-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FANf9/1KlBeHm+bwz6WSTpcmhFBE/sns7LFcVPlcoaEhHPZglwMDrj8EoYQ6GatX M5rf8j7U039zThcpYMVMDQ== 0000826411-96-000012.txt : 19960620 0000826411-96-000012.hdr.sgml : 19960620 ACCESSION NUMBER: 0000826411-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960619 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABLE TELCOM HOLDING CORP CENTRAL INDEX KEY: 0000826411 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL WORK [1731] IRS NUMBER: 650013218 STATE OF INCORPORATION: FL FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21986 FILM NUMBER: 96583061 BUSINESS ADDRESS: STREET 1: 1601 FORUM PL STREET 2: STE 305 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 BUSINESS PHONE: 4076880400 MAIL ADDRESS: STREET 1: 1601 FORUM PLACE CITY: WEST PALM BEACH STATE: FL ZIP: 33401 FORMER COMPANY: FORMER CONFORMED NAME: DELTA VENTURE FUND INC DATE OF NAME CHANGE: 19890312 10-Q 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934. For the quarterly period ended April 30, 1996. ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934. For the transition period from ______________ to _____________. Commission File Number: 0-21986 ABLE TELCOM HOLDING CORP. (exact name of registrant as specified in its charter) Florida 65-0013218 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1601 Forum Place, Suite 1110, 33401 West Palm Beach, Florida (Zip Code) (address of principal executive offices) (407) 688-0400 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO__ As of June 14, 1996, there were 8,203,212 shares, par value $.001 per share, of the Registrant's Common Stock outstanding. 2 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES INDEX ----- PART I - FINANCIAL INFORMATION Page Number ----------- Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - April 30, 1996 and October 31, 1995 3 Condensed Consolidated Statements of Operations - Three months and six months ended April 30, 1996 and 1995 5 Condensed Consolidated Statements of Cash Flows - Six months ended April 30, 1996 and 1995 6 Notes to Condensed Consolidated Financial Statements - April 30, 1996 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited)
April 30, 1996 October 31, 1995 Assets (unaudited) (audited) - ------ ---------------- ---------------- Current assets: Cash and equivalents $ 2,085,177 $ 2,952,239 Investments, net 559,375 571,875 Accounts receivable, net 10,090,422 10,529,124 Inventories 2,785,024 3,535,622 Prepaid expenses and other 1,219,962 831,908 Deferred income taxes 37,0457 151,879 -------------- ------------- Total current assets 16,777,417 18,572,647 Property and equipment, net 6,376,545 6,119,608 Other assets: Deferred income taxes --- 331,739 Investment in Latin American subsidiary 2,095,025 --- Goodwill and contractual rights, net 6,089,311 7,203,761 Other 411,018 254,461 -------------- ------------- Total other assets 8,595,354 7,789,961 -------------- ------------- Total assets $ 31,749,316 $ 32,482,216 ============== =============
Note: The balance sheet at October 31, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to accompanying condensed consolidated financial statements. 4 Condensed Consolidate Balance Sheets (Continued) ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Continued) (unaudited)
April 30, 1996 October 31, 1995 Liabilities and Shareholders' Equity (unaudited) (audited) ---------------- ---------------- Current liabilities: Current portion of long-term debt $ 1,588,360 $ 2,222,369 Lines of credit 4,638,153 3,220,000 Notes payable - other 1,869,049 --- Notes payable to shareholders/directors 1,807,976 1,557,976 Accounts payable 3,017,249 3,446,123 Accrued expenses 1,412,324 728,282 -------------- ------------- Total current liabilities 14,333,111 11,174,750 Deferred income taxes 239,449 --- Long-term debt, excluding current portion 2,775,522 3,033,000 -------------- ------------- Total liabilities 17,348,082 14,207,750 Minority interest --- 807,955 Shareholders' equity: Common stock, $.001 par value, authorized 25,000,000 shares; issued and outstanding 8,203,212 shares in 1996; 8,193,212 shares in 1996 and 1995 8,203 8,193 Additional paid-in capital 12,833,286 12,790,196 Unrealized loss on investments, net (65,625) (53,125) Retained earnings 1,625,370 4,721,247 -------------- ------------ Total shareholders' equity 14,401,234 17,466,511 -------------- ------------ Total liabilities and shareholders' equity $ 31,749,316 $ 32,482,216 ============== ============
Note: The balance sheet at October 31, 1995 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes to condensed consolidated financial statements. 5 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited)
-------------------------------------------------- For the three months For the six months ended April 30, ended April 30, 1996 1995 1996 1995 ----------- ----------- ----------- ---------- DOMESTIC OPERATIONS: Revenues $11,578,375 $ 7,624,773 $21,823,057 $15,284,314 ---------- --------- ---------- ---------- Costs and expenses: Costs of revenues 9,043,309 6,143,476 17,858,711 12,246,538 General and administrative 1,244,933 1,130,899 2,254,876 2,304,834 Depreciation and amortization 420,580 337,646 865,034 679,975 ---------- ---------- ---------- ---------- Total costs and expenses 10,708,822 7,612,021 20,978,621 15,231,347 Domestic operating income 754,508 347,688 844,436 52,967 LATIN AMERICAN OPERATIONS: Revenues $ 1,128,965 $ 274,010 $ 2,347,613 $ 574,158 ---------- --------- ---------- ---------- Costs and expenses: Costs of revenues 662,985 157 045 1,274,407 461,724 General and administrative 426,623 202,861 867,636 590,450 Depreciation and amortization 118,816 122,804 237,720 229,238 ---------- ---------- ---------- ---------- Special charges: Foreign currency and devaluation losses 479,895 (55,529) 1,489,687 (71,120) Write off of goodwill 920,551 --- 920,551 --- Provision for restructuring 2,004,304 --- 1,748,208 --- Minority interest (635,087) (53,604) (882,447) (96,877) ---------- --------- ---------- ---------- Total costs and expenses 3,978,087 373,577 5,655,762 1,113,415 ---------- --------- ---------- ---------- Latin American operating loss 2,849,122 (99,567) (3,308,149) (539,257) ---------- --------- ---------- ---------- Total income (loss) from operations (2,094,614) 248,101 (2,463,713) (486,290) Interest expense 297,213 331,023 534,917 611,201 Interest and other income 63,076 197,367 136,876 323,580 ---------- --------- ---------- ---------- Income (loss) before income taxes (2,328,751) 114,445 (2,861,754) (773,911) Income tax expense 233,610 46,258 234,000 --- ---------- --------- ---------- ---------- Net income (loss) (2,562,361) 68,187 (3,095,754) (773,911) ========== ========= ========== ========== Loss per common share and common equivalent share $ (.31) $ (.01) $ (.37) $ (.09) ========== ========= ========= ========== Weighted average shares outstanding: Primary and fully diluted 8,355,835 8,321,534 8,356,273 8,323,803 ========== ========= ========= ==========
See accompanying notes to condensed consolidated financial statements. 6 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Condensed Consolidated Statement of Cash Flows (unaudited)
For the six months ended April 30, -------------------------------------- 1996 1995 --------------- --------------- Operating Activities: Net loss $ (3,095,754) $ (773,911) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,102,754 909,213 Deferred income taxes 478,861 (69,550) Loss on disposal of property --- 5,560 Translation/transaction losses 479,895 --- Minority interest (635,087) --- Changes in assets and liabilities, net of effects from the acquisition of H.C. Connell, Inc. Decrease in accounts receivable 2,196,634 1,979,813 Decrease (increase) in inventories 757,565 (56,549) Increase in prepaid expenses and other (320,650) (347,424) Decrease in investments --- (85,913) Decrease (increase) in other assets (44,502) 33,994 Decrease in accounts payable and accrued expenses (533,544) (861,389) Decrease in net assets of Latin American operations 429,215 --- Decrease in income taxes payable --- (78,301) --------- --------- Net cash provided by operating activities 815,387 655,543 --------- --------- Investing Activities: Business acquisition (601,617) --- Purchases of property and equipment (1,078,755) (1,203,196) --------- --------- Net cash used in investing activities (1,680,372) (1,203,196) Financing Activities: Net borrowings under lines of credit 445,000 19,000 Borrowings from shareholders/directors 500,000 28,000 Repayments to shareholders/directors (250,000) 458,744 Proceeds from long-term debt 48,810 --- Payments on long-term debt (459,260) (735,181) Proceeds from exercise of warrants --- 125,000 Distributions to minority interests (172,868) (432,951) --------- -------- Net cash provided by financing activities 111,682 (537,388) --------- --------
See accompanying notes to condensed consolidated financial statements. 7 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Condensed Consolidated Statement of Cash Flows (Continued) (unaudited)
For the six months ended April 30, ----------------------------------- 1996 1995 --------------- -------------- Effect of exchange rate changes on cash and equivalents (113,759) --- --------- ---------- Decrease in cash and equivalents (867,062) (1,085,041) Cash and equivalents at beginning of year 2,952,239 3,432,349 --------- ---------- Cash and equivalents at end of year $ 2,085,177 $ 2,347,308 ========= ========== Supplemental disclosures of cash flow information: Non-cash transactions affecting operating, investing and financing activities: Operating activities: Increase in the value of investments, restricted net of tax effect $ 12,500 $ 23,153 ========= ========== Investing and Financing activities: Conversion of notes payable to shareholders to common stock $ --- $ 1,500,000 ======== ========== Liabilities assumed in conjunction with acquisition: Fair value of assets acquired $ 4,201,427 Stock issued in connection with financing acquisition 43,100 --- Note payable issued to Sellers/ directors (2,369,049) --- ----------- ---------- Liabilities assumed $ 1,875,478 $ --- =========== ========== Interest paid $ 447,937 $ 526,204 =========== ========== Income taxes paid, net of refunds $ 0 $ 0 =========== ==========
See accompanying notes to condensed consolidated financial statements. 8 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods presented have been included. Such adjustments consist of normal recurring accruals and those adjustments recorded to reflect the impact of currency devaluations on the Company's operations in Venezuela, a provision for restructuring Latin American operations and the write off of certain goodwill and contractual rights. These results have been determined on the basis of generally accepted accounting principles and practices applied consistently with those used in the preparation of the Company's Annual Report on Form 10-K for the year ended October 31, 1995. Operating results for the three and six months ended April 30, 1996 are not necessarily indicative of the results that may be expected for the year ended October 31, 1996. It is recommended that the accompanying condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1995 Annual Report on Form 10-K. Certain items in the condensed consolidated financial statements for the interim periods ended April 30, 1995 have been reclassified to conform with the current presentation. 2. Inventories The components of inventory consist of the following: [S] [C] [C] April 30, October 31, 1996 1995 ------------ ----------- Raw materials $ 1,445,071 $ 1,719,338 Committed inventory 1,339,953 1,816,284 ------------ ----------- $ 2,785,024 $ 3,535,622 ============ =========== 3. Acquisition On December 8, 1995, the Company, through a wholly owned subsidiary, acquired all of the outstanding Common Stock of H.C. Connell, Inc. ("Connell"). Connell provides outside plant telecommunication services to local telephone operators and also provides power and other utility services to major electric and water companies as well as various government municipalities. The purchase price, adjusted from closing to $2,369,049, was paid by issuing promissory notes totaling $1,869,049 to the seller and with loan proceeds of $500,000 from directors of the Company. The acquisition was accounted for using the purchase method of accounting. 9 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES The proforma unaudited results of operations for the three months and six months ended April 30, 1996 and 1995, assuming consummation of the purchase at the beginning of the respective periods, are as follows:
Three months Six months ended April 30, ended April 30, ------------------------ ---------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Net revenues $12,592,295 $11,696,517 $25,313,648 $22,665,675 Net income (loss) (2,562,361) 366,644 (2,992,571) (359,969) Net income (loss) per common share and common equivalent share $ (.31) $ .04 $ (.36) $ (.04)
4. Borrowings Effective November 29, 1995, the Company entered into a Term Loan and Revolving Line of Credit Facility with a new lender (the "Lender") totaling $12,500,000 (the "Credit Facility"). The Credit Facility is comprised of the following components: (i) a $6,000,000 revolving line of credit (the "Line of Credit"), (ii) a $2,500,000 equipment loan facility (the "Equipment Loan Facility"), (iii) a 60-month Term A loan in the amount of $2,750,000 (the "Term A Loan"), and (iv) a 36-month Term B loan in the amount of $1,250,000 (the "Term B Loan"). The Line of Credit, the Term A Loan and the Term B Loan are each evidenced by separate promissory notes with varying maturities and are secured by certain accounts receivable, inventory and equipment. Each loan accrues interest at either the Lender's prime rate or, at the Company's election, the one (1) month LIBOR rate plus two and seven tenths percent (2 7/10%). Proceeds from the Term A, Term B and a portion of the proceeds from the credit line were used to refinance certain existing debt of the Company. The balance of the Line of Credit will be used by the Company for its working capital needs. The Credit Facility contains covenants, which require, among other conditions, that the Company maintain certain tangible net worth, funded debt, and debt service amounts. At April 30, 1996, the Company was not in compliance with these covenants; however, the Company obtained a limited waiver on the covenants from the Lender effective through July 31, 1997. In addition to the Credit Facility, the Company incurred and assumed additional debt in connection with the acquisition of Connell. At April 30, 1996, the Company's borrowings consist of the following: April 30, 1996 -------------- Lines of Credit: Bank line of credit ($6,000,000 maximum limit), due February 28, 1997; interest payable monthly at prime (81/4 % at April 30, 1996); secured by certain accounts receivable, inventory and equipment $ 4,486,153 Bank line of credit ($200,000 maximum limit); due June 30, 1996; interest payable monthly at prime (81/4% at April 30, 1996) plus 1/2%; secured by certain accounts receivable 152,000 ---------- $ 4,638,153 ==========
10 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES April 30, 1996 -------------- Notes Payable Other: Note payable issued in connection with acquisition; principal and accrued interest at 6% per annum due June 8, 1996; collateralized by capital stock of the subsidiary acquired $ 1,619,049 Note payable issued in connection with acquisition; principal and accrued interest at prime (81/4% at April 30, 1996) plus 1% due June 8, 1996, collateralized by capital stock of the subsidiary acquired 250,000 --------- $ 1,869,049 ========= Notes payable to Shareholders/Directors: Notes payable to shareholders; personally guaranteed by a shareholder/director of the Company $ 1,307,976 Notes payable to directors; principal and accrued interest at prime (81/4% at April 30, 1996) plus 1% due June 30, 1996; secured by certain accounts receivable 500,000 --------- $ 1,807,976 ========= Long-Term Debt: Term loan payable to bank; payable in monthly installments of $45,833 plus interest at prime (81/4% on April 30, 1996) through December 1, 2000; collateralized by certain accounts receivable, inventory and equipment $ 2,566,668 Term loan payable to bank; payable in monthly installments of $34,722 plus interest at prime (81/4% at April 30, 1996) through December 1, 1998; collateralized by certain accounts receivable, inventory and equipment 1,111,112 Term loans payable to bank; payable in monthly installments totaling $39,917 plus interest at prime (81/4% at April 30, 1996) plus 1/2%; through June 30, 1997; collateralized by certain equipment 340,116 Term loan payable to bank; payable in monthly installments of $1,200 plus interest of 81/4% through March 1999, collateralized by certain equipment. 47,610 Mortgage note payable to bank; payable in monthly installments totaling $1,604 plus interest at prime (81/4% at April 30, 1996) plus 1/2%; collateralized by land and building with a carrying value of approximately $440,000 as of April 30, 1996 298,376 --------- Total long-term debt 4,363,882 Less current portion (1,588,360) --------- Long-term debt, excluding current portion $ 2,775,522 =========
The Company is currently involved in a legal action with respect to the amount owed and other terms relating to certain of the notes payable to shareholders/directors totaling $1,307,976, issued in connection with the acquisition of Transportation Safety Contractors, Inc. in June 1994. Said notes are classified as "current" in the accompanying consolidated balance sheets at April 30, 1996 and October 31, 1995. Subsequent to April 30, 1996, the Company negotiated an amendment of the terms relating to the notes totaling $1,869,049 issued in connection with the acquisition of Connell. The amended note accrues interest at the rate of 9% per annum, is due January 2, 1997, and is collateralized by certain accounts receivable, equipment and capital stock of the subsidiary acquired. 11 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES 5. Litigation The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position. 6. Latin American Operations Effective April 30, 1996, the Company's board of directors approved recording the impact of a reorganization plan pursuant to which ownership of certain of the Company's Latin American operations and joint venture arrangements will be restructured. In reaching its decision to reorganize, the Company expects to increase overall operating income by divesting or scaling back those operations which have not met profitability expectations and by mitigating the uncertainties associated with foreign currency exchange risk in the region. In connection with the reorganization , the consolidated financial statements of the Company have been reclassified to report separately the net assets and operating results of Latin American operations. Net assets of the businesses to be restructured , consisting primarily of accounts receivable, real estate and machinery and equipment have been transferred to a wholly-owned subsidiary at their estimated net realizable value and are classified as investment in Latin American subsidiary in the accompanying balance sheet at April 30, 1996. Net assets for these operations were $5,064,406 at October 31, 1995. Operating results for Latin American operations for the six months ended April 30, 1996 include the impact of major currency devaluations experienced in Venezuela during fiscal year 1996, a non -cash charge relating to the write-off of certain goodwill and contractual rights and a provision for restructuring. Such provision for the three months ended April 30, 1996 consists of a $1,256,149 write-down of various investments, accounts receivable and deferred tax assets to net realizable value and a $748,155 accrual for expenses to be incurred during the reorganization period. The special charges totaling $2,766,357 for the three months ended April 30, 1996 and $3,259,886 for the six month period, net of minority interest, reduced primary earnings per share by $0.33 and $0.39, respectively. In April 1996, the Venezuelan government ceased implementation of foreign currency exchange control restrictions and the fixing of statutory exchange rates. Such economic policies have had a significant adverse impact on the Company's Venezuelan operations since going into effect in June 1994. 12 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis relates to the Company's financial condition and results of operations for the three months and six months ended April 30, 1996 and 1995. This information should be read in conjunction with the Company's Condensed Consolidated Financial Statements and related notes appearing elsewhere in this document. Analysis of Operating Income - ---------------------------- For the three months For the six months ended April 30, ended April 30, ------------------------------------------------ 1996 1995 1996 1995 -------- -------- -------- -------- DOMESTIC OPERATIONS: Revenues 100.00% 100.00% 100.00% 100.00% ------ ------ ------ ------ Costs of revenues 78.89% 77.18% 81.83% 80.12% General and administrative 10.86 14.21 10.33 15.08 Depreciation and amortization 3.67 4.24 3.96 4.45 Domestic operating income 6.58 4.37 3.88 .35 LATIN AMERICAN OPERATIONS: Revenues 100.00% 100.00% 100.00% 100.00% ------ ------ ------ ------ Costs of revenues 58.73% 57.31% 54.29% 80.42% General and administrative 37.79 74.03 36.96 102.84 Depreciation and amortization 10.52 44.82 10.13 39.93 Special charges 245.33 (39.81) 139.55 (29.26) Latin American operating income (252.37) (36.35) (140.93) (93.93)
Overview - -------- Domestic operating income more than doubled during the second quarter ended April 30, 1996 to $754,508 from $347,668 during the comparable quarter of 1995. Domestic operating income also increased significantly for the six months ended April 30, 1996 to $844,436 compared to $52,967 for the same period in 1995. The improvement is principally due to a larger revenue base achieved principally through the acquisition of H.C. Connell, Inc. ("Connell") in December 1995 coupled with efficiencies which significantly reduced the level of general and administrative expenses. After recording special charges totaling $2,766,357, net of minority interest, associated with a restructuring plan during the quarter, Latin American operations reported a loss of $(2,849,122) for the three months ended April 30, 1996 compared with a loss of $(99,567) for the same period in the prior year. Year to date for 1996, the loss from Latin American operations was $(3,308,149) compared to $(539,257) in 1995. Consolidated net loss for the three month period was $(2,562,361) or $(.31) per share compared to income of $68,187 or $.01 per share in 1995. For the six months ended April 30, 1996 , consolidated net loss was $(3,095,754) or $(.37) per share compared to a net loss of $(773,911) or $(.09) for the comparable period in 1995. 13 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES During the second quarter of 1996, the Company approved a reorganization plan under which ownership of certain of the Company's Latin American operations and joint venture arrangements will be restructured. The Company expects to increase overall operating income by divesting or scaling back those operations which have not met profitability expectations and by mitigating the uncertainties associated with foreign currency exchange risk in the region. As a result, the Company has classified as special charges for the six months ended April 30, 1996, (a) the impact of major currency devaluations experienced in Venezuela during fiscal year 1996; (b) a non-cash charge relating to the write-off of certain goodwill and contractual rights and (c) a provision for restructuring. Such provision for the three months ended April 30, 1996 consists of a $1,256,149 write-down of various investments, accounts receivable and deferred tax assets to net realizable value and a $748,155 accrual for expenses to be incurred during the reorganization period. During April 1996, the Venezuelan government ceased implementation of foreign currency exchange control restrictions and the fixing of statutory exchange rates. Such economic policies have had a significant adverse impact on the Company's operating results since going into effect in June of 1994. Domestic Operations - ------------------- Domestic revenues for the three month period ended April 30, 1996 increased 44% to $11,463,330 up $3,503,641 compared to revenues of $7,959,689 for the three month period in 1995. Revenues from domestic operations for the year to date were $21,823,057 representing an increase of $6,538,743 or 43% compared to revenues of $15,284,314 for the comparable period in 1995. Approximately 82% of the 1996 revenue increase is due to the acquisition of Connell. The remaining increase is a result of overall growth in the Company's domestic telecommunication services business prompted principally by the recent deregulation of the communications industry. However, revenues were lower than expected, due to the severe weather conditions experienced in the Company's operating areas during the first quarter of 1996 and during February of the Company's second quarter. The Company expects that its backlog of work not completed as planned during the first six months of its fiscal year will be deferred to subsequent quarters of 1996. Cost of revenues for the second quarter of 1996 represents 79% of revenues compared to 77% for the same period in 1995. For the six months ended April 30, 1996 , cost of revenues were 82% of domestic revenues compared to 80% for the first six months of 1995. This softness in gross margins during 1996 primarily reflects a decrease in labor productivity in certain operating areas associated with efforts to work during inclement weather. General and administrative expenses reflect a significant decline as a percentage of revenues as a result of the Company's efforts to enhance financial controls and the implementation of a cost containment program. General and administrative expenses as a percentage of revenues were approximately 11% for the three and six month period ended April 30, 1996 compared to 15% during the same periods in 1995. Latin American Operations - ------------------------- Revenues from Latin American operations increased to nearly break-even levels during 1996 to $1,128,965 during the first three months compared to $274,010 for the comparable period in 1995. Year to date revenues as of April 30, 1996 were $2,347,613 versus $574,158 during the first six months of 1995. This increase reflects increased capital spending by the Company's principal customer in Venezuela. 14 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Costs of revenues during the second quarter of 1996 remained relatively stable at approximately 58% of revenues compared with the comparable period in 1995. Cost of revenues for the six month period ended April 30, 1996 improved significantly to 54% of revenues compared with 80% in the prior year primarily as a result of inefficiencies in the first quarter of 1995 associated with a general lack of business during a holiday season. General and administrative expenses decreased dramatically to 38% of revenues during the three months ended April 30, 1996 compared to 74% of revenues for the same period in 1995. For the six month periods, general and administrative expenses were 74% and 103% of revenues in 1996 and 1995, respectively. The significant improvement reflects the ability of the Company to develop a greater revenue base while maintaining general and administrative expenses at a relatively fixed level. Depreciation and amortization remained stable throughout the periods presented for 1995 and 1996 at approximately $120,000 for the quarterly periods and $235,000 for the six month periods. The substantial improvement during 1996 in depreciation as a percent of revenue from 1995 levels reflects significantly underutilized equipment during 1995. The Company is currently operating at approximately 40% capacity. Liquidity and Capital Resources Cash and cash equivalents totaled $2,085,177 at April 30, 1996 compared to $2,952,239 at October 31, 1995. The decrease is due primarily to the repayment of long term debt of $459,260 and a loan from a shareholder of $250,000. The Company also paid cash of approximately $1.1 million for the purchase of equipment required for new business and for the replacement of inefficient equipment. Such capital expenditures were principally funded by cash flow from operations of approximately $815,000. In December 1995 the Company acquired H.C. Connell Inc., for $2,369,049. The acquisition was funded by the issuance of notes to the seller totaling $1,869,049 and by loans from directors of $500,000. As discussed in Note 4 in the Notes to the Condensed Consolidated Financial Statements, on November 29, 1995, the Company entered into a $12.5 million credit facility (the "Credit Facility") comprised of a $6,000,000 revolving line of credit that expires in February 1997; a $2,500,000 equipment loan facility to be secured by new or used equipment purchased; a 60-month Term A loan in the amount of $2,750,000; and a 36-month Term B loan in the amount of $1,250,000. Proceeds from the term loans and a portion of the credit line were used to refinance existing debt of the Company, excluding loans from shareholders/directors. The balance of the line of credit and the equipment facility will be used to fund growth. At April 30, 1996, the Company was in violation of various covenants associated with the loan. However, the Company obtained a limited waiver on the covenants from the lender effective through July 31, 1997. The Company is currently involved in a legal action with respect to the amount owed and other terms relating to certain of the notes payable to shareholders totaling $1,307,976, issued in connection with the acquisition of Transportation Safety Contractors, Inc. in June 1994. Said notes are classified as "current" in the accompanying consolidated balance sheets at April 30, 1996 and October 31, 1995. Subsequent to April 30, 1996, the Company negotiated an amendment of the terms relating to the notes totaling $1,869,049 issued in connection with the acquisition of Connell. The amended note is collateralized by certain accounts receivable, equipment and capital stock of the subsidiary acquired and is due January 1997. The Company currently has available approximately $5,947,024 of working capital consisting of cash of $2,085,177, lines of credit of $1,361,847 and unused equipment facilities of $2,500,000. The Company expects such working capital will be sufficient to meet its near term operating requirements. 15 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Part II - Other Information Items 1 - 5. Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - none applicable (b) Reports on Form 8-K A report filed on Form 8-K dated December 22, 1995 was filed under Item 2 for the acquisition of H. C. Connell, Inc. and Item 5 for the refinancing loan consolidating the Company's debt. A report on Form 8-K/A-1 was filed under Item 2 on February 20, 1996 presenting the required financial and proforma information relating to the acquisition of H.C. Connell, Inc. A report on Form 8-K was filed March 18, 1996 under Item 5 relating to the resignation of certain directors of the Company. 16 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Able Telcom Holding Corp. (Registrant) By: /s/ William J. Mercurio June 19, 1996 ------------------------------------------------------------- William J. Mercurio, President and CEO Date By: /s/ William D. Callahan June 19, 1996 ------------------------------------------------------------- William D. Callahan, Chief Financial Officer Date By: /s/ Daniel L. Osborne June 19, 1996 ------------------------------------------------------------- Daniel L. Osborne, Chief Accounting Officer Date EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ABLE TELCOM FOR THE QUARTER ENDED APRIL 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL STATEMENTS. YEAR OCT-31-1995 NOV-01-1995 FEB-28-1996 2,085,177 559,375 10,090,422 0 2,785,024 16,777,417 6,376,545 0 31,749,316 14,333,111 0 0 0 8,203 14,393,031 31,749,316 0 12,592,295 0 9,706,294 4,980,615 0 297,213 (2,328,751) (233,610) (2,562,361) 0 0 0 (2,562,361) (.31) (.31)
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