FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 COMMISSION FILE NO 1-13278
INTERNATIONAL FIBERCOM, INC.
Incorporated in the State of Arizona IRS No. 86-0271282
3410 E. University Drive, Suite 180
Phoenix, AZ 85034
(602) 387-4000
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 [ ]
Common Stock without par value
30,489,274 outstanding at March 31, 2000
<PAGE>
INDEX
INTERNATIONAL FIBERCOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Consolidated balance sheets -
March 31, 2000 (unaudited) and December 31, 1999 2
Consolidated statements of income (unaudited)
Three months ended March 31, 2000 and 1999 3
Consolidated statements of changes in stockholders'
equity (unaudited) - Three months ended March 31, 2000 4
Consolidated statements of cash flows (unaudited) -
Three months ended March 31, 2000 and 1999 5
Notes to consolidated financial statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 6. Exhibits and Reports on Form 8-K 16
1
<PAGE>
INTERNATIONAL FIBERCOM, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 8,495,807 $ 3,182,408
Accounts receivable - trade, net 50,026,845 47,457,204
Costs and estimated earnings in excess of billings 24,757,128 19,638,209
Inventory, net 19,927,234 18,722,334
Income tax receivable 8,486,686 868,055
Deferred tax asset 1,961,894 1,961,894
Other current assets 4,376,810 2,625,500
------------- -------------
Total current assets 118,032,404 94,455,604
Property and equipment, net 28,056,359 24,599,623
Goodwill, net 49,265,061 40,398,981
Other assets 1,987,738 1,421,356
------------- -------------
Total assets $ 197,341,562 $ 160,875,564
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of notes payable $ 31,477,289 $ 29,656,260
Current portion of capital lease obligations 2,486,558 2,278,304
Current portion of notes payable to related parties 934,784 925,911
Accounts payable 13,962,350 16,011,676
Accrued expenses 12,165,235 4,401,285
Billings in excess of cost and estimated earnings 4,572,926 3,512,562
------------- -------------
Total current liabilities 65,599,142 56,785,998
Notes payable 19,258,740 19,510,373
Capital lease obligations 7,483,885 6,960,768
Notes payable to related party -- 146,776
Deferred tax liability 1,720,146 1,720,146
------------- -------------
Total liabilities 94,061,913 85,124,061
------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 100,000,000
shares authorized; 30,694,963 shares
issued and 30,489,274 shares outstanding
at March 31, 2000; 29,112,194 shares
issued and 28,906,505 shares outstanding
at December 31, 1999 73,968,893 60,106,750
Additional paid-in capital 12,731,149 2,581,149
Retained earnings 17,409,694 13,893,691
------------- -------------
104,109,736 76,581,590
Less: treasury stock, 205,689 shares, at cost (830,087) (830,087)
------------- -------------
Total stockholders' equity 103,279,649 75,751,503
------------- -------------
Total liabilities and stockholders' equity $ 197,341,562 $ 160,875,564
============= =============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
INTERNATIONAL FIBERCOM, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31,
----------------------------
2000 1999
------------ ------------
(unaudited)
Revenues $ 59,563,715 $ 27,865,337
Cost of revenues 41,347,791 19,402,778
------------ ------------
Gross margin 18,215,924 8,462,559
General and administrative expenses 11,464,112 4,461,491
------------ ------------
Income from operations 6,751,812 4,001,068
------------ ------------
Other income (expense):
Interest income 175,635 38,421
Interest expense (1,461,068) (392,626)
Other Income 27,375 14,345
------------ ------------
(1,258,058) (339,860)
------------ ------------
Net income before income taxes 5,493,754 3,661,208
Provision for income taxes (1,977,751) (1,429,234)
------------ ------------
Net income $ 3,516,003 $ 2,231,974
Preferred stock dividend -- 4,000
------------ ------------
Net income attributable to common stockholders $ 3,516,003 $ 2,227,974
============ ============
Earnings per common share:
Basic $ 0.12 $ 0.08
Diluted $ 0.11 $ 0.08
Shares used in computing earnings per share:
Basic 29,728,857 26,976,948
Diluted 33,047,592 29,081,368
See notes to consolidated financial statements.
3
<PAGE>
INTERNATIONAL FIBERCOM, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
Common Stock Additional
--------------------------- Paid-in
Shares Amount Capital
------------ ------------ ------------
Balance January 1, 2000 29,112,194 $ 60,106,750 $ 2,581,149
Current year activity (unaudited):
Exercise of common stock
options and warrants 1,325,134 7,530,170
Common stock issued in
connection with acquisitions 161,623 3,841,576
Common stock issued in
connection with contingent
acquisition payments 96,012 2,490,397
Stock option and warrant
income tax benefit 10,150,000
Net income
------------ ------------ ------------
Balance, March 31, 2000 (unaudited) 30,694,963 $ 73,968,893 $ 12,731,149
============ ============ ============
Retained Treasury
Earnings Stock Totals
------------ ------------ ------------
Balance January 1, 2000 $ 13,893,691 $ (830,087) $ 75,751,503
Current year activity (unaudited):
Exercise of common stock
options and warrants 7,530,170
Common stock issued in
connection with acquisitions 3,841,576
Common stock issued in
connection with contingent
acquisition payments 2,490,397
Stock option and warrant
income tax benefit 10,150,000
Net income 3,516,003 3,516,003
------------ ------------ ------------
Balance, March 31, 2000 (unaudited) $ 17,409,694 $ (830,087) $103,279,649
============ ============ ============
See notes to consolidated financial statements.
4
<PAGE>
INTERNATIONAL FIBERCOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------
2000 1999
----------- -----------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,516,003 $ 2,231,974
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 2,299,712 976,831
Loss on sale of fixed assets 12,947 --
Changes in operating assets and liabilities:
Accounts receivable, net (1,210,422) 2,105,865
Costs and estimated earnings in excess of billings, net (4,436,683) (2,364,885)
Inventory, net (1,195,900) (82,052)
Income taxes receivable 2,531,369 (642,957)
Other current assets (1,751,310) (72,597)
Other assets 202,923 (302,588)
Accounts payable (2,495,458) (3,488,587)
Accrued expenses 2,338,844 263,543
----------- -----------
Net cash used in operating activities (187,975) (1,375,453)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (3,167,475) (3,415,598)
Cash received from sale of property and equipment 187,949 --
Payments for acquisitions (360,000) (2,575,987)
----------- -----------
Net cash used in investing activities (3,339,526) (5,991,585)
----------- -----------
Cash flows from financing activities:
Proceeds from line of credit 7,500,000 --
Repayment on line of credit (5,500,000) --
Proceeds from notes payable and capital lease obligations 1,655,410 5,890,031
Repayment of notes payable to related parties (137,904)
Repayment of notes payable and capital lease obligations (1,472,667) --
Debt issuance costs (734,109)
Proceeds from warrant and stock option exercises 7,530,170 949,941
----------- -----------
Net cash provided by financing activities 8,840,900 6,839,972
----------- -----------
Net increase (decrease) in cash and cash equivalents 5,313,399 (527,066)
Cash and cash equivalents, beginning of period 3,182,408 4,789,547
----------- -----------
Cash and cash equivalents, end of period $ 8,495,807 $ 4,262,481
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
INTERNATIONAL FIBERCOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
Supplemental disclosure of non-cash transactions:
In connection with acquisitions, the Company
assumed liabilities as follows:
Fair value of assets acquired $ 10,350,177 $ 5,010,337
Cash paid in the first quarter for
acquisitions (including acquisition costs) (360,000) (2,875,987)
Cash paid in April 2000 for acquisitions
closed in the first quarter of 2000 (4,436,425) --
------------ ------------
Liabilities and notes assumed and stock issued to sellers $ 5,553,752 $ 2,134,350
============ ============
Increase in additional paid-in capital resulting from
recognizing tax benefits from stock option and
warrant exercises $ 10,150,000 $ --
============ ============
Accrued contingent acquisition payments payable in cash $ 1,088,546 $ --
============ ============
Contingent acquisition payments paid in common stock $ 2,490,397 $ --
============ ============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
INTERNATIONAL FIBERCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
International FiberCom, Inc. (the "Company"), a C Corporation incorporated in
Arizona on December 29, 1972, is an end-to-end, independent solutions provider
serving the telecommunications industry. The Company delivers a broad range of
solutions designed to enable, enhance and support voice, data and video
communications through wired and wireless networks operating inside and outside
buildings - internal and external networks. In delivering these solutions, the
Company designs, develops, installs and maintains networks that support
Internet-related and other communications applications and services for its
customers through broadband, including fiber-optic and copper, and wireless
connectivity solutions. The Company develops, manufactures and sells proprietary
wireless communications equipment. The Company also resells new, deinstalled and
refurbished communications equipment from a variety of manufacturers. The
Company delivers its products and services through three operating segments:
infrastructure development; wireless technologies; and equipment distribution.
BASIS OF PRESENTATION:
In the opinion of management, the accompanying consolidated financial statements
reflect all adjustments, consisting of normal recurring accruals, necessary to
present fairly the financial position as of March 31, 2000 and the results of
its operations for the three month period ended March 31, 2000. Although
management believes that the disclosures in these financial statements are
adequate to make the information presented 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 three month periods ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the full year
ending December 31, 2000. The accompanying consolidated financial statements
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-K for the year ended December 31, 1999.
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany amounts and
transactions have been eliminated.
RECLASSIFICATIONS:
Certain balances as of December 31, 1999 have been reclassified in the
accompanying consolidated financial statements to conform with the current
period presentation. These reclassifications had no effect on previously
reported net income or stockholders' equity.
7
<PAGE>
INTERNATIONAL FIBERCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS cont'd
(UNAUDITED)
NOTE 2 - SIGNIFICANT BALANCE SHEET COMPONENTS:
Significant balance sheet components consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Accounts receivable, net:
Contract billings $ 38,220,486 $ 38,233,700
Retainage 3,871,533 2,912,227
Non-contract related accounts receivable 9,195,910 7,475,519
------------- -------------
51,287,929 48,621,446
Less: allowance for doubtful accounts (1,261,084) (1,164,242)
------------- -------------
$ 50,026,845 $ 47,457,204
============= =============
Costs and estimated earnings in excess of billings:
Costs incurred on contracts in progess $ 96,953,064 $ 76,631,918
Estimated earnings 30,602,633 21,033,140
------------- -------------
127,555,697 97,665,058
Less: billings to date (107,371,495) (81,539,411)
------------- -------------
$ 20,184,202 $ 16,125,647
============= =============
Included in the accompanying consolidated balance
sheets as follows:
Costs and estimated earnings in excess of billings $ 24,757,128 $ 19,638,209
Billings in excess of costs and estimated earnings (4,572,926) (3,512,562)
------------- -------------
$ 20,184,202 $ 16,125,647
============= =============
Inventory, net:
New and used telecommunications equipment $ 20,285,734 $ 19,218,888
Cabling and equipment 1,211,438 1,222,039
Raw materials 497,232 253,577
------------- -------------
21,994,404 20,694,504
Less: allowance for obsolete inventory (2,067,170) (1,972,170)
------------- -------------
$ 19,927,234 $ 18,722,334
============= =============
Property and equipment, net:
Construction equipment $ 24,790,185 $ 21,783,522
Vehicles 6,281,224 5,299,875
Building and land 3,616,642 2,854,860
Office furniture and equipment 5,110,870 4,985,467
Software 2,059,531 1,964,772
Leasehold improvements 866,898 725,289
------------- -------------
42,725,350 37,613,785
Less: accumulated depreciation (14,668,991) (13,014,162)
------------- -------------
$ 28,056,359 $ 24,599,623
============= =============
</TABLE>
8
<PAGE>
INTERNATIONAL FIBERCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)
NOTE 3 - OPERATING LINE OF CREDIT:
In March 2000, the Company entered into a Credit Agreement (the "Agreement")
with a syndication of commercial banks. Under the terms of the Agreement, the
Company may borrow up to $100,000,000 (plus $10,000,000 in stand-by letters of
credit, of which $0 were issued as of March 31, 2000) and the borrowings bear
interest at either LIBOR plus 175 to 250 basis points or the prime rate plus 25
to 100 basis points, determined based on certain financial covenants, at the
discretion of the Company. The Company has an option, subject to certain
conditions, to increase the maximum borrowings to $150,000,000. The Agreement
requires monthly payments of interest and it matures in March 2003. Although
amounts due under the Agreement were non-current at March 31, 2000, the Company
has classified amounts borrowed for working capital purposes, totaling
$30,260,498, as current, with the remaining $17,477,488 classified as long-term,
for balance sheet purposes. Borrowings are secured by substantially all of the
Company's assets and the Company is required to pay an annual commitment fee
equal to 0.375% to 0.5%, determined based on certain financial covenants, of the
unused portion of the line of credit. The Agreement places certain business,
financial and operating restrictions on the Company relating to, among other
things, the incurrence of additional indebtedness, acquisitions, asset sales,
mergers, dividends, distributions and repurchases and redemption of capital
stock. The Agreement also requires that specified financial ratios and balances
be maintained. As of December 31, 1999, the Company was in compliance with these
covenants.
In connection with the Agreement, the borrowing limit under the Company's
equipment lease line of credit was increased from $10,000,000 to $15,000,000.
NOTE 4 - ACQUISITIONS:
On January 1, 2000, the Company acquired Beecroft Trenching, Inc. ("Beecroft")
in exchange for 161,623 shares of IFCI common stock, valued at $3,841,576, and
$4,436,425 in cash. The cash portion of the consideration was accrued as of
March 31, 2000 and paid to the prior owners of Beecroft in April 2000. The
Company accounted for the acquisition of Beecroft using the purchase method of
accounting.
In 1999, the Company acquired All Star Telecom, Inc. ("All Star") and Blue Ridge
Solutions ("Blue Ridge") and accounted for the acquisitions using the purchase
method of accounting. Their respective purchase agreements included provisions
for contingent consideration that is payable if certain financial targets are
met over a three-year period. Certain financial targets specified in the
purchase agreements were achieved by All Star and Blue Ridge through March 31,
2000 and the Company therefore issued 96,012 shares of IFCI Common Stock, valued
at $2,490,397, and accrued $1,088,546, payable in cash, to the former owners of
All Star and Blue Ridge. The cash portion of the additional consideration was
paid in April 2000 and the total consideration was recorded as additional
goodwill.
NOTE 5 - STOCKHOLDERS' EQUITY:
STOCK OPTION AND WARRANT INCOME TAX BENEFIT
During the first quarter of 2000, certain employees and non-employees of the
Company exercised incentive stock options, non-qualified stock options and
warrants to purchase common stock of the Company. The exercise of in-the-money
non-qualified stock options and warrants, as well as the disqualifying
disposition of in-the-money incentive stock options, results in ordinary income
to the individual and a corresponding income tax deduction for the Company. The
total benefit to be recognized by the Company resulting from these exercises and
sales of stock options and warrants during the first quarter of 2000 is
$10,150,000. This amount has been recorded on the balance sheet as income tax
receivable and additional paid-in-capital.
9
<PAGE>
INTERNATIONAL FIBERCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)
COMPUTATION OF EARNINGS PER SHARE
The computation of basic and diluted earnings per share is as follows:
3 Months Ended March 31,
-------------------------
2000 1999
----------- -----------
Numerator:
Numerator for basic earnings per share - net
income attributable to common stockholders $ 3,516,003 $ 2,227,974
Preferred stock dividends -- 4,000
----------- -----------
Numerator for diluted earnings per share -
adjusted net income attributable to common
stockholders $ 3,516,003 $ 2,231,974
=========== ===========
Denominator:
Denominator for basic earnings per share -
weighted-average shares outstanding 29,728,857 26,976,948
Effect of dilutive securities:
Convertible preferred stock -- 44,381
Convertible debt -- 182,648
Dilutive options and warrants 3,318,735 1,877,391
----------- -----------
Diluted shares outstanding 33,047,592 29,081,368
=========== ===========
10
<PAGE>
INTERNATIONAL FIBERCOM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - cont'd
(UNAUDITED)
NOTE 6 - SEGMENT INFORMATION:
The Company delivers its products and services through three operating segments:
infrastructure development, equipment distribution and wireless technologies.
Infrastructure development provides consulting, design and engineering services;
installs and maintains internal and external broadband communications systems,
including underground and aerial fiber-optic, copper and wireless systems; and
installs and maintains integrated local and wide area networks.
Equipment distribution resells new, deinstalled and refurbished communications
equipment manufacture by a variety of companies. This equipment is used in the
digital access, switching and transport systems of communications service
providers and other companies.
Wireless technologies designs, manufactures and installs proprietary wireless
connectivity solutions designed to enable and enhance wireless communications,
in both fixed and mobile applications, and tests and certifies wireless systems.
Segment information for the three months ended March 31, 2000 and 1999 is as
follows:
<TABLE>
<CAPTION>
Infrastructure Equipment Wireless
Development Distribution Technologies Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
For the three months ended March 31, 2000:
Revenues $ 52,393,635 $ 6,614,077 $ 556,003 $ 59,563,715
Gross margin 15,910,261 2,081,429 224,234 18,215,924
Depreciation and amortization 1,902,687 316,162 80,863 2,299,712
Interest expense 1,297,712 120,679 42,677 1,461,068
Operating income (loss) 6,618,915 515,672 (382,775) 6,751,812
Assets 143,192,761 47,134,746 7,014,055 197,341,562
For the three months ended March 31, 1999:
Revenues $ 19,389,089 $ 7,551,161 $ 925,087 $ 27,865,337
Gross margin 5,452,521 2,485,791 524,247 8,462,559
Depreciation and amortization 665,812 302,519 8,500 976,831
Interest expense 248,886 143,415 325 392,626
Operating income 2,334,089 1,216,574 450,405 4,001,068
Assets 41,229,795 44,626,018 6,205,289 92,061,102
</TABLE>
For purpose of measuring the results of operations of each segment, the Company
allocates corporate overhead and assets to each segment based on a percentage of
revenues.
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
We are an end-to-end, independent solutions provider serving the
telecommunications industry. We deliver a broad range of solutions designed to
enable, enhance and support voice, data and video communications through wired
and wireless networks operating inside and outside buildings - internal and
external networks. In delivering these solutions, we design, develop, install
and maintain networks that support Internet-related and other communications
applications and services for our customers through broadband, including
fiber-optic and copper, and wireless connectivity solutions. We develop,
manufacture and sell proprietary wireless communications equipment. We also
resell new, deinstalled and refurbished communications equipment from a variety
of manufacturers.
We have grown significantly since 1997 as a result of internal growth and
strategic acquisitions. Consolidated revenues since 1997 have grown at an
average annual rate of 73%. We deliver our products and services through three
operating groups:
* Infrastructure Development Group;
* Wireless Technologies Group; and
* Equipment Distribution Group.
We derive a substantial portion of our revenue through contracts accounted for
under the percentage of completion method whereby revenue is recognized based on
the ratio of contract costs incurred to total estimated contract costs. As a
result, gross margins can increase or decrease based upon changes in cost and
revenue estimates during individual contract periods.
On January 1, 2000, we acquired Beecroft Trenching, Inc. ("Beecroft") in
exchange for 161,623 shares of IFCI common stock, valued at $3,841,979, and
$4,436,425 in cash. The cash portion of the consideration was accrued as of
March 31, 2000 and paid to the prior owners of Beecroft in April 2000. The
acquisition of Beecroft was accounted for using the purchase method of
accounting.
In March 2000, we entered into an Amended and Restated Revolving Credit
Agreement (the "Agreement") with a syndication of commercial banks. Under the
terms of the Agreement, we may borrow up to $100 million (including $10 million
in stand-by letters of credit), an increase from the original borrowing limit of
$60 million. We have an option, subject to certain conditions, to increase the
maximum borrowings to $150,000,000. Our borrowings under the Agreement bear
interest at either LIBOR plus 175 to 250 basis points or the prime rate plus 25
to 100 basis points, determined based on certain financial covenants, at our
discretion. In connection with the Agreement, the borrowing limit under our
equipment lease line of credit was increased from $10 million to $15 million.
12
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth our consolidated statement of operations in
dollars and as a percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------
2000 1999
--------------------- ---------------------
<S> <C> <C> <C> <C>
Revenues $ 59,563,715 100.0% $ 27,865,337 100.0%
Cost of revenues 41,347,791 69.4% 19,402,778 69.6%
------------ ----- ------------ -----
Gross margin 18,215,924 30.6% 8,462,559 30.4%
General and administrative expenses 11,464,112 19.3% 4,461,491 16.0%
------------ ----- ------------ -----
Income from operations 6,751,812 11.3% 4,001,068 14.4%
Other income (expense):
Interest income 175,635 0.3% 38,421 0.1%
Interest expense (1,461,068) -2.5% (392,626) -1.4%
Other Income 27,375 0.1% 14,345 0.0%
------------ ----- ------------ -----
(1,258,058) -2.1% (339,860) -1.3%
------------ ----- ------------ -----
Net income before income taxes 5,493,754 9.2% 3,661,208 13.1%
Provision for income taxes (1,977,751) -3.3% (1,429,234) -5.1%
------------ ----- ------------ -----
Net income $ 3,516,003 5.9% $ 2,231,974 8.0%
============ ===== ============ =====
</TABLE>
REVENUES. Revenues for the first quarter of 2000 increased $31.7 million, or
113.8%, to $59.6 million from $27.9 million for the same period in 1999. This
increase was due primarily to revenue growth of $33.0 million in the
infrastructure development, offset by decreases in revenues of $937,000 and
$369,0000 in the equipment distribution and wireless segments, respectively. The
revenue increase for the infrastructure development segment consisted of $19.3
million of revenues generated from subsidiaries acquired subsequent to March 31,
1999 and $13.7 million of revenues generated from internal increases in contract
activity resulting from increased demand for infrastructure development
services. The decrease in revenues for the equipment distribution segment was
primarily the result of the timing of product sales and the mix of inventory
products carried by the Company.. The decrease in revenues for the wireless
segment was the result of the Company reducing the volume of revenue generating
projects in order to concentrate more of its efforts on the research and
development of new technologies.
GROSS MARGIN. Gross margin for the first quarter of 2000 increased $9.7 million,
or 115.3%, to $18.2 million from $8.5 million for the same period in 1999. The
increase in gross margin was due to a $10.4 million increase in the
infrastructure development segment, offset by decreases in gross margin of
$400,000 and $300,000 for the equipment distribution and wireless segments,
respectively. The gross margin increase for the infrastructure development
segment consisted of $5.6 million margin generated from subsidiaries acquired
subsequent to March 31, 1999 and $4.8 million of gross margin generated from
internal increases in contract activity.
Gross margin as a percentage of revenues increased to 30.6% for the first
quarter of 2000 from 30.4% for the same period in 1999, due primarily to
increased gross margin for the infrastructure development segment. Gross margin
as a percentage of revenues for the infrastructure development segment was
30..4% for the first quarter of 2000, compared to 28.1% for the same period in
1999. This increase was primarily the result of the Company obtaining larger
contracts that result in improved production efficiencies and more favorable
terms on new contracts. Gross margin as a percentage of revenues for the
equipment distribution and wireless segments was 31.5% and 40.3%, respectively,
for the first quarter of 2000, compared to 32.9% and 56.7%, respectively, for
the same period in the prior year. Current period gross margin levels in the
13
<PAGE>
equipment distribution segment have declined due to the product mix and cost
basis of inventory sold.. Current period gross margin levels in the wireless
segment have declined due to the Company choosing to not perform certain
projects in order to concentrate more of its efforts on the research and
development of new technologies.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the first
quarter of 2000 increased $7.0 million, or 157.0%, to $11.5 million from $4.5
million for the same period in 1999. The increases were primarily due to
incremental costs associated with acquisitions made during the past 12 months,
as well as internal growth of existing subsidiaries and management additions
made during the past 12 months to support our continued growth. General and
administrative expenses, as a percentage of revenues, for the first quarter of
2000 were 19.2% compared to 16.0% for the same period in the prior year due to
the Company adding management and creating geographical regions to support
future growth.
OTHER INCOME (EXPENSE). Other expenses for the first quarter of 2000 increased
$918,000, or 270.2%, to $1.3 million from $340,000 for the same period in 1999.
The increases are primarily due to interest expense on the Company's credit
facilities. Borrowing activity has increased significantly during the past 12
months due to the acquisition of several subsidiaries through purchase
agreements consisting of all cash or cash and common stock terms as well as the
acquisition of operating equipment to support revenue growth in the
infrastructure development segment.
PROVISION FOR INCOME TAXES. Income taxes for the first quarter of 2000 increased
$549,000, or 38.4%, to $2.0 million from $1.4 million for the same period in
1999. The provision for income taxes increased due to higher current quarter
taxable earnings, offset by a lower effective tax rate for the first quarter of
2000 due primarily to tax savings initiatives implemented by the Company.
NET INCOME. Net income attributable to common stockholders for the first quarter
of 2000 increased $1.3 million, or 57.5%, to $3.5 million from $2.2 million for
the same period in 1999. The increase was the result of higher gross margins,
offset by increases in general and administrative expenses, other expenses and
provision for income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital needs relate primarily to equipment needed to support
revenue growth and to provide working capital for general corporate purposes,
including strategic acquisitions. The company has historically financed
operations through a combination of operating cash flow, lines of credit, and
debt and equity offerings. The Company's liquidity is impacted, to a large
degree, by the nature of billing provisions under our installation and service
contracts. Generally, in the early periods of contracts, cash expenditures and
accrued profits are greater than allowed billings, while contract completion
results in billing previously unbilled costs and related accrued profits.
For the first quarter of 2000, net cash used in operations totaled $188,000 as
compared to $1.4 million for the same period in the prior year. Cash generated
from operations during the period totaled $5.8 million consisting of net income
of $3.5 million and, depreciation and amortization $2.3 million. Operating
assets and liabilities decreased operating cash flow $6.0 million, primarily due
to a decrease in accounts payable and increases in accounts receivable,
inventory, other current assets and costs and estimated earnings in excess of
billings, offset by a decrease in income taxes receivable and an increase in
accrued expenses.
During the first quarter of 2000, the Company used $3.3 million in investing
activities which consisted primarily of net equipment purchases totaling $3.0
million and cash used in business acquisitions totaling $360,000. For the first
quarter of 2000, financing activities generated approximately $8.8 million which
consisted primarily of net borrowings under the Company's credit facilities
totaling $2 million, $1.7 million in proceeds from notes payable and capital
lease obligations, $7.5 million in proceeds from warrant and stock option
exercises, offset by $1.6 million in repayments on notes payable and capital
lease obligations and $734,000 of debt issuance costs paid.
14
<PAGE>
As of March 31, 2000, the Company had a revolving line of credit with a
syndication of commercial banks totaling $100 million (with an option, under
certain conditions, to raise the total borrowings available to $150,000,000),
with an available balance of approximately $52 million. Additionally, the
Company had a $15 million lease line of credit, with an available balance of
approximately $8.5 million. Aggregate proceeds from current working capital,
funds generated through operations and current availability under existing
credit facilities are considered sufficient to fund the anticipated growth in
the Company's operations for the next 12 to 18 months. The Company may, however,
seek to obtain additional capital through additional debt or equity offerings
depending upon prevailing market conditions and the demand for our products and
services.
INFLATION AND SEASONALITY.
We do not believe that we are significantly impacted by inflation or
seasonality.
FORWARD-LOOKING INFORMATION.
This Report contains certain forward-looking statements and information within
the meaning of section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The cautionary statements made in this Report
should be read as being applicable to all related forward-looking statements
wherever they appear in this report. Forward-looking statements, by their very
nature, include risks and uncertainties.. Accordingly, the Company's actual
results could differ materially from those discussed herein. A wide variety of
factors could cause or contribute to such differences and could adversely impact
revenues, profitability, cash flows and capital needs. Such factors, many of
which are beyond the control of the Company, include the following: the
Company's success in obtaining new contracts; the volume and type of work orders
that are received under such contracts; the accuracy of the cost estimates for
the projects; the Company's ability to complete its projects on time and within
budget; levels of, and ability to collect amounts receivable; availability of
trained personnel and utilization of the Company's capacity to complete work;
the Company's ability to complete proposed acquisitions and, upon their
completion, to integrate the acquisitions into its organization and manage its
growth; competition and competitive pressures on pricing; and economic
conditions in the United States and in the regions served by the Company.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not involved as a party to any legal proceeding other than
various claims and lawsuits arising in the ordinary course of its business, none
of which, in our opinion, is material, either on an individual or a collective
basis.
ITEM 2. CHANGES IN SECURITIES.
Sales of Unregistered Securities
During the first quarter of 2000, we issued 161,623 shares of Common Stock to
the shareholders of Beecroft Trenching, Inc. at a price of $23.77 per share, the
then market price, in connection with our acquisition of the stock of that
company. Such shares were issued pursuant to Section 4(2) of the Securities Act
of 1933, as amended, (the "Act") and Regulation D of the Act.
During the first quarter of 2000, we issued 1,270 shares of Common Stock to the
former shareholders of Blue Ridge Solutions ("Blue Ridge") at a price of $24.61
per share, the then market price, in connection with contingent consideration
payable to the former shareholders of Blue Ridge based upon Blue Ridge meeting
certain financial targets, as specified in its purchase agreement. Blue Ridge
was acquired by the Company in April 1999. Such shares were issued pursuant to
Section 4(2) and Regulation D of the Act.
During the first quarter of 2000, we issued 94,742 shares of Common Stock to the
former shareholders of All Star Telecom, Inc. ("All Star") at a price of $25.96
per share, the then market price, in connection with contingent consideration
payable to the former shareholders All Star based upon All Star meeting certain
financial targets, as specified in its purchase agreement. All Star was acquired
by the Company in April 1999. Such shares were issued pursuant to Section 4(2)
and Regulation D of the Act.
ITEMS 3, 4 AND 5 ARE OMMITTED BECAUSE THESE ITEMS ARE INAPPLICABLE TO THIS
REPORT.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable to this report
16
<PAGE>
SIGNATURE
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 /s/ Terry W. Beiriger
-------------------------------------
Terry W. Beiriger,
Chief Financial Officer
DATED: May 12, 2000
17
<PAGE>
EXHIBIT INDEX
Exhibits Description
- -------- -----------
27. Financial Data Schedule
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31,
2000, CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2000, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE FOOTNOTES
THERETO.
</LEGEND>
<CIK> 924632
<NAME> INTERNATIONAL FIBERCOM INC
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 8,495,807
<SECURITIES> 0
<RECEIVABLES> 50,026,845
<ALLOWANCES> 0
<INVENTORY> 19,927,234
<CURRENT-ASSETS> 118,032,404
<PP&E> 42,730,756
<DEPRECIATION> (14,674,397)
<TOTAL-ASSETS> 197,341,562
<CURRENT-LIABILITIES> 65,599,142
<BONDS> 0
0
0
<COMMON> 73,968,893
<OTHER-SE> 29,310,756
<TOTAL-LIABILITY-AND-EQUITY> 197,341,562
<SALES> 59,563,715
<TOTAL-REVENUES> 59,563,715
<CGS> 41,347,791
<TOTAL-COSTS> 52,811,903
<OTHER-EXPENSES> (203,010)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,461,068
<INCOME-PRETAX> 5,493,754
<INCOME-TAX> 1,977,751
<INCOME-CONTINUING> 3,516,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,516,003
<EPS-BASIC> .12
<EPS-DILUTED> .11
</TABLE>
