' Equity $3,993,334 $3,616,108
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Year ended June 30,
1995 1994
(Restated) (Restated)
-------- ---------
<S> <C> <C>
CONTRACT REVENUES EARNED $12,441,071 $10,204,505
COSTS OF CONSTRUCTION 9,415,620 7,437,967
----------- -----------
Gross Profit 3,025,451 2,766,538
OPERATING EXPENSES 1,478,274 1,112,970
ADMINISTRATIVE EXPENSES 1,313,435 1,037,866
----------- -----------
Total Operating and Administrative
Expenses 2,791,709 2,150,836
----------- ----------
Income from Operations 233,742 615,702
OTHER INCOME (EXPENSE):
Interest Income 7,461 13,945
Miscellaneous Income 29,320 19,993
Gain on Sale and Disposal of Assets 670 21,830
----------- -----------
Total Other Income (Expense) 37,451 55,768
----------- -----------
Income Before Income Taxes 271,193 671,470
PROVISION FOR INCOME TAXES (Note 4):
Current Expense 83,022 210,743
Deferred Expense 20,400 43,400
----------- -----------
Total Provision for Income Taxes 103,422 254,143
---------- -----------
NET INCOME 167,771 417,327
Retained Earnings, beginning of year 2,183,241 1,775,914
Dividends (12,500) (10,000)
----------- -----------
Retained Earnings, end of year $ 2,338,512 $ 2,183,241
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended June 30,
1995 1994
(Restated) (Restated)
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 167,771 $ 417,327
Adjustments to reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation 424,995 304,713
Gain on Disposal of Equipment (670) (21,830)
Decrease in Deferred Expenses 2,196 936
Increase in Security Deposits (900) -
Increase in Deferred Income Taxes 20,400 43,400
Changes in Current Assets and Liabilities:
Decrease in Receivables 44,253 254,381
Decrease in Prepaid Income Taxes - 5,904
(Increase) Decrease in Costs and
Estimated Earnings in Excess of
Billings on Uncompleted Contracts 65,263 (162,833)
Decrease in Accounts and Retainage
Payable (230,922) (206,337)
Increase (Decrease) in Accrued
Payroll and Vacation (44,087) 57,073
Increase (Decrease) in Workers
Compensation Claims Disposition
Liability 67,000 (38,000)
Increase (Decrease) in Accrued Taxes (44,131) 60,628
Decrease in Billings in Excess of
Costs and Estimated Earnings on
Uncompleted Contracts (18,904) (44,591)
---------- ---------
Net Cash Provided by Operating
Activities 452,264 670,771
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in Employee Loans 1,208 (1,404)
Proceeds from Disposal of Equipment 11,800 24,030
Purchase of Property and Equipment (1,078,839) (611,362)
(Increase) Decrease in Loans to
Stockholder 471 (718)
---------- ---------
Net Cash Used in Investing
Activities (1,065,360) (589,454)
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Year ended June 30,
1995 1994
(Restated) (Restated)
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (10,000) (5,000)
Loan from Stockholder - (50,000)
Net Borrowing (Payments) Under Line
of Credit Agreement (11,935) 65,442
Proceeds from Issuance of New Debt 853,926 260,887
Principal Payments on Long-Term Debt (397,292) (246,271)
--------- ---------
Net Cash Provided by Financing
Activities 434,699 25,058
--------- ---------
NET INCREASE (DECREASE) IN CASH (178,397) 106,375
Cash, beginning of year 486,837 380,462
--------- ---------
Cash, end of year $ 308,440 $ 486,837
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company is a licensed, bonded utility contractor that operates in
the Central Florida area. Construction activities are primarily
underground telephone, electrical power, and water and sewer
utilities.
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual
results could vary from the estimates that were used.
Revenue Recognition
--------------------
Revenues for contracts are recorded using the accrual method except
for revenues from lump-sum water and sewer construction contracts
which are recognized using the percentage-of-completion method. Under
this method, revenues are measured by the percentage of cost incurred
to date to estimated total cost of each contract.
Contract costs include all direct material, labor and sub-contractor
costs and those indirect costs related to contract performance, such
as labor burden and equipment operation and maintenance costs,
including depreciation. Other operating and administrative expenses
are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and estimated
pro-fitability may result in revisions to costs and income and are
recognized in the period in which the revisions are determined.
The asset, "Costs and Estimated Earnings in Excess of Billings on
Uncompleted Contracts", represents revenues recognized in excess of
amounts billed. The liability, "Billings in Excess of Costs and
Estimated Earnings on Uncompleted Contracts", represents billings in
excess of revenues recognized.
The Company generally warrants its material and workmanship for one
year from the date of acceptance by the customer. Warranty costs are
charged to expense when incurred.
Cash
----
For purposes of the statement of cash flows, cash includes amounts in
demand bank accounts and amounts held by fiscal agents.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Accounts Receivable
-------------------
Accounts receivable are stated at net realizable value. No allowance
for doubtful accounts has been provided since, in management's
judgment based on an analysis of specific accounts over 90 days old,
the balance is entirely collectible.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the
respective assets as follows:
<TABLE>
<S> <C>
Building and Improvements 10-25 Years
Furniture and Office Equipment 5 Years
Construction Equipment 5 Years
Vehicles and Trailers 3-10 Years
</TABLE>
Compensated Absences
--------------------
The Company changed its vacation policy effective July 1, 1993.
Employees are now allowed to accumulate vacation days and are paid
when taken. Vacation benefits earned on an employee's anniversary date
must be used within the following year; any unused vacation is paid on
the succeeding anniversary date. Upon termination, unused vacation is
paid to the employee.
Before July 1, 1993, vacation benefits were paid when earned on the
employee's anniversary date of employment.
Income Taxes
------------
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to the differences between the bases
of property and equipment for financial and income tax reporting, and
from different methods for recognizing workers compensation claims
disposition liabilities. The deferred taxes represent the future tax
return consequences of those differences, which will either be taxable
or deductible when the assets and liabilities are recovered or
settled.
The basis of property and equipment exceeds its tax basis by the
cumulative amount that accelerated depreciation for tax purposes
exceeds straight-line depreciation, and by the amount of salvage value
excluded from the depreciable basis of heavy construction equipment
for financial reporting purposes.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 2 LONG-TERM DEBT
The following schedule summarizes long-term debt at June 30, 1995 and
1994. The equipment and vehicles acquired using the proceeds of these
loans have been pledged as security for the debt.
<TABLE>
<CAPTION>
1995 1994
----------------------------- ------
Long
Current Term Total Total
<S> <C> <C> <C> <C>
Sun Bank:
Note with monthly payments
of $10,000 plus interest
at prime plus .50% $120,000 $ 90,000 $210,000 $ -
Note with monthly payments
of $8,125 plus interest
at prime plus .50% 97,500 89,375 186,875 -
Note with monthly payments
of $6,077 plus interest
at prime plus .50% 72,922 30,384 103,306 -
Note with monthly payments
of $4,664 plus interest
at prime plus .75% 55,967 9,328 65,295 -
Note with monthly payments
of $4,947 plus interest
at prime plus .75% 34,627 - 34,627 93,987
Loans paid off during the
year ended 6/30/95 - - - 15,682
Citizens National Bank:
Note with monthly payments
of $3,115 plus interest
at prime plus .50% 37,381 24,921 62,302 -
Loan paid off during the
year ended 6/30/95 - - - 4,713
Associates Commercial:
Equipment loan payable in
monthly installments of
$2,989 including interest
at 2.9% 11,724 - 11,724 -
KDC Financial:
Loan paid off during
the year ended 6/30/95 - - - 103,113
-------- -------- -------- --------
TOTALS $430,121 $244,008 $674,129 $217,495
======== ======== ======== ========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ended June 30, 1996 $430,121
Year ended June 30, 1997 244,008
-------
$674,129
=======
</TABLE>
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 2 LONG-TERM DEBT (Continued)
The Sun Bank prime rate at June 30, 1995 was 9.0%. Sun Bank requires
the Company to maintain minimum equity of $1.5 million. All long-term
debt is personally guaranteed by H. C. Connell, the majority
stockholder.
Total interest expense incurred and paid for the years ended June 30,
1995 and 1994 were $56,137 and $23,497, respectively.
In addition to the debt listed above, the Company has an unsecured
line of credit with Sun Bank in the amount of $200,000 with interest
at prime rate plus .50%. This line of credit is intended for
short-term working capital needs and subject to renewal annually on
December 1.
NOTE 3 LONG-TERM CONTRACTS IN PROGRESS
Information with respect to water and sewer uncompleted contracts at
June 30, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Costs incurred on contracts
in progress $ 75,385 $1,111,212
Estimated earnings
on contracts in progress 18,223 118,057
--------- ----------
93,608 1,229,269
Less amounts billed on these
uncompleted contracts - (1,085,340)
Unbilled amounts on completed
contracts 3,962 -
---------- ---------
$ 97,570 $ 143,929
========== ==========
</TABLE>
This net amount is included in the accompanying balance sheet under
the following captions:
<TABLE>
<S> <C> <C>
Costs and Estimated Earnings
in Excess of Billings on
Uncompleted Contracts $ 97,570 $ 162,833
Billings in Excess of Costs
and Estimated Earnings on
Uncompleted Contracts - (18,904)
---------- ----------
$ 97,570 $ 143,929
========== ==========
</TABLE>
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 4 INCOME TAXES
The provision for income tax expense consists of the following components:
<TABLE>
<CAPTION>
Year ended June 30,
1995 1994
---- ----
<S> <C> <C>
CURRENT:
Federal $ 71,094 $190,752
State 11,928 19,991
-------- --------
83,022 210,743
DEFERRED:
Federal 16,800 25,200
State 3,600 18,200
-------- --------
20,400 43,400
-------- --------
TOTAL $103,422 $254,143
======== ========
</TABLE>
The following State Emergency Excise Tax credits are available to
reduce future State income taxes:
<TABLE>
<CAPTION>
Year the credit
becomes available Amount
----------------- ------
<S> <C>
June 30, 1996 $ 1,152
June 30, 1998 67
June 30, 1999 67
June 30, 2000 38
-------
Total $ 1,324
=======
</TABLE>
Federal and State income taxes paid during the years ended June 30,
1995 and 1994 totalled $121,501 and $80,000, respectively.
NOTE 5 MAJOR CUSTOMERS
The Company is engaged in utility construction operations on both a
bid contract and continuing contract basis. Approx-imately $9.6
million of the contract revenues earned during the year ended June 30,
1995 resulted from the continuing contracts with United Telephone
Company of Florida and Florida Power Corporation.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 5 MAJOR CUSTOMERS (continued)
The current contract with United Telephone expires August 31, 1996.
Contracts covering one Florida Power region and one Florida Power
district are in effect or have been renewed with expiration dates of
September 2, 1996 and October 1, 1996, respectively.
NOTE 6 RELATED PARTY TRANSACTIONS
The Company's headquarters is located at a site owned by H. C.
Connell, the majority stockholder. The Company and Mr. Connell have
entered into a lease agreement with terms that are re-viewed annually.
For each of the years ended June 30, 1995 and 1994, the Company
incurred and paid $57,600 in rent to Mr. Connell.
As of June 30, 1995 and 1994, Mr. Connell owed the Company $1,539 and
$2,010, respectively. This loan has no stated rate of interest nor
terms of repayment. However, management expects the balance to be
repaid during the next year.
NOTE 7 SELF-INSURANCE PROGRAM
The Company participates in a self-insurance program with Employers
Self Insurers Fund for workers' compensation insurance coverage. Under
the terms of the program, the Company reimburses the Fund for all
claims paid up to an annual maximum obligation based on a percentage
of standard premium. Claims paid above this annual maximum amount are
the responsibility of the Fund.
The Company is required to maintain a minimum balance of $25,000 with
the Fund to service claims, which is included on the balance sheet as
"Cash with Fiscal Agent". Additionally, at the Insurance Fund's
request, the Company has issued the Fund an irrevocable standby letter
of credit in the amount of $650,000 in order to provide the Fund with
continuing financial security.
The 1995 and 1994 financial statements have been restated to reflect
management's estimate of probable loss associated with workers
compensation claims as of June 30, 1995 and 1994. The accrual for
probable workers compensation claims is included in current
liabilities on the accompanying balance sheets.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 8 CONTINGENCIES
There are claims and actions pending against the Company. In the
opinion of management, the amounts, if any, which may be awarded in
connection with these claims and actions would not be material to the
Company's financial position.
<PAGE>
H. C. CONNELL, INC.
LEESBURG, FLORIDA
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1994 AND 1993
<PAGE>
H. C. CONNELL, INC.
INDEX TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
Independent Auditor's Report ............................1
Balance Sheets ..........................................2
Statements of Income and Retained Earnings ..............4
Statements of Cash Flows ................................5
Notes to Financial Statements ...........................7
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
November 14, 1994, except for
Note 8, as to which the date
is May 19, 1997
To the Director and Stockholders
H. C. Connell, Inc.
Leesburg, Florida
We have audited the accompanying balance sheets of H. C. Connell, Inc. as of
June 30, 1994 and 1993, and the related statements of income and retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of H. C. Connell, Inc. as of June
30, 1994 and 1993, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Shumacker, Johnston & Ross, PA
<PAGE>
H. C. CONNELL, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
1994 1993
(Restated) (Restated)
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 461,837 $ 355,462
Cash with Fiscal Agent (Note 2) 25,000 25,000
Receivables:
Accounts 1,365,707 1,373,082
Retainages 91,801 338,807
Employee Loans 1,728 324
Prepaid Income Taxes - 5,904
Deferred Income Taxes 20,900 47,000
Cost and Estimated Earnings in
Excess of Billings on Uncompleted
Contracts (Note 4) 162,833 -
---------- ----------
Total Current Assets 2,129,806 2,145,579
PROPERTY AND EQUIPMENT:
Building and Improvements 116,719 116,719
Furniture and Office Equipment 76,451 75,665
Construction Equipment 3,159,116 2,763,038
Vehicles and Trailers 1,195,390 1,093,373
---------- ----------
4,547,676 4,048,795
Less Accumulated Depreciation (3,083,991) (2,889,559)
---------- ----------
Net Property and Equipment 1,463,685 1,159,236
OTHER ASSETS:
Stockholder Loan (Note 7) 2,010 1,292
Deferred Expenses 20,107 21,043
Security Deposits 500 500
---------- ----------
Total Other Assets 22,617 22,835
Total Assets $3,616,108 $3,327,650
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,
1994 1993
(Restated) (Restated)
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 451,671 $ 594,760
Retainage Payable 89,522 152,770
Accrued Payroll and Vacation 164,539 107,466
Workers Compensation Claims
Disposition Liability (Note 8) 54,000 92,000
Accrued Taxes 85,801 25,173
Dividend Payable 10,000 5,000
Due to Stockholder (Note 7) - 50,000
Bank Line of Credit (Note 3) 111,935 46,493
Billings in Excess of Costs and
Estimated Earnings on Uncompleted
Contracts (Note 4) 18,904 63,495
Current Portion of Long-Term Debt
(Note 3) 182,868 182,607
---------- ----------
Total Current Liabilities 1,169,240 1,319,764
LONG-TERM DEBT (Note 3) 34,627 20,272
DEFERRED INCOME TAXES 219,000 201,700
--------- ---------
Total Liabilities 1,422,867 1,541,736
STOCKHOLDERS' EQUITY:
Common Stock, $1 Par value,
10,000 shares authorized,
issued and outstanding 10,000 10,000
Retained Earnings 2,183,241 1,775,914
---------- ----------
Total Stockholders' Equity 2,193,241 1,785,914
---------- ---------
Total Liabilities and Stock-
holders' Equity $3,616,108 $3,327,650
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Year ended June 30,
1994 1993
(Restated) (Restated)
--------- --------
<S> <C> <C>
CONTRACT REVENUES EARNED $10,204,505 $10,125,105
COSTS OF CONSTRUCTION 7,437,967 8,136,263
----------- -----------
Gross Profit 2,766,538 1,988,842
OPERATING EXPENSES 1,112,970 916,411
ADMINISTRATIVE EXPENSES 1,037,866 822,470
----------- -----------
Total Operating and Administrative
Expenses 2,150,836 1,738,881
Income from Operations 615,702 249,961
OTHER INCOME:
Interest 13,945 5,341
Miscellaneous Income 19,993 13,069
Gain on Sale and Disposal of Assets 21,830 6,480
----------- -----------
Total Other Income 55,768 24,890
----------- -----------
Income Before Income Taxes 671,470 274,851
PROVISION FOR INCOME TAXES (Note 6):
Current Expense 210,743 89,481
Deferred Expense 43,400 21,600
----------- -----------
Total Provision for Income Taxes 254,143 111,081
----------- -----------
NET INCOME 417,327 163,770
Retained Earnings, beginning of year 1,775,914 1,617,144
Dividends (10,000) (5,000)
----------- -----------
Retained Earnings, end of year $ 2,183,241 $ 1,775,914
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended June 30,
1994 1993
(Restated) (Restated)
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 417,327 $ 163,770
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation 304,713 255,838
Gain on Disposal of Equipment (21,830) (6,480)
Increase in Deferred Income Taxes 43,400 21,600
Changes in Current Assets and Liabilities:
(Increase) Decrease in Receivables 254,381 (717,029)
Decrease in Prepaid Income Taxes 5,904 23,292
(Increase) Decrease in Costs and
Estimated Earnings in Excess of
Billings on Uncompleted Contracts (162,833) 8,154
Decrease in Deferred Expenses 936 1,680
Increase (Decrease) in Accounts and
Retainage Payable (206,337) 454,250
Increase in Accrued Payroll and
Vacation 57,073 30,812
Increase (Decrease) in Workers
Compensation Claims Disposition
Liability (38,000) 92,000
Increase in Accrued Taxes 60,628 21,122
Decrease in Billings in Excess of
Costs and Estimated Earnings on
Uncompleted Contracts (44,591) (10,293)
--------- ---------
Net Cash Provided by Operating
Activities 670,771 338,716
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) Decrease in Employee Loans (1,404) 2,731
Proceeds from Disposal of Equipment 24,030 6,580
Purchase of Property and Equipment (611,362) (248,208)
Increase in Loans to Stockholder (718) (721)
--------- ---------
Net Cash Used in Investing
Activities (589,454) (239,618)
</TABLE>
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Year ended June 30,
1994 1993
(Restated) (Restated)
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends Paid (5,000) (5,000)
Loan from Stockholder (50,000) 50,000
Net Borrowing (Payments) Under Line
of Credit Agreement 65,442 46,493
Proceeds from Issuance of New Debt 260,887 65,091
Principal Payments on Long-Term Debt (246,271) (220,744)
--------- ---------
Net Cash Provided by (Used in)
Financing Activities 25,058 (64,160)
--------- ---------
NET INCREASE IN CASH 106,375 34,938
Cash, beginning of year 380,462 345,524
--------- ---------
Cash, end of year $ 486,837 $ 380,462
========= =========
</TABLE>
Disclosure of Accounting Policy:
For purposes of the statement of cash flows, the Company considers cash to
include amounts held by fiscal agents and amounts in demand bank accounts.
See Accompanying Notes to Financial Statements
and Independent Auditor's Report
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
-------------------
Revenues for contracts are recorded using the accrual method except
for revenues from lump-sum water and sewer construction contracts
which are recognized using the percentage-of-completion method. Under
this method, revenues are measured by the percentage of cost incurred
to date to estimated total cost of each contract.
Contract costs include all direct material, labor and sub-contractor
costs and those indirect costs related to contract performance, such
as labor burden and equipment operation and maintenance costs,
including depreciation. Other operating and administrative expenses
are charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions, and estimated
profitability may result in revisions to costs and income and are
recognized in the period in which the revisions are determined.
The asset, "Costs and Estimated Earnings in Excess of Billings on
Uncompleted Contracts", represents revenues recognized in excess of
amounts billed. The liability, "Billings in Excess of Costs and
Estimated Earnings on Uncompleted Contracts", represents billings in
excess of revenues recognized.
The Company generally warrants its material and workmanship for one
year from the date of acceptance by the customer. Warranty costs are
charged to expense when incurred.
Cash
----
Included in the balance captioned cash are amounts deposited in
interest bearing and non-interest bearing bank accounts.
Accounts Receivable
-------------------
Accounts receivable are stated at net realizable value. No allowance
for doubtful accounts has been provided since, in management's
judgment based on an analysis of specific accounts over 90 days old,
the balance is entirely collectible.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the
respective assets as follows:
<TABLE>
<S> <C>
Building and Improvements 10-25 Years
Furniture and Office Equipment 5 Years
Construction Equipment 5 Years
Vehicles and Trailers 3-10 Years
</TABLE>
Compensated Absences
--------------------
The Company changed its vacation policy effective July 1, 1993.
Employees are now allowed to accumulate vacation days and are paid
when taken. Vacation benefits earned on an employee's anniversary date
must be used within the following year; any unused vacation is paid on
the succeeding anniversary date. Upon termination, unused vacation is
paid to the employee.
Before July 1, 1993, vacation benefits were paid when earned on the
employee's anniversary date of employment.
Income Taxes
------------
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes cur-rently due plus
deferred taxes related primarily to the differ-ence between the bases
of property and equipment for financial and income tax reporting, and
from different methods for recog-nizing workers compensation claims
disposition liabilities. The deferred taxes represent the future tax
return consequences of those differences, which will either be taxable
or deduct-ible when the assets and liabilities are recovered or
settled.
The basis of property and equipment exceeds its tax basis by the
cumulative amount that accelerated depreciation for tax purposes
exceeds straight-line depreciation, and by the amount of salvage value
excluded from the depreciable basis of heavy construction equipment
for financial reporting purposes.
NOTE 2 CASH WITH FISCAL AGENT
As a part of the agreement to participate in the workers' compensation
plan administered by Employers Self Insurers Fund, the Company is
required to maintain a minimum balance of $25,000 with the Fund to
service claims.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
NOTE 3 LONG-TERM DEBT:
The following schedule summarizes long-term debt at June 30, 1994 and
1993. The equipment and vehicles acquired using the proceeds of these
loans have been pledged as security for the debt.
<TABLE>
<CAPTION>
1994 1993
----------------------------- ------
Long
Current Term Total Total
<S> <C> <C> <C> <C>
Sun Bank:
2 loans with monthly
payments totalling
$12,500 plus interest
at prime plus .75% $ 2,500 $ - $ 2,500 $152,500
Loan with monthly pay-
ments of $2,197 plus
interest at prime
plus 1.0% 13,182 - 13,182 39,546
Loan with monthly pay-
ments of $4,947 plus
interest at prime
plus .75% 59,360 34,627 93,986 -
Citizens National Bank:
Equipment loan with
monthly payments of
$510 plus interest at
prime plus 1% 4,713 - 4,713 10,833
KDC Financial:
Equipment loan with
monthly payments of
$9,566 including interest
at 2.9% due May 1995 103,113 - 103,113 -
-------- -------- -------- -------
TOTALS $182,868 $ 34,627 $217,495 $202,879
======== ======== ======== ========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ended June 30, 1995 $182,868
Year ended June 30, 1996 34,627
-------
$217,495
=======
</TABLE>
The Sun Bank prime rate at June 30, 1994 was 7.25%. Sun Bank requires
the Company to maintain minimum equity of $1.5 million. All long-term
debt is personally guaranteed by H. C. Connell, the majority
stockholder.
Total interest expense incurred and paid for the years ended June 30,
1994 and 1993 were $23,497 and $20,531, respectively.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
NOTE 3 LONG-TERM DEBT (Continued)
In addition to the debt listed above, the Company has an unsecured
line of credit with Sun Bank in the amount of $200,000 with interest
at prime rate plus .75%. This line of credit is intended for
short-term working capital needs and subject to renewal annually on
December 1.
NOTE 4 LONG-TERM CONTRACTS IN PROGRESS
Information with respect to water and sewer uncompleted contracts at
June 30, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Costs incurred on contracts
in progress $1,111,212 $2,205,475
Estimated earnings
on contracts in progress 118,057 358,338
--------- ---------
1,229,269 2,563,813
Less amounts billed on these
uncompleted contracts 1,085,340 2,627,308
--------- ---------
$ 143,929 $ (63,495)
========== ==========
</TABLE>
This net amount is included in the accompanying balance sheet under
the following captions:
<TABLE>
<S> <C> <C>
Costs and Estimated Earnings
in Excess of Billings on
Uncompleted Contracts $ 162,833 $ -
Billings in Excess of Costs
and Estimated Earnings on
Uncompleted Contracts (18,904) (63,495)
---------- ----------
$ 143,929 $ (63,495)
========== ==========
</TABLE>
NOTE 5 MAJOR CUSTOMERS
The Company is engaged in utility construction operations on both a
bid contract and continuing contract basis. Approx-imately $5.5
million of the contract revenues earned during the year ended June 30,
1994 resulted from the continuing contracts with United Telephone
Company of Florida and Florida Power Corporation.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
NOTE 5 MAJOR CUSTOMERS (continued)
The current contract with United Telephone expires August 31, 1996.
Contracts covering one Florida Power region and one Florida Power
district are in effect or have been renewed with expiration dates of
September 2, 1996 and October 1, 1995, respectively.
NOTE 6 INCOME TAXES
The provision for income tax expense consists of the following components:
<TABLE>
<CAPTION>
Year ended June 30,
1994 1993
----- -----
<S> <C> <C>
CURRENT:
Federal $190,752 $ 89,481
State 19,991 -
-------- -------
210,743 89,481
DEFERRED:
Federal 25,200 7,600
State 18,200 14,000
-------- --------
43,400 21,600
-------- --------
TOTAL $254,143 $111,081
======== ========
</TABLE>
At June 30, 1993, the Company used a State net operating loss
carryforward of $120,664 available from June 30, 1992 to reduce State
income taxes currently payable by approximately $6,600.
The following State Emergency Excise Tax credits are available to
reduce future State income taxes:
<TABLE>
Year the credit
becomes available Amount
----------------- ------
<S> <C>
June 30, 1995 $ 879
June 30, 1996 1,152
June 30, 1998 67
June 30, 1999 67
-------
Total $ 2,165
=======
</TABLE>
Federal and State income taxes paid during the years ended June 30,
1994 and 1993 totalled $80,000 and $55,000, respectively.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
NOTE 7 RELATED PARTY TRANSACTIONS
The Company's headquarters is located at a site owned by H. C.
Connell, the majority stockholder. The Company and Mr. Connell have
entered into a lease agreement with terms that are re-viewed annually.
For each of the years ended June 30, 1994 and 1993, the Company
incurred and paid $57,600 in rent to Mr. Connell.
As of June 30, 1994 and 1993, Mr. Connell owed the Company $2,010 and
$1,292, respectively. This loan has no stated rate of interest nor
terms of repayment. However, management expects the balance to be
repaid during the next year.
As of June 30, 1993, Mr. Connell loaned $50,000 to the Company to
provide temporary working capital. This loan was repaid during the
year ended June 30, 1994 with interest.
NOTE 8 SELF-INSURANCE PROGRAM
The Company participates in a self-insurance program with Employers
Self Insurers Fund for workers' compensation insurance coverage. Under
the terms of the program, the Company reimburses the Fund for all
claims paid up to an annual maximum obligation based on a percentage
of standard premium. Claims paid above this annual maximum amount are
the responsibility of the Fund. Additionally, at the Insurance Fund's
request, the Company has issued the Fund an irrevocable standby letter
of credit in the amount of $515,900 in order to provide the Fund with
continuing financial security.
The 1994 and 1993 financial statements have been restated to reflect
management's estimate of probable loss associated with workers
compensation claims as of June 30, 1994 and 1993. The accrual for
probable workers compensation claims is included in current
liabilities on the accompanying balance sheets.
NOTE 9 CONTINGENCIES
There are claims and actions pending against the Company. In the
opinion of management, the amounts, if any, which may be awarded in
connection with these claims and actions would not be material to the
Company's financial position.
<PAGE>
H. C. CONNELL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
NOTE 9 CONTINGENCIES (continued)
As a result of its examination of the corporate income tax return for
the year ended June 30, 1991, the Internal Revenue Service has
proposed a tax assessment of $40,950 on earnings accumulated in excess
of reasonable needs. Management disagrees with this proposed
assessment and is vigorously opposing the tax. An appellate hearing
has been requested to review this dispute. Management believes they
have a strong argument supporting the Company's position, and,
therefore, has made no provision for this tax in the accompanying
financial statements.
