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, 1997.
( ) 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)
(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 2, 1997, there were 8,370,862 shares, par value
$.001 per share, of the Registrant's Common Stock outstanding.
<PAGE>
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, 1997 and October 31, 1996 3
Condensed Consolidated Statements of
Operations - 5
Three months and nine months
ended July 31, 1997
and 1996
Condensed Consolidated Statements of
Cash Flows - 6
Three months and nine months
ended July 31, 1997
and 1996
Notes to Condensed Consolidated
Financial Statements - 7
July 31, 1997
Item 2. Management's Discussion and Analysis of
Financial Condition and 11
Results of Operations
PART II - OTHER INFORMATION
Items 1 through 5 - Not Applicable
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE>
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
---------- ----------
(unaudited) (Note)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $6,381,668 $3,267,161
Investments --- 571,010
Accounts receivable, net 13,393,442 13,617,792
Inventories 1,308,824 1,374,698
Costs and profits in excess of billings
on uncompleted contracts 1,703,337 954,269
Prepaid expenses and other 951,381 757,883
Deferred income taxes --- 905,898
---------- ----------
Total current assets 23,738,652 21,448,711
Property and equipment, net 13,696,377 10,667,357
Other assets:
Deferred income taxes 344,969 269,942
Goodwill, net 7,115,742 5,919,880
Other 915,667 612,941
---------- ----------
Total other assets 8,376,378 6,802,763
---------- ----------
Total assets $45,811,407 $38,918,831
========== ==========
</TABLE>
Note: The balance sheet at October 31, 1996 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>
Condensed Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
---------- ----------
(unaudited) (Note)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 3,275,886 $ 1,965,611
Notes payable - shareholders 1,397,333 1,307,976
Lines of credit 5,104,348 4,626,178
Accounts payable and accrued liabilities 6,747,772 8,036,142
Billings in excess of costs and profits 500,186 1,218,724
on uncompleted contracts
---------- ----------
Total current liabilities 17,025,525 17,154,631
Long-term debt, excluding current portion 8,413,643 8,149,807
Other liabilities --- 2,015,895
---------- ----------
Total liabilities 25,439,168 27,320,333
Minority Interest 56,103
Contingencies --- ---
Convertible, redeemable preferred stock,
$.10 par value, authorized 1,000,000
shares; 995 shares issued and outstanding
in 1997 6,938,831 ---
Shareholders' equity:
Common stock, $.001 par value,
authorized 25,000,000 shares;
8,337,201 and 8,203,212 shares issued
and outstanding in 1997 and 1996,
respectively 8,337 8,203
Additional paid-in capital 13,392,007 12,833,286
Unrealized loss on investments, net of
tax --- (53,990)
Accumulated deficit (23,039) (1,189,001)
---------- ----------
Total shareholders' equity 13,377,305 11,598,498
---------- ----------
Total liabilities and shareholders'
equity $45,811,407 $38,918,831
========== ==========
</TABLE>
Note: The balance sheet at October 31, 1996 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>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the three For the nine
months ended July 31, months ended July 31,
-------------------------- --------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Revenues $21,984,127 $11,860,240 $61,181,275 $36,030,910
----------- ----------- ----------- -----------
Costs and expenses:
Costs of revenues 17,605,842 9,152,667 47,640,186 28,285,785
General and
administrative 2,143,050 1,744,143 6,366,327 4,866,655
Depreciation and
amortization 1,197,826 644,157 3,237,199 1,746,911
Charges and
transaction/
translation losses
related to Latin
American operations 12,587 18,869 12,587 3,941,641
----------- ----------- ----------- -----------
Total costs and
expenses 20,959,305 11,559,836 57,256,299 38,840,992
----------- ----------- ----------- -----------
Income (loss) from
operations 1,024,822 300,404 3,924,976 (2,810,082)
----------- ----------- ----------- -----------
Other expense (income):
Interest expense 380,566 293,583 1,168,899 828,500
Interest and dividend
income (136,124) (44,222) (362,009) (181,098)
Other (161,087) --- (152,288) ---
----------- ----------- ----------- -----------
Total other expense
(income) 83,355 249,361 654,602 647,402
----------- ----------- ----------- -----------
Income (loss) before
income taxes and
minority interest 941,467 51,043 3,270,374 (3,457,484)
Income tax expense
(benefit) (33,778) (187,262) 850,432 282,412
----------- ----------- ----------- -----------
Income (loss) before
minority interest 975,245 238,305 2,419,942 (3,739,896)
Minority interest 42,668 101,039 130,148 (781,408)
----------- ----------- ----------- -----------
Net income (loss) 932,577 137,266 2,289,794 (2,958,488)
Preferred stock
dividends 75,000 --- 185,000 ---
Discount attributable
to beneficial
conversion privilege
of preferred stock 366,231 --- 938,831 ---
----------- ----------- ----------- -----------
Income (loss)
applicable to
common stock $ 491,346 $ 137,266 $ 1,165,963 $(2,958,488)
=========== =========== =========== ===========
Income (loss) per
common share: $ .06 $ .02 $ .14 $ (.35)
=========== =========== =========== ===========
Weighted average common
shares and common
stock equivalents
outstanding 8,559,306 8,362,305 8,531,490 8,355,804
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the nine months
ended July 31,
--------------------------
<S> <C> <C>
1997 1996
Cash from operations $ 3,761,221 $ 466,623
Investing Activities:
Purchase of property and equipment (2,375,226) (1,869,104
Cash acquired in acquisitions 403,617 ---
Cash paid in acquisitions (3,000,000) ---
Sale of Investments 625,000 ---
----------- -----------
Net cash used by investing
activities (4,346,609) (1,869,104)
----------- -----------
Financing Activities:
Net (payments) borrowings under lines
of credit 126,178 445,000
Payments on long-term debt (7,652,471) (809,945)
Proceeds from debt to finance
acquisitions 3,000,000 ---
Proceeds from long-term debt 3,131,459 105,000
Net proceeds from preferred stock
offering 5,664,148 ---
(Repayments) proceeds from notes payable
- shareholders (250,000) ---
Proceeds from the exercise of stock
options 21,312 ---
Dividends Paid (150,000) ---
Distributions to minority interests (190,731) (26,547)
----------- -----------
Net cash provided by financing
activities 3,699,895 (286,492)
----------- -----------
Effect of exchange rate changes on cash
and equivalents --- (33,148)
----------- -----------
Increase (decrease) in cash and cash
equivalents $ 3,114,507 $(1,722,121)
=========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
July 31, 1997
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 10-Q 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 during fiscal years 1997 and 1996.
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, 1996. Operating
results for the three and nine months ended July 31, 1997 are not
necessarily indicative of the results that may be expected for
the year ended October 31, 1997.
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
1996 Annual Report on Form 10-K.
Certain items in the condensed consolidated financial statements
for the interim periods ended July 31, 1996 have been
reclassified to conform with the current presentation.
2. Acquisition
On December 2, 1996, the Company, through a wholly owned
subsidiary, acquired all the outstanding common stock of Dial
Communications, Inc. ("Dial"). As consideration, the Company
paid $3,000,000 in cash, issued 108,489 shares of common stock
and issued an $892,000 promissory note. The acquisition was
accounted for using the purchase method of accounting and
approximately $1,500,000 of goodwill was recorded which will be
amortized over 20 years. The results of operations of Dial have
been included since the date of acquisition. The cash component
of the purchase was funded in part from the Company's line of
credit and the remainder through a $1,900,000 Term Loan from a
bank. On July 15, 1997 this initial debt was repaid with a
$2,982,000 Term Note. See Note 3.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
July 31, 1997
The pro forma unaudited results of operations for the three and
nine months ended July 31, 1997 and 1996, assuming consummation
of the purchase at the beginning of the respective periods, are
as follows:
<TABLE>
<CAPTION>
For the three For the nine months
months ended July 31, ended July 31,
--------------------- ---------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Revenues $21,984,127 $11,860,240 $62,018,795 $36,030,910
Net income (loss) $ 932,577 $ 137,266 $ 2,312,957 $(2,958,488)
Net income (loss)
per common
share and common
equivalent share $ .06 $ .02 $ .14 $ .(35)
</TABLE>
The unaudited pro forma information does not purport to be
indicative of the results of operations which would have resulted
had the acquisition been consummated at the date assumed.
3. Borrowings
Effective December 2, 1996 the Company entered into a $3,000,000
Term Loan Credit Facility (the"Term Loan") with a bank. The Term
Loan is collateralized by all real and personal property of
Georgia Electric Company ("GEC") which was acquired on October
12, 1996. The Term Loan is payable in sixty monthly installments
of $50,000 plus interest at prime (8.50% at July 31, 1997).
Additionally, excess cash flow of GEC, as defined, is to be paid
to the bank. The Term Loan contains covenants, which require
among other conditions, that the Company maintain certain
tangible net worth, working capital and debt service amounts.
Proceeds from the Term Loan were used to repay $3,000,000 of
borrowings from a bank outstanding at October 31, 1996 which
consisted of a $1,500,000 bank line of credit and a $1,500,000
note payable that was due on December 2, 1996.
On July 15, 1997 the Company entered into a $2,982,000 Term Loan
from a bank payable in fifty-nine monthly installments of $35,500
plus interest at prime (8.50% at July 31, 1997) with a final
payment of $887,500 due on June 29, 2002. The Term Loan is
collateralized by all the real and personal property of Dial
Communications, Inc. ("DCI"). The proceeds from this Term Loan
were used to repay the $1,900,000 Term Loan and $1,221,000 on the
line of credit incurred in the initial funding of DCI.
4. Preferred Stock
Effective December 20, 1996 the Company completed a private
placement transaction of 1,000 shares of $.10 par value, Series
A Convertible Preferred Stock (the "Preferred Stock") and
warrants to purchase 200,000 shares of the Company's common stock
at $9.82 per share. Proceeds from the offering totaled
$6,000,000. Each share of Preferred Stock is convertible to
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
July 31, 1997
shares of the Company's common stock after April 30, 1997 at the
lesser of $9.82 per share or at a discount (ranging from 10% to
20% depending upon the date of conversion) of the average closing
bid price of a share of common stock for three days proceeding
the date of conversion. The Company is recognizing the discount
attributable to the beneficial conversion privilege of
approximately $938,831 by accreting the amount from the date of
issuance through August 20, 1997 as an adjustment of net income
attributable to common shareholders (see Note 5.) Such
adjustment totaled $366,231 for the quarter ended July 31, 1997.
This accretion adjustment, which also represents the amount
needed to accrete to the redemption value of the Preferred Stock
for the period ended July 31, 1997, was recorded as a charge to
accumulated deficit and accompanying credit to the Preferred
Stock. The Preferred Stock accrues dividends at an annual
rate of 5% and is payable quarterly in arrears in cash or
through a dividend of additional shares of Preferred Stock. The
warrants are exercisable after one year provided that the
Preferred Stock is not converted to common stock prior to the
first anniversary date of the private placement. Upon the
occurrence of certain events the Company may be required to
redeem the Preferred Stock at a price equal to the liquidation
preference, plus any accrued and unpaid dividends, plus an amount
determined by formula. Proceeds from the private placement were
used to repay certain debt outstanding at October 31, 1996,
including a $1,869,050 note payable to the sellers of H.C.
Connell, Inc. ("Connell") acquired by the Company on December 8,
1995, a $250,000 note payable to a director, and $2,015,895 due
the former principals of GEC. The amount due to the former
principals of GEC represented undistributed S corporation profits
existing at the date of acquisition, and is presented as"Other
liabilities" in the accompanying consolidated balance sheet at
October 31, 1996.
5. Stock Option Plan
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related Interpretations in accounting for its employee
stock options because the alternative fair value accounting
provided for under FASB Statement No. 123, "Accounting for
Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
The Company's 1995 Incentive Stock Option Plan has authorized the
grant of options to employees for up to 550,000 shares of the
Company's common stock. All options granted have three year terms
and vest ratably over the three year period after one full year
of service and assuming continued employment.
In addition to the shares authorized under the Company's 1995
Incentive Stock Option Plan, certain officers and directors of
the corporation were granted options during the quarter ended
July 31, 1997 by the board of directors at a discount to market
at the date of grant. Compen-
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
July 31, 1997
sation has been recognized during this period using the intrinsic
value method as prescribed by APB 25 "Accounting for Stock Issued
to Employees" totaling $335,625. This amount has been recorded
in other expenses on the income statement.
6. Earnings Per Share
Fully diluted earnings per share data, which includes the assumed
conversion of the convertible preferred stock, has not been
presented because it was not dilutive. Earnings attributable to
common stock reflects adjustments for cumulative preferred
dividends and imbedded dividends arising from discounted
conversion terms on the Series A Convertible Preferred Stock (see
Note 4).
7. Contingencies - Litigation
The Company is involved in various claims and legal actions
arising in the ordinary course of business including claims
relating to notes payable to the former owners of Transportation
Safety Contractors, Inc. These notes payable and related accrued
interest are classified as current in the accompanying balance
sheets net of any amounts due from the former owners. 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 or results of operations.
<PAGE>
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 financial
condition and results of operations of the Company for the three and
nine months ended July 31, 1997 and 1996. This information should be
read in conjunction with the Company's condensed consolidated financial
statements appearing elsewhere in this document. Except for historical
information contained herein, the matters discussed below contain
forward looking statements that involve risks and uncertainties,
including but not limited to economic, competitive, governmental and
technological factors affecting the Company's operations, markets and
profitability.
Results of Operations
The following table sets forth, for the periods indicated, selected
elements of the Company's condensed consolidated statements of
operations as a percentage of its revenues.
<TABLE>
<CAPTION>
For the three months For the nine months
ended July 31, ended July 31,
---------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Revenues 100.00% 100.00% 100.00% 100.00%
---------- ---------- ---------- ----------
Cost of revenues 80.08% 77.17% 77.87% 78.50%
General and 9.75% 14.71% 10.41% 13.51%
administrative
Depreciation and 5.45% 5.43% 5.29% 4.85%
amortization
Charges and
transaction/
translation
losses relating
to Latin American
operations 0.06% 0.16% 0.02% 10.94%
Income (loss) from
operations 4.66% 2.53% 6.42% (7.80%)
Interest expense
and other 0.38% 2.10% 1.07% 1.80%
Net income (loss) 4.24% 1.16% 3.74% (8.21%)
</TABLE>
The Company reported net income for the quarter ended July 31, 1997,
before a reduction for the non-cash charge for the discounted
conversion of the Company's convertible preferred stock (the accretive
dividend) issued in December of 1996, of $857,577 or $.10 a share
compared to a net income of $137,266 or $.02 per share for the same
period in 1996. Net income for the nine month period ended July 31,
1997, before the accretive dividend charge, was $2,104,794 or $.25 per
share compared to a net loss of $(2,958,488) or $(.35) per share for
the same period in 1996. These amounts are after a deduction for
preferred stock dividends paid of $75,000 in the quarter ended July 31,
1997 and $185,000 paid in the nine month period ended July 31, 1997.
The earnings for the quarter ended July 31, 1997 also reflect a
non-cash charge of $335,625 for compensation recognized on stock
options granted to certain officers and directors and transitional
costs associated with the change in executive management of $216,735.
The reportable income was further reduced by the accretive dividend
charge totaling $366,231 for the three months and $938,831 for the nine
months ended July 31, 1997. The increase in net income for the quarter
ended July 31, 1997 is due to the assimilation of the Georgia Electric
Company ("GEC") and Dial Communications, Inc. ("Dial") acquisitions as
well as the continued improvement in margins within the Traffic
Management Group. For the nine month period ended July 31, 1997, the
earnings were additionally improved due to the decrease in special
charges relating to Latin American operations required during the
comparative periods to $12,587 in 1997 from $3,941,641 for 1996 and the
overall improvement in operational results from these operations.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Revenues for the quarter ended July 31, 1997 increased $10,123,887 to
$21,984,127 compared to revenues of $11,860,240 for the same period in
1996. Revenues for the nine month period ended July 31, 1997 increased
by $25,150,365 to $61,181,275 from $36,030,910 for the same nine month
period of the prior year. The acquisition of GEC in October of 1996
and Dial in December of 1996 accounted for approximately $9,300,000 of
the revenue increase for the third quarter of 1997 and approximately
$23,300,000 of the increase for the nine month period ended July 31,
1997. The remaining increases in revenue for the quarter and nine
months period were generated from increased demand for services from
the other subsidiaries.
Cost of Revenues increased during the third quarter to 80.08% of
revenues from 77.17% of revenues for the same period in 1996. This
increase was due to the startup cost associated with Able Integrated
Services, Inc. ("AIS") of approximately $140,000 and cost associated
with the expansion of GEC activities in the Texas market area. For the
nine month period ended July 31, 1997, cost of revenues were 77.87%
compared to 78.50% for the first nine months of 1996. This improvement
is primarily a reflection of the improved labor productivity and cost
cutting measures within the Traffic Management Group and the
assimilation of GEC and Dial acquisitions.
General and administrative expense during the quarter ended July 31,
1997 increased $398,907 from $1,744,143 in 1996 to $2,143,050 in 1997.
For the nine months ended July 31, 1997 these expenses increased
$1,499,672 from $4,866,655 in 1996 to $6,366,327 in 1997. All of the
increase in General and Administrative expenses for the quarter and
nine months ended July 31, 1997 can be attributed to the assimilation
of the GEC and Dial acquisitions.. These expense totals represent a
significant decline as a percentage of revenues from prior years as a
result of the Company's efforts to enhance financial controls and the
implementation of a cost containment program.
The increase in interest expense during the quarter and nine month
period ending July 31, 1997 reflects the recent addition of
acquisition-related debt and the financing of equipment purchases as
well as the payment of debt with the proceeds from the Preferred stock
issue.
Depreciation and amortization expense increased $553,669 and $1,490,288
for the quarter and nine month period ended July 31, 1997 from the
corresponding periods in 1996. The GEC and Dial acquisitions represent
approximately $354,000 and $1,003,000 of the total increase for the
quarter and nine month period respectively. The remaining increase
resulted from the continuing improvement and updating of the Company's
equipment.
Other income and expense includes a $335,625 non-cash charge for
compensation recognized on stock options granted to certain officers
and directors at a discount to market during the quarter ended July 31,
1997. Other income and expense for the quarter ended July 31, 1997
also includes a recapture of bad debt of $200,000 and a reduction in
reserves for settlement of litigation of $297,087 based on offsets as
determined by counsel.
The Company has continued to monitor its Latin American operations due
to poor operating results in 1996. During the nine month period ended
July 31, 1997 Able's international operations have shown improvement.
These improvements resulted from the stabilization of the exchange rate
and increase in revenue producing contracts.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Revenues and net income (loss) from Able's international operating
subsidiaries are presented below for the quarter and nine months ended
July 31, 1997 and 1996. These figures exclude cost associated with the
continued marketing and development cost of the "Neurolama" product and
general and administrative cost of the International Management Group.
<TABLE>
<CAPTION>
Able Telcom International
For the quarter For the nine month
ended period ended
July 31, July 31,
---------------------- ---------------------
From Operating Subsidiaries
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Revenues $1,287,309 $ 774,043 $3,135,483 $ 3,121,656
Expenses 1,027,582 805,052 2,895,667 5,278,063
--------- --------- --------- ----------
Net income (loss) $ 259,727 $ (31,009) $ 239,816 $(2,156,407)
========= ========= ========= ==========
</TABLE>
Based on the current facts and circumstances associated with the
renewed profitability of the Latin American operations, the value of
certain foreign tax credits increased resulting in the recognition of
$244,861 of income tax benefit in the quarter ended July 31, 1997.
This amount is not reflected in the previous table.
The Company's net equity in Latin American operations totaled
$1,619,818 and $1,183,111 at July 31, 1997 and 1996, respectively.
The foreign currency translation and transaction losses improved during
the third quarter of 1997. The stabilization of the Venezuelan bolivar
resulted in a decrease in foreign currency losses of $6,282 and
$3,929,054 for the quarter and nine month period ended July 31, 1997 as
compared to the same periods for 1996.
Income tax expense (benefit) for the quarter and nine month period
ended July 31, 1997 and 1996 differ from the amounts that would result
from applying federal and state statutory tax rates to pre tax income
(loss) primarily due to non deductible goodwill, losses from foreign
operations and the recalculation of other deferred tax items from prior
years based on current facts and circumstances.
Liquidity and Capital Resources
Cash and cash equivalents were $6,381,668 at July 31, 1997 compared to
$3,267,161 at October 31, 1996. Cash was impacted during the first
nine months of 1997 was primarily the result of private placement of
preferred stock.
On December 2, 1996 the Company entered into a $3,000,000 Term Loan
(the "Term Loan") with a bank in connection with refinancing the
acquisition of GEC on October 12, 1996. The Term Loan is payable in
sixty monthly installments of $50,000 plus interest at prime (8.50% at
July 31, 1997). Excess cash flow of GEC, as defined, is to be paid to
the Bank. The Term Loan contains covenants, which require among other
conditions, that the Company maintain certain tangible net worth,
working capital and debt service amounts. The Term Loan is
collateralized by all real and personal property of GEC. Proceeds from
the Term Loan were partially used to repay a $1,500,000 note payable to
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
a bank, outstanding at October 31, 1996 and due on December 2, 1996.
The remaining proceeds were used to repay the Company's lines of credit.
Effective December 20, 1996 the Company completed a private placement
transaction of 1,000 shares of $.10 par value, Series A Convertible
Preferred Stock (the Preferred Stock) and warrants to purchase 200,000
shares of the Company's common stock. Gross proceeds from the offering
totaled $6,000,000. Each share of Preferred Stock is convertible to
shares of the Company's common stock after April 30, 1997 at the
lesser of $9.82 per share or at a discount (ranging from 10% to 20%
depending upon the date of conversion) of the average closing bid price
of a share of common stock for three days proceeding the date of
conversion. The Preferred Stock accrues dividends at an annual rate of
5% and is payable quarterly in arrears in cash or through a dividend of
additional shares of Preferred Stock. In addition, the accumulated
deficit and earnings attributable to common stock reflects adjustments
for cumulative preferred dividends and imbedded dividends arising from
discounted conversion terms on the preferred stock. The warrants are
exercisable at $9.82 per share after one year provided that the
Preferred Stock is not converted to common stock prior to the first
anniversary of the private placement. Upon the occurrence of certain
events the Company may be required to redeem the preferred stock at a
price equal to the liquidation preference, plus any accrued and unpaid
dividends plus an amount determined by formula. The proceeds from the
private placement were used to repay a $1,869,050 note payable to the
sellers of H.C. Connell, Inc., a $250,000 note payable to a director in
connection with the acquisition of Connell, and $2,015,895 due the
former principals of GEC by GEC at the date of acquisition, all of
which were outstanding at October 31, 1996.
In addition, on December 2, 1996, the Company acquired all the
outstanding common stock of Dial. As consideration, the Company paid
$3,000,000 in cash, issued 108,489 shares of common stock (fair value
of $620,421) and issued an $892,000 promissory note with a three year
term bearing interest at prime (8.50% at July 31, 1997) plus 1/2%. The
cash component of the purchase was funded in part from the Company's
line of credit and the remainder through a $1,900,000 Term Loan from a
bank with interest at prime (8.50% at July 31, 1997) plus 1/2%. On July
15, 1997 the initial debt was repaid with proceeds from a $2,982,000
term note. See Note 3.
The Company expects that available cash will be sufficient to meet
normal operating requirements over the near term.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Part II - Other Information
Items 1-5. Not applicable
<TABLE>
<S> <C>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K
On December 21, 1995, the Company filed a Current Report
on Form 8-K and reported on Item 2 thereof, the
acquisition of H. C. Connell, Inc. This Form 8-K was
amended on May 6, 1997 and May 30, 1997 to include
financial statements pursuant to Regulation S-X.
On October 12, 1996, the Company filed a Current Report on
Form 8-K and reported on Item 2 thereof, the acquisition
of Georgia Electric Company. This Form 8-K was amended on
May 6, 1997 to include financial statements pursuant to
Regulation S-X.
</TABLE>
<PAGE>
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/ Gerry W. Hall September 15, 1997
--------------------------------
Gerry W. Hall, President and CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ABLE TELCOM HOLDING CORP. FOR THE QUARTER ENDED JULY 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 6,381,668
<SECURITIES> 0
<RECEIVABLES> 13,393,442
<ALLOWANCES> 0
<INVENTORY> 1,308,824
<CURRENT-ASSETS> 23,738,652
<PP&E> 13,696,377
<DEPRECIATION> 1,197,826
<TOTAL-ASSETS> 45,811,407
<CURRENT-LIABILITIES> 17,025,525
<BONDS> 0
0
6,938,831
<COMMON> 8,313
<OTHER-SE> 13,368,968
<TOTAL-LIABILITY-AND-EQUITY> 45,811,407
<SALES> 0
<TOTAL-REVENUES> 21,984,127
<CGS> 0
<TOTAL-COSTS> 20,959,305
<OTHER-EXPENSES> 161,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 380,566
<INCOME-PRETAX> 898,799
<INCOME-TAX> 33,778
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 932,577
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
