<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 12, 1997(June 30, 1997)
SPECIALTY TELECONSTRUCTORS, INC.
(Exact name of registrant as specified in charter)
Nevada 001-13272 850421409
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
12001 Hwy 14 North
Cedar Crest, NM 87008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (505) 281-2197
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 30, 1997, Microwave Tower Service, Inc., an Oregon corporation
("MTS") became a wholly-owned subsidiary of Specialty Teleconstructors, Inc.,
(the "Registrant"), a Nevada corporation, pursuant to the terms of an Agreement
and Plan of Merger (the "Merger"). The Merger constituted a nontaxable
reorganization under Section 368(a)(1)(a) of the Internal Revenue Code of 1986
and was accounted for as a pooling of interests pursuant to APB 16.
Under the terms of the Merger, the Registrant exchanged 2,380,000 shares of
its common stock for all issued and outstanding shares of MTS common stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
The audited financial statements of Microwave Tower Service, Inc. as
of June 30, 1997 and 1996, and for the fiscal years then ended
appears beginning on page 3 of this Current Report.
(b) Pro Forma Financial Information.
The Registrant has determined to restate certain of its historical
fiscal year end audited financial statements, to reflect the Merger
as if such transaction had taken place at the beginning of the
periods presented, consistent with the accounting treatment for a
pooling-of-interests. Accordingly, the information responsive to
Item 7(b) is contained in, and incorporated by reference from, the
Registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997.
(c) Exhibits.
Exhibit
Number Description
- ------- -----------
2.1 Agreement and Plan of Merger dated as of June 30, 1997 among MTS,
each of the stockholders listed on Exhibit 1 to the Agreement and
Plan of Merger, the Registrant and MTS Acquisition, Inc., a
wholly-owned subsidiary of the Registrant (previously filed)*
23.1 Consent of KPMG Peat Marwick LLP
- -------
* In accordance with Item 601(b)(2) of Regulation S-K, except for Exhibit
1, the exhibits to the Agreement and Plan of Merger have been excluded; such
exhibits will be furnished supplementally upon request by the Securities and
Exchange Commission.
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 hereunto duly authorized.
SPECIALTY TELECONSTRUCTORS, INC.
Date: September 12, 1997 By: /s/ Michael R. Budagher
-------------------------------
Michael R. Budagher, Chairman of
the Board, President, Chief Executive
Officer and Treasurer
2
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Financial Statements
June 30, 1997 and 1996
(With Independent Auditors' Report Thereon)
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Microwave Tower Service, Inc.:
We have audited the accompanying balance sheets of Microwave Tower Service,
Inc., as of June 30, 1997 and 1996, and the related statements of earnings,
stockholder's equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Microwave Tower Service, Inc.
as of June 30, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
KMPG Peat Marwick LLP
Albuquerque, New Mexico
August 29, 1997
4
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Balance Sheets
June 30, 1997 and 1996
<TABLE>
<CAPTION>
Assets (Substantially Pledged) 1997 1996
------------------------------ ---- -----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,252 86,227
Contracts receivable, less allowance for doubtful accounts of
$105,000 in 1997 4,147,722 2,257,705
Costs and estimated earnings in excess of billings on
uncompleted contracts (note 2) 446,196 314,556
Finished goods inventory 2,314,238 689,757
Prepaid income taxes 209,778 62,751
Other current assets 126,600 58,540
----------- ---------
Total current assets 7,261,786 3,469,536
Property and equipment, net (note 3) 2,876,843 1,690,617
----------- ---------
$10,138,629 5,160,153
=========== =========
Liabilities and Stockholder's Equity
------------------------------------
Current liabilities:
Trade accounts payable $ 372,504 582,741
Line of credit (note 4) 2,614,982 232,000
Notes payable to a related party (note 5) 2,000,000 500,000
Accrued expenses 316,487 411,019
Current installments of notes payable (note 6) 196,202 16,828
----------- ---------
Total current liabilities 5,500,175 1,742,588
Deferred income taxes (note 8) 90,000 -
Notes payable, excluding current installments (note 6) 793,870 838,371
----------- ---------
Total liabilities 6,384,045 2,580,959
----------- ---------
Stockholder's equity:
Common stock, no par value. Authorized 100
shares; issued 50 shares 46,217 46,217
Retained earnings 3,708,367 2,532,977
----------- ---------
Total stockholder's equity 3,754,584 2,579,194
Commitments (notes 7 and 9) ----------- ---------
$10,138,629 5,160,153
=========== =========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Statements of Earnings
Years ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Revenues earned:
Installation services $14,643,575 5,537,425
Component sales 8,376,315 4,018,953
----------- ---------
Total revenues earned 23,019,890 9,556,378
----------- ---------
Costs of revenues earned:
Cost of installation services 10,611,519 3,283,440
Cost of components 5,113,096 3,031,256
----------- ---------
Total cost of revenues earned 15,724,615 6,314,696
----------- ---------
Gross profit on revenues earned 7,295,275 3,241,682
Selling, general and administrative expenses 1,476,824 933,521
----------- ---------
Earnings from operations 5,818,451 2,308,161
----------- ---------
Other income (deductions):
Interest income 3,257 2,618
Interest expense (204,420) (55,169)
Other, net (41,174) (27,405)
----------- ---------
Total other income (deductions), net (242,337) (79,956)
----------- ---------
Earnings before income taxes 5,576,114 2,228,205
Income taxes (note 8) 90,000 -
----------- ---------
Net earnings $ 5,486,114 2,228,205
=========== =========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Statements of Stockholder's Equity
Years ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
Common stock Retained
------------
Shares Amount earnings Total
------ ------ -------- -----
<S> <C> <C> <C> <C>
Balance at June 30, 1995 50 $ 46,217 1,155,522 1,201,739
Distributions to stockholder - - (850,750) (850,750)
Net earnings - - 2,228,205 2,228,205
------ -------- ---------- ----------
Balance at June 30, 1996 50 46,217 2,532,977 2,579,194
Distributions to stockholder - - (4,310,724) (4,310,724)
Net earnings - - 5,486,114 5,486,114
------ -------- ---------- ----------
Balance at June 30, 1997 50 $ 46,217 3,708,367 3,754,584
====== ======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Statements of Cash Flows
Years ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,486,114 2,228,205
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Provision for uncollectible receivables 105,000 -
Depreciation of property and equipment 354,826 149,073
Deferred income taxes 90,000 -
Changes in certain assets and liabilities:
Contracts receivable (1,995,017) (1,622,811)
Prepaid income taxes (147,027) (11,628)
Costs and estimated earnings in excess of billings on
uncompleted contracts (131,640) 196,483
Finished goods inventory (1,624,481) (433,727)
Trade accounts payable (210,237) 116,173
Accrued expenses (94,532) 181,867
Other (68,060) 136,967
----------- ----------
Net cash provided by operating activities 1,764,946 940,602
----------- ----------
Cash flows from investing activities -
Purchases of property and equipment (1,276,052) (1,367,274)
----------- ----------
Cash flows from financing activities:
Line of credit, net 2,382,982 62,000
Borrowings on notes payable - 800,000
Principal payments on notes payable (130,127) (21,506)
Borrowings on note payable to a related party 2,000,000 500,000
Repayments of note payable to a related party (500,000) -
Distributions to stockholder (4,310,724) (850,750)
----------- ----------
Net cash provided by (used in)
financing activities (557,869) 489,744
----------- ----------
Net increase (decrease) in cash and
cash equivalents (68,975) 63,072
Cash and cash equivalents at beginning of year 86,227 23,155
----------- ----------
Cash and cash equivalents at end of year $ 17,252 86,227
=========== ==========
Supplemental disclosure of cash flow information - interest paid $ 192,985 52,724
=========== ==========
Noncash investing and financing activities - equipment financed under
note payable $ 265,000 -
=========== ==========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Notes to Financial Statements
June 30, 1997 and 1996
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Description of Business
-----------------------
Microwave Tower Service, Inc. (the Company) is headquartered in Salem,
Oregon, and has regional offices in Salt Lake City, Utah; Phoenix,
Arizona; Denver, Colorado; and Sacramento, California. The Company
provides wireless infrastructure building services and
manufactures, distributes and sells components for the buildout of
wireless infrastructure. Most of the Company's customers are
located in the Western United States and they operate in the
wireless telecommunications industry. The Company's raw materials
are readily available, and the Company is not dependent on a single
supplier or only a few suppliers.
As of June 30, 1997, all of the outstanding stock of the Company was
acquired by Specialty Teleconstructors, Inc.
(b) Revenue Recognition
-------------------
Revenues from fixed-price construction contracts are recognized on the
percentage-of-completion method. Contract costs include all direct
material and labor costs and those indirect costs related to
contract performance. Selling, general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses
are determined.
"Costs and estimated earnings in excess of billings on uncompleted
contracts" represents revenues recognized in excess of amounts
billed.
Revenues from the sale of components are recognized upon shipment to
the customer.
(c) Statements of Cash Flows
------------------------
For purposes of statements of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
(d) Finished Goods Inventory
------------------------
Finished goods inventory is stated at the lower of cost or market.
Cost is determined using the first-in, first-out method.
(e) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation on property
and equipment is provided on a straight-line basis over the
estimated useful lives of the assets.
(Continued)
9
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Notes to Financial Statements
(f) Distributions to Stockholder
----------------------------
Distributions to stockholder are made at the discretion of the Board
of Directors.
(g) Income Taxes
------------
The Company, prior to June 30, 1997, elected to be taxed under
Subchapter S of the Internal Revenue Code and applicable state
statutes. Accordingly, taxable income of the Company is taxed to
the individual stockholder and no provision for income taxes was
made in the accompanying financial statements. Prepaid income taxes
represent amounts on deposit with the Internal Revenue Service made
to retain the Company's fiscal year end.
Effective on June 30, 1997, the Company became taxable as a C
corporation due to a business combination with a taxable C
corporation. Accordingly, deferred income taxes associated with the
differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities at the date of the
change in status have been recorded in the accompanying financial
statements as required by Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes."
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date.
(h) Advertising Costs
-----------------
Advertising costs, all of which are nondirect response advertising,
are expensed as incurred. Advertising expense was approximately
$133,000 and $39,000 during the years ended June 30, 1997 and 1996,
respectively.
(i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
--------------------------------------------------------------------
Of
--
The Company adopted the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," on July 1, 1996. This Statement requires that long-
lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the
(Continued)
10
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Notes to Financial Statements
impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this Statement
had no effect on the Company's financial position, results of
operations, or liquidity.
(j) Use of Estimates
----------------
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
(2) Costs and Estimated Earnings on Uncompleted Contracts
-----------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 281,953 184,077
Estimated earnings 164,243 130,479
Less billings to date - -
----------- ---------
$ 446,196 314,556
=========== =========
Included in the accompanying balance sheet -
costs and estimated earnings in excess
of billings on uncompleted contracts $ 446,196 314,556
=========== =========
</TABLE>
(3) Property and Equipment
----------------------
Property and equipment consists of the following at June 30:
<TABLE>
<CAPTION>
Estimated life (years) 1997 1996
---------------------- ----------- ---------
<S> <C> <C> <C>
Land $ 277,066 277,066
Buildings 15 - 40 1,145,835 1,009,854
Vehicles 5 - 7 1,105,847 502,477
Furniture and fixtures 3 - 10 335,386 161,751
Equipment 3 - 5 1,131,253 503,187
----------- ---------
3,995,387 2,454,335
Less accumulated depreciation (1,118,544) (763,718)
----------- ---------
$ 2,876,843 1,690,617
=========== =========
</TABLE>
(Continued)
11
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Notes to Financial Statements
(4) Line of Credit
--------------
The Company has an available bank line of credit arrangement of $4,000,000,
which matures in May, 1998. Interest is payable monthly at the prime rate
plus 1 percent (9.50% at June 30, 1997). The Company had drawn $2,614,982
and $232,000 as of June 30, 1997 and 1996, respectively. The line of
credit is secured by substantially all assets of the Company.
Borrowings under the secured line of credit are limited to the lessor of
$4,000,000 or 80 percent of the Company's accounts receivable and
inventory balances.
(5) Notes Payable to a Related Party
--------------------------------
The Company had notes payable to a former stockholder of $2,000,000 and
$500,000 at June 30, 1997 and 1996, respectively. The notes are payable
in various installments through April 1998. Interest is payable quarterly
at 8.25 percent, and the note is secured by finished goods inventory of
the Company.
(6) Notes Payable
-------------
Notes payable consist of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note payable to bank, monthly payments of
$2,667 including interest at U.S. Treasury
Index plus 3.5% (9.125% at June 30, 1997);
balance due March 2005; secured by building $ 784,436 788,656
Other 205,636 66,543
--------- -------
990,072 855,199
Less current installments (196,202) (16,828)
------- -------
Notes payable, excluding
current installments $ 793,870 838,371
========= =======
</TABLE>
(Continued)
12
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Notes to Financial Statements
The aggregate maturities of notes payable are as follows:
<TABLE>
<CAPTION>
Year ending June 30
-------------------
<S> <C>
1998 $196,202
1999 32,792
2000 23,284
2001 21,920
2002 and thereafter 715,874
--------
$990,072
========
</TABLE>
(7) Lease Obligations
-----------------
The Company leases certain vehicles and equipment under operating leases
which expire over the next four years. Rental expense for operating
leases was approximately $128,000 and $101,000 for the years ending June
30, 1997 and 1996, respectively.
Future minimum lease payments under noncancelable operating leases at
June 30, 1997 are:
<TABLE>
<CAPTION>
Year ending June 30
-------------------
<S> <C>
1998 $48,627
1999 48,627
2000 48,627
2001 22,906
=======
</TABLE>
The Company is required to pay $16,667 per month through February 1998 for
first priority in producing molded plastic components for the Company at
commercially reasonable prices under the terms of an agreement with a
supplier.
(8) Income Taxes
------------
The income taxes for the year ended June 30, 1997 represent $90,000 related
to the recognition of deferred income taxes resulting from the Company's
election to change tax status effective June 30, 1997.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liability at June 30, 1997 are presented
below:
<TABLE>
<S> <C>
Deferred tax liability - property and equipment,
principally due to differences in depreciation $ 90,000
======
</TABLE>
(Continued)
13
<PAGE>
MICROWAVE TOWER SERVICE, INC.
Notes to Financial Statements
(9) Employee Benefit Plans
----------------------
The Company has a discretionary profit sharing plan and a money purchase
pension plan which were adopted in October 1995. The plans cover all
nonunion employees who have met the service requirements defined under
the plans. Contributions to the discretionary profit sharing plan are
determined annually by the Board of Directors. The Company must
contribute an amount equal to approximately 8 percent of eligible
compensation to the money purchase pension plan each year. Contributions
to the plans were approximately $173,000 and $91,000 during the years
ended June 30, 1997 and 1996, respectively.
(10) Related Parties
---------------
During the year ended June 30, 1996, the Company purchased $325,000 of
components from Wireless Components, Inc., a company owned by Thomas
Carpenter, the sole stockholder of the Company.
14
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- -------- -----------
2.1 Agreement and Plan of Merger dated as of June 30, 1997 among MTS,
each of the stockholders listed on Exhibit 1 to the Agreement and
Plan of Merger, the Registrant and MTS Acquisition, Inc., a
wholly-owned subsidiary of the Registrant (previously filed)*
23.1 Consent of KPMG Peat Marwick LLP
- --------
* In accordance with Item 601(b)(2) of Regulation S-K, except for Exhibit 1,
each of the exhibits to the Agreement and Plan of Merger have been excluded;
such exhibits will be furnished supplementally upon request by the Securities
and Exchange Commission.
15
<PAGE>
CONSENT OF KPMG PEAT MARWICK LLP
Exhibit 23.1
The Board of Directors
Specialty Teleconstructors, Inc.
We consent to incorporation by reference in the registration statement (No. 333-
18899) on Form S-8 of Specialty Teleconstructors, Inc. of our report dated
August 29, 1997, relating to the balance sheets of Microwave Tower Service, Inc.
as of June 30, 1997, and 1996, and the related statements of earnings,
stockholder's equity, and cash flows for the years then ended, which report
appears in the the current Report on Form 8-K/A (Amendment No. 1), of Specialty
Teleconstructors, Inc.
Albuquerque, New Mexico
September 12, 1997
