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 January 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 March 6, 1997, there were 8,313,701 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 -
January 31, 1997 and October 31, 1996 3
Condensed Consolidated Statements of
Operations - Three months ended January 31,
1997 and 1996 5
Condensed Consolidated Statements of Cash
Flows - Three months ended January 31, 1997
and 1996 6
Notes to Condensed Consolidated Financial
Statements - January 31, 1997 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Items 1 through 5 - Not Applicable
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
------------ -------------
(unaudited) (Note)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 5,838,644 $ 3,267,161
Investments 593,750 571,010
Accounts receivable, net 12,559,348 13,617,792
Inventories 1,206,163 1,374,698
Costs and profits in excess of billings on
uncompleted contracts 1,641,902 954,269
Prepaid expenses and other 901,852 757,883
Deferred income taxes 561,219 905,898
----------- -----------
Total current assets 23,302,878 21,448,711
Property and equipment, net 13,394,970 10,667,357
Other assets:
Deferred income taxes 269,942 269,942
Goodwill, net 7,322,665 5,919,880
Other 764,535 612,941
----------- -----------
Total other assets 8,357,142 6,802,763
----------- -----------
Total assets $45,054,990 $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 Balance Sheets (Continued)
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
------------ --------------
(unaudited) (Note)
Liabilities and Shareholders' Equity
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 3,598,780 $ 1,965,611
Notes payable - shareholders 1,605,309 1,307,976
Lines of credit 6,038,437 4,626,178
Accounts payable and accrued liabilities 7,055,498 8,036,142
Billings in excess of costs and profits on
uncompleted contracts 1,298,760 1,218,724
----------- -----------
Total current liabilities 19,596,784 17,154,631
Long-term debt, excluding current portion 6,476,055 8,149,807
Other liabilities --- 2,015,895
Notes payable - shareholders 594,667 ---
----------- -----------
Total liabilities 26,667,506 27,320,333
Contingencies --- ---
Shareholders' equity:
Common stock, $.001 par value, authorized
25,000,000 shares; 8,313,701 and 8,203,212
shares issued and outstanding in 1997 and
1996, respectively 8,313 8,203
Preferred stock 100 ---
Additional paid-in capital 19,129,083 12,833,286
Unrealized loss on investments, net of tax (31,250) (53,990)
Accumulated deficit (718,762) (1,189,001)
----------- -----------
Total shareholders' equity 18,387,484 11,598,498
----------- -----------
Total liabilities and shareholders' equity $45,054,990 $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 months ended
January 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues $ 18,326,139 $ 11,578,375
------------ ------------
Costs and expenses:
Costs of revenues 14,274,962 9,426,923
General and administrative 1,910,110 1,450,703
Depreciation and amortization 998,967 563,358
Charges and transaction/translation losses
related to Latin American operations --- 1,009,792
------------ ------------
Total costs and expenses 17,184,039 12,450,776
------------ ------------
Income (loss) from operations 1,142,100 (872,401)
------------ ------------
Other expense (income):
Interest expense 379,902 237,705
Interest and dividend income (96,509) (73,800)
Other expenses 8,789 ---
------------ ------------
Total other expense 292,182 163,905
------------ ------------
Income (loss) before income taxes and minority
interest 849,918 (1,036,306)
Income tax expense (benefit) 344,679 (255,553)
------------ ------------
Income (loss) before minority interest 505,239 (780,753)
Minority interest --- (247,360)
------------ ------------
Net income (loss) $ 505,239 $ (533,393)
============ ============
Income (loss) applicable to common stock $ 470,239 $ (533,393)
============ ============
Income (loss) per common share: $ .06 $ (.06)
============ ============
Weighted average common shares and common
stock equivalents outstanding 8,443,898 8,354,144
============ ============
</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 three months ended
January 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Cash from operations $ 1,543,564 $ 730,416
Investing Activities:
Purchase of property and equipment (646,713) (456,828)
Cash acquired in acquisitions 403,617 400,000
Cash paid in acquisitions (3,000,000) (2,392,168)
Other 22,944 ---
------------ -----------
Net cash used by investing activities (3,220,152) (2,448,996)
------------ -----------
Financing Activities:
Net (payments) borrowings under lines of
credit (87,741) 445,000
Payments on long-term debt (6,256,136) (209,979)
Proceeds from debt to finance acquisitions 3,000,000 1,715,074
Proceeds from long-term debt 2,177,800 ---
Net proceeds from preferred stock offering 5,664,148 ---
(Repayments) proceeds from notes payable -
shareholders (250,000) 250,000
Foreign currency translation adjustment --- (793,675)
Other --- (13,726)
------------ -----------
Net cash provided by financing activities 4,248,071 1,392,694
------------ -----------
Effect of exchange rate changes on cash and
equivalents --- (216,117)
------------ -----------
Increase (decrease) in cash and cash equivalents $ 2,571,483 $ (542,003)
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
January 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 year
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 months ended
January 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 period ended January 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 with interest at prime (8.25% at January
31, 1997) plus 1/2 % due May 31, 1997.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
January 31, 1997
The pro forma unaudited results of operations for the three months ended
January 31, 1997 and 1996, assuming consummation of the purchase at the
beginning of the respective periods, are as follows:
<TABLE>
<CAPTION>
For the three months
ended January 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues $ 19,163,658 $13,618,120
Net income (loss) 528,402 (528,030)
Net income (loss) per common share and
common equivalent share .06 (.06)
</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
(8.25% at January 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.
See Note 2 "Acquisition" for additional debt incurred in connection with
an acquisition on December 2, 1996.
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 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. The warrants are
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
January 31, 1997
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, including
failure to effect a timely registration statement related to the
conversion features and warrants associated with the Preferred Stock, 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 15, 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. 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. 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 months ended
January 31, 1997. 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
ended January 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues 100.0% 100.0%
--------- --------
Cost of revenues 78.0 81.4
General and administrative 10.4 12.5
Depreciation and amortization 5.5 4.9
Charges and transaction/translation losses
related to Latin American operations 0.0 8.7
Operating income (loss) 6.1 (7.5)
Interest expense and other 2.1 2.0
Net income (loss) 2.8 (4.6)
</TABLE>
The Company reported net income of $505,239 or $.06 per share for the
three months ended January 31, 1997 compared to a net loss of ($533,393) or
($.06) per share for the same period in 1996. Net income for the first quarter
of 1997, primarily reflects the assimilation of the Georgia Electric Company
("GEC") and Dial Communications, Inc. ("Dial") acquisitions as well as the
improved margins within the Traffic Management Group.
Revenues for the three month period ended January 31, 1997 increased
$6,747,764 to $18,326,139 compared to revenues of $11,578,375 for the same
period in 1996. The acquisitions of GEC, in October 1996, and Dial, in December
1996, accounted for $7,275,673 of the revenue increase for the first quarter of
1997. Revenues from traffic management services decreased approximately $1.7
million from the same period in 1996 primarily as a result of the Company's
focus on improving operating margins on existing contracts. Revenues from
telecommunication services increased approximately $1.6 from the prior year
period.
Cost of revenues for the first quarter of 1997 improved to 78.0% of
revenues from 81.4 % of revenue for the same period in 1996, primarily
reflecting improved labor productivity within the Traffic Management Group and
the assimilation of GEC and Dial.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
General and administrative expense during the first quarter increased
$459,407 from $1,450,703 in 1996 to $1,910,110 in 1997. Approximately $421,000
of the increase results from acquisitions of GEC and Dial.
Interest expense during the first quarter of 1997 reflects the recent
addition of acquisition related debt and the financing of equipment purchases.
Depreciation and amortization expense increased approximately $435,000
from $563,358 to $998,967. Approximately $265,000 of this increase results from
the GEC and Dial acquisitions. The remaining $170,000 increase resulted from the
continuing improvement and updating of the Company's equipment.
The foreign currency translation and transaction losses improved
dramatically in the first quarter of 1997 as compared to the first quarter of
1996. The stabilization of the Venezuelan bolivar resulted in a decrease in
foreign currency losses of approximately $1,010,000.
Income tax expense (benefit) for the first quarter of 1997 and 1996 differ
from the amount that would result from applying federal statutory tax rates to
the pre tax income (loss) primarily due to non-deductible goodwill and losses
from foreign operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $5,838,644 at January 31, 1997 compared to
$3,267,161 at October 31, 1996. Cash was impacted during the first quarter of
1997 primarily by proceeds received from a private placement of preferred stock
and the repayment of debt.
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 (8.25% at January 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 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
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
5% and is payable quarterly in arrears in cash or through a dividend of
additional shares of 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, including failure to effect a timely registration
statement, 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.
("Connell"), 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 (8.25%
at January 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 plus 1/2%. The principal balance of
this note, plus accrued interest, is due May 31, 1997.
The Company expects that available cash will be sufficient to meet normal
operating requirements over the near term.
Part II - Other Information
<TABLE>
<S> <C>
Items 1-5. Not applicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None
b) Reports on Form 8-K
On December 13, 1996, the Company filed a Current Report on
Form 8-K and reported on Item 2 thereof the acquisition of Dial
Communications, Inc. This Form 8-K was amended on February 11, 1997.
The acquisition of Dial Communications, Inc. did require the filing
of financial statements pursuant to Regulation S-X.
On December 31, 1996, the Company filed a Current Report on
Form 8-K and reported on Item 5 thereof the completion of a Private
Placement of Preferred Stock in exchange for aggregate proceeds of
$6,000,000.
</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.
(Registrant)
By: /s/ William J. Mercurio March 17, 1997
--------------------------------------
William J. Mercurio, 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 JANUARY
31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 5,838,644
<SECURITIES> 593,750
<RECEIVABLES> 12,559,348
<ALLOWANCES> 0
<INVENTORY> 1,206,163
<CURRENT-ASSETS> 23,302,878
<PP&E> 13,394,970
<DEPRECIATION> 998,967
<TOTAL-ASSETS> 45,054,990
<CURRENT-LIABILITIES> 19,596,784
<BONDS> 0
0
100
<COMMON> 8,313
<OTHER-SE> 18,387,484
<TOTAL-LIABILITY-AND-EQUITY> 45,054,990
<SALES> 0
<TOTAL-REVENUES> 18,326,139
<CGS> 0
<TOTAL-COSTS> 14,274,962
<OTHER-EXPENSES> 8,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 379,902
<INCOME-PRETAX> 849,918
<INCOME-TAX> 344,695
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 505,239
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
