SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996 SEC File No 1-9690
INTERNATIONAL FIBERCOM, INC.
Incorporated in the State of Arizona IRS No. 86-0271282
3615 S. 28th Street
Phoenix, AZ 85040
(602) 941-1900
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 report), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Common Stock without par value (6,238,329) shares outstanding at June 30, 1996
1
<PAGE>
PART 1 - Financial Information
Item 1.Financial Statements
The financial statements are included herewith commencing on page F-1.
Item 2.Management's Discussion any Analysis of Financial Condition and
Results of Operations. Operations.
General
- -------
The Company continued to generate and review new contract opportunities as well
as renegotiate with existing clients during the second quarter or 1996. Income
and profitability were adversely affected by a sixty day slow down with Cox
Communications, as well as a lack of new contracts with US West in this quarter.
Utility division revenues remained essentially flat in the second quarter.
Results of Operations.
- ----------------------
The following discussion relates to the actual operations of the Company in 1996
and for the same period of 1995.
Revenues.
- ---------
Revenues increased by 6% for the three months ended June 30, 1996 to $2,939,969
compared to $2,775,971 for the three months ended June 30, 1995. The increase is
attributable primarily to increased production for Salt River Project and to a
subdivision development.
Although revenues increased slightly the percentage of revenues attributable to
the installation of fiber-optic and telecommunications systems decreased from
76% in the 1995 quarter to 51% in the current quarter of 1996. This decrease was
due to delays in work orders from Cox Communications, Inc. and US West, because
of certain right of way negotiations with municipalities. During the 1996
quarter approximately 19% of revenues were attributable to sewer and water
installation and subdivision development, 18% to electric installation primarily
for S.R.P. and 12% for miscellaneous projects, including concrete replacement
for the City of Phoenix. 2
<PAGE>
Gross Profit.
- -------------
The Company's gross profit for the 1996 quarter was $508,194, or 17% of
revenues, compared to $419,060, or 15% of revenues, for the comparable period of
1995. The Company's gross profit increased due to improved daily production
achieved through better scheduling and field supervision.
General and Administrative Costs.
- ---------------------------------
The Company's general and administrative expenses were $597,957, or 20% of
revenues, for the 1996 quarter compared to $678,602, or 24% of revenues, for the
1995 quarter. The decrease in expenses is due primarily to reduction in
management personnel.
Other Income Expense.
- ---------------------
The other income and expense in the 1996 quarter resulted in $94,547 net expense
as compared to net income of $41,886 in the comparable quarter or 1995. This
difference is due to the increase in interest expense because of increased
Company debt due to equipment purchases as well as charges due for late payments
on various accruals. In addition, the Company reported only a gain of $3,698 on
disposal of equipment versus $84,166 in the 1995 quarter, when several major
pieces of equipment were sold or traded.
Income Tax Expense.
- -------------------
The Company accrued no federal or state income taxes for the 1996 quarter
because of the net operating loss carry forwards attributable to the 1995
results.
Net Income.
- -----------
The Company incurred a net loss of $184,290 for the 1996 quarter as compared to
a net loss of $217,656 for the second quarter of 1995. This improvement is due
primarily to improved gross profit margins and major reductions in general and
administrative expenses.
Backlog.
- --------
The Company had a backlog of approximately $1.5 million, on a work in process
basis, as of June 30, 1996. All such work orders are expected to be completed by
September 1996. In addition, an excess of $1 million of projects were signed but
unstarted as of June 1996. The company expects that all such work will be
started and completed by the end of 1996.
Capital Resources and Liquidity.
- --------------------------------
At June 30, 1996, the Company had $255,974 in cash and an approximate $800,000
line of credit. Such line of credit bears interest at the prime rate of First
Interstate Bank plus 1.5%. The Company believes that the working capital
provided by its 1996 private placement of Preferred Stock, along with expected
internally generated working capital from the operation of Kleven's business in
1996, will satisfy business growth for the next twelve months.
3
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
JUNE 30, 1996
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 255,974 $ 8,749
Accounts receivable
- trade, net of allowance 2,466,600 2,437,648
- other 27,769 45,700
Subscriptions receivable 0 2,373,500
Inventory 0 0
Income tax refund receivable 0 26,000
Prepaid expenses 65,003 47,610
Loans receivable related parties 374,808 371,781
Accrued interest receivable 0 0
Costs and estimated earnings in excess of billings 462,413 451,503
=========== ===========
Total Current Assets 3,652,567 5,762,491
=========== ===========
Property and Equipment, net 2,952,817 3,195,276
=========== ===========
Other Assets:
Accounts receivable long term 115,565 155,565
Loans receivable related parties 293,792 293,792
Goodwill, net 2,736,552 2,795,615
Mortgage closing costs 6,188 6,343
Investment in limited partnership 28,781 24,541
Refundable deposits 12,472 13,450
=========== ===========
3,193,350 3,289,306
=========== ===========
Total Assets 9,798,734 $12,247,073
=========== ===========
</TABLE>
F-1
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
AS OF JUNE 30, 1996
(unaudited)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Current Liabilities:
Bank Overdraft 0 $ 57,751
Notes payable-current portion 728,000 2,096,466
Notes payable-term loans 624,638 0
Notes payable related parties 10,000 60,000
Obligations under capital lease 112,491 112,491
Accounts Payable
-trade 1,148,824 1,785,999
-related parties (5,995) 52,121
Accrued expenses 189,088 946,730
Accrued interest 0 0
Deferred income tax payable 0 0
Billings in excess of costs estimated earnings 110,372 286,178
============ ============
Total Current Liabilities 2,917,418 5,397,736
============ ============
Long-Term Liabilities:
Notes payable-long term 403,034 700,706
Obligations under capital lease 433,632 494,100
Deferred income taxes payable 0 0
============ ============
Total Long Term Liabilities 836,666 1,194,806
============ ============
Total Liabilities 3,754,084 6,592,542
============ ============
Stockholders' Equity:
Series A convertible preferred
stock, 10,000,000 shares authorized 1,972 and
2,750 issued respectively 1,694,856 2,296,382
Common stock, no par, 100,000,000
shares authorized 8,383,873 7,274,929
Common stock warrants 99,082 99,082
Additional paid in capital 352,073 352,073
Retained earnings (3,817,217) (3,699,918)
============ ============
6,712,667 6,322,548
Less: treasury stock 178,690 shares, at cost (668,017) (668,017)
============ ============
Total Stockholders' Equity 6,044,650 5,654,531
============ ============
Total Liabilities and Stockholders' Equity $ 9,798,734 $ 12,247,073
============ ============
</TABLE>
F-2
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
<S> <C> <C> <C> <C>
Contract Revenues $ 2,939,969 $ 2,775,971 $ 6,365,836 $ 6,552,158
Cost of Contract Revenues 2,431,775 2,356,911 $ 5,233,099 5,442,753
=========== =========== =========== ===========
Gross Profit 508,194 419,060 $ 1,132,737 1,109,405
General and Administrative Expenses 597,937 678,602 $ 1,129,378 1,225,670
=========== =========== =========== ===========
Profit from operations (89,743) (259,542) $ 3,360 (116,265)
Other Income (Expense):
Interest income 753 16,700 5,659 17,036
Interest expense (84,964) (58,462) (191,898) (86,036)
Other income (14,304) (518) 36,500 62,971
Gain on disposal of assets 3,968 84,166 29,082 141,834
=========== =========== =========== ===========
(94,547) 41,886 (120,658) 135,805
=========== =========== =========== ===========
Net income before income taxes ($ 184,290) ($ 217,656) ($ 117,298) 19,540
=========== =========== =========== ===========
Provision for tax benefit (expense) 0 0 0 0
=========== =========== =========== ===========
Net income ($ 184,290) ($ 217,656) ($ 117,298) $ 19,540
=========== =========== =========== ===========
Earnings (loss) per Share: ($ 0.03) ($ 0.05) ($ 0.02) $ 0.01
----------- ----------- ----------- -----------
Weighted average Shares Outstanding 5,452,553 4,238,382 4,845,467 2,904,962
=========== =========== =========== ===========
</TABLE>
F-3
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($117,298) $ 19,540
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and Amortization 398,588 212,578
(Increase) decrease in contracts receivable 2,373,500 703,613
(Increase) decrease in inventory 0 132,000
(Increase) decrease in costs and estimated earnings in
excess of billings on uncompleted contracts (10,910) (879,330)
(Increase) decrease in prepaid expenses (17,393) (84,073)
(Increase) decrease in income tax refund $26,000 205,238
(Decrease) increase in accounts payable ($695,288) 153,774
(Decrease) increase in accrued expenses ($757,642) (152,480)
(Decrease) increase in billings in excess of cost and
estimated earnings on uncompleted contracts ($175,806) 108,215
=========== ===========
Net cash provided (used) by operating activities 1,052,730 419,075
=========== ===========
Cash flows from investing activities:
(Purchase) sale of property and equipment (126,598) (89,360)
(Increase) decrease in deposits and 978 (4,643)
(Increase) decrease in goodwill and other assets 25,447 0
=========== ===========
Net cash provided (used) by investing activities ($100,173) (94,003)
=========== ===========
Cash flows from financing activities:
(Repayment) on capital lease obligation 0 0
(Repayment) increase of loans and other
liabilities payable (1,151,969) (92,336)
Proceeds from private offering, net $507,415 29,531
(Repayment) proceeds from stockholder loan (3,027) (76,791)
=========== ===========
Net cash provided (used) by financing activities (647,581) (139,596)
=========== ===========
Net (decrease) increase in cash 304,976 185,476
Cash, beginning of period (49,002) (93,512)
Cash, end of period $255,974 91,964
=========== ===========
</TABLE>
F-4
<PAGE>
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
FOR THE PERIOD ENDED JUNE 30, 1996 AND
THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series A
Convertible Common Stock Additional Treasury
Preferred ---------------------------- Stock Accumulated Paid - In
Stock Shares Issued Amount Warrants Deficit Capital Stock
-------------- ------------- ------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Stockholders' Equity,
December 31, 1994 - 4,417,072 7,274,929 99,082 (1,511,535) 352,073 (668,017)
Issuance of 2,750 shares
of Series A Convertible
Preferred, net of costs 2,296,382 - - - - - -
Net Loss, 1995 - - - - (2,188,383) - -
-------------- ------------- ------------- ------------- ------------- ----------- -----------
Stockholders' Equity,
December 31, 1995 $2,296,382 4,417,072 $7,274,929 $99,082 ($3,699,918) $352,073 ($668,017)
Conversion of 1,328 shares
of Series A Convertible
Preferred Stock to
1,821,257 shares of
Common Stock ($1,108,944) 1,821,257 1,108,944 - - - -
Issuance of 550 shares of
Series A Convertible
Preferred, net of costs 507,418 - - - - - -
Net Loss, June 30, 1996 - - - - (117,298) - -
-------------- ------------- ------------- ------------- ------------- ----------- -----------
Stockholders' Equity,
June 30, 1996 $1,694,856 6,238,329 $8,383,873 $99,082 ($3,817,216) $352,073 ($668,017)
============== ============= ============= ============= ============= =========== ===========
</TABLE>
F-5
<PAGE>
INTERNATIONAL FIBERCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Significant accounting policies:
Basis of presentation:
In the opinion of management, the accompanying consolidated financial
statements reflect all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of June
30, 1996 and the results of its operations for the six months ended
June 30, 1996. Although management believes that the disclosures in
these financial statements are adequate to make the information
presenting not misleading, certain information and footnote disclosures
normally included in financial statements that have been prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities Exchange Commission.
The results of operations for the six months ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the
full year ending December 31, 1996. The accompanying consolidated
financial statement should be read in conjunction with the more
detailed financial statements, and the related footnotes thereto, filed
with the Company's Annual Report on form 10-KSB for the year ended
December 31, 1995.
Principles of consolidation:
The consolidated financial statements include the financial position,
results of operations and cash flows of International FiberCom, Inc.,
and its wholly-owned subsidiary, Kleven Construction, Inc. All material
intercompany transactions, accounts and balances have been eliminated.
Stock options, and restricted stock plans:
At June 30, 1996 the Company had a stock-based compensation plan,
described below. The Company applies APB Opinion 25 and related
Interpretations in accounting for its plan. There was no compensation
cost charged against income for its performance-based plan for the
period ended June 30, 1996. Had compensation cost for the Company's
stock-based plan been determined based on the fair value at the grant
dates for awards under the plan consistent with the method of FASB
Statement 123, the Company's net loss and loss per share would have
been changed to the pro forma amounts indicated below:
F-6
<PAGE>
INTERNATIONAL FIBERCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Three Months Six Months
Ended Ended
June 30, 1996 June 30, 1996
------------- -------------
Net Loss As reported $184,290 $117,298
Pro Forma $221,490 $154,498
Primary Loss Per Share As reported .04 .02
Pro Forma .05 .03
During the year ended December 31, 1994, the Company adopted the 1994
Incentive Stock Option Plan. The Plan authorizes the Company to grant
incentive stock options and non-qualified stock options to key
employees of the Company. In addition, the Company has adopted the 1994
Restricted Stock Plan. This Plan authorizes the granting of restricted
shares of common stock to key employees, consultants, researchers, and
members of the Advisory Board. Under the above Plans, 441,707 shares of
common stock are reserved for issuance. During the six months ended
June 30, 1996, 365,000 options were granted at an exercise price of $1
1/8 per share with a term of 10 years. No restricted common stock was
awarded pursuant to the aforementioned plans. None of the options have
been exercised as of June 30, 1996.
In addition, during the six month period ended June 30, 1996, the
Company issued 100,000 options to non-employees of the Company. The
options are exercisable at a price of $1 1/8 per share for a term of 10
years.
Private Placement Offering:
During the period ended June 30, 1996, the Company commenced a Private
Placement Offering to investors outside the United States of 550 shares
of Series A convertible preferred stock at $1,000 per share. The net
proceeds of the offering were $507,418. The funds from the offering
were received during the second quarter of 1996.
F-7
<PAGE>
PART II
OTHER INFORMATION
-----------------
Response to Items 1-5 are omitted since these items are inapplicable to this
report.
Item 6.
The Company filed a Report on Form 8-K dated March 31, 1995, with the
Securities and Exchange Commission, reporting the divestiture of International
Environmental Corporation.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTERNATIONAL FIBERCOM, INC.
BY Terry Beiriger
-----------------------------------------
Terry Beiriger,
Chief Financial Officer
DATED: August 13, 1996
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000924632
<NAME> INTERNATIONAL FIBERCOM INC
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 255,974
<SECURITIES> 0
<RECEIVABLES> 2,494,369
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,652,567
<PP&E> 5,036,720
<DEPRECIATION> 2,083,903
<TOTAL-ASSETS> 9,798,734
<CURRENT-LIABILITIES> 2,917,418
<BONDS> 0
0
1,699,856
<COMMON> 8,383,873
<OTHER-SE> (4,034,079)
<TOTAL-LIABILITY-AND-EQUITY> 9,798,734
<SALES> 6,365,836
<TOTAL-REVENUES> 6,437,077
<CGS> 5,233,099
<TOTAL-COSTS> 6,362,477
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 191,898
<INCOME-PRETAX> (117,298)
<INCOME-TAX> (117,298)
<INCOME-CONTINUING> (117,298)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (117,298)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
