<PAGE>
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1996
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ______________
COMMISSION FILE NUMBER 1-13272
SPECIALTY TELECONSTRUCTORS, INC.
(Name of small business issuer in its charter)
NEVADA 85-0421409
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12001 STATE HWY 14 NORTH
CEDAR CREST, NEW MEXICO 87008
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (505) 281-2197
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 4,195,713 on January 31,
1997
The Index to Exhibits appears on page 9
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<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 1996 and
1995 (unaudited) 3
Consolidated Statements of Earnings for the three and
six-month periods ended December 31, 1996 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the six-month
periods ended December 31, 1996 and 1995 (unaudited) 5
Consolidated Statements of Changes in Stockholders' Equity
for the six-month periods ended December 31, 1996 and
1995 (unaudited) 6
Notes to the Consolidated Financial Statements as of
December 31, 1996 and 1995 (unaudited) 7
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 7
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS 8
ITEM 2. - CHANGES IN SECURITIES 8
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES 8
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8
ITEM 5. - OTHER INFORMATION 9
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 10
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Balance Sheets
December 31, 1996 and 1995
(Unaudited)
Assets
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 644,434 $4,045,309
Contracts receivable 8,101,699 3,068,837
Costs and estimated earnings in
excess of billings on
uncompleted contracts 1,651,804 456,650
Other 331,820 18,000
----------- ----------
Total current assets 10,693,757 7,588,796
Property and equipment, net
of accumulated depreciation
of $1,243,341 in 1996 and
$624,735 in 1995 2,884,360 1,295,139
Other assets 383,375 237,593
----------- ----------
$13,961,492 $9,121,528
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term notes payable $ 923,928 $ 600,000
Current installments of notes
payable to banks 60,792 74,384
Trade accounts payable 3,179,979 574,957
Billings in excess of costs and
estimated earnings on
uncompleted contracts 295,675 241,193
Accrued expenses 462,766 517,066
Current income taxes - 119,089
Deferred income taxes 186,611 -
----------- ----------
Total current liabilities 5,109,751 2,126,689
Deferred income taxes 232,537 684,747
Notes payable to banks, excluding
current installments 667,886 177,201
----------- ----------
Total liabilities 6,010,174 2,988,637
----------- ----------
Stockholders' equity:
Common Stock, $0.01 par value.
Authorized 10,000,000 shares;
Issued 4,185,713 shares in
1996 and 4,092,308 in 1995 41,857 40,923
Additional paid-in-capital 4,830,935 4,166,359
Retained earnings 3,078,526 1,925,609
----------- ----------
Total stockholders' equity 7,951,318 6,132,891
----------- ----------
$13,961,492 $9,121,528
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. - FINANCIAL STATEMENTS
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Contract revenues
earned $9,130,957 $3,507,256 $14,591,735 $6,487,722
Cost of revenues
earned 7,550,888 2,605,607 11,956,233 5,127,533
---------- ---------- ----------- ----------
Gross profit 1,580,069 901,649 2,635,502 1,360,189
Selling, general
and administrative
expenses 800,578 368,448 1,380,270 781,396
---------- ---------- ----------- ----------
Earnings from
Operations 779,491 533,201 1,255,232 578,793
---------- ---------- ----------- ----------
Other income (deductions):
Interest income 7,714 56,840 30,490 116,790
Interest expense (22,168) (16,849) (55,743) (36,012)
Other, net 186 1,800 58 (9,614)
---------- ---------- ----------- ----------
(14,268) 41,791 (25,195) 71,164
---------- ---------- ----------- ----------
Earnings before
income taxes 765,223 574,992 1,230,037 649,957
Income taxes 292,400 212,746 472,000 240,482
---------- ---------- ----------- ----------
Net earnings $ 472,823 $ 362,246 $ 758,037 $ 409,475
========== ========== =========== ==========
Earnings per common share and common equivalent shares:
Net earnings $ 0.11 $ 0.09 $ 0.18 $ 0.10
========== ========== =========== ==========
Weighted average common
shares outstanding 4,364,696 4,092,308 4,261,264 4,092,308
========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings 758,037 409,475
Adjustments to reconcile net earnings
to net cash provided (used)by operating
activities:
Depreciation of property 436,698 124,934
and equipment
Amortization of goodwill 63,729 23,442
Gain(loss)on sale of equipment - 12,000
Changes in certain assets
and liabilities:
Contracts receivable (1,458,645) (609,397)
Costs and estimated earnings in
excess of billings on
uncompleted contracts (552,365) (278,050)
Other assets (152,915) 124,252
Trade accounts payable 1,025,406 371,952
Billings in excess of costs and
estimated earnings on uncompleted
contracts 59,211 (7,807)
Accrued expenses (293,359) 241,993
Current income taxes (467,725) 119,089
Deferred income taxes (148,877) (101,108)
----------- ----------
Net cash provided (used)by
operating activities (730,805) 430,755
----------- ----------
Cash flows from investing activities:
Purchases of property
and equipment (896,559) (427,392)
----------- ----------
Cash expended in acquisition
of Data Cell Systems, Inc. (160,000) -
Other, net - 1,500
----------- ----------
Net cash used in
investing activities (1,056,559) (425,892)
----------- ----------
Cash flows from financing activities:
Line of credit with bank, net (976,072) -
Borrowings on notes payable to banks 586,466 -
Principal payments on
notes payable to banks (42,065) (46,791)
----------- ----------
Net cash used in financing
activities (431,671) (46,791)
----------- ----------
Net decrease in cash and cash
equivalents (2,219,035) (41,908)
Cash and cash equivalents
at beginning of period 2,863,469 4,087,217
----------- ----------
Cash and cash equivalents
at end of period $ 644,434 $4,045,309
=========== ==========
Supplemental disclosure
of cash flow information:
Interest paid $ 55,743 $ 36,012
=========== ==========
Taxes paid $ 1,088,602 $ 9,060
=========== ==========
Noncash transactions -
acquisition of vehicles
in exchange for debt $ - $ 241,455
=========== ==========
</TABLE>
(Continued)
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and 1995
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Data Cell Systems, Inc. Acquisition
Consisting of :
Accounts receivable 200,000 -
Property and equipment 267,000 -
Other current assets 100,000 -
Goodwill 258,510 -
------- -------
825,510 -
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
SPECIALTY TELECONSTRUCTORS,INC.
Consolidated Statements of Changes in Stockholders' Equity
For the six months ended December 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Common Stock
------------
Additional Retained
Shares Amount Paid-in-capital earnings Total
------- ------ --------------- -------- -----
<S> <C> <C> <C> <C> <C>
Balances as of
June 30, 1995 4,092,308 $40,923 $4,166,359 $1,516,134 $5,723,416
Net earnings - - - 409,475 409,475
--------- ------- ---------- ---------- ----------
Balances as of
December 31, 1995 4,092,308 $40,923 $4,166,359 $1,925,609 $6,132,891
========= ======= ========== ========== ==========
Balances as of
June 30, 1996 4,092,308 $40,923 $4,166,359 $2,320,489 $6,527,771
Issuance of Common
Shares to acquire
Data Cell Systems,
Inc. 93,405 934 664,576 - $ 665,510
Net earnings - - - $ 758,037 $ 758,037
--------- ------- ---------- ---------- ----------
Balances as of
December 31, 1996 4,185,713 $41,857 $4,830,935 $3,078,526 $7,951,318
========= ======= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
SPECIALTY TELECONSTRUCTORS, INC.
Notes to Consolidated Financial Statements
September 30, 1996 and 1995
(Unaudited)
Note 1: Basis of Presentation
The consolidated financial statements and notes thereto at December 31, 1996 and
for the three and six-month periods ended December 31, 1996 and 1995 are
unaudited and do not present all disclosures required under generally accepted
accounting principles but instead, as permitted by Securities and Exchange
Commission regulations, presume that users of the interim financial statements
have read or have access to the June 30, 1996 audited consolidated financial
statements and notes thereto contained in Specialty Teleconstructors Inc.'s
(the Company) annual report on Form l0-KSB incorporated by reference, and that
the adequacy of additional disclosure needed for a fair presentation may be
determined in that context.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair presentation of the results for interim periods. The results
of operations for the six-month period ended December 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
Note 2: Acquisition
As of October 30, 1996, a wholly-owned subsidiary of Specialty Teleconstructors,
Inc., purchased substantially all the assets of Data Cell Systems, Inc., an
Arizona corporation, in exchange for $160,000 in cash and the delivery of 93,405
shares of common stock of the Company. The purchase price of the assets
acquired may be increased by an amount not to exceed $200,000 in the aggregate
if certain pre-tax earnings targets are achieved by the Company during the three
fiscal years immediately following the date of the acquisition and if certain
other conditions are met. The transaction was accounted for by the Company as a
purchase.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
For the Three-Month Periods Ended December 31, 1996 and 1995, Results of
Operations
Revenues. The Company's revenues for the three-month period ended December 31,
1996, increased approximately 160% to $9,130,957 as compared to $3,507,256 for
the same three-month period in the prior year. The Company believes the increase
is related to growth in the Company's wireless infrastructure building and
implementation services business related primarily to an increase in the
installation of facilities related to new PCS systems.
Gross Profit. Gross profit for the three-month period ended December 31, 1996
increased approximately 75% to $1,580,069 as compared to $901,649 for the same
six-month period in the prior year. Gross profit as a percentage of revenue
decreased from 25.7% for the three-month period ended December 31, 1995 to 17.3%
for the three-month period ended December 31, 1996.
SG&A Expenses. SG&A expenses as a percentage of revenues decreased from 10.5%
to 8.8% for the three-month period ended December 31, 1995 and 1996,
respectively. This decrease was a result of operational efficiencies realized
with the increase in revenues.
Net earnings for the three-month period ended December 31, 1996 increased
approximately 31% to $472,823 compared to $362,246 for the same three-month
period in the prior year. As a percentage of revenue, net earnings decreased to
5.2% from 10.3% in the prior year.
For the Six-Month Periods Ended December 31, 1996 and 1995, Results of
Operations
Revenues. The Company's revenues for the six-month period ended December 31,
1996, increased approximately 125% to $14,591,735 as compared to $6,487,722 for
the same six-month period in the prior year. The Company believes the increase
is related to growth in the Company's wireless infrastructure building and
implementation services business related primarily to an increase in the
installation of facilities related to new PCS systems.
Gross Profit. Gross profit for the six-month period ended December 31, 1996
increased approximately 94% to $2,635,502 as compared to $1,360,189 for the same
six-month period in the prior year. Gross profit as a percentage of revenue
decreased from 20.9% for the six-month period ended December 31, 1995 to 18.2%
for the six-month period ended December 31, 1996.
SG&A Expenses. SG&A expenses as a percentage of revenues decreased from 12.1%
to 9.5% for the six-month period ended December 31, 1995 and 1996, respectively.
This decrease was a result of operational efficiencies realized with the
increase in revenues.
Net earnings for the six-month period ended December 31, 1996 increased
approximately 85% to $758,037 compared to $409,475 for the same six-month period
in the prior year. As a percentage of revenue, net earnings decreased to 5.2%
from 6.3% in the prior year.
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS.
None.
ITEM 2. - CHANGES IN SECURITIES.
None.
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders (the "1996 Annual Meeting")was held
on November 1, 1996, in Albuquerque, New Mexico. Prior to the 1996 Annual
Meeting, the Company solicited the vote of the Company's stockholders in
accordance with Regulation 14A under the Securities Exchange Act of 1934, as
amended, and distributed to all stockholders of record of the Company as of
October 7, 1996, a Proxy Statement describing the proposals or matters to be
acted upon including:
(1) The election of Michael R. Budagher, John D. Emery, Terry D. Farmer
and Jon D. Word to serve as directors of the Company until the next
annual meeting of stockholders;
(2) A proposal (the "Proposal to Amend the Articles of Incorporation") to
amend the Company's Certificate of Incorporation increasing the number
of authorized shares of Common Stock from 7,500,000 to 10,000,000;
(3) A proposal (the "Proposal to Approve the Amended and Restated 1994
Stock Option Plan") to approve and ratify the amendment and
restatement of the Company's 1994 Stock Option Plan pursuant to which
the number of
<PAGE>
shares of Common Stock available for awards under the 1994 Stock
Option Plan was increased from 100,000 to 400,000; and
(4) A proposal (the "Proposal to Ratify the Appointment of KPMG Peat
Marwick LLP") to ratify the Board of Directors' appointment of KPMG
Peat Marwick LLP, independent certified public accountants, as
auditors for the Company for the fiscal year ending June 30, 1997.
At the 1996 Annual Meeting, all four of the nominees for directors listed in the
Company's Proxy Statement were elected and no other persons were nominated in
opposition to the nominees listed in the Company's Proxy Statement. Votes cast
in the election of directors were as follows:
Michael R. Budagher:
For: 2,945,714
Against: 0
Abstained: 14,306
John D. Emery:
For: 2,945,714
Against: 0
Abstained: 14,306
Terry D. Farmer:
For: 2,945,714
Against: 0
Abstained: 14,306
Jon D. Word:
For: 2,945,714
Against: 0
Abstained: 14,306
At the 1996 Annual Meeting, the Proposal to Amend the Articles of Incorporation
was passed by the following vote:
For: 2,817,490
Against: 117,655
Abstained: 24,875
At the 1996 Annual Meeting, the Proposal to Approve the Amended and Restated
1994 Stock Option Plan was passed by the following vote:
For: 2,714,785
Against: 208,450
Abstained: 24,875
At the 1996 Annual Meeting, the Propsal to Ratify the Appointment of KPMG Peat
Marwick LLP was passed by the following vote:
For: 2,835,595
Against: 87,640
Abstained: 36,785
ITEM 5. - OTHER INFORMATION.
None.
<PAGE>
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: February 3, 1997
SPECIALTY TELECONSTRUCTORS, INC.
By: /s/ MICHAEL R. BUDAGHER
--------------------------------
Michael R. Budagher, Chairman of the
Board, President, Chief Executive
Officer and Treasurer
By: /s/ DENNIS K. HARTNETT
--------------------------------
Dennis K. Hartnett, Chief Accounting
Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SPECIALTY TELECONSTRUCTORS, INC.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 644,434 644,434
<SECURITIES> 0 0
<RECEIVABLES> 8,101,699 8,101,699
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,693,757 10,693,757
<PP&E> 4,127,701 4,127,701
<DEPRECIATION> 1,243,341 1,243,341
<TOTAL-ASSETS> 13,961,492 13,961,492
<CURRENT-LIABILITIES> 5,109,751 5,109,751
<BONDS> 0 0
0 0
0 0
<COMMON> 41,857 41,857
<OTHER-SE> 7,909,461<F1> 7,909,461<F1>
<TOTAL-LIABILITY-AND-EQUITY> 13,961,492 13,961,492
<SALES> 14,591,735 9,130,957
<TOTAL-REVENUES> 14,622,283 9,138,857
<CGS> 11,956,233 7,550,888
<TOTAL-COSTS> 13,336,503 8,351,466
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 55,743 22,168
<INCOME-PRETAX> 1,230,037 765,223
<INCOME-TAX> 472,000 292,400
<INCOME-CONTINUING> 758,037 472,823
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 758,037 472,823
<EPS-PRIMARY> .18 .11
<EPS-DILUTED> .18 .11
<FN>
<F1>Other Equity of $7,909,461 is comprised of Additional paid-in Capital of
$4,830,935 and Retained Earnings of $3,078,526.
</FN>
</TABLE>
