SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-K/A-2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of earliest event reported: April 1, 1998
(Amending Form 8-K/A-1 filed on June 16, 1998 which amended
Form 8-K filed on April 14, 1998)
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>
EXPLANATORY NOTE
We have included the following amendments to Able Telecom Holding Corp.'s
Form 8-K/A-1 filed on June 16, 1998, with respect to the Company's acquisition
of Patton Management Corporation ("Patton"):
/bullet/ We have amended certain pro forma financial information.
/bullet/ We have amended the consent of Patton's independent public
accountants contained in Exhibit 23.1.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements, pro forma financial information and exhibits
are filed as part of this Form 8-K/A-2:
(A) FINANCIAL STATEMENTS.
Consolidated Financial Statements of Patton Management Corporation and
Subsidiaries:
Report of Independent Public Accountants
Consolidated Balance Sheet as of March 31, 1998
Consolidated Statement of Operations for the Year Ended March 31,
1998
Consolidated Statement of Shareholders' Equity (Deficit) for the
Year Ended March 31, 1998
Consolidated Statement of Cash Flows for the Year ended March 31,
1998
Notes to Consolidated Financial Statements
(B) PRO FORMA FINANCIAL INFORMATION.
Pro forma Combined Statements of Operations (Unaudited) for the
Twelve Months Ended October 31, 1997
Pro forma Combined Statements of Operations (Unaudited) for the Six
Months Ended April 30, 1998
(C) EXHIBITS
23.1 Consent of Independent Public Accountants
<PAGE>
PATTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
Consolidated Financial Statements as of March 31, 1998
Together With
Auditors' Report
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Patton Management Corporation
and Subsidiaries:
We have audited the accompanying consolidated balance sheet of PATTON MANAGEMENT
CORPORATION (a Tennessee corporation) AND SUBSIDIARIES (the "Company") as of
March 31, 1998 (post-quasi reorganization) and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year then
ended (post-quasi reorganization--Note 1). 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 audit.
We conducted our audit 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 Patton Management Corporation
and subsidiaries as of March 31, 1998 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN, LLP
Atlanta, Georgia
May 1, 1998
<PAGE>
<TABLE>
<CAPTION>
PATTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 4,703
Accounts receivable, net of allowance for doubtful
accounts of $25,000 3,106,509
Related-party notes receivable (Note 4) 1,801,732
Costs and profits in excess of billings 1,051
Inventory 148,821
Prepaid expenses and other 84,597
Deferred tax assets (Note 2) 116,125
----------
Total current assets 5,263,538
PROPERTY, PLANT AND EQUIPMENT, NET (NOTES 1, 3 AND 5) 3,535,804
RELATED-PARTY NOTES RECEIVABLE (NOTE 4) 130,136
DEFERRED FINANCING COSTS 168,472
----------
Total assets $9,097,950
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Drafts payable $ 12,849
Accounts payable, including retainage of $104,305 3,103,339
Accrued liabilities 573,539
Income taxes payable 1,283,159
Current maturities of notes payable and long-term debt (Note 5) 1,740,097
----------
Total current liabilities 6,712,983
==========
NONCURRENT LIABILITIES:
Long-term portion of notes payable and long-term debt (Note 5) 2,887,451
Long-term portion of deferred income taxes (Note 2) 396,713
----------
Total noncurrent liabilities 3,284,164
----------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SHAREHOLDERS' EQUITY:
Common stock, $1 par value; 1,000 shares authorized and 56.666 shares
issued and outstanding (Note 5) 10,000
Additional paid-in capital 3,809,665
Treasury stock, 50 shares, at cost (2,695,778)
Retained deficit, since April 1, 1994 (Note 1) (2,023,084)
----------
Total shareholders' equity (899,197)
----------
Total liabilities and shareholders' equity $9,097,950
==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PATTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
OPERATING REVENUES (NOTE 1) $27,981,312
OPERATING EXPENSES 24,746,278
DEPRECIATION EXPENSE 1,293,098
-----------
GROSS PROFIT FROM OPERATIONS 1,941,936
GENERAL AND ADMINISTRATIVE EXPENSES 2,143,718
RELATED-PARTY COMPENSATION EXPENSE (NOTE 4) 233,072
-----------
LOSS FROM OPERATIONS (434,854)
INTEREST EXPENSE (NOTES 2 AND 5) 1,036,956
OTHER INCOME, NET (307,364)
-----------
LOSS BEFORE BENEFIT FOR INCOME TAXES (1,164,446)
BENEFIT FOR INCOME TAXES (97,596)
-----------
NET LOSS $(1,066,850)
===========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PATTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED MARCH 31, 1998
ADDITIONAL UNREALIZED
COMMON PAID-IN TREASURY HOLDING RETAINED
STOCK CAPITAL STOCK (LOSS) GAIN DEFICIT TOTAL
------ ---------- -------- ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 29, 1997 $10,000 $3,809,665 $(2,695,778) $(12,518) $ (956,234) $ 155,135
Net loss 0 0 0 0 (1,066,850) (1,066,850)
Unrealized holding gain, net 0 0 0 12,518 0 12,518
------- ---------- ----------- -------- ----------- ---------
BALANCE, MARCH 31, 1998 $10,000 $3,809,665 $(2,695,778) $ 0 $(2,023,084) $(899,197)
======= ========== =========== ======== =========== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PATTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net loss $(1,066,850)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 1,293,098
Amortization 229,426
Deferred income taxes (148,439)
Minority interest in subsidiaries' earnings (4,524)
Loss on sale of interest in Comquest 26,703
Gain on sale of assets (354,403)
Loss on sale of marketable securities 13,753
Changes in assets and liabilities:
Accounts receivable (150,660)
Costs and profits in excess of billings 257,155
Accounts payable 328,512
Accrued liabilities 225,724
Notes receivable (136,111)
Other current assets 153,577
Other, net 22,883
------------
Net cash provided by operating activities 689,844
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (200,886)
Proceeds from sale of assets 541,102
Sale of marketable securities, net 87,266
Payments received on note from sale of interest in subsidiary 19,864
------------
Net cash provided by investing activities 447,346
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes payable and long-term debt 46,000
Principal payments on notes payable and long-term debt (1,533,467)
------------
Net cash used in financing activities (1,487,467)
------------
NET DECREASE IN CASH (350,277)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 354,980
------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,703
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 653,970
============
Cash paid during the year for income taxes $ 79,992
============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchase of equipment under long-term financing agreements $ 202,142
============
Note receivable for sale of interest in Comquest $ 225,000
============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
PATTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Patton Management Corporation ("PMC" or the "Company") is a holding company
formed in September 1993 which owns subsidiaries that primarily engage in
underground utility construction. Construction is performed under multi-year
service contracts containing unit price and unit price modified for incentive
and penalty provision contracts.
PMC manages the activities of its wholly owned subsidiaries, Wright & Lopez,
Inc. ("Wright & Lopez") and Black Industries, Inc. ("Black"). Wright & Lopez was
acquired by PMC on October 8, 1993 and has three wholly owned subsidiaries:
Wright & Lopez of Alabama, Inc. ("Alabama"), Power Utilities Contractors, Inc.
(inactive), and Wright & Lopez of Florida, Inc. (inactive). The Company also
purchased all of the outstanding stock of Black and an inactive subsidiary,
Inland Air Lines, Inc., on May 31, 1995. In addition, PMC owns 100% of Pressure
Concrete Construction Company ("Pressure Concrete"), which ceased operations in
1993.
Comquest, LLC ("Comquest"), a majority-owned subsidiary, was formed in March
1995. The Company owned 90% of Comquest until April 1, 1997 when that ownership
was reduced to 51%. On August 31, 1997, the 51% interest was sold to the
minority shareholders for a $225,000 promissory note (Note 4). As a result, the
consolidated statement of operations for the year ended March 31, 1998 includes
the operations of Comquest for the period from March 30, 1997 through August 31,
1997.
The Company also owned 100% of an inactive subsidiary, Tower Erection and
Maintenance Company, Inc. which was merged into the Company on December 31,
1997. There was no activity in this company for the current fiscal year.
Management believes that its ongoing operations will continue to generate
operating profit for the Company.
FISCAL YEAR
In 1998, the Company changed its fiscal year-end to a calendar month ending
March 31, 1998. Previously, the Company's fiscal year-end was a 52-/53-week year
ending on the Saturday closest to March 31 of each year.
<PAGE>
QUASI REORGANIZATION
In 1994, the Company underwent a quasi-reorganization as a result of the Company
completing significant changes to its operations. To effect this transaction,
the Company wrote off the remaining amount of negative goodwill relating to the
acquisition of Wright & Lopez and Pressure Concrete and eliminated the retained
deficit.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries. All significant intercompany transactions and accounts
have been eliminated in consolidation.
PRESENTATION
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents and investments with an original maturity of 90 days
or less are stated at cost, which approximates fair value.
PROPERTY, PLANT AND EQUIPMENT
Expenditures for repairs and maintenance are expensed as incurred. Improvements
that extend the useful lives of the assets are capitalized in accordance with
Company policy. Depreciation is provided over the estimated useful lives of the
related assets using the straight-line method of depreciation. The estimated
useful lives of the depreciable assets are as follows:
Buildings and improvements 15 years
Machinery and equipment 5 to 8 years
Furniture and fixtures 5 to 10 years
Automobiles and trucks 3 to 8 years
INSURANCE RESERVES AND ACCRUALS
Under the Company's insurance programs, coverage is obtained for significant
liability limits as well as those risks required to be insured by law or
contract. Included in the Company's insurance programs is a workers'
compensation insurance policy under which premiums are based on a guaranteed
cost.
The Company is self-funded for employee health insurance up to $33,000 per
individual claim with an aggregate stop-loss amount based on the number of plan
participants.
<PAGE>
Claims in excess of this stop-loss amount will be paid by a reinsurer. The
Company funds its health insurance as needed. For the year ended March 31, 1998,
the Company paid claims totaling approximately $142,000.
REVENUE RECOGNITION
Revenues and expenses from unit price contracts are recognized as the work is
performed.
The Company's revenues are derived from multiple contracts with various
customers. For the year ended March 31, 1998, the percentage of revenues from
the Company's major customers in comparison to consolidated revenues are as
follows:
BellSouth Telecommunications, Inc. 43%
ALLTEL Georgia, Inc. 23
Sprint Midatlantic Telecom 17
2. INCOME TAXES
The Company accounts for income taxes under Statements of Financial Accounting
Standards No. 109 ("SFAS No. 109"), "ACCOUNTING FOR INCOME TAXES." SFAS No. 109
requires that deferred tax assets and liabilities be recognized for the expected
tax consequences of temporary differences between the tax basis of assets and
liabilities and their financial reporting amounts.
Components of the net deferred tax liability included in the consolidated
balance sheet as of March 31, 1998 are as follows:
Current deferred tax assets (liabilities):
Accrued liabilities not currently deductible $ 27,740
Accounts receivable 9,500
Other 5,928
Net operating loss 194,937
Valuation allowance (121,980)
116,125
Noncurrent deferred tax assets (liabilities):
Accrued liabilities not currently deductible 10,435
Property basis differences (407,148)
Net deferred tax liability $ (280,588)
The Company has net operating loss carryforwards in the current year of
approximately $513,000 which may be carried back or utilized against future
taxable income until 2013. In the event of a change in control of the Company,
limitations to the availability of the net operating loss carryforwards at March
31, 1998 may apply.
<PAGE>
The income tax benefit at March 31, 1998 consists of the following:
Current provision $ 50,842
Deferred (benefit) (307,191)
Change in valuation allowances 121,980
Other 36,773
$ (97,596)
The Company underwent an Internal Revenue Service ("IRS") examination which was
settled during the year ended March 31, 1998. This resulted in an amount payable
to the IRS and various state tax authorities of approximately $1,300,000, of
which approximately $260,000 is reflected in the consolidated statement of
operations as interest charges during the current year. The payable is the
result of certain adjustments related to both the former and current majority
shareholders' payables to the Company and is included in current liabilities in
the consolidated balance sheet as of March 31, 1998. Subsequent to year-end, the
amount payable to the IRS was paid.
3. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at March 31, 1998 are as
follows:
Land and improvements $ 502,947
Buildings and improvements 383,258
Machinery and equipment 5,312,210
Automobiles and trucks 2,936,849
Furniture and fixtures 178,645
Construction in progress 36,720
9,350,629
Less accumulated depreciation (5,814,825)
$ 3,535,804
4. RELATED-PARTY TRANSACTIONS
At March 31, 1998, the Company has an interest-bearing note receivable from the
majority owner of the Company in the amount of $1,726,732, which is classified
as a current asset on the consolidated balance sheet. This amount was repaid
subsequent to year-end in connection with the purchase of the Company by Able
Telcom Holding Corporation, as described in Note 8.
On September 1, 1997, in connection with the sale of the Company's interest in
Comquest, the purchasers issued a $225,000 three-year promissory note to be paid
quarterly based on 10% of Comquest's revenues, with any remaining amounts
outstanding due at maturity. This note is also guaranteed by the new owners of
Comquest. The promissory note has an interest rate of prime less 2%, adjusted on
the anniversary date of the promissory note. As of March 31, 1998, approximately
$20,000 of this promissory note has been paid.
<PAGE>
The consolidated statement of operations include $233,072 of related-party
compensation expense for the year ended March 31, 1998.
In addition, a manager at Alabama owns a business which performs subcontracting
services for the Company. For the year ended March 31, 1998, the Company paid
this subcontractor approximately $451,000 for services performed.
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consisted of the following at March 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Black promissory term note payable to Congress Financial Corporation
("Congress") at prime plus 2 1/4%, due in monthly installments of $32,500 plus
interest, through June 1999 (10.75% at March 31, 1998) $ 360,500
Wright & Lopez term promissory note payable to Congress at prime plus 2 1/4%,
due in monthly installments of $30,741, plus interest, through June 2000 (10.75%
at March 31, 1998)
830,000
Wright & Lopez mortgage term promissory note payable to Congress at prime plus 2
1/4%, due in monthly installments of $7,609, plus interest, through June 2000
(10.75% at March 31, 1998)
205,435
Subordinated 13.5% note payable to Sirrom Capital Corporation ("Sirrom"), issued
with a detachable stock warrant to purchase 12% of outstanding capital stock of
the Company, due May 26, 2000, net of unamortized discount of $319,634 in 1998
1,580,366
Equipment debt under various capital leases, ranging from three to five years,
interest ranging from 7% to 13% 1,305,247
Black borrowings under Congress revolving credit facility at prime plus 2 1/4%,
interest payable monthly (10.75% at March 31, 1998) 346,000
----------
4,627,548
Less current maturities (1,740,097)
----------
$2,887,451
==========
On May 26, 1995, the Company entered into a five-year loan agreement with Sirrom
in the amount of $2,900,000, due May 26, 2000. Interest is due and payable
monthly with the full principal balance payable at maturity. The Sirrom loan is
principally secured by a pledge of the Company's stock, the Company's stock in
certain of its subsidiaries, and other collateral. In addition, the Company
entered into a stock purchase agreement with Sirrom which granted the holder of
the detachable warrant a right to purchase 18% of the shares of the Company's
capital stock at the date of exercise of the warrant. The agreement also
provides that the percentage of shares eligible for purchase increases by 2% per
year on the anniversary date of the loan agreement beginning May 26, 1997. The
warrant price is $.01
</TABLE>
<PAGE>
per share, and the warrant is exercisable until the maturity of the loan
agreement. The original value attributed to this warrant was $675,000, and was
reflected as debt discount. The debt discount is being amortized into income
over the life of the note payable utilizing the effective interest method. At
March 31, 1998, debt discount related to the Sirrom loan agreement was $319,634.
Amortization of debt discount, included in the consolidated statement of
operations as a component of interest expense, amounted to $133,729 for the year
ended March 31, 1998.
In December 1995, in connection with the issuance of the Congress debt,
$1,000,000 in principal was repaid to Sirrom. Associated with this repayment,
the warrant agreement was amended whereby the right to purchase 18% of the
Company's stock was reduced from 18% to 10% in exchange for a payment in the
amount of $300,000. At March 31, 1998, 12% of the Company's shares may be
purchased with the detachable warrant.
The Sirrom loan agreement contains certain covenants related to the Company's
operations, which include, but are not limited to, restrictions on new
indebtedness, a restriction on compensation payable to the majority owner of the
Company, the restriction on the declaration or payment of dividends, as well as
any return of capital.
On December 13, 1995, Wright & Lopez and Black entered into loan and security
agreements with Congress as well as term promissory notes in the amounts of
$1,660,000 and $1,365,000, respectively, which are principally secured by
certain assets of each of the companies. The loan and security agreements mature
on December 13, 1998, with provisions for renewal periods of one year each at
the option of the lender. Each term promissory note provides for equal monthly
principal and interest payments over the term of the promissory note.
In addition to the term promissory notes, Wright & Lopez and Black also have a
combined $4,000,000 revolving credit facility with Congress which provides for
maximum borrowings under the agreement equal to the lesser of 80% of trade
receivable balances outstanding or $4,000,000. The interest rate on the
revolving credit facility is the prime rate plus 2 1/4%. At March 31, 1998,
$346,000 was outstanding under this facility and was classified on the
consolidated balance sheet as a current liability. The Wright & Lopez agreement
also provides for a letter-of-credit facility in the amount of up to $400,000,
which is included in the total amount available under the revolving credit
facility of $4,000,000. The letter of credit fee is 3% of the daily outstanding
balance of any letter-of-credit accommodations for the previous month. No
amounts were outstanding under the letter-of-credit facility as of March 31,
1998.
The Congress loan and security agreements also provide for various covenants
relating to the Company's operations, which include, but are not limited to, the
maintenance of consolidated working capital, the maintenance of adjusted net
worth, a limitation on any new indebtedness, and a restriction on the
declaration and payment of dividends, as defined by the agreements.
On August 29, 1996, the loan and security agreements were amended and Alabama
entered into a mortgage term promissory note with Congress in the amount of
$350,000, which is secured by land.
<PAGE>
Certain noncancelable equipment leases are classified as capital leases for
financial reporting purposes. The leased assets are included in property, plant
and equipment. Depreciation expense includes the related amortization of the
leased assets.
Future maturities, by fiscal year and in the aggregate, for notes payable,
capital leases and long-term debt are as follows:
Year ending March 31:
1999 $1,740,097
2000 868,996
2001 2,266,103
2002 71,986
----------
4,947,182
Less debt discount (319,634)
----------
$4,627,548
==========
At March 31, 1998, the estimated fair value of consolidated long-term debt
described above approximated the carrying amount of such debt on the balance
sheet. The fair value was estimated in accordance with the requirements of
Statements of Financial Accounting Standards No. 107, "DISCLOSURE ABOUT THE FAIR
VALUE OF FINANCIAL INSTRUMENTS," by comparing the rates of the debt outstanding
at March 31, 1998 to those rates currently required for the Congress debt and
amounts owed under the revolving credit facility and subordinated debt payable
to Sirrom and outstanding capital leases.
Subsequent to year-end, Sirrom transferred its warrant to Able Telecom Holding
Corporation ("Able") and the amounts payable to Congress and Sirrom were repaid
as described in Note 8.
6. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Rent expense was approximately $1,756,000 for the year ended March 31, 1998 and
is included in operating expenses in the consolidated statement of operations.
Future minimum lease payments required under operating leases that have initial
or remaining lease terms of one year or more at March 31, 1998 are as follows:
Fiscal year ending:
1999 $ 636,251
2000 390,108
2001 115,666
2002 3,328
----------
Total $1,145,353
==========
<PAGE>
LITIGATION
The Company is subject to certain legal proceedings and claims which have arisen
in the ordinary course of business. In the opinion of management, the amount of
potential liability with respect to these actions will not materially affect the
consolidated financial position or consolidated results of operations of the
Company.
7. 401(K) PLAN
The Company has a 401(k) plan whereby substantially all employees are eligible
to participate in the plan and may contribute up to 15% of their compensation.
The plan provides for employer matching of up to a maximum of one-half of the
first 4% of the employee's salary deferral, which vests ratably over three years
of service. The Company's contributions to the 401(k) plan totaled approximately
$70,000 for the year ended March 31, 1998.
8. SUBSEQUENT EVENT
Subsequent to year-end, shares of the Company's stock were purchased by Able. In
connection with this sale of the Company's stock, the note receivable from the
majority owner of the Company was repaid. In addition, Sirrom transferred its
warrant for 12% of the Company to Able, and all amounts owed to Congress and
Sirrom included in long-term debt discussed in Note 5 were repaid.
<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/ JESUS G. DOMINGUEZ
---------------------------
Jesus G. Dominguez
Chief Accounting Officer
Dated: July 24, 1998
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATION (UNAUDITED)
FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
PATTON
ABLE TELCOM MANAGEMENT
HOLDING CORP. CORPORATION
AND AND PRO FORMA
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS COMBINED
------------ ------------ ----------- --------
<S> <C> <C> <C> <C>
REVENUES $86,334,449 $30,455,991 $ $116,790,440
COST OF REVENUES 68,181,391 26,375,493 94,556,884
---------------------------------------------------- ----------------
GROSS PROFIT 18,153,058 4,080,498 22,233,556
DEPRECIATION AND AMORTIZATION 4,532,248 1,245,531 63,418 (1) 5,841,197
GENERAL AND ADMINISTRATIVE EXPENSES 8,780,430 2,415,133 11,195,563
---------------------------------------------------- ----------------
OPERATING PROFIT (LOSS) 4,840,380 419,834 (63,418) 5,196,796
INTEREST EXPENSE 1,565,265 775,106 (128,816)(2) 2,211,555
OTHER (INCOME) EXPENSE, NET (602,173) (172,573) 187,251 (3) (587,495)
---------------------------------------------------- ----------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES AND MINORITY INTEREST 3,877,288 (182,699) (121,853) 3,572,736
PROVISION (BENEFIT) FOR INCOME TAXES 727,223 134,988 (46,304)(4) 815,907
---------------------------------------------------- ----------------
INCOME (LOSS) BEFORE MINORITY INTEREST 3,150,065 (317,687) (75,549) 2,756,829
MINORITY INTEREST 292,532 5,962 298,494
---------------------------------------------------- ----------------
NET INCOME (LOSS) 2,857,533 (323,649) (75,549) 2,458,335
PREFERRED STOCK DIVIDEND 260,000 260,000
DISCOUNT ATTRIBUTABLE TO BENEFICAL
CONVERSION OF PREFERRED STOCK 1,266,364 1,266,364
---------------------------------------------------- ----------------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK $1,331,169 $(323,649) $(75,549) $931,971
==================================================== ================
INCOME (LOSS) PER COMMON SHARE:
BASIC $0.16 $0.11
================= ================
DILUTED $0.16 $0.11
================= ================
WEIGHTED AVERAGE COMMON SHARES AND
COMMON STOCK EQUIVALENTS
OUTSTANDING:
BASIC 8,429,733 8,429,733
================= ================
DILUTED 8,504,972 8,504,972
================= ================
</TABLE>
NOTES:
(1) Incremental depreciation related to recording property, plant and
equipment acquired by the Registrant at fair market value.
(2) Elimination of the amortization of debt discount related to debt
repaid by the Registrant.
(3) Elimination of the amortization of deferred financing costs related to
debt repaid by the Registrant offset by the amortization of goodwill
which relates to the goodwill recorded as part of the acquisition of
the stock in Patton Management Corporation.
(4) Adjustment to reflect appropriate effective tax rate.
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
PATTON
ABLE TELCOM MANAGEMENT
HOLDING CORP. CORPORATION
AND AND PRO FORMA
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS COMBINED
------------ ------------ ----------- --------
<S> <C> <C> <C> <C>
REVENUES $56,819,639 $ 9,339,344 $ -- $66,158,983
COST OF REVENUES 43,219,293 8,824,877 -- 52,044,170
--------------------------------------------------- ----------------
GROSS PROFIT 13,600,346 514,467 -- 14,114,813
DEPRECIATION AND AMORTIZATION 2,584,937 500,813 11,709 (1) 3,097,459
GENERAL AND ADMINISTRATIVE EXPENSES 8,065,881 889,805 -- 8,955,686
--------------------------------------------------- ----------------
OPERATING PROFIT (LOSS) 2,949,528 (876,151) (11,709) 2,061,668
INTEREST EXPENSE 786,588 573,670 (57,161)(2) 1,303,097
OTHER (INCOME) EXPENSE, NET (352,123) (365,945) 78,022 (3) (640,046)
--------------------------------------------------- ----------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES AND MINORITY INTEREST 2,515,063 (1,083,876) (32,570) 1,398,617
PROVISION (BENEFIT) FOR INCOME TAXES 956,758 (141,391) (12,377)(4) 802,990
--------------------------------------------------- ----------------
INCOME (LOSS) BEFORE MINORITY INTEREST 1,558,305 (942,485) (20,193) 595,627
MINORITY INTEREST 393,281 -- -- 393,281
--------------------------------------------------- ----------------
NET INCOME (LOSS) 1,165,024 (942,485) (20,193) 202,346
PREFERRED STOCK DIVIDEND 182,579 -- -- 182,579
DISCOUNT ATTRIBUTABLE TO BENEFICAL
CONVERSION OF PREFERRED STOCK 104,773 -- -- 104,773
--------------------------------------------------- ----------------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK $877,672 $(942,485) $(20,193) $(85,006)
=================================================== ================
INCOME (LOSS) PER COMMON SHARE:
BASIC $0.10 ($0.01)
================= ================
DILUTED $0.09 ($0.01)
================= ================
WEIGHTED AVERAGE COMMON SHARES AND
COMMON STOCK EQUIVALENTS
OUTSTANDING:
BASIC 9,192,508 9,192,508
================= ================
DILUTED 9,271,665 9,271,665
================= ================
</TABLE>
NOTES:
(1) Incremental depreciation related to recording property, plant and
equipment acquired by the Registrant at fair market value.
(2) Elimination of the amortization of debt discount related to debt
repaid by the Registrant.
(3) Elimination of the amortization of deferred financing costs related to
debt repaid by the Registrant offset by the amortization of goodwill
which relates to the goodwill recorded as part of the acquisition of
the stock in Patton Management Corporation.
(4) Adjustment to reflect appropriate effective tax rate.
<PAGE>
ABLE TELCOM HOLDING CORP.
AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
On April 1, 1998, Able Telcom Holding Corp. ("Able" or the "Registrant"),
acquired all of the common stock, of Patton Management Corporation
("Patton") for a total purchase price of approximately $4.0 million, of
which approximately $1.7 million was funded by the Company's revolving
credit facility. The acquisition was accounted for using the purchase
method of accounting in accordance with Accounting Principles Board Opinion
No. 16, Business Combinations. Approximately $2.8 million in goodwill was
recorded which is being amortized on a straight line basis over 20 years.
In connection with the acquisition, approximately $3.6 million in long-term
debt outstanding at Patton, excluding that related to capital lease
obligations, was repaid in April 1998 from the Company's revolving credit
facility. In connection with the acquisition, Able expects to reduce its
general and administrative expenses by an estimated $1.0 million as a
result of consolidating division headquarters in its telecommunications
services group.
Had the effect of this adjustment, net of taxes, been reflected in the pro
forma financial information, it would have resulted in increases in the
combined net income of approximately $0.6 million and $0.3 million for the
year ended October 31, 1997 and the six month period ended April 30, 1998,
respectively, or an increase in earnings per share of $0.07 and $0.03,
respectively.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the unaudited pro forma financial statements.
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
23.1 Consent of Independent Public Accountants
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated May 1, 1998 on the consolidated financial statements of Patton
Management Corporation included in this current report on Form 8-K, Amendment
No. 2, into Able Telcom Holding Corp.'s previously filed Registration Statements
Nos. 333-04377 and 333-22105.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 24, 1998
