<PAGE>
================================================================================
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, 1997
[ ] 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: 7,997,926 on February 17,
1998
The Index to Exhibits appears on page 14
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<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
INDEX
-----
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 1997 and
1996 (unaudited) 3
Consolidated Statements of Earnings for the three and six-month
periods ended December 31, 1997 and 1996 (unaudited) 4
Consolidated Statements of Cash Flows for the six-month
periods ended December 31, 1997 and 1996 (unaudited) 5
Consolidated Statements of Changes in Stockholders' Equity
for the six-month periods ended December 31, 1997 and
1996 (unaudited) 7
Notes to the Consolidated Financial Statements as of
December 31, 1997 and 1996 (unaudited) 8
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS 12
ITEM 2. - CHANGES IN SECURITIES 12
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5. - OTHER INFORMATION 14
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Balance Sheets
December 31, 1997 and 1996
(Unaudited)
Assets
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,131,793 $ 960,968
Available for sale securities $ 50,000 $ 293,300
Contracts Receivable, net of $15,741,654 $13,585,469
allowance for doubtful
accounts
Costs and estimated earnings in
excess of billings on
uncompleted contracts $ 2,505,487 $ 2,883,325
Finished goods inventory $ 3,339,147 $ 537,628
Prepaid income taxes $ 261,775 $ 55,730
Other $ 220,437 $ 537,785
----------- -----------
Total current assets $24,250,293 $18,854,205
Property and equipment, net $ 9,021,486 $ 6,112,515
Other assets, net $ 3,571,861 $ 453,433
----------- -----------
$36,843,640 $25,420,153
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 4,441,278 $ 5,304,810
Lines of credit $ 3,964,828 $ 1,703,253
Notes payable to stockholder $ 1,324,000 $ 500,000
Billings in excess of costs and
estimated earnings on uncompleted
contracts $ 606,442 $ 391,844
Accrued expenses $ 842,873 $ 916,736
Current installments of notes
payable $ 613,827 $ 79,443
Current income taxes payable $ 1,009,317 $ 250,232
Deferred income taxes $ 333,814 $ 231,645
----------- -----------
Total current liabilities $13,136,379 $ 9,377,963
Deferred income taxes $ 90,000 $ 277,537
Notes payable to banks, excluding
current installments $ 2,065,211 $ 1,982,207
----------- -----------
Total Liabilities $15,291,590 $11,637,707
----------- -----------
Stockholders' equity:
Common Stock $ 80,689 $ 69,657
Additional paid-in-capital $14,080,222 $ 6,008,874
Treasury stock, 100,000 shares
in 1997 and none in 1996,
respectively $(1,387,500) $ -
Retained earnings $ 8,778,639 $ 7,703,915
----------- -----------
Total stockholders' equity $21,552,050 $13,782,446
----------- -----------
$36,843,640 $25,420,153
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Earnings
For the three and six months ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Three months ended
---------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues earned:
Installation services $26,051,645 $28,414,887 $14,585,420 $16,233,783
Component sales $ 3,523,635 $ 4,748,030 $ 2,189,904 $ 2,892,617
----------- ----------- ----------- -----------
Total revenues earned $29,575,280 $33,162,917 $16,775,324 $19,126,400
----------- ----------- ----------- -----------
Cost of revenues earned:
Installation services $21,479,825 $23,117,299 $12,170,801 $12,985,863
Component sales $ 2,047,508 $ 3,533,610 $ 1,073,829 $ 2,103,243
----------- ----------- ----------- -----------
Total cost of revenues earned $23,527,333 $26,650,909 $13,244,630 $15,089,106
----------- ----------- ----------- -----------
Gross profit on revenues
earned $ 6,047,947 $ 6,512,008 $ 3,530,694 $ 4,037,294
Selling, general and administrative
expenses $ 2,158,899 $ 2,742,335 $ 948,523 $ 1,383,579
----------- ----------- ----------- -----------
Earnings from
operations $ 3,889,048 $ 3,769,673 $ 2,582,171 $ 2,653,715
----------- ----------- ----------- -----------
Other income (deductions):
Interest income $ 61,956 $ 63,267 $ 44,612 $ 22,808
Interest expense $ (150,563) $ (128,883) $ (71,868) $ (65,626)
Other, net $ 61,712 $ 11,823 $ 10,241 $ (235)
----------- ----------- ----------- -----------
$ (26,895) $ (53,793) $ (17,015) $ (43,053)
----------- ----------- ----------- -----------
Earnings before income taxes $ 3,862,153 $ 3,715,880 $ 2,565,156 $ 2,610,662
Income taxes $ 1,493,349 $ 609,282 $ 984,449 $ 366,500
----------- ----------- ----------- -----------
Net earnings $ 2,368,804 $ 3,106,598 $ 1,580,707 $ 2,244,162
Basic earnings per share:
Net earnings $ 0.30 $ 0.45 $ 0.20 $ 0.32
----------- ----------- ----------- -----------
Weighted average common shares
outstanding 7,928,928 6,903,274 7,966,140 6,934,240
----------- ----------- ----------- -----------
Diluted earnings per share:
Net earnings $ 0.29 $ 0.44 $ 0.19 $ 0.28
----------- ----------- ----------- -----------
Weighted average common shares
outstanding plus dilutive
potential common shares $ 8,129,458 $ 7,113,156 $ 8,150,936 $ 7,233,828
----------- ----------- ----------- -----------
Pro forma information:
Net earnings $ 2,368,804 $ 3,106,598 $ 1,580,707 $ 2,244,162
Pro forma adjustment for income
taxes of acquired entity
previously filing as an S
Corporation $ - $ (871,000) $ - $ (666,000)
----------- ----------- ----------- -----------
Pro forma net earnings after
adjustment for income taxes
of acquired entity $ 2,368,804 $ 2,235,598 $ 1,580,707 $ 1,578,162
----------- ----------- ----------- -----------
Pro forma basic earnings per
common share outstanding $ 0.30 $ 0.32 $ 0.20 $ 0.23
----------- ----------- ----------- -----------
Pro forma diluted earnings per
common share outstanding $ 0.29 $ 0.31 $ 0.19 $ 0.22
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Cash Flows
For the six months ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,368,804 $ 3,106,598
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation $ 878,277 $ 592,067
Amortization of goodwill $ 134,277 $ 63,729
Changes in certain assets
and liabilities:
Available for sale securities $ 719,850 $ 12,661
Contracts receivable $ (135,256) $(4,275,190)
Costs and estimated earnings in
excess of billings on
uncompleted contracts $ (272,198) $(1,426,321)
Finished goods inventory $ (588,696) $ 152,129
Prepaid income taxes $ 145,702 $ 7,021
Other assets $ (35,067) $ (300,330)
Trade accounts payable $ 36,258 $ 2,567,341
Billings in excess of costs and
estimated earnings on uncompleted
contracts $ (488,228) $ 149,264
Accrued expenses $ 44,027 $ (321,826)
Current income taxes $ 1,009,316 $ (394,123)
Deferred income taxes $ (50,786) $ (109,563)
----------- -----------
Net cash provided (used)by
operating activities $ 3,766,280 $ (176,543)
----------- -----------
Cash flows from investing activities:
Purchases of property
and equipment $ (561,081) $(1,686,568)
Cash expended in acquisition
of Data Cell Systems, Inc. $ - $ (160,000)
Cash expended in acquisition of
Ellis Tower Company, Inc., net
of cash of $151,701 acquired in
acquisition $ (297,704) $ -
----------- -----------
Net cash used in
investing activities $ (858,785) $(1,846,568)
----------- -----------
Cash flows from financing activities:
Line of credit with bank, net $ 576,918 $ 71,253
Principal repayment on note
payable to stockholder $ (676,000) $ -
Acquisition of treasury stock $(1,387,500) $ -
Distributions of prior S Corporation
earnings $ - $ (435,500)
Proceeds from sale of common stock $ 268,862 $ -
Principal payments on
notes payable to banks $ (547,702) $ (64,292)
----------- -----------
Net cash used in financing
activities $(1,765,422) $ (428,539)
----------- -----------
Net increase (decrease)in cash
and cash equivalents $ 1,142,073 $(2,451,650)
Cash and cash equivalents
Beginning of period $ 989,720 $ 3,412,618
----------- -----------
End of period $ 2,131,793 $ 960,968
=========== ===========
</TABLE>
5
<PAGE>
(Continued)
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Cash Flows
For the six months ended December 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Supplemental disclosure
of cash flow information:
Interest paid $ 150,563 $ 152,205
---------- ----------
Taxes paid $ 262,800 $1,113,270
========== ==========
Noncash transactions - acquisition
of vehicles in exchange for debt $ 640,861 $ 586,466
========== ==========
Ellis Tower Company, Inc. Acquisition
in fiscal year 1998 and Data Cell
Systems, Inc. in fiscal year 1997:
Cash $ 151,701 $ -
Contracts receivable $ 865,919 $ 200,000
Finished goods inventory $ 86,212 $ -
Other current assets $ 33,924 $ 100,000
Property and equipment $ 267,915 $ 267,000
Goodwill $1,729,280 $ 258,510
Trade accounts payable $ (383,326) $ -
Billings in excess of costs and
estimated earnings on uncompleted
contracts $ (496,731) $ -
Accrued expenses $ (7,871) $ -
---------- -----------
$2,247,023 $ 825,510
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
SPECIALTY TELECONSTRUCTORS,INC.
Consolidated Statements of Changes in Stockholders' Equity
For the six months ended December 31, 1997 and 1996
(unaudited)
<TABLE>
<CAPTION>
Common Stock
----------------- Additional
Paid-in Retained Treasury
Shares Amount capital earnings Stock Total
------ ------ ---------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at
June 30, 1996 6,872,308 $68,723 $ 5,344,298 $5,032,817 $ - $10,445,838
Distributions
of prior S
Corporation
earnings - $ - $ - $ (435,500) $ - $ (435,500)
Issuance of common
shares to acquire
Data Cell Systems,
Inc. 93,405 $ 934 $ 664,576 $ - $ - $ 665,510
Net earnings - $ - $ - $3,106,598 $ - $ 3,106,598
--------- ------- ----------- ---------- ----------- -----------
Balances as of
December 31,
1996 6,965,713 $69,657 $ 6,008,874 $7,703,915 $ - $13,782,446
========= ======= =========== ========== =========== ===========
<CAPTION>
Common Stock
----------------- Additional
Paid-in Retained Treasury
Shares Amount capital earnings Stock Total
------ ------ ---------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balances as of
June 30, 1997 7,876,554 $78,765 $12,015,667 $6,409,835 $ - $18,504,267
Issuance of
common stock 71,554 $ 716 $ 268,145 $ - $ - $ 268,861
Issuance of common
shares to acquire
Ellis Tower
Company, Inc. 120,848 $ 1,208 $ 1,796,410 $ - $ - $ 1,797,618
Acquisition of
100,000 shares
for treasury
stock - $ - $ - $ - $(1,387,500) $(1,387,500)
Net earnings $ $ - $2,368,804 $ - $ 2,368,804
--------- ------- ----------- ---------- ----------- -----------
Balances as of
December 31, 1997 8,068,956 $80,689 $14,080,222 $8,778,639 $(1,387,500) $21,552,050
========= ======= =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
(Unaudited)
Note 1: Basis of Presentation
The consolidated financial statements and notes thereto at December 31, 1997 and
for the three and six-month periods ended December 31, 1997 and 1996 are
unaudited and are presented in accordance with the requirements of Form 10-QSB
and consequently do not include all disclosures normally required by generally
accepted accounting principles or those normally reflected in the Company's
Annual Report on Form 10-KSB. Accordingly, the consolidated financial statements
and notes thereto contained herein should be read in conjunction with the
consolidated financial statements and notes thereto contained in the Company's
Form 10-KSB for the fiscal year ended June 30, 1997.
The consolidated financial statements and notes thereto at December 31, 1997 and
for the three and six-month periods ended December 31, 1997 and 1996 reflect (i)
the acquisition of Novak & Lackey Construction Co., Inc., an Oklahoma
corporation ("Novak & Lackey") which was effected as of March 31, 1997 through a
merger between Novak & Lackey and a wholly-owned subsidiary of the Company of
which Novak & Lackey was the surviving corporation, and (i) the acquisition of
Microwave Tower Service, Inc., an Oregon corporation ("MTS") which was effected
as of June 30, 1997 through a merger between MTS and a wholly-owned subsidiary
of the Company, of which MTS was the surviving corporation. The acquisitions of
Novak & Lackey and MTS were accounted for as poolings of interests.
Accordingly, the consolidated financial statements and notes thereto at December
31, 1997 for the three and six-month periods ended December 31, 1997 and 1996
are presented as if the acquisitions of Novak & Lackey and MTS had occurred at
the beginning of all periods presented.
For financial reporting purposes, a pro forma provision for income taxes has
been reflected in the consolidated statements of earnings for the three and six-
month periods ended December 31, 1996 to present taxes on the results of
operations of MTS for the three and six-month periods ended December 31, 1996 on
the basis that is required upon its change in tax status from S Corporation to a
C Corporation. This amount is approximately equal to the required Federal and
state income tax provisions that would have been recorded if MTS had not elected
S Corporation status and was subject to and liable for Federal and state income
taxes as a C Corporation prior to its termination of S Corporation status. MTS
terminated its S Corporation status upon merging with a wholly-owned subsidiary
of the Company on June 30, 1997.
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 three and six-month periods ended December 31,
1997 are not necessarily indicative of the results to be expected for the full
year.
Note 2: Acquisition
As of October 7, 1997, a wholly-owned subsidiary of the Company, purchased
substantially all the assets of Ellis Tower Co., Inc., a Florida corporation, in
exchange for $449,404 in cash and the delivery of 120,849 newly issued shares of
common stock of the Company. The transaction was accounted for by the Company as
a purchase.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
Statements contained in herein that are not historical facts are forward-looking
statements ("forward-looking statements") within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which are intended to be covered by the safe
harbors created by those sections. In addition, such forward-looking statements
may be contained in filings made by the Company with the Securities and Exchange
Commission, or press releases or oral statements made from time to time by or
with the approval of an authorized executive
8
<PAGE>
officer of the Company. Such forward-looking statements are necessarily
estimates reflecting the best judgment of the Company's management based upon
current information and involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such risks, uncertainties and other factors include, but are
not limited to, those set forth in the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 1997 under the caption "ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --
Cautionary Statements" and elsewhere therein and appearing from time to time in
filings made by the Company with the Securities and Exchange Commission. These
risks, uncertainties and other factors should not be construed as exhaustive and
the Company does not undertake, and specifically disclaims any obligation, to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
Results of Operations
For the Three-Month Periods Ended December 31, 1997 and 1996
Revenues. The Company's revenues for the three-month period ended December 31,
1997, decreased approximately 12% to $16,775,324 from $19,126,400 for the same
three-month period in the prior year. Management believes the decrease in
revenues was due primarily to unusually strong demand for the Company's wireless
infrastructure components in the comparative quarter last year and to
Management's decision to concentrate its efforts on improving operating
efficiency by, among other methods, reducing the number of projects it
undertakes using primarily subcontracted labor.
Gross Profit. Gross profit for the three-month period ended December 31, 1997
decreased approximately 13% to $3,530,694 from $4,037,294 for the same three-
month period in the prior year. Gross profit as a percentage of revenue held
constant at 21% for the three-month period ended December 31, 1997 compared with
the same three-month period in the prior year. Management believes the decrease
in gross profit was due primarily to the decrease in revenues, unusually strong
demand for the Company's wireless infrastructure components in the comparative
quarter last year and to Management's decision to concentrate its efforts on
improving operating efficiency by, among other methods, reducing the number of
projects it undertakes using primarily subcontracted labor, partially offset by
increases in operating efficiency resulting from the continued integration of
the Company's acquisitions effected during the quarter and the last half of
fiscal 1997.
Selling, General and Administrative ("SG&A") Expenses. SG&A expenses for the
three-month period ended December 31, 1997 decreased to $948,523 from $1,383,579
for the same three-month period in the prior year. As a percentage of revenues,
SG&A expenses decreased from 7% for the three-month period ended December 31,
1996 to 6% for the three-month period ended December 31, 1997. The decreases in
SG&A expenses and in SG&A expenses as a percentage of revenue resulted
from the decrease in revenues, increased administrative efficiencies resulting
from the continued integration of the Company's acquisitions effected during the
quarter and the last half of fiscal 1997, partially offset by certain non-
recurring expenses (primarily legal and accounting expenses) incurred during the
period in connection with the recent acquisitions of Novak & Lackey Construction
Co., Inc., Microwave Tower Services, Inc. and Ellis Tower Co., Inc.
Net Earnings. Net earnings for the three-month period ended December 31, 1997
were $1,580,707 compared to $1,578,162 for the same three-month period in the
prior year. As a percentage of revenue, net earnings increased to 9% from 8% in
the prior year. The slight increase in net earnings and the increase in net
earnings as a percentage of revenue resulted primarily from improved operating
margins realized by the Company's wireless infrastructure building and
implementation services business and increased administrative efficiencies
resulting from the continued integration of the Company's acquisitions,
partially offset by the decrease in revenues and by certain non-recurring
expenses (primarily legal and accounting expenses) incurred in connection with
the Company's recent acquisitions. In addition, net earnings per share were
negatively impacted by the higher number of shares outstanding during the period
versus the comparative period last year. Net earnings for the prior periods are
stated on a pro-forma basis to adjust for income taxes attributable to net
income realized by
9
<PAGE>
Microwave Tower Services, Inc. which was an S-corporation prior to its
acquisition by the Company in June, 1997.
For the Six-Month Periods Ended December 31, 1997 and 1996
Revenues. The Company's revenues for the six-month period ended December 31,
1997, decreased approximately 11% to $29,575,280 from $33,162,917 for the same
period in the prior year. Management believes the decrease in revenues was due
in part to unusually strong demand for the Company's wireless infrastructure
components in the comparative period last year and to Management's decision to
concentrate its efforts on improving operating efficiency by, among other
methods, reducing the number of projects it undertakes using primarily
subcontracted labor and in part to comparatively lower levels of wireless
infrastructure building and implementation activity in the U.S. experienced
primarily during the first half of the period.
Gross Profit. Gross profit for the six-month period ended December 31, 1997
decreased approximately 7% to $6,047,947 from $6,512,008 for the same six-month
period in the prior year. Gross profit as a percentage of revenue held constant
at 20% for the six-month period ended December 31, 1997 compared with the same
six-month period in the prior year. Management believes the decrease in gross
profit was due primarily to the decrease in revenues, unusually strong demand
for the Company's wireless infrastructure components in the comparative period
last year and to Management's decision to concentrate its efforts on improving
operating efficiency by, among other methods, reducing the number of projects it
undertakes using primarily subcontracted labor, partially offset by increases in
operating efficiency resulting from the continued integration of the Company's
acquisitions effected during the period and the last half of fiscal 1997.
Selling, General and Administrative Expenses. SG&A expenses for the six-month
period ended December 31, 1997 decreased to $2,158,899 from $2,742,335 for the
same six-month period in the prior year. As a percentage of revenues, SG&A
expenses decreased from 8% for the six-month period ended December 31, 1996 to
7% for the six-month period ended December 31, 1997. The decreases in SG&A
expenses and in SG&A expenses as a percentage of revenue resulted from the
decrease in revenues, increased administrative efficiencies resulting from the
continued integration of the Company's acquisitions effected during the period
and the last half of fiscal 1997, partially offset by approximately $140,000 in
non-recurring expenses (primarily legal and accounting expenses) incurred during
the period in connection with the Company's recent acquisitions of Novak &
Lackey Construction Co., Inc., Microwave Tower Services, Inc. and Ellis Tower
Co., Inc.
Net Earnings. Net earnings for the six-month period ended December 31, 1997
increased approximately 6% to $2,368,804 compared to $2,235,598 for the same
six-month period in the prior year. As a percentage of revenue, net earnings
increased to 8% from 7% in the same period in the prior year. The increases in
net earnings and in net earnings as a percentage of revenue resulted from
improved operating margins realized by the Company's wireless infrastructure
building and implementation services business and increased administrative
efficiencies resulting from the continued integration of the Company's
acquisitions, partially offset by the decrease in revenues, and by certain non-
recurring expenses (primarily legal and accounting expenses) incurred in
connection with the Company's recent acquisitions. In addition, net earnings per
share were negatively impacted by the higher number of shares outstanding during
the period versus the comparative period last year. Net earnings for the prior
periods are stated on a pro-forma basis to adjust for income taxes attributable
to net income realized by Microwave Tower Services, Inc. which was an S-
corporation prior to its acquisition by the Company in June, 1997.
10
<PAGE>
Earnings Per Share Disclosures:
The following is the reconciliation of the numerators and denominators of the
basic and diluted EPS computations for net income and other related disclosures
required by Statement of Financial Accounting Standards No. 128, Earnings Per
Share
<TABLE>
<CAPTION>
For the six-month period ended December 31, 1997
------------------------------------------------
Income Shares Per Share
Numerator (Denominator) Amount
--------- ----------- ---------
<S> <C> <C> <C>
Basic Earnings Per Share
Income available to common stockholders $2,389,804 7,928,928 $ 0.30
-----------
Effect of Dilutive Shares
Options $ 200,530
---------- ---------
Dilutive Earnings Per Share
Income available to common stockholders
plus assumed conversions $2,389,804 8,129,458 $ 0.29
---------- --------- -----------
</TABLE>
Options to purchase 15,000 shares of common stock at exercise price of $15.50
per share were outstanding during the above period but were not included in the
computation of EPS shares. The options which expire on October 7, 2002, were
still outstanding as of December 31, 1997.
<TABLE>
<CAPTION>
For the three-month period ended December 31, 1997
--------------------------------------------------
Income Shares Per Share
Numerator (Denominator) Amount
--------- ------------- ---------
<S> <C> <C> <C>
Basic Earnings Per Share $1,580,707 7,966,140 $ 0.20
Income available to common stockholders -----------
Effect of Dilutive Shares
Options $ - 184,796
---------- ---------
Dilutive Earnings Per Share
Income available to common stockholders
plus assumed conversions $1,580,707 8,150,936 $ 0.19
========== ========= ===========
</TABLE>
Options to purchase 233,000 shares of common stock at exercise price of $14.75
to $15.50 per share were outstanding during the above period but were not
included in the computation of EPS because the options' exercise price was
greater than the average market price of the common shares. The options, which
expire between June 30, 2002 to October 7, 2002, were still outstanding as of
December 31, 1997.
<TABLE>
<CAPTION>
For the six-month period ended December 31, 1996
------------------------------------------------
Income Shares Per Share
Numerator (Denominator) Amount
--------- ------------- ---------
<S> <C> <C> <C>
Basic Earnings Per Share
Income available to common stockholders $3,106,598 6,903,274 $ 0.45
---------
Effect of Dilutive Shares
Warrants $ - 73,763
Options $ - 136,119
---------- ---------
Dilutive Earnings Per Share
Income available to common stockholders
plus assumed conversions $3,106,598 7,113,156 $ 0.44
========== ========= ========
Pro forma earnings per share:
Basic $ .32
========
Dilutive $ .31
========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
For the three-month period ended December 31, 1996
--------------------------------------------------
Income Shares Per Share
Numerator (Denominator) Amount
--------- ------------- ------
<S> <C> <C> <C>
Basic Earnings Per Share
Income available to common stockholders $ 2,244,162 6,934,240 $ 0.32
----------
Effect of Dilutive Shares
Warrants $ - 133,685
Options $ - 165,903
------------ ---------
Dilutive Earnings Per Share
Income available to common stockholders
plus assumed conversions $ 2,244,162 7,233,828 $ 0.28
============ ========= ==========
Pro forma Earnings Per Share:
Basic $ .23
==========
Dilutive $ .22
==========
</TABLE>
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 Annual Meeting of Stockholders was held on November 21, 1997. All of the
proposals presented for Stockholder consideration at the Annual Meeting were
approved. The following is a tabulation of the voting on each proposal presented
at the Annual Meeting.
Proposal 1 -- Proposal to amend the Corporation's Articles of
Incorporation to provide for a staggered Board of Directors
<TABLE>
<CAPTION>
Number of Votes Cast
For Against Abstain
--- ------- -------
<S> <C> <C>
5,599,772 367,000 2,485
</TABLE>
Proposal 2 -- Proposal to amend the Corporation's Articles of
Incorporation to give the Board of Directors the authority, without further
action by the stockholders, to issue up to 2,000,000 shares of Preferred Stock
<TABLE>
<CAPTION>
Number of Votes Cast
For Against Abstain
--- ------- -------
<S> <C> <C>
5,574,486 370,046 24,725
</TABLE>
Proposal 3 -- Proposal to amend the Corporation's Articles of
Incorporation to increase the number of shares of Common Stock that may be
issued by the Company from 10,000,000 to 20,000,000 .
<TABLE>
<CAPTION>
Number of Votes Cast
For Against Abstain
--- ------- -------
<S> <C> <C>
5,966,611 1,846 800
</TABLE>
12
<PAGE>
Proposal 4 -- Proposal to amend the Corporation's Articles of
Incorporation to require a supermajority vote of two-thirds of the stockholders
to either amend or repeal provisions contained in the Articles of Incorporation.
<TABLE>
<CAPTION>
Number of Votes Cast
For Against Abstain
--- ------- -------
<S> <C> <C>
5,596,811 369,496 2,950
</TABLE>
Proposal 5 -- Election of Directors.
<TABLE>
<CAPTION>
Number of Votes Cast
Class Name of Director For Against Abstain
----- ---------------- --- ------- -------
<C> <S> <C> <C> <C>
1 Terry D. Farmer 5,966,502 550 2,205
1 Frank D. Lackey 5,966,502 550 2,205
2 John D. Emery 5,966,502 550 2,205
2 Jon D. Word 5,966,502 550 2,205
3 Michael R. Budagher 5,966,502 550 2,205
3 Ernie L. Carpenter 5,966,502 550 2,205
</TABLE>
Proposal 6 -- Proposal to approve and ratify the Corporation's 1997 Stock
Incentive Plan.
<TABLE>
<CAPTION>
Number of Votes Cast
For Against Abstain
--- ------- -------
<S> <C> <C>
5,960,907 7,050 1,300
</TABLE>
Proposal 7 -- Proposal to approve and ratify certain stock options
granted under the Company's 1997 Stock Incentive Plan to employees of the
Corporation or its subsidiaries in connection with certain recent acquisitions.
<TABLE>
<CAPTION>
Number of Votes Cast
For Against Abstain
--- ------- -------
<S> <C> <C>
5,955,707 7,350 6,200
</TABLE>
Proposal 8 -- Proposal to ratify the appointment of KPMG Peat Marwick LLP
as the Corporation's independent auditors for the fiscal year ending June 30,
1998.
<TABLE>
<CAPTION>
Number of Votes Cast
For Against Abstain
--- ------- -------
<S> <C> <C>
5,968,157 400 700
</TABLE>
ITEM 5. - OTHER INFORMATION.
Agreement to Acquire OmniAmerica Holdings Corporation
On February 16, 1998, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with OmniAmerica, Inc., a Delaware corporation,
OmniAmerica Holdings Corporation, a Delaware corporation ("OmniAmerica")
HMTF/Omni Partners, L.P., a Texas limited partnership ("OmniPartners"), and OAI
Acquisition Corp., a Delaware corporation and a wholly-
13
<PAGE>
owned subsidiary of the Company ("Merger Sub").
OmniAmerica owns, manages and operates broadcast towers and wireless
communication sites throughout the United States. OmniAmerica, formed in 1997
by Carl E. Hirsch and Anthony S. Ocepek in partnership with Hicks, Muse, Tate &
Furst Incorporated ("Hicks, Muse"), is privately held.
Under the terms of the Merger Agreement, Merger Sub will be merged with and into
OmniAmerica with OmniAmerica being the surviving corporation and a wholly-owned
subsidiary of the Company. The transaction is structured as a tax-free exchange
in which the owners of OmniAmerica will receive 5.26 million shares of newly
issued Company common stock in exchange for all the issued and outstanding
equity of OmniAmerica. The Merger Agreement also provides that the following
persons initially will hold the following offices within the Company: Carl
Hirsch -- Chief Executive Officer, Michael Budagher -- Chief Operating Officer,
Anthony Ocepek -- Chief Financial Officer. Hicks, Muse, OmniPartners and certain
of their affiliates have agreed to limit their collective ownership prior to
closing to no greater than 49.9% of the outstanding common stock of the Company
(the "Standstill Agreement"). In addition, at the closing of the Merger
Agreement the parties will enter into a related agreement pursuant to which the
Company may acquire additional wireless communications towers from an affiliate
of OmniPartners in exchange for 1.49 million additional shares of Company common
stock.
At the closing of the Merger Agreement, the Company, OmniPartners and certain
other significant stockholders would enter into a Stockholders Agreement
providing for, among other things: (i) certain registration rights in favor of
OmniPartners and such stockholders, (ii) increasing the Board's size to eight
directors (four of which would be designated by Hicks,Muse and four of which
would be designated by Michael Budagher), (iii) approval of certain
extraordinary transactions and the annual budget of the Company by a majority of
both the Hicks, Muse and Budagher designees to the Board of directors and (iv)
the continuance of the Standstill Agreement.
The Merger is subject to several closing conditions and is currently expected to
be consummated by the end of the current quarter.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Employment Agreement, dated December 6, 1997 by and between
the Registrant and Jeffrey A. Howard.
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 18, 1998
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
14
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated December 6, 1997
between Specialty Teleconstructors, Inc., a Nevada corporation having its
principal executive office located at 12001 Hwy 14 North, Cedar Crest, New
Mexico 87008 (the "Corporation"), and Jeffrey A. Howard, an individual residing
at 3208 Greenbrier, Dallas, Texas 75225 (the "Employee").
WITNESSETH:
WHEREAS, the parties are entering into this Agreement to set forth and
confirm their respective rights and obligations with respect to the Employee's
employment by the Corporation.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto mutually agree as follows:
1. Employment; Term; Duties. The Corporation hereby employs the Employee
------------------------
as Vice President and Chief Financial Officer of the Corporation. The term of
the Employee's employment pursuant to this Agreement will commence on December
29, 1997 (the "Commencement Date") and will continue for the period from that
date until terminated as described in Section 5 hereof. The Employee hereby
accepts such employment, and agrees to devote his full time and effort to the
business and affairs of the Corporation with such duties consistent with the
Employee's position as may be assigned to him from time to time by the Board of
Directors of the Corporation.
2. Compensation. In consideration of all services rendered by the
------------
Employee during the term of his employment pursuant to this Agreement, the
Corporation will provide the Employee with the following compensation:
(a) Base Salary. The Corporation will pay the Employee a base salary
-----------
at the annual rate of $120,000, payable in accordance with the
Corporation's payroll practices from time to time in effect. The
Corporation will review the Employee's salary at least once each year and
may in its discretion increase the Employee's salary. Notwithstanding
anything to the contrary in this Agreement, nothing in this Agreement shall
be deemed to impose any obligation on the Corporation or any of its
subsidiaries to continue to employ the Employee, or on the Employee to
remain in the employ of the Corporation or any of its subsidiaries.
(b) Annual Bonus. In addition to the Employee's base salary, for as
------------
long as the Employee is employed by the Corporation, the Employee will be
entitled to an annual bonus which shall be based on growth in earnings
before interest, taxes, depreciation and amortization of the Corporation
and its consolidated subsidiaries ("EBITDA"), as determined in accordance
with generally accepted accounting principles, during each fiscal year
beginning with the fiscal year ending June 30, 1998 over EBITDA for the
immediately preceding fiscal year. The annual bonus will calculated as
follows: If growth in EBITDA is less than 5%, bonus is $0. If growth in
EBITDA is greater than 5% but less than 10%, bonus is 25% of salary. If
growth in EBITDA is greater than 10% but less than 15%, bonus is 50% of
salary. If growth in EBITDA is greater than 15% but less than 20%, bonus is
75% of salary and if growth in EBITDA is greater than 20%, bonus is 100% of
salary. The annual bonus for the fiscal year ending June 30, 1998 only will
be prorated such that the Employee's annual bonus for the fiscal year
ending June 30, 1998 will be 7/12 of the annual bonus otherwise payable
pursuant to the foregoing formula. The annual bonus will be paid within
sixty (60) days after the end of each fiscal year. At the discretion of the
Board of Directors, all or any portion of the annual bonus may be provided
in the form of additional equity in the Corporation.
2. Stock Options; Sale of Shares to Employee. In addition to the
-----------------------------------------
Employee's base salary and annual bonus, the Employee will receive 175,000
options (the "Employee's Stock Options") under the Corporation's 1997 Stock
Incentive Plan (the "97 Plan"). The Employee Stock Options will be issued on the
Commencement Date at an exercise price equal to the closing price of
Corporation's Common Stock on the Nasdaq National Market on the
Page 1 of 6
<PAGE>
Commencement Date. The Employee Stock Options will be issued pursuant to a Stock
Option Agreement in the form attached hereto as Exhibit "A" (the "Employee's
-----------
Stock Option Agreement") and will be issued subject to the terms and conditions
contained or referred to therein. In addition, the Corporation will sell to the
Employee 50,000 shares (the "Purchased Shares") of Corporation Common Stock for
an aggregate purchase price (the "Purchase Price") equal to the product obtained
by multiplying 50,000 by the closing price of Corporation's Common Stock on the
Nasdaq National Market on the Commencement Date. The Purchase Price will be
payable by the Employee's execution and delivery to the Corporation of a
recourse Promissory Note (the "Note") in the original principal amount of the
Purchase Price. The Employee understands and agrees that the Purchased Shares
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act") and, therefore, cannot be resold or otherwise transferred
unless such shares are registered under the Securities Act or unless an
exemption from the applicable registration requirements of the Securities Act is
available and that, accordingly, the certificate representing the Purchased
Shares will bear an appropriate restrictive legend.
3. Employee Benefits. The Employee will be entitled to participate in
-----------------
all incentive, retirement, profit-sharing, life, medical, disability and other
benefit plans and programs (collectively, "Benefit Plans") as are from time to
time generally available to other executives of the Corporation with comparable
responsibilities, subject to the provisions of those programs. Without limiting
the generality of the foregoing, the Corporation will provide the Employee with
basic health and medical benefits on the terms that such benefits are provided
to other executives of the Corporation with comparable responsibilities. The
Employee will also be entitled to a minimum of three weeks paid vacation per
year. Vacation time must be used during the year in which it accrues. Unused
vacation time may not be carried over into the next employment year. Unused
vacation time will not be paid to the Employee upon termination of the
Employee's employment.
4. Reimbursement of Expenses. The Corporation will promptly reimburse
-------------------------
the Employee, in accordance with the Corporation's policies and practices in
effect from time to time, for all expenses reasonably incurred by the Employee
in performance of the Employee's duties under this Agreement. In addition, the
Corporation will pay for any dues, fees or continuing education costs necessary
to maintain any professional licenses the Employee now holds.
5. Termination. The Employee's employment by the Corporation: (a)
-----------
shall terminate upon the Employee's death or Disability (as defined below); (b)
shall terminate sixty (60) days after either the Employee or the Corporation
gives written notice to the other that the Employee or it does not wish to
continue the Employee's employment hereunder (a "Non-Continuation Notice"); (c)
may be terminated by the Corporation with or without Cause (as defined below) at
any time. For purposes of this Agreement, the term "Disability" shall mean a
physical or mental impairment which renders the Employee unable to carry out the
Employee's duties under this Agreement for more than ninety (90) days in any
twelve-month period. For purposes of this Agreement, the term "Cause" shall mean
(i) the Employee's willful and continued failure substantially to perform the
Employee's duties with the Corporation, (ii) any material breach of this
Agreement by the Employee which is not cured within thirty (30) days after
notice from the Corporation thereof, (iii) commission of any act of fraud,
embezzlement or dishonesty by the Employee, or (iv) any other intentional
misconduct by the Employee adversely affecting the business or affairs of the
Corporation in a material manner.
6. Consequences of Termination.
---------------------------
(a) Consequences of Termination For Cause. If the Employee's
-------------------------------------
employment is terminated for cause, then (i) this Agreement shall terminate
immediately, (ii) except as may have vested or accrued or been paid or
become payable prior to the date of such termination or otherwise required
under applicable law, from and after such the date, the Corporation shall
be under no obligation to pay the Employee any compensation (base salary or
annual bonus) pursuant to this Agreement, (iii) the Employee's benefits and
rights under any Benefit Plan shall be paid, retained or forfeited in
accordance with the terms of such plan, and (iv) the Employee's rights with
respect to the Employee's Stock Options will be determined in accordance
with the Employee's Stock Option Agreement.
Page 2 of 6
<PAGE>
(b) Consequences of Termination on Employee's Death or Disability.
-------------------------------------------------------------
If the Employee's employment is terminated because of the Employee's death
or Disability, then (i) this Agreement shall terminate immediately, (ii)
the Employee or his legal representative or estate, as the case may be,
will be entitled to receive any base salary due to the Employee through the
last day of employment, plus any accrued but unpaid annual bonus, to which
the Employee may have been entitled on the last day of employment, but had
not yet received , (iii) the Employee's benefits and rights under any
Benefit Plan shall be paid, retained or forfeited in accordance with the
terms of such plan, and (iv) the Employee's rights with respect to the
Employee's Stock Options will be determined in accordance with the
Employee's Stock Option Agreement.
(c) Consequences of Termination Pursuant to a Termination Event. If
-----------------------------------------------------------
the Employee's employment is terminated pursuant to a Termination Event (as
defined below), then (i) the Corporation will pay the Employee, in full
satisfaction of all of its obligations under this Agreement (except for its
obligations under Section 3 and this Section 6(c) hereof), an amount (the
"Termination Payment") equal to the sum of (1) any base salary due to the
Employee through the last day of employment, plus any accrued but unpaid
annual bonus, to which the Employee may have been entitled on the last day
of employment, but had not yet received, and (2) an amount equal to 100% of
the amount of compensation (base salary and annual bonus) paid (or payable)
by the Corporation to the Employee in respect of the last fiscal year of
the Corporation immediately preceding the date of termination, and (ii) for
one (1) year following the Termination Event, the Corporation will provide
the Employee and members of his immediate family with basic health and
medical benefits on the terms that such benefits are provided to other
executives of the Corporation with comparable responsibilities as of the
date of the Employee's termination of employment; provided, however, that
(1) the Corporation's obligation to provide these basic health and medical
benefits pursuant to this Section 6(c) will cease immediately upon the
Employee's obtaining other full-time employment, and (2) if the Corporation
is unable to provide the Employee with these basic health and medical
benefits under then existing plans without costs it considers excessive,
the Corporation will be entitled to satisfy any such obligation by making a
payment to the Employee equal to the cost to the Corporation during the
last full year immediately preceding the Termination Event of providing
such benefits to the Employee, (iii) the Employee's benefits and rights
under any Benefit Plan, other than any basic health and medical benefit
plan, shall be paid, retained or forfeited in accordance with the terms of
such plan, and (iv) the Employee's rights with respect to the Employee's
Stock Options will be determined in accordance with the Employee's Stock
Option Agreement . The Termination Payment will be in addition to any
salary and bonus otherwise paid during the fiscal year in which the
Termination Event occurs and will be paid in a lump sum within sixty (60)
days following the Termination Event and will be subject to any applicable
payroll or other taxes required to be withheld. The Termination Payment
will not be subject to offset on account of any remuneration paid or
payable to the Employee for any subsequent employment the Employee may
obtain, whether during or after the period during which the Termination
Payment is made and the Employee shall have no obligation whatever to seek
any subsequent employment. For purposes of this Agreement, the term
"Termination Event" shall mean (i) the Employee's receipt of a Non-
Continuation Notice from the Corporation, (ii) termination of the
Employee's employment by the Corporation for any reason other than for
Cause or the Employee's death or Disability, or (iii) the Employee's
submission of a Non-Continuation Notice to the Corporation notifying the
Corporation of the Employee's voluntary termination of employment on
account of (a) a 10% or more reduction of the Employee's base salary by the
Corporation, (b) the Corporation's removing the Employee from or assigning
the Employee duties or responsibilities that are inconsistent, in any
significant respect, with the scope of duties or responsibilities
associated with the office of Vice President and Chief Financial Officer of
the Corporation, or (c) relocation of the Employee's office outside the
Dallas/Ft. Worth, Texas other than to the Corporation's corporate
headquarters.
7. Employee's Office. Initially, the Employee's office will be located
-----------------
in the Corporation's offices in Dallas, Texas. In the event the Employee's
office is relocated to a location outside the Dallas/Ft. Worth, Texas area, the
Corporation will pay or reimburse the Employee for reasonable moving expenses.
Page 3 of 6
<PAGE>
8. Non-disclosure. The Employee agrees that the Employee will not,
--------------
without the prior written consent of the Corporation, communicate or divulge
(other than in the regular course of the Corporation's business) to anyone other
than the Corporation, its subsidiaries and those designated by it, any
confidential information, knowledge or data relating to the Corporation or any
of its subsidiaries or affiliates, or to any of their respective businesses,
obtained by the Employee before or during the term of the Employee's employment
from the Corporation or any of its subsidiaries, except to the extent that the
Employee is compelled pursuant to an order of a court or other body having
jurisdiction over such matter to do so (in which case the Corporation shall be
given prompt notice of such intention to divulge and an opportunity to object to
such disclosure), or such information, knowledge or data is public knowledge or
generally known within the Corporation's industry other than through improper
disclosure by the Employee.
9. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or its breach, shall be settled by arbitration in the City of
Albuquerque, New Mexico, in accordance with the then governing rules of the
American Arbitration Association for commercial matters and the New Mexico
Uniform Arbitration Act then in effect (with the right of discovery for all
parties as provided in the New Mexico Rules of Civil Procedure). This Agreement
shall be specifically enforceable under the prevailing arbitration law. The
award rendered by the arbitrators shall be final and judgment upon it shall be
entered in any court having jurisdiction. The prevailing parties' attorneys'
fees and costs in connection with arbitration shall be paid by the losing party.
10. Successors; Binding Agreement; Assignment. The Corporation shall
-----------------------------------------
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Corporation to expressly assume and agree in writing to perform
this Agreement in the same manner and to the same extent that the Corporation
would be required to perform it if no such succession had taken place, provided
that the Employee need only be a senior executive officer with the authority,
powers and responsibilities set forth in Section 1 hereof with respect to the
subsidiary or subdivision which operates the business of the Corporation as it
exists on the date of such business combination. Failure of the Corporation to
obtain such express assumption and agreement at or prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Employee to compensation and benefits from the Corporation in the same amount
and on the same terms to which the Employee would be entitled hereunder if the
Corporation terminated the Employee's employment without Cause, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination. As used in this
Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and
any successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise. The Corporation may
not assign this Agreement except in connection with, and to the acquiror of, all
or substantially all of the business or assets of the Corporation, provided such
acquiror expressly assumes and agrees in writing to perform this Agreement as
provided in this Section 10. The Employee may not assign his rights or delegate
his duties or obligations under this Agreement.
11. Notice. Any notices or other communications required or permitted to
------
be given hereunder shall be in writing and shall be deemed to have been duly
made or given when hand delivered, one (1) business day after being transmitted
by telecopier (confirmed by mail) or sent by overnight courier against receipt,
or five (5) days after being mailed by registered or certified mail, postage
prepaid, return receipt requested to the party to whom such communication is
given at the address set forth below, which address may be changed by notice
given in accordance with this Section 11:
If to the Corporation:
Specialty Teleconstructors, Inc.
12001 Hwy 14 North
Cedar Crest, New Mexico 87008
Attention: Michael R. Budagher, President
Page 4 of 6
<PAGE>
If to The Employee:
Jeffrey A. Howard
3208 Greenbrier
Dallas, Texas 75225
12. Miscellaneous.
-------------
(a) Severability. If any provision of this Agreement shall be
------------
declared to be invalid or unenforceable, in whole or in part, such
invalidity or unenforceability shall not affect the remaining provisions
hereof which shall remain in full force and effect.
(b) No Oral Modification, Waiver or Discharge. No provision of this
-----------------------------------------
Agreement may be modified, waived or discharged orally, but only by a
waiver, modification or discharge in writing signed by the Employee and
such officer as may be designated by the Board of Directors of the
Corporation to execute such a waiver, modification or discharge. No waiver
by either party hereto at any time of any breach by the other party hereto
of, or failure to be in compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the time or at any prior
or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement or
in the documents attached as Exhibits to this Agreement.
(c) Entire Agreement. This Agreement and the Exhibits attached
----------------
hereto represent the entire agreement of the parties and shall supersede
any and all previous contracts, arrangements or understandings, express or
implied, between the Employee and the Corporation with respect to the
subject matter hereof.
(d) Choice of Law. This Agreement shall be construed, interpreted,
-------------
and governed in accordance with the laws of New Mexico, without reference
to rules relating to conflicts of law.
(e) Section Headings for Convenience Only. The section headings
-------------------------------------
herein are for the purpose of convenience only and are not intended to
define or limit the contents of any section.
(f) Execution in Counterparts. The parties may sign this Agreement
-------------------------
in counterparts, all of which shall be considered one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year first above written.
SPECIALTY TELECONSTRUCTORS, INC.,
A Nevada corporation
By: /s/ Michael R. Budagher
---------------------------------------------
Michael R. Budagher, Chairman of the Board,
President, Chief Executive Officer and
Treasurer
/s/ Jeffrey A. Howard
------------------------------------------------
Jeffrey A. Howard
Page 5 of 6
<PAGE>
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Page 6 of 6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,131,793
<SECURITIES> 50,000
<RECEIVABLES> 15,741,654
<ALLOWANCES> 0
<INVENTORY> 3,339,147
<CURRENT-ASSETS> 24,250,293
<PP&E> 12,941,051
<DEPRECIATION> 3,919,565
<TOTAL-ASSETS> 36,843,640
<CURRENT-LIABILITIES> 13,136,379
<BONDS> 0
0
0
<COMMON> 80,689
<OTHER-SE> 21,471,361
<TOTAL-LIABILITY-AND-EQUITY> 36,843,640
<SALES> 29,575,280
<TOTAL-REVENUES> 29,698,948
<CGS> 23,527,333
<TOTAL-COSTS> 25,686,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,563
<INCOME-PRETAX> 3,862,153
<INCOME-TAX> 1,493,549
<INCOME-CONTINUING> 2,368,804
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,368,804
<EPS-PRIMARY> .30
<EPS-DILUTED> .29<F1>
<FN>
<F1>Other Equity of $21,471,361 is comprised of Additional paid-in Capital of
$14,080,222, Treasury Stock of $(1,387,500) and Retained Earnings of $8,778,639.
</FN>
</TABLE>
