<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____________TO ______________
COMMISSION FILE NUMBER 0-24334
-------------------------
AMERILINK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 31-1409345
----------------------------- ------------------------------------
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1900 E. DUBLIN-GRANVILLE ROAD, COLUMBUS, OHIO 43229
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(614) 895-1313
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X . NO .
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3,478,580 SHARES OF COMMON STOCK WERE OUTSTANDING AS OF NOVEMBER 8, 1996
1
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AMERILINK CORPORATION
QUARTERLY REPORT FOR THE QUARTER ENDED SEPTEMBER 29, 1996
Index Page No.
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PART I: FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets as of March 31, 1996 and
September 29, 1996 (Unaudited) 3
Consolidated Statements of Income (Unaudited) for the
twenty-six weeks ended October 1, 1995 and
September 29, 1996 4
Consolidated Statements of Income (Unaudited) for the
thirteen weeks ended October 1, 1995 and
September 29, 1996 5
Consolidated Statement of Changes in Shareholders'
Equity (Unaudited) for the twenty-six weeks ended
September 29, 1996 6
Consolidated Statements of Cash Flows (Unaudited ) for the
twenty-six weeks ended October 1, 1995 and
September 29, 1996 7
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
PART II: OTHER INFORMATION
Items 1-6 13
Signatures 14
2
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AMERILINK CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
March 31, 1996 September 29, 1996
- --------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 78,680 $ 111,870
Accounts receivable-trade, net of allowance for doubtful
accounts of $95,000 and $208,000 8,899,443 9,688,472
Work-in-process 2,902,617 5,855,465
Materials and supply inventories 1,710,084 1,887,981
Other receivables 221,659 455,611
Deferred tax benefit 127,286 127,286
Other 510,263 342,899
---------- ----------
Total current assets 14,450,032 18,469,584
Property and equipment - net 6,032,551 5,858,325
Deposits and other assets 71,217 172,352
---------- ----------
Total assets $ 20,553,800 $ 24,500,261
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 1,802,121 $ 2,363,701
Liability to subcontractors 1,083,186 1,329,562
Accrued compensation and related expenses 1,078,935 1,092,891
Accrued insurance 536,872 384,653
Other 160,952 166,872
Current maturities of long-term debt 720,000 429,190
---------- ----------
Total current liabilities 5,382,066 5,766,869
Long-term debt, less current maturities 5,843,227 8,875,000
Deferred income taxes 117,839 117,839
---------- ----------
Total liabilities 11,343,132 14,759,708
Shareholders' equity:
Preferred stock, without par; 1,000,000 shares authorized;
none issued or outstanding ---- ----
Common stock, without par; 10,000,000 shares authorized;
3,478,580 shares issued and outstanding 8,061,395 8,061,395
Retained earnings 1,149,273 1,679,158
---------- ----------
Total shareholders' equity 9,210,668 9,740,553
---------- ----------
Total liabilities and shareholders' equity $ 20,553,800 $ 24,500,261
---------- ----------
---------- ----------
- --------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
3
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AMERILINK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Twenty-six Weeks Ended
October 1, 1995 September 29, 1996
- --------------------------------------------------------------------------------
Revenues $27,458,385 $29,183,984
Cost of sales 19,318,213 19,503,376
--------- ---------
Gross profit 8,140,172 9,680,608
Selling, general and administrative expenses 7,373,412 8,522,845
--------- ---------
Income from operations 766,760 1,157,763
Interest expense (223,253) (278,706)
Other income 2,667 3,828
--------- ---------
Income before income taxes 546,174 882,885
Provision for income taxes 218,000 353,000
--------- ---------
Net income $ 328,174 $ 529,885
--------- ---------
--------- ---------
Net income per common share $ 0.09 $ 0.15
--------- ---------
--------- ---------
Weighted average common shares outstanding 3,631,640 3,615,755
- --------------------------------------------------------------------------------
See notes to financial statements.
4
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AMERILINK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Thirteen Weeks Ended
October 1, 1995 September 29, 1996
- --------------------------------------------------------------------------------
Revenues $ 16,414,508 $ 15,662,964
Cost of sales 11,459,013 10,482,132
--------- ---------
Gross profit 4,955,495 5,180,832
Selling, general and administrative expenses 3,942,792 4,518,693
--------- ---------
Income from operations 1,012,703 662,139
Interest expense (123,411) (151,074)
Other income 1,171 3,206
--------- ---------
Income before income taxes 890,463 514,271
Provision for income taxes 356,000 206,000
--------- ---------
Net income $ 534,463 $ 308,271
--------- ---------
--------- ---------
Net income per common share $ 0.15 $ 0.09
--------- ---------
--------- ---------
Weighted average common shares outstanding 3,640,620 3,591,558
- --------------------------------------------------------------------------------
See notes to financial statements.
5
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AMERILINK CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE TWENTY-SIX WEEKS ENDED SEPTEMBER 29, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Number Common Retained
of Shares Stock Earnings Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at March 31, 1996 3,478,580 $ 8,061,395 $ 1,149,273 $ 9,210,668
Net income ---- ---- 529,885 529,885
--------- --------- --------- ---------
Balance at September 29, 1996 3,478,580 $ 8,061,395 $ 1,679,158 $ 9,740,553
--------- --------- --------- ---------
--------- --------- --------- ---------
- ----------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
6
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AMERILINK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Twenty-six Weeks Ended
October 1, 1995 September 29, 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 328,174 $ 529,885
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 922,615 1,055,297
Net gain on disposal of fixed assets (834) (36,355)
Changes in operating assets and liabilities:
Accounts receivable and work-in-process (4,330,963) (3,741,877)
Materials and supply inventories (483,829) (177,897)
Other receivables (21,646) (233,952)
Other current assets (143,351) 167,364
Trade accounts payable 1,997,035 561,580
Liability to subcontractors 358,480 246,376
Accrued compensation and related expenses 65,787 13,956
Accrued insurance (296,258) (152,219)
Other current liabilities 4,067 5,920
---------- ---------
Net cash used in operating activities (1,600,723) (1,761,922)
INVESTING ACTIVITIES
Purchase of property and equipment (2,109,162) (1,315,765)
Proceeds from sale of property and equipment 18,469 471,049
Deposits and other assets 208,583 (101,135)
---------- ---------
Net cash used in investing activities (1,882,110) ( 945,851)
FINANCING ACTIVITIES
Principal payments on long-term debt (5,810,000) (8,310,000)
Proceeds from borrowings on long-term debt 9,300,000 11,050,963
---------- ---------
Net cash provided by financing activities 3,490,000 2,740,963
---------- ---------
Increase in cash and cash equivalents 7,167 33,190
Cash and cash equivalents at beginning of period 71,944 78,680
---------- ---------
Cash and cash equivalents at end of period $ 79,111 $ 111,870
---------- ---------
---------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 225,044 $ 284,130
Income taxes paid $ 174,495 $ 86,465
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
7
<PAGE>
AMERILINK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
AmeriLink Corporation (the "Company") is a nationwide provider of cabling
systems for the transmission of video, voice and data. The Company provides
these services on a national basis predominantly to cable television multiple
system operators. The Company also offers its services to other providers of
telecommunications services, including: traditional telephone service providers
("TELCOs"), including local exchange carriers ("LEC") and long distance
carriers; competitive access providers ("CAPS"); Direct Broadcast Satellite
("DBS") providers; and users of Local Area Network ("LAN") systems. The
Company's cabling services include the designing, constructing, installing and
maintaining of fiber optic, copper and coaxial cabling systems. The Company
provides these services predominately through the use of independent contractors
via its national network of regional and satellite field offices.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. These financial
statements should be read in conjunction with the March 31, 1996 audited
financial statements of AmeriLink Corporation contained in its Annual Report to
Shareholders.
The financial information included herein reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for interim
periods. The results of operations for the Twenty-six weeks ended September
29, 1996 are not necessarily indicative of the results to be expected for the
full year.
2. NET INCOME PER SHARE
Net Income per share is calculated by dividing net income by the weighted
average shares outstanding for the period presented, including, when their
effect is dilutive, common stock equivalents consisting of shares subject to
stock options.
3. NOTES PAYABLE AND LONG-TERM DEBT
On September 27, 1996, the Company amended its credit agreement with its
commercial bank. Under the agreement, the Company has a $12,000,000 unsecured
revolving credit note and an unsecured term note. The interest rate on the
revolving credit note is prime minus 1% and interest is payable monthly. The
revolving credit note matures September 30, 1998 and includes a commitment fee
of 1/4% on any unused portion of the note. Borrowings under the revolving
credit note were $8,875,000 at September 29, 1996.
The unsecured term note in the amount of $1,629,190 matures May 31, 1997.
Interest is payable monthly at the rate of prime. The balance of the unsecured
term note at September 29, 1996 was $429,190.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISONS OF TWENTY-SIX WEEKS ENDED OCTOBER 1, 1995 AND SEPTEMBER 29, 1996
REVENUES
Total revenues for the first six months of fiscal 1997 were $29,183,984
compared to $27,458,385 for the first six months of fiscal 1996, an increase of
6.3%.
The Company implemented a strategy in early fiscal 1997 of obtaining and
performing more residential and commercial premises wiring projects. The
Company believes that the current competitive environment associated with larger
outside plant construction projects, along with uncertainty regarding customer
work commitments on these construction projects, make them less desirable in the
near term than premises wiring projects. Consistent with this strategy, outside
plant construction revenues decreased approximately $4.8 million, or 46%, to
approximately $5.5 million for the first six months of fiscal 1997 from
approximately $10.3 million recorded in the first six months of fiscal 1996.
Total residential and commercial premises wiring revenues (non-construction
cabling services) for the first six months of fiscal 1997 were approximately
$23.7 million compared to approximately $17.2 million for the prior fiscal year,
an increase of 38%. The increase in premises wiring revenues is due primarily
to growth in the Company's local area network cabling services. Local area
network revenues for the first six months of fiscal 1997 were approximately $7.8
million, versus approximately $3.6 million for the comparable period in fiscal
1996. Revenues from the Company's direct broadcast satellite services have also
increased, to approximately $3.7 million for the first six months of fiscal 1997
from approximately $2.2 million for the first six months of fiscal 1996. The
growth in these services is due primarily to increased marketing efforts.
GROSS PROFIT
Gross profit was $9,680,608, or 33.2% of revenues, for the first six months
of fiscal 1997, as compared to $8,140,172, or 29.6% of revenues, for the first
six months of fiscal 1996.
The increase in gross margin for the first six months of fiscal 1997 can
primarily be attributed to a decrease in vehicle and equipment costs as a result
of a reduction of outside plant construction projects. These projects require
the use of heavy machinery, specialized trucks, tool systems, and other related
construction equipment. The Company has also experienced lower business
insurance related expenses for the first six months of fiscal 1997 versus the
first six months of fiscal 1996. The Company's overall operating results for
the first six months of fiscal 1997 were negatively impacted by operating losses
of approximately ($370,000) as a result of the Company's decision to close its
San Diego regional office and the completion of remaining outside plant
construction projects there. This closing process was substantially complete as
of September 29, 1996.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $8,522,845, or 29.2% of
revenues for the first six months of fiscal 1997, as compared to $7,373,412, or
26.9% of revenues for the first six months of fiscal 1996.
The Company's selling, general and administrative cost structure, which
consists primarily of field employee wages and payroll costs, is maintained at
levels necessary to adequately support both anticipated near term revenue levels
and projected longer term revenue levels. These anticipated revenue levels and
associated cost structures may vary among the Company's regional field offices
and geographic market areas. The dollar
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
increase in selling, general, and administrative expenses is primarily due to
increased employee wages and associated costs incurred to support both actual
and anticipated increased revenues. Payroll expenses for fiscal 1997 also
reflect increased amounts for sales personnel engaged in marketing the Company's
network cabling services.
INTEREST EXPENSE
Interest expense was $278,706, or 1.0% of revenues for the first six months
of fiscal 1997, as compared to $223,253 or 0.8% of revenues for the first six
months of fiscal 1996.
The dollar increase in interest expense is primarily due to increased
borrowings to finance accounts receivable and work-in-process.
RESULTS OF OPERATIONS
COMPARISONS OF THIRTEEN WEEKS ENDED OCTOBER 1, 1995 AND SEPTEMBER 30, 1996
REVENUES
Total revenues for the second quarter of fiscal 1997 were $15,662,964
compared to $16,414,508 for the second quarter of fiscal 1996, a decrease of
4.6%.
Outside plant construction revenues for the second quarter of fiscal 1997
were approximately $2.3 million, a decrease of approximately $4.7 million or 68%
from the corresponding quarter last year. This decrease is consistent with the
Company's strategy of focusing on premises wiring projects and reducing
marketing efforts on outside plant construction projects.
Total residential and commercial premises wiring revenues (non-construction
cabling services) for the second quarter were approximately $13.4 million, an
increase of approximately $3.9 million or 42% from the comparable quarter of
fiscal 1996. The increase in premises wiring revenues is due primarily to
growth in the Company's local area network cabling services. Local area network
revenues for the second quarter of fiscal 1997 were approximately $4.6 million,
versus approximately $2.3 million for the comparable period in fiscal 1996.
Revenues from the Company's direct broadcast satellite services also increased,
to approximately $2.3 million in the second quarter of fiscal 1997 from
approximately $1.1 million for the comparable quarter in fiscal 1996. The
Company is also experiencing an increase in premises wiring revenues from
telephone companies issuing work orders for residential cable television
installation work. Revenues from Telco providers increased to approximately
$800,000 for the fiscal 1997 second quarter from approximately $200,000 for the
second quarter of fiscal 1996. The Company believes that work opportunities
from traditional Telco providers should increase in the future as these
companies increase their capital expenditures for video systems.
GROSS PROFIT
Gross profit was $5,180,832, or 33.1% of revenues for the second quarter of
fiscal 1997, as compared to $4,955,495, or 30.2% of revenues for the second
quarter of fiscal 1996.
The increase in gross margin for the second quarter of fiscal 1997 can
principally be attributed to a decrease in vehicle and equipment costs as a
result of a reduction of outside plant construction projects. These projects
require the use of heavy machinery, specialized trucks, tool systems and other
related construction equipment. The Company has also experienced lower business
insurance related expenses for the second quarter of fiscal 1997 versus the
second quarter of fiscal 1996. The Company's overall operating results for
10
<PAGE>
the second quarter of fiscal 1997 were negatively impacted by operating losses
of approximately ($200,000) as a result of the Company's decision to close its
San Diego regional office and the completion of remaining outside plant
construction projects there. This closing process was substantially complete as
of September 29, 1996.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $4,518,693, or 28.8% of
revenues for the second quarter of fiscal 1997, as compared to $3,942,792, or
24% of revenues for the second quarter of fiscal 1996.
The Company's selling, general and administrative cost structure, which
consists primarily of field employee wages and payroll costs, is maintained at
levels necessary to adequately support both anticipated near term revenue levels
and projected longer term revenue levels. These anticipated revenue levels and
associated cost structures may vary among the Company's regional field offices
and geographic market areas. The dollar increase in selling, general and
administrative expenses is primarily due to increased employee wages and
associated costs incurred to support both actual and anticipated increased
revenues. In addition, the Company also increased its allowance for doubtful
accounts by $100,000 during the second quarter of fiscal 1997 as a result of a
customer filing for protection under Chapter 11 of the Bankruptcy Code.
INTEREST EXPENSE
Interest expense was $151,074, or 1.0% of revenues for the second quarter
of fiscal 1997, as compared to $123,411, or 0.8% of revenues for the second
quarter of fiscal 1996.
The dollar increase in interest expense is primarily due to increased
borrowings needed to finance accounts receivable and work-in-process.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. Historically, the Company's principal sources of liquidity have
come from operating cash flow and credit arrangements. The Company's primary
requirements for working capital are to finance accounts receivable,
work-in-process and capital expenditures. Pursuant to a typical construction or
LAN cabling contract, work performed by the Company is generally not billed to a
customer until various stages in a project are complete or until the entire
project is complete. Because the Company pays its suppliers and subcontractors
on a current basis, to the extent that trade payables exceed customer accounts
paid at any given time, the Company draws on its revolving credit note to
finance its work-in-process until project work is billed to and paid by the
customer.
Combined accounts receivable and work-in-process at September 29, 1996
totaled $15,543,937, as compared to $14,963,239 at October 1, 1995, an increase
of $580,698 or 4%. This increase is attributed to a general increase in
revenues and level of operations. Although there is no assurance that the
Company will be able to collect all or any part of these unsecured receivables,
the Company believes it has adequately provided for potential losses through its
allowance for doubtful accounts. The Company's failure to collect substantially
all of its accounts receivable and work-in-process would have an adverse impact
on its working capital and could adversely affect its results of operations.
Capital requirements are dependent upon a number of factors, including the
Company's revenues, level of operations, and the type of contracts and work that
the Company performs. Due to the fact that the Company generally has no
extended commitments from its customers, it is difficult to forecast longer term
revenues and associated capital expenditure and operating cash requirements.
Management believes that current and possible additional credit from its
commercial bank, cash flow from operations, and funds which may be obtained from
the issuance of common stock should provide sufficient capital to meet the
reasonably foreseeable business needs of the Company.
11
<PAGE>
CURRENT CREDIT ARRANGEMENTS. Under a credit agreement with its
commercial bank that was amended September 27, 1996, the Company has a
$12,000,000 unsecured revolving credit note and an unsecured term note. The
interest rate on the revolving credit note is prime minus 1% and interest is
payable monthly. The revolving credit note matures September 30, 1998 and
includes a commitment fee of 1/4% on any unused portion of the note. Borrowings
under the revolving credit note were $8,875,000 at September 29, 1996.
The unsecured term note in the amount of $1,629,190 matures May 31, 1997.
Interest is payable monthly at the bank's prime rate. The balance of the
unsecured term note at September 29, 1996 was $429,190.
CASH FLOW FROM OPERATING ACTIVITIES. For the first six months of fiscal
1997, net cash used in operating activities totaled $1,761,922. This is
principally the result of increases in accounts receivable and work-in-process
that were not offset by corresponding increases in accounts payable and
liabilities to subcontractors. The increase in accounts receivable and
work-in-process resulted from increases in the Company's level of operations.
The Company is limited in its ability to offset increases in accounts receivable
and work-in-process through increases in accounts payable or liabilities to
subcontractors.
CASH FLOW FROM INVESTING ACTIVITIES. For the first six months of fiscal
1997, net cash used in investing activities totaled $945,851. This was mainly
due to the purchase of property and equipment that totaled $1,315,765 for the
first six months of fiscal 1997. The level of capital expenditures is dependent
largely upon the level of construction services that the Company performs. The
Company uses heavy machinery, specialized trucks, and other construction
equipment to perform its construction services. The Company replaces existing
equipment as necessary, and replaces rented equipment with purchased equipment
if economically feasible.
SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS
The Company has no long-term contractual commitments to provide its
services. The contractual commitments which do exist generally can be
terminated on 30 days notice. These contractual commitments do not involve a
firm backlog of committed work because the nature of the Company's contracts
with MSOs, CAPs, Telcos and DBS providers produce daily work orders only on a
project-by-project basis which must be funded by an approved purchase order. In
addition, the Company's operations historically have been influenced by the
budget cycles of the Company's customers and by the impact of weather
conditions. Most of the Company's customers utilize a calendar year budget
cycle, funded with quarterly purchase authorizations, which in certain fiscal
years has resulted in a lack of availability of funds in the Company's third
fiscal quarter and has delayed work authorizations in the Company's fourth
fiscal quarter. Weather can affect the amount of construction cabling services
provided by the Company since they are performed outdoors. Weather can also
impact the Company's non-construction cabling services due to the limited and
lost production associated with poor driving conditions and generally difficult
working environments. Additionally, the construction of new and the rebuilding
of existing aerial and underground cable systems is dependent on the cable
television and the telephone industries' demands, which may fluctuate on a
seasonal basis.
INFLATION
Historically, inflation has not been a significant factor to the Company as
labor is the primary cost of operations and its contracts are typically
short-term in nature. On an ongoing basis, the Company attempts to minimize any
effects of inflation on its operating results by controlling operating costs
and, whenever possible, seeking to insure that selling prices reflect increases
in costs due to inflation.
ENVIRONMENTAL MATTERS
The Company anticipates that its compliance with various laws and
regulations relating to the protection of the environment will not have a
material effect on its capital expenditures, future earnings or competitive
position.
12
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
The Company cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Act of 1995) contained in this
Report or made by management of the Company involve risks and uncertainties, and
are subject to change based on various important factors. These important
factors include, among others, the risk of changing market conditions and
customer purchase authorizations, competitive and regulatory risks associated
with the telecommunications industry, and other risks described in the Company's
Securities and Exchange Commission filings.
AMERILINK CORPORATION
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS. NOT APPLICABLE
Item 2. CHANGE IN SECURITIES. NOT APPLICABLE
Item 3. DEFAULTS UPON SENIOR SECURITIES. NOT APPLICABLE
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 20, 1996, the Company held its Annual Meeting of
Shareholders. The only matter submitted to the vote of shareholders
was the election of three directors, each to serve until the 1998
Annual Meeting of Shareholders. The following table provides the
number of votes cast for and withheld as to the election of directors.
Name of Nominee For Withheld
--------------- --- --------
E. Len Gibson 3,381,091 9,512
William H. Largent 3,373,091 17,512
George Manser 3,373,091 17,512
Item 5. OTHER INFORMATION. NOT APPLICABLE
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description
----------- -----------
4.2 Bank Loan Agreement Amendment dated
September 27, 1996 between Amerilink Corp.
and Bank One, Columbus, N.A.
27 Financial Data Schedule filed herewith
as part of this report on Form 10-Q.
(b) No reports on Form 8-K have been filed
during the quarter ended September 29, 1996.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERILINK CORPORATION
(Registrant)
Date: November 11, 1996 By: /s/ Larry R. Linhart
-------------------------------
Larry R. Linhart
Chief Executive Officer
President
Date: November 11, 1996 By:/s/James W. Brittan
-------------------------------
James W. Brittan
Vice President of Finance
(Principal Financial and
Accounting Officer)
14
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SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement ("Second Amendment") dated as of
this 27th day of September, 1996, by and between Bank One, Columbus, N.A.,
(hereafter referred to as "Bank One"), AmeriLink Corp. and AmeriLink
Corporation (hereafter referred to as "Borrowers").
WITNESSETH:
THAT WHEREAS, Bank One and Borrowers are parties to a Loan Agreement dated
December 29, 1994, as amended as of September 29, 1995 (hereafter referred to as
the "Agreement"); and
WHEREAS, all parties hereto desire to provide for certain amendments to and
modifications of the existing Agreement;
NOW THEREFORE, in consideration of the foregoing the parties hereto agree
that the Agreement be amended and modified effective on the day and year first
above written as follows:
A. The amount of the Revolving Credit Loan as set forth in Section 1.1 of
the Agreement shall be changed from Ten Million Dollars ($10,000,000) to Twelve
Million Dollars ($12,000,000).
B. Section 1.2.1 of the Agreement is hereby deleted in its entirety and
replaced with the following:
1.2.1 DISBURSEMENTS AND PREPAYMENT. Companies shall execute and deliver
to Bank One a promissory note in the form of Exhibit "1.2.1(2nd)"
attached hereto (hereinafter referred to as the "Revolving Credit
Note"). Disbursements on the Revolving Credit Note shall be made
by Bank One upon Companies' request. Companies shall have the
right to pay all or any part of the outstanding principal balance
on the Revolving Credit Note at any time without penalty and
Companies may then reborrow such amounts.
C. Section 1.2.3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
1.2.3 MATURITY, INTEREST RATE, AND BASIS. The Revolving Credit Note will
mature on September 30, 1998 and shall bear interest prior to
maturity at Bank One's Prime Rate in effect from time to time
minus one percent (1%) per annum.
The interest rate will change effective immediately with any
change in Bank One's Prime Rate. Bank One's Prime Rate is herein
defined to mean the rate announced by Bank One from time to time
as its Prime Rate, which rate may not be the lowest or best rate
offered by Bank One. Interest shall be calculated on the basis
of the actual number of days elapsed over a year of 360 days.
D. Section 1.2.4 of the Agreement is hereby deleted in its entirety and
replaced with the following:
Page 1 of 4
<PAGE>
1.2.4 INTEREST PAYMENTS. Interest on the outstanding principal balance
of the Revolving Credit Note shall be paid by Companies in
monthly installments commencing on February 28, 1995 and
continuing on the last day of each succeeding calendar month
until September 30, 1998, when all accrued but unpaid interest
shall be due and payable in full.
E. Section 1.3.1 of the Agreement is hereby deleted in its entirety and
replaced with the following:
1.3.1 TERM NOTE. The indebtedness created hereunder shall be evidenced by
Companies' promissory note to Bank One in the form of Exhibit
"1.3.1(2nd)" attached hereto and hereinafter referred to as "Term
Note." Said Term Note shall be executed by Companies and
delivered to Bank One payable to the order of Bank One.
F. Section 1.3.3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
1.3.3 INTEREST PAYMENTS, RATE AND BASIS. Interest upon the unpaid
principal balance of the Term Note shall be due and payable
monthly beginning on February 28, 1995 and continuing on the last
day of each succeeding calendar month thereafter until the
maturity of said Term Note. The Term Note shall bear interest
prior to maturity at Bank One's Prime Rate in effect from time to
time.
The interest rate will change effective immediately with any
change in Bank One's Prime Rate. Bank One's Prime Rate is herein
defined to mean the rate announced by Bank One from time to time
as its Prime Rate, which rate may not be the lowest or best rate
offered by Bank One. Interest shall be calculated on the basis
of the actual number of days elapsed over a year of 360 days.
G. Borrowers shall execute and deliver to Bank One an Amended and
Restated Revolving Credit Note in the form of Exhibit "1.2.1(2nd)". Borrowers
shall execute and deliver to Bank One an Amended and Restated Term Note in the
form of Exhibit "1.3.1(2nd)".
H. As modified and amended by this Second Amendment, the Agreement is in
all respects reinstated, ratified and confirmed by the parties hereto and the
Agreement and this Second Amendment shall be read, taken and construed as one
and the same instrument.
Page 2 of 4
<PAGE>
EXHIBIT "1.2.1(2nd)"
AMENDED AND RESTATED REVOLVING CREDIT NOTE
$12,000,000.00 Columbus, Ohio September 27, 1996
On or before September 30, 1998, for value received, the undersigned promises to
pay to the order of Bank One, Columbus, N.A. (hereinafter called "Bank One") the
sum of Twelve Million and 00/100 Dollars ($12,000,000.00), with interest
(computed on the basis of the actual number of days elapsed divided by a year of
360 days) before maturity on the balance from time to time remaining unpaid at a
rate as set forth in that certain Loan Agreement dated as of December 29, 1994,
as amended between the undersigned and Bank One (the "Loan Agreement"). The
interest rate will change effective immediately with any change in Bank One's
Prime Rate. Interest shall be computed and payable monthly beginning on October
31, 1996 and continuing thereafter on the last day of each month and monthly
until the maturity hereof. Both principal and interest are payable in lawful
money of the United States at the Main Office of Bank One, 100 East Broad
Street, Columbus, Ohio 43271.
The undersigned authorize(s) any Attorney-at-Law to appear for the undersigned
in an action on this promissory note, at any time after the same becomes due, as
herein provided, in any court of record in or of the State of Ohio, or
elsewhere, to waive the issuing and service of process against the undersigned,
and to confess judgment in favor of the legal holder of this promissory note
against the undersigned, for the amount that may be due, with interest at the
rate therein mentioned and cost of suit, and to waive and release all errors in
said proceedings and judgment, and all petitions in error, and right of appeal
from the judgment rendered.
This promissory note evidences a borrowing under and is entitled to the benefits
of the Loan Agreement. The principal may become due or may be declared
forthwith due and payable in the manner and upon the terms and conditions and
with the effect provided in the Loan Agreement.
THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN BANK ONE AND THE UNDERSIGNED ARISING OUT OF, IN CONNECTION
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE
UNDERSIGNED AND BANK ONE IN CONNECTION WITH THIS PROMISSORY NOTE, THE LOAN
AGREEMENT, OR ANY OTHER AGREEMENT OR DOCUMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY BANK ONE'S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED
IN THIS PROMISSORY NOTE OR ANY OTHER DOCUMENT RELATED HERETO.
Page 3 of 4
<PAGE>
EXHIBIT "1.3.1(2nd)"
AMENDED AND RESTATED TERM NOTE
$1,629,189.96 Columbus, Ohio September 27, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of Bank One,
Columbus, N.A. (hereinafter called "Bank One") the sum of One Million Six
Hundred Twenty-nine Thousand One Hundred Eighty-nine and 96/100 Dollars
($1,629,189.96), with interest (computed on the basis of the actual number of
days elapsed divided by a year of 360 days) before maturity on the balance from
time to time remaining unpaid at a rate as set forth in that certain Loan
Agreement dated as of December 29, 1994, as amended between the undersigned and
Bank One (the "Loan Agreement"). The interest rate will change effective
immediately with any change in Bank One's Prime Rate. Interest shall be payable
on February 28, 1995 and monthly intervals thereafter. Both principal and
interest are payable in lawful money of the United States at the Main Office of
Bank One, Columbus, N.A., 100 East Broad Street, Columbus, Ohio 43271.
The principal hereof shall be payable in twenty-eight (28) consecutive monthly
installments of Sixty Thousand and 00/100 Dollars ($60,000.00) each, the first
of which shall be due on February 28, 1995, and continuing on the same day of
each month thereafter until May 31, 1997, at which time any remaining balance of
principal, together with all interest accrued thereon, shall be due and payable.
The undersigned hereby authorize(s) any Attorney-at-Law to appear for the
undersigned, in an action on this promissory note, at any time after the same
becomes due, as herein provided, in any court of record in or of the State of
Ohio, or elsewhere, to waive the issuing and service of process against the
undersigned and to confess judgment in favor of the legal holder of this
promissory note against the undersigned for the amount that may be due, with
interest at the rate herein mentioned and costs of suit, and to waive and
release all errors in said proceedings and judgment, and all petitions in error,
and right of appeal from the judgment rendered.
This promissory note evidences a borrowing under and is entitled to the benefits
of the Loan Agreement. The principal may become due or may be declared forthwith
due and payable in the manner and upon the terms and conditions and with the
effect provided in the Loan Agreement.
THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN BANK ONE AND THE UNDERSIGNED ARISING OUT OF, IN CONNECTION
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE
UNDERSIGNED AND BANK ONE IN CONNECTION WITH THIS PROMISSORY NOTE, THE LOAN
AGREEMENT, OR ANY OTHER AGREEMENT OR DOCUMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY BANK ONE'S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED
IN THIS PROMISSORY NOTE OR ANY OTHER DOCUMENT RELATED HERETO.
Page 4 of 4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE BALANCE
SHEET AS OF SEPTEMBER 29, 1996 AND STATEMENT OF OPERATIONS FOR THE TWENTY-SIX
WEEKS ENDED SEPTEMBER 29, 1996 OF AMERILINK CORPORATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 111,870
<SECURITIES> 0
<RECEIVABLES> 9,896,472
<ALLOWANCES> 208,000
<INVENTORY> 1,887,981
<CURRENT-ASSETS> 18,469,584
<PP&E> 5,858,325<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 24,500,261
<CURRENT-LIABILITIES> 5,766,869
<BONDS> 8,875,000
0
0
<COMMON> 8,061,395
<OTHER-SE> 1,679,158
<TOTAL-LIABILITY-AND-EQUITY> 24,500,261
<SALES> 29,183,984
<TOTAL-REVENUES> 29,183,984
<CGS> 19,503,376
<TOTAL-COSTS> 28,026,221
<OTHER-EXPENSES> (3,828)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 278,706
<INCOME-PRETAX> 882,885
<INCOME-TAX> 353,000
<INCOME-CONTINUING> 529,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 529,885
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
<FN>
<F1>Property, plant and equipment is Reported Net of Accumulated Depreciation
on the Consolidated Balance Sheet.
</FN>
</TABLE>
