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, 1999
OR
[ ] 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 OF OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1000 HOLCOMB WOODS PARKWAY
SUITE 440
ROSWELL, GEORGIA 30076
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(770) 993-1570
----------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
----------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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 July 31, 1999, there were 12,070,795 shares, par value $.001 per share, of
the Registrant's Common Stock outstanding.
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ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of July 31, 1999
(Unaudited) and October 31, 1998. ..................................... 3
Condensed Consolidated Statements of Operations (Unaudited)
for the three months and nine months ended July 31, 1999 and 1998 ..... 4
Condensed Consolidated Statements of Comprehensive Income
(Unaudited) for the three months and nine months
ended July 31, 1999.................................................... 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the nine months ended July 31, 1999 and 1998....................... 6
Notes to Condensed Consolidated Financial Statements (Unaudited) ......... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk ................... 21
PART II. OTHER INFORMATION
Items 1, 4 and 5 - Not Applicable
Item 2. Changes in Securities and Use of Proceeds .................................... 21
Item 3. Defaults Upon Senior Securities .............................................. 23
Item 6. Exhibits and Reports on Form 8-K ............................................. 24
SIGNATURES ................................................................................... 31
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
JULY 31, OCTOBER 31,
1999 1998(1)
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Currents Assets:
Cash and cash equivalents .................................................. $ 16,603 $ 13,544
Accounts receivable, net ................................................... 80,540 64,159
Costs and profits in excess of billings on uncompleted contracts ........... 85,073 105,478
Prepaid expenses and other current assets .................................. 11,302 2,641
--------- ---------
Total current assets .............................................. 193,518 185,822
--------- ---------
Property and equipment, net ........................................................... 29,174 32,074
--------- ---------
Other assets:
Goodwill, net .............................................................. 43,873 31,374
Assets held for sale ....................................................... 12,750 38,750
Other non-current assets ................................................... 3,603 2,740
--------- ---------
Total other assets ................................................ 60,226 72,864
--------- ---------
Total assets ...................................................... $ 282,918 $ 290,760
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term-debt .......................................... 3,126 $ 15,047
Accounts payable and accrued liabilities ................................... 38,813 62,558
Billings in excess of costs and profits on uncompleted contracts ........... 70,330 57,439
Reserves for losses on uncompleted contracts ............................... 16,503 25,390
Stock appreciation rights payable .......................................... 6,036 --
--------- ---------
Total current liabilities ......................................... 134,808 160,434
Long-term debt, non-current portion ........................................ 79,605 76,047
Advances from WorldCom ..................................................... 32,000 --
Other non-current liabilities .............................................. 5,216 2,737
--------- ---------
Total liabilities .......................................................... 251,629 239,218
Contingencies
Series B Preferred Stock, $.10 par value; aggregate liquidation value of
$3,895,000 and $17,820,000; 4,000 shares authorized;
779 and 3,564 shares issued and outstanding ................................ 2,455 11,325
Shareholders' Equity:
Common stock, $.001 par value, authorized 25,000,000 shares; 12,070,795 and
11,065,670 shares issued and outstanding, respectively ..................... 12 11
Additional paid-in capital ................................................. 43,076 35,164
Senior Note Warrants ....................................................... 1,244 1,244
Series B Preferred Stock Warrants .......................................... 5,404 5,400
WorldCom Stock Options ..................................................... -- 3,490
WorldCom Phantom Stock ..................................................... 606 606
Retained earnings (deficit) ................................................ (21,485) (5,698)
Accumulated other comprehensive income ..................................... (23) --
--------- ---------
Total shareholders' equity ................................................. 28,834 40,217
--------- ---------
Total liabilities and shareholders' equity ................................. $ 282,918 $ 290,760
========= =========
</TABLE>
(1) The balance sheet at October 31, 1998 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
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ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenue:
Construction and maintenance $ 102,562 $ 58,305 $ 283,099 $ 115,125
Conduit -- -- 35,721 --
----------- ----------- ----------- -----------
Total revenue 102,562 58,305 318,820 115,125
Costs and expenses:
Construction and maintenance 83,112 46,615 236,942 90,222
Costs of conduit -- -- 34,673 --
General and administrative expense 10,413 5,337 25,088 14,703
Impairment of intangible assets -- 1,319 --
Depreciation and amortization expense 2,491 2,034 8,352 4,865
----------- ----------- ----------- -----------
Total costs and expenses 96,016 53,986 306,374 109,790
----------- ----------- ----------- -----------
Income from operations 6,546 4,319 12,446 5,335
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (2,059) (1,304) (6,747) (2,092)
Change in value of stock appreciation rights (3,105) -- (124) --
Other (871) (1,205) (1,681) (1,046)
----------- ----------- ----------- -----------
Total other income (expense) (6,035) (2,509) (8,552) (3,138)
Income before income taxes, minority interest
and extraordinary item 511 1,810 3,894 2,197
Provision for income taxes 257 706 2,137 857
----------- ----------- ----------- -----------
Income before minority interest and extraordinary item 254 1,104 1,757 1,340
Minority interest 93 314 292 610
----------- ----------- ----------- -----------
Income (loss) before extraordinary item 161 790 1,465 730
Extraordinary loss on the early extinguishment
of debt, net of tax of $1,226 -- -- 1,841 --
----------- ----------- ----------- -----------
Net income (loss) 161 790 (376) 730
Preferred stock dividends (39) (67) (283) (145)
Redemption of 2,785 shares of Series B Preferred Stock -- -- (9,899) --
Value assigned to Series B Preferred
Stock Warrant modifications -- -- (1,894) --
Discount attributable to beneficial conversion
privilege of preferred stock -- (7,909) (3,336) (8,013)
----------- ----------- ----------- -----------
Income (loss) applicable to common stock $ 122 ($ 7,186) ($ 15,788) ($ 7,428)
=========== =========== =========== ===========
Weighted average shares outstanding:
Basic 11,794,718 9,918,292 11,939,517 9,660,921
Diluted 13,933,544 9,916,404 13,188,164 9,642,253
Income (loss) per share (see Note 6):
Basic:
Income (loss) before extraordinary item $ 0.01 ($ 0.72) $ 0.12 ($ 0.77)
Extraordinary loss on the early extinguishment
of debt, net of tax of $1,226 -- -- 0.15 --
Net income (loss) 0.01 (0.72) (0.04) (0.77)
Income (loss) applicable to common stock 0.01 (0.72) (1.32) (0.77)
Diluted:
Income (loss) before extraordinary item $ 0.01 ($ 0.72) $ 0.11 ($ 0.77)
Extraordinary loss on the early extinguishment
of debt, net of tax of $1,226 -- -- (0.14) --
Net income (loss) 0.01 (0.72) (0.04) (0.77)
Income (loss) applicable to common stock 0.01 (0.72) (1,32) (0.77)
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ 161 $ 790 ($376) $730
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (98) (10) (23) 75
Total other comprehensive income (loss) (98) (10) (23) 75
----- ----- ----- ----
Comprehensive income (loss) $ 63 $ 780 ($399) $805
===== ===== ===== ====
</TABLE>
See notes to condensed consolidated financial statements
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<CAPTION>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
FOR THE NINE MONTHS
ENDED JULY 31,
1999 1998
<S> <C> <C>
Cash provided by operating activities $ 8,064 $ 3,993
------- --------
Cash flows from Investing Activities:
Capital expenditures, net (4,252) (8,744)
Acquisition of businesses (net of cash acquired of $4,705 in 1998) -- (1,209)
Repurchase of Series B Preferred Stock Warrants (1,890) --
------- --------
Net cash used in investing activities (6,142) (9,953)
------- --------
Cash flows from Financing Activities:
Repayments of long-term debt and other borrowings (12,555) (91,075)
Redemption of Series B Preferred Stock (18,677)
Proceeds from the issuance of long-term debt
and other borrowings 32,131 71,413
Proceeds from the issuance of preferred stock, net (92) 18,110
Proceeds from the exercise of stock options 497 2,784
Dividends paid on preferred stock (167) (204)
Other -- 1
-------- --------
Net cash provided by financing activities 1,137 1,029
-------- --------
(Decrease) Increase in cash and cash equivalents 3,059 (1,151)
Cash and cash equivalents, beginning of period 13,544 6,230
-------- --------
Cash and cash equivalents, end of period $ 16,603 $ 5,079
======== ========
Supplemental Disclosure:
Increases in goodwill resulting from final
purchase price allocations 15,207 --
Valuation of detachable warrants $ -- 6,644
Common stock issued in accordance with GEC earnout provisions 4,595 1,278
Common stock issued in exchange for note payable to director 828 --
Discount attributable to beneficial conversion privilege of preferred stock 3,335 7,909
Value assigned to the February 1999 Series B Preferred
Stock Warrant modification 1,894 --
Compensation recognized on common stock awarded to employees 350 --
Compensation recognized on common stock options awarded to non-employees 131 --
Compensation recognized on below market options -- 93
Conversion of Series A Preferred Stock -- 6,818
Valuation of options and equity awards issued in acquisition -- 4,096
Cash paid for:
Interest 1,993 2,092
Income taxes 4,364 --
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management of Able Telcom Holding Corp. ("Able Telcom" or the
"Company"), the unaudited condensed consolidated financial statements furnished
herein include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of operations for the interim
periods presented. These interim results of operations are not necessarily
indicative of results for the entire year. The condensed consolidated financial
statements contained herein should be read in conjunction with the consolidated
financial statements and related notes contained in the Company's 1998 Annual
Report on Form 10-K/A ("Form 10-K/A").
The accompanying unaudited condensed consolidated financial statements are
prepared on an accrual basis and include the accounts of the Company and all its
subsidiaries. A substantial portion of consolidated total assets, liabilities
and revenues are generated by one subsidiary of the Company, MFS Network
Technologies, Inc. ("MFSNT"), which was acquired during the fiscal year ended
October 31, 1998.
The value assigned to the Company's interest in Kanas Telcom, Inc. ("Kanas") in
conjunction with the acquisition of MFNST (as described below) represented
Company management's best estimate of the net proceeds expected to be received
from the sale of the Company's interest in Kanas. That estimate was based, in
part, on active negotiations with potential buyers and included the expected
earnings or losses from the operations of Kanas during the holding period (from
July 2, 1998, through the ultimate sale of the asset or approximately July 2,
1999. Company management continues to evaluate opportunities to sell the
Company's interest in Kanas. However, Company management no longer contemplates
that such transaction will occur before fiscal year 2000. Therefore, beginning
July 2, 1999, the Company began to account for its interest in Kanas, which it
intends to continue to classify as "assets available for sale," under the equity
method of accounting. The Company intends to reevaluate the net realizable value
of its interest in Kanas on an ongoing basis.
All material intercompany accounts and transactions have been eliminated.
Certain items in the condensed consolidated financial statements as of October
31, 1998 have been reclassified to conform with the current presentation.
2. ACQUISITION
On July 2, 1998, the Company acquired the network construction and
transportation systems business of MFSNT from WorldCom, Inc. ("WorldCom")
pursuant to a merger agreement dated April 26, 1998 ("Plan of Merger"). On
September 9, 1998, the Company and WorldCom finalized the terms of the Plan of
Merger through the execution of an amended agreement. The acquisition of MFSNT
was accounted for using the purchase method of accounting at a total price of
approximately $67.5 million. In addition, the MFSNT acquisition agreements, as
amended, provide that on November 30, 2000, the Company shall pay to WorldCom
certain amounts, if positive: (i) the difference between $9.0 million related to
losses on MFSNT projects in existence on March 31, 1998 and recorded by MFSNT as
of June 30, 1998, and the amount actually lost on such contracts through
November 30, 2000, (ii) the difference between $3.0 million related to losses on
MFSNT projects not recorded by MFSNT as of June 30, 1998 and the amount actually
lost on such contracts through November 30, 2000, and (iii) the difference
between $5.0 million and the aggregate costs of Able in defending the
litigation, and payments made in settlement or in payment of judgements with
respect to preacquisition litigation. The range of this contingent consideration
potentially payable to WorldCom is from $0 to $17.0 million. Presently, Company
management expects to pay no additional consideration to WorldCom pursuant to
the aforementioned provisions.
During the three months ended July 31, 1999, the Company completed its
allocation of the MFSNT purchase price. The purchase price allocation disclosed
in the Company's Form 10-K/A and the final purchase price allocation is as
follows (in millions):
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FINAL
FORM 10-K/A ALLOCATION
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<S> <C> <C>
Cash and accounts receivable $ 47.0 44.8
Costs and profits in excess billing on uncompleted contracts 93.7 93.7
Assets held for sale 38.8 38.8
Prepaid expenses 1.0 1.0
Property 5.7 5.7
Goodwill (1) 16.5 30.2
Accounts payable (13.7) (13.7)
Billings in excess of costs and profits on uncompleted contracts (56.6) (56.6)
Reserve for losses on uncompleted contracts (Refore to footnote 5) (40.5) (48.3)
Accrued restructuring costs (2) (2.0) (2.0)
Property taxes payable (15.0) (15.0)
Other accrued liablilites (3) (7.4) (11.1)
----- ----
Total allocated purchase price $ 67.5 67.5
===== ====
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- - ----------------
(1) Goodwill is being amortized on a straight-line basis over 20 years.
(2) Accrued restructuring costs related primarily to serverance and benefit
costs associated with the involuntary termination of employees pursuant to
an approved restructuring plan.
(3) Includes allowances for costs related to litigation and claims of $5.0
million which, according to the Plan of Merger, is payable to WorldCom in
the event specified litigation costs and claims are not paid by the
Company.
In conjunction with the acquisition of MFSNT, the Company granted an option to
WorldCom (the "WorldCom Option") to purchase up to 2,000,000 shares of the
Company's common stock, at an exercise price of $7.00 per
<PAGE>
share, but subject to a 1,817,941 share maximum limitation, and the right to
receive upon satisfaction of certain conditions phantom stock awards (the
"Phantom Stock Awards") equivalent to 600,000 shares of common stock, payable in
cash, stock, or a combination of both at the Company's option. The WorldCom
Phantom Stock Awards are exercisable only on the following three days: July 2,
1999, July 2, 2000, or July 2, 2001. WorldCom will be entitled to receive any
appreciation of the Common Stock over a base price of $5 3/32 per share, but in
no event shall the maximum payment exceed $25.00 per share. The fair values of
the WorldCom Option and Phantom Stock Awards were estimated at the date of grant
at $3.5 million and $0.6 million, respectively, and were included as a component
of the total consideration paid for the acquisition of MFSNT.
On January 8, 1999, the Company and WorldCom agreed to convert the WorldCom
Option into stock appreciation rights ("SARs") with similar terms and
provisions, except that the SARs provide for the payment of cash to WorldCom
based upon the appreciation of the Company's common stock over a base price of
$7.00 per share. The SARs may revert back to the WorldCom Option allowing for
the exercise of all 2,000,000 shares (no longer subject to the 1,817,941 share
limitation) if certain shareholder approvals are received.
In connection with the establishment of the SAR liability as of January 8, 1999,
the fair value of the SARs was estimated to be approximately $5.9 million as
compared to the previously estimated fair value of the WorldCom Option. The
difference of $2.4 million represents debt issue costs of $0.5 million and a
reduction of paid-in capital of $1.9 million. The exercise period for the SARs
granted commences on the earlier of: (i) one (1) business day after the date
upon which the potential issuance of common stock is voted on by the
shareholders of the Company, and (ii) July 1, 1999, and ending on January 2,
2002. As of July 31, 1999, the fair value of the stock appreciation rights
liability has been estimated to be $6.1 million. Changes in the valuation of the
SARs has resulted in a charge to earnings during the three and nine months ended
July 31, 1999, of $3.1 million and $0.1 million, respectively.
3. ACQUISITION OF COMSAT CONTRACTS
During the fiscal year ended October 31, 1998, the Company acquired 12 contracts
with the Texas Department of Transportation (the "COMSAT Contracts") from CRSI
Acquitision, Inc., a subsidiary of COMSAT Corporation ("COMSAT"). The COMSAT
Contracts were for the installation of intelligent traffic management systems
and design and construction of wireless communication networks. In exchange for
assuming the obligations to perform under the COMSAT Contracts, the Company
received consideration from COMSAT of approximately $15.0 million. The COMSAT
Contracts generated revenues, costs of revenues and margins as follows:
THREE MONTHS ENDED JULY 31, NINE MONTHS ENDED JULY 31,
--------------------------- --------------------------
1999 1998 1999 1998
------ ------ ------- ------
Revenues $2,516 $5,858 $10,484 $9,764
Costs of revenues 1,741 2,816 6,209 5,084
====== ====== ======= ======
Margins $ 775 $3,042 $ 4,275 $4,680
====== ====== ======= ======
These revenues, costs of revenues and margins are non-recurring and are not
generally indicative of returns the Company expects to achieve on future
contracts. As of July 31, 1999, substantially all work related to the COMSAT
Contracts had been completed.
4. ASSETS HELD FOR SALE
Assets held for sale at July 31, 1999, consist of an equity interest in Kanas
Telcom, Inc. ("Kanas"). Kanas was acquired in the MFSNT Acquisition, and has
been held for sale since that time. The carrying value of the Company's interest
in Kanas, which was assigned in purchase accounting, represents the net proceeds
expected to be received from an ultimate sale which was based, in part, on
active negotiations with potential buyers.
The Company is a 25% owner of Kanas, with the remaining 75 percent owned by
native corporations of Alaska. Kanas' primary asset is a telecommunications
network along the Alaskan Pipeline system between Prudhoe Bay, Alaska and
Valdez, Alaska (the "Alyeska Network"). MFSNT had been contracted by Kanas to
build the fiber optic network. During the construction of the Alyeska Network,
which was completed in December 1998, Kanas was a development-stage company.
Kanas owns and is responsible for maintaining the Alyeska Network. While the
Company does not participate in the day-to-day management of Kanas, Kanas has
contracted with MFSNT to operate and maintain the Aleyska Network for 15 years.
The term of the Kanas O&M agreement began in December 1998 and is not expected
to generate a net profit to the Company over the term of the agreement.
As of December 31, 1998, the unaudited financial statements of Kanas reflected
total assets, liabilities and equity of $88.9 million, $88.8 million and
$123,000, respectively. Additionally, the unaudited financial statements
reflected net income for the year ended December 31, 1998, of $1.2 million. The
Company's proportionate share of Kanas' pre-operational gains/losses from July
2, 1998, through October 31, 1998 and during the three and nine months ended
July 31, 1999, was insignificant. The Company has received no dividends from
Kanas.
WorldCom was and continues to be the guarantor of the payment obligations of
Kanas under its credit agreement. In conjunction with the acquisition of MFSNT,
the Company has agreed to indemnify WorldCom under its guarantee. The aggregate
commitment of the lenders under the Kanas credit agreement at July 31, 1999
was approximately $85.4 million.
During the three months ended April 30, 1999, the Company finalized the sale of
conduit inventory that runs from Ohio to New York, for approximately $35.7
million resulting in net cash proceeds, after revenue sharing payments, of $27.0
million. The conduit inventory, which had a carrying value of $26.0 million, was
reported as "assets held for sale" at October 31, 1998.
<PAGE>
5. IMPAIRMENT OF INTANGIBLE ASSETS
As part of the integration of MFSNT into the Company, management has undertaken
a consolidation and realignment of all subsidiaries into operational divisions,
both to achieve operational synergies and to close unprofitable operations. As a
result of significant turnover and the deterioration of underlying contracts,
the Company closed Dial Communications, Inc. ("Dial") during the three months
ended April 30, 1999. For the three and nine months ended July 31, 1999, Dial
had contract margins of $(2.7) million and $(2.9) million, respectively, and
losses before income taxes of $5.4 million and $6.4 million, respectively, which
included a $1.3 million write-off of goodwill.
The Company, at each balance sheet date, evaluates whether events or changes in
circumstances have occurred that indicate the carrying value of its long-lived
assets and identifiable intangibles may not be recoverable. If such events or
changes in circumstances are deemed to have occurred, the Company estimates the
future cash flows related to the assets and compares the sum of the expected
future cash flows (undiscounted and without interest charges) to the carrying
amount of the assets to determine if there has been an impairment. If an
impairment has occurred, the Company will write the assets down to their
estimated fair value. The estimated fair value of the assets is typically
calculated using the present value of estimated expected future cash flows using
a discount rate commensurate with the risks involved.
6. RESERVES FOR LOSSES ON UNCOMPLETED CONTRACTS
At July 2, 1998, the date the Company acquired MFSNT, MFSNT had $11.7 million of
reserves for losses on uncompleted contracts recorded on its balance sheet.
Through the Company's due diligence efforts, the Company estimated the need for
reserves for contract losses of $40.5 million, resulting in a $28.8 million
adjustment through purchase accounting. Together these reserves for contract
losses relate to specific MFSNT loss jobs, jobs where the current estimates of
remaining contract costs exceed remaining contract revenues. Revenues and costs
of revenues recognized in the Company's consolidated statement of operations on
these contracts subsequent to the acquisition have resulted in no net margin.
The following is a summary of the reserves for losses on uncompleted contracts
(amounts in thousands):
<TABLE>
<CAPTION>
NETWORK TRANSPORTATION
SERVICES SERVICES
JOBS JOBS TOTAL
-------- --------------- --------
<S> <C> <C> <C>
Previously recorded by MFSNT(1) $ 6,100 $ 5,600 $ 11,700
Purchase accounting adjustments(1) 7,454 21,346 28,800
-------- -------- --------
Adjusted balance, July 2, 1999(1) 13,554 26,946 40,500
Amount utilized (4,825) (10,285) (15,110)
-------- -------- --------
Balance, October 31, 1998 8,729 16,661 25,390
Amount utilized (1,597) (3,435) (5,031)
-------- -------- --------
Balance, January 31, 1999 7,132 13,226 20,358
Amount utilized (1,033) (1,904) (2,937)
-------- -------- --------
Balance, April 30, 1999 6,099 11,322 17,421
Amount utilized (4,660) (4,071) (8,731)
Valuation adjustments(2) 11,847 (4,034) 7,813
-------- -------- --------
Balance, July 31, 1999 $ 13,286 $ 3,217 $ 16,503
======== ======== ========
</TABLE>
(1) The difference between the $11.7 million reserves recorded on the July 2,
1998 MFSNT balance sheet and the $40.5 million of reserves for contract
losses that the Company estimated through due diligence efforts were
primarily the result of differences in the costs associated with:
(i) extending the estimated completion dates of the jobs; (ii) the software
development effort; (iii) liquidated damages; and (iv) disputed
subcontractor claims.
(2) The valuation adjustments made during the three months ended July 31, 1999,
were the result of revised fair value assessments on certain contracts.
7. BORROWINGS
WorldCom was and continues to be the guarantor of the payment obligations of
Kanas under its credit agreement. In conjunction with the acquisition of MFSNT,
the Company has agreed to indemnify WorldCom under its guarantee. The aggregate
commitment of the lenders under the Kanas credit agreement at July 31, 1999
was approximately $85.4 million.
During the three months ended April 30, 1999, the Company finalized the sale of
conduit inventory that runs from Ohio to New York, for approximately $35.7
million resulting in net cash proceeds, after revenue sharing payments, of $27.0
million. The conduit inventory, which had a carrying value of $26.0 million, was
reported as "assets held for sale" at October 31, 1998.
<PAGE>
The WorldCom Advance agreement also provided for additional advances to the
Company of up to $15.0 million against amounts otherwise payable pursuant to the
WorldCom master services agreement. ("Additional WorldCom Advance") The
Additional WorldCom Advance is non-interest bearing and would be repayable to
WorldCom on November 30, 2000. To date, the Company has not received any
additional advances against the Additional WorldCom Advance.
During the three months ended April 30, 1999, the maturity date in the Company's
Credit Facility was amended to November 1, 2000 and certain minimum ratios were
also amended. The Company is currently in compliance with the provisions of the
Credit Facility and anticipates continuing compliance therewith. If compliance
is not maintained, or if waivers of non-compliance are not received, reported
current liabilities would be increased by $35.0 million.
8. SERIES B PREFERRED STOCK
During the three months ended January 31, 1999, the Company was in technical
violation of certain provisions of its Series B Preferred Convertible Stock
("Series B Preferred Stock") issued in June 1998. Such default resulted from the
Company's failure to have a registration statement covering the resale of shares
of common stock underlying the Series B Preferred Stock and warrants associated
with the Series B Preferred Stock (the "Registration Statement") declared
effective by December 27, 1998. Such default gave the holders of the Series B
Preferred Stock the option to require the Company to redeem their securities at
premium prices. During the quarter ended January 31, 1999, the holders of the
Series B Preferred Stock notified the Company of their intent to exercise such
redemption right; however, such notice was subsequently deferred.
In February 1999, as described above, approximately 78% of the Series B
Preferred Stock was purchased from the original holders and, in connection with
such purchase, the Company was given until May 18, 1999 to effect the
Registration Statement described above. The Purchaser and the remaining holders
of the Series B Preferred Stock agreed to either waive all outstanding defaults
under such securities or refrain from exercising any remedies with respect to
any such outstanding defaults for a period of 90 days from February 17, 1999.
During such period of time, the Company had agreed to use its best efforts to
have the Registration Statement declared effective. To date, the Registration
Statement has not been declared effective. In September 1999, the holders of the
remaining 779 shares agreed to a further extensions to October 31, 1999.
In connection with the purchase of the 78% of the Series B Preferred Stock, the
Company agreed to clarify the conversion price with respect to the remaining 779
Series B Preferred Shares. The conversion price was modified from 97% of market
value, as defined in the agreements, to a fixed amount of approximately $3.50
per share which will be further reduced by 1.5% per month until the Registration
Statement is declared effective. The reduction of the conversion price resulted
in a charges to income applicable to common stock of $0.5 million and $3.5
million during the three and six months ended July 31, 1999. The conversion
price with respect to the remaining 779 Series B Preferred Shares at July 31,
1999, was $3.18.
In connection with the purchase of the 78% of the Series B Preferred Stock, the
Company agreed to certain modifications in the conversion price of the related
warrants. The conversion price of (i) warrants to purchase a total of 370,000
shares of the Company's common stock was reduced to $13.25 per share and (ii)
warrants to purchase a total of 630,000 shares of common stock was reduced to
$13.50 per share. The Company determined the value of the Series B Preferred
Stock warrants immediately preceding and after the February 17, 1999
modification. The difference in these valuations of approximately $1.9 million
was charged to retained earnings during the three months ended April 30, 1999.
On May 7, 1999, the warrants to purchase the 630,000 shares of common stock were
purchased by the Company for $3.00 per share.
9. STOCKHOLDERS EQUITY
During the nine months ended July 31, 1999, the Company: (a) issued 628,398
shares of common stock to the former owners of Georgia Electric Company ("GEC")
pursuant to the earn-out provision of the acquisition agreement whereby the
Company purchased all of the outstanding shares of GEC: (b) Issued 115,286
shares of common stock to a director of the Company in full settlement of
amounts due this director and previously
<PAGE>
reported as "Notes Payable to Directors;" (c) Granted 50,000 shares of common
stock to an employee resulting in compensation expense of $350,000; (d) Issued
140,000 options to terminating employees and non-employees resulting in
compensation expense of $0.1 million; and (e) Issued 208,461 shares of common
stock in connection with the exercise of options.
10. EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted per share (dollars, in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
JULY 31, JULY 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Basic:
Income (loss) available to common
stockholders (numerator) $ 122 $ (7,186) $ (18,843) $ (7,428)
Weighted-average number of
common shares (denominator) 11,794,718 9,918,292 11,939,517 9,660,921
Income (loss) per common share $ 0.01 $ (0.72) $ (1.58) $ (0.77)
Diluted:
Income (loss) available to common
stockholders (numerator) $ 122 $ (7,119) $ (18,843) $ (7,428)
Weighted-average number of common shares 11,794,718 9,916,404 11,939,517 9,642,253
Common stock equivalents arising
from stock options, warrants and
convertible preferred stock 2,138,826 1,683,266 1,248,647 706,234
Total shares (denominator) 13,933,544 11,601,558 13,188,164 10,367,155
Income (loss) per common share(1) $ 0.01 $ (0.72) $ (1.32) $ (0.77)
</TABLE>
(1) The effect of securities that could dilute basic earnings per share
are antidilutive for all periods presented, therefore, basic and diluted
earnings per share are equivalent. The Company has potentially dilutive
securities that could have a dilutive effect in the future. Those
securities include warrants related to the Series A Preferred Stock,
Series B Preferred Stock warrants, stock options, warrants and phantom
stock awards.
11. CONTINGENCIES
LITIGATION
On May 21, 1998, SIRIT Technologies, Inc. ("SIRIT") filed a lawsuit in the
United States District Court for the Southern District of Florida against Able
and Thomas M. Davidson, who has since become a member of Able's Board of
Directors. SIRIT asserts claims against Able for tortious interference,
fraudulent inducement, negligent misrepresentation and breach of contract in
connection with Able's acquisition of MFSNT and seeks injunctive relief and
compensatory damages in excess of $100.0 million. At present, the parties are
conducting discovery in this case.
On or about September 10, 1998, Shipping Financial Services Corp. ("SFSC") filed
a lawsuit in the United States District Court for the Southern District of
Florida against the Company, its then Chairman of the Board Gideon Taylor, then
Chief Executive Officer Frazier L. Gaines, Chief Accounting Officer Jesus
Dominguez, and then Chief Financial Officer Mark A. Shain (collectively, the
"Defendants"). All of these cases have been consolidated with the SFCS case. The
plaintiffs have not yet filed their consolidated amended complaint. The
consolidated complaint asserts claims under the federal securities laws against
Able and four of its officers and former officers allegedly that the Defendants
caused the Company to falsely represent and mislead the public with respect to
(i) two acquisitions: the MFSNT Acquisition and the acquisition of the COMSAT
Contracts, and (ii) Able's ongoing financial condition as a result of the
acquisitions and the related financing of those acquisitions. Plaintiffs have
received certification as a class action on behalf of themselves and all others
similarly situated persons and seek unspecified damages and attorneys' fees.
Able is currently assessing the allegations set forth in the lawsuits and
intends to vigorously defend this matter. An adverse outcome in this lawsuit or
in other shareholder lawsuits would likely have a material adverse effect upon
Able's consolidated financial position, results of operations and cash flow.
The Company is subject to other lawsuits and claims for various amounts which
arise out of the normal course of its business. The Company intends to
vigorously defend itself in these matters. The Company does not believe that any
of these suits will have a material adverse effect on the Company's financial
position.
13
<PAGE>
CONTRACTS
The Company has and will continue to execute various construction and other
contracts which may require the Company to, among other items, maintain specific
financial parameters, meet specific milestones and post adequate collateral
generally in the form of performance bonds. Failure by the Company to meet its
obligation under these contracts may result in the loss of the contract and
subject the Company to litigation and various claims, including liquidated
damages.
13. ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and for Hedging Activities"
was issued in June 1998. The Statement requires all derivative instruments to be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement will generally require changes in the derivative's
fair value to be recognized currently in operations. The Company expects to
adopt SFAS No. 133 during the year ended October 31, 2000. The Company is
currently evaluating the effect of the adoption and currently does not expect
the adoption of this Statement will have a significant effect on the Company's
Consolidated Financial Statements.
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 nine months ended July 31, 1999 and
1998. This information should be read in conjunction with the Company's
condensed consolidated financial statement appearing elsewhere in this document.
Except for historical information contained herein, the matters discussed below
contain forward looking statements that involve risk and uncertainties,
including but not limited to economic, governmental and technological factors
affecting the Company's operations, markets and profitability.
As a result of acquisitions during the fiscal year ended October 31, 1998,
primarily the acquisition of the network construction and transportation systems
business of MFS Network Technologies Inc. ("MFSNT"), material changes exist in
substantially all balance sheet and statements of operations categories.
Additionally, during the fiscal year ended October, 31, 1998, the Company
acquired the COMSAT Contracts which generated revenues, costs of revenues and
margins as follows:
THREE MONTHS ENDED JULY 31, NINE MONTHS ENDED JULY 31,
---------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- -----------
Revenues $ 2,516 $5,858 $10,484 $9,764
Costs of revenues 1,741 2,816 6,209 5,084
======= ====== ======= ======
Margins $ 775 $3,042 $ 4,275 $4,680
======= ====== ======= ======
These revenues, costs of revenues and margins are non-recurring and are not
generally indicative of returns the Company expects to achieve on future
contracts. As of July 31, 1999, substantially all work related to the COMSAT
Contracts had been completed.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected elements of
the Company's condensed statements of operations as a percentage of its
revenues:
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED JULY 31, ENDED JULY 31,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Construction and maintenance 100.0% 100.0% 88.8% 100.0%
Conduit sales 0.0% 0.0% 11.2% 0.0%
----- ----- ---- -----
Total revenues 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Construction and maintenance costs 81.0% 80.0% 74.3% 78.4%
Costs of conduit 0.0% 0.0% 10.9% 0.0%
General and administrative 10.2% 9.1% 7.9% 12.8%
Impairment on intangible assets 0.0% 0.0% 0.4% 0.0%
Depreciation and amortization 2.4% 3.5% 2.6% 4.2%
----- ----- ---- ----
Total costs and expenses 93.6% 92.6% 96.1% 95.4%
Income from operations 6.4% 7.4% 3.9% 4.6%
Other income (expense), including minority interest -5.8% -3.8% -2.6% 2.2%
Provision for income taxes 0.3% 1.2% 0.7% 0.7%
Extraordinary loss from the extinguishment of debt,
net of tax 0.0% 0.0% 0.6% 0.0%
Net income (loss) 0.2% 1.4% -0.1% 0.6%
Income (loss) applicable to common stock 0.1% -12.3% -5.0% -6.5%
</TABLE>
REVENUES
Construction and Maintenance - Construction and maintenance revenues were $102.6
million and $283.1 million for the three and nine months ended July 31, 1999,
respectively, compared to $58.3 million and $115.1 for the same respective
periods of fiscal 1998 increases of $44.3 million or 75.9 percent and $ 168.0
million or 145.9 percent, respectively. For the three and nine months ended July
31, 1999, MFSNT generated construction and maintenance revenues of $72.4 million
and $189.9 million, respectively.
Conduit Sales - Sales of conduit during the three months ended April 30, 1999
generated revenues of $35.7 million. The sale of the conduit inventory, which
had previously been reported as held for sale and runs from Ohio to New York,
generated net cash flow to the Company of $27.0 million.
COSTS AND EXPENSES
Construction and Maintenance - Construction and maintenance costs were $83.1
million and $236.9 million for the three and nine months ended July 31, 1999,
respectively, compared to $46.6 million and $90.2 million for the same
respective periods of fiscal 1998 increases of $36.5 million or 78.3 percent and
$146.7 million or 162.6 percent, respectively. For the three and nine months
ended July 31, 1999, MFSNT generated construction and maintenance costs of $60.1
million and $162.2 million, respectively.
The Company's construction and maintenance margins were 19.0 percent and 16.3
percent for the three and nine months ended July 31, 1999, respectively,
compared to 20.0 percent and 21.6 percent for the same respective periods of
fiscal 1998. The Company's construction and maintenance margins for the nine
months ended have been adversely effected by losses from Dial Communications,
Inc. (Dial), a wholly-owed subsidiary of the Company, that has generated
negative margins of $1.4 million for the nine months ended July 31, 1999,
respectively.
As part of the integration of MFSNT into the Company, management has undertaken
a consolidation and realignment of all subsidiaries into operational divisions,
both to achieve operational synergies and to close unprofitable operations. As a
result of significant turnover and the deterioration of underlying contracts,
the
<PAGE>
Company closed Dial during the three months ended April 30, 1999. For the nine
months ended July 31,1999 Dial had losses before income taxes of $6.1 million,
which included a $1.3 million reduction of goodwill that is reflected in the
accompanying statement of operations for the nine months ended July 31, 1999 as
"Impairment of Intangible Assets."
On July 2, 1998, the Company acquired the network construction and
transportation systems business of ("MFSNT") from WorldCom, Inc. ("WorldCom")
pursuant to a merger agreement dated April 26, 1998 ("Plan of Merger"). On
September 9, 1998, the Company and WorldCom finalized the terms of the Plan of
Merger through the execution of an amended agreement. The acquisition of MFSNT
was accounted for using the purchase method of accounting at a total price of
approximately $67.5 million. In addition, the MFST acquisition agreements, as
amended, provide that on November 30, 2000, the Company shall pay to WorldCom
certan amounts, if positive: (i) the difference between $9.0 million related to
losses on MFSNT projects in existence on March 31, 1998 and recorded by MFSNT as
of June 30, 1998, and the amount actually lost on such contracts through
November 30, 2000, (ii) the difference between $3.0 million related to losses on
MFSNT projects not recorded by MFSNT as of June 30, 1998 and the amount actually
lost onn such contracts through November 30, 2000, and (iii) the difference
between $5.0 million and the aggregate costs of Able in defending the
ligigation, and payments made in settlement or in payment of judgements with
respect to preacquisition litigation. The range of this contingent consideration
potentially payable to WorldCom is from $0 to $17.0 million. Presently, Company
management expects to pay no additional consideration to WorldCom pursuant to
the aforementioned provisions.
During the three months ended July 31, 1999, the Company completed its
allocation of the MFSNT purchase price. The purchase price allocation disclosed
in the Company's Form 10-K/A and the final purchase price allocation is as
follows (in millions):
<TABLE>
<CAPTION>
FINAL
FORM 10-K/A ALLOCATION
----------- ----------
<S> <C> <C>
Cash and accounts receivable $ 47.0 44.8
Costs and profits in excess billing on uncompleted contracts 93.7 93.7
Assets held for sale 38.8 38.8
Prepaid expenses 1.0 1.0
Property 5.7 5.7
Goodwill (1) 16.5 30.2
Accounts Payable (13.7) (13.7)
Billings in excess of costs and profits on uncompleted contracts (56.6) (56.6)
Reserve for losses on uncompleted contracts (Refer to footnote 5) (40.5) (48.3)
Accrued restructuring costs (2) (2.0) (2.0)
Property taxes payable (15.0) (15.0)
Other accrued liabilities (3) (7.4) (11.1)
------- -------
Total allocated purchase price 67.5 67.5
======= =======
</TABLE>
(1) Goodwill is being amortized on a straight-line basis over 20 years.
(2) Accrued restructuring costs related primarily to severance and benefit
costs associated with the involuntary termination of employees pursuant to
an approved restructuring plan.
(3) Includes allowances for costs related to litigation and claims of $5.0
million which, according to the Plan of Merger, is payable to WorldCom in
the event specified litigation costs and claims are not paid by the
Company.
General and Administrative - General and administrative expenses were $10.4
million and $25.1 million for the three and nine months ended July 31, 1999,
respectively, compared to $5.3 million and $14.7 million for the same respective
periods of fiscal 1998 increases of $5.1 million or 95.1 percent and $10.4
million or 70.6 percent, respectively. For the three and nine months ended July
31, 1999, general and administrative expense attributable to MFNST was $3.6
million and $6.9 million, respectively.
General and administrative expenses during the three and nine months ended July
31, 1999 were adversely effected by charges of $1.2 million related to
deferred compensation, stock compensation and severance agreements with former
and existing officers of the Company.
Depreciation and Amortization - Depreciation and amortization expense was $2.5
million and $8.4 million for the three and nine months ended July 31, 1999,
respectively, compared to $2.0 million and $4.9 million for the same respective
periods of fiscal 1998 increases of $0.5 million or 22.5 percent and $3.5
million or 71.7 percent, respectively. For the three and nine months ended July
31, 1999, depreciation and amortization expense attributable to MFSNT was $1.1
million and $3.2 million, respectively.
Depreciation and amortization expense as a percentage of revenues was 2.4
percent and 2.6 percent for the three and nine months ended July 31, 1999,
respectively, compared to 3.5 percent and 4.2 percent for the same respective
periods of fiscal 1998. These decreases as a percentage of revenue, are
attributable to the significant increase in revenues from MFSNT which, as a
construction management company, does not require the same percentage increase
in capital assets as the Company's construction companies.
OTHER INCOME (EXPENSE)
Other income (expense) was $6.1 million and $8.8 million for the three and nine
months ended July 31, 1999, respectively, compared to $(2.5) million and $(3.1)
million for the same respective period of fiscal 1998 and consist of the
following:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JULY 31,
---------------------------------------------------
CHANGE 1999 1998 $CHANGE % CHANGE
- - ------ -------- ------- -------- --------
<S> <C> <C> <C>
Change in the value of stock appreciation rights $(3,105) $ 0 $(3,105) --
Interest expense (2,059) (1,304) (755) (57.9)%
Minority interest (93) (314) 221 70.4
Other (871) (1,205) 334 27.7
$(6,128) $(2,823) $(3,305) (117.1)%
======= ======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JULY 31,
------------------------------------------------------
1999 1998 $CHANGE % CHANGE
------- -------- -------- --------
<S> <C> <C> <C>
Change in the value of stock appreciation rights $ (124) $ -- $ (124) --
Interest expense (6,747) (2,092) (4,655) (222.5)%
Minority interest (292) (610) 318 52.1%
Other (1,683) (1,046) (637) (60.9)%
$(8,846) $(3,748) $(5,098) (135.0)%
======== ======= ======= =====
</TABLE>
Stock Appreciation Rights - The change in the value of the stock appreciation
rights is a non-cash item related to the value of amounts potentially owed to
WorldCom under the existing WorldCom stock appreciation rights (WorldCom SARs).
Management expects the conversion of WorldCom SARs into options for the
Company's common stock at the Company's next shareholders' meeting and will not
result in a cash charge to the Company. The
<PAGE>
value of the WorldCom SARs will be increased or decreased based on the fair
value of the WorldCom SAR's utilizing the price of the Company's common stock at
each reporting date until the WorldCom SARs are converted to options or
exercised by WorldCom.
Interest Expense - The increase in interest expense during fiscal 1999 compared
to fiscal 1998 is primarily attributable to the acquisition of MFSNT. During the
three and nine months ended July 31,1999, the Company had $35.0 million
outstanding under its Credit Facility with an average interest rate of
approximately 7.5 percent, $30.0 million outstanding under the WorldCom Note
with an interest rate of 11.5 percent and $15.0 million outstanding under its
property taxes payable of that imputes interest at 15 percent.
The $32.0 million outstanding under the WorldCom Advance is non-interest
bearing.
PROVISION FOR INCOME TAXES
The provision for income taxes was $0.3 million and $2.1 million for the three
and nine months ended July 31, 1999, respectively, compared to $0.7 million and
$0.9 million for the same respective periods of fiscal 1998 increases
(decreases) of $(0.4) million or 57.1% percent and $1.2 million or 133.3%
percent, respectively. During the three and nine months ended July 31, 1999, the
Company has provided income taxes at a 41 percent rate that approximates the
rate used when applying federal and state statutory rates to pre-tax income,
after adjusting for the amortization of nondeductible goodwill and other
permanent items.
EXTRAORDINARY LOSS
During the nine months ended July 31, 1999, the Company purchased all of its
outstanding Senior Subordinated Notes with an outstanding principal balance of
$10.0 million resulting in an extraordinary loss from the early extinguishment
of debt or $1.8 million, net of tax of $1.2 million. The Senior Subordinated
Note were purchased with proceeds from the WorldCom Advance.
INCOME (LOSS) APPLICABLE TO COMMON STOCK
Income (loss) applicable to common stock was $0.1 million and $(15.8) million
for the three and nine months ended July 31, 1999, respectively, compared to
$(7.2) million and $(7.4) million for the same respective periods of fiscal 1998
- - - increases (decreases) of $7.3 million or 101.7 percent and $(8.4) million or
112.6 percent, respectively.
During the three months ended April 30, 1999, the Company purchased 2,785
shares, or approximately 78 percent, of the Company outstanding Series B
Preferred Stock, modified the conversion price of the remaining Series B
Preferred Stock, and modified the terms of the Series B Preferred Stock Warrants
resulting in changes to income applicable to common stock of $15.1 million.
Additionally, during the three and nine months ended July 31, 1999, dividends on
the Series B Preferred Stock totaled $0.1 million and $0.3 million,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $16.6 million at July 31, 1999 compared to $13.5
million at October 31, 1998. The increase in cash and cash equivalents of $3.1
million during the nine months ended July 31, 1999 resulted from cash provided
by operating and financing activities of $8.1 million and $1.1 million,
respectively, offset by cash used in investing activities of $6.1 million.
Cash provided by operating activities during the nine months ended July 31, 1999
of $8.1 million is primarily the result of net unrestricted proceeds from
conduit sales of $20.0 million offset, in part, by costs on loss contracts of
$16.7 million that were charged against the reserve for contract losses.
Cash used in investing activities during the nine months ended July 31, 1999 of
$6.1 million is due to net capital expenditures required to support increased
operations and replacement of existing equipment and the repurchase of some of
the Series B Preferred Stock warrants.
Cash provided by financing activities during the nine months ended July 31, 1999
of $1.1 million is due primarily to redemptions of Series B Preferred Stock, net
repayments of long term debt and other borrowings, dividends paid on preferred
stock and proceeds from the issuance of stock options.
<PAGE>
In February 1999, WorldCom advanced the Company $32.0 million for the purposes
of arranging the purchase of 2,785 shares, or approximately 78 percent of the
Series B Preferred Stock and the purchase of the outstanding $10.0 million of
Senior Notes. This advance is non-interest bearing and due the earlier of (i)
October 31, 2000 or (ii) the dates of redemption and/or conversion of the Series
B Preferred Stock or the Senior Notes.
As of July 31, 1999, the Company had fully utilized its availability under its
Credit Facility. WorldCom has agreed to make available additional non-interest
bearing advances to the Company of up to $15.0 million against amounts otherwise
payable pursuant to the WorldCom Master Services Agreement, which, if advanced,
would be due on October 31, 2000. As of July 31, 1999 and the date of this
filing, no amounts were outstanding under WorldCom's obligation to provide such
additional advances.
The Company believes that is has available cash from operations, as well as from
the additional advance available from WorldCom described above, sufficient to
meet the Company's operating and capital requirements for the next twelve
months. Nonetheless, pursuant to the terms of the documents relating to the
Series B Preferred Stock, under certain circumstances, including without
limitation, if the registration statement that includes the shares of common
stock underlying the Series B Securities is not declared effective on or before
October 30, 1999 may have the option to require the Company to redeem their
securities at premium prices. Although the Company intends to use its best
efforts to comply with the provisions in the documents relating to the Series B
Preferred Stock, the failure of which would provide the holder the right to
exercise such redemption option, there can be no assurance that the Company will
be able to do so, in part, because certain of such matters are dependent upon
the efforts or approval of others (such as the Securities and Exchange
Commission with respect to the effectiveness of the aforementioned registration
statement). In addition, there can be no assurance that the Company will not
experience adverse operating results or other factors which could materially
increase its cash requirements or adversely affect its liquidity position.
CAUTIONARY STATEMENTS
Certain of the information contained herein may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, as the same may be amended from time to time ("the Act") and in
releases made by the Securities and Exchange Commission ("SEC") from time to
time. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance,
or achievements expressed or implied by such forward-looking statements. The
words "estimate," "believes," "project," "intend," "expect" and similar
expressions when used in connection with the Company, are intended to identify
forward-looking statements. Any such forward-looking statements are based on
various factors and derived utilizing numerous important assumptions and other
important factors that could cause actual results to differ materially from
those on the forward-looking statements. These cautionary statements are being
made pursuant to the Act, with the intention of obtaining benefits of the "Safe
Harbor" provisions of the Act. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those in the
forward-looking statements as a result of various factors, including but not
limited to those set forth below.
Important assumptions and other important factors that could cause actual
results to differ materially from those in the forward-looking statements
include, but are not limited to: (i) risks associated with leverage, including
cost increases due to rising interest rates: (ii) risks associated with the
Company's ability to continue its strategy of growth through acquisitions; (iii)
risks associated with the Company's ability to successfully integrate all of its
recent acquisitions: (iv) the Company's ability to make effective acquisitions
in the future and to successfully integrate newly acquired businesses into
existing operations and the risks associated with such newly acquired
businesses; (v) changes in laws and regulations, including changes in tax rates,
accounting standards, environmental laws, occupational, health and safety laws:
(vi) access to foreign markets together with foreign economic conditions,
including currency fluctuations; (vii) the effect of, or changes in, general
economic conditions; (viii) economic uncertainty in Venezuela; (ix) weather
conditions that are adverse to the specific businesses of the Company, and (x)
the outcome of litigation, claims and assessments involving the Company.
<PAGE>
Other factors and assumptions not identified above may also be involved in the
derivation of forward- looking statements, and the failure of such other
assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. The Company assumes no
obligation to update these forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting such
forward-looking statements.
YEAR 2000
The Company's business is dependent upon various computer software programs and
operating systems that utilize dates and process data beyond the year 2000. The
Company's actions to address the risks associated with the year 2000 are as
follows:
THE COMPANY'S STATE OF READINESS. The Company has established programs to
coordinate its year 2000 (Y2K) compliance efforts across all business functions
and geographic areas. The scope of the programs include addressing the risks
associated with the Company's i) information technology (IT) systems (including
the Company's products and services), ii) non-IT systems that include embedded
technology (e.g., equipment and other infrastructure), and iii) significant
vendors and their Y2K readiness. The Company is utilizing the following steps in
executing its Y2K compliance program: 1) awareness, 2) assessment, 3)
renovation, 4) validation and testing, and 5) implementation. The Company has
completed the awareness and assessment steps for all areas.
IT Systems. The Company's most significant renovation effort involves the
conversion of substantially all of MFSNT's IT Systems. The Company believes it
will be substantially completed with its testing and implementation for all IT
Systems by October 31, 1999.
Non-IT Systems. The Company expects to have all of its mission critical non-IT
systems Y2K compliant by October 31, 1999. The Company is currently formulating
its testing and implementation plans for its mission critical non-IT systems.
Significant Vendors. As part of the Company's Y2K compliance program, the
Company has contacted its significant vendors to assess their Y2K readiness. For
all mission critical third party software embedded in or specified for use in
conjunction with the Company's IT systems and products, the Company's
communications with the vendors indicates that the vendors believe they will be
Y2K compliant by October 31, 1999. Such third party software is being tested in
conjunction with the testing of the IT systems and products discussed above.
There can be no assurance that i) the Company's significant vendors will succeed
in their Y2K compliance efforts, or ii) the failure of vendors to address year
2000 compliance will not have a material adverse effect on the Company's
business or results of operations. Additionally, the Company has no independent
verification nor validation processes to assure the reliability of third party
relationships' risks and cost estimates.
THE COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES. Since inception of its
program through October 31, 1998, the costs related to the Company's Y2K
compliance efforts were not material. The total estimated costs to complete the
Company's Y2K compliance effort are approximately $2.0 million. The estimated
costs to complete, which does not include any costs which may be incurred by the
Company if its significant vendors fail to timely address Y2K compliance, is
based on currently known circumstances and various assumptions regarding future
events. However, there can be no assurance that these estimates will be achieved
and actual results could differ materially from those anticipated.
THE RISKS OF THE COMPANY'S YEAR 2000 ISSUES. The Company's failure to timely
resolve the Y2K risks could result in system failures, the generation of
erroneous information, and other significant disruptions of business activities.
Although the Company believes it will be successful in its Y2K compliance
efforts, there can be no assurance that the Company's systems and products
contain all necessary date code changes. In addition, the Company's operations
may be at risk if its vendors and other third parties fail to adequately address
the Y2K issue or if software conversions result in system incompatibilities with
these third parties. To the extent that either the Company or a third-party
vendor or service provider on which the Company relies does not achieve Y2K
compliance, the Company's results of operations could be materially adversely
affected. Furthermore, it has been widely reported that a significant amount of
litigation surrounding business interruption will arise out of Y2K issues. It is
uncertain whether, or to what extent, the Company may be affected by such
litigation.
THE COMPANY'S CONTINGENCY PLAN. The Company has not yet developed a
comprehensive contingency plan to address the situation that may result if the
Company or its vendors are unable to achieve Y2K compliance for its critical
operations. During fiscal 1999, based upon the status of the Company's Y2K
compliance efforts at that time and the Company's perceived risks to critical
business operations, the Company plans to evaluate what areas the Company
believes a contingency plan may be necessary, and execute such contingency plan
if warranted. The i) inability to timely implement a contingency plan, if deemed
necessary, and ii) the cost to develop and implement such a plan, may have a
material adverse effect on the Company's results of operations.
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS. Except for
statements of existing or historical facts, the foregoing discussion of Y2K
consists of forward-looking statements and assumptions relating to
forward-looking statements, including without limitation the statements relating
to future costs, the timetable for completion of Y2K compliance efforts,
potential problems relating to Y2K, the Company's state of readiness, third
party representations, and the Company's plans and objectives for addressing Y2K
problems. Certain factors could cause actual results to differ materially from
the Company's expectations, including without limitation i) the failure of
vendors and service providers to timely achieve Y2K compliance, ii) system
incompatibilities with third parties resulting from software conversions, iii)
the Company's systems and products not containing all necessary date code
changes, iv) the failure of existing or future clients to achieve Y2K
compliance, v) potential litigation arising out of Y2K issues, the risk of which
may be greater for information technology based service providers such as the
Company, vi) the failure of the Company's validation and testing phase to detect
operational problems internal to the Company, in the Company's products or
services or in the Company's interface with service providers, vendors or
clients, whether such failure results from the technical inadequacy of the
Company's validation and testing efforts, the technological infeasibility of
testing certain non-IT systems, the perceived cost-benefit constraints against
conducting all available testing, or the unavailability of third parties to
participate in testing, or vii) the failure to timely implement a contingency
plan to the extent Y2K compliance is not achieved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on debt
obligations that impact the fair value of these obligations. The Company's
policy is to manage interest rates through a combination of fixed and variable
rate debt. Currently, the Company does not use derivative financial instruments
to manage its interest rate risk. The table below provides information about the
Company's risk exposure associated with changing interest rates (amounts in
thousands):
<TABLE>
<CAPTION>
EXPECTED MATURITY DURING THE FISCAL YEARS ENDED
1999 2000 2001 2002 2003 THEREAFTER
------ ------ ------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Fixed rate debt $3,216 $2,543 $32,109 $1,895 $1,703 $6,355
Average interest rate 12.6% 13.0% 11.9% 15% 15% 15%
Variable rate debt $ -- $ -- $35,000 $ -- $ -- $ --
Average interest rate --% --% 7.5% --% --% --%
</TABLE>
<PAGE>
The Company has no cash flow exposure due to interest rate changes for its fixed
debt obligations. All of the Company's debt is non-trading. The fair value of
the Company's debt approximates its carrying value.
Although the Company conducts business in foreign countries, the international
operations were not material to the Company's consolidated financial position,
results of operations or cash flows as of July 31, 1999. Additionally, foreign
currency transaction gains and losses were not material to the Company's results
of operations for the six months ended July 31, 1999. Accordingly, the Company
was not subject to material foreign currency exchange rate risk from the effects
that exchange rate movements of foreign currencies would have on the Company's
future costs or on future cash flows it would receive from its foreign
subsidiaries. To date, the Company has not entered into any significant foreign
currency forward exchange contracts or other derivative financial instruments to
hedge the effects of adverse fluctuations in foreign currency exchange rates.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 12, 1998, the Company granted options to purchase 150,000 shares of
the Company's common stock, par value $0.001 per share ("Common Stock") to two
employees of the Company. The options were granted pursuant to the Company's
1995 Stock Option Plan, as amended (the "Plan"), are non-qualified, vested over
three years, are exercisable at $7.125 per share, and expire on July 8, 2000. In
addition, on November 12, 1998, the Company granted options to purchase 350,000
shares of Common Stock to employees of the Company's subsidiaries acquired in
connection with the MFSNT acquisition. The options were granted outside the
Plan.
On December 23, 1998, the Company granted options to purchase 12,500 shares of
Common Stock to employees of the Company. The options were granted pursuant to
the Plan, are qualified, vested immediately, are exercisable at $5.75 per share,
and expire on December 31, 2004.
On December 31, 1998, in an effort to correct certain of the actions taken by
the Company's Board of Directors in order to maintain compliance with the Plan,
as amended, the Board of Director's rescinded certain of the stock option grants
made during the fiscal year ended October 31, 1998, or 530,000 options under the
Plan and 310,000 options outside the Plan. These ambiguities and compliance
issues included, in certain instances, (i) granting options that had been
granted inside the Plan where there were not a sufficient number of shares
available, (ii) granting options at below market prices to nonemployee directors
with the Plan, contrary to terms of the Plan, (iii) not specifying whether the
grants were issued inside or outside the Plan, (iv) not specifying the exercise
period for the options granted or (v) issuing options outside the Plan, which
could be considered contrary to the terms of certain financing documents. These
options, which vested immediately, were reissued at the fair market value ($5.75
per share), as defined by the Plan, on December 31, 1998, as well as shortened
certain of the expiration dates of the options. In addition, the Company
rescinded and reissued the 350,000 options outside the Plan and the 150,000
options pursuant to the Plan described above on December 31, 1998 at $5.75 per
share for the reasons described above. These options vested immediately and
expire on November 12, 2004 (outside the Plan) and December 31, 2004 (pursuant
to the Plan).
On December 31, 1998, the Company granted options to purchase 1,050,000 shares
of Common Stock to employees of the Company's subsidiaries acquired in
connection with the MFSNT acquisition. The options were granted outside the
Plan, are non-qualified, vest over three years, are exercisable at $5.75 per
share, and expire on November 12, 2004.
On December 31, 1998, the Company granted options to purchase 40,000 shares of
Common Stock to an employee of the Company. The options were granted outside the
Plan, are non-qualified, 20,000 of which vested on January 1, 1999, 10,000 vest
on December 31, 1999 and 10,000 vest on December 31, 2000, are exercisable at
$5.75 per share, and expire on the earlier of September 19, 2005 or two years
after the date of termination.
On December 31, 1998, the Company granted options to purchase 180,000 shares of
Common Stock to three employees of the Company. The options were granted
pursuant to the Plan, are non-qualified, vested immediately, are exercisable at
$5.75 per share, and expire on December 31, 2001.
<PAGE>
On February 17, 1999, 2,785 shares of non-voting Series B Convertible Preferred
Stock, $0.10 par value ("Series B Preferred Stock") were purchased by the
Company for approximately $18.9 million and retired. In connection with the
purchase of the 78% of the Series B Preferred Stock, the Company agreed to
certain modifications in the conversion price of the related warrants. The terms
of the existing Series B Preferred Stock conversion price for the remaining
shares were modified from 97% of market value, as defined in the agreements, to
a fixed amount of approximately $3.50 per share for 404 of the remaining 779
shares. The conversion price of (i) warrants to purchase a total of 370,000
shares of the Company's common stock was reduced to $13.25 per share and (ii)
warrants to purchase a total of 630,000 shares of common stock was reduced to
$13.50 per share. On May 7, 1999, the warrants to purchase the 630,000 shares of
common stock were purchased by the Company for $3.00 per share.
On February 19, 1999, 628,398 shares were issued to the former owners, or their
assignees, of Georgia Electric Corporation ("GEC") pursuant to the earn-out
provision of the acquisition agreement whereby the Company purchased all of the
outstanding stock of GEC.
Effective April 1, 1999, the Company granted to an employee options to purchase
100,000 shares of Common Stock. The options were granted outside the Plan, are
non-qualified, 75,000 of which vested immediately with the remaining 25,000
vesting on June 21, 2000, are exercisable at $6.375 per share, and expire at the
earlier of September 19, 2005 or two years from the date of termination.
Effective April 1, 1999, the Company granted a consultant options to purchase
40,000 shares of Common Stock. The options were granted outside the Plan, are
non-qualified, 20,000 of which vested immediately, 10,000 vest on April 1, 2000,
and 10,000 vest on April 1, 2001, are exercisable at $6.375 per share, and
expire two years from the date of expiration of the consulting agreement or any
extensions or renewals thereof.
On April 30, 1999, the Company granted to an employee a restricted stock award
of 50,000 shares of Common Stock.
On April 30, 1999, the Company converted a payable to a Director of the Company
in the amount of $0.8 million into 118,286 shares of Common Stock based upon a
conversion rate equal to the fair market value of the Company's common stock on
the date of conversion, or $7.00 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For the period from November 1, 1998 through February 17, 1999, the Company was
in violation of the payment terms of its $10.0 million principal amount 12%
Senior Subordinated Notes (the "Senior Notes"). These Senior Notes were
purchased from the holders effective February 17, 1999, as described above, and
subsequently canceled.
The Company was not in compliance with certain provisions (i.e., certain minimum
ratios, total debt limitations) of the Company's $35.0 million three-year senior
secured revolving credit facility ("Credit Facility") during the six months
ended April 30, 1999. The Company has obtained a waiver for its noncompliance
during the six months ended April 30, 1999. During the three months ended April
30, 1999, the Credit Facility was amended to change certain minimum ratios.
In February 1999, as was reported on the Company's Form 10-K/A, approximately
78% of the Series B Preferred Stock was purchased from the original holders and,
in connection with such purchase, the Company was given until May 18, 1999 to
effect a registration statement covering the resale of shares of common stock
underlying the Series B Preferred Stock and warrants associated with the Series
B Preferred Stock (the "Registration Statement"). The purchaser and the
remaining holders of the Series B Preferred Stock agreed to either waive all
outstanding defaults under such securities or refrain from exercising any
remedies with respect to any such outstanding defaults for a period of 90 days
from February 17, 1999. During such period of time, the Company had agreed to
use its best efforts to have the Registration Statement declared effective. To
date, the Registration Statement has not been declared effective. In May 1999,
the holders of the remaining 22% agreed to a further extension from May 19, 1999
until August 18, 1999.
In addition, during the second quarter ended April 30, 1999, the Company was and
continues to be in default on the
<PAGE>
Series B Preferred Stock for the nonpayment of dividends related to the
remaining 22% (or 779 shares) of shares of Series B Preferred Stock.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
2.1 Asset Purchase Agreement, dated November 26, 1997, among Able
Telcom Holding Corp., Georgia Electric Company, Transportation
Safety Contractors, Inc., COMSAT RSI Acquisitions, Inc. and
COMSAT Corporation (1)
2.2 Indemnification Agreement, dated February 25, 1998, among Able
Telcom Holding Corp., Georgia Electric Company, Transportation
Safety Contractors, Inc., COMSAT RSI Acquisitions, Inc. and
COMSAT Corporation (1)
2.3 Stock Purchase Agreement, dated as of April 1, 1998, among Able
Telcom Holding Corp., James P Patton, Rick Boyle and Claiborne K.
McLemore III (2)
2.4 Closing Memorandum and Schedule, dated April 1, 1998, among Able
Telcom Holding Corp., James P Patton, Rick Boyle and Claiborne K.
McLemore III (2)
2.5 Agreement and Plan of Merger by an among MFS Acquisition Corp.,
Able Telcom Holding Corp., MFS Network Technologies, Inc. and MFS
Communications Company, Inc. dated as of April 22, 1998 (9)
2.5.1 Amendment to Agreement and Plan of Merger among MFS Acquisition
Corp., Able Telcom Holding Corp., MFS Network Technologies, Inc.
and MFS Communications Company, Inc. dated as of July 2, 1998(10)
2.5.1.1 Amendment No. 2 dated as of July 21, 1998 to Agreement and Plan
of Merger among MFS Acquisition Corp., Able Telcom Holding Corp.,
MFS Network Technologies, Inc. and MFS Communications Company,
Inc. (11)
2.5.1.2 Agreement between WorldCom Network Services, Inc. and Able Telcom
Holding Corp. dated as of September 9, 1998 (13)
2.5.1.3 Agreement between WorldCom Network Services, Inc. and Able Telcom
Holding Corp. dated January 26, 1999 (12)
2.5.2 Promissory Note of Able Telcom Holding Corp. dated July 2, 1998
to MFS Communications Company, Inc. (10)
2.5.2.1 11.5% Promissory Note between Able Telcom Holding Corp., and
WorldCom Network Services, Inc. dated as of September 1, 1998(12)
2.5.3 Stock Pledge Agreement dated as of July 2, 1998 by Able Telcom
Holding Corp. in favor of WorldCom, Inc. (10)
2.5.4 Master Services Agreement between WorldCom Network Services, Inc.
and MFS Network Technologies, Inc. dated as of July 2,1998
(exhibits omitted) (11)
2.5.5 Assumption and Indemnity Agreement dated as of July 2, 1998 among
Able Telcom Holding Corp., WorldCom Inc., MFS Communications
Company, Inc., MFS Intelenet, Inc., MFS Datanet, Inc., MFS
Telcom, Inc. and MFS Communications, Ltd. (schedule omitted) (10)
<PAGE>
2.5.6 License Agreement between MFS Communications Company, Inc. and
Able Telcom Holding Corp. dated as of July 2, 1998 (10)
2.5.7 Modification to Stock Option Agreement between the Company and
WorldCom, Inc. dated January 8, 1999 (12)
2.5.8 Agreement to Enter Into Stock Appreciation Rights Agreement
between the Company and WorldCom, Inc. dated January 8, 1999(12)
2.5.9 Financing Agreement between WorldCom Network Services, Inc. and
Able Telcom Holding Corp. dated February 16, 1999 (12)
2.5.9.1 Amendment and Restatement of Financing Agreement by and between
WorldCom Network Services, Inc. and Able Telcom Holding Corp.
dated April 1, 1999
2.5.10 Agreement dated March 15, 1999 by and between Able Telcom Holding
Corp. and WorldCom Network Services, Inc.
3.1 Articles of Incorporation of Able Telcom Holding Corp., as
amended (3) (4)
3.1.1 Articles of Amendment to the Articles of Incorporation of Able
Telcom Holding Corp. (13)
3.2 Bylaws of Able Telcom Holding Corp., as amended (3)
4.2 Specimen Common Stock Certificate (3)
4.3 Specimen Series A Preferred Stock Certificate (6)
4.4 Form of Warrant issued to Credit Suisse, First Boston and
Silverton International Fund Limited (4)
4.6 Able Telcom Holding Corp. 1995 Stock Option Plan (13)
4.7 Amendment to Able Telcom Holding Corp. 1995 Stock Option Plan,
dated April 24, 1998 (13)
4.8 Series B Convertible Preferred Stock Purchase Agreement (13)
4.9 Registration Rights Agreement for Series B Convertible Preferred
Stock Purchase Agreement and 350,000 Warrants (13)
4.10 Registration Rights Agreement for 650,000 Warrants associated
with Series B Convertible Preferred Stock Purchase Agreement (13)
4.11 Form of Common Stock Purchase Warrants for 350,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement (13)
4.12 Form of Common Stock Purchase Warrants for 650,000 Shares in
connection with Series B Convertible Preferred Stock Purchase
Agreement (13)
4.13 Preferred Stock Purchase Agreement by and among Able Telcom
Holding Corp., RGC International Investors, LDC, and Cotton
Communications, Inc. dated February 17, 1999 (12)
4.14 Warrant Amendment between Able Telcom Holding Corp., and
Purchasers (as defined) dated February 17, 1999 (12)
<PAGE>
4.15 Securities Purchase Agreement by and between the Sellers (as
defined) and Cotton Communications, Inc. dated February 17, 1999
(12)
10.15 Stock Purchase Agreement between Able Telcom Holding Corp.,
Traffic Management Group, Inc., Georgia Electric Company, Gerry
W. Hall and J. Barry Hall (5)
10.16 Stock Purchase Agreement between Able Telcom Holding Corp.,
Telecommunications Services Group, Inc., Dial Communications,
Inc., William E. Newton and Sybil C. Newton (8)
10.17 Promissory Note of Able Telcom Holding Corp. Payable to William
E. Newton and Sybil C. Newton (8)
10.23 Form of Stock Purchase Agreement among Able Telcom Holding Corp.,
Traffic Management Group, Inc., Georgia Electric Company, Gerry
W. Hall and J. Barry Hall (5)
10.25 Securities Purchase Agreements, dated as of January 6, 1998,
between Able Telcom Holding Corp. and each of the Purchasers
named therein (6)
10.25.1 Letter Agreement dated July 2, 1998 related to Securities
Purchase Agreements dated as of January 6, 1998 (13)
10.26 Senior Secured Revolving Credit Agreement dated as of April 6,
1998, between Able Telcom Holding Corp. and Suntrust Bank, South
Florida, N.A. and Bank of America, FSB (9)
10.27 Credit Agreement among Able Telcom Holding Corp., NationsBank,
N.A. and The Several Lenders from Time to Time Parties Hereto
dated as of June 11, 1998 (exhibits and schedules omitted) (13)
10.30 Employment Agreement with Stacy Jenkins, dated July 16, 1998 (13)
10.32 Amendment to June 11, 1998 Credit Agreement among Able Telcom
Holding Corp. NationsBank N.A., and the Several Lenders from Time
to Time Parties thereto, dated as of June 30, 1998 (13)
10.32.1 Amendment and Amended and Restated Limited Waiver to June 11,
1998 Credit Agreement among Able Telcom Holding Corp.,
NationsBank N.A., and the Several Lenders from Time to Time
Parties thereto, dates as of June 30, 1998 (15)
10.33 Employment Agreement with Billy V Ray, Jr., dated December 1,
1998 (12)
10.35 Financial Advisor and Placement Engagement Letter, dated April 3,
1998, between Washington Equity Partners and Able Telcom Holding
Corp. (14)
10.36 Employment Agreement with G. Vance Cartee, dated January 4, 1999
(12)
10.37 Employment Agreement with Edward Pollock, dated January 1, 1999
(12)
10.38 Employment Agreement with Frazier L. Gaines, dated November 12,
1998 (12)
<PAGE>
10.40 Employment Agreement with Rick Boyle, dated April 1, 1998 (12)
10.41 Financing Agreement between Able Telcom Holding Corp. and Cotton
Communications, Inc. dated February 17, 1999 (without exhibits)
(12)
10.41.1 Termination Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated March 22, 1999 (15)
10.42 11.5% Non-Recourse Promissory Note between Cotton Communications,
Inc. and Able Telcom Holding Corp. dated February 17, 1999 (12)
10.43 Stock Pledge Agreement between Able Telcom Holding Corp. and
Cotton Communications, Inc. dated February 17, 1999 (12)
10.44 Employment Agreement with Michael Arp, dated January 1, 1999 (15)
10.45 Consulting Agreement and Employment Agreement with James E.
Brands, dated March 15, 1999 (15)
10.46 Employment Agreement with Michael Summers, dated May___, 1999
11 Computation of Per Share Earnings (7)
21 Subsidiaries of Able Telcom Holding Corp. (13)
27 Financial Data Schedule
(1) Incorporated by reference from an exhibit to the Company's
Current Report on Form 8-K (File No. 0-21986), dated February 25,
1998, as filed with the Commission on March 12, 1998, as amended by
Form 8-K/A-1, dated May 11, 1998, as filed with the Commission on
April 14, 1998.
(2) Incorporated by reference from an exhibit to the Company's
Current Report on Form 8-K (File No. 0-21986), dated April 1, 1998,
as filed with the Commission on April 14, 1998.
(3) Incorporated by reference from an exhibit to the Company's
Registration Statement on Form S-1 (File No. 33-65854), as declared
effective by the Commission on February 26, 1994.
(4) Incorporated by reference from an exhibit to the Company's
Current Report on Form 8-K (File No. 0-21986), dated December 20,
1996, as filed with the Commission on December 31, 1996.
(5) Incorporated by reference from an exhibit to the Company's
Current Report on Form 8-K (File No. 0-21986), dated October 12,
1996, as filed with the Commission on October 25, 1996.
(6) Incorporated by reference from an exhibit to the Company's Annual
Report on Form 10-K (File No. 0-21986) for the fiscal year ended
October 31, 1997, as filed with the Commission on February 13, 1998,
as amended by 10-K/A, as filed with the commission on March 20, 1998.
(7) Incorporated by reference from Note 6 to the Condensed
Consolidated Financial Statements (Unaudited) filed herewith.
(8) Incorporated by reference from an exhibit to the Company's
Current Report on Form 8-K (File No. 0-21986), dated December 2,
1996, as filed with the Commission on December 13, 1996, as amended
by Form 8-K/A-1, dated February 11, 1997, as filed with the
Commission on February 11, 1997.
(9) Incorporated by reference from an exhibit to the Company's
Quarterly Report on Form 10-Q (File No. 0-21986), for the quarter
ended April 30, 1998, as filed with the Commission on June 14, 1998.
(10) Incorporated by reference from an exhibit to the Company's
Current Report on Form 8-K (File No. 0-21986), dated July 2, 1998, as
filed with the Commission on July 16, 1998.
(11) Incorporated by reference from an exhibit to the Company's
Current Report on Form 8-K/A (File No. 0-21986),
<PAGE>
dated July 2, 1998, as filed with the Commission on August 3, 1998.
(12) Incorporated by reference from an exhibit to the Company's
Annual Report on Form 10-K/A (File No. 0-21986), for the fiscal year
ended October 31, 1998, as filed with the Commission on March 1,
1999.
(13) Incorporated by reference to an exhibit to the Company's
Quarterly Report on Form 10-Q (File No. 0-21986), for the quarter
ended July 31, 1998, as filed with the Commission on September 21,
1998, as amended by Form 10-Q/A, as filed with the Commission on
October 13, 1998.
(14) Incorporated by reference to an exhibit to the Company's Form
S-1 (File No.333-65991), as filed with the Commission on October 22,
1998.
(15) Incorporated by reference to an exhibit to the Company's
Amendment No. 1 to Form S-1 (File No. 333-65991), as filed with the
Commission on April 8, 1999.
(b) Reports on Form 8-K
On February 16, 1999, the Company filed a Current Report on Form 8-K (File No.
0-21986), dated February 16, 1999, announcing earnings for the fiscal year ended
October 31, 1998 and the timing of filing the Annual Report on Form 10-K.
On March 16, 1999, the Company filed a Current Report on Form 8-K (File No.
0-21986), dated March 12, 1999, announcing the resignation of Gideon D. Taylor
from the Company's Board of Directors.
SIGNATURES
Pursuant to the requirements of the Securities and 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)
September 14, 1999 By: /s/ MICHAEL A. SUMMERS
------------------------------
Michael A. Summers
Chief Accounting Officer
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0
2,455
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